Energy

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

It is always disconcerting when a company's chief financial officer announces they are heading off having held the job for just 15 months. But SolarCity's announcement that Brad Buss will soon be leaving the finance role he filled in August 2014 isn't entirely surprising.

SolarCity is undergoing a painful transformation from a company hell-bent on deploying as many megawatts of panels as it can to one that is a little more concerned with how much that growth might actually be worth. As elsewhere in the energy sector, shareholders have grown somewhat nervous about spiraling costs and a rate of cash burn that is approaching $600 million a quarter.

The stock, which slipped in after-market trading on news of Buss' departure plans, has fallen by around half since the end of July. One of the biggest drops came on Oct. 29, when the company spelled out the pivot toward (relative) thrift. SolarCity's problem is that, even though circumstances dictate that it strike a more responsible pose on growth, its investor base has been attracted largely by the promise of exponential expansion.

Scorched
Source: Bloomberg

SolarCity's choice to succeed Buss suggests it is sticking with the new plan. Chief Operations Officer Tanguy Serra has been appointed President and will take over the CFO role in February. In Tuesday's announcement, the company drew attention to this:

Mr. Serra joined SolarCity in May 2013 as executive vice president of operations, and was promoted to COO in February 2014. He has overseen a significant reduction in the company's installation cost -- from an average of $2.96 per watt in 2013 to $1.92 per watt in Q3 2015 -- and has helped the company more than triple its installation volume in the same timeframe.

That reduction in installation costs featured prominently in the third-quarter presentation where CEO Lyndon Rive laid out the company's new priorities. What wasn't in Tuesday's announcement was that, over the same period, SolarCity's sales and marketing costs and general overhead have climbed from 71 cents per watt to 91 cents as the company chased after marginal customers for the sake of growth.

Overcast
SolarCity's panel installation cost
Source: Company presentations



SolarCity likely hopes Serra can bring a bit of his cost-cutting magic from the installation side to the crucial customer-acquisition operation. In the meantime, though, his sudden elevation merely underlines the scale of the challenge SolarCity faces as it tries to remake itself for a harsher financing climate.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in San Francisco at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net