As rooftop-solar growth ebbs, installers chase profitability

Bloomberg

There’s long been a Catch-22 about residential solar: despite staggering market demand, it’s been hard to make money doing it. Until now. Sunrun Inc. said that it’s cash-flow positive. And Blackstone Group LP-backed Vivint Solar Inc. expects to hit that mark next year.
Rooftop solar installers have chased growth in recent years, investing revenue into marketing and installations. The model helped fuel the expansion of residential power systems in the US, driven by leases and power-purchase agreements that require little to no upfront cash from consumers.
“It’s a major milestone if both of these companies can demonstrate that they can fund their continuing operations and continue to create new leases and generate money,” said Joseph Osha, a San Francisco-based analyst at JMP Securities LLC.
Sunrun expects to generate about $40 million of normalized cash flow this year. “We are very clearly profitable,” Chairman Ed Fenster said in an interview. The shares gained 7.8 percent to $6.35 at 10:02 a.m. in New York.
Vivint is pushing to be cash-flow positive in 2018, Chief Executive Officer David Bywater said in an interview. The Lehi, Utah-based company has prioritized profitability under Bywater, who became CEO last year, over a single-minded focus on installation growth. “Others were leading this charge on growth, growth, growth,” Bywater said. “But growth is only great with strong unit economics.”
Though rooftop power was once the fastest-growing part of the US solar industry, installations have slowed this year as some states revised incentive programs. Cash flow and profitability became leading industry buzzwords.
Investors began focusing on companies’ marketing and unit costs, while debating the financial merits of long-term leases versus sales, either paid with cash or funded with loans.