First Solar and SunPower Plan to Form Joint-Venture Yieldco

First Solar Inc. and SunPower Corp., the two largest U.S. solar-panel manufacturers, are planning a joint venture that will own and operate some of their projects.

The companies expect to register for an initial public offering for the new venture, according to a statement Monday. They didn’t say when that may occur or how much they would seek to raise through the IPO. The shares surged in after-hours trading.

The SunPower-First Solar venture would be part of a growing trend in the renewable-energy industry to pool projects into publicly traded entities that offer shareholders payouts, known as yieldcos. Companies that build power plants, including Abengoa SA and NRG Energy Inc., sell completed projects to their yieldco affiliates and use that capital to fund new power plants.

“The two companies have been cats and dogs in terms of whose technology is better, but at the end of the day it’s less relevant as you look at the cost-effectiveness of solar and the value that can be extracted,” Jeff Osborne, a Cowen & Co. analyst, said by telephone.

Yieldcos operate power plants and sell electricity, using that revenue to fund dividends to investors. SunPower has projects that could be included in such a vehicle right now, Osborne said.

“SunPower is doing the heavy lifting in 2015 and 2016,” he said. “First Solar didn’t have enough projects to create one immediately, but they do in the longer term. Getting together certainly makes sense.”

Technology Mix

The partnership would be one of the only yieldcos to hold primarily solar farms; other similar ventures hold a mix of wind, solar and other generating technologies, said Jacqueline Lilinshtein, a clean-energy analyst with Bloomberg New Energy Finance. It will also combine SunPower’s polysilicon technology with First Solar’s thin-film panels.

“A portfolio of the two technologies, which operate in different sectors and geographies, could reduce risk, lower capital costs and widen the pool of operating assets that feed into the yieldco,” she said in an e-mail.

First Solar gained 12 percent to $55.11 at 5:43 p.m., after the close of regular trading in New York. SunPower climbed 11 percent. Both companies report quarterly earnings Tuesday.

Copyright 2015 Bloomberg

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