U.S.-based solar firm SunPower was one of the most outspoken critics of the new solar tariffs, which were imposed under the Section 201 trade case brought by Suniva and SolarWorld Americas.

As an American company that makes higher-priced high-efficiency solar modules, predominantly manufactured in Mexico and Asia, SunPower was hit hard when the Trump administration slapped 30 percent import tariffs on virtually all foreign-made solar panels.

In that context, SunPower’s announcement on Wednesday that it intends to acquire trade case petitioner SolarWorld Americas came as a surprise to many.

But for SunPower CEO Tom Werner, the case for buying the Hillsboro, Oregon-based solar manufacturer became clear following discussions with President Trump’s trade representatives.

“There are in fact tariffs, and the tariffs influence both the political environment and the economic environment,” Werner said, in an interview. “And then there is our conclusion, after meeting with the administration over the last several months, of their strong desire for American solar manufacturing.”

“This move aligns us...with the current administration,” he said. “So that’s really the catalyst.”

SolarWorld backs its potential new parent

Shortly after the tariffs were announced in January, SunPower, along with numerous other companies, filed a request for exclusion. SunPower made the case that its copper-plated, interdigitated back contact (IBC) technology is fundamentally different from other solar technologies, and should be exempt from the safeguard measures placed on imported crystalline-silicon solar cells and modules.

In the absence of a tariff exclusion, SunPower said it would have to implement layoffs and forgo investments in U.S.-based solar manufacturing. 

In a twist, SolarWorld Americas submitted a letter on Monday, just two days before the acquisition plans were announced, backing SunPower’s exclusion request — but not that of any other major solar equipment manufacturer.

“SunPower has explained that excluding these products will allow it to increase its investment in R&D and module manufacturing in the United States — a key goal of the Section 201 remedies,” the trade case petitioner noted.

Suniva, the other petitioner, did not support SunPower’s application.

SolarWorld’s filing in support of its potential new parent company appears to signal “a huge conflict of interest,” according to MJ Shiao, head of Americas at GTM Research.

But Werner dismissed claims of impropriety, framing the latest developments instead as the result of newly aligned interests in a new state of play.     

“The petitioners had the choice of, first, do they want tariffs or not? And they were both clear on that: The answer is yes. Secondly, they had a choice of any exclusions,” he said. “Both of them agreed to [support exclusions for] off-grid products. So the idea of agreeing to excluding products is not novel or unique.”

“SolarWorld supporting us, I think, is an indication that we do have an American technology that is highly unique,” Werner continued. “It’s fair to say our interests aligning is also a factor.”

When asked about the irony of the two solar firms joining forces following a year of intense trade policy battles, the CEO underscored the need to be forward-looking in light of the new tariff scenario.

“The reality is that there are tariffs, and SunPower is navigating that new reality,” he said. “We’re focused on the future, not the past. We think we can have a more comprehensive product offering that our customers will be happy comes from SunPower, and that’s the thesis of this transaction — I will reiterate, catalyzed by the trade case.”

"Highly unlikely" tariff exclusion will be denied

With SunPower’s tariff exemption request still pending, Wednesday’s acquisition news raises questions around how the Trump administration will respond. GTM asked the Office of the U.S. Trade Representative to comment on how SunPower’s acquisition of SolarWorld would affect the exemption decision, but did not receive a response by the time of publication.

Werner, meanwhile, said he was confident SunPower would be let off the hook. When asked if the SolarWorld deal would be terminated if SunPower was unable to get the tariff exemption, he said, "That's a highly unlikely scenario."

"Of course, we have contingencies, but we think they’re highly unlikely to be implemented," he said. “We’re convinced what will happen is we will be excluded [for] IBC, and we will make SolarWorld Hillsboro a much more effective organization."

Werner added that the tariffs will cost SunPower somewhere between $1.5 million and $2 million per week. An exemption would allow the company to take that money and invest it in both American R&D and U.S.-based manufacturing. 

“So this is a bold bet by virtue of being an American pioneer — and having the largest commitment to American solar manufacturing — that that will win the day in the exclusion process,” he said. “And the money we would be spending on exclusion, we would [instead] be spending on American manufacturing.”

A broader set of product offerings

SunPower initially announced its intention to make additional U.S. investments last month, as part of it exclusion filing. U.S.-made solar modules, including SolarWorld America's modules, are automatically exempt from import tariffs.

If U.S. and German regulators approve the SolarWorld Americas acquisition, SunPower plans to upgrade part of the Hillsboro facility to produce its P-Series solar panels. SunPower also plans to keep the SolarWorld brand and continue manufacturing SolarWorld’s original products, “in at least some capacity,” Werner said.

In combining the two companies, SunPower would rival competitor First Solar as the largest solar module manufacturer in the U.S. SunPower would also boast a more diversified product lineup and be able to expand its market presence.

The acquisition would “clearly allow us to offer a broader set of products to our customer base, and, we think, increase share in the rooftop business in America,” said Werner.

While SunPower has long branded itself as offering unique, high-efficiency solar products, Werner acknowledged there are scenarios where efficiency isn’t the top priority — which is typically when there’s adequate and sufficiently affordable space to install a greater number of cheaper, lower-efficiency panels.

“So there are times when our dealer partners would want a lower upfront-capital-cost product, where efficiency is less important,” he said. “This [acquisition] allows us to implement our quality systems at SolarWorld and offer our dealer base that broader product offering.”

More acquisitions to come?

With respect to financing the deal, Werner said SunPower is “turning a corner” on its financials by both selling off assets and cutting expenses. In its most recent earnings report, the company reported a net loss of $851.2 million last year, which was significantly higher than its net loss of $471.1 million in 2016.

To improve its cash position, SunPower announced plans to sell 45,000 residential solar contracts in the first half of the year, with expected net proceeds of $200 million. While the sale was framed as a way to reduce debt and improve financial transparency, the availability of additional cash likely supported the move to purchase SolarWorld. However, the terms of the acquisition, which is expected to close in June, were not disclosed.

Asked if SunPower plans to make additional acquisitions to expand its U.S.-based manufacturing presence, Werner said it was “unlikely,” but not impossible.

“We don’t have the balance sheet to be particularly forward-leaning in terms of further acquisitions. But we’re always in conversation,” he said. “I think we have an incredible market position in America, and we have highly differentiated products, we have great channels to market, and those are desirable by other entities.”

“So it would be fair to say that we’re active,” Werner said, with respect to making other new investments. “But highly unlikely in the near term.”