Why I'm Picking up More Shares of SunPower Corporation


Source: SunPower

Of all the renewable energy stocks that I cover, SunPower (NASDAQ: SPWR  ) is the only one I own in my portfolio. Over the next few years, I believe that it will prove itself to be one of the winners in the solar industry. The company's recent news regarding its entry into the Chinese market is one more reason why I'm confident in the company's success.

First time in China
With the government looking to add 14 GW of solar power capacity in 2014, China represents a major market opportunity for solar companies. In an attempt to gain market share here, SunPower recently announced a deal in which it will sell 70 MW of cell packages to joint-venture firm, Huaxia Concentrated Photovoltaic Power. The cell packages will be used in two concentrated photovoltaic, or CPV, projects, which are expected to be completed in 2015. Located in Mongolia, the C7 Tracker power plants, a 20 MW project and a 100 MW project, use parabolic mirrors, unlike the traditional flat, rectangular panels. According to the company, its C7 Tracker offers the lowest leveled cost of electricity, or LCOE, for utility-scale deployment. The company claims that a "400-MW C7 power plant requires less than 70 MW of SunPower cells."

SunPower does not foresee this as being its only endeavor in China but rather as what SunPower president and CEO Tom Werner calls "a first step in our aggressive efforts to break into the Chinese market." He adds, "Working together with our strong local partners, we believe that we can deploy significant volumes of our SunPower C7 Tracker power plants to help serve China's growing need for clean power."

If SunPower succeeds in developing a CPV system that seriously brings down the LCOE, it will be a significant threat to the success of another U.S. solar company looking to grab a share of the Chinese solar market. First Solar (NASDAQ: FSLR  ) took its first steps toward entering the Chinese market in 2009, when it announced its intent to develop a 2 GW solar project in Inner Mongolia. Development of the project never really took off, but Jim Hughes, First Solar's CEO, announced that the company has signed a memorandum of understanding with the city of Ordos in Mongolia. The company will be supplying the city with 300 MW to 500 MW of solar panels, and construction is expected to begin this year.

Concentrating on CPV
One of the company's highlights from the fourth quarter was the booking of its largest C7 project to date -- a 20 MW datacenter, which is scheduled to begin construction this year. Management contends that this is further evidence of its status as the "the market share leader in the U.S commercial business." This and the Chinese projects may very well be just the start of the company's efforts to profit from the CPV market. Although the CPV market is rather small now, industry research firm, GlobalData, expects the global market to rise dramatically in the next five years -- growing from 357.9 MW in 2014 to 1,043.96 MW by 2020.

Around the world
The company has made progress in 2013 diversifying in global markets. In 2012, of the company's total revenue, EMEA accounted for 18.7% and APAC accounted for 8.8%, whereas in 2013, although EMEA dropped to 17.3%, APAC grew to 15.6%. Illustrating the importance of global diversification, management commented on the company's outlook for 2014 as "extremely strong" with "a very balanced portfolio across the world." Management expects that half of its revenue will come from foreign markets.

Foolish final take
In 2013, SunPower successfully diversified its operations in global markets, and this latest deal in China proves that the company is intent on furthering its diversification. The deal also reaffirms my opinion that the company is poised to profit nicely from the growing adoption of solar power, both in the U.S., and around the world.

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Read/Post Comments (10) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 13, 2014, at 2:06 PM, ronwiserinvestor wrote:

    SunPower is a great product but they'll have some competition now that Hyper X Solar has been released on the market. The solar modules used in Hyper X solar systems offer a small footprint, high efficiency and much lower pricing which provides the perfect combination for a fast return on investment.

    Hyper X solar offers a better PTC to STC ratio "Real World" performance according to the California Energy Commission's performance rating listings than over 100 of SunPower's solar panel models.

    Hyper X solar also offers an incredible -0.27%/degree C temperature coefficient rating for awesome performance in hot/warm climates and best of all Hyper X solar systems are priced thousands less and even tens of thousands less on larger systems than a SunPower solar system.

  • Report this Comment On April 14, 2014, at 7:58 AM, jargonific wrote:

    Competition has been squelched to some extent by US govt. trade decisions over recent months. Sunpower has become successful in manufacturing, leasing, and plant construction.. they are getting larger and have created good name recognition.

    When Yingli reports downturn, sunpower investors should take that as their cue to do as this writer suggests. Buy.

  • Report this Comment On April 14, 2014, at 12:43 PM, mookysmoo wrote:

    Why is there no love for SPWR on the market compared to its peers? It seems like it's taking the fall for any bad news in the solar sector while not getting the lift from the good. Anyone could offer any insight?

    The lack of corporate news is frustrating even though I'm bullish on the business model. I believe this stock will break away from the competitors and less affected by the sector fluctuation in the near future.

