Why are operational metrics so important?
Key operational metrics allow us to understand and compare the operational performance of one period with another. Such metrics can be used to compare the operational performances of downstream solar (TAN) companies like Sunrun (RUN), Vivint Solar (VSLR), and SolarCity (SCTY). SunPower (SPWR), notably, derives a significant portion of its revenue from downstream operations.
Megawatts deployed and installed
Megawatts deployed represents the production capacity of solar systems that have completed the required inspections in a particular period. It includes solar energy systems deployed under Energy Contracts as well as for solar energy system direct sales.
Megawatts installed represents the production capacity of solar energy systems, for which installation is completed along with applicable tests. The system is then ready for grid connection, which is completed during the applicable period. This metric includes solar energy systems deployed under energy contracts as well as for solar energy systems. We should note that the higher megawatts installed, the higher the company’s future cash inflows.
Unlevered project cash flow
Unlevered project cash flow represents the forecast of gross project cash flows after tax equity lease or PPA (power purchasing agreements) distributions for megawatts deployed under energy contracts. The higher the cash flows from underlying assets a project represents, the higher the value creation for the company.
Pre-tax unlevered NPV
Pre-tax unlevered NPV (net present value) represents the NPV of the forecasted unlevered project cash flows discounted at 6%. Tax considerations are not included in the calculation of this metric.
By contrast, the renewal of unleveraged NPV represents the NPV of unlevered project cash flow forecast from the renewal of existing energy leases, or PPAs. For 4Q15, the company reported a pre-tax unlevered NPV of $3.63 per watt deployed, as compared to $2.56 in 3Q15.
Cost per watt is the sum of all operating costs incurred per watt of deployed capacity. A lower cost per watt implies higher operational efficiency.
Keep reading for a discussion of SolarCity’s customer base.