Bankrupt solar installer Sungevity comes back in merged business
US residential solar installer Sungevity has emerged from bankruptcy as Solar Spectrum after a merger. Oakland-based Sungevity filed for bankruptcy in March, leading to massive lay-offs. Private equity firm Northern Pacific Group bought the assets that became Solar Spectrum before acquiring a majority stake in Horizon Solar Power in August. Northern Pacific now hopes to merge the two companies under the brand Sungevity, in what may become a platform for more solar buyouts.

In the ups and downs of the solar coaster, even the dead can rise again.

Case in point: Sungevity is back.

Oakland-based Sungevity, the fifth-largest residential solar installer at the start of the year, combusted in a spectacular bankruptcy in March that resulted in mass layoffs, unpaid accrued vacation days and bounced final checks. The remnants of the company that emerged from bankruptcy assumed the name Solar Spectrum.

The private equity firm Northern Pacific Group, which bought the assets that became Solar Spectrum, acquired a majority stake in Southern California installer Horizon Solar Power from Oaktree's GFI Energy Group on August 17. Now the plan is to nest the two solar companies under the umbrella of the Sungevity brand, in what could soon become a platform for further solar acquisitions.

"It was unfortunate what happened with Sungevity, but we believe the brand stands for a lot of positive things," said Horizon CEO Frank Kneller. "Most important to us was their total commitment to the customer and ensuring the customer had a flawless experience."

That's a novel approach for the residential solar industry, which has few healthy models for how to grow sustainably. It's a similar setup to General Motors, which houses separate but related brands like Chevy and Buick. GM also went through a high-profile bankruptcy recently, but people still buy its cars.

With this merger come national aspirations, which Solar Spectrum inherited from Sungevity. That marks a change of strategy for Horizon, having grown within the borders of California so far.

Pairing Horizon's and Sungevity's installations from Q1, the combined company would rank fifth among U.S. residential installers with 1.8 percent national market share, according to GTM Research's PV Leaderboard. The new Sungevity says it has the momentum to reach fourth place by next quarter.

Why Sungevity?

When kick-starting a new solar consortium, branding it with the name of a recently expired giant isn't the obvious choice.

The leadership team is betting that brighter memories from its 10-year run outweigh more recent history.

"In its heyday, Sungevity was the undisputed champion of solar customer service," said Horizon President Brian Walrod. "Sungevity did a lot of tremendous things for the industry, and although it didn't end in a great place, it doesn't erase the positive impact that it made."

That positive impact may be lost on those who closely followed the collapse, or the employees who were not paid for accrued vacation time, or whose final checks bounced.

"Why the hell would anyone bring back that brand?" was how one former Sungevity employee reacted to the news.

For those Americans who exercise a less granular understanding of the ins and outs of the cleantech world, the bankruptcy might not have registered. Say what you will about Sungevity, that company knew how to spend money on marketing, and that investment could continue to pay dividends for the new ownership.

There is a crucial difference between the old Sungevity and the new.

The former was caught on a treadmill of growth in order to raise money, said William Nettles, executive vice president of strategy and investor relations at Solar Spectrum. The name now belongs to a private equity firm that can afford a longer-term strategy.

"We have investors who believe in putting their money to work in a smart way and have the patience to make sure that we grow profitably," Nettles said. "I think that is very unique at this time. Investor sentiment toward solar is negative right now. Other investors are sitting on the sidelines."

New allies

Solar Spectrum and Horizon will continue operating as separate companies, but will start working together to enhance growth.

Horizon started in Southern California and has seen six years of profitable growth while expanding to new counties, not new states. The company approaches solar based on its roots in the construction industry, Walrod said. The firm does installation in-house.

The multi-channel sales approach includes field marketing, door-knocking, digital lead generation, paid leads, direct mail and retail, Kneller said, adding that his team watches the cost of customer acquisition "daily."

Solar Spectrum, active in California and several New England states, specializes in remote sales and installs through a partner network. A signature software program tracks each step from sales to installation.

That makes for two different but complementary go-to-market strategies, Walrod said. It's feasible that the two could share technology and leads as they pursue different markets with their respective approaches. But the collaboration won't stop there.

"This will really create a platform for future industry consolidation," Walrod said.

The new platform is already evaluating another acquisition, in fact. In a market with more headlines about companies divesting from solar installation than investing, the Horizon acquisition sent out a beacon of hope.

But dreams of nationwide expansion raise red flags in this industry.

"So many of the national residential solar companies, like Sungevity, have gone under in the past two years that it has started to look increasingly like the national model just doesn't work," said Allison Mond, a solar analyst at GTM Research. "That said, Horizon Solar Power is the largest residential company operating solely in California, and it has been doing really well, with double-digit growth and successful reduction of customer acquisition costs despite difficulties across the board in the California market."

Moving out of that core market invites new challenges. But the leadership team at least knows what kind of odds they're up against.

"We want to be smart about it," Kneller said. "The landscape is littered with people who tried to go nationwide."