Michael Kanellos

Sun not shining on IPO for solar installer May 8, 2008 at 10:04 AM

Not all solar IPOs are created equal.

Real Goods Solar, a solar installer that says it erected the first residential solar panel in the U.S. in 1978, started trading in a public offering at $10 a share today. The stock, however, is hovering around the $9 level at the moment. It has traded mostly between $8.25 and $9.25 so far. It’s not the end of the world. Dell geared up for its IPO amid the 1987 stock meltdown. Nonetheless, it’s not the best news in the world. The $10 offering price was at the low end of the pre-IPO $10 to $12 offering price range.

Solar installation is, according to some, the next hot frontier in solar. Installation takes up about half of the cost of a residential solar system, but it’s still relatively antiquated. Basically, guys with tool belts clamber up onto your roof, do a lot of measuring and cutting, and then hand you a bill for several thousand dollars. (There’s your answer when some dolt says “Why can’t the solar industry grow like Facebook or Google?”). Most of the research in the solar panel universe has been spend on improving the efficiency of solar cells.

In recent years, however, SolarCity, Standard Renewable Energy and others have come up with ways to reduce some of those onerous install costs. SolarCity organizes installations to reduce time in the field truck runs. Sungevity, a newcomer to the field, has developed software that can give a customer a solar system estimate over the Internet, a process that most companies can only accomplish with a visit to the home. Real Goods’ main selling point is that it has done a lot of installations—more than 2,400—and can use this experience to expand rapidly. The company is part of the Gaiam lifestyle group, which also sells yoga tapes. Some may scoff, but lifestyle products are expected to grow too.

Still, installation is essentially a branch of contracting and thus margins are tight. The queasiness surrounding the solar tax credits doesn’t help either. Not counting two acquisitions, Real Goods pulled in $16.8 million in revenue in fiscal 2007 and $102,000 in net profit. Including the acquisitions of Marin Solar and Carlson Solar, Real Goods had revenue of $32.7 million and net income of $491,000, according to the S-1 filed with the SEC.

Real Goods hopes to expand beyond its traditional base in California and Colorado into Arizona, Nevada and other states rolling out solar incentives.

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