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New SPAC Deals Highlight Hidden Corners of Solar Market

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Rakesh  Sharma's picture
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I am a New York-based freelance journalist interested in energy markets. I write about energy policy, trading markets, and energy management topics. You can see more of my writing at Rakesh Sharma  

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This far, solar technology has mostly been focused on two markets: residential and utility. Recent Special Purpose Acquisition Company (SPAC) deals, however, are spotlighting the technology’s perceived utility in other markets.   

Heliogen, a startup that uses concentrated solar power (CSP), is merging with a SPAC called Athena Technology to go public at an estimated valuation of $2 billion. Founded by entrepreneur Bill Gross in 2013, the Pasadena, Calif., - based company has heavyweight backers like mining giant Rio Tinto, steelmaker Arcelormittal SA, Microsoft co-founder Bill Gates, and LA Times owner Patrick Soon-Shiong. Heliogen’s investors are also its customers, meaning they will use its services to make green hydrogen to power their operations according to an investor presentation.  

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As compared to photovoltaic technology, CSP is expensive because laying out large banks of solar panels and storage is costly. Heliogen uses cameras controlled by artificial intelligence (buzzword alert) that monitor the mirrors and tilt them into optimal positions. It is planning to bring economies of scale to the overall cost of setup and operations by using small mirrors on its panels and modularizing the entire process. Each 5 MW module manufactured by Heliogen will be replicated at scale.      

Altus Power targets the commercial and industrial market for solar. The company announced a merger with a SPAC sponsored by real estate giant CBRE group for a valuation of $1.6 billion. Altus, which is based in Greenwich, Connecticut, is more of a finance company than a solar one that uses renewable energy credits to build a business. Over the years, it acquired 410 MW of distributed solar assets across six states making it among the top 5 largest providers of distributed solar and community solar in the US. 

The company’s target market consists of rooftop and parking lot solar installations on commercial properties. To that end, its partnership with CBRE, which owns $7 billion worth of commercial real estate across the country, will serve it well. The Wall Street Journal also pointed out that the partnership with CBRE will help Altus access a diverse portfolio of commercial properties with varying levels of credit available to them. 

A Challenging Proposition 

As I pointed out in an earlier post, the current crop of green energy SPAC deals have set unrealistic expectations for revenue to garner high valuations. Both startups discussed above are no different.  

To say that Heliogen’s revenue estimates are optimistic would be understating the case. The company hopes to skyrocket from an estimated revenue of $8 million this year to $2,396 million in 2026. Its estimated $27.2 million losses this year are expected to metamorphose into profits of $604.3 million within the same time frame. 

Heliogen faces several challenges. CSP’s past record in the United States has been dismal due to the high costs involved. So, its domestic market may be limited. Foreign markets are a growth opportunity but they require expertise and supportive regulation for execution. The company’s current customer roster consists of multinational companies who are also investors in the startup.  

The capital intensive nature of CSP also means that the company will have to make substantial investments before it can spin profits from the venture. The WSJ writes that it might be difficult to achieve economies of scale for the company, given the limited market for CSP. The technology itself also needs refining because it is limited by distance and does not function well under less than ideal circumstances, such as dusty conditions. Together these drawbacks have limited the market for CSP and, in turn, Heliogen. While its investors may benefit from an accompanying public offering pop in Heliogen’s shares, the company still has to overcome multiple challenges to reach its target figure. 

And what of Altus Power? Its challenges are similar in that the market for rooftop and parking lot solar is limited. Community solar is also yet to take off. But it is operating within the constraints of an already existing technology and market. To that extent, it is at an advantage as compared to Heliogen.  

The company projects an estimated EBITDA (Earnings Before Income Taxes Depreciation Amortization) of $38 million for this year. It plans to grow that figure to $228 million by 2024 while maintaining hefty margins of 68% and multiplying its solar assets from 410 MW to 1,685 MW. A bit much, you say? As I mentioned earlier, SPAC companies do not lack ambition. Whether they follow it up with execution is the big question.

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