SunPower Corp. warned it could be insolvent within 12 months after losses widened in the third quarter despite efforts the company has made to cut costs and restructure its business over the past two years.
Proceeds from a pending $27 million loan and the expected sale of equity interest in a portfolio of residential solar leases should be sufficient to cover SunPower's capital needs and committed expenditures over the short term. The California-based company can also borrow up to $95 million under an existing agreement with Credit Agricole Corporate & Investment Bank, according to a quarterly financial report filed with the U.S. Securities and Exchange Commission on Oct. 31. "However, we cannot predict, with certainty, the outcome of our actions to generate liquidity as planned," SunPower said.
In addition to "general economic" conditions that could prevent SunPower from accessing outside funding or generating the cash it needs for operations and planned investments, the company said it is grappling with "continued market pressure" that is driving down the average selling price of its solar equipment.
"These events and conditions indicate that we may not have the liquid funds necessary to satisfy our estimated liquidity needs within the next 12 months," the company said.
SunPower had $220.8 million in unrestricted cash and equivalents at the end of September, down from $435.1 million at the end of 2017. It reported spending more than $401.9 million on operating expenses during the nine months ended Sept. 30.
For the third quarter, SunPower posted a net loss of $89.8 million, which included impairment charges of approximately $369.2 million for legacy manufacturing equipment, compared to a loss of $46.2 million a year earlier. The company expects to continue losing money through 2019.
On a conference call with analysts Oct. 30, executives cited headwinds including the cost of U.S. tariffs on imported solar cells and panels and a market slowdown caused by new solar policies in China that have driven down equipment prices globally.
The company announced a series of restructuring and cost-cutting initiatives in 2016 in response to an equipment glut and other challenging market dynamics. In February, SunPower and First Solar Inc. sold the yieldco they jointly owned, 8point3 Energy Partners LP, to Capital Dynamics Inc. in a deal that valued the project holding company at about $1.7 billion. In August, SunPower sold its microinverter business to Enphase Energy Inc. for $25 million and 7.5 million shares of common stock.
The company also plans to exit the project development business, though it still expects to spend money building power plants to sell to customers, according to the company's Oct. 31 SEC filing.
After President Donald Trump imposed a new round of solar tariffs in January, SunPower said it planned to buy the Oregon-based manufacturer SolarWorld Americas Inc. in order to build up a manufacturing presence in the U.S. The deal closed two weeks after the Trump administration exempted some of SunPower's cells and panels from the new import taxes.
Due to the timing of the exemption, however, SunPower expects to incur $20 million of tariff-related charges during the fourth quarter as it works through remaining inventory. The company anticipates spending $81 million this year expanding manufacturing capacity and upgrading technology, among other projects.
"We continue to face challenging industry conditions and a competitive environment," SunPower said in the SEC filing. "If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity investments or debt securities or obtain other debt financing."
SunPower shares closed at $6.09 on Nov. 2, down 32% since the start of the year.