After First Solar (NASDAQ:FSLR) reported its earnings last week and SunPower (NASDAQ:SPWR) reported this week, we're starting to get a clearer picture of what the second quarter looked like for solar companies The market's reaction to the two reports couldn't have been more different, but the underlying story was similar, as I'll discuss below.
Outside of earnings, we got a look at how Tesla (NASDAQ:TSLA) is progressing on its solar roof and energy storage, plus some other notable news items.
What to take from earnings season
Heading into earnings season, I mentioned the possibility that solar companies would sell more modules than they expected, and for higher prices. And that proved to be true, based on the performance and comments from First Solar and SunPower. The big difference between their performance is that First Solar had more ability to keep its manufacturing plants running, delaying upgrades or altering where upgrades are taking place, and SunPower had relatively little ability to take advantage of the short-term boost in demand.
The other underappreciated part of the two reports is how big a factor project sales can be. First Solar is selling at least three major solar projects in 2017, and they're being sold for more than management originally anticipated. And if you look at First Solar's expected increase in sales ($150 million), operating income ($140 million), and operating cash flow ($500 million) compared to a 200 MW increase in expected module sales, you can see that there's likely more than $100 million in increased value from project sales. That's what drove the earnings beat and the higher guidance.
8point3 Energy Partners' days may be numbered
First Solar has been saying for three months that it wants to sell its stake in 8point3 Energy Partners (NASDAQ: CAFD), and this week SunPower said it will likely join its co-sponsor in a sale. The structure is also important because either both sponsors will be bought out and 8point3 Energy Partners will stay public or the entire yieldco will be bought out.
If a utility buys 8point3 Energy Partners, it would likely want to keep the public shares, hoping to eventually drop new renewable energy assets down to the yieldco and collect dividends and incentive distribution rights. But if a pension fund or private equity fund buys the company, it may just take the long-term contracted cash flow and generate slow and steady returns.
At the very least, it looks like SunPower and First Solar will agree to sell their stakes later this year. And when they do, it'll likely mean a big cash infusion to the solar manufacturers.
Tesla's solar roof is coming... someday
Tesla CEO Elon Musk and CTO JB Straubel already have the company's solar roofs on their own homes, Musk said on the company's recent conference call, so the product is now in the market. But it may still be a while until non-Tesla executives can get their hands on the illusive roof.
Tesla said in its conference call Wednesday that Panasonic's module production at Gigafactory 2 will be at least six months late, aiming to begin production late this year, and roof tiles won't begin production until about the same time. Tesla has had multiple delays, putting its solar modules years behind schedule, so there should be some level of skepticism that it will be able to make the solar roof on a mass scale anytime soon.
News and notes
Here are a few more notable items from the week.
- Tesla has been tapped to supply 40 MWh of battery storage systems for the 144 MW Revolution Wind farm off the coast of Massachusetts. The batteries will shift supply to peak times in hopes of reducing peak prices for electricity.
- Ikea has launched a solar-plus-storage product in the U.K., bringing advanced energy products much closer to the consumer. The company has partnered with Solarcentury to provide solar panels and LG Chem to provide 3.3 kWh and 6.5 kWh storage options.
- Hawaiian Electric Company, a subsidiary of Hawaiian Electric Industries (NYSE:HE), has agreed to purchase electricity from 110 MW of solar plants from NRG Energy (NYSE:NRG) on Oahu. The price of 10.8 cents per kWh is about one-third the cost of retail electricity in Hawaii, another example of how cost-effective solar energy is in parts of the U.S.
Check back to fool.com for more solar coverage next week.