Please ensure Javascript is enabled for purposes of website accessibility

Why France Is SunPower's Secret Weapon

By Travis Hoium – Aug 16, 2019 at 8:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The U.S.-based solar panel manufacturer benefits there from its alliance with its majority-owner, French energy giant Total.

When investors think about the locations that solar companies are relying on for demand, France may not be the first one that comes to mind. The country isn't particularly big in the solar industry -- it aims to install just 2.7 gigawatts (GW) this year, out of the approximately 120 GW that is expected to be installed globally. But there's one solar company in particular that's focused on taking as large a share of that business as it can get. 

SunPower (SPWR 1.91%) and its parent Total (TTE 5.83%) have won as much as one-third of France's solar power tenders, and with 2.7 GW allocated this year and 2.9 GW each of the next five years, the stakes are worth billions. 

Large solar installation in a field.

Image source: SunPower.

SunPower's symbiotic relationship with Total

SunPower isn't directly a leader in development in France, but it leans on parent company Total to build -- and sometimes own and operate -- projects. Solar is part of the oil and gas giant's strategy to diversify its energy mix, and guaranteed rates in France provide it with a good development opportunity. 

Since SunPower moved out of the business of large-scale solar power system development, Total has stepped in, offering solutions from SunPower around the world. Both companies hope this will lead to large opportunities elsewhere. 

Why France works for SunPower

The French market is a nice foundation for both SunPower and Total. For SunPower, it provides steady demand for solar panels to be used in everything from large-scale projects to rooftop installations. In a relatively high-cost market, SunPower's high-efficiency products have proven attractive because they squeeze more energy production from each square foot. 

For Paris-based Total, operating in France offers a bit of a home field advantage when it comes to finding solar project opportunities. The company can also easily collect data about the cost of building projects and the performance of solar systems, which will help it develop models for further development. As it invests more in renewable energy assets, it'll also slowly shift its earnings structure to include these assets, which investors will become accustomed to over time. Energy companies that have tried to shift too quickly to renewable energy have struggled to convince investors that the strategy is a sound one, because the financial results look so different from those of traditional energy businesses. 

In short, investors should view France as a testing ground for Total, and a place where SunPower can prove its technology excels in a competitive, but mature, market. 

A steady stream of demand

Building solar in France can provide both SunPower and Total with a steady stream of demand each year under a solid regulatory framework -- something which many developing countries lack. That's a strength for both companies, and their partnership is beginning to bear fruit. 

The next step on the road to making it a true success will involve taking what they're learning, and applying it to larger projects in the Middle Eastern, African, and South American regions where Total has a presence in oil and natural gas production. Together, they could become a power couple in renewable energy globally. 

Travis Hoium owns shares of SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SunPower Corporation Stock Quote
SunPower Corporation
$23.48 (1.91%) $0.44
TotalEnergies Stock Quote
$49.23 (5.83%) $2.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.