By Eric Wesoff
SunPower (NASDAQ:SPWR) started off the new year with a big sale.
The solar project developer and PV module manufacturer just announced the sale of its 579-megawatt Antelope Valley Solar Project (AVSP) to Warren Buffett's MidAmerican Renewables. The sale price, including interest in the project and engineering, procurement, and construction (EPC) services, looks to be in the range of $2.0 billion to $2.5 billion, according to Ben Kallo of Baird Equity Research. Shares of SunPower stock jumped 9 percent on the news.
Construction starts this year. The plant will provide power to Southern California Edison (SCE) under long-term power purchase agreements (PPAs) starting in 2015.
We spoke with SunPower CEO Tom Werner about the project.
"It's huge," said the CEO. "Because of the scale of this project, this is not something you start building unless you've got the financing or unless you've sold it. So, the transaction itself means that shovels will hit the ground pretty quickly -- because that's a prerequisite for something of this scale."
He added, "There is no other project of this size. This is the largest ever. And there aren't going to be many more of this size."
Here's a link to the Draft EIR and an EIR addendum for the project, which spans 3,230 acres across Kern and Los Angeles counties. The power plant has its final conditional use permits and has completed its CEQA-mandated environmental review.
Regarding MidAmerican, the buyer of the plant, Werner said, "This is the first time we've worked with [MidAmerican], but I will say we know them well. [...] It's a Buffett company and really credible. They have two gigawatts of renewables, they have tax capacity -- these guys know what they're doing, and they get deals done. This is a real stamp of approval on SunPower."
"A project of this scale is roughly a third of our revenues for the next few years -- if our revenues were similar to what we guided to last year. Which gives us the stability, the foundation for our employees and our suppliers and people we work with," said the CEO, adding, "And that also gives us the scale to get cost out further. Because we build the power plant in blocks -- generally speaking, one-megawatt blocks -- since we're building 579 megawatts, that means we have 579 opportunities to get cost out and improve things."
"It gives us cash generation that's very predictable from the project. So, counterparties who care about cash generation -- that is, financiers and banks -- do see us as being far more credit-worthy, which will have a positive impact on [for example] a residential lease program."
Kallo of Baird Equity Research saw the sale leading to "significant revenue generation opportunity, as well as improved sales visibility in out-years. Additionally, due to the large scale of the project, it gives SunPower a sizable captive demand channel for its modules, which should help ensure the company maintains healthy factory utilization levels even if the oversupply conditions in the industry take longer than expected to be resolved."
The project uses SunPower solar panels mounted on SunPower T0 Trackers. SunPower will serve as EPC contractor and will operate and maintain the site.
Werner said, "This is almost the size of a coal-fired power plant. Just think: four or five years ago, if we would have said that was going to happen, people would have thought you and I were crazy."