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Hit by regulatory 'headwinds' in Q1, SolarCity cuts installations guidance

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Hit by regulatory 'headwinds' in Q1, SolarCity cuts installations guidance

Rooftopsolar developer SolarCityCorp. reported May 9 that it was cutting its guidance for solarpanel installations for the year to account for softer-than-expected first-quarterbookings.

Speakingduring the company's first-quarter earnings call, CEO Lyndon Rive saiduncertainty about how the Nevada Public Utilities Commission would resolve thequestion about whether existing net energy metering customers would be"grandfathered" spilled over into other states, slowing down itssales efforts.

Regulatoryproceedings in California, Massachusetts and New Hampshire added to concerns,while a planned price hike pulled some bookings forward into the fourth quarterof 2015. Finally, the extension of the 30% federal investment tax creditremoved the sense of urgency in purchasing decisions from the commercialsegment.

Theregulatory "headwinds" have largely abated, Rive told analysts on thecall, but the company does not expect to recover its prior sales momentum untilthe third quarter.

As aresult, SolarCity said it had to reduce its forecast for 2016 from 1.25 GW ofinstalled solar capacity to be installed for the year to 1 GW to 1.1 GW largelydue to 150 MW lower than expected bookings in the quarter.

On afinancial basis, the company reported non-GAAP loss of $2.56 per share,compared to a loss of $1.52 per share a year ago. On a GAAP basis, the companyreported a net loss per diluted share of 25 cents compared to a loss of 22cents per diluted share in the prior quarter.

Thefirst-quarter S&P Global Market Intelligence estimate for normalized EPSwas a loss of $2.39 per share, with a 24 cent loss for GAAP EPS.

Followingthe announcement, SolarCity's stock fell more than 20% to $17.91 in afterhourstrading.

Saleshave begun to regain momentum with 25% more capacity booked over the past twomonths compared with January and February, according to a company .

Quarterlyinstallations increased year over year from 153 MW to 214 MW, in what thecompany said was typically the slowest quarter for installations due to weatherconstrains. Installations were down, however, from the third and fourthquarters of 2015, when the company recorded installations of 256 MW and 272 MW,respectively.

"Wesignificantly exceeded our projected 180 MW mostly due to the earliercompletion of a large utility-scale project in Maryland that was originallyanticipated for [the second quarter]," the company said in a letter toshareholders. Residential installations were up 32% and commercial crew 114%.

Rivesaid the company has seen an increased demand for system ownership amongcustomers. He noted the company has redesigned a product that was previously ahybrid power purchase agreement and loan offering.

Healso pointed to $728 million in cash financing in the first quarter that at$3.12 per watt will be available for project financing capacity along with acash equity trade of $227 million with John Hancock Financial Corp. in which SolarCitycommitted underlying cash flows of about 200 MW of assets SolarCity owns andcontinues to service for customers.

Thisarrangement has opened up another financial market for capital and the most sophisticatedinstitutional investors have shown interest in similar arrangements.

Thecompany reported installation costs declined 6% year over year to $1.98 perwatt, but were up compared to the third and fourth quarters of 2015 due to agreater mix of higher-cost commercial installations.