8point3 Energy Partners beats guidance & stays on course during Q1

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8point3 Energy Partners’ results for its first quarter since the extension of the U.S. Investment Tax Credit show a company which is growing slowly and carefully, and delivering more to shareholders than it has promised. The company’s first quarter ended on February 29.

Revenue and net loss were both US$7.1 million during the quarter, as the company recognized cash for the winter generation of 432 MW of solar projects. 8point3 also managed Cash Available for Distribution (CAFD) of $18.3 million, roughly $3 million above guidance.

8point3 also declared a Q1 distribution of $0.225 per share, a sliver above guidance.

After swooping up more than 100 MW of projects in the previous quarter, Q1 acquisitions were very conservative, with the company acquiring only a 20 MW multi-site PV project at a Southern California School District from SunPower.

In the second quarter, the company has additionally acquired another 90 MW in two projects, with all three totaling a $148 million investment.

8point3 stresses that it has both plenty of project available from its sponsors, as well as plenty of liquidity to fund acquisitions for the next few quarters. The company estimated that it had around $250 million in liquidity at the close of Q1, mostly through a revolving fund.

As a result of the extension of the U.S. Investment Tax Credit (ITC) many PV project developers have pushed back timelines for project completion into 2017, and 8point3 has also tweaked the planned timeline for its project acquisition. The company still plans to acquire over 800 MW of projects from its Right of First Offer (ROFO) portfolio this year, but now plans to pick up another 300 MW in 2017.

8point3 expects this to represent most of its growth over this period, and reiterated that it has no plans to acquire projects from parties other than First Solar and SunPower.

The stock price of 8point3, like other yieldcos, has been hit by general slowness in the energy space. The company also alludes to fallout from the ongoing collapse of SunEdison, which was a leader in the space through its two yieldcos. “Dislocations in other yieldcos and the MLP space have temporarily hurt the industry” stated 8point3 Chief Financial Officer Mark Widmer on the company’s earnings call. However, he said that he expects investors to come back to the space.

“This will be a very important asset class,” predicted Widmer.

One analyst on the call additionally questioned how much residential solar is in 8point3’s 432 MW. Investors appear concerned over the inclusion of residential solar assets, which they consider inferior assets to utility-scale projects, and this was the stated reason behind hedge fund manager David Tepper’s lawsuit which effectively blocked SunEdison from acquiring Vivint Solar.

It is unclear how much these concerns are based in reality. Residential projects represent around 9% of 8point3’s current portfolio, and Widmer says these assets have been performing “extremely well”. He also noted that the company doesn’t have plans to drop down additional residential assets in the near term.

The company additionally dismissed any concerns about a shortage of tax equity. “We have not seen a significant slowdown in tax equity,” noted Widmer. “We have certainly heard a lot about that in the media.” He also suggested that there may be a “flight to quality” in the industry.

For the first quarter of 2016 the company predicts revenue of $11-12 million, CAFD of $6.0-$7.5 million, and to grow its distribution of $0.232 per share. Over the course of 2016 and into 2017, 8point3 expects distribution growth of 12-15% annually.