First Solar CEO: Tesla's SolarCity offer a 'head scratcher'

First Solar chief executive James Hughes sees few obvious reasons for Tesla Motors to buy SolarCity, calling the offer a “head scratcher” and saying that putting the two companies under a single roof would result in a “very complicated business.”

In explaining its offer to buy SolarCity, Tesla stated its belief that “the possibilities for product, service and operational synergies would be substantial.”

Hughes, however, views things differently. “I’m not sure I understand the synergies associated with combining them,” he said, speaking Wednesday at ACORE’s Renewable Energy Finance Forum in New York.

“My observation is it’s a bit of a head scratcher,” he says of Tesla’s offer. “I don’t have a clear and distinct explanation for the [proposed deal] – though it’s certainly interesting.”

Despite consistently being two of the most valuable and high-profile US-based solar companies in recent years, Arizona-based First Solar and California-based SolarCity have largely operated in different parts of the industry – with First Solar focused on module manufacturing and developing utility-scale solar plants, and SolarCity on selling, installing and maintaining rooftop PV kits.

However, competition between the two companies looks set to intensify in the years ahead. SolarCity is building a module “gigafactory” in upstate New York, and the company recently launched itself into the utility-scale solar and storage business.

Hughes – who will soon pass the reins as First Solar CEO to current CFO Mark Widmar – calls SolarCity a “business in transition” with many “interesting moving parts.”

Being part of much-larger Tesla could help SolarCity as it attempts to diversify into utility-scale solar, Hughes acknowledges.

“One of the challenges they’ll have in their present form playing in the utility-scale business is that to be successful you really need significant access to capital – either through your balance sheet or through strategic relationships,” he says.

“I think they would struggle in that department.”

Tesla’s offer, however, “potentially aligns them with a much larger balance sheet and much better access to capital.”

Tesla may also be able to help SolarCity get its New York module plant up and running successfully, Hughes says, though he notes that module manufacturing is a “very different game” than rooftop solar.