A few years ago, yieldcos were all the rage, with large PV makers and developers increasingly following on the lead of SunEdison and building their own vehicles to own solar and wind assets, to separate these stable assets from the riskier business of making PV and deploying it. Yieldco after yieldco held initial public offerings, and such companies began increasingly scooping up renewable energy projects while often offering attractive dividends.
However, today it seems that yieldcos are increasingly destined to be merely another holding in the portfolio of large asset managers. Earlier this month, Canadian asset manager Brookfield closed on its purchase of former SunEdison yieldcos TerraForm Power and TerraForm Global. And late yesterday SunPower and First Solar announced that the two companies have entered into an agreement to sell off their shared yieldco 8point3 Energy Partners and its 710 MW-DC of solar projects to Capital Dynamics.
In the proposed all-cash transaction, Capital Dynamics will scoop up the 8point3 stock held by First Solar and SunPower at $12.35 per share. This will be decreased by dividends paid in the interim and represents a significant discount from the $14-$16 per share that the stock has been trading at for months.
Capital Dynamics has also committed to support the company with $1.1 billion in debt financing. The proposed transaction is expected to close in the second or third fiscal quarter of 2018 and will represent a roughly $977 million equity value and a $1.7 billion enterprise value.
A set of slides accompanying the announcements gives several reasons for the change, including a note that the sponsors have been able to recycle capital fasterand thus prefer to sell projects at an earlier stage in construction and development than was suited for 8point3.
For each company, there may be additional factors. First Solar has gone all in on its re-tooling for the larger format Series 6 modules, which involves both its factories in Ohio and in Malaysia, as well as twin new factories in Vietnam.
Additionally, SunPower has its own problems. The company will be one of the worst hit by Section 201 tariffs, given that it manufactures outside the United States and that the ad valorem nature of the tariff means that premium products like its X-Series modules will be affected more than inexpensive solar. This adds to the financial difficulties at the company, which has been losing money every quarter for years.
Correction: This article was updated at 8:30 AM EST on February 7. Capital Dynamics has confirmed that it is buying 8point3 without co-investors, and the capacity of 8point3’s holdings has been updated.