Sunrun Takes $1.2 Billion Charge in Latest Blow to Solar

(Bloomberg) -- The promise of the renewable energy industry, underscored by Sunrun Inc.’s acquisition of Vivint Solar three years ago, had investors rushing to jump in. Now, solar stocks are facing a major sell-off, spurring Sunrun to take a $1.2 billion charge to write down the value of its purchase.

The move at the biggest US rooftop solar company comes on the heels of a string of bad news across the sector. SunPower Corp. tumbled 5.6% Wednesday after cutting its full-year guidance due to weaker demand for its rooftop solar systems. SolarEdge Technologies Inc., which makes inverters that allow homes to use solar power, saw its stock plunge more than 20% in late trading Wednesday. 

Companies have struggled over the past two quarters with higher interest rates that make consumers less willing to finance rooftop power systems. Moreover, California slashed incentives for panels earlier this year, cutting into demand in the biggest US home solar market. Companies also are trying to work through inventories that piled up after a rush of orders to compensate for supply-chain snarls. 

“This has been a volatile time across the solar industry with changes in important policies and rising interest rates, leading to difficult conditions in the sector,” Sunrun Chief Executive Officer Mary Powell said during Wednesday’s quarterly earnings call. In response, Sunrun is focused on cutting costs and selling higher-margin home batteries, Powell said. 

Sunrun shares fell more than 7% in post-market trading after it reported revenue that fell short of analyst estimates and lowered its full-year solar installation forecast. The company reduced its goodwill primarily tied to its all-stock acquisition of Vivint by $1.2 billion, resulting in a $1.5 billion third-quarter loss. 

Sunrun bought Vivint at a time when investors were eager to fund clean energy companies because of their green credentials. The tie-up created a rooftop solar juggernaut when installations were expected to rise as the industry worked its way back from the worst of the coronvirus pandemic. Now, installations have slowed with inflation and other economic headwinds. 

SolarEdge, which warned two weeks ago that results would be weaker than expected due to slack demand, estimated fourth-quarter revenue of $300 million to $350 million, far below analysts’ expectations of $719 million. The lackluster sales projection comes as Europe is working through a glut in solar equipment that has dragged down many companies doing business there.

Last year, Europe’s demand for solar arrays surged as Russia’s invasion of Ukraine threatened the continent’s supply of natural gas and drove up power prices. SolarEdge scrambled to fill all the orders, Chief Executive Officer Zvi Lando told analysts Wednesday during the company’s third-quarter earnings call. 

Now that power prices have dropped, Europe is awash in equipment, he said, and that oversupply will take two to three quarters to correct. After demand recovers, the company forecasts quarterly revenue to range between $600 million and $700 million.

“We are firm believers not only in the long-term but in the mid-term trajectory of this market,” Lando said.

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