SolarCity Preparing Third Quarter IPO (FSLR, STP, YGE, RSOL, WEST, KYO, BAC, GOOG)

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Solar systems installer SolarCity is reported to be preparing an IPO in the third quarter of this year. A Reuters report notes that Goldman Sachs will be the lead underwriter for the stock offering, which is expected to put a valuation of $1.5 billion on the company.

SolarCity is the largest solar installer in the US, with about 14% of a market worth more than $2 billion. The company does not reveal its module suppliers, but did sign a 5-year supply contract with First Solar Inc. (NASDAQ: FSLR) in 2008, and has in the past used modules manufactured by both Suntech Power Holdings Co. Ltd. (NYSE: STP), Yingli Green Energy Holding Co. Ltd. (NYSE: YGE), Kyocera Corp. (NYSE: KYO), Sharp, and thin-film start-up Miasole. Competitors among publicly listed companies are Real Goods Solar Inc. (NASDAQ: RSOL) and Westinghouse Solar Inc. (NASDAQ: WEST), formerly Akeena Solar, which licenses the Westinghouse brand from Toshiba Corp.

SolarCity offers homeowners solar installation with a variety of payment options, but the company’s rapid growth has come from its power-purchase agreements with homeowners who install the rooftop systems and then pay only for the power they use. These projects are financed by loans to SolarCity from the likes of Bank of America Corp. (NYSE: BAC) and Google Inc. (NASDAQ: GOOG) which have backed the program with loans totalling well over $240 million.

The company also offers systems purchasing plans and lease plans for residential and commercial customers. SolarCity also has a major contract with the Department of Defense to install solar systems on military housing units. The company was supposed to receive a federal loan guarantee to partially fund the $1 billion project, but the application was filed too late to be considered by the September 30th deadline. That’s when BofA/Merrill Lynch stepped in with financing.

SolarCity is also on the side of installers who disagree with the dumping case filed by the US division of Germany’s Solarworld AG against Chinese solar panel makers. The falling cost of the solar panels has generated more interest among consumers and commercial customers for installing solar PV systems, which is good for SolarCity, Real Goods, and other installers like Sungevity and SunRun.

SolarCity offers installation services in 11 states and the District of Columbia. And unlike the ill-fated Solyndra, SolarCity’s brand is both well-known and popular.

Paul Ausick

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