SunPower Corporation (SPWR) 2015 Q1 法說會逐字稿

Good afternoon and welcome to SunPower Corporation's first-quarter 2015 results conference call.

Today's call is being recorded.

If you have any objections, please disconnect at this time.

I would now like to turn the call over to Mr. Bob Okunski, Senior Director of Investor Relations, SunPower Corporation.

Thank you, sir, you may begin.

Thank you, Carolyn.

I would like to welcome everyone to our first-quarter 2015 Earnings Conference Call.

On the call today we will start up with an operational review from Tom Werner, our CEO, followed by Chuck Boynton, our CFO who will review our first-quarter 2015 financial results.

As a reminder, a replay of this call will be available later today on the investor relations page of our website.

During today's call we will make forward-looking statements that are subject to various risks and uncertainties, that are described in the Safe Harbor slide of today's presentation, today's Press Release, our 2014 10-K, and our quarterly reports on form 10-Q.

Please see those documents for additional information regarding those factors that may affect these forward-looking statements.

To enhance this call, we have also posted a PowerPoint slide, which we will reference during this call on the event and presentations page of our investor relations website.

In the same location we have posted a supplementary data sheet detailing some of our historical metrics, as well as an additional document providing historical data related to our new segmentation reporting structure that we announced last quarter.

Finally, we will not be taking any questions related to our proposed joint YieldCo vehicle with First Solar.

All publicly available information related to the transaction is available in our original S1 and subsequent amendment, which are both on file with the SEC.

We will provide additional details through updates to this document.

With that I would like to turn the call over to Tom Werner, the CEO SunPower, who will begin on slide 3. Tom.

Thanks, Bob, and thank you for joining us today.

I'll start by providing some brief comments on the quarter before discussing our performance in greater detail.

Please turn to slide 4.

Q1 was another solid quarter as we executed well across all geographies and end segments.

Shipments for the quarter were strong despite the further build-out of our YieldCo assets, as well as the shifting of a few projects in China.

In our power plant business we met our US project milestones, including Solar Star and Quinto, while starting construction on our second project at Nellis Air Force Base.

Internationally, we dedicated our merchant plant in Chile and expanded our footprint in South Africa, as we started construction of our Prieska project.

In APAC our focus remains on China where we were pleased to announce our latest projects with Apple, adding to the projects we have done with them in the United States.

In distribute generation we saw solid demand in the US and Japanese residential markets.

Our North American commercial pipeline also continue to grow as we announced a number of agreements in both the public and private sectors.

We see the commercial segment offering significant opportunity for growth.

Finally, we continued the development of our Smart Energy platform through an exclusive commercial partnership with EnerNOC.

Upstream we executed well on our technology and cost ware advance, while achieving record cell output during the quarter.

The ramp at Fab 4 is on track with first solar can expected mid year.

I would now like to provide more color on each segment of our business starting with power plants.

Please turn to slide 5.

In the Americas construction at our 579-megawatt Solar Star Project remains on plan with more than 500 megawatts already grid connected.

We expect to achieve full project completion in July.

Construction of the 135-megawatt Quinto Project is also on track, with completion expected in the fourth quarter, and we plan to contribute this project to our 8point3 joint YieldCo vehicle.

We continue to expand our footprint in the public sector and started construction at our second project at Nellis Air Force Base during the first quarter.

When complete, the combined projects will be our largest military installation, at approximately 30 megawatts.

Finally, we closed construction financing on the 50-megawatt Hooper Project for Excel in Colorado during the quarter.

In EMEA we are focused on expanding our current market footprint in both France and South Africa.

We see France as a top European market for our high-efficiency products, and continue to work closely with Total to increase our pipeline in France.

We reached a major milestone in South Africa in Q1 with the start of construction on our 86-megawatt Prieska project.

With this project, and our leading local supply chain, we now have more than 150 megawatts of power plants, either completed or under construction in South Africa, and anticipate strong, ongoing demand in this market.

