New majority stakeholder posts $431M loss; company weighs shutting down Malaysian cell plant over AD/CVD tariffs
This week, Singapore-based solar manufacturer Maxeon Solar Technologies announced financial results for the second quarter of 2024. Rather than handle a bunch of bad news on a conference call, Chief Executive Officer Bill Mulligan addressed a letter to the company’s shareholders.
In the letter, Mulligan reveals all of Maxeon’s solar modules imported into the United States from Mexico have been detained by Customs and Border Protection since July to assess compliance with the Uyghur Forced Labor Prevention Act (UFLPA).
“In July 2024, Maxeon experienced our first-ever detentions by CBP of modules imported from Mexico into the U.S.,” he says. “These detentions are intended to review whether Maxeon’s products comply with anti-forced labor provisions as set out in the UFLPA. Since then, all of Maxeon’s imports of solar modules into the U.S. have been detained by CBP.”
These detentions include both performance line panels manufactured at the company’s Mexicali factory for utility-scale customers and IBC panels manufactured in its Ensenada factory for DG customers.
“CBP has explained that these are routine detentions not related to any concerns specific to Maxeon,” Mulligan continues. “We are fully cooperating with CBP’s information requests and are in continuous contact with CBP authorities to help facilitate CBP’s investigation and respond to CBP’s inquiries.”
At this point, Maxeon does not have any indication from CBP as to when the detained shipments might be released and when the company will be able to resume module imports into the United States.
“Based on our internal and third-party reviews, we believe our supply chains are in compliance with all relevant rules and regulations, as well as leading ESG standards, but have no visibility into the CBP’s process or timing, and are therefore uncertain as to when we will be able to recommence deliveries into our largest end-market,” Maxeon’s CEO adds.
“Maxeon has been a long-time ESG leader in the solar industry and a supporter of the UFLPA since its inception,” a Maxeon spokesperson told Renewable Energy World. “Maxeon continues to require a UFLPA-compliant supply chain for its products imported into the U.S., including polysilicon produced outside of China.”
More cell uncertainty
In the letter to shareholders, Maxeon warns the company is facing considerable risks and uncertainties due to trade policy issues, including the re-imposition of Section 201 bifacial tariffs on modules imported into the U.S. from its Mexicali facility and proposed new AD/CVD tariffs on solar cells manufactured at its Malaysian factory.
“While we believe that these types of import tariffs will be fundamentally supportive for our planned Albuquerque cell and module factories, they critically impact the economic viability of our current supply chain,” Mulligan explains.
“For this reason, we are evaluating the shutdown of our Malaysian Fab 3, where we have been manufacturing solar cells since 2011, and plan to re-tool Mexicali Modco for P7 TOPCon with solar cells sourced from independent third parties in the future. In this event, we would expect associated charges of at least $100 million in the second half of the year, a large majority of which would be non-cash charges for related asset write-downs.”
A tumultuous Q2
Maxeon reported losses of more than $7.78 million in Q2 2024 after tallying a $14.87 million loss in Q1 this year. The company shipped 526 MW in Q2, and there were notably no sales to SunPower Corp., as the committed volumes under the settlement and release agreement were fully delivered during the previous quarter. GAAP operating expenses for Q2 included a provision for expected credit losses of $11 million resulting from SunPower Corp.’s recent bankruptcy filing, largely associated with unsecured indemnifications for ongoing litigation and warranty claims inherited from Maxeon’s spin-off from SunPower in 2020. Maxeon was SunPower’s primary provider of solar panels through March 2024, when the companies decided to end an exclusive agreement.
In addition to the CBP issue, the company says it continues to face significant market headwinds and uncertainties due to intense competitive pressures, subdued distributed generation (DG) market demand, project delays, and order cancellations affecting its large-scale business, in addition to an unpredictable policy environment.
In its Q2 financial disclosure, Maxecon says because of an “unprecedented level of uncertainty,” it will be unable to provide financial guidance for the third quarter and is therefore withdrawing its full-year 2024 revenue and adjusted EBITDA guidance. Maxeon says it expects its Q3 revenue will “decline significantly from the second quarter,” for the reasons above.
Leadership changes and a new majority stakeholder
Kai Strohbecke stepped down as Maxeon’s chief financial officer at the end of last month. Ken Olson, who joined Maxeon as senior vice president and group treasurer in October 2023, has taken on the role of interim CFO effective September 1, 2024.
To regain compliance with Nasdaq listing requirements, Maxeon will be undergoing a 100-for-1 reverse share split, which was recently approved by shareholders in the company’s Annual General Meeting.
Earlier this year, Chinese wafer manufacturer TCL Zhonghuan (TZE) announced plans to become the majority stakeholder in Maxeon. On June 20, 2024, Maxeon completed the sale of $97.5 million of 9.00% Convertible First Lien Senior Secured Notes due 2029 to TZE. On August 30, TZE completed a $100 million equity investment in Maxeon to become the controlling stakeholder.
“The fact that TCL/TZE is backing Maxeon is of significant importance and having the support of such a large and successful corporation brings numerous benefits,” a Maxeon spokesperson said in a statement to Renewable Energy World. “It ensures stability even in a challenging economic environment. This means Maxeon can continue its focus on innovating and delivering high-quality solar solutions and not the market turbulence.?The strategic relationship also brings significant manufacturing expertise and can help us scale and achieve increased competitive efficiency.”
However, TZE is having its own financial troubles. The company said it lost CNY 3.06 billion in the first half of 2024, equivalent to more than $431 million. Revenue fell more than 50% year-over-year and sales expenses increased.
Other large Chinese PV companies have also reported first-half losses, including Tongwei (CNY 3.13 billion) and GCL Technology (CNY 1.48 billion).
