First Solar, Inc. (NASDAQ:FSLR), the leading solar energy company in the United States is still surviving despite the challenges confronting the solar energy industry. Analysts expect the company will report a second quarter net income of 60.1 cents per share, when it reports earnings at the close today.
Instead of just selling solar panels, the company started developing and selling an entire solar power plant to energy companies. More detailed analysis on the collapse can be found here. Warren Buffet Berkshire Hathaway Inc. (NYSE:BRK.A) (BRK.B)’s MidAmerican Energy Holdings Co. and NextEra Energy, Inc. (NYSE:NEE) agreed to purchase solar power plants from First Solar.
Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS
Michael Mauboussin's notes from his presentation at the 2020 Morningstar Investment Conference, held on September 16th and 17th. Q2 2020 hedge fund letters, conferences and more Michael Mauboussin: Challenges and Opportunities in Active Management Michael Mauboussin is Head of Consilient Research at Counterpoint Global in New York. Previously, he was Director of Research BlueMountain Capital, Read More
During the first quarter of 2012, First Solar reported $497 million sales. Fifty three percent (53%) of its sales were generated from selling power plants.
On the other hand, Solar panel manufacturer Solyndra LLC filed a Chapter 11 reorganization plan to the United States Bankruptcy Court in Wilmington Delaware on Friday. The company proposed full payment for holders of administrative expenses and priority claims.
The company is currently liquidating its remaining assets, which will be placed under the Solyndra Residual Trust. The failed solar panel manufacturer raised $14 million after selling its miscellaneous assets. It is hoping to sell the rest of its assets in order to increase the amount of funds to be returned to its creditors and to the taxpayers.
Based on court documents, the total amount of Solyndra’s general unsecured claims is between $50 million to $120 million. Debt holders will try recover approximately 2.5 percent to 6 percent.
Solyndra is trying to distribute the assets and restructure the liabilities of its debtors fairly and efficiently. The private equity firms that poured $70 million in the company last year will be able to recover 50 percent of their investment.
The United States government will only recover 17 percent or approximately $24 million of the first loan, of the $143 million. There is no guarantee the government will be able to retrieve a single penny from the second loan worth $385 million granted to Solyndra. According to court documents, repayment depends on the outcome of the liquidation of the company’s assets.
The company’s largest debtors are largest debtors are Argonaut Ventures I, LLC, the investment arm of George Kaiser Family Foundation and Madrone Partners LP. Argonaut funded the $3.5 million payment to employees when the company suddenly stopped its operations.
The court is expected to conduct a preliminary hearing for its Chapter 11 reorganization plan on September to determine if Solyndra provided enough information to its creditors to vote on the plan.
The company tried to find a buyer to take over its business operations on a turnkey basis and rehire its almost 1,000 employees before filing for bankruptcy last year.
Solyndra is not the only company that failed in the solar energy industry. Arizona based Stirling Energy Systems Inc. also filed for bankruptcy on September last year. The company built two solar power plants in California to convert the heat of the sun into electricity, six solar power plants in New Mexico and a demonstration plant in Peoria.
Another company, Maricopa LLC, a license holder of the Stirling Energy Systems technology also filed for bankruptcy last April 2012.
Evergreen Solar, Inc. (PINK:ESLRQ), a solar panel maker based in Massachusetts was also in trouble last year. The company also filed for Chapter 11 protection.
Companies in the solar energy industry in the United States are struggling due to competition from Chinese rivals, which have a cost advantage. According to Brett Prior, analyst from GTM research, the difference of manufacturing cost in China and the United States is too high. He said, “It costs $1.10 per watt in China to make a solar panel. That same exact process costs $1.80 here in the U.S. That’s a 60 percent difference, and that’s too big.”
Solyndra has become a political issue, as it received large loans from the Federal Government. Many also allege that the company failed for reasons not related to China. Mitt Romney visited the empty company offices on a campaign trail where he criticized the Obama administration over Government loans to the bankrupt Solar company.