In China, we recently received formal governmental approval for our second joint venture.

Our two Chinese joint ventures position us well to participate meaningfully in the world's largest solar market.

We also announced our most recent partnership with Apple for two 20-megawatt projects in Sichuan, with project ownership shared by Apple and our second joint venture.

Construction has already started and we expect completion by the end of the year.

This is our first international project with Apple and brings our total deployed capacity with them to over 130 megawatts globally.

I would now like to briefly discuss our DG business.

Please turn to slide 6.

Q1 was a significant quarter for us as we further developed our Smart Energy capabilities, launched new products, added to our pipeline in commercial, and expanded our residential footprint.

As part of our Smart Energy strategy we signed an exclusive three-year cross-marketing agreement with EnerNOC.

This partnership will enable commercial customers to align sophisticated energy consumption and demand management analytics to manage their power use.

When integrated with real-time SunPower solar production and performance data, customers will be able to drive increased energy savings.

We expect to launch the first combined offers this summer.

We are also partnering with Stem, a leader in the intelligent storage solutions, to allow new and existing US commercial customers to further decrease their overall cost of energy by using the Stem solution for demand charge reduction.

This will complement our energy intelligent software offer from EnerNOC.

We also began shipping our latest AC panels based on micro-inverter technology.

These products will significantly reduce the amount of hardware required for a system, shorten installation time and lower long-term ownership costs.

Moving on to DG markets and market dynamics.

As previously mentioned, long-term DG demand trends remain solid.

In the US, market fundamentals are strong as our residential installs increased 30% year over year.

With our high-efficiency technology, industry-leading quality, and flexible financing options, we continue to see strong demand in our targeted residential markets.

Our cash and loan offers remain the key driver in this segment, but we continue to build our lease capacity as returns remain compelling for us, as well as our financing partners.

Interest from potential financing partners remains high, and we look forward to announcing new lease partners in the near future.

We also made significant progress in our commercial channels since the beginning of the year.

For example, we recently announced power purchase agreement with Stanford University, which will be filled with an off-site power plant that we will build and design.

This 68-megawatt 20 year PPA is the largest PPA ever signed by a US college or university and, when complete, will supply Stanford with more than 50% of their projected annual electricity needs.

This innovative transaction enables Stanford to take advantage of solar power generated, both from campus rooftop systems, as well as from an off-site power plant.

This project has been added to our 8point3 ROFO portfolio, and completion is expected by the end of 2016.

In EMEA our recent restructuring program will be substantially complete this quarter, and will allow us to enhance long-term profitability in this market.

Our core EU markets are stabilizing and we remain bullish on the long-term potential of this region.

Japan remains a key DG market for SunPower, accounting for more than 25% of our overall megawatt shipments during the first quarter.

Our unique high-efficiency technology has allowed SunPower to maintain a leading share in the Japanese market.

In summary, Q1 was a solid quarter as we met our project commitments, expanded our power plant and residential footprint, executed on our cost and technology road maps and added assets to our HoldCo strategy.

With global demand for renewables continuing to increase, we are well positioned to achieve our goals for 2015.

With that I would like to turn the call over to Chuck to review financials.

Chuck.

Thanks, Tom.

Good afternoon and please turn to slide 7. For today's call I will focus my remarks on our Q1 performance.

Before we get started, I would like to remind everyone that we initiated our new segment reporting structure in Q1, which is now based on our end-customer categories rather than geographic regions.

We believe that this structure provides more transparency by our business, while giving investors a greater understanding of our model.

As Bob mentioned, we provided a table detailing our historical performance based on the new segmentation in the appendix of our Q1 presentation deck, as well as posting a document on our IR website.

Q1 was another solid quarter for the Company, as we executed well in all geographies and end-market segments, generating $58 million in EBITDA, while building and adding to our HoldCo asset strategy.

As a reminder, EBITDA would be substantially higher if we were not building assets on our balance sheet in support of our proposed offering of 8point3.

