Cypress Creek Issues Layoffs in Pivot to Growth Markets

Picture Credit: Cypress Creek

Cypress Creek Renewables, a top U.S. utility-scale solar developer, has issued a round of earners affecting roughly 20% of its workforce, according to sources knowledgeable about the issue. The company said the discounts come amid an effort to refocus on its competitive markets.

Jobs cuts began to take effect Friday. LinkedIn currently shows 540 people employed at the firm. Based on that amount, the layoffs will influence around 100 employees.

Cypress Creek confirmed a reduction in headcount but fell to comment on exact numbers. Included in the restructuring, the developer said it would change to the most promising markets, but declined to define where it plans to expand operations and where it plans to pullback.

CEO Matt McGovern said the fluctuations were precipitated by market factors.

“We& & rsquo;re taking the steps we’re to ensure we're more competitive in the future, at the markets where we know we have competitive edge,” he said.

McGovern advised Greentech Media that the company would prioritize business operations moving forward in “core value creation centers” of development, EPC and project finance. Cypress Creek has also caused new executivesBryan Ellis, former president of U.S. energy sales at Tesla, as CFO; Mike Belikoff, former chief operating officer at Strata Solar, to direct EPC and O&M; and Noah Hyte, that had been promoted to executive vice president of development.

The company also confirmed it’s participated Barclays to research market partners which may be inclined to take on a part of its operating portfolio. According to reporting at SparkSpread, Cypress could be seeking to sell off a meaningful part of its 1.5-gigawatt solar own portfolio. (The company declined to affirm this record, and Barclays didn’t respond to requests for comment.) Only last week, Cypress Creek offloaded five jobs, totaling 580 megawatts, to British developer Cubico Sustainable Investments.

McGovern described a variety of factors that made jobs less economically viable and finally pushed the Advances and the reorganization, including the company’s competitive expansion into new markets, country policy changes in implementation of the Public Utility Regulatory Policies Act (PURPA), along with increasing strain from tariffs on solar cells, metals and steel.

“The impact for Cypress was pushing jobs to negative territory from a fiscal modeling perspective,” mentioned McGovern. “It’s much like we can go to any of those utilities on the opposite side and increase the PPA rates because our prices are going up. In order to allow us to be more competitive in such markets, we must be selling them electricity at or below their avoided costs — or else we don’t have a voice in the dialogue. That’s where those items are colliding involving the PURPA dynamics, the way that’s playing out in various markets and where that growth in cost is particularly painful. ”

The announcement is not the first indication of a decision. In May, the company stated it would stop investments at 1.5 gigawatts' worth of jobs, 20% of its pipeline, as a result of fiscal pressures from Section 201 tariffs.

In reference to the restructuring, the company maintained that its long-term parade of jobs remains unchanged at more than 7 gigawatts.

“We are attempting to be practical as we can and invest our dollars in jobs that we believe have the prime line of sight toward completion,” mentioned McGovern. “We now have a lot of inventory we’re eager to operate through. ”

Sources knowledgeable about the issue told Greentech Media that the company’s 2019 pipeline might be as much as halved: around 500 megawatts rather than previously forecasted figures of around 1 gigawatt. Cypress Creek dropped to comment on this figure and stated the amount is continually being refined. 

Another twist on the solar coaster

Cypress Creek’s story is one of rapid expansion and success that is quick. The Santa Monica-based firm was founded in 2014. By December 2017, the company’s construction arm, Cypress Creek EPC, had deployed 1 gigawatt of solar across 16 countries in the course of 18 weeks. McGovern stated the company has completely developed 3.2 gigawatts of solar to date.

Last week’s job reductions follow a solid, but slightly down year for the developer. Cypress Creek reports this past year it deployed 686 megawatts of power over 78 jobs. That’less than the 798 megawatts of solar power that it deployed in 2017, but nevertheless enough to cinch first place at the annual solar position — for the second year in a row — according to preliminary figures by Wood Mackenzie Power & Renewables.

But the layoffs, combined with the engagement of Barclays and the Cubico deal, suggest economic conflicts. Although Cypress Creek has sold off jobs before, such as 79 megawatts at May 2017 and 130 megawatts at October 2017, the most recent sale is significantly larger, possibly indicating it’s part of an effort to create money.

“Cypress Creek historically has been a developer and proprietor of projects,” stated Colin Smith, a solar analyst at WoodMac. “While it is not uncommon to sell off individual jobs, the selling of this big of a bit of the portfolio suggests they are changing business plan or attempting to free up capital. ”

There’s been substantial turnover in recent months. Info from LinkedIn reveals Cypress Creek dropping its vice president, also a vice president of technology, its chief technology officer, vice president of O&M and its vice president of new market development.

PURPA problems

Smith noted the Cypress Creek was abandoned exposed to policy changes in major markets since it invested in jobs that depended on contracts tied to PURPA.

In 2017, Cypress Creek’s largest market, North Carolina, transformed implementation principles for PURPA. Legislation (HB 589) reduced the size of jobs qualified for “regular provide ” contracts — power-purchase agreements with a set cost that utilities need to cover centers that qualify from 5 megawatt to 1 megawatt. The country shortened those contracts from 15 to 10 decades.

