Renewable energy group in European push

An oversubscribed institutional placing, raising £12.3 million, has given US solar-panelled-roof maker Solar Integrated Technologies (SIT) the firepower to enter the European market. If it succeeds over here, it will end up with a much bigger price tag than today's £62.4 million.

SIT is based in Los Angeles. Its photovoltaic roofing system, honed by the company's Californian founders, chief executive Edward Stevenson and chief operating officer Bruce Khouri, is manufactured by fusing flexible solar cells to lightweight industrial fabrics. This not only protects it against the elements and turns the roof into an electricity-producing asset but offers further advantages over traditional solar panels.

SIT's system can be installed in the same time scale as a normal roof, it weighs a lot less than most solar panels, is easy to install and offers superior energy yields in low light conditions. The disadvantages are its lower power density and the fact that it is not suitable for smaller roofs.

'Our bag is the commercial/industrial space,' says Khouri. 'That's where we get the biggest bang for our buck. But we also have portable structures for remote use. And these have had expressions of interest from the military, and could be used by the likes of the Red Cross.'

For SIT customers, Khouri says, the system acts as a hedge against rising energy costs. It is also a single source solution that lowers their fixed operating costs. 'They have to have a roof anyway. So why not have an energy generating one?'

And clients like what they see. SIT has recently completed projects for, and won repeat business from, the likes of Coca Cola and Frito-Lay (Pepsico). For instance, the Coca Cola bottling plant project in Los Angeles, completed in the last quarter of 2003, brought in $3 million.

The Frito-Lay project, also in Los Angeles, was worth $800,000. Frito-Lay has contracted SIT for three further roofing projects.

SIT has 'current proposals' with household names such as Wal Mart, C&A and Ikea. Among other things, the newly received cash will beef-up capacity at the currently constrained Los Angeles site, as SIT expects demand coming through the door from Europe. Khouri claims the company can quadruple production for an outlay of just $1.5 million.

This management duo has already demonstrated the success of the business model across the pond, and the pair plan to replicate that in Europe where the renewable energy market is five times the size of the US and ten years ahead in terms of regulation.

They are looking to establish a regional office in Paris along with the established offices in London and Dusseldorf, and set up production facilities in Germany.

Khouri says the 'renewable' energy market is also a big one. 'We could bounce around forever without running into our competition. And those competitors don't deliver a roofing system, only a panel. Our roofing systems keep water out, as well as deliver solar electricity. So you can just buy a roof, or buy a SIT roof generating electricity.'

'Our contracted order book is very strong,' claims Stevenson, 'with approximately $74 million (£41 million) of forward contracts booked, of which $53.8 million (£30.4 million) is scheduled for delivery this financial year.'

In calendar 2003, SIT turned in a $131,000 pre-tax profit (£70,000) on a turnover of $8.3 million (£4.7 million). Its effervescent management believes forecasts from KBC Peel Hunt (see table) are conservative. They are 'highly confident' about prospects for a profitable 2004 and seem to have good reason to be.