Report: BrightSource Energy IPO Likely in 2-3 Years

BrightSource Energy is close to securing approval from the California Energy Commission for its first commercial project to build a solar thermal power plant, it’s lined up a hefty federal loan guarantee and raised a round of private equity this year. Is it time for the company to go public?

Not according to a new report that evaluated BrightSource’s potential as an investment. Next Up Research, part of Global Silicon Valley Partners, estimated in the report that BrightSource won’t be a good IPO candidate for a few years, not the least because investors in the public market aren’t so bullish on solar these days. It cited Solyndra’s move to ditch its IPO plan as a prime example.

“Although BrightSource appears to have promising technology, the company’s IPO could be at least 2-3 years away, at least till it completes the first phase of Ivanpah project by mid 2012,” Next Up said.

Ivanpah Solar Electric Generating System is a 370-megawatt project that BrightSource wants to build on federal land in California’s Mojave Desert (the company’s press releases say 392 megawatts, but it will use some of the power onsite). The siting committee of the California Energy Commission last month recommended it for approval, which is almost certain to happen before the end of the year. The project is part of the Oakland, Calif., company’s plan to build about 2.61 gigawatts worth of solar power generation in order to deliver on the contracts it has inked with the Pacific Gas and Electric and Southern California Edison.

BrightSource wants to build 2.61 gigawatts of projects by 2016. It will need a lot of money to make that happen. One of BrightSource’s investors has talked about the IPO as a way to raise money, not an exit.

Talks about an IPO have intensified over the past year, as the company showed that it could secure government and private money. The startup has gotten a federal loan guarantee for $1.37 billion, and that loan guarantee will enable it to borrow money from the U.S. Treasury’s Federal Financing Bank. The company announced it had raised $150 million in equity in May, a Series D round that brought the total amount of private equity it had raised to more than $300 million.

But BrightSource will need to raise a lot more money in the next few years. Next Up estimated that BrightSource can build its projects for less than $3.50 per watt and considered that cost effective. But it also said BrightSource can be an attractive IPO candidate once it starts to generate revenue from the first phase of Ivanpah project. By Next Up’s calculations, BrightSource will likely generate around $34 million in 2012, $168 million in 2013 and $693 million in 2017.

Certainly, BrightSource could entertain an earlier IPO and look to Tesla Motors (s TSLA) for inspiration. Tesla secured $465 million in federal loans, landed an investment from Toyota and went public in June to raise the money it needed to bring electric cars to the masses. Its IPO received a warm welcome even though it had been posting losses and won’t likely turn a profit until at least 2012.

The federal loan guarantee isn’t the only government dollars that BrightSource is likely to draw. It will be eligible for a federal program that gives the cash equivalent of a 30 percent investment tax credit if it can start construction of Ivanpah before the year’s end.

The deadline for the cash grant program, in fact, is a key reason why the California Energy Commission is on a streak to approve a series of solar thermal power projects these days, Anthony Eggert, told us during at an event last week to announce a biofuel station network.

The program, courtesy of the American Recovery and Reinvestment Act, is highly coveted by project developers because they could get the incentives sooner than they would with a tax credit. Plus, a tax credit is good only when a company generates income. The grant program gives rebates. The program is eligible not only to projects that are put into service in 2009 and 2010, but also to those that begin construction before the end of 2010. Solar project developers have until Jan. 1, 2017 to complete their work.

The commission gave the final nod to the 250-megawatt Abengoa Mojave Solar Project earlier this week, after approving a 250-megawatt Beacon Power Solar Energy Project two weeks ago. Its siting committee issued recommendations for approval for four other projects within the past two months: Blythe Solar Power Project (1GW), Imperial Valley Solar Project (709MW), Ivanpah Solar Electric Generating System Project (370MW) and Genesis Solar Energy Project (250MW).

In all, the commission will consider and likely approve nine solar thermal power projects totaling more than 4.3 gigawatts by the end of this year. Most of the projects use curved or flat mirrors to concentrate the sunlight on liquid-filled equipment to produce steam for running electricity-producing turbines. The Stirling engine designs rely on mirrors focus the light to heat up tubes filled with hydrogen gas to power a 4-cylinder engine that in turn drives the turbine (for Calico and Imperial Valley projects).

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