OptiSolar Hawks Its Crown Jewels to First Solar

The credit crisis isn’t just shaking up the solar industry, it’s reshaping it — forcing major deals to shift from the weak to the strong.

OptiSolar, a privately held startup that won a coveted 550 megawatt solar project to supply PG&E with solar power, is selling its project pipeline — Topaz and much more — to First Solar for an equity stake in the latter valued at $400 million.

In addition to the PG&E project, the pipeline will present First Solar with other projects that are in talks with utilities in California and the western U.S. that could generate 1.3 megawatts, as well as land rights to 136,000 “strategic” acres capable of producing up to 19 gigawatts of new projects, and the staff of 30 or so that won these projects for OptiSolar.

First Solar is an industry leader that only last week was worrying that canceled contracts from some customers might leave it with too much inventory. OptiSolar recently laid off nearly half its staff and delayed construction of an ambitious new plant, citing financing concerns. Today’s deal is aimed at addressing the companies’ respective problems.

The benefits appear to be stronger for First Solar, however, which said it won out over several other bidders. At once, it has gained what it’s been wanting for years: a sizable chunk of the market for U.S. utilities, many of which are mandated by state regulators to rely more on renewable energy.

“This is a watershed acquisition…that will catapult us into a whole new league when it comes to the U.S. utility market,” said First Solar CEO Michael Ahearn. “Many of these kinds of projects are still in the thinking stage and years away from realization. This package in total would be very hard to replicate at all and certainly not without many years of work.”

Although the acquisition is expected to add about $70 million in new revenue to First Solar from projects close to completion, it will subtract 35-40 cents from its per-share earnings, largely because of the stock dilution from OptiSolar’s equity stake. First Solar said the pipeline will add modestly to earnings next year and increase volumes by 600-700 megawatts between 2010 and 2013.

To meet the demand from PG&E and any other projects, First Solar will need to expand its production capacity. In a call with analysts, the company said it expects the 550 MW Topaz project to require three years to install, and to rely on some outside contractors to help build it in that time frame. But the payoff could be a much stronger footing in the U.S. market than it had expected even a few months ago.

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