SolarCity Goes Public This Month

SolarCity set the price range for its IPO in the $13-$15 range and plans to go public this month on Nasdaq, under the ticker SCTY.

They hope to raise $150 million to extend what’s becoming a vast solar network and to acquire complementary companies.

This is an exciting IPO because it’s one of the first on the solar installation side. As most of you know, there are dozens of listed solar manufacturers, all of whom have since their stock prices crushed over the past few years. But the rapidly declining solar prices that have made it so hard on manufacturers have been a boon for solar installers, which SolarCity is benefiting mightily from.

In 2011, the installed cost of US solar PV systems fell an impressive 11%-14%, and another 3-7% in the first half of 2012, according to Lawrence Berkeley Lab’s latest Tracking the Sun report.

The solar industry and cleantech in general could sure use a successful IPO. While there have been a bunch of IPO’s over the past year or two, only Tesla Motors has gained traction and many companies have cancelled planned public listings, such as BrightSource Energy and Smith Electric Vehicles. There have also been high-visibility bankruptcies like A123 Systems and the highly politicized Solyndra.

"If SolarCity’s IPO does well it could potentially mark a big transition point," Rob Day, a partner with Black Coral Capital told Reuters. "SolarCity represents the next wave of cleantech that people should be much more excited about."

About SolarCity

The company was founded in 2006 by brothers Lyndon (CEO) and Peter Rive (COO) – and their cousin Elon Musk, CEO of Tesla Motors who serves as Chairman of SolarCity (who owns 31.9%). Lately, the two companies have begun to leverage eachothers’ strengths and co-develop products.

SolarCity has pioneered what has become a breakthrough model for the solar installation industry – solar leasing. The ability for homeowners and businesses (including WalMart) to put solar on their roofs without paying the upfront costs of the system and installation has been transformative. Instead, they sign a long term contract to buy electricity at a fixed price from SolarCity, at lower prices than from their utility.

As of June 2012, SolarCity has installed solar systems on 33,792 buildings in the US and 70-80% of solar installations in California, Arizona and Colorado use the "no money down" approach, according to GTM Research.

SolarCity has raised $210 million in venture capital funding and $1.57 billion for 15 equity funds that pay the upfront costs for solar systems. Banks like 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.

Its most exciting project is SolarStrong – the largest solar rooftop project in US history, literally doubling the number of residential solar systems in the US. SolarCity is installing 300 MW of solar – 120,000 rooftop systems – at 124 military bases in 33 states. Bank of America Merrill Lynch is financing the debt portion of the $1 billion project, and its equity funds (which qualify for the federal solar tax credit).

Tesla and SolarCity are more frequently working together. SolarCity’s solar panels will power Tesla’s national solar charging network for its electric cars, and SolarCity’s new energy storage offering works off Tesla’s batteries. SolarCity is also diversifying into energy efficiency audits and upgrades and is even starting utility-scale solar projects.

SolarCity’s Positioning

The company has yet to make a profit, but revenue is growing nicely. It has $70 million in debt, but revenue grew from $32.6 million in 2009 to $59.5 million in in 2011 and to $71.4 million in the first half of 2012. Margins are at 14.9%, compared to negative 46.2% in 2010.

SolarCity has become the second biggest solar installer in the US after SunPower, and competitors include Sungevity, Vivint, Clean Power Finance and SunRun.

In its prospectus, SolarCity says it benefits greatly from net-metering policies in 46 states, but that would be a risk for the company it policies change. The prospectus also discloses that two SolarCity funds are being audited by the Internal Revenue Service – which questions the valuations used to calculate the tax credits investors have received.

Solar leasing is expected to be among the most important drivers for the solar PV market for the foreseeable future as government incentives dry up, making SolarCity an important company to keep your eye on.

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