Solar panels are seen on the rooftop of the Larkin Building at the University of Toronto. They were installed by CarbonFree Technology Inc., a Toronto-based solar power project developer, under Ontario’s feed-in-tariff program.
Solar power producer Silver Ridge Power Inc. withdrew its planned initial public offering Tuesday, citing market conditions as the main reason that the deal couldn't get done.
Such reasoning may seem a bit ironic in this market. The S&P 500 keeps setting new all-time highs and the S&P/TSX Composite Index has been relatively stable for the past six months, save for the odd blip here and there.
However, there is truth to what the company said. Despite the solid markets, investors are still shy about taking chances and they continue to prefer yield-oriented securities such as real estate investment trusts that still sell with no problems.
Silver Ridge tried to be flexible, reducing the amount it wanted to raise to $150-million from $175-million, but that wasn't enough to get the deal done. According to someone familiar with the offering, there was very little investor interest.
Before the planned offering, Silver Ridge has no assets, but had the deal gone through the company would have bought operating solar power assets from a joint venture between AES Solar and private equity firm Riverstone Holdings.
After the purchase, Silver Ridge planned on operating fully functioning solar power plants, while AES and Riverstone would develop new solar power assets through a company called Juniper Point. Silver Ridge would have been given the right of first refusal to buy future power generating assets from Juniper in the future.
Though the market conditions make it hard for most deals to get sold, AES's operating figures also weren't very appealing to potential investors. The company posted operating losses for the past three years, and its European operations, which account for 41 per cent of the business, were severely hindered last year.
Within Europe, Italy accounts for the biggest share of the pie and last year the Italian government cut the amount it would pay solar power producers by 40 per cent, resulting in an impairment charge of $17-million for AES. Similar actions were also taken by governments in other European countries.
(Tim Kiladze is a Globe and Mail Reporter.)
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Tim Kiladze