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Tesla Motors CEO Ties to SolarCity IPO (TSLA, FSLR, STP, YGE, KYO, RSOL, WEST)

Reports of a third quarter IPO from solar PV installer SolarCity could propel Tesla Motors Inc. CEO Elon Musk into the ranks of US billionaires. Musk, a cousin of SolarCity’s founders, is the company’s chairman and holds a 26% stake in SolarCity. At a rumored valuation of $1.5 billion, Musk’s stake would be worth about $375 million, which added to his $650 million stake in Tesla elevates him into the billionaire ranks.

SolarCity, which does not manufacture solar PV cells or modules but only installs systems, has an agreement to purchase panels from First Solar Inc. (NASDAQ: FSLR) and has also used panels made by 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. The company competes directly with installers Real Goods Solar Inc. (NASDAQ: RSOL) and Westinghouse Solar Inc. (NASDAQ: WEST).

SolarCity has a contract worth about $1 billion to install solar PV systems on military housing, and the company has been able to get financing for its installations by repaying loans through lease agreements or power-purchase agreements with homeowners rather than depending on the homeowners to pay for the solar PV systems up front.

The dramatic decrease in solar panel prices last year has pushed the company’s growth, and SolarCity is now the market share leader in solar installations with 14%. Real Goods, which claims 6% of installations, trails in second place, but the company has expanded into the northeast US and is competing harder with SolarCity in states like New Jersey and Maryland.

The outcome of the trade case involving US-based solar PV manufacturers against Chinese competition could be the make-or-break issue in SolarCity’s plans. Solar PV installers like SolarCity and Real Goods probably account for about half the 100,000 US jobs related to solar energy. Solar panel manufacturing probably accounts for fewer than 5,000. A high tariff on Chinese solar panels could decimate the installation business.

Paul Ausick