Solar Financier OneRoof Now Public on TSX via Reverse Merger

The old reverse merger trick

Eric Wesoff March 11, 2014

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

OneRoof Energy, a solar financier, is gaining access to public funding as a newly-public company -- on Tier 2 of the TSX Venture Exchange (TSXV) under trading symbol "ON" according to a release issued today.

The residential solar industry is about customer acquisiiton, channel strategy, new business models and an all-of-the-above approach to raising capital to finance PV rooftops.

OneRoof representatives have labeled the reverse merger transaction a part of "ongoing activities to continue to raise funds."

This is how we parsed the deal, with help from a few smart colleagues, in earlier reports:

Carlaw is a Canadian capital pool company or "blind pool vehicle" with no assets but cash. "A capital pool company (CPC) uses its cash holdings to evaluate promising businesses or assets that it would acquire in a qualifying transaction, which it has to complete within 24 months of listing," according to Investopedia. OneRoof intends to reverse-merge into Carlaw and use its capital-raising ability as the “qualifying transaction” that keeps Carlaw listed on the TSXV. A OneRoof subsidiary will raise C$55 million from Canadian investors prior to the merger. At the time of the merger, OneRoof's financing subsidiary and OneRoof will merge into the Canadian shell company through a "three-cornered merger." OneRoof will then rename the company and appoint directors and officers. Desjardins Capital Markets is the lead agent.

It was a transaction not for the faint of heart, said one of the Canadian translators. And pending some approvals, it looks like it is going through.

Despite the contortions needed to make this kind of deal happen, it's evidence of the creativity that solar companies show in accessing capital (see SolarCity securitization, SolarCity crowdfunding, Mosaic loans, etc.) It means that Canadian investors can invest in a public "Canadian" solar financing firm. It will also illustrates capital's hunger for solar investments.

And we can add "reverse mergers on a Canadian exchange" as a financing category alongside banks, utilities, and car companies amidst the approximately $6 billion brought to bear in residential solar financing. Here's a recent recap of that activity.

In an interview with GTM, OneRoof Energy CEO David Field said, “My business is the acquisition of non-regulated customers. It is not necessarily the business of putting solar on rooftops."

OneRoof also needs to be good at raising money, and it has done that as well, with GDF SUEZ Energy North America announcing a minority stake in OneRoof in September of 2013. Last year, OneRoof announced that it added another $100 million from Morgan Stanley and Main Street Power Company to its available funds.

OneRoof has also raised more than $80 million in operating capital and finance capital from Hanwha, Black Coral Capital, U.S. Bank, The Quercus Trust, Yellowtree Energy, and Spring Ventures.

We'll be watching the One Roof Energy Group corporate performance -- on the Toronto Exchange.

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A recent residential solar round up, condensed:

According to sources, Sungevity is moving some of its leasing business to the turnkey Clean Power Finance finance and deal platform. Sungevity is also moving to offer a power purchase agreement. Currently, most of Sungevity's leasing finance comes through dedicated tax equity funds with a sponsorship model that requires Sungevity to contribute to the financing, a less-than-optimal use of venture investor equity funding. Sources close to the deal have suggested that the sponsorship equity model is expensive for Sungevity, while CPF needs to offset some of its losses from the SolarCity-Paramount deal.

According to sources close to CPF, the company is budgeted to complete 16,000 deals in 2014 -- a massive level of growth over last year's 8,200 deals. CPF completed about 4,500 deals in 2012. It was suggested that CPF makes $2,400 per deal. CPF has not verified these figures.

Vivint, the second-largest solar installer in the U.S., didn't disclose the terms or source of its three new equity transactions, which will enable the funding of $280 million worth of solar systems. Vivint gained more than $700 million in residential solar financing last year. Vivint Solar expects to open up 30 new offices this year.

RGS Energy (RGSE), a solar installer and financier, has partnered with Mosaic, an online solar investment platform, to launch a home solar loan product. RGS Energy aims to offer the loan to California homeowners starting in the first half of 2014. Mosaic's online platform will offer opportunities to invest in the solar loans to qualified investors. According to the VP of GTM Research, Shayle Kann, "The market share of third-party ownership has largely leveled off over the past six months, and we expect to see increasing availability and attractiveness of residential solar loan products this year."

Watch an interview with OneRoof Energy CEO David Field: