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Exelon Corp. (EXC) said Friday that a $1.36 billion solar-power plant deal with First Solar Inc. (FSLR) has hit a delay, stemming from problems with the project's federal loan guarantee and a construction permit that the company said it hopes to resolve later this month.
In September, Exelon agreed to buy a 230-megawatt solar farm near Los Angeles from First Solar for up to $1.36 billion. The deal was contingent on a $646 million loan guarantee that the U.S. Department of Energy issued that month for a loan from the Federal Financing Bank to back construction of the project.
Now, however, the loan and the deal have been delayed by an issue with a construction permit that First Solar obtained from Los Angeles County.
The companies said in documents filed late Thursday with the Securities and Exchange Commission that they had expected the Energy Department to provide an advance on the loan before the end of 2011, but that the advance has been delayed until Feb. 24, pending resolution of an "issue" with First Solar's construction permit for the project.
The loan guarantee snag comes at a difficult time for First Solar and its rivals in the global solar-power market as they struggle to remain profitable amid falling prices, a global oversupply of solar panels and uncertain future demand. It also comes as the Energy Department program itself has come under increasing scrutiny and criticism following the high-profile bankruptcy in September of federal loan recipient Solyndra LLC and the October bankruptcy of Beacon Power Corp. (BCONQ), which also obtained federal loans.
Exelon spokesman Paul Elsberg said Friday that the Chicago-based power giant expects to obtain the solar-power loan and continue with the acquisition.
"Exelon remains committed to Antelope Valley Solar Ranch One and expects to receive the initial loan advance upon resolution of the construction permit issue,' Elsberg said. "Exelon is confident that this issue will be resolved in the near term."
However, a statement in First Solar's SEC filing that suggested the solar firm might have to buy back the project sent the company's shares sliding almost 9% to about $44.64.
Exelon shares were down 0.3% to $39.93.
In the document, First Solar said that if the department doesn't approve an initial loan payment by Feb. 24 or a at a later date to be determined, the company would have to buy back the project from Exelon for $75 million, the amount Exelon has paid the solar company so far.
Spokesmen at First Solar and the Energy Department declined to comment.
Exelon said it still plans to invest up to $713 million in equity in the project and that the acquisition supports the company's "commitment to clean energy."
PG&E Corp.'s (PCG) California utility has agreed to buy the electricity from the facility under a long-term contract. First Solar will build and operate the project, which will use 3.8 million of its solar panels.
The solar farm is one of dozens of solar, wind, geothermal and other renewable-power facilities under construction or development amid a renewable-energy boom in California and nearby states. California utilities are required to use renewable sources for one third of the electricity they sell by 2020, under a law that is part of the state's 2006 plan to fight climate change.
-By Cassandra Sweet, Dow Jones Newswires; 415-269-4446; email@example.com
-Matt Jarzemsky contributed to this report.