SunPower (NASDAQ:SPWR) has always held a strong presence in the residential solar market. The company is now counting on the leasing programs in the United States and a supply agreement with Toshiba of Japan to further strengthen its position. The residential and commercial segment accounts for about 52% of the company’s Trefis price while the utility-scale components business accounts for the remaining 48%.
Last year, the U.S. added about 1,855 MW of solar power capacity. The residential segment accounted for about 300 MW, or 16% of the total market. Although small when compared to the utilities and commercial segments, the residential market is important to solar firms since it provides a more continuous revenue stream, unlike larger projects like power plants where revenues are subject to some volatility.
The primary requirements of the residential market are efficiency and aesthetics. SunPower is recognized as the industry leader in conversion efficiency, with rooftop panels like the SunPower E20 offering efficiencies of up to 20%. SunPower panels have also been well-reviewed in terms of design.
See our full analysis for SunPower here
Solar Equipment Leases for Homeowners
SunPower is banking on its leasing scheme to bring in more residential customers. The company reports that the leasing scheme, which began in late 2011, has garnered over 10,000 customers as of the last quarter. [1] Solar equipment leasing is gaining favor with consumers as it allows them to enjoy the benefits of solar power with little or no initial outlays besides not having to bother about operation and maintenance issues. In California, the largest solar market in the U.S., about half of all domestic solar installations are leased.
Since leasing is capitally intensive, SunPower has tied up with Citigroup and Credit Suisse, who have agreed to fund about $325 million toward the leasing program [2] The company expects the effects of leasing to be cash neutral in the near term while having a positive impact on the long-term cash balance. [3]
Toshiba Supply Agreement
Last week, SunPower signed a multi-year contract to supply 100 MW of solar modules to Toshiba. This deal will be an extension of the 70 MW contract signed with the Japanese electronics giant in 2010. Toshiba will act as a systems integrator, combining these modules into solar systems for the Japanese residential markets.
The deal will allow SunPower to strengthen its reach in the Japanese market, which contributes about 10% to its revenues [4].
We have a $5.04 price estimate for SunTech, about 6% ahead of its current market price.
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