Vermont solar giant iSun faces bankruptcy and fire sale | Business | Seven days

Click to zoom Courtesy of Patrick McCormack

  • Courtesy of Patrick Mccormack

SunCommon’s merger with iSun reflects an ambitious vision to be a publicly traded, socially conscious leader in the U.S. solar industry based in Vermont.

Instead, after three years, the combined company collapsed, leading to sudden layoffs, lawsuits, nearly worthless stock, and now bankruptcy.

iSun claims that by the time it filed for Chapter 11 bankruptcy protection in federal court in Delaware on June 3, it was losing $250,000 a week. In the lawsuit, CEO Jeffrey Peck said the company was “on the brink of closure.” Only a bridge loan from Siltstone Capital, a Texas investment firm, saved him. At a hearing last week, a federal judge approved $4 million in emergency financing that will allow iSun to avoid liquidation.

“We actually ran out of money at the end of this week,” iSun attorney Michael Busenkell told the judge, explaining the motion.

To avoid a complete shutdown of the lights, iSun management proposed a court-supervised sale of the company to a subsidiary of Siltstone Capital, with the proceeds used to repay creditors. It’s unclear what will happen after the so-called Section 363 sale.

The collapse of iSun is the latest sign of trouble in the U.S. solar installation industry. High interest rates have slowed demand among residential customers, and states such as California have reduced incentives for solar energy. The bankruptcy also marks the failure of iSun’s leaders’ aggressive growth strategy, which tried to transform the local, family-owned electric utility contractor into a dominant regional player in every solar energy sector.

Most solar companies in the Northeast are small and specialized. Williston-based iSun installs arrays on a commercial and industrial scale. In 2021, iSun raised $40 million to acquire SunCommon, the largest rooftop solar installer in Vermont, and also gain a foothold in the residential sector.

It was an intriguing partnership. SunCommon was founded by the nonprofit policy advocacy organization Vermont Public Interest Research Group and later organized as a public benefit corporation, the state’s designation for community service companies. iSun’s origins date back to 1972, when Peck’s father founded Peck Electric. Jeffrey Peck turned his family’s solar business around during the Great Recession and took it public in 2019, making iSun one of only a few publicly traded companies in Vermont. At that time, the combined company had approximately 350 employees, most of whom worked in Vermont.

iSun is seeking to expand beyond Vermont into markets up and down the East Coast to capitalize on the anticipated growth of the solar industry. Last year, the company generated nearly $100 million in revenue, a record high. But iSun hasn’t been profitable: It reported an operating loss of $19.4 million last year, down from a whopping $53.8 million loss in 2022, according to documents filed with the U.S. Securities and Exchange Commission.

Still, Peck earned $945,000 last year, including a $267,500 bonus, while then-CFO John Sullivan received a $152,500 bonus.

Cash Strapped iSun has struggled over the past year to find new financing needed to pay its bills. In December, he borrowed $8 million at an interest rate of more than 20 percent.

In March, the company announced that Peck was being replaced as CEO by Bob Zulkoski, a private equity expert who co-founded the venture capital fund Vermont Works. Zulkoski headed a three-person “triage team” tasked with forging a new path for the failing company. That’s according to emails included in a new civil lawsuit that Zulkoski and two other “selection team” members filed against iSun in state court.

However, just a month later, iSun announced that Zulkoski was leaving and Peck would return as CEO. CFO Sullivan also left. In a press release, the company described the change as a “strategic restructuring of the leadership team.”

Peck plans to “continue the extraordinary journey that Bob has prepared for us,” he said in a statement.

The lawsuit alleges a less amicable split. Zulkoski refused to sign the company’s annual report to investors “due to errors and inadequate disclosures in the document,” he alleges in his complaint. iSun then terminated his employment “without explanation, cause or notice of any kind.” Zulkoski and others are seeking damages for breach of contract. Similarly, SunCommon founders Duane Peterson and James Moore, in a separate lawsuit, accuse iSun of failing to make payments due to them related to the 2021 sale.

iSun’s publicly released annual report, signed by Peck, in April noted that the company may not be able to “continue as a going concern.” It also revealed poor internal accounting practices that created a “reasonable possibility” of errors in the companies’ financial statements.

After Peck returned as CEO, iSun announced a plan to consolidate its plummeting stock price, only to abandon the plan 24 hours later. In late May, NASDAQ delisted iSun, citing its low price of about 10 cents per share. iSun shares hit a 2021 high of $26 per share; it is currently trading at less than 2 cents per share.

Court filings show the company had fewer than 200 employees when it filed for bankruptcy, down from 275 in April. This was reported by several current and former SunCommon and iSun employees Seven days that number dropped because the company laid off dozens of workers without notice in May. A laid-off SunCommon employee, who asked to remain anonymous because he is looking for a new job, said he was called into a private meeting with senior management – but not human resources staff – on May 29 and was told he no longer had a job, effective immediately. . He added that the company did not provide severance pay.

“Everyone was a little upset about the lack of notice and lack of HR presence,” the former employee said.

Ten SunCommon employees in Vermont and 16 in New York were laid off on the eve of the bankruptcy, according to an email from company executives. Seven days. The total number of layoffs at iSun and its subsidiaries is unknown.

In its bankruptcy filing, iSun blames high interest rates for slowing consumer demand, especially in the housing market, and increasing the cost of new financing.

Siltstone Capital, which touts its large portfolio of oil and gas mineral rights in Texas and Appalachia, did not respond to a request for comment on its plans for iSun if the court-supervised purchase goes through. Peck asked for questions in writing. It did not respond directly to them, but issued a statement saying the bankruptcy and upcoming auction “will ensure our long-term sustainability and competitiveness.” He said the company’s operations would “continue as usual.”

“We are committed to minimizing any disruption to our employees, customers and suppliers during this period,” Peck wrote.

Vermont solar industry advocates say the iSun turmoil doesn’t reflect the health of the broader industry in the state.

“I just haven’t heard from others in the solar industry in Vermont that they can’t do it,” said Peter Sterling, executive director of Renewable Energy Vermont, an industry advocacy group.

His group and others have criticized the state Public Utility Commission for continually lowering net metering rates and reducing payouts to customers who sell excess solar-generated electricity to the grid. On May 30, the Commission announced another reduction, which will enter into force this summer. But Sterling said there is still plenty of work for solar installers in Vermont.

National industry analysts predict slower solar growth in the coming years. Analysts from research firm Wood Mackenzie expect the number of photovoltaic installations to grow by about 3 percent annually until 2029.

“While this is certainly evidence of the solar industry’s strong position in the energy transition, it also represents a slowdown in the industry’s growth,” the company wrote in its latest report.

Norwich Solar CEO Jim Merriam, whose leaner company pursues commercial projects, agrees. “I think the industry as a whole is pretty stable,” he said.

The more modest market is not a big problem for his company, which employs about 40 people, he said.

“We determine the pace of development based on what we see on the street,” Merriam said. “We don’t have this external pressure from investors to grow, grow, grow.”