SunPower Beats Estimates on Residential Solar Leasing

SunPower Corp. (SPWR), the solar-panel maker majority-owned by Total SA (FP), reported a second-quarter loss that beat estimates on growing sales of residential power systems. The shares fell after it cut its 2012 sales forecast.

The net loss narrowed to $84.2 million, or 71 cents a share, from $147.9 million, or $1.51, a year earlier, San Jose, California-based SunPower said today in a statement. Earnings excluding costs for some utility and power-plant projects were 8 cents a share. Analysts had expected an 11-cent loss, the average of 17 estimates compiled by Bloomberg.

As demand for panels for utility-scale solar projects slows, SunPower is focusing on homeowners. It began offering solar leases for consumer rooftop systems nine months ago, and the business may generate as much as 25 percent of sales in a year, Chief Financial Officer Charles Boynton said during a conference call with analysts today.

“Residential leasing is going to be a significant driver for SunPower,” Chief Executive Officer Tom Werner said in an interview today. The company had more than 10,000 lease deals at the end of the quarter.

With solar leases, SunPower covers the costs of installing rooftop panels and owns the systems. Homeowners have little or no upfront costs and make monthly payments to SunPower under long-term contracts.

The same model has become widely used by solar financing companies such as Solarcity Corp. and Sunrun Inc., and accounts for 75 percent of residential projects this year in California, the biggest U.S. solar market by cumulative installations, according to Pavel Molchanov, an analyst at Raymond James & Associates in Houston.

‘Viable’ Model

“It’s a very viable and real business model, and it’s been working well,” he said in an interview. “I think it makes sense” for SunPower.

Sales rose to $595.9 million from $592.3 million. Revenue for the year will be in a range of $2.4 billion to $2.6 billion, compared with a May 3 forecast of $2.6 billion to $3 billion.

Slowing demand in Europe and the delay until next year of some large solar projects led the company to rein in its forecast, Werner said. Prices for solar panels declined 37 percent in the last 12 months to 84 cents a watt and global installations may fall this year after governments in Europe and the U.S. trimmed subsidies.

The shares fell 10 percent to $4.20 at 6:19 p.m., after the close of regular trading in New York.

By creating a sales channel for its own panels, SunPower is following a similar path as First Solar Inc. (FSLR), the largest U.S. solar company. Tempe, Arizona-based First Solar on Aug. 1 reported second-quarter net income that increased 81 percent from a year earlier after increasing its focus on utility-scale projects that use its panels.

Residential Investment

The downside of the solar lease model is that it’s capital intensive, Molchanov said. That may be addressed by an agreement today with Citigroup Inc. and Credit Suisse Group AG, which will provide financing for $325 million of residential solar leases.

SunPower’s U.S. residential sales will increase in the second half of the year, easing the impact of falling prices and shifting the company to a profit, Ben Kallo, an analyst at Robert W. Baird & Co. in San Francisco, said in an interview.

“We do see strength in the U.S. rooftop market,” Kallo said. “Sunpower’s relationship with Total, liquidity and today’s deal should help them garner market share.”

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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