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Big Oil Takes a Plunge Into Solar

By Travis Hoium - Updated Apr 6, 2017 at 10:06PM

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Total is offering to buy 60% of SunPower. Is this the start of a trend?

Mark your calendars: April 28, 2011 was the day Big Oil took notice of solar power and couldn't stand on the sidelines any longer.

Total (NYSE: TOT), one of the biggest oil companies in Europe, made a massive tender offer for 60% of American solar manufacturer SunPower (Nasdaq: SPWRA). The offer is for $23.25 per share, a 46% premium to yesterday's closing price. The deal also includes a $1 billion line of credit over the next five years to SunPower.

This is a big deal because after years of complaints that the solar industry isn't economically viable, oil giants may finally be coming around to solar's potential. Until now, investments have been halfhearted PR stunts by companies like BP Solar or total disinterest (in the case of ExxonMobil). But this is different.

Total isn't making a halfhearted attempt at building a solar company. It isn't a tiny investment in an alternative energy startup; this is a multi-billion dollar investment in an independent, successful solar manufacturer. I'm even wondering if Total attempted to buy the whole company and SunPower said, "I don't think so."

Investors across the solar industry are taking notice with First Solar (Nasdaq: FSLR), LDK Solar (NYSE: LDK), and Canadian Solar (Nasdaq: CSIQ) all jumping higher today. Could this put pressure on other companies to make a move?

Mergers that might make sense
If other oil firms decide it's the right time to move into solar, I don't see it being with Chinese manufacturers who benefit from subsidies in China. It would make more sense to acquire a firm that is currently private, like Solyndra or BrightSource Energy.  It could also make sense to see a manufacturing company acquiring equipment manufacturer GT Solar (Nasdaq: SOLR) to take advantage of solar's massive growth in capacity.

Even a deal to give Evergreen Solar (Nasdaq: ESLR) the capital they need to survive might be a reasonable value with the right backer. But the company hasn't proven to be profitable like competitors, so even that's a stretch.

Bottom line: I don't think this will start a rash of acquisitions by big oil in the solar sector. But no matter how I look at this deal, I see it as a big boost for solar manufacturers in general.

What do you think about the future of solar deals?

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

TotalEnergies Stock Quote
$49.44 (0.63%) $0.31
First Solar, Inc. Stock Quote
First Solar, Inc.
$101.20 (2.11%) $2.09
Canadian Solar Inc. Stock Quote
Canadian Solar Inc.
$33.67 (2.22%) $0.73

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