Solar Investing

By pjain      Published July 7, 2021, 5:18 a.m. in blog Housing   

Solar Market Research, Companies

SPWR FSLR SCTY CSIQ JKS TSL YGE CAFD VSLR

Solar Key Trends

Overview

  • Global New installs 46 GW'14

  • Global Investment +25% to $150b '14 - will continue similar CAGR

  • US solar growth 30% 6.2 GW annual install'14, 32% of all new Electric Generation US 60% for large utility scale,20% residential, <10% SMB/Corporate US 200k employed in solar = 2x as in coal sector

  • Estimated 660 GW US rooftop potential vs all coal power plants in USA = 336 GW

  • Subsidies dropping globally as Cost/Watt drops

    • US $/watt installed residentially $3.5 - 50% of Q1'20
    • US utility install cost at $1.6/w, commercial $2.25/w
    • Germany feedin now reasonable
    • California Solar Initiative reduced
    • Expiring 2017 - US Investment tax credit (major Solar tax benefit in USA)

DEMAND: Electric Vehicles big pull for Solar esp. Home Chargers

Demand - EVs, Lower Costs

  • Standards for Inverters

    TSLA powerwall makes installation easier and is compatible with SMA inverters, a market leader in residential solar. SolarCity saying it will expand Powerwall installations, eventually making it a standard

INDUSTRY ECONOMICS have Problems PROBLEMS

  1. Chinse Solar Dumping A Problem - LARGE is bad!
  2. reliable solar panel stock an oxymoron
  3. developers/installers: SunEdison Bankrupt
  4. VC has dried up - hard to make a dent!
  5. "largest in the world" title has been more of a warning sign than anything else - now Canadian Solar

COST per WATT - Solar Available - Not all Installs feasible!

  1. Efficiency sweet-spot a saver / differentiator

  2. Trends for installed watt capacity

  3. $2.71 /watt installed cost to SCTY

Solar Utility Politics

  • Net Metering Policy to "UTILITY COSTS"

    The net-metering change means that the energy that gets sold back during the day is sold at the price it costs the utility to produce the energy, the “wholesale” cost. This makes the economics of installing solar panels much less attractive for consumers, and as a result, SolarCity has effectively pulled out of Nevada.

SCTY struggling after Nevada changed its net-metering policy. In short, the energy that SolarCity produces during the day that it doesn’t need, it sells back to the utilities. Until the law was changed, the energy was sold back to the utility at the same price that the consumer bought electricity for during the night when they needed it.

Finance Rates/Securitization needed to grow

  1. Low FCF Critical to Installer business model is that it constantly needs financing to fund solar installations. Its business simply doesn't generate enough cash for SolarCity to finance projects itself, so it slices and dices the value created from each solar project and sells the pieces to investors. DEFICIT> SCTY cost E2.71 per watt to build solar systems, which was less than the $2.73 per watt it got in financing during 2015.
  2. rinse & repeat - it could fund operations with tax equity and securitizations while taking a piece of the value as profit long term.

  3. Tax equity, where investors pay a certain amount for the tax benefits of a solar project (30% investment tax credit and accelerated depreciation) along with a percentage of the project's cash flow. The rest of the funding has to come from SolarCity itself or some form of debt. And the company would prefer to sell the future cash flows from solar projects to investors in the form of securitizations, which would give SolarCity immediate cash flow and put the risk of customers paying their bills on securitization investors.

  4. GET LENT> Why securitization is such a desirable market Securitization isn't a new concept in finance, but it is new in solar. More commonly, securitization is used to fund credit card debt or mortgages. A bank bundles thousands of debts together and sells off pieces to debt investors, who take different interest rates depending on the risks they take. In a perfect world, a bank can fund 100% or more of its lending with these securitizations, creating a sustainable cash flow cycle.

  5. PROBLEM - RESTRICT AMOUNTS RISING LT interest rates are killers! While rates have risen from 4.5% to 5.5 & now 6.25% the total volume securitized has fluctuated to now down!

    • investors aren't as confident in residential solar cash flows as they once were.

FinMgt/Gutso - WHY SO MANY Bankrupt

Solar as diversification

100B Global Market

Solar City-like entities have a 100B global market to break into (residential electricity), just like Tesla. And it's just as likely. But they'll definitely raise more money in the short-medium term. At a much higher price then 60/share.

