SunPower Corporation (SPWR - Analyst Report) has sold its two co-located Antelope Valley Solar Projects (“AVSP”) to MidAmerican Solar, a unit of Berkshire Hathaway (BRK.B - Analyst Report). SunPower will receive a purchase amount in the range of $2 billion to $2.5 billion.
Located in Kern and Los Angeles Counties in California, these two projects have electric generation capacity of 579 megawatt (“MW”). The two projects will comprise SunPower Oasis Power Plant, which is a fully integrated modular solar technology unit that is built to quickly set up utility-scale solar projects with minimum land use. The Oasis product employs high-efficiency SunPower solar panels installed on SunPower T0 Trackers. These T0 Trackers have the capacity to capture 25% additional energy as they keep the panels well positioned to track the sun during the day.
Construction of these two projects is expected to begin in the first quarter of 2013 and get completed by the end of 2015. Besides acting as an engineering, procurement and construction contractor, SunPower will operate and maintain the facility as per a multiyear services agreement.
Per the two long-term power purchase contracts that are approved by the California Public Utilities Commission (“CPUC”), the renewable energy generated from these two projects will be sold to Southern California Edison (SCE), a subsidiary of Edison International (EIX - Analyst Report).
Together these two projects will be the largest solar photovoltaic power development in the world. During the construction period, the projects are expected to create 650 jobs. Also, the projects will be able to offset more than 775,000 tons of carbon dioxide emissions per year, which is almost equal to eliminating approximately three million cars over 20 years of the operation of the plant.
SunPower is not the only company to have entered into a solar project with MidAmerican Solar. This is MidAmerican’s third solar investment. Its other solar projects include First Solar’s (FSLR - Analyst Report) 550-megawatt Topaz Solar Farms in San Luis Obispo County and a 49.0% ownership interest in the 290-megawatt Agua Caliente solar project in Yuma County, Arizona.
Based in San Jose, California, SunPower Corp. designs, manufactures and delivers the highest efficiency, highest reliability solar panels and systems. Residential, business, government and utility customers rely on the company's experience and guaranteed performance to provide maximum return on investment throughout the life of the solar system.
SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company is proactive in entering new markets. Throughout the world, SunPower has more than 1,000 solar power plants in operation, which also includes the first 130 megawatts of 250-megawatt California Valley Solar Ranch, which is under construction in San Luis Obispo County, California.
Going forward, we are bullish on the company due to its diversified channel strategy with a strong presence in the residential and commercial market, along with its status as a conversion efficiency leader. Also, the proceeds from the sale of the project, to some extent, would help in overcoming the glut of solar panels in the market and lower average selling prices that the company is facing.
However, we still remain concerned due to the higher cost structure of the company compared to its peers, subsidy roll back risk in Europe, rising competition, financial stability of its customers and foreign exchange risk. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.