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BrightSource Energy raises $115 million
San Francisco Business Times - by Lindsay Riddell
May 12, 2008 -- Oakland, CA
BrightSource Energy Inc. has raised a $115 million to finance solar power plants -- bringing its total raised capital to $160 million -- in the face of expiring subsidies for solar companies.
Oakland-based BrightSource designs and operates solar and solar thermal power projects which use tall solar towers to capture the sun's heat and produce steam. That steam turns turbines to generate power. The company sells the power generated to utility companies and announced a deal in March to provide up to 900 megawatts to Pacific Gas & Electric.
But the 30 percent federal investment tax credit that makes the financing of its projects work is set to expire at the end of December, which squeezes margins and threatens solar companies' ability to secure financing from banks.
Stephan Dolezalek, managing director of BrightSource's largest investor VantagePoint Ventures, said it would be tough to make the economics work if subsidies aren't renewed but can work even if renewed tax incentives are reduced to 10 percent.
"The lower the price point for delivering power, the better off you are," he said. "Without subsidies, BrightSource, like other companies, will be challenged in its ability to make money. It's margins will be cut. With a lower level of subsidy, BrightSource can function. With higher subsidies, they'll do quite well."
Dolezalek said he believes its "highly unlikely" solar subsidies won't be renewed by a new administration after the next presidential election, since all three candidates have expressed support for some kind of solar tax incentives.
And he's not the only one throwing money behind that prediction. BrightSource's other investors in the round include big players in alternative energy including Google's philanthropic arm Google.org, BP Alternative Energy, Chevron Technology Ventures, and Menlo Park venture capital firm Draper Fisher Jurvetson.
Part of the draw to BrightSource is it can produce power at a rate on par with natural gas -- something traditional solar photovoltaic systems haven't been able to do.
While BrightSource is set to push forward -- with or without subsidies -- banks hold the real power here. The project BrightSource has proposed in the Mojave Desert is expected to cost $3 billion to build, Dolezalek said.
You need significant amount of lending power to be able to build that out," Dolezalek said. "So the question is, will lenders fell they can get enough economics out of it? And lenders, with subsidies in place, feel more comfortable making those kinds of loans."
He said BrightSource is at least 12 months away from shoring up bank financing for its project and that by then the company should know if the tax subsidies have been extended.