Recapping a Wild Week in Solar
Dec 23rd 2011 2:14PM
Updated Dec 23rd 2011 2:24PM
As a rough year for solar stocks comes to an end we're continuing to see trends that are likely to continue into 2012. Weak solar manufacturers are filing for bankruptcy, those who aren't committed are pulling out, and the strong solar players are getting endorsements from some of the biggest names in investing.
Before we get into the news of this week I have to mention a second large investment Warren Buffett's MidAmerican Energy Holdings made in solar just after my article last week was published. The company bought a 49% stake in the 290 MW Agua Caliente project currently owned by NRG Energy and being built by First Solar (NAS: FSLR) . Buffett's investment isn't an endorsement of solar manufacturing stocks, but it is a major endorsement of the long-term viability of solar as an energy source.
Another one bites the dust
The shakeout in the solar industry has been a major topic for discussion this year and the companies heading to bankruptcy court, or a European equivalent, have been lining up fast and furious lately. Last week Solon filed for insolvency and this week Solar Millennium followed the same path.
This insolvency is a bit different because Solar Millenium has a massive 2.25 GW pipeline of solar projects in the U.S. alone. Blythe is 1GW, while Amargosa Farm and Phalen are both 500 MW each.
These projects have recently been transitioned from a solar trough technology the company was going to build to a standard photovoltaic design. The company has been in talks to sell assets, but up to now has been unable to make the sale.
A pipeline that large could have a number of potential buyers so it will be interesting to see how the company and the courts handle the assets in the future.
Giving up on solar
BP (NYS: BP) is far too big to file bankruptcy over its floundering solar business, but this week it did finally throw in the towel. After more than 30 years in the business the current conditions became too tough for BP and the company "has decided to abandon solar energy."
It seems a bit odd that a company with that much history in solar would give up just when the energy source is reaching grid parity, widely viewed as the point solar demand will take off.
This is big news for JA Solar (NAS: JASO) who has a supply agreement with BP and will now have to fill that void in its demand.
Matters of efficiency
This week JA Solar announced its Maple solar cells hit a conversion efficiency of 18.5%. As lower tier cell manufacturers like JA Solar, LDK Solar (NYS: LDK) , and Renesola (NYS: SOL) fight for the scraps left in the supplier market, the efficiency of the Maple cells may be the difference between joining the companies above and being one of solar power's new powerhouses.
The huge news of the day is SunPower (NAS: SPWR) acquiring Tenesol SA, a solar subsidiary of Total (NYS: TOT) . Tenesol is involved in the design, engineering, manufacturing, installation, and managing of solar energy systems. The company will add to SunPower's downstream capabilities with experience installing over 15,000 solar systems totaling 500 MW.
The deal itself is for $165.4 million in cash, but it's accompanied with a private stock sale to total of 18.6 million shares for $8.80 a piece, a 50% premium to last night's closing price. While the announcement didn't say if the deal would be accretive Telesol will have approximately 200 million euros in revenue this year so it will be a nice boost to the top line.
The overall deal does two things for SunPower, it expands the amount of captive demand the company has for modules and also reinforces Total's commitment to the company. A giant in the energy sector like Total is nice to have in your corner.
Foolish bottom line
While some companies are giving up on solar SunPower, my energy pick for 2012, is continuing to expand its reach. As this solar shakeout continues we'll see both the trend of bankruptcies and expansions continue.
Interested in reading more about solar stocks? Add the solar stocks below to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.
At the time this article was published Fool contributor Travis Hoium owns shares of First Solar, Sunpower, and has also sold puts in SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of Total and First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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