This Solar Company's Diversification Is a Catalyst

Author's Avatar
Dec 30, 2014

Sun Power (SPWR, Financial) witnessed robust demand across all its end channels and geographies. This is a key reason why the company's outperformance will continue in the future.

A look at the different markets

For the distributed generation business, Japan was its major market with 28% of its shipments during the quarter. In the U.S., Sun Power is experiencing healthy demand for its residential channel and for all its offers that include lease, loan and cash.

In commercial, Sun Power grabbed projects from both new and active customers. For instance, Sun Power extended its long-term 10-megawatt follow-on agreement with Verizon that is estimated to cover the use of carport, ground-mount and rooftop systems in 8 diverse locations.

For its power plant business, Sun Power continues to operate the Solar Star projects from MidAmerican. Also, the development of its Quinto project remains on track with the completion estimated to be executed by the second half of 2015.

Globally, Sun Power is executing brilliantly on its projects in Chile and South Africa, and it was lately awarded with a 41-megawatt supply contract in the recently opened French tender process.

Technology roadmap to drive growth

Sun Power executed brilliantly on its technology roadmaps and delivered a key milestone in the third quarter, producing its billionth high-efficiency, industry-leading solar cell.

From the operations perspective, Sun Power is accelerating the development of Fab 4 with first silicon estimated to be delivered by early next year.

Power plants are believed to be the main drivers of its worldwide business. In the Americas, Sun Power has currently reconnected with over half of the 579-megawatt Solar Star project, and development of its 135-megawatt Quinto project is well on track. In Chile, Sun Power’s 70-megawatt Salvador which is its merchant plant is nearing completion, with all the PV panels installed already and the project is forecast to be fully energized by this year end.

Considering Africa, Middle East and Europe in the third quarter, Sun Power was assigned a 41-megawatt supply contract from a GDF SUEZ subsidiary, comprising of 4 French power plant projects. The first French power plant project is already partially delivered with the remaining planned to be developed by the end of the consecutive year. Sun Power also captured a 1-megawatt system from the Dubai Airport which is estimated to be at the top in a high-profile projects pipeline in the Middle East.

In China, Sun Power is continly expanding its LCPV joint venture, and it is finding new ways to utilize its early success in Inner Mongolia into different provinces. Sun Power views significant opportunity for this innovative technology in an LCV-LCPV pipeline of over 1 gigawatt capacity.

In the U.S., Sun Power is critically balancing its residential business between lease transactions and cash, struggling with the weaker demand. This balance is estimated to accelerate the short-term cash flow generation whereas holding a longer-term booked value stream in line with its holdco strategy. In Lease, by the end of third quarter, Sun Power has nearly 25,000 customers making the total contracted payments of over $750 million.

Sun Power extended its Corporate Alliance program in the quarter, with unique agreements for both Volkswagen and Audi, to introduce its industry-leading, superior-quality solar solutions for their U.S. customers. Sun Power also lately declared its very recent public sector PPA win with a 16-megawatt ground-mount project for UC Davis. Upon completion, this project is believed to be the biggest solar project in any university or college in the U.S. and is estimated to add to its holdco project portfolio.

The DG market in Europe is continuously evolving with pricing and demand remaining competitive. Sun Power witnessed excellent traction in both France and Germany for the quarter and remains optimistic on the development of EU markets in long-term.

Conclusion

In Asia Pacific, Japan is believed to a major market for Sun Power which is successfully leveraging its partnerships with Sharp and Toshiba to penetrate the key market. During the quarter, Japan comprised of 28% of Sun Power’s total shipments. And, Sun Power is renewing its supply agreement with Toshiba until 2018 and expects Japan to remain a significant material market the future.