I will provide more detail on our HoldCo assets later on in my remarks.

Again our strong performance was led by our utility and power plant business, specifically Solar Star.

Additionally Q2 bookings to date have been solid in all segments giving us confidence that we are well positioned for future long-term growth, specifically on the P&L.

Non-GAAP revenue was down sequentially, but in line with our forecast, as we executed well on our commitments, despite some seasonality in our residential business.

Power plant and commercial revenue declined sequentially, primarily as a result of projects that we are building on our balance sheet related to our HoldCo strategy.

Our non-GAAP gross margin for the quarter was 20.5% and above our guidance.

Power plant margins were on plan led by our large US projects, while commercial margins declined slightly, again, impacted by the HoldCo strategy I just discussed.

We expect our commercial margins to increase over time to the high teens, low 20s as we launch new products this year that offer significant cost reductions and decreased insulation times compared to our current generation of commercial products.

In residential, our business was solid as we saw significant year-over-year megawatt growth in the US and stable overall deployments.

On a sequential basis, megawatts were down due to typical seasonal patterns.

Non-GAAP residential margins for the quarter were 22.7% as we continue to benefit from stronger cash with North American cash and loan sales totaling 56% of our shipments, while 44% were leased.

Overall we deployed 90 megawatts of residential products globally.

Lease bookings were 19 megawatts in Q1, with total lease bookings of 241 megawatts, representing $913 million in net contracted payments, excluding the residual value.

In addition, NCI for the quarter was $19 million as we saw a significant number of installs during the quarter, primarily in California.

First-quarter non-GAAP OpEx declined more than $3 million sequentially as we prudently managed our expenses in the quarter.

We expect OpEx to increase slightly as we continue to invest in our Smart Energy strategy, as well as other key initiatives.

For the quarter, our factories ran at full utilization with record cell output.

Additionally, we are continuing the construction of Fab 4, which remains on plan for our 2015 megawatt production goals.

CapEx for the quarter was $25 million and below forecast, as we are still finalizing some of our retrofit work at the facility, which is slightly delaying equipment install.

We expect CapEx spending to increase throughout the year as construction of Fab 4 progresses.

Moving on to the balance sheet on slide 8. At the end of the quarter we had $600 million in cash and more than $850 million in total liquidity.

The main driver in a decline in cash was the expected redemption of our $250 million convertible bond, as well as spend related to our HoldCo strategy.

Additionally, inventory rose sequentially as we prepared for our upcoming project builds, such as the approximately 90 megawatts we plan to install at Quinto in Q2.

We expect cash to trended down slightly in Q2 before improving in Q3, largely driven by the collection of our $240 million receivable for Solar Star when complete.

Before I turn the call back to Tom, I would like to provide a brief update on our HoldCo assets and touch on valuation.

Please turn to slide 9.

We have updated our HoldCo assets to 679 megawatts, primarily driven by our lease signings in Q1.

Our HoldCo asset base remains diversified with projects roughly split evenly between DG and power plants.

Quarter-date bookings are strong, including the announcement of our 68-megawatt for Stanford, and we expect to add additional assets to our HoldCo this quarter.

On slide 10 for reference, we are providing a more detailed analysis of our major power plant and commercial HoldCo assets.

As you can see from the chart, we expect to install more than 100 megawatts of HoldCo assets in the second quarter.

All assets listed are either part of our initial 8point3 portfolio, or part of the ROFO list detailed in our current S-1.

Finally, we have been getting a number of investor questions on valuation pending our proposed launch of our joint YieldCo vehicle.

On slide 11 we are providing a general framework -- a general valuation framework to help investors understand how we think about the value of our business, assuming a successful offering of 8point3.

It is composed of three parts.

First, our core business, which we see as an EBITDA multiple, this includes all projects across all three of our end-segments, or their sold at NTP, COD, or held for our proposed YieldCo vehicle.

