Wells Fargo & Company (NYSE: WFC) and solar technology company SunPower Corporation (NASDAQ: SPWRA) teamed up today with an agreement for Wells to finance up to $100 million in new solar energy systems. SunPower will create agreements with end power users and handle operational issues, and Wells will finance and retain ownership of the systems, according to a pair of press releases from the two companies.
The Business Insider says that a research note from FBR Capital says this amount will allow SunPower to add about 20-25 MW of capacity, and that pricing for the solar power will be at competitive rates of under $0.15/kwh. The overall effect on earnings is expected to be immaterial. The average estimate for EPS for the 2009 fiscal year is $1.07, but with a wide range of $0.03 to $1.48. EPS last year was $2.28.
The deal comes as the solar market, which boomed in prior years from flows of venture capital seeking to create a clean energy source competitive with rising oil prices, is seeing pricing pressure from excess capacity and a lack of demand. The global credit crunch has halted the ability of utilities and governments to finance the large-scale solar projects that solar power companies were depending on to generate profits.
The poor near-term demand picture and a high initial cost structure led SunPower to raise over $400 million in new capital at the end of April, in a combination offering of convertible debt and additional stock. The capital raise was successful, though, and SunPower was able to increase the amount of both offerings. SunPower stock is down more than 80% from its late 2007 high.
Wells Fargo has completed more than 150 similar deals to invest in commercial solar projects through their Environmental Finance unit, which has also financed wind and thermal projects. It's an area the company is excited about, according to spokeswoman Stephanie Rico; since 2006, Wells has offered nearly $2 billion in capital to build clean energy infrastructure.
James Cullen also edits and writes at CollegeAnalysts.com. He has no personal position in the stocks mentioned above.
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