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SolarCity delaying Buffalo factory production

SolarCity’s Buffalo factory likely won’t hit full production until the summer of 2017 – somewhere between three to six months later than the initial timetable.

SolarCity CEO Lyndon Rive said it will take longer than expected to order and receive some of the sophisticated equipment that will be used to produce solar panels at the South Park Avenue factory.

“Some of the equipment has longer lead times than we originally expected,” Rive said during a conference call to discuss the company’s earnings. “So that equipment is going to be arriving around the second quarter or third quarter of next year.”

The $900 million factory, which is being built and equipped through a $750 million state investment, initially was expected to reach full production during the first quarter of next year. Rive said during a stop in Buffalo in December that the timetable had been delayed until the second quarter.

The factory is expected to employ about 1,460 workers once it hits full production, churning out 9,000 to 10,000 solar panels daily. The factory – the biggest solar panel production facility in the Western Hemisphere – will have the annual capacity to build enough solar panels to generate 1-gigawatt of electricity.

Rive said he expects construction on the 1.2 million-square-foot factory to be largely completed during the early spring. The company is expected to start installing production equipment this spring – even as construction work continues on other parts of the factory – and begin limited manufacturing later this year.

Because of the delay, SolarCity said it expects to be able to push about $65 million to $70 million of the money that it expects to spend on the project into next year – a move that Credit Suisse analyst Patrick Jobin said will help the company meet its goal of generating as much cash as it uses by the end of this year.

State officials said it is not unusual for large and complex projects like the SolarCity factory to take longer than initially expected as plans are tweaked and SolarCity incorporates things that it has learned about the production process from its smaller, 100-megawatt pilot production line in Fremont, Calif.

“While we suspect this is genuinely due to equipment delivery delays, it does beg the question if there is a desire to delay the Buffalo plant startup to preserve cash near-term or provide more time for scaling the technology,” Jobin wrote in a research note.

SolarCity said the Fremont plant currently is producing solar panels that can convert about 20 percent of the sun’s energy into electricity and expects to be producing panels that top 21 percent efficiency by the end of the year. Most conventional panels operate at about 15 percent to 18 percent efficiency.

The company’s strategy in building the Buffalo factory is to drive down its costs by producing its own supply of high-efficiency solar panels in large quantities, allowing it to capitalize on economies of scale in the production process, while also allowing it to build rooftop solar systems that require fewer panels to generate the same amount of electricity as similarly-sized systems that use conventional panels.

The news of the delay came as SolarCity’s stock plunged by 21 percent to its lowest level since April 2013 after the company fell short of its fourth-quarter growth targets and warned that its first quarter would be weak because of its decision to stop installing rooftop solar systems in Nevada after regulators there slashed incentives.

SolarCity shares fell by $7.31 to $19.04 in mid-day trading Wednesday.