SunPower, First Solar JV Talks Boosts Solar Sector

Earnings Reuters

Shares of solar companies got a boost on Tuesday, a day after SunPower Corp (SPWR) and First Solar Inc (FSLR)said they were in talks to jointly spin off some assets, a move expected to generate stable cash flows for the long-standing rivals.

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SunEdison Inc in July became the first solar company to bundle and spin off some of its power plants into a vehicle known as 'yield co', which earns money through long-term contracts with utilities. Renewable energy firm NRG Energy Inc spun off its yield co in 2013.

The cash flows give the parent company access to funds that are cheaper than taking a loan and promises investors regular dividend payouts.

"Many investors were starting to believe that maybe an yield co won't come from the likes of SunPower and First Solar," S&P Capital IQ analyst Angelo Zino said.

"... You'll likely probably see more yield co offerings here in the coming quarters as a result."

Shares of SunPower, which also reported a better-than-expected quarterly profit on Tuesday, jumped as much as jumped 19 percent. First Solar's stock rose 17 percent.

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Share of other solar companies such as Trina Solar Ltd and Canadian Solar Inc rose between 3-12 percent on Tuesday.

SunPower, majority owned by French energy giant Total SA , expects to file with U.S. regulators by the end of the current quarter to spin off the new company, Chief Executive Tom Werner said on a conference call on Tuesday.

SunPower, the second-largest U.S. solar panel maker, had been investing heavily to build new solar plants to counter competitive pricing of modules by Chinese manufacturers.

Strong demand from utilities for electricity from such plants helped SunPower's fourth-quarter adjusted earnings of 26 cents per share beat analysts' average estimate of 24 cents.

But the revenue stream from such plants have been choppy, hurting profits, and SunPower said in November it would ramp production of solar modules to counter the unpredictability.

The company said on Tuesday it was withdrawing its full-year forecast, announced in November, to take into account the venture with First Solar. 

(By Shubhankar Chakravorty; Writing by Sayantani Ghosh in Bengaluru; Editing by Savio D'Souza)