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Solar IPOs Offer Dim Prospects

NEW YORK ( TheStreet -- With government funding fading, more solar companies are looking to the IPO market for money.

SolarCity and NC Solar are two of the latest names to file for public offerings, but the companies couldn't be more different. SolarCity has been growing its revenue, while NC Solar is a business with a single customer. What they do have in common is government assistance.

SolarCity, which installs solar energy systems for homes and businesses, is seeking to raise a maximum of $201.3 million. Initially the company sold the systems outright, and then it moved to leases and power purchase agreements. Customers that receive solar power rebates sign those over to the company. The company currently has a balance of grants from the Treasury Department of $190,704.

The number of buildings with SolarCity installations has increased to 33,792 as of June 2012 from roughly 19,000 in December 2011. A typical lease agreement may be an upfront payment of $5,000 for a 20-year lease with monthly payments of $200.

To date, SolarCity has raised $1.57 billion through 23 investment funds. Approximately $648 million of the amount raised remains available for future deployments. Revenue for the six months ended June 30, 2012 totaled $71.4 million, up from $20.3 million in the same period a year earlier. Losses, however, came in at $48.9 million for the latest six-month period vs. a profit of $11.9 million in the same period last year.

Unfortunately, the government's largess may soon evaporate. The 30% federal cash grant paid by the Treasury Department would be sequestered should the government decide to jump off the fiscal cliff. In addition, the Internal Revenue Service has already started to phase out a 30% tax credit, which is set to expire in three years.

SolarCity also has some legal troubles. It, along with several other players in rooftop solar energy, have received subpoenas related to the Treasury Department's grant program.

Plus, the IRS has started audits of two of SolarCity's investment funds, reviewing the fair market value of its solar power systems. If they overvalued the systems, then they'll have to pay the fund investors back. SolarCity has called the potential amounts "significant."

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