Total Backs More Sunshine

| About: TOTAL S.A. (TOT)

Summary

SunPower acquires AU Optronics' share of Malaysian JV for solar PV fabrication.

Total Energy Ventures takes stake in AutoGrid.

Total Energy Ventures already has stakes in Sunverge, Aquion Energy and Stem.

Clear strategy to dominate the solar/storage industry as it emerges.

Total still hoping for a future for gas and oil, but it has a plan B.

As the storm clouds gather for the fossil fuel industry with possible imminent ratification of the Paris climate agreement, the oil and gas major that is showing most clearly its thinking is Total (NYSE:TOT). Total has made public its goal to be one of the top 3 solar companies.

Here I summarize recent actions relevant to Total achieving its goal to be one of the top 3 solar companies. This involves a combination of acquiring outright (or taking a major stake) in leading companies involved with solar power and energy storage, and investment in early stage companies with disruptive technologies.

Total is majority shareholder (~65%) in SunPower and it is actively involved with the "Oasis" integrated power plant solar solution offering of SunPower.

Things are very tough for solar PV suppliers as the relentless decrease in cost of solar PV continues, with latest low of $24.2/MWh joint bid by JinkoSolar (NYSE:JKS) and Marubeni (OTCPK:MARUY) for a 350 MW solar farm in Abu Dhabi. Note that this bid is being reviewed to make sure it is feasible. However the companies involved are major players. The availability of cheap finance is suggested to be critical for success of the project.

With prices nearing bottom, it is chaos for the solar PV suppliers. Notwithstanding its stock price being hammered, SunPower (NASDAQ:SPWR) shows no sign of losing its determination to be a major player in solar panel production and integration of solar power in distributed energy provision.

Today's news is that SunPower is purchasing for $170 million, AU Optronics (NYSE:AUO) share of a joint venture which manufactures solar cells at an 800 MW fabrication facility in Melaka, Malaysia. This resolves a dispute with AU Optronics and allows SunPower to upgrade the technology and expand production of the SunPower high efficiency solar cell technology. The agreement also involves a continuing relationship with AU Optronics through a supply agreement for provision of 100 MW of SunPower's E-series solar panels.

SunPower CEO Tom Werner positioned the acquisition as follows "Consistent with our previous comments, SunPower is working to increase our future manufacturing capacity for our highest-value products while driving down costs," Werner said. "We will thoughtfully manage capacity during the current industry volatility, but we are committed to being a leading upstream industry participant over the long term, leveraging our unique, high value solar panel technologies. Purchasing AUO's portion of the Melaka joint venture is an opportunity for us to enable technology upgrades, cost reductions and future expansion consistent with this strategy."

SunPower closed at $7.83, up 3.98% today on the news, while Canadian Solar was up 1.43% and First Solar (NASDAQ:FSLR) down 1.15% and JinkoSolar was down 2.6%. It might be worth watching to see if SunPower's dramatic reversal over the past month might have been overdone.

In a move indicating serious intent in the battery storage space, Total acquired 100% of leading European battery manufacturer Saft for $1.1 billion. The acquisition valued Saft at 9x 2015 earnings.

Total Energy Ventures

Total Energy Ventures is Total's venture capital arm. It is building an impressive list of strategic investments in innovative companies in the renewable energy (especially solar) space.

Sunverge is a pioneer in energy storage and distributed energy resource management. It's core business is in building elements of Virtual Power Plants (VPP) and assisting in connecting them up with a cloud based platform. Australian company AGL is the exclusive channel partner for Sunverge in Australia.

Total Energy Ventures participated in a $36.5 million Series C Funding round along with one of Australia's largest integrated energy companies AGL, the Australian Renewable Energy Agency, SBCVC and Siemens Venture Capital.

This investment by Total gives it an insight into the development of VPPs.

AutoGrid is an "Energy Internet" company which has a software licence model to support energy utilities to reduce energy balancing costs and improve operational efficiency. It combines a silicon valley entrepreneurial culture with deep knowledge of employees hired from the utility industry. To date its focus has been on energy utilities in the US and Europe, although its biggest growth is now in the Asia Pacific, with emphasis on, but not limited to, China and Korea.

Recently it began to focus on India, which has different characteristics to US and European markets. With blackouts common and commercial and industrial customers invested in backup generation, AutoGrid has much to offer in terms of data analysis and optimization of the operating environment. It helps manage Distributed Energy Resources (DERs) in real time and at scale. AutoGrid's Energy Data Platform manages petabytes of smart meter, sensor and third party data and interprets it to predict and optimize operations of millions of assets in global energy networks.

The company's core focus is to provide software to energy utilities. Unlike some competitors it doesn't compete with its clients. It is not an energy aggregator. It has best of breed software and provides integration and engineering support.

While big companies like ABB (NYSE:ABB), GE (NYSE:GE) and Siemens (OTCPK:SIEGY) operate in the same space, AutoGrid believes its focus on software enablement differentiates it as having a clear focus. AutoGrid sees the big companies as having other (distracting) products to sell, making the software angle of less importance to them.

Total Energy Ventures has participated in AutoGrid's $20 million Series C-2 funding round.

Other Series C investors include :

· Energy Impact Partners, which is a utility backed investment firm that provides capital to companies optimizing energy consumption and improving sustainable energy generation. It represents five major utilities (Xcel Energy (NYSE:XEL), Ameren (NYSE:AEE), Southern Company (NYSE:SO), National Grid (NYSE:NGG) and Great Plains Energy (NYSE:GXP))

· Envision Ventures, which is a Silicon Valley-based software for big data venture fund

· Envision Energy, which is the second largest wind turbine company in China and has a significant focus on smart energy management software

· E.ON (OTCQX:EONGY), based in Germany, is one of the world's largest electric utility service providers

The above companies are all serious players in the energy space. It will be interesting to watch AutoGrid's development, with a group of major investors, many of which are possible acquirers.

Stem is a company focused on energy management through solar PV generation and battery storage. Total Energy Ventures invested in the company January 2015 in a $27 million Series B round. That round occurred when Stem was installing nearly 100 MW of behind the meter storage.

Stem has an 85 MW deal with Southern California Edison (NYSE:EIX), it has a relationship with Pacific Gas & Electric (NYSE:PCG) and was a successful bidder in Consolidated Edison's (NYSE:ED) demand response auction.

Aquion is a battery technology company in which Total Energy Ventures took a stake in November 2014.

Conclusion

This week might signal a significant change in the fortunes of the fossil fuel industry, as there is a meeting in New York to consider making the COP21 agreement on greenhouse gas emissions binding.

Of the oil majors, Total is the only company which is explicitly and seriously addressing what it will do in a carbon constrained world. New developments both with SunPower and also through Total Energy Ventures indicate an integrated and strategic approach to Total becoming one of the major solar companies going forward. For those who aren't ready yet to let go of their oil and gas investments, Total offers such an investment, but with a bridge to the future.

SunPower's share price has been further savaged this month and it has been below $8 for the last 4 trading sessions. There is a lot of uncertainty in the solar industry at the moment and prices of panels are under great stress. I don't think SunPower will be a casualty of the coming shakeout, but it is for investors to review whether now is a good time to take a stake or wait for worse times before it gets better.

Keep an eye out for what happens to the solar/storage/energy management investee companies of Total Energy Ventures.

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Disclosure: I am/we are long SPWR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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