I haven’t written much about solar recently, and for good reason: There really hasn’t been much to write about. Many U.S. solar panel companies have gone belly-up, like EPV Solar, whose intellectual property was purchased by New Millennium Solar Equipment Corporation.
- Others, like Evergreen Solar, Inc. (Nasdaq: ESLR), have outsourced their manufacturing operations overseas. Even that hasn’t helped this struggling U.S. manufacturer, whose shares are trading for just over a $1.
- Still others have merged with or been bought out by larger competitors, like Advanced Solar. Running out of money, it was acquired in November of 2009 by Applied Materials (Nasdaq: AMAT). Or OptiSolar, which was acquired for $400 million by First Solar, Inc. (Nasdaq: FSLR) in March of 2009.
But last week, an event took place that could be a big game changer for the solar industry…
Total French Oil Giant Controls 60% of SunPower
Total S.A. (NYSE: TOT), the French oil and gas giant (the world’s fifth-largest), shelled out a cool $1.38 billion for a controlling 60 percent stake in SunPower Corporation (Nasdaq: SPWRA).
Based in San Jose, California, SunPower’s deal with Total is already having repercussions across the entire market. Solar, like wind and geothermal, can be a capital-intensive business.
New manufacturing plants are expensive, as is the amount of capital required to ramp up production for large projects. Access to large amounts of capital won’t be a problem for SunPower, not with Total as their major shareholder.
Total has the industrial and financial muscle power that gives SunPower the ability to cut its costs for building new plants as well as the ability to quickly expand its manufacturing footprint.
Perhaps the biggest variable for solar companies is their cost of capital when financing new projects. That ultimately factors into the customers’ ability to calculate the cost of solar power when doing return on investment (ROI) calculations.
Having Total as a banker could allow SunPower to more easily undercut its competitors, including some of the big Chinese solar companies like JA Solar Holdings (Nasdaq: JASO) and Trina Solar Limited (NYSE: TSL).
Faster Growth on the Way for SunPower?
With essentially unlimited access to capital at very attractive rates (zero percent, perhaps?), SunPower shouldn’t have any problems accelerating its growth.
Increasing manufacturing capacity is a key element to achieving that higher growth, and that’s already underway. Right now SunPower has about 580 megawatts of manufacturing capacity, and says it will have one gigawatt by the end of the year, and two gigawatts by 2014.
And this isn’t Total’s first foray into the solar market. It already owns a solar module company, Tenesol, and a solar cell company, Photovoltech. Both will become part of SunPower once the deal goes through.
Why’s an Oil Company Getting Involved in Solar, Anyway?
Excellent question. The answer, at least in Total’s case, started back in 2007 when the company’s new CEO, Christophe de Margerie, took over and issued a company mandate to diversify into renewables.
Since then, it’s looked at over 200 solar companies before entering negotiations with SunPower nine months ago. The company has additional plans to enter the biomass field, but no concrete plans have yet been announced.
Total’s partnership with SunPower begs the question of whether France has plans to become a force to be reckoned with in greentech.
It would certainly seem to be the case.
- Schneider Electric has purchased five companies in the past few months to expand its presence in the power delivery and building management sectors.
- Saint-Gobain, Louis XIV’s mirror maker, recently invested $80 million in Sage Electrochromics, a maker of smart windows.
- In 2010, Areva SA, France’s nuclear power behemoth, bought solar thermal company Ausra.
- Veolia Environnement (NYSE: VE) is buying up water technology companies.
- Nissan-Renault is one of the top companies leading the charge on the EV front.
Perhaps the “French Connection” to greentech isn’t so surprising, when you think about it. After all, it was a Frenchman, Edmond Becquerel, who discovered the photovoltaic effect in the first place, way back in 1839.
A year after that in 1840, another Frenchman, August Mouchet proposed that steam engines could be solar powered. Yet another Frenchman, Gaston Plante, invented the commercial lead-acid battery in 1859, a design that’s still widely used today.
Since Total plans to run SunPower under its current management team, it will certainly be a solar stock worth watching over the next year or so. If it does well, Total might just decide to buy the rest of the company.
And if you’re a shareholder, that will likely mean tidy gains if the company continues to perform.
Disclosure: No positions