At the exact identical moment, North Carolina began working toward a auction program, where an secretary would assist utilities jobs bigger than 1 megawatt. The legislation stated those contracts may last. *

PURPA was developed to promote the use of renewable energy resources, and the 1978 legislation helped drive North Carolina to become the country ’s second-largest solar industry. Solar advocates expressed concern that changes to PURPA contracts passed in HB 589, followed closely with a regulatory arrangement lowering the “averted price ” rate utilities cover for PURPA deals, would possess a “controlling impact ” about costs paid for solar in the coming years.

Though Cypress Creek originally opposed efforts to restrict the state’s PURPA contracts — arguing that the changes would make it difficult to secure financing — the developer later supported the laws. In addition, it said it’d resolved previous disagreements with Duke Energy, a supporter of those changes.

But these changes are at present squeezing Cypress Creek in what was a fundamental sector.

“PURPA development is a volume game, maybe not a lowest-cost game,” stated Smith. “Cypress Creek was constructing a lot of volume in the place where they weren & rsquo out ;t incentivized to push for lowest-cost. At the exact identical time, we were visiting developers in the space compete on who was able to find the lowest PPA possible. ”

Cypress Creek staffed up fast for expansion and dropped down to the North Carolina PURPA market with the purchase of FLS Energy at November 2016. At the time, FLS was a successful version of Cypress Creek Renewables, said Smith, that made the buy an interesting move. Cypress Creek was the leading PURPA developer in terms of capacity.

“In my eyes, it would have been better to acquire [a company that] do better with commercial and industrial clients, or [who had] made more inroads into co-op or municipal utilities,” he said. “The PURPA market is risky and can have rapid shutoffs. ”

More speed bumps

North Carolina wasn’t even the final of Cypress Creek’s state-level PURPA struggles. The developer became entangled in legal disputes in Montana and Michigan over PURPA contracts. In a comment to Energy News in June about its struggles in Michigan, Cypress Creek mentioned “comparable encounters ” with utilities elsewhere. Previously, Cypress Creek has gone after PacifiCorp to get PURPA-related complaints.

The coverage conflicts were exceptional in each state. However, put simply, utilities didn’t even wish to get asked to continue paying PURPA’ldquo & & s;averted price ” rates, that are often higher compared to rates that are solar. In nations where the general public utility commission sided with utilities, the reduction of those guaranteed payouts put solar developers jobs in peril.  

The implications of those PURPA struggles could hurt Cypress Creek’s bottom line. As stated by the company’therefore no complaint against DTE, it’d registered 141 generator interconnection software at 775.5 megawatts. In its complaint against Consumers Energy, Cypress Creek stated it’d 700 megawatts of power. In total, Cypress Creek stated it intended to pour $3 billion to Michigan.

Randy Wheeless, a spokesperson with Duke Energy, stated the utility still has about 370 PURPA contracts within its queue. Though Wheeless declined to state how many of those jobs were from Cypress Creek, Duke testimony registered with the state utility commission in 2017 attributed 65 percent of its interconnection lineup to just three firms: Cypress Creek Renewables, Strata Solar and ESA Renewables.

Together with the changes in the legislation, Wheeless said a “rdquo & healthful amount; of queued jobs will get grandfathered to the contract rate under PURPA, but, moving forward, jobs that are fewer will do so. That may mean many of the jobs in the pipeline are no longer viable.

Cypress Creek stated state-level PURPA fluctuations have limited market access and expansion, which is 1 reason that the company has pursued offtake plans and other markets in recent decades. 

Cypress completed its first community solar job at New York state . Sources noted the New York market took longer to establish than anticipated, but might represent a growth opportunity for your company in future. 

Tariffs hurt, too

Based on CEO McGovern, the strain made by tariffs played impacting a central role “substantial volumes of jobs that we can’t pursue the exact identical timeline. ”

“In some situations, they&; rsquo;re rdquo, & no more viable .

Though coverage changes in China and a oversupply in the market have pushed prices down, McGovern said that that softening hasn’t alleviated stresses that were current.

“We& & rsquo;re mentioned McGovern.

Besides deploying hundreds of megawatts of solar cells round the U.S., Cypress Creek has also led to the increase of the business through solar training programs. To encourage the workforce in areas where it plans expansion and also to pull underrepresented communities to solar, the company has invested between $10,000 and $26,000 in programs in Michigan, New York, South Carolina, North Carolina, Illinois and, most recently, Oregon.

The company advised Greentech Media that those initiatives would last.

And regardless of the pressures that are short term, McGovern remains optimistic about the company’future. He said the fluctuations won’t even keep Cypress Creek from victory in the markets where it will continue sending funds.

“We are amazingly competitive in our identified markets,” mentioned McGovern. “The attention on our business going forward is prioritizing the assets where we all know we’re the best and continuing to function. ”

*Correction: This article previously stated that competitive bidding contracts from North Carolina could just last. 20 decades, they can last.

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