US: Principal Solar to launch IPO, plans 500 MW of PV in Texas

Principal Solar announced at the end of May its intention to launch an IPO on the Nasdaq capital market. In addition to the sale of 2.5 million shares for between $9 and $11 a share, there is the option to purchase up to 375,000 additional shares of its common stock for $3.7 million.

On Friday, the solar company said it in preparation for its move to Nasdaq – where it will be listed under the symbol PSWW – it had executed a 1:4 reverse stock split. The listing is expected this week.

The funds raised will, said Principal Solar, be used to acquire the minority interest in its subsidiary, Powerhouse One, LLC (around $767,000), repay debt (around $1.9 million), fund potential acquisitions and project financing (over $14 million), redeem preferred stock, and increase capitalization and financial flexibility.

In the May 21 SEC filing, Principal Solar noted that as of this March 31, it had approximately $566,000 of cash on hand. Furthermore, it has only generated a total revenue of around $1.69 million since a reverse merger between itself and Kupper Parker Communications, Inc. in March 2011. As such, it says, "there remain questions about the company’s ability to continue as a going concern."

Global plans

Despite this, Principal Solar says it is confident of its future going forward. It believes, particularly, that its board members and executives who come from the traditional energy industry will help it achieve its goals.

In addition to buying, owning and operating solar power projects, it plans to build solar plants. "The company plans to target large commercial enterprises whose facilities can accommodate at least 1 MW of solar on their property and/or offer significant promotional impact for the Company through the target’s well-known brand in its community," it said in the filing.

Overall, it intends to become the "world’s first" distributed solar utility. "Although there are many individual solar projects in operation throughout the world, we don’t believe that anyone has previously attempted to bring together multiple, disparate, geographically diverse solar projects under common ownership thereby building a complete utility-scale solar power generation company. Our business plan begins with a rollup strategy," it explained.

This includes buying up U.S. solar assets with a positive cash flow and bundling them into a distributed generation business. As a next step, Principal Solar plans to focus on projects between 10 and 100 MW in size.

The company needs to raise in excess of $1.5 billion to achieve its goals, including around $300 million in project financing and $5 million for administrative cash requirements for the next two years.

Solar targets

Looking at the solar industry, Principal Solar has identified four companies – Canadian Solar, SolarCity, TerraForm Power and First Solar – which it says are helping to grow the Independent Power Producer (IPP) and Large Solar PPA Developer landscape.

It adds that they could "become viable strategic partners and/or acquisition targets for the company."

Solar assets

In another SEC filing, on Friday, June 5, Principal Solar announced its intention to develop up to 500 MW of PV across three projects with Energy Surety Partners, LLC in Texas. The first, Principal Sunrise VI (TER1), is a 150 MW plant located near Amarillo, Texas. No details were provided on the remaining projects. Overall, a joint capital investment of $800 million is anticipated, with commercial operations taking place between 2016 and 2017.

Meanwhile, in the May 21 SEC filing, Principal Solar said it will not develop solar products itself, but will buy modules from companies like GCL Solar, among others, and inverters from SMA Technology, among others.

Recently, the company has agreed to purchase 100 MW of PV modules from JinkoSolar (U.S.) Inc. It has also agreed to buy an unidentified amount of PV inverters from Advanced Energy Industries, Inc. The contract prices are said to be under negotiation, but the company believes the transactions will contribute to its profitability in 2016.

Since 2011, the company has acquired four entities, including three solar power production companies totaling just under 3.2 MW. They include Capstone Solar and SunGen Entities, both in 2011; Powerhouse One, LLC in 2013; and Innovative Solar 46, LLC (PS IV) in 2015. It is currently in negotiations to acquire Innovative Solar 42, LLC (PS V).

This April, Principal Solar entered into an EPC contract for around $73 million with Alpha Technologies Services to build the 78.5 MW PS IV solar plant in North Carolina; a project it acquired from Innovative Solar Systems, LLC in 2014. It is expected to cost $164 million, including an estimated $10 million from the IPO. Construction on the plant is scheduled to be completed late this year.

Also in North Carolina, Principal Solar agreed to acquire PS V for $5.8 million. The company is currently looking for partners to complete the 72.9 MW project, including financing. It is expected to cost $153 million, including an estimated $5 million from the IPO. The acquisition is expected to be completed this August, and project construction early next year.

Principal Solar has a current solar project pipeline totaling 2.4 GW.

Financials

In Q1 2015, Principal Solar recorded total revenues of $184 million, down from the $217 million recorded in Q1 2014. Net loss, meanwhile, dived from $470,000 to $1.2 million.