Competitors for leases or PPAs

There are many, many other companies that offer similar deals like this to homeowners

  • Solar City

  • SunRun, Sunnova, Vivint, SunEdison, SunPower, Clean Power Finance, and NRG

Finance Only companies

There are also a whole series of companies that offer loans for solar systems (different than leases or PPAs)

like Mosaic, Admiral's Bank, and Dividend Solar.

Solar Deploy, Project Companies

Solar Manufacturers Overview

Demand - Utilities replace Generators

Utilities have been slow in signing contracts for projects due in 2017.

FINANCE/BEAN COUNTER - no funda advantage!

Evergreen Solar in Massachusetts '11

SPWR ni$400m

  • FY'21 - gross profit margin of 16.41%.
  • Q1'21 EPS $0.05 beat by $0.03, Revenue at $306 m missing estimates by $1 m
  • v Stock has gained 22.77% in the past 6 months and 19.95% year to date.
  • Q2 June 2nd,2021 de-levered its balance sheet by retiring the 2021 convertible bond allow CAPEX free for growth

  • SEG: Residential market

  • CEO said TAM in the rooftop market of about 100m US homes

  • STRUCT

  • n% -17% LOSS! Q1'16 -0.30 - exp $0.57 to grow to $1.5'18

  • diversified -? COMPLICATED > Even SunPower, who is the second most steady company of the group, has its fingers in nearly every global solar market and everything from the smallest solar systems to the largest in the world.

  • GROWTH oriented> not really a growth company. It's turning on previously shut down manufacturing plants, but production is only expected to grow from 2.5 GW in 2015 to 2.9-3.0 GW in 2016. The company may announce more expansion plans next month, but for now it's content just turning existing production back on.

  • D/E 70%, not that strong B/S ~ offering integrated solar power systems to power plants as well as both residential and commercial customers

    • HIGH Efficiency for less space/less predictable sunlight X-series cells astronomical 22% rate.

      IoT tie-up with AT&T help customers "remotely monitor cargo, homes, vehicles, containers, and solar panels"

  • ABOUT: SunPower Corp Residential, Light Commercial, Commercial and Industrial Solutions, and Others, and offers commercial roof, carport, and ground-mounted systems.

Residential LT contract plays

  • Q1'16 Residential solar growth isn't as strong as it was expected to be. This is a combination of the lack of urgency to sign contracts after the investment tax credit extension in December, regulatory uncertainty in some states, and market saturation. Notably, SolarCity reduced its 2016 installation guidance from 1.25 GW to 1.0-1.1 GW.

SCTY SolarCity x

- losing money n% -14%
- 40% short sales, 
- reliance on LT contracts - but future is uncertain .. tsla hype "inhome batteries" bolstering stock!
  • TOO GUTSY/RISKY> SolarCity, who is trying to deal with regulations for rooftop solar in over a dozen states. It is also trying to get into commercial solar, which has been a fiasco over the past year. Now, add energy storage and module manufacturing and the business is getting more complicated by the day.

VSLR Vivint Solar x

- n= -42%

RUN

  • ABOUT Sunrun : develops residential solar energy systems in the US. The company also sells solar energy systems and products, such as solar panels.

On June 16th, Morgan Stanley raised its price target for Sunrun Inc. (NASDAQ: RUN) to $91, commenting that the stock was among the “most compelling” in the clean energy sector. In the first quarter of 2021, Sunrun Inc. (NASDAQ: RUN) had

  • FY'21 gm 18%
  • Q1 EPS of -$0.12, missing by -$0.08, REV $335 m beating by $11 m
    • stock has gained 201.44% in the past year.

Solar Financing, YieldCos

YIELDCO owns projects with LT contracts & Dividends

  • YieldCos = solar long term electricity sales contracts

  • yieldcos such as Abengoa Yield, TerraForm Power, and TerraForm Global have been put into question because of the insolvency of their parents.

Built on a constant need for new financing and as borrowing costs have gone up - and Solar went from subsidized darling & sweet loans to a risky proposition! Problem for SCTY, SunEdison

The yieldco model has been discredited, faith that financing will last forever is diminishing.

HASI

Hannon Armstrong Sustainable Infrastructure Capital, Inc. provides capital and services to the renewable energy and other sustainable infrastructure markets. The company focuses on grid-connected projects to deploy cleaner energy sources such as solar and wind for power generation and ranks 10th on our list of the best solar stocks for 2021.