  • Report this Comment On April 14, 2014, at 12:56 PM, clanza875 wrote:

    They have $275 million in convertible debt coming due at 5:00 eastern time on April 15th. The conversion is at $26.40 per share. Right now the market doesnt know if SPWR will get the benefit of converting that debt to stock or if they will have to pay $275 million in cash to settle the debt. Its unclear what the stock will do until this situation clears. If they dont get the conversion they will likely have to do a secondary offering of equity to raise that additional cash.

  • Report this Comment On April 14, 2014, at 12:57 PM, clanza875 wrote:

    either way you are looking at a big dilution of current equity holders

  • Report this Comment On April 14, 2014, at 1:05 PM, jargonific wrote:

    Thanks clanza875 but that was decided last week no?

    The terms of this conversion are what I was referring to above as it is part of the reason for the shorting of the stock at this moment AND there seems to be a haze around the information which in our case came after a share purchase.

    We were unaware as we purchased shares at 32.00 and believing the stock to be sturdy and the company in a growth phase we were hopeful.

    Short sellers ate our profits this year. We are about to get OUT of this market if possible. However looks like we will hold these shares a while.

  • Report this Comment On April 14, 2014, at 1:17 PM, jargonific wrote:

    Doing this ahead of building up fund for leasing makes sense.. just hope the share price hangs in there...

    I believe it will.. hopeful...someone at Motley Fool should write more about this. We bought before the announcement was made on the first. Almost thought it was an April fools joke... then too maybe they are true Motley Fools.

    SEE:

    SunPower Closes $42 Million in Non-Recourse Debt to Finance Residential Solar Lease Program

    Font size: A | A | A

    8:00 AM ET 4/3/14 | PR Newswire

    Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI) and SunPower Corp. (NASDAQ: SPWR) today announced an agreement under which HASI will provide $42 million in non-recourse debt to help finance SunPower's residential solar lease program. The transaction allows SunPower to leverage its existing lease assets and expand its program while increasing its cash position and strengthening its balance sheet. More than 20,000 Americans are enrolled in the company's lease program.

    "The SunPower Lease program offers our customers financing under highly competitive terms for their SunPower solar panels, the most efficient on the market today. When coupled with our unprecedented level of energy assurance, the SunPower Lease program delivers more value to the homeowner," said SunPower CFO Chuck Boynton. "Among our portfolio of financing options, solar lease remains one of the more popular choices by consumers and our innovative partnership with Hannon Armstrong will allow us to further fund the program's growth this year."

    "We are pleased to announce our new relationship with SunPower, facilitating their ability to make rooftop solar power systems accessible to more American homeowners," said Jeffrey Eckel, president and CEO of HASI. "With this investment, we are further diversifying our portfolio of economic, reliable and sustainable distributed energy assets, targeting assets that can produce sustainable yield."

    In addition to attractive terms and low monthly payments, the SunPower lease includes one of the solar industry's only direct-from-manufacturer performance guarantees.

    About Hannon ArmstrongHannon Armstrong (NYSE: HASI) makes debt and equity investments in sustainable infrastructure projects. The company focuses on profitable projects that increase energy efficiency, provide cleaner energy, positively impact the environment or make more efficient use of natural resources. HASI targets projects that have high credit quality obligors, fully contracted revenue streams and inherent economic value.

    The company, based in Annapolis, MD, has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes beginning with the year ending December 31, 2013. For more information, visit www.hannonarmstrong.com.

    About SunPower SunPower Corp. (NASDAQ: SPWR) designs, manufactures and delivers the highest efficiency, highest reliability solar panels and systems available today. Residential, business, government and utility customers rely on the company's quarter century of experience and guaranteed performance to provide maximum return on investment throughout the life of the solar system. Headquartered in San Jose, Calif., SunPower has offices in North America, Europe, Australia, Africa and Asia. For more information, visit www.sunpower.com.

    SunPower is a registered trademark of SunPower Corp. All other trademarks are the property of their respective owners.

    SOURCE SunPower Corp.

    Disclosures

  • Report this Comment On April 14, 2014, at 2:15 PM, mookysmoo wrote:

    Thanks for the response Chanza. I'm hope SPWR will break away from the competitors since it's in a different class.

  • Report this Comment On April 14, 2014, at 2:22 PM, jargonific wrote:

    Indeed. But where's the bottom? Shesh, the share price moves quickly. Hang in there everybody and good luck!!

  • Report this Comment On April 16, 2014, at 7:11 AM, REvinger wrote:

    the high percentage of shorts maybe due to the success of SPWR. the carbon cartel and Chinese competition see SPWR as the major threat. even if they lose money the carbon cartel with their multi-billion dollar campaign against renewables can wage a continual war of shorting SPWR.

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