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‘Bedrock’ Utility Market To Double U.S. Solar Installations In 2016

U.S. solar installations will more than double in 2016, driven by the “bedrock” utility market that could account for three-quarters of all new capacity, according to a recent trade study. Solar installers — like First Solar ( FSLR ), SunPower ( SPWR ), SolarCity ( SCTY ) and Sunrun ( RUN ) — will add 16 gigawatts in 2016, bringing cumulative installations up to 41.6 GW and growing by a record 120% year over year, GTM Research forecasts. Cumulative installations already have increased 1,180% since 2010, when the U.S. had 2 GW in total capacity. In 2015, installers added 7.26 GW, up 16%, driven by 66% growth in the residential market. Capacity touched 25.6 GW. Between 2016 and 2020, GTM sees the U.S. solar market adding 24 GW, reaching 97 cumulative installations by 2020. In 2018, GTM expects all segments to grow on a year-over-year basis, and by 2021, more than half of all states will be markets with annual installation above 100 megawatts. Cumulative installations are expected to top 100 GW. ITC Extension Pushes Solar The push was likely driven by the extension of the Investment Tax Credit on solar which, until late December, was poised to expire for residential installations at the end of 2016. Utilities would have seen the subsidy step down from 30% to 10%. GTM credited North Carolina developers for a Q4 boom in the solar market. In 2015, North Carolina became the second state outside California to add more than 1 GW of utility photovoltaic (PV) installations on an annual basis. In 2015, the utility market accounted for 57% of installed capacity. But installation growth lagged the residential market, up 6% year over year to 4 GW. The residential market added 2.1 GW, up 66% vs. 2014. The residential market has grown at 50%-plus rates for four consecutive years. The non-residential market was flat for the third consecutive year in 2015. But in 2016, the utility market will grow by triple digits, GTM predicts. “Looking ahead to the rest of 2016, we anticipate another banner year for U.S. solar, which will benefit from gigawatts of utility (photovoltaic) that rushed through the early stages of development to ensure interconnection in 2016,” GTM wrote in the report. Utility To Outgrow Residential Utility solar is becoming more economical, with costs now ranging between $35 per megawatt-hour to $60/MWh. Regions in Texas and the Southwest are retiring aging coal fleets and replacing them with utility solar and natural gas, GTM wrote. In 2015, Arizona, California, Massachusetts, Nevada, New Jersey and North Carolina all surpassed 1 GW in cumulative solar capacity. But new net-metering regulations that Nevada’s Public Utilities Commission voted in late last year will force that state from its position as the No. 1 PV market to No. 31 in 2016. IBD’s Energy-Solar industry group, led by First Solar and SunPower, hit a nearly three-year low last month. It ranks No. 50 our of 197 groups tracked. Nevada might not be alone, GTM wrote. Although California passed net-metering 2.0, which the solar market has embraced, other states could go the Nevada route. This year, Nevada upheld net-metering reform that doesn’t grandfather existing solar customers under the old rate scheme. Net metering refers to the system that lets rooftop solar customers get credits for any excess energy they send back to the grid, but those credits are now far less generous in Nevada. “While a growing number of state markets are picking up steam, an even larger number of states are considering reforms to net-metering rules that threaten the market’s ability to maintain a hockey-stick growth trajectory,” GTM wrote. Meanwhile, component pricing for residential is expected to stagnate, while utility sees a continued plunge. Overall system pricing fell by 17% in 2015. Residential hardware costs fell 16% in Q4, but soft costs (including customer acquisition costs) jumped by 7%. The non-residential market saw 15% and 6% declines in hardware and soft costs, respectively. Utility soft costs declined by 37% and 23% in fixed-tilt and tracking projects, respectively, said GTM.

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.”

SunEdison Torched As Banks Pull Vivint Solar Funds; Dividend Cut

Vivint Solar ( VSLR ) could join Appaloosa Management in suing SunEdison ( SUNE ) over the former’s pending — and imperiled — acquisition by SunEd, a Credit Suisse analyst suggested Thursday, as at least two other investment banks downgraded SunEd stock. SunEdison shares ping-ponged this week amid rumors that banks are balking at issuing the $1.2 billion needed to finance the Vivint Solar acquisition. This week, SunEdison delayed its 10-K filing and suspended a popular dividend program. Needham and Macquarie both downgraded the stock Thursday. In the long term, suspending SunEd’s 6.75% perpetual convertible preferred stock could save $8.3 million per quarter, Credit Suisse analyst Patrick Jobin wrote in a research report. But Thursday was another bad day for the shares, down more than 13% in midday trading on the stock market , near just 1.55. SunEd fell 12% and 24% on Monday and Tuesday, respectively, but rose 19% Wednesday. Shares of SunEd yield company TerraForm Power ( TERP ) and Vivint Solar were down 3.5% and more than 1%, respectively. SunEdison Cash Crunch Expected Company-specific uncertainty — not solar industry uncertainty — prompted Needham analyst Edwin Mok to downgrade SunEd stock to hold from buy. “We now believe SunEdison could face an even greater cash crunch ahead, preventing the company from reaching the important goal of operating cash flow positive,” Mok wrote in a research report. Although SunEd obtained financing in January, “it appears SunEdison is facing mounting financial challenges, with a sharp rise in cost of capital which could ultimately cripple the future prospects of the company,” he wrote. Looming capital cost increases have plagued the solar industry this year. No. 1 residential installer SolarCity ( SCTY ) has shaved 60% off shares this year on that worry. IBD’s 22-company Energy-Solar industry group is down 25% this year. SunEd’s outlook is further complicated by a liquidity question, Mok wrote. In January, SunEd said it had $619 million in cash at the end of Q4. Of that, $56 million was not committed to the project business. Cash Questions Delay 10-K On Tuesday, SunEd delayed its 10-K filing to investigate those cash claims. Banks have balked at financing the Vivint Solar deal without updated financials, according to the Wall Street Journal. And SunEdison can’t finance Vivint Solar on its own, Mok and Jobin wrote in separate reports. Jobin suggested a Vivint Solar breakup — worth a $34 million fee — would help SunEd preserve some short-term cash. SunEd has until March 18 to close the deal before opening itself to a specific performance lawsuit by Vivint Solar. Vivint also could terminate the deal before then. That’s unlikely, though, considering Vivint Solar’s shareholders “overwhelmingly” approved the bid on Feb. 24, Jobin wrote. Last month, Appaloosa sued to prevent SunEd from dropping Vivint Solar’s debt-laden rooftop portfolio down to yield company TerraForm Power. Appaloosa has a 9.5% stake in TerraForm Power. A judge tossed Appaloosa’s injunction request last week. Image provided by Shutterstock .