Solar companies could turn to public money for financing

Solar companies could turn to public money for financingIn a time when all developers have to work hard to find financing, more than 100 solar businesses have filed paperwork for initial public offerings on the stock exchanges.

While they’ve filed, they haven’t acted on the filings, said Partho Sanyal, managing director of Bank of America Merrill Lynch’s global power, utility and renewable energy group. He spoke at the Solar Power Generation USA conference in Los Vegas last week.

“I don’t see a lot of buzz about new IPOs being introduced,” Sanyal said. “Maybe these companies are waiting for the right time to launch their deals.”

Going public is not easy to do, and it’s risky, Sanyal said.

“There’s been a lot of taint from IPOs not making money,” he said. “Some companies, at the time they went public, there were a lot of expectations and the story hasn’t really born itself out yet. Some very large-scale good companies have not performed very well in terms of how the public capital markets have reacted.”

At the same time public financing is the deepest and most liquid equity, Sanyal said.

The trick to going public, he said, is for a solar energy company to have a clear roadmap of where it is headed and how it will get there. That’s the biggest challenge for most companies—looking out 25 years.

“The power business is a bit different,” Sanyal said. “I feel like we can project 25 years out because there’s a 25-year power purchase agreement on the books. So if all those things hold up, you just need a roadmap of how many of these you are going to do before you try to go public.”

The biggest hurdle will be overcoming history, or lack there of. Most of the solar companies are too new to have a track record for success.

“There’s not 25 years of data about how heliostats will perform,” Sanyal said.

Much of what the public wants in a solar company is what banks look for, too, said Brett Prior, a senior analyst with GTM Research.

“There are no Googles we can hold out as examples of big payoff,” Prior said. “So far, if you invested in solar, you’re not sitting on a very pretty portfolio.”