100 Ways SolarCity Is Burning Chinese Solar Stocks

SolarCity's deal with REC Group is a crushing blow for Chinese solar panel suppliers.

Jun 15, 2014 at 3:45PM

Ec Solar Panel Home

Source: SolarCity

SolarCity (NASDAQ:SCTY), the leader in residential solar installations, is off to a bright start in 2014. Expanding into Nevada, the 15th state in which it operates, the company recorded 136 MW of bookings in the first quarter -- an all-time record. Sourcing its PV modules from a variety of Chinese companies, SolarCity offers its customers competitive pricing by mitigating the risks associated in dealing with only a few suppliers. An invaluable customer to companies like Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE), SolarCity dealt its Chinese suppliers a crushing blow when it recently announced an agreement with REC Group.

Why the bears are growling
Earlier in the week, the U.S. Department of Commerce dealt the first blow to the Chinese PV suppliers when it announced, in a preliminary ruling, that the Chinese companies unfairly benefited from government subsidies. The U.S. International Trade Commission is expected to make its final ruling on the issue in October. According to the Commerce Department, the Chinese products affected by the ruling amounted to approximately $1.5 billion in 2013.

Pdg

Source: Trina Solar.

Imposing a preliminary duty of 18.56% on imports of Trina Solar, the Commerce Department imposed a duty of 26.89% on most other Chinese companies. Following the news, shares of Yingli Green Energy dropped nearly 10% while shares of Trina Solar dropped nearly 6%.

Salt on the wound
In an effort to diversify where it sources its panels from, SolarCity announced an agreement in which it will purchase a minimum of 100 MW and up to 250 MW of solar panels from REC Solar during a 12 month period beginning in Q4 2014. Addressing the deal, Tanguy Serra, SolarCity's chief operating officer, said, "The availability of competitively priced, U.S. trade-compliant PV modules is an important development for the global solar industry."

Following the Commerce Department's preliminary ruling, SolarCity's decision to move away from Chinese suppliers was expected. In the company's 10-Q SEC filing, it states:

...business and financial results may be harmed as a result of increases in the cost of solar panels or tariffs on imported solar panels imposed by the U.S. government." Furthermore, the company states that "the declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the pricing of our solar energy systems and customer adoption of this form of renewable energy.

The deal with REC Solar will not fully meet SolarCity's expected demand for solar panels in 2014. Having booked 136 MW in the first quarter, this translates to an annualized rate of 544 MW. Should SolarCity deem the supply agreement a success at the end of the year, REC solar could benefit substantially in that SolarCity is guiding for a range of 900-1,000 MW to be deployed in 2015.

The Foolish conclusion
I've been bullish on SolarCity's disruptive business model for a long time, and the recent findings from the Commerce Department are not changing my opinions in the slightest; nonetheless, it is something to definitely keep an eye on. SolarCity's customer base is growing by leaps and bounds. From 2010 to mid-2015, the company is guiding for a CAGR of 98%, and it will be critical that it find solar panel suppliers to meet that demand. 

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

 

Scott Levine has no position in any stocks mentioned. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. 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