As we discussed the Analyst Day, EBITDA is a good proxy for free cash flow and a very straightforward way to value our core business.

As a reminder, we do not expect to be consolidating 8point3, which is a different structure than other vehicles in the market.

I wanted to point out that this de-consolidation will have different impacts in our P&L on a GAAP and non-GAAP basis in relation to EBITDA.

For example, under our standard non-GAAP accounting practice, when we sell a project to 8point3 in it reaches COD, we will recognize revenue and margin for the sale, but will defer a portion of margin equal to our ownership stake in YieldCo.

This deferred margin will be recognized through our equity income line over the life of the project as our ownership stake in 8point3 declines over time.

While this treatment allows us the best financing flexibility related to cash flow, and builds a long-term income stream, it will obviously understate our EBITDA in the short-term.

Second, the market value of our limited partnership units in 8point3 simply shares owned times market price.

The third piece is the value we will accrue by holding incentive distribution rights in 8point3.

In closing, our Q1 performance was solid as we executed across all segments.

We believe that our long-term strategic approach to the renewables market, significant project pipeline, and our proposed YieldCo venture, will enable us to maximize the value of our assets, lower the cost of capital for the Company and generate significant shareholder returns over time.

With that I will turn the call back to Tom.

Thanks, Chuck.

Looking forward, we believe that our underlying business fundamentals continue to remain strong for 2015.

As a result of our announcement on February 23, announcing our intention to form 8point3 Energy Partners, as well as our pending S-1 registration statement, we are withholding our FY15 financial guidance until such time as we can finalize the impact of 8point3 on our expected financial performance.

However, on slide 12 we have provided our forecasted recognized and deployed megawatts for Q2.

With that I would like to turn the call over for questions.

In addition to Chuck, we also have a Howard Wenger, President, Business Units, and Bob Okunski, our Senior Director of Investor Relations.

Questions, please.

Thank you.

(Operator Instructions)

Brian Lee, please state your company name.

Goldman Sachs.

Thanks for taking the questions.

I had two of them.

First one was on just the pipeline.

So the HoldCo was relatively flat here, but your overall market prospects, they seem to be pretty positive based on the prepared comments and across a number of GOs.

So just curious how you're thinking about what gets retained on the balance sheet and HoldCo, YieldCo versus what you sell to third parties, and what the criteria are for that decision process?

Great, Brian, thank you, this is Chuck.

So we had a great quarter starting off in Q2 booking the Stanford deal at 58 megawatts, as you see from the filing is now in the ROFO list.

Q1 the bookings that -- we had a great cash quarter of cash bookings, our PPA bookings were primarily in residential.

As we look forward we'll find many more PPAs in North America and internationally, and the key focus for 8point3 would be in the OECD countries we referenced in the S-1.

We do plan on doing many other projects outside of the OECD countries, and there we'll traditionally finance with project debt and likely sell the equity.

Fair enough, but I guess, maybe it's a simple question, but how do you guys think about what actually sits at the ROFO list level versus what actually gets housed in what you are officially calling the HoldCo pipeline?

Fair enough in the ROFO list we work with First Solar and our bankers to put debts that we thought would be most appealing, so there is a broad list from both companies.

Additionally both companies have many assets that they're planning on holding and may sell later to 8point3, or might sell to other third parties, or retain long-term.

It's really our decision and First Solar's decision on that long-term.

Okay, fair enough.

That's helpful.

Second question was around the comments you made about the commercial segment margins, and thanks for breaking those out, by the way.

But can you elaborate on what the new technologies are that are going to reduce the cost in that segment to drive the margin expansion your targeting?

And then, related to that, how should we think about the long-term gross margins by segment, and how does that look when you are monetizing the YieldCo strategy?

Fair to assume that we could see additional margin expansion through that vehicle?

Thanks, guys.

This is Howard, I will do the cost and product piece, and Chuck will follow up on the margin piece.

We're really excited about the commercial market.

We've got a long legacy there, starting with our acquisition of PowerLite more than seven years ago.

