Tuesday, November 17, 2009

Uh oh: "First Solar Exec Gaffney Leaves; Profit Hit On Severance" (FSLR; GE)

The stock got to $127.54 today before closing up 58 cents at $123.99. In early after-hours trading it was down 58 cents to $123.43. Although the EU/cadmium story has been around for a while and has most importantly resurfaced in the last month I hadn't written on it as FSLR always seemed to be able to grease the right palm/ego.
This is an important post from Tech Trader Daily:

First Solar (FSLR) disclosed in an 8-K filing this morning said EVP and corporate secretary John Gaffney is leaving his post by “mutual agreement” with the company. Gaffney, formerly an attorney with Cravath, Swaine & Moore, was in charge of the company’s sustainable development and environmental affairs activities, as well as the legal and corporate development departments.

According to the filing, the company will take a $6.9 million after-tax Q4 hit to net income to cover his severance, or about 8 cents a share.

Gordon Johnson, an analyst with Hapoalim Securities, notes that Gaffney was involved in recent efforts to lobby for continued exclusion of the company’s cadmium telluride solar products from a pair of European standards known as WEEE (the Waste Electrical and Electronic Equipment directive) and RoHS (the Restriction of Use of Certain Hazardous Substances directive). As the New York Times recently reported, there is a move in Europe to extend the rules to cover the use of cadmium in solar products.

“Given Mr. Gaffney’s role as the lead coordinator in such effort, we question the inconvenient timing of his departure,” Johnson writes in a research note. “Mr. Gaffney’s termination during such a crucial period carries potentially negative inferences and could be indicative of negative complications in the company’s recent lobbying efforts. We reiterate out view that any tightening of EU regulations on cadmium in PV panels would be extraordinarily detrimental to FSLR and highlight the possible negative conjectures of Mr. Gaffney’s awkwardly timed departure.”>>>MORE

We had previously said, in our June '08 post "First Solar, PrimeStar Solar and Cadmium Risks (FSLR; GE)":

There has been quite a bit of misinformation flying around the blogosphere on the risk to human health from FSLR's use of cadmium in their photovoltaic cells. Cd is comparatively stable, FSLR's compound, CdTe, more so. There is some risk when it is exposed to fire but the fire has to be hot.* See note below.

The biggest risk is political. If one of the German ground arrays that use FSLR cells were to suffer a grass fire, it is probable that no cadmium would be released. It is also probable that FSLR would have a tough sell convincing the populace and politicians to allow any further deployment of CdTe. Cd is one of the six hazardous materials subject to the EU's "Restriction of Hazardous Substances Directive"

The National Renewable Energy Lab did a lot of the development work on CdTe with FSLR.
Here are a few of their publications on the subject, reading the first one will make you smarter on this subject than 99% of all bloggers (I know, not a high bar)...
PrimeStar is the CdTe company GE is counting on to carry their solar flag, after halting production of polysilicon based panels a couple weeks ago.