OOne of the largest residential solar installers in the U.S. appears to be on the brink of bankruptcy, the latest sign of the troubled industry’s difficulties.
SunPower, which is supported by French oil conglomerate TotalEnergies, said on July 17 that it would no longer support new leases or power purchase agreements, meaning it would essentially not acquire new customers. The company also said in a letter to dealers who sell its systems that it could not support the installation of panels that had been delivered but not yet installed.
“This is a significant and incremental negative for the company,” Philip Shen, managing director of Roth MKM, wrote in a note to clients.
The company’s announcement follows months of turmoil. Last December, SunPower said it may not be able to continue operating because it violated a key term of a credit agreement. The company then said in February that it needed more time to complete its quarterly financial statement; the Nasdaq later informed SunPower was in default for not completing its forms in a timely manner. SunPower also acknowledged that previous financial reports “should no longer be relied upon” due to accounting errors. On July 3, SunPower reported that Ernst and Young, its independent accounting firm, had resigned on June 27. Later documents indicated a disagreement between the two companies over an audit.
The company’s shares were trading at 72 cents on Monday, down 98% from its 2021 peak.
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SunPower is one of the top five or ten largest residential solar installers in the country, according to BloombergNEF analyst Pol Lezcano. Its struggles also highlight why the residential solar industry is struggling in the U.S., Lezcano says. Solar companies are spending huge amounts of money on overhead, including sales and marketing, which makes panels more expensive for homeowners. As interest rates rise and states change compensation formulas for what homeowners can earn by selling power back to the grid, customers aren’t buying as many solar systems.
SunPower’s business sheet reflects these challenges. The company had revenues of US$14.8 million in 2019; It lost $200 million in 2023 as its operating expenses doubled, Lezcano says.
Meanwhile, solar sellers overcharge for systems and keep the difference, says Walid Halty, a former solar salesman who now runs a company, Monalee, designed to sell solar energy without salespeople. It’s one reason the systems can be overpriced, Halty says, offering less incentive for potential customers to save a lot of money by switching to solar power.
“You could sell it for whatever price the owner said yes to,” Halty says of his days in the solar industry. “It’s almost like you buy a $20,000 car and the dealership can sell it for $40,000 if they want.”
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Another source of SunPower’s problems: Solar companies rely heavily on loans to stay afloat. This is because many solar companies offer leasing products that allow consumers to invest little money upfront. To pay for the installation and maintenance costs of these systems, solar companies need to borrow money.
But SunPower’s financial disarray likely made it difficult for the company to find creditors, Lezcano says. “The fact that they were unable to carry out financial audits and verify financial information,” he says, “made it impossible for them to obtain financing in the capital markets.”
MKM’s Roth sees SunPower’s struggles as a potential positive for other large solar companies like SunRun and Sunnova. But there’s also a chance that SunPower’s problems could further shake up the residential solar market. If you file for bankruptcy, your finances will be closely scrutinized. And lenders who look at SunPower’s books and determine that the industry’s business model is broken may be hesitant to lend to other companies in the industry, according to an industry insider who is not permitted to speak publicly on the matter.
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Homeowners with SunPower systems already installed won’t be immediately affected by the recent news, Lezcano says. If the company goes bankrupt, other companies can take over management of the owners’ systems. But in some cases where solar companies have gone bankrupt, consumers are still waiting, sometimes with broken systems, to find out what comes next.
This story originally appeared on Time.com read the full story
