First Solar, Inc. FSLR and SunPower Corp. SPWR declared that their joint yieldco named 8point3 Energy Partners LP has filed for an initial public offering (“IPO”) with the U.S. Securities and Exchange Commission (“SEC”).
The filing specified neither the number of shares that would be offered nor their IPO price. The joint venture will apply to list its shares on the NASDAQ Global Market. The Goldman Sachs Group, Inc. and Citigroup Inc. will be acting as the lead book running managers for the IPO.
The formation of 8point3, the joint yieldco, was announced in late Feb 2015. Yieldcos own renewable energy generating assets and operations, and offer a lucrative option to investors by providing them with a low-risk return profile. Apart from benefiting investors, yieldcos also make it easier for renewable energy companies like First Solar and SunPower to raise funds for new projects.
As they offer capital to the companies at low costs while promising good returns to investors, solar companies are particularly keen on forming a yieldco. SunEdison, Inc. SUNE formed a yieldco last year and named it TerraForm Power, Inc. TERP
The rising demand in the solar space to raise more capital and increase investments so as to ramp up the number of ongoing projects and installations is essentially to take advantage of the 30% solar tax credit before it declines. The tax credit for solar systems on residential and commercial properties is expected to drop to 10% in 2017. As per the Solar Energy Industries Association, the tax credit has been instrumental in boosting solar installation by a compound annual growth rate of 76% since it was implemented in 2006.
Additionally, the U.S. Energy Information Administration projects solar consumption in the U.S. to surge 86% to 0.571 quadrillion btu in 2016 from 2013 levels. This promises better days for the solar companies ahead. The expected boost in demand and current investments made by the companies in anticipation of a drop in tax credit will likely yield positive results, going forward.
Both First Solar and SunPower currently have a Zacks Rank #3 (Hold).
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