Lyndon Rive
Rive on a San Mateo, CA residential rooftop with Solar City installed solar panels. Photograph by Gregg Segal for Fortune

SolarCity Lowers Annual Guidance on Weaker Home Solar Demand

Aug 01, 2016

As it goes through the process of being acquired by electric car maker Tesla Motors, solar installer SolarCity has lowered its forecast for how many solar panels it would install this year, blaming weaker than expected bookings in the first half of the year.

The news on Monday sent SolarCity's (scty) shares down 8% in morning trading to $24.56.

The solar company doesn't plan to announce its full second quarter earnings until Aug. 9, but it likely had to release some financial metrics early because of updated deal terms for its acquisition that were also disclosed on Monday.

Tesla (tsla) announced that it planned to acquire SolarCity in late June, but the deal announced on Monday was slightly less lucrative for SolarCity. SolarCity shareholders will now receive fewer shares of Tesla—0.110—than the 0.122 to 0.131 shares that were originally proposed.

To see inside Tesla's Gigafactory watch our video.

Tesla now plans to buy the company for $25.37 per share versus the original anticipated range of $26.50 to $28.50 per share. Tesla's CEO Elon Musk reiterated on a call with analysts on Monday morning that he had recused himself from the deal negotiations because he is also SolarCity's chairman and therefore was unfamiliar with the change in the offer price.

"I know about as much as you do how this price was obtained," he said.

SolarCity said that it now planned to install 900 to 1,000 megawatts of rooftop solar panels in 2016, below its previous annual guidance of 1,000 to 1,100 megawatts. For comparison's sake, 1,000 megawatts of energy is about how much electricity one large coal or natural gas plant produces.

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At the same time, SolarCity preannounced that it installed 201 megawatts in the second quarter of this year, which was more than the 185 megawatts of solar panels than it had previously anticipated installing in that time period.

In addition, SolarCity said it planned to introduce two new products in the second half of this year. One will be a combined solar panel and storage product, presumably working with Tesla, and a new type of solar panel product.

Analysts with JP Morgan said the lowered guidance fueled concern that demand "is tapering" for home rooftop solar panels in more mature markets" like California.

Analysts with Cowen and Company said that SolarCity faces "advancing competition, an aggressive cost reduction profile that needs to be successfully implemented, and an over-exposure in general to the U.S. solar market, given upcoming subsidy changes."

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