Yieldco 8point3 in holding pattern pending strategic review


There were more questions than answers on 8point3 Energy Partners’ Q2 2017 results call yesterday afternoon, many of them related to the yieldco’s strategic review process. This review was triggered by sponsor First Solar announcing that it would leave the partnership with SunPower under which the two companies jointly sponsor 8point3, as it pursues its retooling to make large-format modules.

8point3 has had very little to say about this process, and during the call declined to even give information on the timeline of the review.

During this review the yieldco is unlikely to acquire more projects and is definitely not taking on more debt. In fact, the company forfeited 320 MW of First Solar projects which it had right of first on, resulting in the developer offering these projects to third parties.

There is a lack of clarity about what happens next, with 8point3 stating that it would “keep all of its options open” during the call. But despite this, the yieldco reported remarkably solid results during Q2. 8point3 grew revenues to $17 million during the quarter, beating guidance on revenue, profit and, as is being watched by many investors, the company’s cash available for distribution (CAFD).

8point3 brought in $19 million in CAFD during the quarter, and in line with promises paid out a dividend of just over $0.26 per share, which provides a healthy margin for investors who can pick up the stock at under $15 per share.

This dividend also set to increase another 3% during Q3, in line with the company’s expectations to up its dividends 12% over the course of the year. “We have a payout ratio that allows us to grow dividend payout for a while,” noted 8point3 executives on the call.

8point3 is generating these payouts while still paying off debt and did not utilize its $125 million at the market (ATM) equity offering during the quarter. The yieldco stated that it expects to generate additional cash during Q3 and Q4, which will allow it to pay down its revolver and/or a loan from first Solar – which is easier as it is acquiring projects.

The yieldco still has around 300 MW of projects in its right of first offer portfolio, and estimates that around 2/3 of this is distributed generation, with commercial and industrial projects representing the majority.

However, until the review is over it is unlikely to add these projects to the 945 MW which it currently owns, with executives noting that the company is in a “holding pattern”. And while there are many questions about the future, as long as the payouts continue, investors do not appear to be too worried.

8point3 stated that it is maintaining the guidance for 2017 which it issued earlier, including the expectation that it will generate $91-101 million in CAFD over the course of 2017. During that time the yieldco is assuming no acquisitions.

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