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Vivint Solar Reported a Record Low Cost per Watt in 3Q16

Sheldon Krieger - Author

Nov. 11 2016, Updated 11:04 a.m. ET

Vivint Solar’s cost per watt

Cost per watt is the sum of all operating costs incurred per watt of installed capacity in a particular period after considering cancellations. Lower cost per watt implies higher operational efficiency.

Vivint Solar (VSLR) reported a record low cost per watt of $2.85 for 3Q16 as compared to $2.94 in 2Q16 and $3.12 in 3Q15. A record low installation cost per watt of $2.02 and lower S&M (sales and marketing) expenses helped the company to report the lowest cost per watt since its inception.

Moving ahead, a decrease in solar panel prices and BOS (balance of system) costs could have a positive impact on the company’s cost performance.

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Estimated retained value

Estimated retained value represents the net cash flow (discounted at 6.0%) a company expects to receive from long-term customer contracts. The value is calculated after deducting cash distribution to fund investors and estimated operating expenses for systems installed as of the measurement date. A higher estimated retained value represents higher future cash flows from operations.

Vivint Solar’s estimated retained value has consistently been on the rise over the quarters. However, its quarter-over-quarter growth rate has been falling since 1Q15. For 3Q16, Vivint Solar reported an ERV (estimated retained value) of $1,228 million, which rose 10.1% on a quarter-over-quarter basis compared to about 10.2% in 2Q16.

Since ERV is sensitive to interest rates, any future rise in interest rates could have a negative impact on ERV for VSLR and peers Sunrun (RUN) and SolarCity (SCTY) and the downstream operations of SunPower (SPWR).

Megawatts booked

Megawatts booked includes the total capacity of solar (TAN) energy systems sold to customers or subject to an executed customer agreement after considering cancellations during the applicable period. Selling and marketing (or S&M) costs can be estimated using this operating metric. Lower megawatts booked could lead to higher S&M costs per watt.

For 3Q16, Vivint Solar reported its megawatts booked at about 59 MW (megawatts) as compared to 74 megawatts booked during 2Q16.

In the next part of this series, let’s look at VSLR’s 3Q16 revenue.


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