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SunEdison restructures

Not very long ago SunEdison was a shining star in the solar industry. The company was quick to seize opportunities and was everywhere from India to Chile to Korea and across the US from California to New Hampshire.  As one of the largest solar developers in the world with a market value of $10 billion, the company was a pace setter. Yet its stock is now about 1% of the value it held nearly a year ago. According to a Reuters article, the company was valued at $117 million on 15 April. Late last week SunEdison announced that it is seeking bankruptcy protection.

There is no one cause to the downfall of SunEdison, but rather it stems from a series of problems. It grew too fast. It formed subsidiaries called yieldcos. Its debt continued to climb and yet its acquisitions of huge solar projects continued.  In July SunEdison made the move that spelled doom. The company agreed to acquire Vivint Solar, a distributed solar company that would give SunEdison an entry into the residential solar market. The purchase price was $2.2 billion, a sum that may have tipped the balance of SunEdison’s debt against itself. In addition, many SunEdison investors were against the Vivint acquisition, which began the fall in its stock prices. In addition, SunEdison came under investigation by the Security and Exchange Commission and the Justice Department for financial wrongdoings.

Is a SunEdison failure doom & gloom for solar?

Jenny Chase, Bloomberg New Energy Finance’s Head of Solar stated that “SunEdison’s bankruptcy says more about the company’s strategic decisions than about the solar industry as a whole. Comparable companies SunPower and First Solar have managed a develop-and-sell business profitably over the past three years.”

I spoke with Conlan O’Leary, CEO of Sighten, a company that developed a software platform that spans the lifecycle of a solar asset from streamlining origination to system design to sales and operations and more. As an entrepreneur in the solar industry, Conlan said it’s easy to be bullish on the solar industry when electric rates keep going up and the cost of solar is coming down. He sees the fall of SunEdison not as doom and gloom for the industry at all, but rather as a “self-inflicted situation.”

SunEdison announced that it is filing for bankruptcy and plans to restructure. SunEdison has projects in the pipeline all over the world, most of which are worth considerable sums of money. Unfortunately, most of the money it invested was borrowed, so it will have to liquefy the assets to pay its debts. Bloomberg’s Chase noted that “investors will take time to do the due diligence to value these projects correctly before handing over cash for them.”

The SunEdison debacle can be summed up as overzealous pursuit of growth, and it is an example of bad business practices rather than a negative statement about the solar industry in general.  If anything, the SunEdison issue offers us an opportunity to take stock of the solar industry. O’Leary said “the fundamentals of distributed generation solar have never been better,” going back to the basic math of dropping solar prices with rising electric rates.

The fact that SunEdison got itself into a tailspin has nothing to do with the viability of solar, the strength of the current market or its future potential. It also reminds us that solar is now a mainstream industry, with successes and failures just like any other.  

Written by Anne Fischer, Managing Editor, Solar Novus Today

Labels: SunEdison,bankruptcy,chapter 11,restructuring,yieldcos,Vivint

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