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Creative Financing Powers Sales -- And Risks -- At SunPower

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  • The Company: Solar-technology maker SunPower
  • The Filing: SunPower's latest Form 10-Q, its quarterly report for the period ended March 31
  • The Finding: SunPower frequently negotiates solar-services agreements that allow customers to limit their purchase to just the electricity generated -- not the solar-power systems themselves. Shifting financing obligations may accelerate sales of its solar-electric systems, but is the company digging deeper into financial uncertainty?
The Gist: Shifting the financing burden of such turnkey facilities to third parties is powering SunPower's growth. First quarter revenue was $273.7 million, up 92 percent from a year earlier. SunPower derived approximately 46 percent of its sales from financing companies that set up power-purchase agreements with commercial and utility-scale power-plant customers, up 16 percent.

Now, however, one of SunPower's largest customers last year, MMA Renewable Ventures, has just run into the credit-crunch buzzsaw. MMA accounted for about 10 percent of SunPower sales in the first quarter, but according to SunPower's filing, still owes SunPower a significant amount of money. Sunpower didn't disclose how much it's owed, but said that any resulting losses could adversely impact its business.

Repackaging risk doesn't stop there for SunPower. The company often executes power-purchase agreements directly with customers with the expectation that it can later assign the agreement to an outside financier. SunPower doesn't disclose its total exposure to unsecured financing or the value of sales guarantees, called system put-rights, whereby SunPower could be required to buy back customers' systems.

So SunPower has to both avoid fallout from the credit meltdown and make sure its financial incentives spur continued growth, because it's also on the hook for $3.4 billion in guaranteed polysilicon purchases from suppliers.

Question: If specialty financing for solar construction dries up, can solar-powered toaster giveaways be far behind?

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