Blog Post

Was First Solar's Purchase of OptiSolar Shady?

A couple weeks ago we received an email query from an exec at an environmental group wondering about the legality and ethics of solar maker OptiSolar incorporating yet-to-be-approved Bureau of Land Management land applications into its price when solar giant First Solar agreed to acquire the thin-film PV company back in March. I’m not sure how legal it is, I told him, but I would assume First Solar (s FSLR) would do due diligence on how viable the applications are and factor that risk into the price. Well, it looks like the environmentalists aren’t the only ones with concerns: The Los Angeles Times reports that the inspector general’s office of the Department of the Interior is investigating First Solar’s $400 million acquisition of OptiSolar.

Bureau of Land Management official Greg Miller told the LA Times that: “There is no value associated with a mere application, which could be rejected by us for a variety of reasons…A company can buy another company along with its applications, as long as those applications are not listed as assets. That would be wrong…We’re trying to weed out speculators who are filing applications, then waiting for someone to buy them at the highest price.”

Basically the investigations are trying to determine how much of OptiSolar’s $400 million acquisition had to do with the applications. First Solar’s press release from March just cites “strategic land rights of approximately 136,000 acres.” A First Solar spokesperson assures the Times that it was done above board. I’m wondering, regardless of any legal or ethical issues, how much would tentative applications be worth? In the meantime, as Barron’s points out, if the Department of Interior does find anything shady in the deal, it could have a really negative effect First Solar’s stock.

7 Responses to “Was First Solar's Purchase of OptiSolar Shady?”

  1. Anno Hermanns

    I’m a little bit puzzled by the discussion about whether or not the application to BLM has value.

    The only way it could not have value is if the Obama Administration’s BLM was to reject California’s largest ever solar power plant, leaving PG&E in the lurch for meeting its renewable energy mandates.

    Come on, guys. BLM will get their process, and then they’ll sign on the dotted line.

  2. Kevin Christy

    If the BLM is intent on eliminating “speculation” then it can, like other regulators and agencies have done, impose some kind of test or qualification that only serious developers can clear. I’m sure that Optisolar didn’t solicit many millions of dollars for its manufacturing interest as a cover for its speculative development activities. They meant to build projects, and it certainly sounds as if their decision to sell was a reluctant one. The Opti/First Solar deal is a very poor example of speculative queue squatting.

  3. Yeah I partly agree with you Kevin. I’m thinking that the attention on the issue originally came from environmental groups that don’t want solar companies using public land that they don’t own as an asset for ethical reasons. Which is an entirely different issue as to whether its legal to use the price of land applications in the deal (which honestly I’m not sure of, and am looking into). Any legal buffs out there have any thoughts?

  4. Kevin Christy

    The entire concept is bizarre. If First Solar believes the applications have value then they have value. How does that qualify as “shady?” It’s not like Optisolar was trying to dupe poor little First Solar into buying the Brooklyn Bridge. First Solar employs smart people who understand a lot more about development than the LA Times or the Department of Interior.