The Federal Energy Regulatory Commission on Nov. 16 approved an Oct. 5 application from 8point3 Energy Partners LP and Desert Stateline LLC for the sale by First Solar Inc. of certain indirect passive membership interests in Stateline to 8point3 Operating Co. LLC (OpCo).
FERC noted: “Applicants state that the Proposed Transaction may not require authorization under FPA section 203(a)(1); they nevertheless ask the Commission to authorize the Proposed Transaction. This order authorizes the Proposed Transaction without making any determination of jurisdiction.”
OpCo is jointly owned by 8point3 Partners, First Solar and SunPower Corp. (caled the “Sponsors”). OpCo indirectly holds active and passive ownership interests in a portfolio of solar projects that the Sponsors transferred as part of an initial contribution of assets. OpCo currently holds equity interests in approximately:
- 467 MW of solar wholesale generation capacity located in the California Independent System Operator (CAISO), PJM Interconnection, Imperial Irrigation District and Public Service Co. of Colorado markets and balancing authority areas (BAAs);
- 24 MW of behind-the-meter, non-jurisdictional commercial and industrial solar facilities in California and Maryland; and
- 39 MW of behind-the-meter, non-jurisdictional residential rooftop solar facilities located in nine states.
The jurisdictional solar generation facilities in which OpCo holds interests are all either qualifying facilities or directly owned by public utilities with market-based rate authorization. 8point3 Partners owns a minority economic interest in OpCo through the holding of membership interests referred to as “common units” and controls OpCo through the ownership of a non-economic, managing member interest. The Sponsors indirectly hold the majority economic interests in OpCo. The Sponsors indirectly control 8point3 Partners.
There are two classes of limited partnership interests in 8point3 Partners; Class A shares and Class B shares. The Class A shares were previously sold to the public in an initial public offering in June 2015, are currently traded on the NASDAQ Global Select Market, are entitled to 100% of the economic interests in 8point3 Partners, and represent a minority of the limited voting rights in 8point3 Partners. The Class A shares are passive in nature and do not constitute voting securities. The Sponsors hold the Class B shares, which do not carry any economic interest, and represent a majority of the limited voting rights in 8point3 Partners,
8point3 Partners is a yieldco formed by the Sponsors as a vehicle for monetizing the value of certain of their contracted solar generation assets. Iin order to ensure that cash distributions by 8point3 Partners are maintained and increase over time, each of the Sponsors has entered into a Right of First Offer Agreement (ROFO Agreement) with OpCo pursuant to which the Sponsor will sell interests in certain of its generation facilities to OpCo in certain circumstances. This just-approved transaction will occur pursuant to First Solar’s ROFO Agreement with OpCo.
Stateline owns an approximately 300-MW photovoltaic facility located in San Bernardino County, California. The project began commercial operation in late summer 2016 and is interconnected to transmission facilities owned by Southern California Edison (SCE) within the CAISO market. The entire output of the project is committed to SCE pursuant to a long-term power purchase agreement. Stateline is authorized to make wholesale sales of electric energy, capacity and ancillary services at market-based rates and is an exempt wholesale generator.
Stateline is solely owned by Desert Stateline Holdings LLC (Stateline Holdings). Southern Renewable Partnerships LLC (Southern Renewable), a wholly owned indirect subsidiary of Southern Co. (NYSE: SO), is the managing member of Stateline Holdings and owns 100% of the voting, Class A membership interests in Stateline Holdings.
FSAM DS Holdings LLC (FSAM Holdings) is a wholly owned subsidiary of FS Asset Management, which in turn is a wholly owned, indirect subsidiary of First Solar. FSAM Holdings owns 100% of the passive Class B membership interests in Stateline Holdings (Class B Interests).
As the managing member of Stateline Holdings, Southern Renewable has the sole power and authority to conduct the day-to-day management and operation of Stateline Holdings, and by extension, Stateline and the project. The Class B interests are passive non-voting securities.
First Solar has decided to offer to sell indirectly up to 100% of the Class B interests in Stateline Holdings through the sale of interests in FSAM Holdings that are subject to the ROFO Agreement with OpCo. Thus, First Solar and OpCo are in the process of negotiating the sale of such passive interests to OpCo through this transaction. As a result of this transaction, OpCo would acquire indirect passive ownership interests in Stateline and the project.