SunPower Swings to a Loss, Italy Shaking Up Solar


SunPower & Flextronics Factory in Milpitas, CA

Solar companies know what to blame for their weak first quarterly financials this year: Italy and the country’s revision of its solar subsidies. Solar bellwether SunPower (s SPWRA) this afternoon, announced a quarterly loss of $2.12 million ($0.02 loss per share), down from a positive net income of $12.57 million for the first quarter a year earlier, and far worse than the $152.25 million in net income for the fourth quarter of 2010. SunPower cites Italy’s subsidy revision throughout its statement.

SunPower generated $451.42 million in revenue for the quarter, up from $347.27 million from the year earlier. Wall Street was predicting revenue of $477 million. SunPower’s shares are down 1.42 percent in trading at $20.76. SunPower CEO Tom Werner noted in a statement that the company’s revenue “was lower than plan as a result of changing market conditions in Europe,” (i.e., Italy).

SunPower CFO Dennis Arriola also pointed fingers at Italy in the company statement: “Revenues and inventory levels in the first quarter were impacted by the pause in business activity in Italy, as several projects awaited clarity on the new tariffs . . . We plan to revise our 2011 guidance before the end of the second quarter to reflect the recent changes in Italy.”

Italy has struggled for months to revise its solar subsidies in order to curb an explosive growth in solar project installations in recent years and to lessen the burden on consumers who pay for those incentives through their electric bills. It was only last Thursday when the Italian government finally approved a new set of solar electricity rates  – which are still higher than rates for electricity from fossil fuels – that utilities must pay. The new incentives, to start in June, could cut solar spending by up to 33 percent in 2011 and 2012.

SunPower has devoted a lot of resources to developing the Italian market, including spending $277 million on acquiring Malta-based project developer SunRay that focused heavily on Italy, and completing 85 MW of projects in the country. SunPower also bought an Italian solar distributor, Solar Solutions, back in 2008. Italy was SunPower’s largest market in 2010, accounting for about 40 percent of its revenue, according to its annual report. The U.S. followed with 29 percent of revenue and Germany with 11 percent.

Shares of First Solar (s FLSR), SunPower, Trina (s TSL) and Yingli (s YGE) all have been falling anywhere from as little as one percent to around three percent in recent trading.

In light of SunPower’s weaker earnings, the high-efficiency panel maker has a game-changing backer announced late last month: SunPower plans to sell 60 percent of the company to French oil and gas giant Total (s tot) for $1.38 billion. Total offered $23.25 per share for up to 60 percent of the Class A and Class B shares – a significant premium over the closing price. Total also promises to give SunPower up to $1 billion of credit support over the next five years to support its power plant development business and allow the solar company’s current management to continue running SunPower. The Total deal is one of the largest solar manufacturing acquisitions to date.

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