Solar industry bellwether SunPower reversed its fortunes by delivering profits in 2013 and now expects to produce even better results this year, including substantial growth in its program that funds solar panels on home rooftops. The news shows the official turnaround of the solar sector and the emergence of home solar roofs — and new types of financing — as a massive market. Just two years ago SunPower had to significantly cut some of its production.
Executives of the solar panel maker and power project developer said this week that their factories are running at full-tilt to meet demand. The company is building a factory in the Philippines, and it recently raised a $220 million fund from Bank of America Merrill Lynch to boost a program that enables homeowners to use solar electricity without paying for the equipment and installation costs. Lining up the funding was crucial to show that the program’s growth won’t be hampered by a lack of money, as was the case during part of 2013.
“2013 was a break out year for the company,” said Tom Werner, SunPower’s CEO, during a call Wednesday afternoon with analysts to discuss the company’s earnings. “We are confident we will be able to continue to deliver a strong financial performance.”
The $220 million for the residential solar lease program is particularly interesting to watch because the potential for growth is great. SunPower launched the program in 2011 and has been touting it ever since, even though the program is still too new to make any significant impact on the company’s financial performance.
Homeowners in the program pay for the electricity from the solar panels on their roofs via a long term contract, or lease. The money for buying and installing the equipment comes from the fund. Investors who finance the leases get to use a 30 percent federal income tax credit that is designed to encourage solar installations.
SunPower also has worked with banks to offer loans for those who want to own the solar equipment, and it expects to announce a new loan soon, said Chuck Boynton, SunPower’s chief financial officer. “Our balance sheet and superior products means we will no longer see financing capacity as a significant bottleneck to growing our business,” Boynton said during the earnings call.
The leasing business has taken off in the United States in the past six years because leases allow consumers to enjoy using solar electricity without paying tens of thousands of dollars for the equipment and installation. Many solar installers also market their leases as a way to reduce monthly utility bills, though there is no guarantee that homeowners will always enjoy lower electric rates through their solar contracts than what they will pay their utilities. A lease often runs 15 to 20 years.
The popularity of leases has propelled the growth of several startups, including SolarCity (s SCTY), which went public in 2012 and is seen as a rare successful exit in the world of venture-backed cleantech companies.
To do well in the leasing business, solar companies have to keep raising money and hope that they won’t run out of it before they close the next fund. Early last year, Werner told analysts that demand for the company’s leases outstripped the money it had available to fund them.
While SunPower executives have been trumpeting the growth of its residential lease program for over a year, they were more circumspect on Wednesday and talked about their desire to have a good mix of leases and cash sales.
Cash sales, of course, gives company a much quicker boost to its finances while the leases promise a steady return over a long period of time. Having a good mix will help minimize risks, such as changes in government incentives and policies and the rise in interest rates, Boynton said.
Rebates, tax credits and mandates for renewable energy generation have driven much of the solar market’s growth in the U.S. and elsewhere in the world. A policy change has shown to be able inflict a lot of pain in the solar industry.
SunPower expects to deliver better financial results in 2014 by generating between $2.45 billion and $2.65 billion in sales and $0.65 and $0.95 per share in earnings.
The company posted $638.1 million in revenue for the fourth quarter of 2013, down from $678.5 million from a year ago. It generated a net income of $22.3 million, or $0.15 per share, whereas a year ago it reported $144.8 million in losses, or $1.22 per share. SunPower saw a slight growth in its 2013 revenue of $2.51 billion and a net income of $95.5 million ($0.70 per share), compared with $2.42 billion in revenue and $352 million in losses (-$3.01 per share) in 2012.