NEW
YORK (MarketWatch) -- SunPower Corp. shares rallied 18% Friday after
the solar-panel maker announced its participation in a giant
800-megawatt, photovoltaic project from Pacific Gas & Electric
Corp., hailed by industry insiders as the first major utility-scale
endeavor of its kind in the United States.
Video: PV Solar Hits the Big Time
SunPower CEO Tom Werner gives Stacey Delo an exclusive interview about the new deal. (Aug. 14)
Analysts
cheered the project's news as a positive move for the solar stocks, hit
by concerns tied to a slowing economy and oversupply, as well as
uncertainty over federal tax subsidies for alternative energy.
A common sight on
rooftops or emergency phones on the highway, photovoltaic panels are
finally taking a stab at producing energy that rivals full-scale coal
and nuclear plants, at least when the sun is shining.
PG&E
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PCG 40.02,
-0.48,
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said that the combined power from two freshly signed power agreements with SunPower
(SPWR:sunpower corp com cl a
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SPWR 95.29,
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and privately held OptiSolar Inc. will generate enough power for 239,000 California homes each year.
Shares of SunPower rose $13.95 on Friday to close at $92.52, the stock's loftiest level since May 16.
SunPower Chief Executive Tom Werner said the deal marks the culmination
of 20 years of effort in the photovoltaic business to install a power
plant on the scale of a traditional power plant.
The combined scope of PV
cells for the two projects equals the entire installed base in the rest
of the United States for 2007, according to the company.
Analyst Michael Carboy of Signal Hill said that the deal could generate about $1.3 billion in revenue for SunPower.
The value of OptiSolar's contract could top $2 billion based on an
installed cost of about $4 per watt for thin-film solar, he added.
Credit Suisse analyst
Satya Kumar raised his price target on SunPower to $120 a share from
$100 a share and reiterated his outperform rating. He brushed off any
notion that SunPower's rival First Solar Inc.
(FSLR:first solar inc com
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FSLR 278.06,
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+1.9%)
would get hurt by the deal.
"The contract is a broad positive for solar in general, where stocks
have been in malaise despite what we thought were good earnings, as it
demonstrates the potential of photovoltaics in the utility market,"
Kumar wrote in a note to clients.
OptiSolar, backed in part
by Canadian private-equity firm ARC Financial, loomed on Wall Street's
radar screen after the deal.
"The OptiSolar part of
this contract demonstrates amorphous silicon low efficiency can be a
utility-scale solution and is a longer-term positive for Applied
Materials
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AMAT 18.35,
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," Kumar said.
Jefferies analyst Paul Clegg said SunPower's announcement makes the
solar-power firm less susceptible to concerns about oversupply.
"SunPower's central
message for the last two years has been enabling grid parity through
50% to 60% cost reductions by 2012," Clegg wrote to clients. "Signing
such a large agreement at apparently very low price levels signals
SunPower's high level of confidence that it can sell large volumes of
PV systems at prices substantially below current levels and still
generate target margins."
Wedbush Morgan analyst Al
Kaschalk noted that the companies said the deal is contingent upon the
solar-power investment tax credit, which awaits congressional approval.
He's expecting an extension later this year or early in 2009.
"We continue to believe
that utility-scale projects such as this 800-megawatt announcement need
initial support in the way of tax incentives ... to help utilities
achieve an increasing percentage of their power deliveries from
renewables," Kaschalk added.
Other projects
Other big-scale projects are under way in the United States, with
thermal-solar plants in the desert Southwest picking up steam as well.
See thermal-solar story.
Faced with a California rule to tap into renewable sources for 20% of
its electricity by 2010, PG&E has entered into contracts for more
than 2,500 megawatts of solar power.
The latest two deals announced late Thursday are as follows:
-
The 550-megawatt Topaz Solar Farm project, deploying lower-cost,
thin-film photovoltaic panels manufactured by OptiSolar in Hayward and
Sacramento. Located in San Luis Obispo County, the Topaz project will
begin power delivery in 2011 and be fully operational by 2013.
-
SunPower's
planned 250-megawatt solar ranch, located in San Luis Obispo County's
California Valley, with power delivery in beginning in 2010 and fully
operational in 2012.
Steve Gelsi is a reporter for MarketWatch in New York.
