Lasted edited by Andrew Munsey, updated on June 15, 2016 at 1:48 am.
Discussion page for Directory:Citizenre Corporation
Citizenre has made no visible progress with no press releases in almost a year, no announced hires, no announced funding, no ground breaking of the manufacturing plant, no customer installations, etc. Essentially, it is a living zombie. They claim to have 1693 active associates with 31,876 online registrations and 13,605 received FRAs --> well below the goal to have 100,000 signed FRAs by May of 2007 that during the 1st Quarter of 2007 they cited as a critical number associated with the release of their funding. Their contract with Ed Begley has expired and is not being renewed. They have never revealed any information to indicate that the company is real and actually has funding.
There are so many red flags and question marks about Citizenre that it really is a sick joke. They do not appear to have any clue how to actually implement the operational side of their business plan. The fraud David Gregg and Rob Styler are committing against their MLM "ecopreneurs" is the saddest part of the story. Way too many are spending too much time and money marketing Citizenre with little hope of actually seeing any money EVEN if Citizenre even managed to do a couple of megawatts per month of single family home installations (highly unlikely in this environment for any player in the industry).
Citizenre claims that they will use NABCEP certified installers. However, there are only about 400 of these individuals nationwide and virtually all are already fully employed. They have no idea how hard it actually is to recruit installers.
The tax credits are proving to be extremely difficult to sell (tax credit buyers are paying $0.85 on the dollar for federal tax credits and $0.30 to $0.50 per dollar for state tax credits but will not pay for the depreciation). The Federal 30% ITC will expire in six months and it is unlikely that it will be renewed. This clearly impacts their economics. So does the reduction in the CA rebates and the expiration of other rebate programs. Costs are rising for everything from PV modules to diesel for installer's trucks. At the same time, lending has virtually halted and there is zero funding for the securitized debt required to finance all of the customer installations.
On August 21, 2007,
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Yesterday, Citizenre released a press release announcing their “financing team? that will help them raise funding. Citizenre does not have any funding. You don't make this announcement if you have already closed financing. If you have funding, this is not news.
My analysis from six months ago that Citizenre is a highly unethical attempt to prove that there is sufficient demand (e.g. FRAs) to justify financing remains valid. Unfortunately, Citizenre's timing is lousy and they are extemely vulnerable because they tried to sell first and only after they succeeded in selling, finance and build long-lead time infrastructure (PV and inverter manufacturing plant thousands of installations dependent on equipment made in the plant).
We are several weeks into the worst credit crunch since 1973 and possibly 1929/1930. Lending has largely stoped - particularly for sub-prime and alt-a mortgages, jumbo mortgages, asset-backed securities, junk bonds, commercial paper, M&A takeovers, and pretty much all lending below AA or AAA. Major banks and investment banks have several hundred billion worth of loans made in the last couple of months (mostly for M&A deals and asset securitization deals) that they are unable to sell to investors without taking major losses. Everyone is scared and pulling back right now. For the little bit of lending that is available, credit spreads have increased by several hundred basis points. This means that if you were expecting a 5% interest rate in July, you may be paying 7% or 7.5% in August if you can still get the loan. Any assumptions about financing that are more than two weeks old have to be revisited. A month ago, GE Money was willing to finance PV systems for single family homes at rates between 7.5% and 14+%, but wanted 5 to 7 year terms. However, even then, they were more interested in commercial PV loans than residential loans. GE is still trying to value the collateral value of home PV systems - there are a lot of technical challenges and costs associated with removing PV systems and a used system may only have value for the first five years.
For Citizenre, they have the assumption that they can essentially give low interest, no documentation, 25 year loans to their customers (a lender's view of the FRA cashflows). This is essentially a sub-prime, unsecured loan, and any asset-backed security based on a pool of these FRAs would be extremely hard to value right now. The default rate on FRA's is unknown. Likewise, the cancellation rate and the effective duration of the FRA stream (e.g. how long the average customer has the system on their roof given the easy cancellation terms) are also unknown. Right now, investors do not trust the investment bank valuations of asset-backed securities because 1) there is really no liquid market for these, 2) everything is marked-to-model (where the model is an investment bank spreadsheet) based on investment bank assumptions that may be questionable and overly optimistic, 3) there are major conflicts of interest by the rating agencies and investment banks, and 4) there has been way too much fraud in this space (as much as 50% of all sub-prime loans may have been tainted by frauds committed by one or more of the parties involved - the borrower, the broker, the originator, the rating agency, the investment bank, the appraiser).
