SunPower Announces Restructuring to Double Residential Go-To-Market
Construction workers install SunPower tiles on homes in San Ramon, California.
Robert Nickelsberg | Getty Images
SunPower said on Tuesday it was restructuring its operations in an effort to focus exclusively on the rapidly growing residential solar market. The company acquires residential solar power supplier Blue Raven, while also looking to sell its commercial and industrial operations.
SunPower CEO Peter Faricy said the acquisition was a natural fit for several reasons, including Blue Raven’s customer-centric approach aligns with SunPower’s currency. Additionally, over 90% of Blue Raven customers are located in 14 states, which represents just 5% of SunPower’s sales. In other words, the acquisition expands SunPower’s presence in places where the company has struggled to capture market share.
“From a strategic point of view, this transaction is an example of something that allows us to serve consumers much faster than we would have done otherwise,” said Faricy, adding that the deal will be positive in terms revenue and EBITDA from day one.
SunPower will gain over 20,000 Blue Raven customers, adding to the 376,000 residential customers it had at the end of the second quarter.
The total value of the acquisition transaction is $ 165 million, with cash required to complete the transaction of up to $ 145 million. SunPower used cash from operations to finance the acquisition, with the majority of funds raised after the company sold 1 million shares of Enphase Energy.
Focus on residential solar
Faricy said that while the commercial and industrial solar segment is an attractive space to operate with strong growth to come, the company’s decision to sell the division comes down to the allocation of capital and the desirability of a streamlined business.
He noted that the unit has attracted the interest of potential buyers, but has not disclosed any individual names. Faricy also highlighted the attractiveness of the asset, saying that SunPower is currently making money in commercial and industrial areas through management contracts, while a future owner could benefit from both management and ownership. financing of the operation.
SunPower intends to use the money from a potential sale to reinvest in its new residential core business, particularly around customer acquisition and extended digital services for homeowners.
âIn our case, we are pleased to have clarity for investors on this singularly focused strategy now, focusing on the residential future,â said Faricy.
A restructuring of this nature is not the first for SunPower. In August 2020, the company established a manufacturer of photovoltaic modules Maxeon Solar, although the two separate entities are still working together.
Shifting the company’s focus to individual consumers may have been a natural fit for Faricy, who took over as SunPower in April. He was previously CEO of Global Direct-to-Consumer Selling for Discovery Inc., and was also Vice President of Amazon Marketplace.
And while commercial and industrial solar offer alternative growth avenues, the majority of SunPower’s revenue comes from residential operations.
Sales for the full year 2020 of the residential and light commercial sector totaled $ 848 million, while the commercial and industrial unit grossed $ 254.8 million. The residential unit is also more profitable. Gross margins per watt fell from $ 0.19 in 2019 to $ 0.66 this year, while margins in the commercial and industrial division declined from $ 0.25 to $ 0.06 during the same period .
âThe facts are that the residential business is bigger, growing faster and more profitable,â Faricy summed up. “[Residential] is the right place to focus on as we move forward, and I think we expect it to be well received by investors. “
Going forward, SunPower wants to be a one stop shop for consumers. Rather than having a single customer relationship when installing the system, the company adds energy storage, electric vehicle capabilities, and a host of digital products, including energy management systems.
Residential solar installations have jumped in recent years, but by the end of 2020, only 2.7 million, or 3%, of homes in the United States sported roof panels. President Joe Biden’s climate agenda calls for an increase in the share of solar in electricity generation from 3% today to 40% by 2035. Solar installations will have to increase in the years to come if these targets must be achieved.
But opportunities don’t always translate into returns for investors looking to capitalize on long-term trends. After a record 2020 year, solar stocks suffered in 2021. Supply chain bottlenecks, rising commodity costs and political uncertainty are among the factors that rocked sentiment.
Faricy noted that SunPower had remained largely immune from the chip shortage, saying the company had visibility until the end of the calendar year. That said, he acknowledged the difficulty of securing components, saying supply chains are an “ongoing challenge”.
SunPower shares have risen nearly 6% in the past month, helped by an almost 10% gain last Friday after S&P Dow Jones Indices announced that SunPower would be added at the S&P MidCap 400 before the opening bell Tuesday. The Invesco Solar ETF, by comparison, is down 10% from last month.
SunPower shares rose 2% in pre-market trading on Tuesday.
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