BrightSource IPO Could Make Big Winners Of VantagePoint, DFJ

If a cleantech company’s IPO creates the “Netscape moment” John Doerr predicted last fall, it could be the offering of BrightSource Energy Inc.

The solar thermal plant developer filed for a $250 million initial offering late Friday with investors VantagePoint Venture Partners and Draper Fisher Jurvetson set to be big winners if the stock does well. (BrightSource was the top cleantech IPO choice of a November VCJ feature story.)

Trouble is, there are numerous hurdles facing the company’s business plan, including a construction delay at its first solar thermal plant, Ivanpah, in southern California.

In truth, the company is little more than a diamond in the rough. It earned just $13.5 million in revenue last year and posted a net loss of $71.6 million. Revenue was $11.5 million in 2009, and losses will continue for some time.

Still, there is little doubt BrightSource will be a key test of retail investors’ interest in cleantech startups and probably a roaring success with its potential to remake the nation’s and potentially the world’s energy landscape. It’s solar thermal technology harnesses the sun’s rays to super heat water and drive turbines, generating electricity without substantial greenhouse gases and with greater efficiency than the previous generation of solar thermal facilities.

If so, VantagePoint, with its massive position, should reap big benefits. The firm is the startup’s largest shareholder with 24.9% of its stock, or 23.5 million shares. The second largest holder is Alstom Power Inc., with 17.8% of BrightSource shares.

Morgan Stanley BrightSource owns 10.5% of the company and DFJ holds 6.7%. The Los Angeles Advisory Services Inc. holds 7.5%, while Riverwood Capital Partners has 3.7 percent.

BrightSource’s future growth clearly depends on the successful construction of Ivanpah and the Coalinga solar-to-steam enhanced oil recovery project now underway for Chevron. Both will help prove the company’s technology is ready for commercial deployment.

Already, Ivanpah has drawn considerable government and private interest. In April, the plant received final approval for a $1.6 billion Department of Energy guaranteed loan. Bechtel is a key contractor, Riley Power supplies the boiler, Siemens makes the turbine, and NRG Solar and Google are controlling equity investors.

The company says its losses will continue as it builds the plant and plans others. According to an S-1 filed with the Securities and Exchange Commission, BrightSource has an “110,000-acre development site portfolio…in California and the U.S. Southwest that has the potential to accommodate approximately 11 GW of installed capacity. We currently have two sites in advanced development, Rio Mesa Solar and Hidden Hills Ranch, each located in California.”

As a result, “we have generated substantial net losses and negative operating cash flows since our inception and expect to continue to do so for the foreseeable future as part of the development and construction of solar thermal energy projects using our systems,” it adds.

Nevertheless, the suspension of construction at parts of Ivanpah will likely attract the greatest investor attention. Here is how the company explains the delay in its S-1:

“In April 2011, the U.S. Bureau of Land Management, or BLM, advised that it will require the issuance of a revised biological opinion by the U.S. Fish & Wildlife Service, or FWS, prior to providing permission to proceed with the construction of Ivanpah’s second and third phases.” The reason? Workers have found more endangered desert tortoises on the site than expected.

Despite this hurdle, government energy officials are clearly behind the new facility, and there is little doubt it will proceed, perhaps with some changes. That should encourage public market investors and bring one of the first big paybacks to long patient venture firms.

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