Total ‘Doubling Down’ on Solar by Increasing Stake in SunPower

Total SA (FP), Europe’s third-largest oil producer, raised its bet on solar energy by boosting its stake in SunPower Corp. and selling its renewable energy development unit to the U.S. company.

Total, which already owns 60 percent of the second-largest U.S. solar-panel maker, agreed to pay $163.7 million for an additional 6 percent, SunPower said yesterday in a statement. The solar company agreed to acquire Total’s Tenesol SA unit for $165.4 million in cash.

Total will pay a 50 percent premium over the Dec. 22 closing price for the SunPower shares, a move that Pavel Molchanov, a Houston-based analyst at Raymond James & Associates Inc., said was a vote of confidence in the company. Its plans contrast with BP Plc, Europe’s second-largest oil company, which is shuttering its solar unit after 40 years.

“Total not only made a big bet” on solar with its $1.3 billion investment in SunPower in June, Molchanov said. “It’s now doubling down by investing more money.”

Increasing its stake may be more symbolic than practical, he said. “I’m not sure the 6 extra percent means much, but they are putting their money where their mouth is.” Total is “telegraphing that they remain committed to SunPower.”

Total may refrain from buying the remainder of SunPower, Molchanov said, so the solar company will continue to have its own stock.

Potential SunPower investors may not know how the solar business is performing and “shareholders and employees won’t be motivated in the company if its shares are all in Total, an oil company,” he said.

SunPower shares have plunged 72 percent since April 29, the day after Total announced that it would buy its majority stake.

Slumping Solar Prices

Solar panel prices have slumped 47 percent this year. Global supply increased as producers, especially in China, boosted production while demand growth slowed after Germany, Italy and other important markets cut incentives.

That’s helped drive three U.S. solar companies into bankruptcy this year including Solyndra LLC, which received a $535 million U.S. government loan guarantee. Two German companies, Solon SE and Solar Millennium AG filed for insolvency this month.

BP told staff this month it’s closing its solar business because the division has become unprofitable.

Other companies are moving into the solar industry. Warren Buffett’s MidAmerican Energy Holdings purchased this month a $2 billion solar project under development in California and 49 percent of a $1.8 billion plant being built in Arizona.

Global investment in renewable energy was $195 billion in 2010 and is expected to more than double to $395 billion in 2020, according to Bloomberg New Energy Finance.

Underrepresented Markets

Buying Tenesol will bring “added flexibility and a stronger marketing presence in key markets where we currently are underrepresented,” SunPower Chief Financial Officer Dennis Arriola said Nov. 3 on an earnings conference call, when SunPower was still considering the acquisition.

Tenesol has installed more than 500 megawatts of solar systems worldwide, mostly in Europe and emerging markets.

“Combining the activities of Tenesol with SunPower is a step forward in Total’s strategy to become a world power in the promising solar industry,” Philippe Boisseau, president of the oil company’s gas and power division, said in the statement.

Helen Kendrick, a SunPower spokeswoman, said the company wouldn’t comment on the deal beyond the statement.

Total will purchase the SunPower shares when the Tenesol acquisition closes, which is expected in early 2012.

To contact the reporters on this story: Ehren Goossens in New York at egoossens1@bloomberg.net; Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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