SunPower Sells Majority Stake to French Oil Giant Total

French oil and gas giant Total (TOTF.PA) is buying a majority stake in one of the few, large US-based solar companies – SunPower (Nasdaq: SPWRA, SPWRB).

Total is the fifth largest oil and gas company in the world with vast geographic reach and financial resources. The deal is one of the largest investments by a traditional oil and gas company into the renewable energy space and is viewed as a vote of confidence in the long term viability of the solar industry. 

Total likely used the opportunity of low solar industry valuations to make the investment at a reasonable price.

SunPower plans to sell 60% of its shares for for $1.38 billion, the companies announced Thursday. It’s one of the largest solar acquisitions to date.

A Total Group subsidiary will buy SunPower shares at $23.25 per share for each class, a 46% premium over the April 27, 2011 closing price. That values SunPower at $2.3 billion.

In addition, Total will provide SunPower with up to $1 billion of credit support over the next five years.

Their press release says the companies have entered into a "broad strategic relationship to shape the future of the solar industry."

"Total’s commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector," said Tom Werner, SunPower’s CEO.

"With Total’s $1 billion credit support agreement, solar research and development investments and the other resources available through its global network, we have taken the next step in positioning our business for continued growth and long-term success. Our relationship with Total will improve our capital structure enabling SunPower to accelerate our power plant and commercial development businesses, and expand our manufacturing capacity with lower cash requirements."

SunPower will continue to operate under present management. Total opted against an outright purchase to maintain SunPower’s entrepreneurial nature and agility. The Board of Directors will be expanded to 11 members, 6 of which nominated by Total.

"Over the past years, Total has built up sizeable renewable energy activities. Today, Total is executing on its strategy to become a major integrated player in solar energy. We evaluated multiple solar investments for more than two years and concluded that SunPower is the right partner based on its people, world-leading technology and cost roadmap, vertical integration strategy and downstream footprint," said Philippe Boisseau , President, Total Gas and Power Division.

Consolidation of the solar industry is inevitable, spurred by intense competition from low-cost Chinese producers that have emerged over the past years. Independent solar companies  need capital to expand; selling to multinationals is a prime way to do that. First Solar (Nasdaq: FSLR) is one of the few big US independent solar companies left. 

Last November, Total it would build a 50 MW solar manufacturing facility in France and also took a 20% stake ($45 million) in Massachusetts-based Konarka, which makes organic solar cells.

In 2010, French nuclear giant Areva last year acquired Ausra, to take a lead in concentrating solar, and Japan’s Sharp, one of the world’s largest solar panel manufacturers, bought Recurrent Energy, to enter solar plant development. 

SunPower is both a solar panel manufacturer and a solar plant developer. Founded in 1985, it’s known for having the most efficient panels, with a unique style that makes them more attractive on roofs – which fetches a premium price.

The boards of both companies have approved the agreement. It still has to clear anti-trust authorities in the U.S. and Europe.

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