Week of: 06.14.10 – 06.18.10
Not every cleantech IPO is on the right track
There are few things as exciting to the cleantech world as a juicy initial public offering (IPO), and this week has been full of news on that front. Electric car maker Tesla Motors said it will sell 11.1 million shares to the public on June 29 at a price ranging between of $14 and $16 a share, raising up to $178 million. Then, Italian electric utility Enel said it would go ahead with the share sale of its renewable unit in October. The deal is expected to raise as much as €3 billion ($3.69 billion), and will be one of the sector’s largest offerings so far.
Then again, few recent IPOs have shown themselves to be on the right track.
Take Solyndra, the California maker of thin-film photovoltaic cells: On Thursday: company officials announced that it had folded IPO plans that could have raised as much as $300 million. Instead, Solyndra turned to its investors to raise $175 million in convertible promissory notes. The company blamed “uncertainties in the public markets” for the cancellation.
Recent Securities and Exchange (SEC) fillings showed that Solyndra has raised lots of cash, nearly $970 million. It also secured a massive $535 million loan guarantee from the U.S. Department of Energy. Yet the company also spent a lot of money building a manufacturing complex, that should start shipping panels in the fourth quarter of this year. Despite the production ramp up, Solyndra has not yet achieved economies of scale. As Earth2Tech reported last spring, the company’s production costs are actually much higher than its competitors. This has led independent auditors to question if Solyndra could continue operating at the current burn rate.
Solyndra exemplifies why cleantech IPOs have failed to take off. Despite lots of positive buzz, investors are staying on the sidelines because the revenue and profit picture remains murky. It’s not a train wreck, to be sure, but its not high-speed rail either.
Other cleantech disappointments include battery maker A123 systems (NASDAQ: AONE), whose shares, issued shares last fall, are currently trading far below their introductory price. Biofuel maker Codexis (NASDAQ: CDXS) is also trading below its introductory price, as is Chinese PV maker Jinko Solar (NYSE: JKS), which issued shares last month.
Enel Green Power might actually be one of the few successful green IPOs. It’s backed by a massive operation that generates revenues and it will have no problem accessing project finance to grow its renewable energy portfolio. Those are all certainties investors are looking for in this seesaw equity market.
In other news… On Tuesday, Obama addresed the country on the Gulf oil spill. The Oval Office speech was peppered with well-worn talking points and buzzwords (“addiction to oil,” “a new green economy,” “bipartisanship”) but it was not the detailed road map many that many in the environmental community and punditocracy were expecting. It was widely panned.
We at G.E.R. took a different approach. As we posted here, we actually thought the address was — if not electrifying — pure Obama. A close read of the speech actually illuminates the sort of green energy plan Obama would like to sign into law. Yes, he did not mention climate change, Kerry-Lieberman or concrete details on how he planed to transition out of fossil fuels, but he did provide some hints as to what kind of energy policy he wants to sign into law. One that prices carbon, includes a push for greater energy efficiency and some sort of federal mandate for more wind and solar-powered electricity. Why the lack of details? As he did for the healthcare debate, he’s leaving it to Congress to execute it.
Obama’s week got a whole lot better after the speech. On Wednesday, BP agreed to put $20 billion in an independently managed escrow account to pay for the environmental damages and lost wages caused by the Gulf oil spill (or gusher, or Oilpocalypse). The announcement came after a three-hour long meeting between BP officials and President Obama at the White House. After weeks of bad press on its handling of the spill, the administration had finally gotten ahead of the story. How important of a victory was it? On Thursday, in his opening remarks at the grilling of BP CEO Tony Hayward, U.S. Representative Joe Barton (R – Texas) apologized for the “shakedown” that he said led BP to handover the $20 billion. But Barton apologized at 4 pm, after Republican leadership threatened to take away his committee post. Then, just for good measure, Barton apologized again.
VC and PE Watch
Taiwan Semiconductor (TSM) invested $50 million for 21 percent of solar startup Stion, a developer of high efficiency, thin-film solar photovoltaic modules. The investment was made by TSM’s Venture Tech Alliance unit and is part of a $70 million Series D financing that’s included return backers Khosla Ventures, Lightspeed Venture Partners, General Catalyst Partners and Braemar Energy Ventures.
TerraPower, a company that develops reactors powered by depleted Uranium, raised $35 million as part of a Series B financing. Charles River Ventures and Khosla Ventures participated in the raise. So did Intellectual Ventures co-founder Nathan Myhrvold and Bill Gates, which partially owns Intellectual Ventures.
Kleiner, Perkins, Caufield & Byers-backed Amonix, a California maker of concentrated photovoltaic (CPV) systems, hired Patrick McCullough as its new Chief Financial Officer just a few weeks after closing on a $129.4 million Series B funding.
Unlike his Pittsburgh speech last week, in which Obama actually said that a comprehensive energy and climate change bill had to include a cap-and-trade provision, his Oval Office address didn’t mention cap-and-trade once. The environmental community understood this as the death of the carbon-pricing scheme (we didn’t). This came as the Environmental Protection Agency (EPA) concluded that Kerry -Lieberman and its cap-and -trade provision will have “a relatively modest impact on U.S. consumers” and cost households about $79 to $146 per year. This is a golden talking point that the Obama administration should put front and center in its campaign to get climate change and energy done by July. All along cap-and-trade opponents have said that the scheme is bad for business. It actually isn’t, according to the EPA. If the Obama administration is to meet it’s goal, it will have to sell Kerry – Lieberman as a cost effective, business-supported legislation and steer away from any enviro, green talking points. The EPA has just handed a golden talking point that will help them do that!