Reading cleantech news and SEC filings this last couple of weeks makes for a holy moly, OMG, damn that takes guts set of moments. Well, the cleantech sector is nothing if not entertaining. I’m obviously going to have to up my game and find more entertaining deals.
Total (TOT) buys controlling stake in Sunpower (SPWRA). Sunpower was certainly a pioneer, and really kicked off vertical integration in photovoltaics with its acquisition of Powerlight in 2006. $2.3 Billion equity valuation? 46% share price acquisition premium? Wow. No guts, no glory. But at something like a little south of a PE of 30 on the 2011 earnings guidance as well as 2011 year over year revenue growth forecast of close to 30%, probably not too far out of line. And they didn’t even have to buy the whole thing!
Sunpower has had a hell of a run, but basically every solar analyst on the planet has been crowing that its core strategic advantages have seriously eroded. And maybe they have. We shall see. But growth is growth, and high performance panels are high performance panels. With another $1 billion in letter of credit from Total to backstop it, I think this is a gutsy, but strong move. If I’m Sunpower, I needed to do something. And with my stock price at not much over 10% of my high? This is a deal I’ll take. And if I’m Total, buy control of Sunpower for a 7th of it’s price peak and a PEG of around 1 to get a Tier 1 position in solar and stacks of growth potential I can pour cash into? Or build another offshore platform? Hmmmmmmh. I think I’d actually like the solar play this time. And take the margin risk.
KiOR (KIOR) files for IPO. Um, wow. Fascinating technology, though still a lot of scale-up to be done. We know for sure that Vinod Khosla has a cast iron stomach and more guts than me. I read the S-1 cover to cover last night. S-1s are notoriously messy reading and tricky to decipher how the venture rounds were done, but here’s what it looks like at first read:
- July 07 Khosla invests $2.5 mm in a milestone deal of $1.4 and $1.1 for c. 50% of the stock excl option plan, a c. $2.5-3 mm pre money/ $5-6 mm post. Great, nice cheap deal.
- Mid 08 Artis (who was also heavy into Solyndra) and Alberta Investment pump in another c. $12 mm for c. 55% excl option plan, about a 1x uptick c. $10-12 mm pre-money. CEO comes in here. Price and capital in still within normalcy, but rolling almost as fast as we did our Zenergy deal in superconductors a few years back. But then it gets really gutsy.
- Aug 09 Khosla $15 mm bridges a conv note, and gets paid handsomely when in mid 2010 Khosla puts in another $80-90 mm in addition to the prior Convertible note for 35% of the Company, but all of the voting control.
- Somewhere in there the state of Mississippi gives them $75 mm in no interest loans kicking in this last quarter (which sounds like it goes into default if KiOR doesn’t invest $500 mm into the state of Mississppi by 2015).
- They then file for an IPO with Credit Suisse, UBS, and Goldman. All with like just a 15 barrel of oil equivalent per day pilot plant, planning to scale to a still miniscule 800 BOEPD with the couple of hundred million dollar investment from Mississippi and Khosla.
This isn’t just Khosla priming the pump and dumping on the rest of the venture world. This is money where your mouth is. This is make ‘em pay to play style Texas Hold’em. Pushing all in on a pair of queens with a straight flush showing on the flop. Figuring pot odds be damned, the pair of queens is worth a shot if we can push half the table in with us, and we’ll just buy back in and do it again if it doesn’t work out. Damn. No guts no glory.
And of course, for BrightSource, one IPO filing and more “tortoise troubles”. Basically the regulators now think there are more endangered desert tortoises getting moved or killed than they had permitted Brightsource at Ivanpah. The week after you file for an IPO and Google (GOOG) gives you money?
And phase II and III are on ice or partial ice. I asked my wife how exactly it happens that they miss this badly on the number of tortoises (she’s been doing environmental risk assessments in the SoCal desert her whole career). Her answer, usually means somebody on one side or the other doesn’t understand statistics.
This is already a very tight deal. And I was never sure exactly what a measely $250 mm in IPO money was going to do to help, when each project costs $2 billion, and takes fifty to a hundred million and years to develop. I’m thinking they need some real Total style money in this one to win. But at this time in my reading, I’m beginning to think I have no guts.
Time to think about upping my game again. My partners will be glad to hear that. They think I’ve gotten a little risk averse.