CORCOM-38 2018Annualreport Cover 27MAR19 V5 JL.Indd
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Corporate Headquarters SunPower Corporation 77 Rio Robles San Jose, California 95134 408.240.5500 sunpower.com Annual Report ©2019 SunPower Corporation. All Rights Reserved. SUNPOWER, the SUNPOWER logo, and all other trademarks cited herein are the property of SunPower Corporation in the U.S. and other countries as well. 2018 Executive Officers Thomas H. Werner President, Chief Executive Officer and Chairman of the Board Manavendra Sial Executive Vice President and Chief Financial Officer Kenneth Mahaffey Executive Vice President and General Counsel Douglas J. Richards Executive Vice President, Changing the Way Our World is Powered Administration Jeffrey Waters Finding the right solar doesn’t have to be complicated. For more Chief Executive Officer, than 30 years, SunPower has helped homeowners and businesses SunPower Technologies across the globe reduce their monthly electricity bills with the Vichheka Heang most efficient, powerful and reliable panels available, all backed Corporate Controller by our industry-leading 25-year warranty. It’s solar made simple. and Principal Accounting Officer Headquartered in Silicon Valley, SunPower has a team of about Board of Directors 6,600 dedicated, customer-focused employees in Africa, Asia, Australia, Europe, North and South America. For more information Thomas H. Werner Chairman of the Board about how SunPower is changing the way our world is powered, visit www.sunpower.com. François Badoual Director Antoine Larenaudie Director Helle Kristoffersen Director Catherine Lesjak Director Thomas R. McDaniel Director Ladislas Paszkiewicz Director Julien Pouget Director Patrick Wood III Director April 5, 2019 Dear Shareholder: During 2018, SunPower made pivotal changes and investments that helped to set the course for our future – one that has already begun. We transformed from a highly diversified and capital-intensive company to a profitable, growing business focused on innovation and the distributed generation (DG) market. SunPower Simplifies and Focuses We needed to get back to basics. Key for the company last year was to simplify our business, set the course for sustainable profitability and de-leverage our balance sheet. Our financial statements can now easily be read and valued. We worked through the difficult task of reducing our operations expenses by almost 30 percent, lowering the threshold for long-term profitability. To de-leverage the balance sheet and fund investments in innovation, we sold assets that were no longer strategic or core to the future success of the company. This included selling our power plant development business to Clearway Energy Group, our stake in a joint venture Yieldco with First Solar to Capital Dynamics, and our microinverter business to Enphase Energy. We also created SunStrong Capital, a joint venture with Hannon Armstrong. This took existing SunPower-developed assets and provided a vehicle for acquisition of future projects to improve our cost of capital and remove debt from our balance sheet. One cost of doing business that we couldn’t completely avoid were solar tariffs. Like the rest of the solar sector, SunPower felt the effects of the Trump Administration’s solar tariffs, announced in January 2018. It cost us a significant amount of roughly $46 million. We made a compelling case to the U.S. government for a technology exclusion, and after several quarters, SunPower’s technology was one of a very few excluded, allowing us to further invest in American innovation. We should see the benefits of this during 2019. As the solar industry has grown and matured, we made the strategic decision to manage our company as two separate business units: SunPower Technologies (SPT) for manufacturing and global DG sales, and SunPower Energy Services (SPES) for North America residential and commercial. Each business has unique characteristics and can be managed more effectively as stand-alone businesses. We expect this to result in faster decision- making, tailored partnerships and lower capital intensity. SunPower Technologies - SPT Through SPT, we’ve introduced our most innovative module yet, A-Series, and are currently selling it through SPES in North America. Our A-Series panel, built from our high-performing yet lower-cost Next Generation Technology (NGT), was developed in the Silicon Valley Research Facility at our headquarters. The 400- and 415-watt modules feature our fifth-generation Maxeon solar cells, which are an impressive 65 percent larger than previous generations, therefore helping to generate much more power while lowering costs. We also launched a 400-watt home solar panel, called Maxeon 3, in Europe and Australia, where we see continued growth and market share. We’re especially proud that we introduced the world’s first 400-watt residential solar panels as most in the industry are just crossing the 300-watt threshold for home solar. That’s solar innovation – which is the heart of SunPower. To complete our newest product offerings, we have our high-quality 19-percent efficient Performance Series (P-Series) modules. These modules are still considered market leaders in power ratings and have lower up- front costs - a key attribute needed to serve the international power plant market. Leveraging a unique cell interconnect technology, we see strong demand for our cost-effective P-Series, which are currently the most deployed shingled cell solar panels in the world. For the second year running, DNV GL – a global independent energy expert and certification body – named the P-Series solar panel a top performer in all five DNV GL tests. Reliability through thermal cycling, damp heat, humidity-freeze, dynamic mechanical load and potential induced degradation were all measured. Last April, we made a commitment to invest in American manufacturing. Delivering on our commitment, SunPower acquired the assets of SolarWorld Americas in Hillsboro, Ore., in October. Months later, following equipment moves from our Mexico factory, we were delivering P-Series solar panels assembled in America to commercial customers across the country. We also produce P-Series in a joint venture in China serving international markets. SPT has an international sales force and has sold both Maxeon and P-Series modules in more than 100 different countries. SunPower Energy Services - SPES We formed SPES to focus on selling complete solar energy solutions to America and Canada. The future of solar energy is high-performance solar systems paired with storage and software to deliver reliable, clean and cost- effective energy to distributed generation customers. SPES is comprised of commercial and residential market segments. North America Commercial Our commercial business is focused on being the leading distributed energy company in North America by concentrating on the integration of high-performance solar systems with storage and software. We have introduced Helix Storage with proprietary algorithms to help maximize the value of solar energy for our customers. With market-leading products, we’ve built a commercial franchise that led us to become the number one commercial solar provider in the U.S. with the largest installed base, according to Wood Mackenzie. We have an unmatched customer base of Fortune 500 companies – where eight out of 10 corporate buyers are SunPower customers – in multiple states, including Macy’s, Target, Toyota and Walmart. More than 55 percent are repeat customers. With this market position, we are able to offer our customers value service solar systems that optimize their solar energy. These services include demand charge savings, monitoring, data analytics and optimization, energy management and wholesale grid services. We’re already seeing a storage attach rate of about 40 percent and we have deployed 9 megawatt hours at more than 20 sites. North America Residential SunPower has been an innovator in the American residential solar market. In 2005, we created an independent dealer channel. We’re a leader in North American residential sales and as a residential solar panel supplier, seeing 15 percent growth and 278 megawatts installed in 2018. To date, SunPower solar systems have been installed on more than 236,000 U.S. homes. We also have a commanding position in the new homes business, being the choice of 18 out of 20 leading California homebuilders and seeing 65 percent year-over-year growth in 2018. We look forward to working closely with our home builders to deliver on the California new homes solar mandate, which requires that all new homes incorporate solar power beginning in 2020. And we can see other states taking a similar policy approach in the future. In addition to our differentiated products and sales channels, SunPower has invested heavily in digital to make the solar buying experience seamless. Through our advanced web application, it’s easy for our dealers to design, price and adjust solar solutions in real time. We will be bringing our Helix Storage and services technology to the residential market through an Equinox storage solution in 2019. We expect this will be a core part of our business in 2020 and beyond. Our Future is Bright SunPower is well-positioned for the future, with two focused business units working to deliver innovative solar solutions with profitable growth. I am particularly proud of the role our about 6,600 employees around the globe played throughout our transformative 2018 – and for their help advancing the adoption of solar. We’re still at the beginning of a worldwide transition to clean, reliable and cost-effective