First Solar and SunPower Exploring New Ownership Strategies at YieldCo 8point3

It was 2014. We were young and hope was in the air. We were experimenting with kale, mixed-race presidents and solar project YieldCos.         

And this week, First Solar, one of the last solar companies to jump into the YieldCo pool, announced it was looking to get out of the water and sell its 25.4 percent share of 8point3 Energy Partners.

First Solar said it was “committed to utility-scale project development business” but was looking to “fully align resources and capital in support of transition to Series 6 offering.” First Solar said it was “reviewing alternatives for the sale of its interests” in the YieldCo.

The thin film solar leader announced that it would work with its joint venture partner SunPower in this effort.

For its part, SunPower announced an evaluation of its own strategic options regarding the YieldCo joint venture, stating that its options included a potential replacement partner for First Solar. Tom Werner, SunPower CEO said,  “[W]e believe 8point3 can continue to benefit from owning long-term, high quality renewable assets.”

In 2015, 8point3, the YieldCo formed by vertically-integrated solar developer superpowers (and competitors) First Solar and SunPower, priced its IPO at $21.00 per share. The shares listed on the Nasdaq under the symbol “CAFD.” (CAFD is an acronym for “cash available for distribution,” an insider joke for people in finance.) 8point3's primary objective is to “generate predictable cash distributions that grow at a sustainable rate.”      

First Solar said that capital raised by the sale “would support the planned transition to Series 6 production and provide additional funding for the expected deployment of multiple gigawatts of Series 6 capacity over the next several years.”

First Solar reports that it intends “to accelerate the return of capital from its systems business by selling projects earlier in the construction phase, including the California Flats and Cuyama projects.” If 8point3 is unable to acquire these projects, First Solar expects to sell these projects to third parties.

UBS finds “In light of FSLR's sizable cash and marketable securities balance (>$2 Bn) as of 12/31, we emphasize the decision to sell the shares would appear largely a reflection on value rather than distress as well as a reflection of mgmt's continued strategic ambitions, as utility-scale efforts slow as well.”

The equities analyst adds, “We could very well see a similar story to TERP play out here where the sponsor outright sells the whole subsidiary to a new parent sponsor (Brookfield in this instance) rather than just selling down the strategic sponsor's interest.”

8point3 Energy just announced its financial results for its first fiscal quarter.

  • Exceeded Q1 2017 revenue, net loss, adjusted EBITDA and CAFD guidance
  • Completed acquisition of minority stake in First Solar's Stateline project
  • Declared Q1 2017 distribution of $0.2565 per share, an increase of 3.0 percent over the Q4 2016 distribution
  • For the first quarter of fiscal 2017, 8point3 Energy Partners reported revenue of $9.9 million, net loss of $5.3 million, adjusted EBITDA of $13.1 million and CAFD of $22.1 million.
  • 2017 financial guidance remains unchanged, reiterates fiscal year 2017 distribution growth of 12 percent

“Given our cash flow profile, we are well positioned to achieve our guidance for the year as well as reach our 12 percent distribution growth rate for 2017,” said 8point3 CEO Boynton.    

The YieldCo's fiscal year 2017 guidance remains unchanged: revenue of $63.3 million to $66.7 million, net income of $27.0 million to $32.6 million, Adjusted EBITDA of $106.5 million to $113.1 million, and CAFD of $91.5 million to $101.0 million.  

It is significant that 8point3 has not altered its 2017 financial outlook in light of First Solar's announcement.

Oppenheimer notes, “CAFD posted results modestly ahead of Street expectations and maintained FY guidance as the company’s portfolio continues to perform well. We view the news that FSLR will be exploring strategic options for its stake as not entirely surprising as the company looks to focus more on equipment manufacture and opportunistic project development. We believe SPWR may be able to find a partner that is more closely aligned with the goals of CAFD and brings additional strategic resources to support growth.”

from GTM Solar


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