We're fully integrated to the customer, we have our own sales team, our own EPC, so we provide the full turnkey solution.

We are driving cost down.

What we're doing is we're following the pioneering work we did in the power plant business with our Oasis product, where we have a modular product plug-and-play, and we're applying that to the commercial segment, and we're rolling those products out this summer.

It's a full turnkey solution for roof, ground and parking, so that's just part of the puzzle.

Then we have our unique partnership with EnerNOC where there's a convergence of the PV solution with digital, and a full energy connectivity to the customer so they can help manage their demand and get maximum savings on their buildings, so that's how we're approaching that.

So I'm going to pass this to Chuck.

Great.

And Brian on the margins by segment, I mentioned we expect our commercial margins to grow high teens, low 20s.

We certainly do projects all the time that are margins that are well above that, and there's a global mix that you'll see that has impacts over time.

On residential our margins this quarter were 22.7%, that does not include NCI, and NCI is a great value in residential, if you added that margins would be closer to 30% plus.

If you look at power plants, again it's depending on geographic location and the ultimate sale price, for the quarter we were 22% for power plant.

And then your question on the impact of selling to 8point3, the sales will be at market prices to 8point3, so we think we'll have consistent margins over time and we'll get the benefit, as well, of the IDRs and dividend growth of our shares.

So we think that it's a great model, both selling to 8point3 and selling to third parties.

Okay, thanks, guys.

Patrick Jobin, please state your company name.

Hi, Credit Suisse, thanks for taking the question, a few here.

I'm just following up on that kind of drop-down pricing mechanism, as you think about a hybrid model, is there anyway you can tweak value maximization if you push down to accelerate IDRs, or kind wanting to keep some EBITDA on the parent level?

I guess is the first question, kind of your thought process there.

And then the second question is just better understand the commercial gross margins today, I guess that is lower than we were thinking about.

Thanks.

This is Tom, I'll take the first part, just some general comments about the YieldCo, and maybe working off of Brian's question as well.

The YieldCo gives advantages, the proposed YieldCo gives advantages to sponsor co, i.e.

SunPower, by virtue of having a predictable place to sell projects in more frictionless, in terms of the way the terms will work, and there's economics that improve because of that.

So it does allow us to be more competitive as we look at, as we approach different markets.

Than as you talk about how much of that aggressiveness do you put into the sale of the project versus building into the drop-down.

I'll let Chuck speak to how we think of the different cash flow and cap the IDRs.

Great.

We can't talk a lot about 8point3 in this phase and so we look forward to having a lot more detailed discussions with you over time, but clearly, as I mentioned, evaluation of SunPower, there was the traditional EBITDA value to SunPower, as well as the share price and our ownership in 8point3 and the IDRs.

If you read a registration statement you'll see we have these expanded IDR structures, which we think will provide great value to SunPower and First Solar long-term.

Unfortunately we can't get into those details until after we've completed the offering.

Okay, and on commercial gross margins, just better understand that 6% level.

What's causing that today?

Sure, this is Howard, I'm going to answer that.

It's a function of mix, so we're a global company, we have commercial business in the European continent, as well as Asia-Pacific and the US.

What we see going forward are sequential margin improvement in commercial business as we move more of our business to the US and into complete solutions.

So we're very optimistic about the commercial business and our ability to attack it with complete solutions, increasing ASP, better customer capture, and improved revenue and margin outlook.

Okay last one for me, sorry.

Storage plus solar, what are your views on kind of the economics of the storage solution, and when you would anticipate some type of inflection points bundling those offerings?

This is Tom, first and Howard will add on.

So we've been optimistic and investing in the combination of solar plus storage plus energy management, and we will have comprehensive offering.

We already do self-storage, and we'll have a comprehensive offering of all three, as Howard mentioned, this summer.

So that's a really powerful proposition because of the obvious things you can do, you can you solar when you want, you can optimize load.

So again, you'll see that this summer.

