Production Expansion On SunPower’s Mind In 2019

SunPower Launches Partner Search To Fund Manufacturing Capacity Expansion; Curbs Losses & Reduces Net Debt By Over 50% To Less Than $600 Million By 2018-End
04:39 AM (Beijing Time) - 15. February 2019
SunPower has gradually seen its shipments for its shingle technology P-Series going up since 2017. In 2019, it expects these panel series to account for up to half of its shipment volume. (Source: SunPower Corp.)SunPower has gradually seen its shipments for its shingle technology P-Series going up since 2017. In 2019, it expects these panel series to account for up to half of its shipment volume. (Source: SunPower Corp.)

Key Takeaways

  • SunPower is actively on the look out for partners to help it fund its manufacturing capacity expansion plans for NGT technology
  • GAAP revenues in Q4/2018 improved more than 6% to $456.8 million, but dropped close to 30% on YoY basis
  • Net loss for the year was contained at $811.1 million, while in 2017 it was reported to be $929.9 million
  • Overall GAAP revenues in 2019 are forecasted in the range of $1.8 billion to $1.9 billion with capital expenditure of $75 million and 1.9 GW to 2.1 GW to be deployed in the entire year

Leading US crystalline silicon solar module maker SunPower Corp is looking for a strategic partner to fund its expansion plans for its next generation technology (NGT). In 2019, it sees deployment of more than 100 MW of NGT panels and plans to ramp up its NGT production capacity to over 250 MW. The Total owned solar company is in active discussions with a number of parties, it said, regarding funding to complete the full conversion of its Fab 3A and eventually scale it up around 1.8 GW.

This proposed investment could be in the form of a minority stake in the manufacturing business or customer investment to allow preferential access to the company’s products, among other options, said SunPower Chief Executive Tom Werner, according to Reuters.

Analysts from investment bank Cowen point out that this isn’t the first time SunPower is looking for partner funding for its manufacturing operations, as AU Optronics helped it fund Fab 3 as part of a JV close to 10 years ago. “Without NGT, we see the company having a tough time in the domestic market post ’21 when tariffs go away and competitive pricing intensifies. Management indicated they expect to have a partner for non-dilutive funding announced in 2-3 quarters,” said Cowen analyst Jeffrey Osborne. NGT is the 6-inch version of SunPower’s IBC back contact cell technology, which the company traditionally has been producing on 5-inch wafers.

At the beginning of February 2019, SunPower officially announced commercial operations of its Oregon fab that produces the company’s shingle technology P-Series panels (see SunPower’s Oregon Fab Starts Production). In 2019, it expects to ship up to 150 MW of its P-Series modules from the Oregon fab, Werner said as he announced the company’s Q4/2018 and full year 2018 financial results.

This year, SunPower sees its P-Series account for up to half of its shipment volume, and the conversion of its E-Series capacity to NGT at Fab 3 is hoped to allow the company to increase its total IBC volume to 2019 as well.

During the call with analysts, Werner confirmed material completion of the company’s corporate transformation efforts in Q4/2018, and called 2019 as the year to deliver the results of the transformation which would mean return to sustainable profitability (see slide).

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A year back, SunPower had announced its decision to exit the utility-scale solar power project development business expecting better demand for the distributed generation segment catering to residential and commercial clientele (see SunPower To Focus On Distributed Solar).

Q4/2018 Down 30% YoY

Compared to the previous quarter, SunPower’s GAAP revenues in Q4/2018 improved more than 6% to $456.8 million, but dropped close to 30% on YoY basis. Its gross margin was a negative of 1.7%. It managed to bring down its net loss from last year’s $572.7 million to $158.2 million in Q4/2018, but it’s still up from previous quarter’s $89.8 million. SunPower produced 278 MW in Q4/2018, and shipped 318 MW.

“With the sale and deconsolidation of our residential lease portfolio during the quarter, we have simplified our financial statements and reduced our net debt by more than 50% to less than $600 million by the end of the year,” said SunPower CFO Manvendra Sial. “Additionally, we improved our cash position and prudently managed our operating expenses while further investing in our growth initiatives. With the completion of our strategic transformation, DG-focused strategy and commitment to technological innovation, we are well positioned for sustainable profitability in 2019.”

Cowen’s Osborne highlighted in particular two developments in a research paper published after the financial results announcement:

“We were most impressed with the deleveraging of the balance sheet and working capital improvement (inventory down 20% sql.),” he said. He noted that SunPower has transitioned to an asset light model with its focus on DG, while net debt was down over 50% sequentially and now largely consists of the two converts out in the ’21/’23 timeframe.

Adding, “We have been impressed by the attach rate of storage with SunPower’s commercial projects over the past few quarters and management appeared very optimistic about residential attach rates as well. This should increase ASPs on a per watt basis by ~25%, while driving higher profitability.”

Meeting 2018 target

A year back, SunPower provided its full year 2018 guidance of GAAP revenues to be between $1.6 billion to $2.0 billion, and managed to meet this guidance securing $1.72 billion in 2018 (see Strong Q4, Weak 2017 For SunPower).

Net loss for the year was contained at $811.1 million, while in 2017 it was reported to be $929.9 million (see Strong Q4, Weak 2017 For SunPower). The solar products maker exited 2018 with net debt of $589.6 million, bringing it down from $1.16 billion in 2017.

Guidance

SunPower has guided for GAAP revenues of $290 million to $330 million with gross margin of -3% to 0.0% and net income loss of $70 million to $50 million for Q1/2019. This quarter, it plans to deploy 360 MW to 400 MW.

In 2019, overall GAAP revenues are forecasted in the range of $1.8 billion to $1.9 billion with capital expenditure of $75 million and 1.9 GW to 2.1 GW to be deployed in the entire year.

The management expects H1/2019 to be impacted by seasonality, while H2/2019 is likely to be better with commercial delivery schedules.

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani