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Article from SFGate.

Two weeks ago, solar power plant company BrightSource Energy abruptly canceled plans for an initial public stock offering, convinced that investors currently have little appetite for new solar shares.

Now SolarCity Corp. will test that theory.

SolarCity on Monday reported plans for its own IPO. The San Mateo company, best known for leasing rooftop solar systems to homeowners and businesses, filed a confidential draft registration statement with the U.S. Securities and Exchange Commission last week.

SolarCity’s brief statement announcing its IPO did not specify a price range for the stock or say when trading might commence.

The company was founded in 2006 by brothers Lyndon and Peter Rive. Their cousin – Tesla Motors CEO Elon Musk – chairs the company’s board.

SolarCity had been widely expected to go public this year. The popularity of residential solar leases, which allow homeowners to install solar panels without paying the up-front cost, has grown quickly. SolarCity and San Francisco’s SunRun Inc. have emerged as the field’s dominant players.

Ugly year for stocks

But SolarCity could face headwinds on Wall Street.

Solar stocks have endured an ugly year, falling even before the highly public bankruptcy of Fremont’s Solyndra. All have been hammered by a worldwide plunge in solar cell prices, the result of new factories in China flooding the market. A Bloomberg index of major solar stocks – including First Solar Inc. and SunPower Corp. – lost 67 percent of its value in the last 12 months.

So burned have investors been that they may look askance at solar companies that have nothing to do with making cells.

BrightSource, based in Oakland, called off its IPO on April 11, just hours before trading was scheduled to start. The company’s large solar power plants don’t use photovoltaic cells. Instead, they use fields of mirrors to concentrate sunlight and generate heat.

And yet, as BrightSource executives spoke with potential investors in the weeks before the planned IPO, the investors were skittish. It didn’t help that solar stocks, which had shown some improvement in January and February, tanked during the road show, said BrightSource CEO John Woolard.

“The feedback we were getting from investors was, ‘In the solar space in particular, it’s been a bad place for us to be, recently,’ ” Woolard said last week.

He felt fortunate that BrightSource didn’t absolutely need to move forward with its stock sale. The company’s board unanimously voted to cancel the IPO rather than postpone it.

“You can always get a deal done,” Woolard said. “The questions are: at what price? Is there after-market support? Is it going to be a good outcome or not? Is it a deal you want?”

The fall in solar cell prices that has gutted so many solar stocks has, in fact, helped SolarCity.

Although they receive less public attention than struggling solar manufacturers, the companies that develop or install photovoltaic solar systems have benefited from tumbling prices, which make their systems more affordable. That could work in SolarCity’s favor when the company’s shares start trading.

Deal with military

“It’s not a good time for solar manufacturing, but it’s a great time for other parts of the solar industry,” said Ron Pernick, managing director of the Clean Edge Inc. market research firm. “This is one of the areas where we’re seeing a lot of deployment and growth, and it’s quite robust.”

Some large, institutional investors are already quite familiar with SolarCity.

Both Bank of America Merrill Lynch and U.S. Bankcorp. are financing a $1 billion SolarCity project to place solar panels on military housing across the country. The U.S. Department of Energy had initially agreed to back the effort with a loan guarantee of $275 million, under the same federal program that gave Solyndra $528 million to build a factory in Fremont. But the loan program expired before the department and SolarCity could agree on terms.

Those banks understand SolarCity’s business and know that the company doesn’t share the problems plaguing manufacturers, Pernick said.

“I think savvy investors will understand the difference,” he said. “Whether the general public does, we’ll have to see.”

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Here is a article from the VC blog at WSJ.

“At The Wall Street Journal’s ECO:nomics conference in March, famed venture capitalist John Doerr declared the clean-technology industry needs a “Netscape moment” – an IPO listing that will capture the public’s imagination and usher in a slew of other companies through an open gate to the public markets.

Several clean-tech investors were looking to solar company Solyndra Inc. as perhaps such a breakthrough. But the fact that Solyndra – which exceeded $100 million last year and has been selling panels briskly – couldn’t pull of an IPO, raises the question of what comes next.

The maker of thin-film solar panels, the first renewable-energy recipient of federal loan guarantees, cited “adverse market conditions” for its decision to pull the IPO. The move will make expansion more difficult for Solyndra, which will require hundreds of millions of dollars in capital to reach its goals.

Rather than persuade public-market investors to buy in, Solyndra opted to once again turn to its private backers for more cash, selling $175 million in secured convertible promissory notes to undisclosed existing investors. The company has already raised $970 million in equity from these backers, the second highest total ever among venture-backed companies.

A tepid IPO market is some reason to blame for Solyndra’s withdrawal. Public investors haven’t exactly embraced unprofitable, risky plays like Solyndra this year, no matter how promising. While Solyndra is selling its product and expanding, mounting losses and an auditor’s going concern statement in its IPO filing didn’t make anything easier for the Fremont, Calif.-based company.

Public investors may also be skeptical whether Solyndra can match up with publicly traded First Solar Inc., which also sells thin-film solar panels and is considered a trail blazer for the industry by many venture capitalists.

“First Solar is preventing the tech [solar] companies from going public,” said Stephen Chin, analyst with UBS AG. “None of these start-up companies like Solyndra, Nanosolar, have scale or large capacity. I think that’s the biggest hindrance. First Solar is hard to compete against,” he added. UBS owned more than 1% of First Solar shares as of end of May, according to a disclosure statement.

Indeed, Solyndra’s manufacturing costs are high at $4 per watt for the fourth fiscal quarter ended Jan. 2, 2010. First Solar, on the other hand, plans to have costs of 78 cents per watt by the end of this year. Solyndra appears to be selling at a loss, too, as its average selling price for the full year ended Jan. 2 was $3.29 per watt, down from $3.75 per watt a year earlier.

“If the more you sell, the more money you lose,” you can’t make that work, said Kevin Landis, portfolio manager for Firsthand funds, which have a stake in another solar CIGS company SoloPower Inc.

First Solar plans to have annual production capacity of about 2 gigawatts at the end of next year, compared to 300 MW promised by Solyndra. Its panels use copper indium gallium diselenide, or CIGS, as the semiconducting material, which has higher potential efficiencies than First Solar’s cadmium telluride.”

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