  • STRUCT
  • Annual dividend growth was expected to be at a compound annual of 3-5%
  • CAGR 7-10% growth in its distributable EPS on a compounded annual basis by 2023
  • The company has a gross profit margin of 100%

  • FY'21

  • Q1'21 FFO of $0.43 beat by $0.04 on- Revenue $24 m y+6% beat $1.38 m
  • v +102 in the past year

CAFD point3 Energy Partners x

most stable of all the yield cos. It sells energy to utilities, building owners, and homeowners on long-term contracts, with a weighted average life of 21.3 years, and there's very little cost associated with running solar projects. So cash flow is very predictable, unlike that of a lot of solar companies today. It also has technologically differentiated and well-capitalized sponsors in SunPower and First Solar, and has a conservative balance sheet itself. 6% dividend yield that's expected to grow 15%

Solar Power Utilities

SOL

ReneSola is a solar power provider operating through three segments: Solar Power Project Development, EPC services, and Electricity Generation Revenue. The company also develops community solar gardens, sells project rights, and operates about 100 solar power projects with 173 MW in aggregate capacity, as of December 31st, 2020. It ranks 12th on our list of the best solar stocks for 2021.

ReneSola Ltd (NYSE: SOL) raised its revenue in the first quarter to a large extent because of projects in Hungary and Utah. The income for the quarter rose to $3 million, a big improvement from the net loss of $2 million in the first quarter of 2020. In Q1 2021, ReneSola Ltd's (NYSE: SOL) EPS was $0.05, beating estimates by $0.07. Its revenue came in at $22.77 million, representing a 7.62% growth year over year and beating estimates by $2.77 million. ReneSola Ltd (NYSE: SOL) also has a gross profit margin of 25.18%

VST

  • ABOUT Vistra Corp: electricity provider in the US with a generation capacity of about 38,700 MW. The company’s portfolio mainly includes solar, nuclear, and battery energy storage facilities and it ranks 2nd on our list of the best solar stocks for 2021.

  • FY'21 - gross profit margin of 13.5%.

  • Q1'21 div of $0.15/share y 3.52% and payable on June 30th
  • Q1'21 EPS of -$2.89, missing by -$0.85. Revenue $3.21 b y+12.21% beat by $1.88 b
  • v The stock has gained 0.37% in the past year

TERP TerraForm Power

SunEdison 15 - Bankrupt?

SunEdison tried to acquire everything from a residential solar company to wind projects, dubbing itself the largest renewable energy company in the world. It's financing got more and more complicated and now it's on the verge of collapse.

BEP

  • SEG: H2 Power Generation
  • Mar'21 plans to build a green hydrogen plant with Plug Power abd utilize 100% of its hydroelectric powered renewable energy

  • About: Brookfield Renewable Partners L.P. renewable energy company operating mainly in North America, Colombia, Brazil, Europe, India, and China. It uses solar power to generate electricity, alongside hydroelectric, wind, and other renewable energy sources.

  • FY'21 T$45 - gross profit margin of 67%

  • Q1'21 EPS -$0.24 missing estimates by -$0.23, REV $1 b y+29% beat by $92m 6.88%
  • v stock has gained 53.38% in the past year.

Solar PV and Modules Companies

Investing overview

SOL MAXN DQ HASI FSLR CSIQ SPWR NEE BEP ENPH SEDG RUN VST

MAXN

Maxeon Solar Technologies, Ltd is a designer and manufacturer of solar panels and other solar system components across the world. The company offers interdigitated back contact and shingled solar cells and panels under the SunPower brand and ranks 11th on our list of the best solar stocks for 2021.

  • flagship installation using its advanced solar tech to power the new international logistics "hub" owned by Kering

  • FY 2021

  • Q1'21 EPS -$1.38 exp -1.45 on $165 m exp +$5 m

FSLR c48 b40 mb 30

  • FY'21 gm=27% T$90-100
  • Q1 $0.8b y+51%, EPS 0.81 exp=-.03
  • v +87% in 1 year
  • benefited from Biden's ban on Chinese solar products from Xinjiang SILICA based

  • THESIS: If the cash flow and low cost installations can lead to a continually improving efficiency and even wider margins I

  • FSLR ni $250m 5yr$_30%, NI5yr 56%

  • n% MOST PROFITABLE

    • First Solar (for utilities power projects)
  • strong financial model incredible balance sheet with $1.8 billion in cash and just $289 million in long-term debt, as of the end of 2015.

  • STEADY OPS - Not going for broke for solar panel marketshare

  • Older panel tech .. might have caught back up

  • EFFICIENCY PROBLEM> builds large solar plants using its thin-film solar panels and that's it. Part of the improvement over the past two years has been increasing efficiency in its core thin-film solar modules.

