SunPower Corporation (SPWRA) announced that it would design and construct two solar power systems of 1.7 megawatts at Rancho California Water District (RCWD) facilities. The systems are expected to save the district approximately $8.5 million in electricity costs over the next 25 years.
Under this new agreement, SunPower will build a 1.1-megawatt SunPower Tracker system at the district's Senga Doherty Pump Station in Murrieta. The Tracker positions SunPower solar panels, to follow the sun's movement during the day. This increases sunlight capturing capacity by 25% over conventional fixed-tilt systems, while significantly reducing land use requirements.
Also at RCWD headquarters in Temecula, SunPower will construct a 610-kilowatt solar parking canopy structure, providing both a cool parking lot and generate solar electric power for RCWD's facility.
The systems will be funded with qualified energy conservation bonds (QECBs), which are issued by the state of California and are designed to provide low-interest financing to promote the use of renewable energy in state, local, and tribal government facilities. RCWD will own the renewable energy credits associated with the systems.
SunPower will start construction on the two systems this summer and expects to complete by the end of 2011.
SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company has been proactive in venturing into new markets. Apart from a sizeable presence in the US, it is already focusing on improving market share in Spain and Germany, while gaining new market share in emerging markets like Italy, Australia, France, Japan and Greece.
SunPower’s presence within the residential and commercial markets is getting more and more prominent with the expansion of its network of dealers globally. By fiscal-end 2011 the company expects its global dealer network to almost double to around 2,000 dealers.
Finally, by steering clear of long-term contracts for sales through its dealer network, the company is geared for experiencing growth in its margins with the help of some short-term upswing in the solar market.
SunPower Corporation designs, develops, manufactures, markets and sells high-performance solar electric power technology products, systems and services worldwide for residential, commercial and utility-scale power plant customers. The company’s semiconductor-based solar cells and solar panels, which convert sunlight into electricity, are manufactured using proprietary processes and technologies.
Over the longer-term, however, we are bullish on SunPower with an Outperform recommendation, given its diversified channel strategy with a strong presence in the residential and commercial market, along with its status as a conversion efficiency leader.
The company also has a firm focus on spreading out its revenue stream by climbing the solar value chain. Going forward the company will reap benefit from its low cost manufacturing base, which should improve further with the completion of its Malaysian JV.
Over the near term, the stock is trading at a premium valuation compared to its peers, which is unwarranted given an oversupply of solar panels in the market resulting in lower ASPs, subsidy roll back risk in Europe, rising competition, financial stability of its customers and foreign exchange risk. SunPower currently has a short term Zacks #3 Rank (Hold) in line with peers like Ascent Solar Technologies, Inc. (ASTI) and China Sunergy Co. Ltd. (CSUN). Over the longer run, we maintain our Outperform recommendation on SunPower shares.
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