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Total Buys Majority Stake in SunPower

In a landmark deal for the solar industry, French oil major Total SA will spend $1.37 billion to buy a controlling stake in SunPower Corp. The San Jose, Calif.-based SunPower is one of the few companies that is successfully competing for market against Chinese panel makers. The deal is a major step for a solar company to join forces with a traditional fossil-fuel company that has access to cash and credit needed to accelerate solar deployment around the world, reports The Wall Street Journal.

Total said it would acquire a 60% stake in SunPower with the remaining shares publicly traded. It also said it would provide a $1 billion line of credit to help SunPower grow. According to WSJ, SunPower said the deal also provides SunPower with much needed access to debt financing.

Total, known for its oil and gas exploration and production, has had an active role in solar energy for nearly 30 years, but the move highlights solar’s growing viability as an energy resource, writes barrons.com, and the deal puts the value of the solar power firm at about $2.3 billion.

Indeed, streetinsider.com reported that solar stocks were trading sharply higher Friday following news. Shares of SunPower were up more than 35 percent in afternoon trade Friday while Total shares are up 0.6 percent. The key takeaway for investors, according to streetinsider, is “that Total, a major integrated oil & gas company, is now diversifying in a big way into solar.” Speculators were betting today that others, like Exxon, will follow.

SunPower CEO SunPower CEO Tom Werner echoed that sentiment almost verbatim. “This is old energy betting on new energy. This is a bet for the future,” he said to San Jose’s Mercury News.

According to Reuters, overall, Total’s move into renewable energy is one of the biggest ever by an oil and gas giant, and interest in the sector has grown in the wake of Japan’s Fukushima nuclear crisis.

Falling government support for solar power in Germany and Italy have put the solar sector under additional pressure. But, overall, the sector is eager to reject to government subsidy model, and investors have been waiting for large-scale consolidation in the solar sector. But activity has been slow because the industry is still in its early stages, and reliance on government subsidies to compete with fossil fuels is not a stable model.

The deal “is something we have been waiting for and with the industry gradually moving more from Germany, Italy and the rest of Europe to the U.S. and China, the utilities and power groups will get a bigger role,” Jon Sigurdsen, renewable fund manager at DnB Nor Group unit Carlson, said in the Reuters report.

Shawn Qu, CEO and founder of Canadian Solar told Mercury News, “the fact that a global oil and gas giant like Total has made such a significant investment in a solar company is extremely encouraging for the entire solar industry. Total’s investment demonstrates that solar is really coming into its own as a viable energy market, and traditional energy conglomerates want to be part of that burgeoning growth.”

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