  • It doesn't try to enter new countries it doesn't understand, doesn't try to sell to customers it doesn't know, and hasn't strayed from a conservative financing strategy.

MISSED SALES FORECASTs stock drop to $48 - Q1'16 Stock came under fire from investors after missing revenue by 13% verse consensus estimates. The stock has been driven down about 20% to $48.56 in the last two weeks since the announcement. For Q1 net sales were 848 million in the quarter compared to 942 million in Q4. The decrease in sales results are primarily from the timing of revenue recognition across multiple systems projects and the completion during the quarter of our Tenaska West and Southern projects.

  • PROBLEM: SLOW GROWTH not really a growth company. It's turning on previously shut down manufacturing plants, but production is only expected to grow from 2.5 GW in 2015 to 2.9-3.0 GW in 2016. The company may announce more expansion plans next month, but for now it's content just turning existing production back on.

SEDG

  • FY'21
  • Q1'21 EPS $0.98 REV $405.49 m beat $10 m
  • v Stock has gained 111% in the past year

  • ABOUT: SolarEdge Technologies, Inc: DC inverter systems for solar photovoltaic installations worldwide. It provides power optimizers, communication devices, and smart energy management solutions for residential, commercial, and small utility-scale solar installations and inverters. The company ranks 4th on our list of the best solar stocks for 2021.

ENPH

  • STRUCT gross profit margin is 44.59%.
  • Q1'21 started a $500 million buyback program to repurchase shares.
  • EPS $0.56 beat by $0.12, Revenue $302 m Y+47% beat by $9.32 m.
  • v stock has gained 12.07% in the past 6 months and 10.75% year to date

  • ABOUT Enphase Energy, Inc: home energy solutions for the solar photovoltaic industry. The company operates in the US and internationally. It also offers semiconductor-based microinverters, which convert energy at the solar module level. The company ranks 2nd on our list of the best solar energy stocks to invest in.

Chinese PV and Modules - Solar Companies

Chinese Solar PV - BIG & FAILING

Chinese companies have spurred the industry forward by driving the production costs of solar panels sharply downward. The resulting market has been difficult for companies in higher-wage economies to compete with. In fact, even the Chinese manufacturers may have been too aggressive in their pricing. Four Chinese solar energy companies have now failed to make bond payments on debt they’ve wracked up, according to Bloomberg:

A venture of Yingli Green Energy Holding Co., the top producer of panels until 2014, missed payments on 1.76 billion yuan of its notes. That brings the number of companies that defaulted on bonds to four, involving $1.8 billion…

DQ - polysilicon, China

  • ABOUT: Daqo New Energy Corp and its subsidiaries manufacture polysilicon for photovoltaic products in China. The company's polysilicon is processed into ingots, wafers, cells, and modules for solar power generation, and it offers ready-to-use polysilicon packaged for crucible stacking, pulling, and solidification products. It ranks 9th on our list of the best solar stocks for 2021.

  • Jun'25 2021 - Fell and rebounded would be minimally impacted by the US solar material ban on China

  • June'21 to IPO its subsidiary, Xinjiang Daqo New Energy

  • FY'21 forward PE ratio of 8.36.

  • Q1 EPS $1.08 exp+$0.19, revenue $256m y+52% missed by $42 m
  • v gained 18.96% in the past 6 months, 6.48% year to date

CSIQ

  • STRUCT: company has a 17.68% gross profit margin.

  • FY'21

  • Q1'21 EPS of $0.36, missed by $0.03, on revenue of $1.1b y+32% beat by $49m
  • v Stock gained 142% in the past year as well

  • Q2 June 28th, 2021 Plans IPO on Shanghai exch.

  • Subsidiary CSI Solar would be issuing about 541 million shares, and it expects to hold approximately 64% of them
  • Jun'21 acquired a $60 m facility to support growth in the global energy business.
  • company is also planning to expand project development pipelines in Africa, Europe, and the Middle East.

  • ABOUT: Canadian Solar (chinese)

  • manufactures solar ingots, wafers, cells, modules, and other solar power products. The company has two segments: Module and System Solutions and Energy

JKS x Jinko Solar Chinese

- n% 4.3%
- D/E 3x - way too high!

TSL x TrinaSolar Chinese

- n% 2.5%
- D/E 1.7x - way too high!

YGE x Yingli Green Energy Chinese

- LOSING MONEY n% -13%

Failures in Past

Q Cells x

Suntech Power x

x Solyndra in California Bankrupt '11 - Obama couldn't save


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