(TOT) SunPower Renews GRID Partnership

SunPower Corporation (SPWR), a Silicon Valley-based manufacturer of high efficiency solar cells, solar panels and solar systems announced that it is renewing its supplier partnership with GRID Alternatives.

GRID Alternatives is a non-profit organization that brings the benefits of solar technology to low-income communities. Using a barn-raising model, GRID Alternatives leads teams of volunteers and job trainees to install solar power on qualifying homes, providing needed savings for families struggling to make ends meet while preparing workers for jobs in the fast-growing solar industry and cleaning our air. Nearly 3,000 California families have benefited from the program to date, saving more than $80 million in lifetime electricity costs, and more than 11,000 people have received hands-on solar installation experience.

Under the terms of the agreement, SunPower is providing GRID Alternatives with its high efficiency solar panels through a combination of donations and fair market value sales. The renewed commitment will bring solar technology to underserved communities across California and Colorado, generating approximately $4.8 million in energy savings over a 30-year life of the solar power systems. In addition, the partnership will provide thousands of hands-on training opportunities for job seekers through GRID’s volunteer-based installation model.

SunPower has worked with GRID Alternatives since 2006 providing philanthropic gifts and equipment and donating more than 1,300 employee volunteer hours to help hundreds of families install solar electric systems on their rooftops. This seven-year partnership is expected to generate approximately $15 million in savings for these families over the life of their systems.

SunPower is a vertically integrated solar company with presence across the entire solar value chain. The company designs, develops, manufactures, markets and sells high-performance solar electric power technology products, systems and services worldwide for residential, commercial and utility-scale power plant customers. The company’s semiconductor-based solar cells and solar panels, which convert sunlight into electricity, are manufactured using proprietary processes and technologies. SunPower is largely owned by French oil major Total S.A. (TOT).

SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company is proactive in entering new markets. In addition to a sizeable presence in the US, it is already focusing on improving market share in France, Germany, Italy, Spain and Japan, while gaining new market share in emerging markets like England, Greece, Israel and Malta. SunPower is also increasing its global market presence within the residential and commercial markets by expanding its network of dealers. Finally, by steering clear of long-term contracts for sales through its dealer network, the company is geared for margin growth on the back of any short-term upswing in the solar market. SunPower mainly competes with First Solar, Inc. (FSLR).

SunPower is however witnessing falling Average Selling Prices and margins in its residential and small commercial markets segment which accounts for approximately two-thirds of its top line. We expect the trend to continue unabated in the near future with valuation further restrained by the higher cost structure of the company compared to its peers. Other risks include subsidy roll-back in Europe and foreign exchange risk. SunPower presently retains a short-term Zacks Rank #3 (Hold).

In the near term, we would rather advise investors to accumulate the short-term Zacks Rank #2 (Buy rating) stock Yingli Green Energy Holding Co. Ltd. (YGE).

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