From Semiconductors to Green Power: Borrego CEO Mike Hall (Part 5)

SM: Is your business entirely residential?

MH: No. Now we are entirely the other way. I took over as CEO in January. After the investment came in we restructured the board and the company. We had separated into two divisions in 2007, which provided a nice, clean way of splitting. Accordingly, we sold the residential portion of the company.

We have completely changed our model to commercial, industrial, and government. We were spending a tremendous amount of effort maintaining and optimizing the infrastructure associated with the physical installation of a system. We have backed away from that and are working with subcontractors and partners to install. We are entirely focused on the engineering, business development, and finance.

It is a different business and a different company now. We are really excited about it because we think it will scale better.

SM: Explain a bit more about what you do today as part of your company. You subcontract installation and integration. What exactly do you do?

MH: We put the projects together. We get the money together by working with banks and syndicators. We create the financial model through which a customer can understand where their cash flows are going to be. We do the procurement and engineering. On the back end, we will do the operation and maintenance.

SM: You are taking the inventory but not doing the integration?

MH: Yes. Technically we are still the installer because we are the general contractor. We handle project management, and we are still on site. We are not staffing every person who holds a wrench. It is tough to justify that model in this environment because there is a huge excess capacity of construction professionals who are really good and who really want to work in the solar industry.

SM: Where are you geographically?

MH: We are in San Diego, Berkeley, Massachusetts north of Boston, and we have a small team in New Jersey. Pennsylvania is also a new market that is just popping up now.

SM: What is your process of getting deals now? Did Google AdWords scale?

MH: No. It got to the point where the return was tough to justify. The bids got very high and people would click on three ads and contact three companies. By advertising there you were setting yourself up for a lot of competition. We are much more guerilla now. We figure out who the best candidates are and go after them.

In our industry it is a question of what people and organizations pay for their energy and whether or not they have the facility to build a cost-effective PV system. Are they likely to have cash on hand or be creditworthy enough to put together some sort of financing structure? If you find those elements, then there is a good chance we can work with them. We used to do a thousand deals a year; now we try to do 30.

SM: Is your plan to grow organically?

MH: I don’t believe that M&A with or of other similar businesses just to be geographically [divserse and gain] market share makes sense. It is a fairly low-margin business. It is in the teens and has a fairly low barrier to entry. Acquisition and integration costs are likely more expensive than going after it organically.

SM: It sounds as though you actually could become more of a project financing company.

MH: That is the way we have to go. Look at all the energy companies out there. The money is made in structuring the finance and then somebody comes out and drops down a turnkey power plant. There is a huge amount of engineering that goes into it, but there are plenty of firms that can do that.

This segment is part 5 in the series : From Semiconductors to Green Power: Borrego CEO Mike Hall
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