Sempra and Soitec Cement Solar Ties - Analyst Blog

San Diego Gas & Electric (“SDG&E”), a subsidiary of Sempra Energy (SRE), and subsidiaries of Soitec Solar Development, LLC have entered into two 25-year contracts to generate 125 megawatts (MW) of solar energy at SDG&E. The energy will be produced using Soitec's Concentrix concentrator photovoltaic (CPV) technology.

This contract is in addition to the one signed in April this year between the two parties. In the preceding collaboration SDG&E and Soitec had entered into a 25-year agreement and signed three contracts ensuring a combined capacity of 30 MW of solar energy. The specifics remain the same, with electricity to be generated at three solar power plant sites in San Diego County and Soitec Concentrix technology modules used. The solar modules for CPV technology for all the five contracts will be manufactured at the new Soitec factory to be built in the San Diego area. The new manufacturing facility will have an annual production capacity of 200 MW and will be liable to supply all of SDG&E projects with the Concentrix CPV technology.

Taken together, the five contracts, comprising five separate projects, will be capable of generating a combined total of 155 MW of energy that will be enough to supply more than 60,000 homes. Both the proposed projects will be located in San Diego County and will be situated near SDG&E electric substations.

The CPV technology produces power at a much higher efficiency in comparison to the standard solar panels. At 100% capacity, Soitec's San Diego operations facility will generate up to 450 direct jobs and more than 1,000 indirect jobs.  The company expects the factory location to be announced this summer, and expects it to be completed within 18 months of start of construction. The power contracts are, however, subject to approval from the California Public Utilities Commission.

Sempra Energy's diversified basket of businesses insulates its operations to a significant degree from regulatory rate risks. Sempra presents a lower risk profile relative to its peers. This outlook is supported by stable utility earnings, steady progress at its LNG terminals, ongoing installations of smart meter and renewable power projects in the Pacific Southwest.

However, due to a lack of any near-term positive triggers, along with near-term trepidation in natural gas prices, an ongoing land dispute regarding its LNG terminal in Mexico and pending regulatory cases, the company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

In May this year, Sempra Energy announced its first-quarter 2011 earnings of $1.07 per share surpassing the Zacks Consensus Estimate of $1.02 and the year-ago quarterly earnings of 42 cents per share. Total revenue of Sempra Energy in the first-quarter 2011 was $2.4 billion versus $2.5 billion in the year-ago period, reflecting a fall of 3.9%. Reported revenue in the quarter was also lower than the Zacks Consensus Estimate by $23 million.

Soitec Solar Development, LLC, is a renewable energy company managed by Soitec SA (SLOIF). Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas.