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Vivint Solar Junks Sale To SunEdison Amid Liquidity Questions

Vivint Solar ( VSLR ) junked its sale to SunEdison ( SUNE ) early Tuesday, only four days after SunEd settled with Latin America Power shareholders for $28.5 million, having terminated the acquisition of that company in October. SunEd shareholders had been leery of the deal, and SunEdison stock rocketed 10% as of early afternoon trading on the stock market today , though it was still holding just barely above 2. The stock is nearly 95% off its 2015 high of 33.45, achieved July 20 — the day the company announced its bid to acquire installer Vivint Solar. Under that agreement, SunEdison had until Feb. 26 to close the deal, and the company had ignored a pair of Vivint Solar notices stating as much, according to an 8-K filed by Vivint Solar early Tuesday. The deal would have been vacated March 18. Legal Overhang Preferred? SunEdison’s financials are seemingly too constrained to close the deal, Vivint Solar wrote. Last week, SunEdison delayed its 10-K filing , citing an ongoing investigation into its liquidity, and suspended a dividend program. Also last week, rumors surfaced that banks backing the Vivint Solar acquisition might pull their funding amid SunEdison’s tenuous financial position. SunEdison representatives declined to comment on Monday and didn’t immediately return an email Tuesday. In its filing, Vivint Solar said, “SunEdison’s representatives subsequently have informed the company that SunEdison is unable to the cause the closing to occur in the foreseeable future.” The company plans to seek all “legal remedies available to it in respect of such willful breach.” The legal overhang is preferable to acquiring Vivint Solar, S&P Global Market Intelligence analyst Angelo Zino told IBD on Monday, before the deal was terminated. Under the original deal, SunEdison is required to pay Vivint Solar a $34 million breakup fee. “I think investors would rather see the deal not close and handle an undisclosed legal settlement fee at some point in the future,” Zino said. But he said it doesn’t behoove Vivint Solar to force SunEdison into a bankruptcy. Hyper-Growth Plan Backfired Like SunEdison shares, Vivint Solar stock has plunged since July 20. Shares jumped 45% that day, but they then fell more than 65% through Monday’s close. Vivint Solar’s fall on Wall Street, and pressure from SunEd activist investor Appaloosa Management, forced SunEdison to cut its bid on Vivint Solar in December. In midday trading Tuesday, Vivint Solar stock was down 21%, just above 4. Vivint has been the No. 2 U.S. residential solar installer, behind SolarCity ( SCTY ). SolarCity stock was up 2% early Tuesday afternoon. “Vivint Solar fundamentals have been deteriorating,” Zino said on Monday. Appaloosa owns 9.5% of SunEd yield company TerraForm Power ( TERP ). SunEdison planned to tap TerraForm Power and fellow yieldco TerraForm Global ( GLBL ) to fund its plan for hyper-growth via acquisitions, Zino said. TerraForm Global filed its IPO less than two weeks after the Vivint Solar bid was announced. Investor sentiment quickly soured on the yieldco model, taking SunEdison stock down with it. “SunEdison had a growth type of mentality, looking to aggressively spend on acquisitions and fund it via these yieldco vehicles,” Zino said. “So once that Vivint Solar transaction was announced, some investors got concerned they were maybe doing too much.” The Vivint Solar purchase was sold to SunEdison investors as a way to complete SunEd’s portfolio, he said. SunEdison planned to drop Vivint Solar’s 922-megawatt rooftop portfolio down to TerraForm Power. Appaloosa tried to prevent that, noting the rooftop assets were embroiled in debt. A judge tossed Appaloosa’s injunction last week — now a moot point, Credit Suisse analyst Patrick Jobin wrote in a research report Tuesday. TerraForm Power stock shot up as much as 15% Tuesday, on the failed Vivint Solar transaction, and was up more than 4%, near 10.65, in early afternoon trading. Before Tuesday, its shares had fallen nearly 70% since July 20. SunEdison Liquidity Questioned The vacated Vivint Solar bid frees SunEdison’s near-term liquidity by $206 million, Jobin wrote. But it also highlights how precarious SunEdison’s liquidity actually is. “Lest we forget, SunEdison has an ongoing board investigation into allegations from former executives that the company misrepresented their liquidity position, and has delayed filing their 10-K,” he wrote. Jobin maintained his neutral position and 3 price target on SunEdison stock. Zino reiterated his hold rating on SunEdison stock. Financially, it no longer makes sense to drop assets down to TerraForm Power and TerraForm Global, Zino told IBD. Like No. 1 and No. 2 solar companies First Solar ( FSLR ) and SunPower ( SPWR ), SunEdison ought to be selling assets to third-party project developers — the “lifeblood” of the solar industry. “The fact SunEdison hasn’t been able to sell projects here in recent months, it raises a lot of questions for us,” he said. “What does the market actually look like for SunEdison’s projects?” Project developers like Dominion ( D ) buy solar assets, providing up-front capital financing. SunEdison can’t afford to keep large-scale projects on its already tight balance sheet. But the third-party market could be sour on SunEdison’s assets, Zino said. “The third-party market looks good for SunPower and First Solar,” he said. “We haven’t seen any problems on their end selling projects and generating cash. But the pricing environment for SunEdison may not be the same as it is for their competitors.”

First Solar Rockets On Q4, Delays 2016 Projects To Milk ITC Extension

No. 1 solar installer First Solar ( FSLR ) is “firing on all cylinders” after reiterating 2016 earnings guidance late Tuesday despite pushing 200-250 megawatts in projects out to 2017, a Deutsche Bank analyst wrote Wednesday. Both Cuyama and Switch projects will be recognized entirely in 2017, and First Solar plans to delay the latter piece of its 280-MW California Flats project until 2017. Apple ( AAPL ) is a partner in the Monterey County, Calif., project. The lowered guidance followed First Solar’s “solid” Q4 and 2015 sales and earnings beats, Deutsche Bank analyst Vishal Shah wrote in a research report. Shah reiterated his buy rating and 86 price target on First Solar stock. In early trading on the stock market today , First Solar stock rocketed 13% to around 70. SunPower ( SPWR ) stock lifted about 9%, leading shares of jointly-owned yield company 8point3 Energy Partners ( CAFD ), up 3.5%. For Q4 ended Dec. 31, First Solar reported $1.60 earnings per share on $942 million in sales, down 15% and 6.5%, respectively, vs. the year-earlier quarter, but leading analyst expectations for 76 cents and $929 million. First Solar’s 2015 sales and EPS came in at $3.6 billion and $5.37, up a respective 37% and 6%, and leading Wall Street projections for $3.56 billion and $4.51. Delayed Projects Slug Guidance But First Solar lowered 2016 sales guidance to $3.8 billion to $4 billion vs. earlier guidance for $3.9 billion to $4.1 billion. CFO Mark Widmar credited the ITC extension for more flexibility. At the midpoint, sales would be up 8% and EPS down 21% vs. 2015 metrics. The new outlook topped the consensus of 19 analysts polled by Thomson Reuters for $3.8 billion and $4.11. For 2016, First Solar expects to drop the Kingbird, Stateline and Moapa projects (about 440 MW) down to 8point3. Cuyama was originally slated to drop to 8point3 in 2016, but won’t complete until 2017 to leverage the ITC benefits, Widmar said on the call. Congress’ ITC extension shed visibility on sector, CFO Jim Hughes told analysts on the call. First Solar now sees a 20.3 GW potential booking pipeline, up 18% quarter over quarter. The United States represents about 40% of that opportunity vs. 25% in Q3. “The ability to push projects out has given us a little more flexibility in terms of available supply,” Hughes said. Credit Suisse analyst Patrick Jobin retained his neutral rating and 65 price target on First Solar stock, noting component gross margins exceeded 26% in Q4 vs. his expectations for 19.2%. Total gross margins were 24.6% vs. his model for 19.7%. “Importantly, the shipment guidance of 2.9 GW to 3 GW (for 2016) was retained, implying project push-outs are replaced with increased mix of third-party module sales,” he wrote in a report. S&P Capital analyst Angelo Zino continued his buy rating and 75 price target on First Solar stock, noting the greater 2016 visibility. “We believe First Solar is executing well on efficiency and cost reduction efforts aiding higher margins,” he wrote in a report. “We see higher U.S. bookings are more projects are viable post-ITC extension and see competitor struggles as an opportunity.”

First Solar Tops Wall Street Q4 Views, But Lowers 2016 Sales Guide

No. 1 solar installer First Solar ( FSLR ) topped Wall Street’s Q4 and 2015 views late Tuesday but lowered its 2016 sales guidance by $100 million, largely as a result of the late-2015 extension of a key solar tax credit. First Solar’s Q4 earnings, released after the close Tuesday, came hours after the company announced it had surpassed 6 gigawatts in cumulative installed capacity in its power plant segment globally. Worldwide, First Solar is installing about 30 to 40 megawatts per week on 2 GW of active projects, the company says. First Solar stock was up 3% in after-hours trading following the release of its earnings, and No. 2 installer SunPower ( SPWR ) was up 1.5%. First Solar stock fell 3.8% in Tuesday’s regular session, and SunPower shares lost 6.1%. Yield company 8point3 Energy Partners ( CAFD ), a First Solar-SunPower partnership, plunged 6.8% in Tuesday’s regular session. EPS Shatters Expectations For Q4, First Solar reported $942 million in sales and $1.60 earnings per share, down 6.5% and 15%, respectively, vs. the year-earlier quarter. Both measures beat the consensus expectations of 19 analysts polled by Thomson Reuters for $929 million and just 76 cents. During Q4, First Solar saw 761 MW in solar rooftop production, up 50% vs. the year-earlier quarter, CFO Mark Widmar told analysts during the company’s earnings conference call. In all of 2015, the company produced 2.5 GW, up 36%. First Solar wrapped up 2015 with $3.6 billion in sales and a record-smashing $5.37 EPS, up a respective 6% and 37% and topping the consensus for $3.56 billion and $4.51. Three months earlier, First Solar guided to $3.5 billion-$3.6 billion in sales and $4.30-$4.50 in EPS. Bookings hit the 3.4 GW mark in 2015, Widmar said. But First Solar lowered its 2016 sales guidance to $3.8 billion-$4 billion — which would be down 8% at the midpoint — from its previous guidance of $3.9 billion-$4.1 billion. First Solar maintained its $4-$4.50 EPS guidance, which would be down 21% at the midpoint. Prior Guidance Discounted ITC First Solar CEO Jim Hughes, speaking on the call, described 2015 as an “outstanding” year. First Solar delivered on its promise circa-2014 to reach 22% cell conversion efficiency within its solar modules, with a record 22.1% announced Tuesday. CFO Widmar noted First Solar’s earlier 2016 guidance didn’t include the possibility of an extension to the Investment Tax Credit on solar power. Congress extended the ITC, a key subsidy underpinning the solar industry, in late December. Wall Street previously saw a cliff for 2017 installations, with the ITC scheduled to sunset Dec. 31, 2016. Now, some projects planned to have been completed in 2016 — to benefit from the outgoing ITC — have been extended into 2017, Widmar told analysts. “The outlook we provided at the time did not incorporate the extension of the ITC,” he said. “Some projects could be extended into 2017 to achieve lower installation cost per watt on the construction of these plans.” He added: “While our guidance anticipates we will recognize a significant portion of California Flats in 2016,” two other big projects will be recognized entirely in 2017. California Flats is a 280 MW project in Monterey County, Calif., about 100 miles south of San Francisco. Apple ( AAPL ) is a partner in the project and will be using much of the energy generated. 8point3 Drop-Downs Hit Sales First Solar’s 2016 sales outlook was also impacted by project drop-downs to the 8point3 yieldco. SunPower experienced the same shifted revenue conundrum when issuing Q1 guidance that halved analyst projections earlier this month. First Solar isn’t leaving much business on the table in 2016, Widmar said. But the ability to push projects out to 2017 “gives us a little bit more flexibility in terms of supply.” Hughes said the ITC extension removed some of the uncertainty shadowing the U.S. solar market. First Solar is now seeing utilities embrace solar and new developers in new territories seeking greener energy. The ITC extension “allowed us to advance some of our own projects, it allows our customers to advance some of their projects, and it’s firmed up what the financial environment looks like,” he said. “The competitive environment has improved a little bit vs. the past 18 months or so.”