First Solar to Sell O&M Business to NovaSource, Still Seeking Sale of Project Development Arm
First Solar has agreed to sell its North American operations and management business to NovaSource Power Services, the company formed from SunPower’s O&M business, as part of a streamlining to focus on its core business making thin-film solar modules.
The biggest solar panel maker in the Western Hemisphere has also officially launched a "strategic evaluation" of divesting its project development arm, one it hinted at in February but delayed over the spring due to the COVID-19 pandemic.
Thursday’s agreement to sell the O&M business was driven by expectations of a more challenging environment for a business that’s seeing increased competition and reduced power purchase agreement (PPA) prices for the utility-scale solar projects it serves, CEO Mark Widmar said during the Tempe, Ariz.-based company’s second quarter earnings conference call.
Back in 2017, First Solar’s O&M business was seeing above 30 percent gross margins driven by legacy contracts, he said. But since then, competitive pressure and falling PPA prices have driven those margins closer to the 10-percent range. While First Solar could retain the business, “we would need to continue increasing the business scale as well as enhancing the range of O&M product and service offerings” to keep up, he said.
That made the offer from NovaSource a compelling one, he said, although terms of the sale were not announced. The company, owned by private equity firm Clairvest Group, was created in May when it bought the solar O&M business of SunPower. The Silicon Valley-based solar company decided last year to spin out its module manufacturing business as Maxeon Solar to concentrate on residential and commercial solar installation and batteries and energy services.
Like many solar manufacturers, First Solar took on multiple aspects of the process of getting its modules into deployment in its early days. Similarly, it’s since been evaluating the competitiveness of its various business units, including its engineering, procurement and construction (EPC) business, which it abandoned last year to move to a third-party EPC model.
That decision has led to First Solar separating O&M activities from its North American project development business, which it raised the possibility of selling in February. Many solar EPCs are now offering O&M services through the timespan of the project guarantees they provide for their work, “and some of them want to do that longer term,” Widmer said.
While the search for different options for its project development arm slowed in the second quarter due to broader disruptions from the COVID-19 pandemic, First Solar decided in June “that the market is now in a better position to evaluate sale” or other strategic alternatives, he said.
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