Have You Seen SunPower in the Middle East and Africa?

The Middle East and Africa does not have an image as a hot solar market, but SunPower and others have very promising leads in the region.

May 12, 2014 at 11:52AM

Solar energy is taking off in the Middle East and Africa. In 2014 their PV demand is expected to grow 50%. By 2018 annual demand is expected to reach 4.4 GW, but it could go as high as 10 GW. SunPower (NASDAQ:SPWR) expects that by 2016 the region's demand will be greater than Japan's and slightly less than the rest of the Asia Pacific (APAC) region excluding China and Japan. SunPower is set up to succeed, with 22.2% of its power plant pipeline in the Middle East and Africa.

Reasons to be bullish
Solar can easily flourish in the Middle East and Africa because these regions have very high levels of solar radiation. All things held equal, more sunshine means more energy and a higher ROI. Also, high population growth is pushing the regions' absolute energy demand upward.

There are number of Middle East-specific factors that work in solar's favor. Big oil producing nations like Saudi Arabia use crude-derived products to power themselves. If Saudi Arabia can replace ancient oil-based power plants with solar systems then they can decrease the amount of oil that is sucked into the domestic market, thereby lining the royal coffers with more crude exports. It is estimated that Saudi Arabia could release an extra 500,000 barrels of oil equivalent per day (mboepd) into the export market if it can de-carbonize half of its electricity generation by 2020.

Secondly, the Middle East has huge sums of money that could easily be put into the solar industry to diversify local economies. The Saudis are already aiming to grow their local economy with 24 GW of installed renewable energy by 2020. SunEdison (NYSE:SUNE) has arranged a feasibility study with the Saudi government for the construction of a $6.4 billion solar manufacturing plant in Wa'ad Al Shammal, Saudi Arabia.

Many parts of Africa do not have the deep pockets of the Middle East, but this doesn't mean that they will be shut out of the growing solar market. Installment plans are already being used to sell small rooftop systems without costly transmission hookups to rural consumers.

Investments to consider
SunPower is one of the best Middle Eastern and African plays around. It has a strong gross margin of 27%, a developing utility pipeline in the region and is in a good position to use Total's African connections. 

SunEdison is another company to watch, but treat it with caution. Its margins are low, and it may undergo big changes in the near future. There is talk of spinning off its semiconductor segment and creating a new utility company to hold and operate some of the solar plants SunEdison constructs. Its Q1 2014 gross margin of 8.6% could be stronger, and its semiconductor segment is a drag on earnings with an operating loss of $16.9 million in the quarter. 

Canadian Solar (NASDAQ:CSIQ) has a 4.5 GW DC pipeline, but the Middle East and Africa are of secondary importance. Canada, Japan and China comprise the majority of its late-stage pipeline. It does have some long-term interest in Saudi Arabia and medium-term interest in South Africa, but its eyes are focused elsewhere. 

The most worrying part of Canadian Solar is its total debt to equity ratio of 3.3. Now that the solar industry is on the upturn the company has less to worry about, but Canadian Solar will need to spend big bucks to keep up with advances in manufacturing. Upgrading its manufacturing capacity will not be cheap as it is the third largest module manufacturer in the world.

First Solar's (NASDAQ:FSLR) bread and butter is utility solar, and the Middle East and Africa are big parts of its long-term pipeline. Its potential bookings in the region are much bigger than its opportunities in Europe or APAC.

In addition to the encouraging geographical make-up of its pipeline, First Solar's Q1 2014 was much stronger than competitors like SunEdison. First Solar posted a gross margin of 24.9% and an operating income margin of 14.7%. If First Solar can achieve its goal of boosting its practical manufactured efficiencies to 19.6% in 2017, then it should remain one of the top global solar manufacturers.

Stick with the best
Yet again SunPower and First Solar are the cream of the crop. They have fat margins, and their pipelines are already slanted toward the growth in the Middle East and Africa. Additionally, SunPower should be able to use Total's existing relationship with a number of oil producing countries to its advantage. On the other hand Canadian Solar and SunEdison have little exposure to African and Middle Eastern growth.

Why is OPEC worried about this game-changer?
Imagine a company that rents a very specific and valuable piece of machinery for $41,000… per hour (that’s almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company’s can’t-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we’re calling OPEC’s Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock… and join Buffett in his quest for a veritable LANDSLIDE of profits!


Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers