As the solar module market grew at a 47% CAGR to $17 billion over the last five years, New Hampshire-based GT Solar established itself as a leading supplier of ingot-casting equipment to solar cell makers. Now, the company is capitalizing on the industry's supply shortage of key raw material polysilicon by offering new entrants, particularly in Asia, the equipment necessary to produce polysilicon. With the favorable industry backdrop and a market looking for unique green investment opportunities amid soaring prices for traditional energy, GT Solar's financial sponsors, which are selling all of the offering's 30 million shares, hope the time is right for this latest solar play. Credit Suisse and UBS are managing the deal.

Solid Fundamental Foundation

GT Solar has established extensive relationships with many of the world's leading solar players, including BP Solar, LDK, Schott, SolarWorld, SunTech, Trina, Yingli and Zhen Jiang. Continued investment by these players has created strong demand for GT Solar's products, which is evidenced by the substantial portion of revenue that GT Solar receives up front from its customers. GT Solar also has strong revenue visibility, and expects to recognize half of its $1.3 billion backlog by March 2009. Furthermore, the company has made significant headway into the polysilicon manufacturing equipment market by securing contracts with six customers for a total of $659 million (50% of its backlog).

Key Risks

The main risk for GT Solar is the potential for reductions in government subsidies, which would likely curb the long-term demand for solar energy. In addition, growth in the market for GT Solar's new polysilicon equipment could slow if traditional polysilicon suppliers to the semiconductor market, such as MEMC Electronic Materials (NYSE: WFR), increase capacity. The company also has very high customer concentration as one customer accounted for 62% of fiscal 2008 sales and three customers currently account for 59% of its backlog.

The Bottom Line

GT Solar plans to be the first solar capital equipment maker to tap the US public markets, which have seen a wave of wafer and module makers go public in recent years. Although GT Solar's story is not immune to the subsidy cut concerns that led to a weeks-long sell-off in the solar industry earlier this summer, it is a unique green investment opportunity with a steep growth trajectory and a solid fundamental story. While not likely the light at the end of the tunnel for the slow IPO market, GT Solar has the potential to be a bright spot amid the broader market woes.