Monday, November 14, 2016

Solar Earnings in a Trump World: SunPower, SolarCity, SolarEdge, Vivint

SunPower, SolarCity, Vivint Solar and SolarEdge have just gone through the first solar company earnings calls of the Trump era. This was already a weird time for the solar industry, with plunging prices, murky regulatory futures, and for the moment, falling utility rates. That weirdness now seems like the good ol’ days. A Trump presidency combined with a GOP-dominated Congress “could result in a wholesale dismantling of many of the solar incentives and policies at the federal level,” according to Roth Capital Partners, which added, “Although the Trump team has indicated to our sources that it has no plans to roll back the ITC extension, our checks suggest the ITC could very well be on the chopping block at some point. The CPP is effectively dead. All in, tens of [gigawatts] of solar demand are at risk.” A Trump presidency could also squelch the drive for renewable energy and efficiency at the DOE and FERC . Roth goes on to make the contention that “the combination of a Trump presidency and GOP legislature…will likely spill over to the state level and possibly embolden utilities and influence PUC decisions on NEM, [time-of-use rates], and other policies important for resi and C&I.” Marching into this breach are the major solar players, a few of which just announced their earnings. We spoke with SunPower CEO Tom Werner after listening in on the earnings call. Werner pointed out that modifying the ITC would have to go though Congress and said he was “cautiously optimistic” that there is continuing bipartisan support for solar. He cited a recent survey from Pew Research that finds that 89 percent of U.S. adults favor expanding use of solar power and that the “sentiment bridges the partisan divide.” Howard Wenger of SunPower said that FERC’s “jurisdiction is really on the transmission system, and net metering plays out at the more local level. So, we don’t think [distributed generation]…is the purview of FERC.” He continued, “As Tom referenced, solar is the way to energy independence, which is something that both sides of the aisle have historically wanted.” Werner saw minimal impact on utility solar in the repeal of the CPP “because utilities — and we interface with utilities a lot — are very impressed with the [dwindling] risk premiums of solar. […] And if you look at the cost of solar, it’s hitting a point where it’s competitive with almost any other energy choice. And lastly, of course, you don’t have fuel risk,” he said. “We believe that 2018 will still be a pivot year [for utility solar].”

513655e11e12fbe1117aab51faba54ae.jpegIn Werner’s view, “capitalism will work” in light of solar’s clear price advantage. He also suggested that significantly changing energy policy and the Investment Tax Credit might not be a top priority in the new administration — “the ITC doesn’t cost that much; it’s working and has an expiration date.” SunPower beats earnings, lowers guidance — but might face a Total “takeout” SunPower’s share price is down 3 percent with a beat on Q3 earnings but a miss on expected revenues. SunPower also signed a multi-year, 200-megawatt PV module supply agreement with Total “to solarize various facilities around the world.” Last quarter brought restructuring news from CEO Werner and a reduction in 2016 revenue guidance. This quarter, the firm once again cut its full-year revenue forecast. Oppenheimer Equity Research notes, “Volumes in the residential market look solid, but note GM is trending lower even with strong AC module sell-through. As Total looks to install ~200 megawatts in solar systems and SPWR shares dip to historical lows, we believe speculation about a full takeout will increase.” Here are key takeaways from the quarter: Non-GAAP revenue was $770.1 million compared to consensus of $786 million. Non-GAAP gross margin, as well as EBITDA, came in above consensus. According to SunPower, “Global panel ASPs are down approximately 25 percent in the third quarter as panel manufacturers liquidate excess inventory. We do not expect price reductions to continue at this pace, but we do believe that the panel price environment will remain very challenging into 2017.” Werner said, “We see our competitors’ selling price as below even what we believe to be cash costs (and we spend a fair amount of time modeling cash costs for all of our competition). We’re not doing that.” Guidance was lowered to a range of $2.6 billion to $2.8 billion, while aiming to deploy 1.325 gigawatts to 1.355 gigawatts. The company now expects GAAP 2016 revenue of $2.43 billion to $2.63 […]

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