This morning, SunPower (SPWR) announced that it had sold a majority interest in two solar projects totaling 123MW. Owners of stock in SunPower’s jointly sponsored Yieldco 8point3 Energy Partners (CAFD) might be wondering,
“Hey, shouldn’t SunPower be selling these projects to CAFD?”
The Yieldco model has Yieldcos using inexpensive capital from income investors to fund the purchase of projects from their developer sponsors, which have more expensive capital because developing solar projects is riskier than owning already-developed ones. In fact, one of the two projects in question can be found in 8point3’s “Right of First Offer” or ROFO list in its last (Q3) earnings presentation:
The point is, at its current share price, 8point3 is not in a position to issue new stock to finance the equity portion of the projects in the ROFO list at prices that can be offered by their parties like the actual buyer, New Energy Solar. In other words, CAFD does not have the inexpensive capital that the Yieldco model assumes it should.
Given the rapidly falling prices for solar modules, both Sunpower and 8point3’s other sponsor, First Solar (FSLR) are not profitable, and their need for cash has had some investors worrying that its sponsors might force 8point3 to buy some projects at prices it cant afford. This sale of projects to a their party helps alleviate that worry, and should give comfort to investors, like myself, who have been buying CAFD for its very attractive 7.6% annual yield.
That’s the flip side of “expensive capital” for publicly traded securities: A high yield. Get it while it lasts.
Disclosure: Long CAFD, FSLR.
