Joint Sunpower/First Solar yieldco reports solid quarterly results

Solar stocks have taken a pummelling since mid-June, first because of false association with falling oil prices, and then later due to general market malaise that began with a crash in Asian markets.

Yieldcos have been no exception. This includes 8point3 Energy Partners, the joint yieldco of First Solar and Sunpower. Since its initial public offering in June, the company’s stock value has fallen by roughly half from around US$20 to close at $10.61 at the end of September.

However, despite this grim stock market performance, 8point3 reported solid financial and operational performance in its quarterly results, released late Wednesday. At the close of the quarter on August 31, the company reached 301 MW of operational projects, and will be paying out $0.157 per share for the quarter.

8point3 has secured another 131 MW of projects which will come online in the fourth quarter. For that quarter, 8point3 expects to distribute around $0.217 per share.

There are a lot more projects to come, as Sunpower and First Solar rush to put projects online in advance of the drop-down of the U.S. federal Investment Tax Credit. 8point3 is first in line to acquire 1.14 GW of projects, 98% of which is expected to be completed by the end of 2016. 88% of this capacity is located in the United States.

Looking at the longer term, 8point3 estimates that the pipeline of available projects from its sponsors rose 1.7 GW to over 15 GW during the quarter.

And while 8point3 CEO Chuck Boynton says that he is not “happy or complacent” about the share price, he also notes that the company has enough liquidity to continue to acquire projects through the first half of 2016, mostly through its $200 million revolving credit facility.

“We can grow the company wihtout accessing the capital markets in the short term,” explains Boynton. He says that he expects to raise further funds in the second half of 2016.

8point3 stresses its differences from other yieldcos, noting its conservative capital structure and low pay-out ratio. Boynton says that being the only solar-only yieldco in the space is another advantage, citing “lower risk profile compared to other renewables such as wind.”

“Other yieldcos are having struggles of their own, and obviously that weighs down the whole industry,” says Boynton. However, he also says that stock problems in the space are not necessarily rational. “This dislocation is technical, not fundamental,” he stresses.

One of the advantages of the yieldco structure is that these structures are insulated from the risks of manufacturing and the quarter-to-quarter variability of project development, as well as any market troubles if the ITC drops down as planned in 2017.

8point3 projects that it will have $74 million in cash available for distribution to shareholders in 2016, and for this level to stay at $68 million in 2017 and 2018, with “low variability thereafter”.