SunPower Corporation (SPWR) has entered into a purchase power agreement to sell electricity to Pacific Gas and Electric (PG&E), a subsidiary of PG&E Corporation (PCG), from its 100-megawatt (:AC) Henrietta Solar Project in Kings County, California.
Currently, the contract is dependent on the approval of the California Public Utilities Commission and SunPower's ability to complete all applicable permits. California has a state mandate that requires its investor-owned utilities to have 33% of their electricity from renewable sources by 2020. PG&E Corp. will buy the electricity in order to meet this goal.
At the site of the project, SunPower will deploy the SunPower OasisTM power plant. SunPower power plant is the energy industry’s first modular solar power block that provides a cost-effective way to rapidly deploy utility-scale solar. It makes the best use of the available land and its each power block uses highly efficient 435-watt SunPower solar panels with the SunPower T0 Tracker. The T0 Tracker positions the panels to track the sun during the day in such a manner that results in up to 25% more energy capture over fixed-tilt solar power systems. The 1.5 MW solar power blocks with sophisticated energy management tools provide an effective solution for fulfilling rising energy demands.
The project is expected to begin construction in 2015 and come online by late 2016. The project will be able to provide electricity that can power approximately 36,000 average California homes. It will likely create approximately 200 jobs during construction and inject $72.7 million into the local economy.
SunPower is a vertically-integrated solar manufacturer, which has a strong presence along the entire solar value chain from cells through installation. Going forward, key growth drivers of the company are its diversified channel strategy with a strong presence in the residential and commercial market and its status as a conversion efficiency leader. The company also has a steadfast focus on spreading its revenue stream by climbing the solar value chain.
However, we are apprehensive about the higher cost structure of the company compared to its peers, the glut of solar panels in the market, lower ASPs, subsidy roll back risk in Europe, rising competition, financial stability of its customers and foreign exchange risk. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
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