Photographer: Laura Segall/Bloomberg
Capital Dynamics to buy yieldco from First Solar and SunPower
Yieldco assets offer stable revenue prized by investors
8Point3 Energy Partners LP, a renewable-energy venture formed by America’s two largest solar manufacturers, fell the most on record Tuesday, a day after its owners agreed to sell it for a price below its market value.
Swiss asset manager Capital Dynamics AG agreed to buy 8Point3 for $977 million, less than its market value of about $1.1 billion as of Monday. 8Point3 shares fell as much as 15 percent, the most intraday since they began trading in June 2015. They were down 12 percent to $12.16 at 12:34 p.m. in New York.
“We will not sugarcoat it: we are disappointed,” Pavel Molchanov, an analyst at Raymond James Financial Inc., said in a research note Tuesday. But “the odds of a competing proposal emerging seem very low.”
First Solar Inc. and SunPower Corp. formed 8Point3 in 2015 to buy solar farms that they developed. As prices for solar power plunged, the venture struggled to acquire power projects at prices that would sustain a publicly traded holding company, and they put it up for sale last year.
“It may not appear that they maximized the value of the company, but they just wanted to get out of this thing. The longer it stuck around, the more problematic it becomes,” Joseph Osha, a San Francisco-based analyst at JMP Securities, said in an interview. “It’s feed this thing or die.”
Capital Dynamics has been interested in 8Point3 for months, and loomed as a likely buyer. The acquisition of 8Point3 would marry the largest solar-focused institutional asset investor with the only solar-only yieldco portfolio, said Nathan Serota, a New York-based analyst at Bloomberg New Energy Finance, in an email Monday. A unit of Capital Dynamics plans to take over the company by acquiring 8Point3’s general partner and all of the outstanding Class A shares, according to a statement Monday.
“It has become very difficult for 8Point3 to acquire projects that met its return threshold,” Chief Executive Officer Chuck Boynton said on a conference call Monday.
Capital Dynamics already has more than 3,000 megawatts of power plants in development or operation, and bought several U.S. solar farms in 2017. That includes the 250-megawatt Moapa plant in Nevada built by First Solar and the 328-megawatt Mount Signal 3 project in California developed by 8minutenergy Renewables LLC. The firm focuses on private assets including equity, clean energy infrastructure and credit.
While so-called yieldcos like 8Point3 have fallen from favor on Wall Street since clean-energy giant SunEdison Inc.’s 2016 bankruptcy, the wind and solar farms they operate remain appealing to institutional investors seeking reliable revenue from long-term utility contracts.
“When the stock prices for these yieldcos drop, often the assets fit better in private hands than in the public markets,” said Travis Miller, a Chicago-based analyst at Morningstar Inc. “Private equity and infrastructure investors have a longer time horizon to be able to invest in these assets that have long-term contracts. They don’t have to worry about market fluctuations day to day.”
In the past year, Brookfield Asset Management Inc. agreed to expand its stake in TerraForm Power Inc. and acquire all of TerraForm Global Inc., as SunEdison relinquished control of its two yieldcos in deals that value their combined equity at $2.49 billion. AES Corp. and Alberta Investment Management Corp. paid $853 million for solar developer FTP Power LLC.
Capital Dynamics has strong institutional backing, including passive investments from California State Teachers’ Retirement System and a unit of Stichting Pensioenfonds ABP, a pension fund for Dutch civil servants and education workers. 8Point3 would add about 700 megawatts to its solar portfolio.
“It was a robust process, so I’d be surprised if anyone else entered the process at this point,” John Breckenridge, managing director at Capital Dynamics, said in an interview Tuesday.
— With assistance by Chris Martin, and Matthew Monks