Emerging Solar Market Creates Demand for Strong Projects from SunPower

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Nov 25, 2014
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SunPower Corporation (SPWR, Financial), is a solar energy services company and operates in the Americas, the EMEA, and the APAC regions designing, manufacturing, and delivering solar systems to residential, commercial, and utility customers. The company posted robust third quarter results last month, marked by solid performance across all geographies and end channels and beat consensus estimates on revenue and earnings.

A strong performance

Non-GAAP revenue came in ahead of the company’s own guidance with primary growth driver being an acceleration of Solar Star project, leading to around 309 megawatts connected to the grid. The Solar Star project is expected to be completed six months ahead of schedule by mid of next year. The non-GAAP gross margin for the quarter clocked 16.7% on the back of increasing demand and stable average selling price, or ASP.

SunPower delivered a solid performance in the residential products segment having deployed 92 MW globally which included 42MW in APAC, 11 in Europe and 38 in North America. The large projects had strong demand and margin from residential customers in the American market gave a boost to the margin in America. The Solar market in America is growing at an explosive rate, increasing by 418% between 2010 and 2014.

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In its plant business, SunPower continues to execute well on the Solar Star projects from MidAmerican. Also, the construction is on track for Quinto project, which is expected to complete in the second half of 2015. It also continues to see strong demand from residential channel through cash, loan and lease offers. These tailwinds in the U.S. market are a solid growth driver going forward.

The prospects going forward

As per Research and consulting firm GlobalData, APAC’s solar installation is expected grow at CAGR of 18.6% per year, rising from 19.6 GW cumulative installed capacity in 2012 to 420.6 GW by 2030. Out of this 77% will be accounted for by the twin market leaders – Japan and China.

SunPower has presence in both markets. The company has already extended its supply relationship with Toshiba until 2018 and Japan accounted for 28% of shipments during the quarter. Of the three regions, only APAC margins were lower, primarily due to the impact of a legacy project developed in 2012 at a lower margin.

Going forward, from the start of next year, the company expects the APAC margins to move back to historical levels of high teens to low 20s and this looks to be in line with the growth prospects in APAC region. The company is also executing well on its projects in South Africa and Chile where it was recently awarded a 41-megawatt supply agreement in the French tender process.

During the quarter, the factories ran at full capacity utilization. SunPower is continuing the construction of Fab 4, besides implementing the new technology at Fab 2. The first silicon is expected out of Fab 4 early next year. The company executed well on the technological roadmap front, producing the billionth Industry-leading, high-efficiency solar cell. Going forward, the company expects its upstream capacity to grow threefold by 2019.

SunPower is also betting on its holdco strategy for long-term growth. The current holdco pool stands at 640 megawatts and this includes the new residential leases as well as 21 megawatts of commercial PPAs, including 16-megawatt project for UC Davis. Quinto project saw closure for construction financing and remains on track for completion next year.

The company is also shopping for growth. SunPower recently announced the acquisition of Solarbridge Technologies, a leader in integrated microinverter technologies for the solar industry. "SunPower's acquisition of SolarBridge and its high performance microinverter technology will allow us to develop a differentiated product specifically optimized for our high efficiency solar panels," said Tom Werner, SunPower president and CEO.

"This is the beginning of integrating electronics into our world-class solar panel technology. In this case, the combined result will provide our residential customers with an elegant, reliable and complete solution that fits their home specifications, including system design flexibility, ease of installation and maintenance and improved overall aesthetics."

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