- Capital Dynamics is set to buy 8point3 Energy Partners for $12.35 per share in an all-cash transaction
- The implied equity value of the deal is around $977 million, with an enterprise value of around $1,658 million
- Capital Dynamics was chosen from 130 interested parties that responded to a competitive marketing process launched
- The deal is likely to close in the second or third quarter of 2018
Asset management firm Capital Dynamics will buy First Solar and SunPower’s joint venture 8point3 Energy Partners LP. The transaction will be in cash for $12.35 per share. The implied equity value of the deal is approximately $977 million, with an enterprise value of around $1,658 million.
Research analysts from investment bank Roth Capital Partners pointed out that the per-share price of the transaction is 11% lower than the closing price of $13.83 per share. “Despite being an all-cash deal with debt financing secured, existing holders are likely disappointed,” read a commentary from Roth.
“While the price paid was a disappointment, we are constructive on the sale of 8point3 as it serves as a meaningful inflow of capital for both companies and it was a cash offer,” Cowen and Company wrote in an industry update. Adding, “The competitive landscape in the solar market has shifted significantly since the initial advent of YieldCo vehicles. Vertically integrated solar companies like First Solar and SunPower have not only reduced operating expenses, but have also elected to sell projects earlier in the development lifecycle as there is no longer any economic value to hold them on the balance sheet until completion.”
Background on the deal
Both the parent companies had been looking for buyers for 8point3. A competitive marketing process led to 130 interested parties who were then granted access to perform comprehensive due diligence over a multi-phase process. Capital Dynamics was then chosen from the lot. The deal is expected to close in the second or third quarter of 2018.
Capital Dynamics made the bid through its Clean Energy Infrastructure (CEI) team to acquire 710 MW of operational net generation capacity. In 2017, the CEI team invested in 1.1 GW of solar projects. “With our extensive asset management capabilities and financing expertise, we have been able to achieve terms that we expect to be received positively by shareholders, while meeting our long-term investment objectives,” said John Breckenridge, head of the CEI business at Capital Dynamics.
8point3 came into being in 2015 as a growth-oriented limited partnership, owning, operating and acquiring solar power projects. In April 2017, First Solar expressed interest in selling its share in the yieldco. It wanted to focus on its transition to a Series 6 product offering and use the resources to allow for faster recycling of its systems business capital.
Incidentally, First Solar also sold its cash equity interest in the 250 MW Moapa Southern Paiute Solar Project in Nevada to Capital Dynamics last year (see First Solar Sells 250 MW Project). SunPower had been interested in continuing with its interest in the yieldco, and was open to finding a potential replacement partner for First Solar.
As of November 2017, its portfolio consisted of interests in 946 MW of solar energy projects including 10 utility-scale projects, and four commercial and industrial projects, as well as a portfolio of residential distributed generation (DG) solar assets.
In Q4/2017, the yieldco reported revenues of $15.8 million. For Q1/2018, revenue guidance is in the range of $9 to $10 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guidance was offered as $8.5 million. Roth Capital Partners analysts called the guidance light.