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First Solar, SunPower evaluating sale of interests in 8point3 Energy Partners

First Solar Inc. and SunPower Corp. are separately exploring strategic alternatives that could include the sale of their interests in 8point3 Energy Partners LP, just two years after the solar developers brought the yieldco public.

Ahead of 8point3's first-quarter earnings release on April 5, First Solar indicated it has initiated a strategic review of its 28% interest in the joint yieldco. The review could entail a replacement of First Solar in 8point3, or no sale at all, according to April 5 statements from both sponsors.

As a joint-owner, SunPower indicated it too is evaluating its own strategic position in the yieldco, of which it owns 36.5%, and did not reject the possibility it could become the only sponsor after the review.

"As we accelerate the cash conversion cycle from our systems business we will further enable this important transition in our business," First Solar CEO Mark Widmar said in a statement, pointing to the developer's push to focus on its Series 6 solar modules. "We want to thank SunPower for their partnership in forming 8point3, which has a portfolio of high quality solar assets and proven operating performance. We look forward to working cooperatively with them through this process."

First Solar declined to comment on who it has hired for the strategic review. SunPower did not respond to request for comment, but did emphasize the prospect of replacing First Solar as one outcome.

"We will work with our financial advisors to evaluate all alternatives for our investment in 8point3, including a potential replacement partner for First Solar, as we believe 8point3 can continue to benefit from owning long-term, high quality renewable assets," SunPower President and CEO Tom Werner said in his company's separate statement.

Strong market for sale

Both companies left the door open to the possibility that the reviews may not culminate in any future transaction, but the growing market for contracted renewable assets similar those owned by 8point3 and other yieldcos could favor a sale by First Solar.

"The market is very strong for projects from both companies and as a testament to I think the sponsors, and as it relates to the 8point3, this is a collection of just really high investment-grade offtakes with 20-year plus contracts and very well structured without any project level debt. So these are really crown jewels," chairman and CEO of 8point3 General Partner LLC Chuck Boynton said, declining to comment on how long the review process could take.

In light of First Solar's announcement, 8point3 deferred discussions about debt refinancing and its right of first offer, or ROFO, pipeline.

Goldman Sachs analyst Brian Lee noted that First Solar accounts for about half of the project pipeline to which 8point3 has a ROFO. Boynton said it is too early to say how First Solar pulling out of the venture would impact the yieldco's strategic approach.

Boynton said he did not think First Solar's announcement would impact the companies' relationships with investors.

"We do not know what that outcome will be, but I do not expect us to be doing things differently or against each other during this period of time. So I think the reality is that we have guided the year assuming no additional drop downs, and that's probably a fair assumption," Boynton added on the call.

J.P. Morgan Securities analyst Paul Coster said there is "an imperative at First Solar to liquidate some of their projects that are held on the balance sheet" to help with the transition to the company's Series 6 panel line, a nod to First Solar's strategic pivot into its module business.