Solar energy systems provider,
) announced a definitive agreement to acquire Paramount Solar, a
subsidiary of Paramount Equity LLC. for $120 million. The deal is
expected to be completed in September, subject to customary
Calif.-based Paramount Equity, majority-owned by GuthyRenker
LLC, is the largest direct-to-consumer marketing company.
Paramount Solar inks deals with customers and then directs them
to solar retail service providers like SolarCity to complete the
installation work. Homeowners have the option of either buying a
solar energy system or opt for a lease of up to 20 years.
SolarCity will pay $116.3 million in stock and $3.7 million in
cash for Paramount Solar. Upon the completion of the deal,
Paramount Equity Mortgage, LLC, Value360, LLC, and Ironstone
Insurance LLC, the remaining divisions of Paramount Equity, will
continue to operate as independent companies. Also, Paramount
Equity's CEO, Hayes Barnard, will become the chief revenue
officer of SolarCity.
In recent times, the utilization of solar energy is rising
primarily due to its clean nature and a growing awareness among
the masses regarding its benefits. Also, government incentives
and financing options that help to lower the cost of solar panel
installation have led to an increase in solar business.
In fact, solar power is currently the only viable choice for
residential consumers seeking an environment-friendly power
alternative. Solar power limits the expenses and losses
associated with transmission and distribution from large-scale
electric plants to end users, unlike other renewable resources
such as hydroelectricity and wind power.
The Paramount acquisition will complement SolarCity's own
sales effort. Paramount uses direct mail, online ads and radio
spots to reach consumers, while SolarCity directly approaches
homeowners to sell their solar services.
Therefore, the acquisition will help SolarCity to develop and
offer its systems directly to consumers and thereby further
increase its already large customer base. Currently, the company
has more than 68,000 customers and expects the acquisition to
increase its customer base to 1 million customers by Jul
The acquisition will also help SolarCityto better compete with
other energy producers like
NRG Energy, Inc.
The company stated that the acquisition will have a more
significant impact in 2014. For 2013, the company raised its
installation forecast to 278 megawatts from 270 megawatts to take
into account the signed contracts that Paramount will bring.
SolarCity is a leading service solar provider with more than
3,300 employees, 68,000 customers and more than 400 megawatts
(MW) deployed. The company plays to its strength by providing
renewable power at a lower rate than the grid price to
residential and commercial markets in the U.S.
During the recently reported second quarter, the company's
residential megawatts (MWs) deployed increased 144%; cumulative
energy contracts signed and outstanding increased 105% and
cumulative customers increased 97% from the year-ago quarter.
SolarCity carries a Zacks Rank #3 (Hold).
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