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BrightSource's Withdrawn IPO Seen As Setback Within Industry

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04/13/2012 | 01:50pm CEST

(This article was originally published Thursday.)

   By Cassandra Sweet 

BrightSource Energy Inc.'s decision to cancel its planned initial public offering may have been the right move for the solar-power company, but it was a disappointment to clean-technology industry members who had hoped for a successful debut.

The Oakland, Calif., company Thursday withdrew its registration to go public with the Securities and Exchange Commission, after announcing late Wednesday night that it was canceling its IPO, which had been scheduled for this week. BrightSource cited poor market conditions as a reason for the reversal.

"We made this decision from a position of strength," BrightSource Chief Executive John Woolard said Thursday. "We're in a strong financial position, we have a great foundation of investors and our business continues as planned."

NRG Energy Inc. (>> NRG Energy Inc), which is the lead investor in a 392-megawatt solar-power plant called Ivanpah that BrightSource is building in the California desert, said construction of the project was going well and that BrightSource is a strong, resourceful company.

Nevertheless, some in the industry viewed the company's IPO reversal as a sign that alternative-energy firms may not be welcome in the stock markets.

"It's a really disappointing statement of investor sentiment into solar," said Sheeraz Haji, chief executive of consulting firm The Cleantech Group in San Francisco. "I fear that this is a bit of groupthink that's going to hurt a number of good companies in the public markets."

Sheeraz noted that stock-market investors may have been unable to distinguish a strong company with a solid technology and good sales contracts from solar companies "that have some real challenges."

Many investors may remember the troubles of California solar-panel maker Solyndra LLC, which filed for bankruptcy last September after taking more than $500 million in federal loans. Solyndra had filed to go public in December 2009, but the company later abandoned the plan.

BrightSource representatives said they were unable to comment on the company's future plans now that it isn't going public because of a 30-day "cooling-off" period required under federal law.

VantagePoint Capital Partners, the company's largest investor, declined to comment.

Signs that the IPO market was turning away from alternative-energy companies emerged last month, when Enphase Energy Inc. (ENPH), of Petaluma, Calif., which makes electrical inverters for solar-panel systems, proceeded with its IPO, but had to sell its shares for half their initial target price. Enphase sold 8.97 million shares for $6 each, down from the company's earlier price range of $10 to $12. The company's backers agreed to buy 2.5 million of the shares.

Declines such as this have been routine in the solar-power market, as falling prices and a global oversupply of solar panels have hurt solar-panel makers and their competitors and suppliers. U.S. solar-panel maker and solar-farm developer First Solar Inc. (>> First Solar, Inc.) has seen its stock plummet from about $145 a year ago to $22 at Thursday's close. The world's other leading solar firms have similarly watched their shares plunge, while a string of other solar companies have filed for bankruptcy.

The mood in the solar-power industry now is "doom and gloom, except for those who refuse to accept that there's something to be gloomy about," said Paula Mints, a solar-market analyst at Navigant Consulting in Palo Alto, Calif.

One reason for the gloominess, aside from the falling prices and supply glut, is that governments in key solar markets such as Germany and Italy are cutting solar-power incentives, which means demand is likely to slip this year, Mints said. She predicts that 2012 global solar-panel shipments will be flat or below last year's 23,600 megawatts, or 23.6 gigawatts.

   What's Next For BrightSource? 

David Crane, chief executive of NRG Energy, which has pledged to invest up to $300 million in BrightSource's current power project, said the company is doing a good job on it and that its withdrawn IPO doesn't affect the Ivanpah project at all.

"They're a partner and a critical supplier for the Ivanpah project, which is an important, ground-breaking project for us," Crane said.

Before NRG decided to invest in BrightSource's power project, it completed a thorough review of BrightSource, including the question of whether the Ivanpah project would "in any way be dependent on a successful IPO by BrightSource in a reasonable period of time," Crane said. "We concluded that it wasn't."

The company has long-term contracts with utilities owned by PG&E Corp. (PCG) and Edison International (>> Edison International) to purchase the electricity from the Ivanpah project and several others that are under development in California and the Southwest U.S.

Unlike solar panels, which use a semiconductor material to convert sunlight into electricity, BrightSource uses arrays of mirrors that concentrate sunlight onto a central boiler that produces steam. The steam is used to drive power turbines to generate electricity.

BrightSource has worked to distinguish itself from developers of solar-panel projects, which tend to generate electricity during fewer hours of the day and can be more intermittent than solar-thermal technologies such as BrightSource's. But stock-market participants may be lumping together alternative-energy companies, regardless of their individual technologies and strengths, or weaknesses.

The result could be a closed, or low-priced, market for such companies.

BrightSource's IPO experience could have a "chilling effect on other clean-technology companies hoping to go public," The Cleantech Group's Haji. "This is a setback if you're waiting in the wings."

-By Cassandra Sweet, Dow Jones Newswires, 415-439-6468, cassandra.sweet@dowjones.com

Stocks mentioned in the article : NRG Energy Inc, Edison International, First Solar, Inc.
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Financials ($)
Sales 2016 13 636 M
EBIT 2016 1 649 M
Net income 2016 250 M
Debt 2016 16 257 M
Yield 2016 2,01%
P/E ratio 2016 24,55
P/E ratio 2017 84,81
EV / Sales 2016 1,45x
EV / Sales 2017 1,46x
Capitalization 3 503 M
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Number of Analysts 15
Average target price 16,7 $
Spread / Average Target 50%
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Mauricio Gutierrez President, Chief Executive Officer & Director
Howard E. Cosgrove Non-Executive Chairman
Kirkland B. Andrews Chief Financial Officer & Executive Vice President
Thomas H. Weidemeyer Independent Director
Lawrence Stephen Coben Independent Director
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