SolarCity Corporation (SCTY) continues to expand its solar panel manufacturing business. The largest rooftop solar power provider in the U.S. announced that it will construct a new solar panel manufacturing factory in Buffalo, NY. Following the announcement, the share price of the company increased around 4.4% to $63.04 on Sep 24 from the previous day.
The solar panel factory will be established over a one million square foot site at RiverBend in South Buffalo, known as the Buffalo High-Tech Manufacturing Innovation Hub. Previously, a portion of the land was occupied by a steel mill. The factory is expected to commence operations in 2016.
SolarCity will invest a total of $5 billion over the next 10 years to construct and operate the facility, while the state of New York will finance $750 million in the project. The government fund will be utilized for the construction of the factory and the installation of additional infrastructure. The company will pay $1 plus the cost of utilities to lease the site over the next decade. It also has an option to renew the lease.
Once full production is achieved, the factory will be able to meet over one gigawatt of solar capacity annually. In addition, the project will create new jobs in the state.
SolarCity is currently following an aggressive strategy to enhance its solar panel manufacturing capacity. On Jun 17, 2014, the company acquired Silevo Inc., a Californian solar panel maker, for $200 million. Silevo has a planned solar panel plant in Buffalo, NY which is expected to come online by the next two years.
SolarCity sources a considerable part of the solar panels, utilized for its solar energy systems, from the Chinese manufacturers. The U.S. government continues to enforce tariffs on China-made solar cells. Implementation of the tariffs will increase the price of these solar panels, which will subsequently increase U.S. solar installers’ cost of operations.
The construction of this latest solar panel manufacturing unit and the acquisition of Silevo Inc. will collectively allow SolarCity to lessen its dependence on Chinese solar panel providers and reduce operating costs.
SolarCity maintains a stable financial position with a cash balance of $405.3 million as of Jun 30, 2014. A favorable liquidity profile supports the company’s systematic investment in organic as well as its growth ventures.
SolarCity currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector worth considering include Canadian Solar Inc. (CSIQ), ReneSola Ltd. (SOL) and Enphase Energy, Inc. (ENPH). Canadian Solar and ReneSola carry a Zacks Rank #1 (Strong Buy) while Enphase Energy holds a Zacks Rank #2 (Buy).
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