SolarCity Slumps on Nevada Rooftop Fees, Plan to Sell Plants

  • Nevada affirmed increased fees on solar homes Wednesday
  • Bernstein says SolarCity seeking capital to fund growth

SolarCity Corp. fell the most in 10 weeks after Nevada regulators affirmed a decision that’s threatening the development of solar rooftops in the state, and analysts at AllianceBernstein Holding LP said management is planning to sell interests in some power plants to fund new development.

SolarCity fell 13 percent to $37.12 at the close in New York. That’s the biggest one-day decline since Oct. 30, when the largest U.S. rooftop developer reported a bigger-than-expected loss and a shift in strategy to reduce costs.

At a hearing late on Wednesday, Nevada utility regulators upheld fees on solar rooftops that took effect Jan. 1. That’s prompting developers including SolarCity to exit the state, eliminating what had been a growing and lucrative market. It’s one of several solar companies and industry groups that requested a rehearing on the decision.

Another drag on the stock came from Bernstein analyst Hugh Wynne, who raised concerns with management about how the company plans to raise funds to maintain its rapid growth.

New Capital

“SolarCity management is aware that the company’s current enviable situation is unlikely to last, and that new sources of capital must be identified if the company is to continue to grow,” Wynne said Thursday in a research note.

In a first transaction, he expects a sale to institutional investors of leases or power-purchase agreements “representing the value of 100 to 200 megawatts of new solar systems,” raising $150 million to $300 million.

“The high marketing and development expenses associated with SolarCity’s extremely rapid growth in installations, and the company’s expansion into manufacturing, have already created significant cash flow pressures,” Wynne said.

The additional type of financing arrangement allows the company to monetize more of the asset and improve cash margin, said Jonathan Bass, a SolarCity spokesman.

“We would monetize 100 percent of the cash flows for a portion of our new assets,” Bass said by e-mail. That enables “maintaining the customer relationship and generating more upfront cash, which we can reinvest in growth at attractive rates,” he said.

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