SunPower receives €44.5m financing for largest plant in Italy, signs JV with AUO for Fab 3

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SunPower has received financing of €44.5 million for the second phase of the 85MW Montalto di Castro solar photovoltaic power park, which once complete, will be the largest of its kind in Italy. The company has also formed a joint venture with AU Optronics for the ownership and operation of SunPower’s 1.4GW third solar cell fabrication facility (Fab 3), currently under construction in Malaysia. SunPower and AUO will equally own the JV and contribute equal capital funding.

The plant financing is made up of a term loan of €40 million and a short-term VAT facility of €4.5 million. The sole lending bank for the second phase of the project is Barclays Bank PLC, which is acting as mandated lead arranger, agent and account bank.

“Barclays offered attractive debt terms early on in the bank selection process and they remained impressively professional and dedicated to the transaction even through the volatile market conditions of the past few weeks. This is testament to the creditworthiness of a well-executed utility scale PV power park from the SunPower team,” said Tim Corfield, head of project finance for SunRay group, the SunPower company.

The second phase of project construction includes an additional 8.8MW that began construction in February and is expected to be complete by July 2010. The entire 85MW Montalto di Castro park, located just north of Rome in the province of Viterbo, is planned to be built and fully operational by the end of this year.

“The Montalto park is the first and largest solar project of its kind in Italy, and we are very pleased to have completed the financing on this second phase,” said Dennis Arriola, SunPower CFO. “The demand for solar in Italy is strong today and growing because solar is a quickly installed, cost-competitive, reliable source of power. Financiers understand that these parks make good business sense while serving local communities with clean, renewable power.”

Speaking about the newly formed JV with AUO, SunPower’s CEO Tom Werner said, “AUO’s proven ability to rapidly scale advanced manufacturing technology while driving consistent, aggressive cost reduction makes them the ideal partner to help SunPower ramp Fab 3.”

“We expect this JV will reduce our effective Fab 3 capital expense per watt by more than 35% while capitalizing on AUO’s world-class manufacturing expertise to reduce solar cell manufacturing costs. As a result of SunPower’s downstream channel investments, demand has been rapidly increasing for our differentiated high-efficiency solar panels and systems. We believe that this JV will enable us to produce moreMW faster, at lower cost, with substantially less cash contribution from SunPower.”

“It is our great pleasure to work with SunPower,” said K.Y. Lee, chairman of AUO. “This joint venture sets a remarkable milestone for AUO’s solar business. SunPower leads the solar industry with the world’s highest efficiency technology for solar cells. With the Fab 3 JV, we will join our strengths to maximize our competitiveness and long-term benefits. Customers worldwide will profit from the synergy of vertical integration and scale for their solar investments.”

Fab 3 Joint Venture – update

Update: In a conference call to discuss the new joint venture manufacturing operations for Fab 3, SunPower executives noted that the total capital expenditure for Fab 3 would be US$1.2 billion, which included all equipment and facilities costs. Expenditures are through to 2014 when all 28 manufacturing lines planned for the facility are fully operational.

Executives noted that a key factor in the JV was the ability for SunPower to reduce its capital spending plans but retain its target for capacity expansion. It was noted in the call that the company had expected to spend between US$375 and US$475 million in 2010 on Fab 3. However, with the JV, SunPower’s spending will be reduced to between US$200 and US$250 million in 2010.

The CapEx/Watt would therefore be reduced by more than 35%, from approximately US$0.85/W to less than US$0.55/W in 2014, when the fab is fully ramped.

Further important benefits were also raised, including the ability to now ramp the plant at a faster rate and the expectation to enable cost reductions to be implemented faster. The expertise of AUO in advanced automation techniques was noted as a key aspect in these aspects of the JV. Fab 3 is now expected to ramps faster to the tune of 200MW more nameplate capacity in 2012.

SunPower said that the accelerated cost reduction per watt that would begin in 2011 would also improve figures at SumPower’s Fabs1 and 2 as the greater purchasing power of a 1GW plus production filtered down from the JV.

This would reduce its polysilicon pre-purchasing cash cost by US$200 million, basically by 50% due to the JV agreement, saving US$50 million in 2010 and 2011.

The JV will see modules sold independently by both parties. AUO will be able to sell modules with JV high-efficiency cells in Asia, except Japan and Australia. However, in 2013 onwards, AUO can sell modules in the EU but on self-developed projects.

Further reporting by Mark Osborne

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