In the beginning of 2015, the two U.S.-based solar companies named First Solar Inc. (FSLR, Financial) and Sunpower Corporation (SPWR, Financial) entered into a joint venture for owning and operating a portfolio of solar generation assets. While First Solar remains famous for designing, manufacturing and distributing solar power systems and modules, the San Jose-based Sunpower Corporation is well-known for designing and manufacturing solar electric systems for residential and commercial customers in the U.S. This joint venture is a planned move by these two solar companies which urge to protect their renewable assets through the formation of a “yieldco,” that is an alternative to formation of master limited partnerships or real estate investment trusts.
This Tuesday, the companies’ management expressed its next move in the solar space pertaining to the filing of the initial prospectus for the initial public offering of the yieldco formed last month. So what are the details of the yieldco formation and its initial public offering that are expected to create a wave on the NASDAQ stock exchange? Let’s dig in further to get to the real answer.
The benefit of yieldco formation
The parent companies shared last month while forming such a type of joint venture that the JV would be listed on the stock exchange and would deal in certain solar energy assets having a predictable cash flow stream linked to it. Through such a formation, the parent companies would stand to gain in the long run as it would facilitate raising of capital at much lower costs from the market, and thus is a preferred choice over formation of master limited partnerships.
For the shareholders and investors, formation of the yieldco named 8point3 Energy Partners by these two established solar companies in the U.S. is something that should be of huge appeal since this is a mode being used to retain the ability to pay dividend to the shareholders of both the parent companies. The yieldco named 8point3 offers liquidity rights to pay off debt from building solar plants or to be used as financing in a solar project both for SunPower and First Solar. Such a JV often offers low-risk-return to the shareholders from a highly predictable cash flow that is linked with long-term contracted utility rates.
Notably, many shareholders might have wondered why the name given to the yieldco looks so obscure –Â it’s actually based on the amount of time taken for sunlight to travel from the sun to the earth which is nearly 8.3 minutes.
8point3 Energy IPO details still not very clear
The joint venture of the two large solar companies has been in the news since the beginning of the week with the management declaring that the IPO was almost on with the solar energy yieldco filing the prospectus with the SEC on March 10 expressing the interest to raise around $50 million from the market.
News sources have confirmed that Goldman Sachs and Citi would be the joint bookrunners on the deal, but no ticker or initial price has been decided upon till date. Though the equity capital to be raised is likely to remain to the tune of $50 million, the number of common shares that would be floated in the market is still under cover.
In fact, this IPO would mark the second instance when a solar energy yieldco gets publicly-listed in the U.S. Such public listings of solar energy yieldcos started off last year with TerraForm Power Inc. (TERP, Financial) raising over $500 million as equity capital through its initial public offering. TerraForm Power Inc. was formed by SunEdison Inc. (SUNE, Financial) in July last year to capitalize on the growth potential in renewable power resources.
Parting word
It is to be noted that while First Solar and SunPower were doing such advanced discussions, their stocks spiked about 18% combined to report a massive gain in the stock market. News sources have confirmed that since February 24, First Solar has gained more than 20% through this Monday’s close while SunPower stock has gained almost 16%. This reflects that the market is treating the yieldco’s IPO as "hot news" and investors are waiting for more information from the company’s end after the filing of the preliminary prospectus of 8point3 Energy Partners. Let’s stay tuned for more news on 8point3 Energy Partners IPO that would hopefully introduce a new momentum for both the solar companies’ stocks soon after its listing on the NASDAQ.
