SunPower (Nasdaq: SPWR) has officially closed on its purchase of Tenesol SA from Total (NYSE: TOT), which is also SunPower's majority owner. This consolidates Total's solar business under SunPower's umbrella and expands the company's reach in solar installations.
For shareholders, the deal really just dilutes ownership slightly. The company sold 18.6 million shares of stock to Total for $8.80 per share to pay for the transaction, essentially covering all of its costs.
The impact on operations
For years, SunPower has been adding to its downstream solar installation capabilities. The company acquired Powerlight in 2006 and SunRay in 2010. This adds to the company's growing captive demand source, while growing its capabilities in smaller projects. Tenesol has completed over 15,000 installations of more than 500 MW, an average of just 33.3 kW each.
So this may not have a great impact on earnings in the near future, but if we go through another year like 2011 and demand falls off the table again, SunPower's solar-installation capabilities will help soften the blow.
Others trying to follow suit
First Solar (Nasdaq: FSLR) has also been in the large-scale solar installation business for some time, and Chinese competitors are starting to follow suit.
LDK Solar (NYSE: LDK) recently got a loan from the China Development Bank to build two solar plants totaling 8 MW. And Suntech Power (NYSE: STP) has a joint venture that finances, develops, and operates large solar power plants.
The trend will likely continue at more established Chinese companies. It's becoming imperative for manufacturers to integrate downstream to avoid the boom-and-bust dynamic that demand often takes. Module makers like Trina Solar and Yingli Green Energy are most likely to move into the power plant business in a big way because of their balance sheets and bankability of their modules. That's something to keep an eye on as China's new feed-in tariff creates a natural market for these competitors.
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