Happy solstice: Solyndra files for IPO, could become next CIGS

andarchan

CIGS could soon have a new name and face on Wall Street--Solyndra. While much of the business community was sipping egg nog and eating Christmas cookies at office parties or buying armloads of presents on the final Friday before the coming holiday, Solyndra filed an S-1 registration statement for an initial public offering with the Securities and Exchange Commission. The purveyor of cylindrical copper-indium-gallium-(di)selenide thin-film photovoltaics will trade under the symbol “SOLY,” according to SEC documents, with Goldman Sachs and Morgan Stanley running the book on the proposed offering, joining Ascent Solar and DayStar as the only publically traded CIGS pure-play companies.

CEO Chris Gronet and his team have come a long way in a short time since emerging from stealth mode with a splash a little more than a year ago, and the prospectus filed as part of the S-1 provides a new level of granularity about the progress and plans of the company.

Like any IPO prospectus, the Solyndra tome (as in a couple hundred pages) contains a brutal amount of financial accounting procedure and stock valuation minutiae and boilerplate. Since it's a preliminary document, it keeps blank such items as which market SOLY will trade on (my guess would be NASDAQ), precisely how many shares will be traded, and what price the shares will be offered at; still, it does include company information that had been kept under wraps until now.  

For starters, the question of how many megawatts have been produced and shipped by Solyndra can now be answered.

For the nine months ended Oct. 3, 2009, the firm says it had produced 17.9MW out of its initial line in the Fab 1 facility, claiming a 40.2MW annualized production run rate for the period. That average run-rate number popped up to 45MW for the fiscal month just ended, a huge jump from the 7.8MW rate achieved in 2008.

Solyndra’s expansion plans for Fab 1 call for pushing capacity up to 110MW by the end of 2010. (btw, the average nameplate power rating for those panels came to 178W, or about  4.45W per tubular thin-film module, at 40 modules per panel.)

The company’s new production facility, Fab 2, is already under construction up the street from the first fab on Kato Road in Fremont. The plans call for the first phase, with a 250MW annualized run-rate capacity to be achieved by mid-2012, to start popping out panels by the first quarter of 2011.

The $535 million loan guarantee from the Department of Energy that will provide a big chunk of the funding to build the factory has made headlines, but it turns out Solyndra filed another application for a second DOE loan guarantee on Sept. 11 and the second part of the app on Nov. 17, this time for $469 million, to help underwrite the costs of building Phase II of Fab 2. If Gronet and Co. are successful in obtaining the second guarantee, the Fed will be into them for over a $1 billion.  

The PV omnifacialists will need all the help they can get finding the money to build out Fab 2, even though they have contingency plans for alternative methods of financing in case the loan monies don’t come through as planned. The prospectus states the “all-in” cost of capital for both phases of Fab 2 is about $1.38 billion, with $642 million of that medium-sized semiconductor fab-like amount needed for Phase II.

A couple of line items missing from the document (or at least I couldn’t find them in it) are the almighty manufacturing cost-per-watt (let alone cost-per-watt installed or kilowatt-hour per installed watt) and conversion efficiency metrics. Maybe once Solyndra goes public, they will see the light and present those numbers on a quarterly basis, just like First Solar does.

(UPDATE: About those conversion efficiencies.... A little more digging reveals that apparently 11-14% under standard test conditions have been achieved, but unclear whether those are aperture- or total-area measurements.)

The company began shipping commercially in July 2008 and pushed 1.6MW out the door for the fiscal year ended Jan. 3, 2009, compared to 17.2MW sold through the third quarter, showing it has made significant incremental progress quarter over quarter. Compare revenues for the recent nine months--$58.8 million—with those for the previous fiscal--$6 million—and the growth is impressive.

But revenues don’t equate to profits, and Solyndra is a long way from getting out of the red.

The company has seen “significant net losses” since its inception, including a net loss of $27.2 million in 2006, $114.1 million in 2007, $232.1 million in 2008, and $119.8 million in the first nine months of fiscal 2009. It also had an accumulated deficit of $505 million (yup, a half-billion samolians) as of Oct. 3.

And it ain’t over yet, according to the company. “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future,” says Solyndra. “Moreover, we expect that average selling prices of our photovoltaic systems will continue to decline until we offer our products at a price per watt that is comparable to conventional energy sources and alternative distributed generation technologies.”

With keywords popping out like “significant losses...negative cash flow...for the foreseeable,” potential shareholders will need a hearty appetite for risk. The company admits it needs to raise a boatload of additional capital to fund its expansion and grow its business.

Still, if Solyndra manages to pull off its gameplan for commercial rooftop solar domination, the upside is future revenues in the billions and hopefully a good run of profitability for those willing to tough it out for awhile.

Argonaut Ventures believes they will execute on the plan, since the firm and its affiliates hold 35.7% of the outstanding common stock and, if I read the document correctly, can buy up to 15% of the aggregate of the shares to be offered in the IPO.

Which brings us to the customer side.  Solyndra says its panels have been deployed in more than 100 commercial installations worldwide. As a glance at its Eurocentric customer list suggests, more than 85% of the company’s business has been in Europe so far, with the rest mostly Stateside.

Geckologic and Phoenix Solar were dominant customers for FY2008, accounting for 29% and 27%, respectively, of Solyndra’s minuscule total revenues. For the recent nine-month period, USE Umwelt Sonne Energie,  Carlisle, and Alwitra accounted for 19%, 17%, and 13%, respectively, of revenues.

Not wanting to put too many panels in so few baskets, the CIGS firm says it expects that its “customer concentration will decrease over time” as production capacity increases to “meet the requirements of an expanded customer base.”

One new tidbit is the amount of “orders” generated via framework agreements with system integrators and roofing materials manufacturers: up to 865MW to be delivered by the end of 2013. That’s pushing close to a gigawatt, and underscores the company’s anxiousness to ramp and expand its production capacity.

But, as Solyndra cautions, “these framework agreements are long-term contracts that set forth volume and price expectations over a number of years, [so] they generally do not result in firm purchase commitments until a purchase order is issued.”

Better than a hope and a prayer, but not exactly “done deals” either.

So, no pressure on Solyndra apart from a laundry list of risks, a balance sheet bleeding red, an ambitious expansion plan needing major funding help, and an unproven technology just now getting into the field and under sun.

I can’t wait to see how the IPO unfolds—that is, if the IPO happens at all (remember the recent pushback by Chinese thin filmers Trony Solar?)—and whether the latest publically traded, pure-play CIGS company becomes a darling of Wall Street, earning the nickname “Second Solar,” or struggles with the sizeable burdens it has taken on.

(Correction note: The original headline suggested that if/when Solyndra goes public, it would be the first pure-play CIGS company to do so. Actually, Ascent Solar and DayStar lay claim to being the first publically traded CIGS firms, and Solyndra makes three. Some of the copy has also been revised to reflect this.)