The story behind BrightSource’s IPO withdrawal

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the policy or position of BERC.

In a stunning development on the domestic renewable energy market, Oakland-based BrightSource Energy Inc. withdrew its planned IPO just hours before shares were scheduled to go public.  BrightSource is a leading developer of utility-scale solar energy projects in the Mojave Desert of southern California.

BrightSource has been perhaps the most visible player in the nascent utility-scale solar industry, their Ivanpah Solar project having been touted by President Obama as evidence of his administration’s green credentials.  They received a $1.6 billion loan guarantee from the Department of Energy as a part of the American Recovery and Reinvestment Act (ARRA), the stimulus package.

Their much-ballyhooed IPO, valued at upwards of $180 million, was seen as a harbinger of the future fiscal viability of the utlity-scale renewable market.  However, BrightSource cited sub-optimal market conditions and economic volatility as making an IPO imprudent at this time.

There may be more complex reasons for the delay of the IPO, however.  To begin, while BrightSource has several projects under the permitting process in the California desert, only one (Ivanpah) has actually broken ground, and none have yet delivered any actual solar power in California.  As documented on this blog a few weeks ago, and by the LA Times, Ivanpah has run into costly and lengthy hurdles related to the negative environmental impacts associated with a large-scale industrial facility being placed in the middle of undisturbed desert.

Additionally, BrightSource employs solar thermal technology, in which mirrors heat water to generate steam power.  While this is a proven technology, the price of photovoltaics, an alternative technology, has plummeted in recent months, making the solar thermal model seem like a less attractive investment.

BrightSource remains optimistic, however, stating in their official statement withdrawing the IPO that they are, “in a strong financial position and have the support of world-class investors and partners.” And indeed, this is true.  An examination of BrightSource’s investors and venture partners reveals a wide network of connections to the highest levels of politics and energy finance.

They are owned in largest part by VantagePoint Capital Partners, a venture capital company in Silicon Valley.  Perhaps the most prominent political figure associated with VantagePoint is Robert F. Kennedy, Jr., who is a venture partner there.  RFK Jr. famously led the opposition to the Cape Wind project, a wind power project located off-shore of the Kennedy home territory of Cape Cod, Massachusetts, citing negative impacts to aesthetics and the environment.  While RFK Jr. has achieved many laudable environmental accomplishments (including most famously the founding of the Riverkeeper project), one can’t help but notice a juxtaposition, given the complaints of negative impacts to aesthetics and the environment leveled at VantagePoint’s investments.

VantagePoint’s political connections do not end with RFK Jr., however.  James Woolsey, CIA Director under President Clinton, was a former venture partner.  Alan Salzman, VantagePoint’s founder and CEO, has been profiled as a Republican activist and fundraiser.  VantagePoint’s political connections even span the Atlantic: David Miliband, an MP in Britain, the former British Foreign Secretary, and the brother of Labour Party chief Ed Miliband, is a senior advisor.

There are many smaller-scale investors in BrightSource who are also connected at high levels to the political and energy structure.  The venture capital firm Draper, Fisher and Jurvetson owns a 5% stake, and is headed by Tim Draper, who was described as “George W. Bush’s point man in Silicon Valley”.  NRG Energy owns a stake, and they are a traditional energy company, owning 29 gas, coal and oil power plants across 11 states.  Oil-producing stalwarts Chevron and BP also own minority shares.

It’s not only the ownership of BrightSource that is well-connected.  BrightSource’s former chairman of the board John Bryson is now President Obama’s Secretary of Commerce.  Current Senior VP for Government Affairs Joseph Desmond was a former chairman of the California Energy Commission, which has regulatory authority over the Ivanpah project.  In other words, from ownership to management, BrightSource has ties to the highest echelons of political and economic power in the U.S.

Criticism has come from many corners over the siting and handling of the Ivanpah project.  There have been grumblings surfacing on the right-wing of the blogosphere about a vast left-wing conspiracy linking the BrightSource loan guarantee to the Solyndra debacle from last year.  These are mostly a lot of conspiracy-theory rubbish, not least of which reason that BrightSource’s connections, illustrated above, reach to both sides of the aisle in Washington.

Nonetheless, with the withdrawal of the IPO, and a spate of recent bankruptcies amongst other utility-scale solar developers, the mood in the utlity-scale solar power industry right now is “doom and gloom”.  Should BrightSource and other utility-scale solar developers falter, and thus default on their DOE loans, the connections referenced here could prove disastrous for politicians who have been championing the cause of these projects.  In the meantime, the future of domestic energy production, the fate of an ecosystem, and a few billion dollars of taxpayer money hang in the balance.