SunPower and First Solar, two of the world's more successful vertically integrated solar developers, typically announce their quarterly earnings on the same day. Last week's earnings calls found the firms, uncharacteristically of late, declaring small losses for the quarter. The loss is more about two companies being "in transition" in terms of their financial structure (pending the launch of the First Solar-SunPower joint YieldCo) than it is about market weakness.

Tom Werner, SunPower CEO, said, "Operationally, we achieved record quarterly output at our cell manufacturing facilities in the first quarter and continued to execute against our long-term cost reduction roadmap."

Jim Hughes, CEO of First Solar, said, "As anticipated, the first quarter was a transitional period as we executed on our plans to form 8point3 Energy Partners," adding, "We continue to enhance the overall strength of our business, with our lead line now running at 16.3 percent efficiency and our announced strategic alliance with Caterpillar."

SunPower Q1 2015

  • Net sales of $440 million with losses of $9.6 million GAAP dollars
  • The 579-megawatt Solar Star project is "on plan," with more than 500 megawatts connected to the grid with completion expected in July
  • Completion of the 135-megawatt Quinto solar project is on track to finish in 2015 and slated for the YieldCo, currently in registration
  • The 70-megawatt Salvador merchant project in Chile has been "dedicated"
  • Construction has begun on the 86-megawatt Prieska project in South Africa
  • SunPower announced an international partnership to build a 40-megawatt Apple project in China's Sichuan province
  • Werner reported France as the company's strongest country market in Europe, helped by SunPower's majority owner, Total
  • The CEO also claimed strong residential business in Japan and the U.S.
  • SunPower began shipping its integrated modules using the acquired SolarBridge microinverter
  • SunPower started developing energy products with EnerNOC and Stem
  • The company entered into a 68-megawatt, 20-year PPA with Stanford University

 First Solar Q1 2015

  • Net sales of $469 million with $62 million in losses
  • Q1 full fleet average efficiency of 14.7 percent vs 14.4 percent last quarter
  • The firm's lead line is running at 16.3 percent in late April 2015, and the company continues to execute on its efficiency roadmap  
  • Potential booking opportunities have grown to 14 gigawatts
  • First Solar intends to add two production lines at its Ohio factory, according to the CEO
  • The CEO said that the company is “virtually sold out” for 2015
  • Modules built at the company's Malaysian facility have a cost of below 40 cents per watt
  • Entered into a microgrid partnership with Caterpillar's genset product offerings
  • The TetraSun high-efficiency product is still ramping and is now in the processes of certification and qualification  

The impact of the YieldCo

These mediocre quarterly earnings from First Solar and SunPower are not true indicators of their corporate health -- both companies are holding on to assets they would have previously sold, in order to fill the initial YieldCo portfolio.

What's more, both firms might see a boost in earnings when the YieldCo lists and acquires its initial portfolio.

One stock commenter (and stockholder) notes: Unlike SunEdison and NRG Energy, SunPower will not be consolidating the YieldCo results into financials. This means that when SunPower sells a project to 8point3, it will recognize revenue and margin for the sale, but will defer a portion of margin equal to its ownership stake in the YieldCo. This deferred margin will be recognized through SunPower's equity income line over the life of the project as SunPower's ownership stake in 8point3 declines over time. This treatment allows SunPower to benefit from the project sale to 8point3 immediately in terms of EBITDA and leaves a residual long-term income stream. While this mechanism will understate the company's EBITDA in the short term, it gives a far better visibility into the company's earnings stream than its YieldCo peers."

SunPower began reporting its financials by segment rather than by geography. The company's guidance for Q2 is 315 megawatts to 350 megawatts, with at least 170 megawatts from power plants and 80 to 90 megawatts in residential. First Solar expects Q2 sales ranging from $750 million to $850 million.

Both companies are withholding 2015 full-year guidance until the YieldCo's impact on 2015 financials is finalized.

Credit Suisse Group analysts see "no structural issues at First Solar despite project delays."

UBS said of the First Solar-SunPower YieldCo: "We continue to see the complementary nature of their respective portfolios as ideal to create among the most credible YieldCos in the space (utility scale and DG). The real question remains to what extent these conventional technology companies will opt to pursue other development angles (e.g., wind) in an attempt to become a truly diversified YieldCo."

The YieldCo is expected to list in the second quarter.