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French oil giant boosts stake in San Jose solar company

December 23, 2011|Bloomberg

Total SA, Europe's third-largest oil producer, increased its bet on solar energy by buying more of San Jose-based SunPower Corp. and selling its renewable energy development unit to the U.S. company.

Total, which already owns 60 percent of the second-largest U.S. solar-panel maker, agreed to pay $163.7 million to raise its stake to 66 percent, SunPower said today in a statement. The solar company will buy Total's Tenesol unit for $165.4 million in cash.

Total is buying the SunPower shares at a 50 percent premium over yesterday's closing price, a move that Pavel Molchanov, a Houston-based analyst at Raymond James & Associates Inc., said was a vote of confidence in the company. Its plans contrast with those of BP Plc, Europe's second-largest oil company, which is exiting the solar industry after 40 years.

"Total not only made a big bet" on solar with its $1.3 billion investment in SunPower in June, Molchanov said. "It's now doubling down by investing more money."

The investment may be more symbolic than practical, he said. "I'm not sure the 6 extra percent means much, but they are putting their money where their mouth is." Total is "telegraphing that they remain committed to SunPower."

SunPower shares have plunged 73 percent through yesterday since April 29, the day after Total announced that it would buy its majority stake. SunPower rose 2.6 percent to $6.00 at 1:32 p.m. in New York today. Total climbed 2.1 percent to 38.64 euros.

Slumping Solar Prices

Solar panel prices have slumped 47 percent this year. Global supply increased as producers, especially in China, boosted production while demand growth slowed after Germany, Italy and other important markets cut incentives.

That's helped drive three U.S. solar companies into bankruptcy this year including Solyndra LLC, which received a $535 million U.S. government loan guarantee. Two German companies, Solon SE and Solar Millennium AG filed for insolvency this month.

BP told staff this month it's closing its solar business because the division has become unprofitable.

Other companies are moving into the solar industry. Warren Buffett's MidAmerican Energy Holdings purchased this month a $2 billion solar project under development in California and 49 percent of a $1.8 billion plant being built in Arizona.

Global investment in renewable energy was $195 billion in 2010 and is expected to more than double to $395 billion in 2020, according to Bloomberg New Energy Finance.

Underrepresented Markets

Buying Tenesol will bring "added flexibility and a stronger marketing presence in key markets where we currently are underrepresented," SunPower Chief Financial Officer Dennis Arriola said Nov. 3 on an earnings conference call, when SunPower was still considering the acquisition.

Tenesol has installed more than 500 megawatts of solar systems worldwide, mostly in Europe and emerging markets.

"Combining the activities of Tenesol with SunPower is a step forward in Total's strategy to become a world power in the promising solar industry," Philippe Boisseau, president of the oil company's gas and power division, said in the statement.

Helen Kendrick, a SunPower spokeswoman, said the company wouldn't comment on the deal beyond the statement.

Total will purchase the SunPower shares when the Tenesol acquisition closes, which is expected in early 2012.

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