Rooftop

SunPower is dead. Who slayed the residential solar giant?

SunPower is dead. Who slayed the residential solar giant?
(Courtesy: SunPower)

After months of publicly coughing up blood, SunPower is headed to that big solar field in the sky.

Once a titan of residential photovoltaics, the rooftop installer filed for Chapter 11 bankruptcy late Monday. The company has agreed to sell off some of its remaining assets to Complete Solaria for $45 million, subject to court approval. SunPower intends to shed any remaining stuff of value according to Section 363 of the U.S. Bankruptcy Code. Following an “expeditious sale process,” the company plans to liquidate any remaining assets and undergo an “orderly and efficient winddown of its operations,” targeting September.

Complete Solaria will serve as the Stalking Horse Buyer (the first bidder to make an offer on assets of a company filing for bankruptcy) for the assets associated with SunPower’s Blue Raven Solar business, New Homes business, and non-installing Dealer network. By filing for Chapter 11, other interested parties will now have the opportunity to submit competing bids. Under the terms of the asset purchase agreement (APA), Complete Solaria will acquire the Assets and assume certain related liabilities for $45 million in cash. SunPower has asked for approval to complete the transaction mid to late September.

“For nearly 40 years, SunPower has made solar energy more accessible to Americans, driven by our mission to change the way our world is powered. We are confident Complete Solaria’s CEO, T.J. Rodgers, will carry forward our vision to shape the future of residential solar as a pioneer in this space,” said Tom Werner, executive chairman at SunPower. “In light of the challenges SunPower has faced, the proposed transaction offers a significant opportunity for key parts of our business to continue our legacy under new ownership. We are working to secure long-term solutions for the remaining areas of our business, while maintaining our focus on supporting our valued employees, customers, dealers, builders, and partners.”

“Solar energy utility generation costs are now 2.4 cents per kilowatt hour (kWh) versus 3.6 cents per kWh for coal, the cheapest fossil fuel source,” stated T.J. Rodgers, CEO of Complete Solaria. “Thus the move to zero‑emission solar energy is accelerating, along with distributed solar power generation, as homeowners can now generate their own power for 8-10 cents per kWh, below the price of utility power in most states. We look to welcome Blue Raven Solar, the SunPower New Homes Division, and a portion of SunPower’s Dealer network into the Complete Solaria portfolio. This acquisition will strengthen our position in the market and put more muscle behind our commitment to driving the future of clean, reliable energy.”

SunPower has requested court approval to access the necessary collateral to fund operations and administrative expenses as the Chapter 11 cases play out. To support its operations during the court-supervised process, the company is filing a variety of customary motions seeking, among other things, authorization to meet its obligations to its employees. SunPower expects to receive court approval for these requests.

SunPower’s installed products should continue operating as expected at this time. The company will no longer be able to service installed systems, but says “We are diligently working on an agreement with a service provider.”

How did this happen?

SunPower’s fall from its pedestal atop the residential solar sector was a long and bumpy one; high interest rates, NEM 3.0’s impact on the California market, and murmurs of financial misconduct can all be blamed.

The California Public Utilities Commission’s new-ish net metering program slashes the value of distributed generation by 70-80%, in favor of incentivizing residential and commercial paired solar and storage, better suiting the state’s evolving grid needs. This development, coupled with high interest rates, significantly hampered SunPower’s business operations when the policies went into effect.

Red flags over finances started being raised last December after SunPower breached a credit agreement. It was due to late financial reporting caused by a subsidiary’s inventory reporting error, per Reuters, which allowed its lenders to immediately demand the repayment of its $65 million debt. The company soon received a waiver from its lenders preventing technical default and providing $75 million in funding, extending the timeframe for repayment. At the time, SunPower expressed “substantial doubt” over its ability to continue operations without more funding.

Then in February of this year, the U.S. Securities and Exchange Commission subpoenaed Sunpower for documents pursuant to “revenue recognition practices” in quarterly reports from 2023, according to the SEC’s filing. SunPower announced additional waiver extensions from Atlas Securitized Products Holdings, L.P., and Bank of America, soon followed by $175 million in capital financing through the second-lien term loan. However, by the end of February, former SunPower CEO Peter Faricy had departed the company.

In March, SunPower announced it received a notice from the Nasdaq indicating that the company is not in compliance with a Nasdaq listing rule after a delay in filing a form. In April, Thomas Werner, SunPower’s principal executive officer and executive chairman, wrote a letter to SunPower employees explaining that for the company to “achieve financial viability,” it needs to transition “away from areas where we have been unable to sustain profitable operations, and improving financial controls.” In other words, layoffs were imminent.

“As such, we are moving to a low fixed-cost model that we believe we will be able to better flex when the market is up or down,” Werner said in the letter. “Specifically, we are winding down our SunPower Residential Installation (SPRI) locations and closing SunPower Direct sales. We are also reducing our workforce to better align our business with our new focus. With this shift, we will reduce our workforce by approximately 1,000 people in the coming days and weeks.”

In June, Ernst & Young resigned as auditor of SunPower because the firm did not want to be associated with the company’s financial statements. In an SEC filing on July 3, SunPower disclosed that Ernst & Young had informed its Audit Committee back in April that the company’s internal controls necessary for reliable financial statements didn’t exist.

Last month, SunPower sent a letter to dealers announcing it will no longer support new leases, PPA sales, and new project installations of those financing options. This had a ripple effect on SunPower’s massive dealer network, immediately impacting businesses like Renova, the largest solar company in the Coachella Valley.