SunPower Posts Growing Solar Margins, Markets, and Project Pipeline

But losses continue as well. Can SunPower reduce costs and make it into the black in 2013?

Eric Wesoff February 11, 2013

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

SunPower (SPWR) shared news of a better-than-expected Q4 -- with a non-GAAP profit in a noisy $678.5 million revenue quarter that included a number of one-time adjustments and costs. According to the GAAP worldview, the company lost $144.8 million for the quarter, attributable to the previously mentioned one-time charges.

SunPower shipped 153 megawatts in the fourth quarter for a total of 936 megawatts in 2012 with revenue of $2,417.5 million compared to $2,374.4 million in 2011.

SunPower

SunPower (and First Solar) was savvy enough to become a solar developer and power plant builder in addition to manufacturing photovoltaic (PV) panels. It's possible that these two firms could not have survived as pure-play module companies.

SunPower highlights its "efficiency-adjusted" message and First Solar trumpets its off-axis performance -- but in the end, a power plant has to deliver cheap kilowatt-hours.

SunPower CEO Tom Werner said that the highlight of the quarter was the sale of its 579-megawatt Antelope Valley Solar Project (AVSP) to Warren Buffett's MidAmerican Renewables. The sale price, including interest in the project and engineering, procurement, and construction (EPC) services, looks to be in the range of $2.0 billion to $2.5 billion, according to Ben Kallo of Baird Equity Research. When completed, the 579-megawatt AVSP could edge out the 550-megawatt Topaz project -- developed by First Solar but also owned by MidAmerican -- as the nation's largest PV plant.

Werner said of the project in an earlier interview, "There is no other project of this size. This is the largest ever. And there aren't going to be many more of this size."

Here are some SunPower highlights since Q3 2012:

Signed a joint venture for the C7 concentrator in China
Construction started on 33 megawatts in two projects in South Africa
Japan accounted for approximately 15 percent of shipments in Q4
The residential lease program has signed up a total of 14,200 customers and installed 114 megawatts
Initial volume production of next-generation 23.5 percent Maxeon cells is underway
The 250-megawatt CVSR project for NRG remains on track, due to be completed by the end of the year
Finalized $100 million agreement with U.S. Bancorp in lease financing

Strong North American margins made up for a difficult quarter in Europe, Middle East, and Africa (EMEA). SunPower is seeing its leasing program accelerate, with demand overtaking financing capacity, exhausting its cash grant lease program months ahead of plan. The firm looks to launch new financing programs in the European market -- like its leasing business in the U.S.

Guidance

The company guided Q1 2013 non-GAAP guidance as: revenue of $475 million to $550 million, gross margin of 18 percent to 22 percent, capital expenditures of $30 million to $40 million with 150 megawatts to 170 megawatt realized. On a GAAP basis, SunPower looks for revenue of $450 million to $525 million, gross margin of 3 percent to 7 percent and loss per share of $0.85 to $0.60.
SunPower management looks for 2013 sales to be flat compared to 2012, but with improved earnings per share.

Sanjay Shrestha of Lazard Capital notes "strong visibility in annual shipments of about 1 gigawatt, coupled with mix of high-margin business and ongoing cost reduction initiatives. [...] We believe the company is one of the beneficiaries of ongoing bifurcation in the PV industry."

Chart from GTM Research's report U.S. Residential Solar PV Financing: The Vendor, Installer and Financier Landscape, 2013-2016