North Coast Solar Stocks

November 17, 2009

First Solar Exec Gaffney Leaves; Profit Hit On Severance

Filed under: FSLR — Tags: , , , , — Jason @ 2:53 pm

By Eric Savitz
barrons.com

First Solar (FSLR) disclosed in an 8-K filing this morning said EVP and corporate secretary John Gaffney is leaving his post by “mutual agreement” with the company. Gaffney, formerly an attorney with Cravath, Swaine & Moore, was in charge of the company’s sustainable development and environmental affairs activities, as well as the legal and corporate development departments.

According to the filing, the company will take a $6.9 million after-tax Q4 hit to net income to cover his severance, or about 8 cents a share.

Gordon Johnson, an analyst with Hapoalim Securities, notes that Gaffney was involved in recent efforts to lobby for continued exclusion of the company’s cadmium telluride solar products from a pair of European standards known as WEEE (the Waste Electrical and Electronic Equipment directive) and RoHS (the Restriction of Use of Certain Hazardous Substances directive). As the New York Times recently reported, there is a move in Europe to extend the rules to cover the use of cadmium in solar products.

“Given Mr. Gaffney’s role as the lead coordinator in such effort, we question the inconvenient timing of his departure,” Johnson writes in a research note. “Mr. Gaffney’s termination during such a crucial period carries potentially negative inferences and could be indicative of negative complications in the company’s recent lobbying efforts. We reiterate out view that any tightening of EU regulations on cadmium in PV panels would be extraordinarily detrimental to FSLR and highlight the possible negative conjectures of Mr. Gaffney’s awkwardly timed departure.”

Johnson notes that FSLR produces only products that are cadmium-based, and that the current RoHS rule limited the amount of CdTe to 100 parts per million in any substrate – while the CdTe layer in First Solar’s panels are 47% Cadmium (or in other words, 470,000 parts per million.) “Thus, to be clear, FSLR is not currently in compliance with the RoHS directive, and will likely need to apply for an exemption in the near future,” creating “a large risk to the investment case” for FSLR shares, he writes.

FSLR today is up 47 cents, or 0.4%, to $123.88.

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