In terms of projecting when storage is economic, the last comment I'll make is it depends on the application and what the energy is worth to the customer.

So it's economic today, where the loss of energy is very expensive to the customer.

For example, battery backup, where, again, downtime would be really catastrophic, but if you wanted to mainstream storage, I'll let Howard take that piece.

Yes, probably the best applications for storage in solar today are in the commercial segment and, as Tom mentioned, depends on geography.

So where there are places of high demand charges were you can clip the peak demand of the customer, you can really realize some significant demand charge savings, so those are places like California, New York and Hawaii.

And we're seeing pay backs that could be less than five years, to give you a feeling.

Residential in the US, the economics of storage, because solar is in predominately places where there is net metering, the economics of storage are more challenged but there's still value to the customer because you're providing backup power and security.

In places like Germany, storage with residential customers is quite powerful because there you can increase the self-consumption and get the full value of the solar generated, and export less to the grid capturing high retail price, so it really depends on geography and segment.

Great.

Thank you.

Ben Kallo, please state your company name.

Robert W. Baird.

Thanks for taking my question.

Just on the higher level, could you guys talk about the overall health of the market, and then maybe looking ahead to some of the new markets developing in 2016, 2017 where you guys are seeing opportunity?

Thanks.

Sure.

What I would say is in Q1 markets were really good and, as we look forward, they're quite strong and continue to be quite strong.

As you look at sort of a regional breakdown, North America is growing really rapidly and will continue to do so and, as we all know, we think the ITC is not predictable which way it will go in January of 2017, so that likely will be a catalyst for further growth in the next 18 months, and so business is very strong.

China insatiable demand, almost, their installing as much as almost the rest of the world.

In Japan continues to be strong, as we speak.

In Japan the FX is not going a direction favorable to a company like ours, although we do sell in US currency.

As we look out to 2016 and 2017, of course as costs comes down, as we drive costs down further, we think North America will still be strong and we model that with various ITC scenarios.

However, for sure the economics are getting very favorable for countries like all of South America, especially the strongest economies there, that being Chile and Brazil, but you'll see solar in all of those countries.

We expect Mexico to be coming on as the market policy becomes more clear in the next six to nine months.

And then of course China will be a volume engine, for sure, for the solar energy for the indefinite future.

In Japan, we think likewise, that it's got sustainable demand, it just makes sense in Japan, and that would be a good market for the long-term.

So add South America and Latin America to the existing markets would be my answer for 2016 and 2017.

One more question on the new -- and thanks for that -- on the new Fab.

Could you just talk to us about how comfortable you are with that original 30% cost down, now that you have it on Fab 2 with some of the changes there.

And then how confident you are for First Silicon and the second half after the push out.

First Silicon will happen in the second half, so extremely confident.

The cost down will be certainly north of 20%, approaching 30%, and you shouldn't read that as a walkway from the commitment, it's just we haven't started producing yet, so as committed as ever.

I will give you some statistics, we've done 100,000 cell, what we call soft turn-on run, and the performance of those cells was above the efficiency target of the Fab, and the yield was close to the yield targets of the Fab, which indicates that we'll get higher performance and likely the economics.

I've been around since the original Fab and I have to smile when I talk about 100,000 piece first turn on run, how far we've come.

That would've been the first year, probably, in the old days, so we have a very good sense of how this Fab is going to perform.

We have data that suggest it's going hit plan or be plan.

Thanks, guys.

Chris Sinclair, please state your company name.

Bank of America Merrill Lynch, thanks for taking my question, I have two of them.

Either Chuck or Tom, how are you arranging construction of financing today?

Is a primarily through revolvers?

And also do you see the changing ahead to use of warehouse facilities, or something along those lines, so that you have a more repeatable financing vehicle?

I also had a follow-up after that.

Its Chuck, thank you.

So we've done multiple facilities, recently Hooper was closed, and that's a traditional mini perm structure that gives us flexibility long-term.

We have the same facility with Quinto.

We have not used our corporate revolver, and we have considered a warehouse for smaller projects, but quite frankly we've got a very strong balance sheet and lots of cash, so we didn't like the economics of a smaller facility.

But for large ones like Hooper and Quinto, a mini perm facility we thought kind of best suited our needs.

That's very helpful.

And then a follow-up for Tom, obviously with the pending YieldCo there's no full-year guidance.

I'm kind of curious when you look into 2015, are there any tangible or quantifiable goals that you can tell us that you have for this year for SunPower?

For sure, your question is which ones we'll highlight, but we will grow as a company.

We do pending SEC comments and finalization of the process, we do plan on launching the YieldCo which makes us more aggressive in terms of pipeline acquisition for 2015 and beyond.

Another goal is to establish a strong presence in the markets that are going to be big in 2016, 2017 and 2018, which we are accomplishing, and I would add China.

China is very successful for us as a Company.

We've installed 60 megawatts so far, and we have an increasingly large pipeline of projects in China.

So getting China to an efficient model that will allow us to capitalize on the sites pipeline that we're developing is also a key goal for the year.

And then of course, as Ben asked the question, to get additional capacity on our latest generation of technology that allows us to grow in 2016, 2017 and 2018.

This would be the top four or five.

Thanks, Tom, thanks, John.

Vishal Shah, please state your company name.

Deutsche Bank.

Tom, I guess first question on the US market.

As you think about ITC and the tax equity availability, I mean, do you have a timeline as to when -- by when these projects need to be on the ground in order to get a tax equity?

Are we talking first quarter of 2016, or you can actually start construction of a project even late 2016 and expect to get it ITC?

I can give you really broad answer and let Chuck or Howard add-on.

I think that what we're going to see, Vishal, is compressed construction cycles.

We've been through a few of these, those of you who have been with us for a while, we've been through incentives that have lapsed, and what we find is that you can do some amazing things in short order.

So I would think the timelines towards the middle, or late even, 2016.

That's right so are planning model has the projects that we're using tactically to finance completed by the end of 2016 COD.

Okay, that's helpful.

And then you guys mentioned that you're also maybe looking to do some M&A once the YieldCo is up and running.

Can you just talk broadly speaking about how the environment is for M&A right now in the US, and also, I mean, if you think about the growth that you are expecting beyond 2015, a lot of the growth is going to come from some of the non-OECD countries.

I guess one of your competitors talked about emerging markets YieldCo.

How you plan to monetize some of that growth that you expect to see?

Do you have any thoughts on another YieldCo in the long run?

Thank you.

Sure all take the second part first.

So we have been studying international YieldCo's, and I'm not sure there's a public market that are as bullish about the in the short-term given the risk profile.

However, we have been doing syndicated deals internationally in some of these countries, and we have a distinct advantage with Total as a partner doing co-development.

We see many of these emerging markets as great opportunity for us to develop with Total, and even with other partners.

In some cases we have retained small equity ownership percentages, like in South Africa, in other cases we have chose to outright sell the equity.

I think over time we'll look at these new and emerging structures, but today the markets were focused on in China, we have strong partners there, and Africa, Middle East, we're working with Total to partner.

And then the first part of M&A, we always look at pipeline, we always look at new opportunities, and there are many projects out there.

We like the position that we have with our pipeline and the projects that we're building.

But, of course, following 8point3, as you suggested, we'll continue to evaluate new opportunities.

We're going to end our comments with that last question, that we're in a strong position because of our organically grown pipeline, that we're not in the position we necessarily need to acquire, but we are aggressively looking at all opportunities that we can find.

So somebody listening to the call has a great pipeline, please do contact us, but again we're in a position where we can be selective.

We really appreciate everybody calling in, we know you have another call to go to, so thank you.

Strong quarter for SunPower and we look forward to our next call so thank you very much.

With that we will conclude today's conference thank you for your participation you may disconnect your lines at this time.