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8point3 (CAFD) to Buy 49% Stake in SunPower’s Solar Project


8point3 Energy Partners CAFD announced that it has entered into an agreement to acquire a 49% interest in SunPower Corp.'s SPWR 102-megawatt (MW) Henrietta solar project for $134 million. Meanwhile, Southern Company SO will continue to hold its 51% stake in the project.

8point3 Energy is a partnership formed by First Solar, Inc. FSLR and SunPower to own, operate and acquire solar energy generation projects. The sponsors of 8point3 Energy intermittingly drop down assets to the partnership. In Apr 2016, the companies dropped down 90 MW of solar projects to the partnership.

Benefits of the Transaction

The acquisition is expected to generate nearly $10.9 million in annual cash distributions throughout its 20-year contract life. It will enable 8point3 Energy to hold an interest in 637 MW of solar projects.

The acquisition is expected to close in Sep 30, 2016, subject to financing and other customary closing conditions. 8point3 Energy will finance the stake purchase through a combination of cash on hand, borrowings under its existing credit facility and the issuance of additional equity.



Scope of Alternate Energy

Regulations pertaining to pollution control are becoming increasingly stringent, making it crucial for utilities to spend more on emission control infrastructure. Meanwhile, because of their clean-burning nature, investment in the alternate energy space could prove to be profitable. In particular, solar energy, which presently contributes to only 1% of the total electricity generation in the U.S., represents ample scope of improvement in the days to come.

Earnings Update

The partnership reported third-quarter fiscal 2016 earnings of 38 cents, missing the Zacks Consensus Estimate of 42 cents by 9.5%. In the fiscal fourth quarter, revenues are projected to be in the range of $13.5 million to $14.5 million, while for the full year, revenues are anticipated in the $60.2–$61.3 million band.

Zacks Rank

8point3 Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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