While much of the solar market rejoiced at the decision in late December to extend the U.S. Investment Tax Credit (ITC) for solar projects, some analysts had warned that this move could serve to lower guidance figures for 2016 for a handful of firms exposed to the U.S. PV market.
Yesterday, SunPower corp. – one of the larger solar manufacturers and developers based in the United States – stated outright that the ITC extension posed a series of near-term challenges for the firm in its Q2 financials, namely in the fact that the urgency to complete power plants before the end of 2016 no longer remains.
Hence, despite posting solid second quarter revenue, SunPower shook the market by announcing it is to close a Philippine panel assembly facility, transfer equipment to Mexico, and shed 1,200 jobs (15% of its total workforce) in the process.
This realignment will see SunPower take restructuring charges of between $30 million and $45 million, of which “a substantial portion” will be incurred in Q3, with more than 50% of total charges to be cash.
The company will also reduce its operating expense by around 10% next quarter, and expects a loss for the year of between $125 million to $175 million. In earlier guidance, SunPower had expected to at least break even, and maybe even return to modest profit for FY 2016. Looking ahead to 2017, SunPower forecasts a further net loss of between $100-$200 million.
SunPower CEO Tom Werner took the step of reducing his cash salary and bonus for the remainder of the year to $1, while confirming that the company will drop-down its remaining minority stake in the 102 MW Henrietta project to 8point3 Energy Partners LP, a joint venture (JV) with First Solar.
Q2 solid, but not strong enough
Revenue for the second quarter hit $420.5 million, which was an improvement on the $384.9 million posted in Q1 and far higher than Q2 2015, when revenue was $381 million. However, the firm’s net loss for the quarter remained high, at $70 million (down from $85.4 million in Q1), whereas in Q2 2015 SunPower turned a profit of $6.5 million.
Non-GAAP gross margin tumbled further, to 13.1% (down y-o-y from 17.6%), with guidance for FY 2016 expecting that margin to fall to between 9.5-11.5%.
This reduced outlook can be traced to the post-ITC extension climate, which has stripped the U.S. solar power plant sector of its urgency to complete projects before year end, Werner said, negatively impacting SunPower’s bottom line and forecast. “The extension of the ITC, as well as the bonus depreciation credit, while beneficial to the long-term health of the industry, has reduced the urgency to complete new solar projects by the end of 2016, with many customers adopting a longer-term timeline for project completion.”
Werner added that SunPower will now streamline its power plant development segment, instead shifting investment to DG markets and focusing on a “limited number of core markets, primarily in the Americas”.
By shifting assembly from the Philippines to Mexico, SunPower can better serve its end markets. The company is also planning to increase the relative mix of its X-Series modules, increasing output by up to 100 MW by the end of 2017.