When is a solar energy company a loan flipper instead of a solar energy company? How about when the value of its loan subsidies vastly exceeds the value of its solar project? A case in point is First Solar’s sale of its Antelope Valley Solar Ranch 1 (AVSR1) to Exelon.

On February 9, First Solar, Inc., made an 8-K filing with the Securities and Exchange Commission. The filing warned that First Solar’s sale of the AVSR1 to Exelon may fall through because of difficulty in getting building permits. The filing gives some hints about the value of the loan-guarantee subsidies relative to the value of the underlying project.

The AVSR1 project has been awarded a loan guarantee from the Department of Energy (DOE). This, of course, makes the project more attractive to potential purchasers, like Exelon, by lowering borrowing costs. Indeed, First Solar sold several of its billion-dollar solar projects within hours of receiving confirmation of DOE loan guarantees. The better the loan terms, the higher would be the price of any package that includes the loan guarantee.

The first interesting number on the 8-K filing is $646 million—the loan amount that DOE is guaranteeing for AVSR1. The second interesting number is $75 million—the purchase price of the project (which First Solar will have to repay to Exelon if the deal falls through).

Normally, the purchase price should include the net value of the project plus the value of the loan guarantee. For instance, suppose there is a house for sale that contains a box of cash containing $100,000. If the box conveys, then the purchase price of the house will be $100,000 over its market value.

So subtracting the value of the guarantee on the $646 million loan from $75 million will tell us the net value of the project. This net value will be (in expected present-value terms) the difference between the revenues generated (a measure of the value to consumers) minus all the construction and operating costs.

Using a ballpark guess that the loan guarantee would lower the interest rate by two percentage points (say, from 6.5 percent to 4.5 percent), we can calculate the annual savings. For a 20-year loan, that saving is a little under $9 million per year. Pretending loan guarantees are not subsidies because they do not cost the government anything is a favorite theme of both those who disburse the loans and those who receive them. However, Solyndra and all the other bankrupt recipients of the DOE loan guarantees put a stake through the heart of that logic. In other words, $9 million per year is not zero.

Now, the next step is to calculate the present value of the annual savings. It turns out those savings have a present value of about $100 million—more than the purchase price of the project and the loan guarantee together.

It would be as though the house and its $100,000 in cash in the example above sold for less than $100,000. If that were the case, the house is definitely a tear-down.

To be fair, the $646 million is not likely to be paid all at once on day one. Adjusting for that would lower the value of the guarantee. On the other hand, the interest rate to finance the project without the loan may be higher than 6.5 percent per year, which would raise the value of the guarantee.

In any event, working with round numbers, subtracting the value of the loan guarantee from the purchase price gives a negative number: –$25 million. The clear implication is that without the loan guarantee, the AVSR1 project would produce output whose value is about $25 million less than the project’s cost. In short, it is a big money loser. And it would be a money loser in spite of the fact that Exelon already has a 25-year power purchase agreement with some California utilities for the full output of ASVR1. These utilities must buy renewable electricity to meet California’s renewable energy standard—at an undisclosed price that is likely much higher than that for electricity from conventional sources.

Scratching the surface of First Solar’s 8-K filing tells us the net value of their solar project is smaller than the value of the loan guarantees. In fact, the net value of the project appears negative without the guarantees. Combining this finding with the rapidity with which it sells the projects after they get the guarantees implies First Solar is more of a loan broker than a solar-power creator.

Whatever First Solar may be, three cheers for whoever is blocking the building permits!