Axiom analyst Gordon Johnson says investors should stay away from First Solar and its solar energy yieldco 8Point3 Energy Partners because 8Point3 is unable to pay its mounting debts, and First Solar may not be able to get a favorable price when it unloads its stake in the company.
Shares of CAFD plummeted more that 9 percent on Thursday after First Solar announced it plans to sell its 28 percent ownership stake in the company. First Solar and rival SunPower Corp. (SPWR) created 8Point3 as a joint venture to serve as a vehicle to hold solar energy assets currently under long-term utility contracts.
Yieldcos such as 8Point3 Energy were designed to provide investors with a safe way to invest in solar energy and generate dependable, high yields. 8Point3 Energy’s current yield, for example, is 8.4 percent.
Unfortunately, a solar panel supply glut has weighed on industry prices in the past year, and the 2016 bankruptcy of industry leader SunEdison has further depressed investor sentiment. 8Point3 Energy’s stock is now down 15.1 percent in the past year. At this point, Johnson says the entire industry is on shaky financial footing.
Johnson also says neither First Solar nor SunPower are able to give 8Point3 favorable prices on new asset purchases, a situation that puts 8Point3 in a difficult spot.
“With just $14 million in cash and dilutive equity raises apparently the only option to fund incremental acquisitions … we see both growth and debt repayment as structurally impaired,” Johnson says of 8Point3 Energy.
The situation isn’t much better for First Solar, which has roughly $4 per share of value directly linked to 8Point3. “Were the equity markets to turn on the company, we believe growth would stagnate, pushing up the required dividend yield [and] weighing on the shares,” Johnson says.
First Solar hopes the proceeds it generates from a sale of its 8Point3 stake will help the company develop its next-generation Series 6 solar panels.
SunPower believes 8Point3 Energy “still offers significant, long-term strategic value.” The company intends…
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