SunPower feels output constraints

SunPower is missing out on sales in the booming US residential rooftop PV market because it is unable to produce enough modules, chief executive Tom Werner acknowledges.

In addition to its core businesses as a module supplier and EPC contractor, California-based SunPower competes with US rooftop installation specialists and financiers like SolarCity and SunRun in offering residential PV leases and loans.

Yet even with its roughly 1.1GW of module capacity running at full utilization, SunPower’s “residential energy solutions” business booked just 12.1MW of business in the most recent quarter, and installed 8.4MW.

By comparison, market leader SolarCity, which has not yet reported its second-quarter results, expects to deploy at least 105MW in the quarter.

SunPower’s performance in this sector has led analysts to question whether it may be missing out on opportunties in the residential space.

Addressing those concerns on Thursday after the company reported its quarterly results, Werner said: “We are very bullish on this market, and we expect to expand our share.”

“Our challenge is... we are fully allocated.”

SunPower's module capacity is set to grow significantly over the next few years.

Its 350MW “Fab 4” factory, under construction in the Philippines, is on track to produce 50MW of modules next year and 250MW in 2016, Werner says. By 2017, the company expects to have 1.8GW of capacity.

SunPower is also in the process of determining where it will build “Fab 5”, with several countries under consideration. That factory will be “at least" 700MW, according to Werner, who says the company intends to "go big".

In the meantime, however, demand for SunPower's modules in the US residential space is exceeding supply. And by the time more capacity has been brought online, the market dynamics and policy landscape may well have shifted.

So far in 2014, SunPower has nailed down $86m in solar-lease financing from Hannon Armstrong, and $200m from Admirals Bank for solar loans, giving it ample financial firepower for growth.

Explaining the company's decision to hold back modules, Werner says: “We’ve had a long history of a strategy of not being overly allocated to one market.”

While the Americas account for more than two-thirds of SunPower's revenues, it is a major supplier to other regions, such as the high-margin Japanese market, where its market share exceeds 10%.

Werner also fended off concerns that the company's "go-to-market" strategy for the US residential sector needs tweaking.

Many big players in the sector are moving towards vertical integration, meaning everything from customer acquisition to module installation. SunPower, however, relies on a network of independent dealers for its residential business.

“We will be more heavily tied into our go-to-market [strategy]" going forward, Werner says, pointing to a recent software suite the company acquired to help its dealers accelerate sales.“The independent channel will still be independent, but we’ll be more involved.”

SunPower’s shares fell more than 5% in after-hours trading on Thursday after the company, which is majority owned by France’s Total, announced that its revenues and earnings fell year on year – in spite of stable module prices.

Revenues came in at $507.9m, compared to $576.5m during the year-ago period.

Net income was $14.1m during the second quarter, compared to $19.6m last year.

The company held its full-year guidance steady, with revenues expected to come in at $2.5bn-$2.65bn on 1.2GW-1.3GW of module sales, much of which stay within the company’s own downstream businesses.