SunPower to remain capacity constrained through 2015

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Major PVEP SunPower will remain capacity constrained through 2015 and rely on only a 350MW new fab in the Philippines through 2016, before starting the construction of a giga-fab in 2017.

Despite running at full-capacity, SunPower is limiting capital expenditures to its Fab 4 facility in the Philippines through 2016, with expectations of only having 50MW of module production from the fab next year, compared to previous guidance of production being between 50MW and 100MW.

The main ramp of the new facility is planned for 2016 with an expected production capacity of 250MW. Current capacity is around 1.3GW.

“If you include the full ramp of Fab 4, our total capacity will reach approximately 1.8GW in 2017, a 40% increase versus current capacity, noted Thomas Werner, Chairman, Chief Executive Officer and President of SunPower during the second quarter conference call. “In our existing fabs, we remain focused on driving improvements with respect to yield, equipment effectiveness and output. We are also still evaluating locations for capacity expansion beyond Fab 4 and plan to update investors on this initiative by the end of the year.”

A key reason for the slow ramp of Fab 4 may be due to it being SunPower’s pilot volume production plant for its Gen 3 solar cell technology.

According to Werner, 25% of SunPower’s total production capacity in 2016 would be Gen 3 specification with solar cell efficiencies close to 25%. With the ramp of Fab 4 in 2016, cell efficiencies are expected to be heading towards 25.5%. The comoany expects production costs to be reduced by around 35%.

R&D of Gen 3 technology remains at Fab 2, also located in the Philippines.
Small capacity increases are also coming via existing fabs. Fab 2 has 50MW of extra capacity taking it to 600MW in 2014 and plans for a further 25MW in 2016 and a further 25MW in 2017.

Fab 3 has increased capacity from 650MW in 2013 to 700MW in 2014. This is planned to increase to 775MW in 2015.

Including the new Fab 4 ramp to 250MW, SunPower will have a nameplate capacity of 1.7GW by the end of 2016.

Fab 5 update

According to Werner, the previously discussed next major production plant, Fab 5 would be “at least twice as big as Fab 4.” This would suggest that the nameplate capacity would in the 2GW range when built and fully ramped.

However, the CEO noted in the earnings call that the Fab 5 site selection analysis was still ongoing. However, the likely place would be in Malaysia with Fab 5, due to mature local infrastructure and access to trained staff.

Financial results

SunPower reported second quarter 2014 GAAP revenue of US$507.9 million, down from US$692.4 million. Gross margin was 18.5%, down from 23.5% in the prior quarter. The company reported a net loss of US$14.1 million, compared to a profit of US$65 million in the previous quarter.

The produced 306MW in the quarter and had recognised revenue on 311MW, down from 327MW in the prior quarter.

The company guided third quarter recognized revenue of 325MW to 360MW and reiterated guidance of 1,225MW to 1,300MW for the year.

GAAP Revenue for the third quarter was guided at US$575 million to US$625 million, reiterating full-year guidance of US$2.5 billion to US$2.7 billion.

Project pipeline

Despite being capacity constrained, SunPower increased in PV project pipeline by around 500MW since the first quarter, taking its total pipeline to 8GW.

The company highlighted that its North American commercial project pipeline exceed US$1 billion in value, supported by continued strong demand in that segment.

SunPower noted that within its power plants segment that the 579MW Solar Star project, the largest in the world was scheduled for completion the second half of 2015.
So far, SunPower has completed more than 270 Oasis power blocks at the project that accounted for over 1 million modules. A total of 228MW had been grid connected.

On the international front, SunPower said that its C7 CPV technology was being used in Inner Mongolia, China on projects totalling 115MW, with plans to expand its partnership with TZ Group to other regions in China.

The company noted that the partnership was working on a pipeline in the country of around 1GW. The C7 technology enables SunPower to boost project installations without impacting constrained module production. 

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