An 11th hour withdrawal from a long-anticipated initial public offering could be a potentially damaging blow for a cleantech startup trying to raise additional capital from the public markets.
But BrightSource, the concentrating solar power startup with 9 GW of projects in the pipeline, has not ruled out another attempt at a public launch.
In April, the industry was hoping that BrightSource would be a bright spot after a challenging year for solar. Misery in the solar industry in 2011 peaked with the collapse of thin film manufacturer Solyndra, which also withdrew its filing a year before it went bust dramatically.
After an award of almost $1.6 billion from the Department of Energy’s loan guarantee program in 2011, renewable advocates and adversaries were anxiously anticipating appetite for public stock in the Oakland, California company.
But the day before the company was due to go public on NASDAQ’s platform, its chief executive John Woolard decided to withdraw the registration filed a year earlier at the Securities and Exchange Commission.
In an exclusive interview with Breaking Energy, Joseph Desmond, BrightSource’s senior-vice president of government affairs and communications, said:
“Fortunately, we were in a position where we don’t have to do a deal. Was there a deal to be had? Sure, but not on the terms that management felt good about, so John Woolard made the call. The idea is not to go out to IPO for the sake of an IPO but to raise money.
“It was the right decision for us. We had the support of our investors and board. We have working capital and we didn’t need to do a deal. We simply chose to say another day.”
Market conditions deteriorated dramatically in the two weeks leading up to the scheduled IPO, which was priced to raise around $180 million that may now be sought through private financing.
“An IPO would have been nice but when we started the process the markets were looking very good and the two weeks from the time we started the roadshow. Then the markets had their worst weeks of the year.
“We have a successful track record of raising private equity and we can continue to do so. We know the projects have off-takes [Power Purchase Agreements] so it’s not as if that’s an impossible challenge.”
For more on private equity involvement in cleantech investing, read here.
As Breaking Energy reported at the time, Nasdaq’s Volatility Index increased 33%, the Dow Jones fell 2.4%, Nasdaq’s cleantech index fell further, at 6.6%, and individual stocks such as First Solar fell dramatically by 14.5%.
Meanwhile, Enphase Energy, a solar microinverter company, had tested the waters in March, and only raised 46% below target.
“The solar sector was taking a bit of a beating. We’re not in photovoltaics but you’re still caught up in that environment,” said Desmond.
BrightSource was founded in 2006 and raised $530 million in private financing from VantagePoint, Alstom, Morgan Stanley, Google, BP Alternative Energy, StatoilHydro Ventures, Chevron Technology Ventures, Draper Fisher Jurvetson and DBL Investors, among others.
By 2017, BrightSource expects to have 13 plants online with a combined capacity of 2,377MW.
But its 392 MW Ivanpah Solar Electric Generating System in the Mojave Desert, which is scheduled to begin operating next year, is the company’s flagship project.
Pacific Gas & Electric and Southern California Edison have 25-year Power Purchase Agreements to take electricity from Ivanpah.
NRG Energy invested $300 million, Google added $168 million in equity last year and the project was awarded $1.6 billion, the largest DoE loan for a solar project.
Desmond said that taxpayer dollars are protected because NRG and Google are the majority owners, leaving BrightSource as a 14% minority owner. NRG, Google and BrightSource established a separate legal entity, Solar Partners, who are responsible for the project.
If BrightSource collapses, Ivanpah will still go ahead and taxpayers will be repaid, said Desmond.
“Ivanpah’s financing is designed to survive were anything to happen to BrightSource. The project has taken all the steps to ensure taxpayers get their money back with interest,” he said.
Desmond said that the loan allowed BrightSource to scale up its ambitions.
“The loan guarantee was instrumental in helping us demonstrate that jump from R&D to a small commercial demonstration. It allowed us to build at the scale such that we could deliver competitively. Could we have done it without a loan guarantee? We would have had to but maybe it would have been a smaller project.”
When BrightSource first applied for the Ivanpah loan in 2006, the US energy industry was different in two fundamental ways: natural gas prices were high relative to today’s prices and states were enthusiastically enacting Renewable Portfolio Standards before the 2008 global recession.
Desmond, who is a former chairman of the California Energy Commission, insisted that central station solar will continue to play a role in the US despite the challenge from natural gas.
“If you want to take a 50-year view, you wouldn’t find anyone that would say that the cost of gas is going to be where it is today. Renewables provide a hedge against fuel price volatility.”
BrightSource has responded with the addition of thermal storage to future power plants and an expansion into other sectors such as Enhanced Oil Recovery. It is also looking to new markets in South Africa, Israel and Australia.
“We think there is lots of growth in the CSP market in the same way that there’s lots of growth in the solar PV market,” he said. “The market is so large and so global that we feel good about what the future looks like.”
Another IPO attempt may also be considered under more benign market conditions to offer BrightSource’s loyal investors an exit and return on investment.
Desmond said that a successful solar IPO would be welcome in the industry, but the successful operation of Ivanpah, the world’s largest CSP plant, will have a huge impact.
“We’re excited – it will be a milestone. But we have a long-term future – that sun’s going to burn for a long time to come.”
