Energy Business

SunPower, First Solar Joint Venture Yieldco Sets IPO Terms

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A joint venture between two solar PV makers has set its terms for an initial public offering (IPO) that is expected to price next week. 8point3 Energy Partners is a solar energy yieldco formed by SunPower Corp. (NASDAQ: SPWR) and First Solar Inc. (NASDAQ: FSLR).

The new company’s initial portfolio of assets includes 262 megawatts of generation from four First Solar-owned plants and 163 megawatts of generation from SunPower-owned plants. The partners have also award rights of first offer to 8point3 on another 1,143 megawatts of generation.

8point3 is organized as a limited partnership and will be treated as a corporation for U.S. federal income tax purposes. Distributions to the holders of the company’s shares will be taxable as ordinary dividend income to the extent of 8point3’s current and accumulated earnings and profits as computed for U.S. federal income tax purposes. The company expects to pay an annual distribution of $0.8388 per share initially, and it is targeting its annual distribution growth rate at 12% to 15% per share for the three years following the IPO.

Other yieldcos are structured like an MLP or a REIT to eliminate the double taxation of corporate profits and to lower the cost of capital to the company.

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SunEdison Corp. (NYSE: SUNE) spun off its own yieldco, TerraForm Power Inc. (NASDAQ: TERP), a publicly traded yieldco created last year. TerraForm currently holds nearly 800 megawatts of solar generation and recently added 521 megawatts of contracted wind and solar in its acquisition of First Wind Holdings.

According to the amended Form S-1A filed on Wednesday, 8point3 plans to offer 20 million shares in an expected price range of $19 to $21. At the midpoint of the range, the IPO would raise $400 million. The underwriters have 30-day option on an additional 3 million shares. Joint bookrunners for the IPO are Goldman Sachs, Citigroup, Deutsche Bank, JPMorgan and Credit Agricole. Co-managers include HSBC, Mitsubishi UFJ Securities, Mizuho Securities and Baird.

Net proceeds of approximately $375 million from the IPO will be used to acquire 20 million common units (about 28%) of 8point3’s operating company. The operating company then intends to distribute approximately $146.1 million to First Solar and $191 million to SunPower. The remaining $37.8 million will be used for general corporate purposes.

8point3’s name refers to the number of minutes it takes light from the sun to reach earth.

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