With Close to $800M, Solyndra Becomes One of the Most Capitalized Startups Ever

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SolyndraEvent3At the ground-breaking of solar startup Solyndra’s second factory this morning, the company, which makes tube-shaped thin-film solar panels, detailed just how much more private equity it’s raised in order to secure the first Department of Energy loan guarantee:  $198 million. On top of the more than $600 million the company raised previously, this brings the company’s total amount of private equity raised to somewhere around $800 million.

SolyndraEvent1

Holy smokes – that makes the company one of the most capitalized startups (in terms of private equity) that I’ve heard of. According to Dow Jones VentureSource there’s only one company that raised more than Solyndra has: fiber optic network company Western Integrated Networks (WINfirst), which raised $889 million in the broadband build-out era of the late 90’s. Hopefully Solyndra won’t go the way of that wayard telecom firm, which fell into bankruptcy and sold its assets for $12 million.

Kelly Truman, Solyndra’s Vice President, Marketing & Business Development, told us that most of the new round came from existing investors, but that some new, undisclosed investors also joined the latest round. Existing investors include Redpoint Ventures, RockPort Capital, Argonaut, CMEA Capital, U.S. Venture Partners, the Walton family fund Madrone Capital, Abu Dubai’s MASDAR and Richard Branson’s Virgin Green Fund. As part of the conditions of the DOE loan guarantee, which will go toward building its second factory in Fremont, Solyndra had to raise this new equity to cover 27 percent of the cost of the factory. The $535 million loan commitment provides the remaining 73 percent.

When you get into this level of private equity financing it becomes a whole new ball game for investors. There’s so many investors involved, with many of them adding in very sizable amounts. Tom Baruch, founder and managing director of CMEA Capital, who’s fund reinvested in Solyndra’s latest round, said while the deal is unusual for his firm (CMEA does a lot of early stage investments), he said Solyndra’s intellectual property and differentiation is so great that in this case it’s OK that the deal is capital intensive. “It’s unusual, but our business is changing rapidly. We have to evolve too.”

As for Solyndra’s ground breaking ceremony, it was a good day for the investors. Baruch called it “one of the most exciting moments” he’s experienced in his years of investing.

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solarman

A year ago when standard crystalline PV modules (CSI) averaging 15% efficiency were selling for $4+/Wp, they had a chance but needed to overcome technical and cost issues.

Fast forward to present: they still have technical problems, plus CSI market is in a race to the bottom on price.

CSI module prices are down to $1.7/Wp, and headed to <$1.5 in 2010.

And with value-chain consolidation, massive cell/module overcapacity for the next 3 years, and more poly capacity coming online pushing poly prices to around marginal cost ($30-50/kg), <$1.5/Wp and below for 15.5-16% modules (yes, they're making marginal efficiency improvements) is here to stay.

How can a 10-11% Solyndra module compete in this market? Or any thin-film, for that matter?

Sure if you throw $800 million at a 500 MW factory, you will get economies of scale in ANY industry. But Solyndra's COSTS are unlikely to go below $1.5/Wp anytime soon, so will be loss-making.

Sure, they'll continue the "thin-film superior performance" argument; but this is marginal at best. And the "cheaper install argument", although with CSI installs requiring 35% less panels, the install and BOS costs will be equal or less than Solyndra's.

Rooftop space utilization? Smoke and mirrors. You'll never get an honest comparison from Solyndra of their system vs. a 15% CSI system tilted at 15-20% in SW USA. Because the CSI roof produces MORE power.

Yes, Solyndra has a 1.2 GW "pipeline" of customers, but so did ALL the PV companies who are watching their customers walk out on contracts. These "take or pay" contracts have zero security because you'll bankrupt your customer by enforcing them.

The same case will be for Solyndra, you'll see.

Why? Installers have no choice but default as they compete for projects; they MUST choose the cheaper CSI. It's impossible to honor the Solyndra contract you signed for at $2 or $3 and compete against the guy buying even more efficiency CSI modules for only $1.5. Simply impossible.

Not to even mention the ongoing technical problems at Solyndra and lack of installed proven reliability which limits project finance leverage and worsens the IRR for the installer/developer.

I've been told installers are struggling to even get 50% leverage using Solyndra modules (if I am wrong, please direct me to a banker offering higher leverage).

Even the mighty First Solar is being brought to its knees as even it cannot compete with <$1.5/Wp CSI. Reading the writing on the wall, it is acquiring massive install projects (Optisolar) so it has someone to sell to (itself). With only one margin end-to-end, it may be able to successfully compete in future power projects.

The PV world has radically changed in 12 months, and there is no going back.

The good news is cheap CSI is now offering grid parity MUCH faster than expected, and the solar boom will be intense once credit markets recover.

The bad news is there is no longer a place for low-efficiency PV products like Solyndra and many others.

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