SolarCity, the US solar installer that helped pioneer the popular solar leasing model, filed for an IPO last week, with an initial target of raising $200 million on the public market. It will trade on Nasdaq under the ticker symbol, SCTY.
Solar stocks – which consist mostly of manufacturers – have been crushed in the past couple of years; SolarCity’s IPO could give the industry a much needed boost on the public market.
The low solar panel prices that have hurt solar manufacturers so much have been a boon for the installation side of the industry, and SolarCity has been expanding rapidly across the US.
"This is the first real interesting downstream business model, and it has a chance to prove that solar is economically viable if you’re in the right place in the value chain," Aaron Chew, an analyst at Maxim Group told Delaware Online.
"This may be a pretty game-changing moment for the solar industry. "We can finally see how plummeting component costs benefit a company operating on the downstream side of the solar business," says Anthony Kim, a solar analyst at Bloomberg New Energy Finance.
As the second biggest US installer (after SunPower), SolarCity is making solar affordable to many thousands of homeowners and businesses (including WalMart) through solar leasing. Its landmark Project SolarStrong – the largest solar rooftop project in US history – is adding 120,000 rooftop systems at 124 military housing developments, doubling the amount of rooftop solar in the US.
Under the solar leasing model, homeowners and business owners simply pay for the electricity their solar system generates – without the upfront investment. They sign a long term agreement to buy electricity at a fixed price from SolarCity, at lower prices than from their utility.
SolarCity has raised $1.57 billion for 15 funds that pay the upfront costs for solar systems. Banks like Bank of America Merrill Lynch (financing Solar Strong) and Credit Suisse have loaned hundreds of millions of dollars, and Google’s $280 million investment is its biggest in renewable energy, creating the largest residential solar fund in the US. Earlier this year, SolarCity raised $80 million in venture capital.
The company says it has over 15,000 solar projects completed or underway across the country, and customers have chosen the solar-as-a-service option for 12,000 of them – the others purchased their systems outright.
As of June 30, SolarCity has over 31,600 customers, up from 5,755 at the end of 2009. It generated $46.6 million in revenue for that quarter, a dramatic rise from $13 million for the same quarter in 2011.
The company was founded in 2006 by brothers Lyndon (CEO) and Peter Rive (COO) – and their cousin Elon Musk, CEO of Tesla Motors and chairman of SolarCity.
Tesla and SolarCity are more frequently working together. SolarCity’s solar panels will power Tesla’s solar charging network for its electric cars, and SolarCity’s new energy storage offering works off Tesla’s batteries.
Competitors include Sunrun, Sungevity, newcomer Vivint Energy, as well as and stalwart SunPower.
In its prospectus, SolarCity says it has benefited greatly from net-metering policies in 46 states that let residential and business consumers sell the excess solar energy they generate back to the grid.
But that could also be a risk for the company – some utilities are considering changes that could make it more expensive for customers to do this.
"Certain jurisdictions have proposed assessing fees on customers purchasing energy from solar energy systems and a utility in San Diego, California recently attempted to impose a new charge that would disproportionately impact solar energy system customers who utilize net metering, either of which would increase the cost of energy to those customers and could reduce demand for our solar energy systems," says SolarCity in the prospectus. "Any similar government or utility policies adopted in the future could reduce demand for our products and services and adversely impact our growth."
The prospectus also discloses that two SolarCity funds are being audited by the Internal Revenue Service (IRS) – which questions the valuations used to calculate the tax credits investors have received.
"If … the [IRS] determines that the valuations were incorrect and that our investment funds received U.S. Treasury grants in excess of the amounts to which they were entitled, we could be subject to tax liabilities, including interest and penalties, and we could be required to make indemnity payments to the fund investors," the SEC filing says.
Last week, SolarCity announced a major expansion into New York state – its 15th state – made possible in part by the next phase of the NY-Sun Initiative. They already have 100 solar jobs in NY, and are ramping up further.
Here’s the prospectus:
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