Commercial Business is Soaring for Akeena Solar

This past week, Akeena Solar (Nasdaq: AKNS), announced third quarter financial results.

The company posted strong revenue growth with particularly robust results in the commercial solar business.

According to Barry Cinnamon, president and chief executive officer, of Akeena, "Commercial revenues quadrupled versus the third quarter a year ago and more than doubled from the second quarter as installation crews focused on commercial jobs with year end deadlines."

Furthermore, Akeena remains very optimistic about commercial solar in the future, especially as it relates to the utility market.

Cinnamon states: "With the passage of the ITC, many commercial jobs are progressing to the installation stage. For 2009, a restoration of the commercial tax credit and new utility opportunities, we're anticipating substantial growth in the U.S. market. We are laying the groundwork for significant sales in the burgeoning utility market now that utilities can take advantage of the 30% ITC. Since our Andalay flat roof system is both light-weight and non-penetrating, it is ideally suited for flat rooftops leased by utilities".

The issue with Akeena, though, is how the company will finance all this potential growth and meet demand.

As of the third quarter the company was down to a mere $2.6 million in cash and cash equivalents, and yet the company reported $5 million in operating losses during the quarter. So the cash situation is surely tight at the company. Presumably, increased sales and improved margins can narrow the company's losses in the coming quarters, but we wouldn't surprised if Akeena raises money in the equity market early next year (assuming of course that the equity markets stabizlize).

In the meantime, it appears as if Akeena is financing the business via their credit facility with Comerica bank which allows a line of credit up to $25 million. In the latest quarter, the company's credit facility line in the balance sheet jumped to about $15 million from $4 million in the last quarter. However, the credit facility also requires Akeena to post cash collateral against the line of credit, which explains the company's $15 million in restricted cash as of the third quarter. If business doesn't improve soon, presumably the company will reach the limits of the credit facility in early 2009, requiring Akeena to either increase the facility or raise cash via other means, such as an equity infusion.

In sum, the commercial solar opportunities for Akeena are quite exciting, but the company's financial situation is bleak, casting doubt on the company's ability to fully benefit from the coming commercial solar boom. Until the financing issues are cleared up, Akeena remains more of a dream, than a reality.