If you change the assumptions, Citizenre's model will break down. There are four major vulnerabilities to Citizenre in this credit crunch:
a) Customer Credit Worthiness Risk: Since no customers have completed credit checks, we don't know what percentage of them have prime credit. A significant portion of the 19,700+ customers may not have acceptable credit scores and their FRAs may not be financeable.
b) Interest Rate Risk: If Citizenre has to pay higher interest rates, their margins will decrease, making the service uneconomic for them to offer in some locations. This means that they either a) have to raise the rates they charge (which could make the KWH cost of electricity higher for their customers than they pay their utilities) and/or b) have to exit certain markets - particularly those with low interest rates. Again, a large percentage of customers could be lost if entire states have to be abandoned or if Citizenre is forced to change the rates promised.
c) Geographic Risk: Lenders may avoid investing in asset-backed security loans from certain regions that are particularly hard hit by real estate mortgage foreclosures. 50% of the sub-prime mortgages in the past three years were issued in California and Florida. Unfortunately, California is the most attractive solar market in the country (~80% of the US solar market).
d) Contract Language Risk: Lenders may object to certain terms in the FRA contract and require changes. The financing term has the greatest impact on the economics of FRAs. If lenders require shorter terms (e.g. 5 to 7 years, instead of 25 years), Citizenre cannot offer FRAs at their current rates.
Even if we assume that this deal was fundable in the second quarter of this year, today it is toxic and unfundable given the credit crunch. When one adds the other risks in the deal (execution, inexperienced management team, technology risks, manufacturing risks, MLM marketing scheme), it becomes even less likely to get funded.
Structured Growth Partners is a no-name, two-person fundraising company with no history, bios, or verifiable information. It is unlikely that they are registered with the SEC as a broker-dealer (legally required if they take commissions or success fees from Citizenre on any funds raised). If you are trying to raise hundreds of millions or billions of dollars, you don't use a no-name firm, you use either a major investment bank or specialty boutique (energy) investment bank with a proven track record in the field. The little advisors are typically used by startups and small businesses to help them get between several hundred thousand and several million dollars. They also frequently want excessive fees that scare away legitimate investors - particularly venture capital firms.
On July 25, 2007,
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There is no tangible or verifiable evidence that they have any funding, plant, equipment ordered, or technology.
They still have not paid the $500,000 to the sale reps promised to be paid when they reached 10,000 FRAs.
I seriously doubt they have been able raise any capital beyond several hundred thousand dollars of angel investor funds.
My best guess from six months ago still stands - that Citizenre is a highly unethical fishing expedition trying to prove demand exists so they can raise capital. I am somewhat surprised that they have lasted six months since Jeff Wolfe of Gro Solar, myself, and others raised serious concerns and documented assorted red flags about Citizenre.
Citizenre has yet to release any official press releases or release any data that could be independently verified or confirmed that addressed any of the concerns raised to date. Effectively, their response is to "trust us". The cult-like following and lack of critical thinking that they have in their MLM sales force is scary.
Even if they succeeded in raising the capital (very doubtful), there are a large number of flaws and technical challenges that must be successfully overcome for Citizenre to be a viable business model. These challenges include
# successfully building a manufacturing plant, obtaining the necessary equipment, staffing it, training the employees, and obtaining quality certifications - something that would normally take 18 to 24+ months
# obtaining UL 1703 certification for their PV modules
# obtaining UL 1741 certification for their inverters
# keeping their initial customers and their independent sales force happy for another 18 to 24 months before the first installation happen
# successfully scaling and implementing the process to make solar ingots from industrial silicon while obtaining acceptable quality
# building an installer network throughout the country
# maintaining their access to capital to obtain the several billion dollars per year of capital required to operate their rental network
# obtaining the senior management and technical talent needed to successfully implement such a complex set of projects (especially given the inexperience of their senior management team and CEO)
# successfully and profitably sell rentals and install them in 40+ states even though solar is economic after subsidies and incentives in at best 25% of them and
# proving that they are able to achieve their claimed economies of scale that are greater than those achieved to date by existing manufacturers such as Suntech, Yingli Solar, Sharp, etc. who already operate vertically integrated PV manufacturing operations at or beyond the scale envisioned by Citizenre.
On July 25, 2007, a concerned citizen wrote:
After about a year of receiving inflated figures, and broken promises about capacity, plant construction dates, and supposedly silicon-saving technology, not much has been heard from Citizenre lately, why is that? are they laying low, before the big roll-out? Is it another MLM scam, like the money Rob Styler made on the Lifewave Patch scam? Do your research and dillegence!!!
On Dec. 29, 2006, New Energy Congress member, Congress:Member:Noah Seidman wrote:
What an incredible company (Citizenr? Corp). The philosophy is "why buy land when you can use someone elses". Kills three birds with one stone provides electricity to the homeowner, makes profit for the company, effects environmental issues positively.
On Dec. 21, 2006, a New Energy Congress member wrote:
I’m concerned about the ability to meet demand, the long wait until systems will be installed, and the performance of their AC-output solar panels in the field. I’m told their funding partners won’t be unveiled until some time in January, so we’ll see if they really have the funds behind them to handle the growth.
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