Wednesday, August 5, 2015

Solar Is Big Business

Solar is big business.  Sunrun rang the NASDAQ bell this morning as it went out for its initial public offering.  Click here for full article from GreenTech Media.  Here's some excerpts from the article by Julia Pyper (emphasis added):

The San Francisco-based residential solar company raised nearly $251 million by selling 17.9 million shares, for an initial market cap of around $1.36 billion. 
Trading opened Wednesday morning on the lower scale of Sunrun’s target range at $13.06 per share. The company was expected to IPO between $13 and $15.
Sunrun is the second-largest residential solar company in the U.S. with approximately 79,000 solar customers across 13 states. SolarCity, the largest U.S. residential solar installer, has about 250,000 customers and a market cap of $5.67 billion. [Note:  Hawaiian Electric Industries, which includes both the Hawaiian Electric Companies and American Savings Bank, market cap was at $3.304 billion today]
Credit Suisse, Goldman Sachs & Co. and Morgan Stanley are acting as the lead underwriters of the IPO, which was first announced in June.
Sunrun’s revenue nearly quadrupled last year to $198.5 million, but the company also reported a doubling in losses, totaling $162.5 million. Sunrun has raised roughly $681 million since it was founded in 2007. VC investors with significant ownership of Sunrun pre-IPO include Foundation Capital, Accel Partners, Canyon Partners, Sequoia Capital and Madrone Partners.
An August 13, 2014 GreenTech Media article by Eric Wesoff, "Which Solar Company Boasts the Highest Market Cap?" gives a glimpse into this sector, click here for the full article.  Here is a 2014 breakdown of the biggest U.S. solar companies and, interestingly, the article notes that the top four are vertically integrated.  Also, please note that the market caps given were as of August 12, 2014.

Market capitalization of U.S. solar firms:
First SolarCdTe module maker, EPC$6.92 billion
SolarCityResidential PV installer, financier$6.5 billion
SunPowerc-Si module maker, EPC$5.98 billion
SunEdisonc-Si module maker, EPC$5.6 billion
TerraForm PowerSunEdison solar project YieldCo$3.25 billion
GT AdvancedPV panel manufacturing equipment$2.23 billion

The article, which also included information on Asian module and poly makers traded on U.S. exchanges and inverter builders, ends with the following observations:
That $3 billion to $7 billion range that included a cluster of solar firms is in the range of E*Trade ($6.1 billion), Pepco Holdings ($6.7 billion), a utility in the mid-Atlantic that serves more than 2 million customers, or Hawaii's utility holding company HEI ($3.48 billion).
Apple is the market cap leader at $574.6 billion.
These heady valuations could set the bar for solar IPO aspirants such as Vivint Solar (S-1 filed) or Sunrun (rumored to be considering an IPO).
Additional updates:  Vivint Solar went public on October 1, 2014 and is pending purchase by SunEdison.  Here's an excerpt from BloombergBusiness on the IPO:

Oct. 1 (Bloomberg) -- Vivint Solar Inc. closed at $16.01 in its first day of trading, giving Blackstone Group LP, the world’s largest alternative asset manager, and other investors a more than $1.1 billion unrealized gain on their two-year-old investment in the solar-panel installer. 
A July 20, 2015 GreenTech Media article by Stephen Lacey, "Feeding the Beast:  SunEdison Plans to Buy Vivint Solar for $2.2 Billion," chronicles the growth of SunEdison:
With a roughly $9 billion market cap, SunEdison is a fraction of the size of the biggest oil companies. But the company's YieldCo structure is allowing it to expand at a record-setting pace. It now has 53 gigawatts of projects under development or completed -- nearly equaling the generation fleet of Duke Energy, the biggest electric utility in the U.S.
In January, SunEdison acquired leading wind developer First Wind for $2.1 billion, giving it 521 megawatts' worth of projects to drop into TerraForm. Last month, TerraForm picked up another 930 megawatts' worth of projects from Invenergy.
The article also provides the following observation:
SunEdison is a leader in large-scale project development, but has struggled to find its place in the residential PV sector. It sold home solar with the help of installation partners, but didn't have a strong team for originating projects -- until now.
Vivint Solar gives SunEdison the best door-to-door solar sales team in the country and one of the largest residential pipelines, behind SolarCity and Sunrun.
"Vivint Solar's competitive advantage lies entirely in its sales capabilities, making up for SunEdison's biggest weakness," said Nicole Litvak, a senior solar analyst with GTM Research. "We've already seen other acquisitions of sales and lead-generation companies in the residential space, such as SolarCity's acquisition of Paramount Solar, and this will not be the last." 
Yesterday, SunEdison took its yieldco (click here for more information on the yieldco structure) TerraForm Power public according to a August 4, 2015 Clean Technical news blurb:
Originally announced back in May, TerraForm Global is SunEdison’s “emerging markets yieldco subsidiary,” which will be “formed to own and operate contracted clean power generation assets in attractive, high-growth emerging markets.” SunEdison made available 45 million Class A shares on the NASDAQ stock exchange on July 31, sold at $15.00 per share, and representing total proceeds of $675 million.
Suffice it to say, solar is big business.  But, in my humble opinion, all this activity is also reminiscent of the bubble.  

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