Two years ago, solar yieldcos were all the rage. SunEdison had led the way with TerraForm Power and Global, and other companies were lining up to create their own vehicles for long-term solar asset ownership. In July 2015, First Solar and SunPower launched a company which was touted as being the best-managed and most secure solar yieldco to date, 8point3 Energy Partners, due to its dual-sponsorship structure.
Now both of 8point3’s sponsors are getting out of the business. In April First Solar announced that it would sell its stake in the company, as focuses on manufacturing and specifically switching production over to its large-format Series 6. And today SunPower also announced that it plans to offer its share of the yieldco up for sale.
The company states that this was due to feedback “from the market”. “The feedback from the market overwhelmingly was to buy out SunPower and First Solar or to buy out the whole company,” stated SunPower Chief Financial Officer Chuck Boynton on the company’s results call. “Based on the feedback from the market we’ve decided to take (the option of replacing First Solar) off the table.”
SunPower declined to comment on the details of how it plans to go about selling its share, and noted that the sale is part of the company’s restructuring, and larger plans to “divest non-core assets to fund innovation and de-lever its balance sheet”. This will include some of the company’s utility-scale assets, as could also include the company’s leased residential solar projects, which it notes represent $1.5 billion in long-term receiveables.
Such a restructuring is clearly needed, as SunPower continues to bleed red ink. The company’s revenues fell 20% year-over-year to $337 million during Q2. More concerning was a net loss of $94 million, the latest in a long string of quarterly losses, a situation which well predates the more recent declines in PV module prices.
SunPower says that it hopes to return to “sustainable profitability” in 2018, but it is less clear how the company is going to get there.
And it is a bit of irony that SunPower is getting out of 8point3, which continues to increase its dividends quarter to quarter, and whose stock has seen a rebound over the last three months. The pulling out of its sponsors has also put 8point3 in a holding pattern, and despite solid results the company is not buying up any more projects while it undergoes its own strategic review process.
However, the moves by First Solar and SunPower may be part of a larger shift in the industry. KWh Analytics Founder and CEO Richard Matsui has chronicled the disillusionment than many investors experienced with yieldcos starting in the summer of 2015, when “the self-reinforcing cycle of high growth and high yield collapsed”.
Ultimately, these moves may also say more about First Solar, SunPower, the state of global solar manufacturing and the two company’s priorities at this complicated time.
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