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5 Images Every First Solar Investor Should See

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5 Images Every First Solar Investor Should See
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On February 23, a Deutsche Bank research report shed some light on the proposed First Solar, Inc. (NASDAQ: FSLR) "Yieldco JV" with SunPower Corporation (NASDAQ: SPWR).

Deutsche Bank upped its price target for First Solar from $60 to $68 and raised the company to a Buy rating from Hold.

5 Slides That Support The Yieldco JV

Equity Value Contribution

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"Valuation is now based on approximately $14 of equity value from Yieldco at 5 percent yield plus 10x 2015 EPS of $4.53, plus $9 of net cash," the analysts wrote.

Key Assumptions

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SunPower "has spoken publicly about approximately 640MW of potential yieldco assets consisting of 245MW operating, 183MW in construction, and 212MW contracted. In aggregate, SPWR expected these approximately 640MW to yield $90-100 million of unlevered cash, or $70-80 million of CAFD (85 percent payout ratio)."

Related Link: Why First Solar, Sunpower YieldCo Is Like Coke And Pepsi

Unsold Projects

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"First Solar did not give specific details around what projects it would drop into a Yieldco, but as of Q3 '14 we see 755MW of unsold projects with a PPA slated for a 2015 finish, and 744MW of projects by 2016, for a total of approximately 1500MWdc of projects currently unsold with a signed PPA by the end of 2016."

Identified Assets

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"FSLR has a stronger pipeline of unsold projects (mostly utility scale in the US) and strong balance sheet. On the other hand, SPWR has a great expertise in commercial/residential and international projects along with strong backing from TOTAL."

Forecasted Asset Pipeline

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Deutsche Bank's SunPower Valuation Is Unchanged

SunPower's price target, meanwhile, "is based on 20x 2016E EPS of $1.96 plus $1.25B in target yieldco equity value," (discounted back 10 percent to arrive at DB's PT of $43).

Downside risks, they write, include: "Regulatory/execution issues for installations, ability to fill pipeline, financing costs/access, capacity expansion timing, cost reduction abilities, competitor panel pricing, pace of lease monetization/expansion."

Image credit: Bjorn Laczay, Wikimedia

Latest Ratings for FSLR

DateFirmActionFromTo
Apr 2018Bank of AmericaUpgradesNeutralBuy
Apr 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Mar 2018UBSInitiates Coverage OnBuy

View More Analyst Ratings for FSLR
View the Latest Analyst Ratings

Posted-In: Deutsche Bank Total Yieldco JVAnalyst Color Long Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

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