SunPower revenues fall short of expectations

13. May 2011 | Top News, Markets & Trends, Intersolar preview | By:  Ucilia Wang

How do you say "It’s all your fault" in Italian? A waiting game that played out in Italy as the government revised its solar subsidies was mainly to blame for SunPower’s first-quarter net loss and generated sales that fell short of its expectation, the company said Thursday.

SunPower photovoltaics plant in Monalto, Italy

SunPower blames Italy for its poor performance. Image: SunPower Corporation.

The Silicon Valley company reported $451.4 million in revenue when it had anticipated bringing in $475 million to $525 million in the first quarter. The $451.4 million was a two-fold drop from the $937.1 million in the fourth quarter and a 30 percent increase from $347.3 million during the same year-ago quarter.

SunPower posted a net loss of $2.1 million, or two cents per share, in the first quarter, compared with a net income of $152.3 million, or $1.44 per share, in the fourth quarter and a net income of $12.6 million, or 13 cents per share, from the first quarter in 2010.

"Overall revenues for the quarter were impacted as customers waited for clarity in Italy which delayed projects and pushed out some sales of the systems," said Dennis Arriola, chief financial officer, during a conference call with analysts.

Italy, along with Germany and France, were looking at a significant cut to their feed-in tariffs starting in 2011. Germany and France settled on their revised tariffs earlier this year while Italy struggled to do so until last week, when it finalized a plan that saw a budget cut of up to 33 percent for the next year and half.

Uncertainties over Italy, the No. 2 market in 2010, cause no amount of anxiety, which translated into a slowdown in solar equipment orders and installations. It also led to a buildup of more than 10 gigawatts of solar panel inventories, prompting distributors to cut prices to try to clear the stockpiles, said IMS Research’s analyst Sam Wilkinson.

Aside from a higher-than-expected inventory, SunPower also ended up with a glut of inverters. The company ordered too many of them in the second half of last year, said CEO Tom Werner. It won’t be buying more so that it could use them up in the next few quarters, he added.

SunPower isn’t alone in suffering the consequences. First Solar, Yingli Green Energy, Trina Solar and Phoenix Solar, among others, all felt the sting, though some of them haven’t changed their full-year forecast.

Italy was SunPower’s largest market in 2010, accounting for 40 percent of its revenue, according to its annual report. The United States followed with 29 percent and Germany with 11 percent. The company spent $277 million in 2010 buying Malta-based project developer SunRay that focused heavily on Italy. Back in 2008, it bought an Italian distributor solar Solutions. In January this year, SunPower announced it had completed 85 megawatts of projects in Italy in 2010.

The United States is now SunPower’s largest territory. The domestic market accounted for over one-third of the company’s first-quarter revenue, Arriola said. Italy followed with 17 percent and France with 16 percent.

To be sure, these European markets remain important for SunPower because of their sizes. But the company will have to shift its focus to the residential and commercial rooftop segments now that the new feed-in tariffs for those types of installations are more lucrative in Italy and elsewhere on the continent.

SunPower plans to complete two ground-mounted projects of 15 megawatts each by the end of August, the deadline for a grace period set by the Italian government for projects that were already under development before it finalized the new tariff policy.

The company has more ground-mounted projects that it won’t be able to finish by the deadline, however, and the company plans to sell off the permits or permits along with equipment, said Howard Wenger, president of the utility & power plant business at SunPower.

The company has been seeking partnerships, such as a joint venture with AUO Optronics in Taiwan to build a factory in Malaysia, to help it grow in an increasingly competitive market. Last month, SunPower announced an agreement to sell a 60 percent stake to French oil and gas firm Total for nearly $1.4 billion. Total promises to provide $1 billion in credit over five years to help finance SunPower’s project development business.

SunPower said Thursday it expects to ship between 160 and 190 megawatts, and generate $500 million to $550 million in revenue for the second quarter. For 2011, the company anticipates shipping 825 to 920 megawatts.

But Arriola noted the company is still figuring out what subsidy changes in Italy means for SunPower’s 2011 shipment and sales. He plans to provide an update on the company’s forecast for the second quarter and the full year before the end of the second quarter.


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