SunPower (SPWR) Gains on Project with Nevada Energy

Remy Merritt  |

SunPower Corporation (SPWR) shines as an outlier in the solar industry, reporting gains of 7 percent. Shares in the solar ETF Guggenheim Solar ETF (TAN) have gained 0.50 percent.

Driving the day’s action was the revelation of plans for a joint project with Nevada Energy for the construction of a 19-megawatt PV plant on the Nellis Air Force Base. The Nellis Air Force Base project will add 19 megawatts of capacity to the 14-megawatt system that has been operating since 2007. This Nevada plant upgrade is anticipated to offset 27,000 tons of carbon emissions, and its launch is contingent upon approval from the Nevada Public Utilities Commission (NVPUC).

These two projects will add generating capacity to plants already in place in both locations. Construction of the 50-megawatt plant in Colorado’s San Luis Valley is expected to begin in 2015, and will double the region’s power capacity already totaling 49 megawatts between two preexisting SunPower plants. The Colorado expansion expects a final carbon emissions offset of 127,000 tons, the equivalent of 483,000 cars.

This is the second major upcoming construction project on the West Coast for the second-largest United States solar manufacturer, both of which are expansion ventures on preexisting solar photovoltaic (PV) power systems. The other project, announced in a May 27 press statement, is a purchasing partnership with Colorado’s Xcel Energy to build a plant in the San Luis Valley capable of generating 50 megawatts of solar energy, enough electricity to serve 13,500 Colorado homes.

A Timely Development

Headquartered in San Jose, Calif. with offices across Europe, Australia, Asia, Africa and the Middle East, SunPower boasts the highest efficiency in solar energy production, claiming the world record of up to 24% cell efficiency. Its most recent construction of two plants in South Africa will generate 33 megawatts of renewable energy for local communities.

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In a press release detailing the plant’s completion, SunPower’s project partner AE-AMD proudly announced an on-time finish and full adherence to construction scheduling. SunPower has upgraded its technology and installation processes over the past five years, and this year’s earnings per share (EPS) have already shown a 122 percent increase.

Construction of the existing 14-MW plant at the Nellis Air Force Base spanned nine months in 2007; today, SunPower president Howard Wenger announced the company can “install more than one megawatt per day at our larger power plant sites, creating long-term value for our utility customers and competing effectively with traditional energy sources.”

Once approved by the NVPUC, the 19-MW expansion is expected to begin next year and reach operability within a year. The large-scale expansion of the San Luis Valley plant is expected to be completed by the end of 2016, requiring just under two years of construction.

So, What About China?

SunPower’s stock success may be attributed to a recent development in the trade war between the United States and China, a battle that SunPower has circumvented by manufacturing in Malaysia.

Previously, Chinese solar pieces necessary to new plant construction and existing plant maintenance were subject to tariffs ranging from 34% to 254%, which Chinese companies avoided by outsourcing to Taiwan and other third-party manufacturers.

This loophole made Chinese solar panels a cheaper option for global solar projects, but a lawsuit brought to the U.S. Department of Commerce by US-based SolarWorld has advanced an end to price discrepancies between Chinese and US solar corporations.

If the solar company is Chinese, the tariff on parts will fall firmly within the range of 18-35% regardless of whether those pieces were manufactured in China, Taiwan or any other third-party country. This levels the playing field between Chinese and US-based solar corporations, effectively raising the cost of Chinese solar suppliers to more closely meet US corporations. The final determination on the investigation will be reached by the Department of Commerce on August 18, 2014.

Near-Future for SunPower Could be Bright

Until then, SunPower and other US-based solar power corporations can expect improvements in their stock value as investors see Chinese solar imports increasing in price. However, the market is largely reactive to the news of stricter import tariffs; technical price increases on Chinese solar components are only expected to reach pennies per watt of installation.

While the final effect of SolarWorld’s lawsuit may be minor, SunPower stock is clearly popular among investors for the time being. Prior to recent tariff developments, the most recent analysis released on April 25 by Northland Capital raised its price target on SunPower from $38 to $47 a share, almost a 40 percent premiumon its current price.

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