First Solar and SunPower’s Yieldco Venture Seeks $483 Million in Stock Offering

NEW YORK — 8point3 Energy Partners LP, the renewable energy partnership formed by First Solar Inc. and SunPower Corp., is seeking to raise as much as $483 million in an initial public offering.

8point3 plans to sell as many as 23 million shares for $19 to $21 each, according to a statement Wednesday. It will trade on the Nasdaq under the symbol CAFD. The proceeds will be used to pay the partnership’s owners and for general corporate purposes, including future acquisitions.

First Solar and SunPower, the largest U.S. solar manufacturers, are the first to jointly create such a so-called yieldco. Under this model, companies that develop power plants create a separate unit to own and operate the assets once they’re producing electricity. The structure, which lowers borrowing costs for the parent and provides a steady stream of dividends for investors, is becoming increasingly popular in the renewable-energy industry.

“This will be well received by the same kinds of investors who looked at the yieldco IPOs from last year,” Pavel Molchanov, an analyst at Raymond James Financial Inc. in Houston, said Wednesday in a telephone interview.

Yieldco initial offerings have “dominated” first-quarter public financing for clean energy, attracting more than $1.5 billion of $2.2 billion in investment, said Jacqueline Lilinshtein, a New York-based analyst for Bloomberg New Energy Finance. This year, seven yieldco IPOs added to a pool of about 12, she said.

‘Growth Ahead’

TerraForm Power Inc., which SunEdison Inc. took public last year, this month began returning a quarterly dividend of 32.5 cents a share, almost twice as much as in 2014. NextEra Energy Partners LP, another yieldco vehicle, offered 20.5 cents to shareholders in May 2015, up from an initial 18.8 cents. 8point3 said it expects to pay a minimum of about 21 cents.

“This is a company that will have a lot of growth ahead of it,” Molchanov said. “It’s starting out with a low yield, but plenty of growth ahead of it.”

Goldman Sachs Group Inc. and Citigroup Inc. are leading the offering, joined by Deutsche Bank AG, JPMorgan Chase & Co. and Credit Agricole SA, according to a regulatory filing. The underwriters have a 30-day option to purchase as many as 3 million shares, on top of 20 million being offered to the public.

“Some of their competitors will be looking at this to gauge investor sentiment for their own yieldcos — the likes of Canadian Solar, Trina Solar will very much be keeping an eye on this IPO and the amount of investor sentiment behind it,” James Evans, a London-based Bloomberg Intelligence analyst, said by telephone.

First Solar, based in Tempe, Arizona, rose 2.3 percent to $50.29 at the close in New York. SunPower rallied 5.2 percent to $31.58, the biggest one-day gain for the San Jose, California- based company since Feb. 24.

Copyright 2015 Bloomberg

Lead image: Money pile. Credit: Shutterstock.

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