Total to buy SunPower as it makes major play into utility-scale solar business

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UPDATED: At an initial cost of approximately US$1.37 billion, French oil and gas company Total will purchase 60% of SunPower's outstanding Class A and B shares, taking a majority share in the US-based PV manufacturer and major project developer. The deal was said to have been approved by the boards of both companies. A further US$1 billion of finance will be made available to SunPower so that it can accelerate its project pipeline rollout, add manufacturing capacity, and further its R&D activities.

SunPower's board will be expanded to 11 members following the closing, with the current management team remaining to run operations. The agreement also includes conditions that mean Total will need to demonstrate its ability to purchase additional shares of SunPower in the future. However, Total will nominate a majority of directors to SunPower's board.

“Total's commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector,” commented Tom Werner, SunPower's CEO. “With Total's $1 billion credit support agreement, solar research and development investments, and the other resources available through its global network, we have taken the next step in positioning our business for continued growth and long-term success. Our relationship with Total will improve our capital structure, enabling SunPower to accelerate our power plant and commercial development businesses, and expand our manufacturing capacity with lower cash requirements.”

Total is not new to the PV market, as it has previously invested and nurtured activities in joint-venture affiliates Tenesol and Photovoltech and has small stake holdings in OPV developer Konarka and AE Polysilicon. 

“The world future energy balance will be the result of a long-term transition in which renewable energies will take their place alongside conventional resources,” said Philippe Boisseau, president of Total's gas and power division. “Over the past years, Total has built up sizeable renewable energy activities. Today, Total is executing on its strategy to become a major integrated player in solar energy. We evaluated multiple solar investments for more than two years and concluded that SunPower is the right partner based on its people, world-leading technology and cost roadmap, vertical integration strategy and downstream footprint.” 

As part of the deal Total will offer to guarantee an amount up to US$1 billion for SunPower's repayment obligations with respect to letters of credit issued over the next five years for utility power plant and large commercial installation businesses.

According to SunPower, this credit support facility would enable the firm to substantially reduce the total costs LOCs and financing and lower its cost of capital and increasing its access to uncollateralized debt financing. Total had net income of US$13.6 billion in 2010.

SunPower and Total have also entered into a research and collaboration agreement under which the companies said they would focus on advancing photovoltaic technologies across multiple research and development projects.

Update 1. 

Tom Werner noted in the call that the deal struck with Total had been under discussion for about one year. Discussions were already under way on partnering on a number of projects, he noted.  

SunPower also updated expected revenue for the first quarter, saying it expected results of US$450 million. However, SunPower also said in the call to discuss the deal with Total that its Italian PV project pipeline would see revenue generation moved from the second quarter to the third quarter, due to the wait in expected FiT changes in the country. 

Total looked at 200 companies over two years, including thin-film PV firms, before selecting SunPower, which matched its goals of leading technology with high efficiencies and an integrated downstream business model.

In respect to the AUO-SunPower JV for cell and module manufacturing, the impact of the Total investment will be positive, as all parties want to see the rapid capacity expansion to continue. The purchase would also support a faster ramp. 

A question was asked as to why Total did not acquire all the shares. Werner noted that Total liked the entrepreneurial pace of the company and wanted a structure that could react fast to opportunities. 

The real impact of the investment will start in 2012.
 
CPV product has real upside. Total’s footprint in the Middle East was mentioned. On a UPP cost perspective SunPower would work directly with Total.

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