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  1. The impending insolvency of SunEdison (NYSE: SUNE) is a unique-to-the-company event unrelated to conditions in the solar industry. In fact, everything that has happened to SunEdison is a result of its operational failure to deliver profitability in most of its core operations. The media frenzy over unsatisfied hunger for acquisitions and that being a cause of its collapse is certainly true, but not in a just too-big-too-fast conclusion. Most of those acquisitions and expansions never happened. However, the detrimental aspect of acquisitions and particularly extremely overpriced objective to buy Vivint destroyed the company’s stock and with it, one source of the cash flows, ability to sell equity. The permanent inability to produce operating profitability had one resolution, SunEdison sold debt and equity to cover its cash flow needs. As a second one, SUNE planned to sell solar projects to own yieldcos. The last objective while the only legit way for long-term sustainability, was done hastily by buying third party projects instead of focusing on drop-downs of projects held on own balance sheet. SunEdison’s stock selloff caused by the pursuit of Vivint merger, pressured prices of both yieldcos, TerraForm Power (NASDAQ: TERP) and Global (NASDAQ: GLBL), complicating conditions for them to sell equity and pay for drop-downs. The alternative, selling projects to third parties delivered no results, due to weak gross margins, and the company ran out of cash. I think it is critical to state again that SunEdison’s potential bankruptcy has nothing to do with the solar or wind being the company's business objectives. The company has failed as a business model because it never produced operating profit to support its financial costs. There are companies, which every day engage in the wind and solar, whether be manufacturing or sale of energy, and deliver profit, not only as an operating profit but also as net income. Further, that failure of the model has nothing to do with yieldcos. For the record, the developer model was probably the only viable business the company had, besides a collection of revenue from sales of energy produced by plants on its balance sheet. In the end, SunEdison was a just too costly as a developer and it held all that cost on its balance sheet, unable to drop it to own yieldcos. If I accounted for“one-offs” which happened every quarter, impacting operating expenses, this company just could not last. Having to observe non-profitability and the cycle of cash flow funded from debt and sale of equity, as early as April of last year, I do not see how SUNE restructuring could lead to a revival of the company under those conditions. In my opinion, I see dissolution because those inherit disorders preventing the company to operate efficiently cannot be cured with deleveraging of the balance sheet. If SUNE was dissolved, the yieldcos could undergo severe devaluation, in a more negative form than I have suspected previously. I think there will be a lot of interest in getting hands on yieldcos’ equity by creditors as a form of compensation. B class shares and ownership in operating subsidies reflected by them offer the most apparent liquid value in SunEdison’s asset book. Under insolvency, both yieldcos are considered independent entities from SunEdison. While that independence is legally upheld, the relationship with SunEdison adds few concerns. First, based on legal interpretation of that independence on a granular level of each asset in their portfolio, and how commitments made by SUNE alone or in conjunction with yieldcos will impact yieldcos now handling them without SUNE. Lastly, how financial interconnection of SUNE with yieldcos will be restated by receivership and how fast any yieldco's obligations to SUNE will be in need of monetization. Events to date are already remarkably uncomfortable for yieldcos. The full administrative dependency, which has become the most obvious in the failure of reporting of financial results is one of the most ludicrous factors affecting them today. Secondly, the paper-thin independence offered by legal structure has absolutely no representation in the physical organization structure. Yieldcos lack a managerial body of real people to represent their interests when now facing creditors. Still, I expect both Terraform Power (TERP) and Terraform Global (GLBL) to survive, but I am concerned with the conditions of the bankruptcy of SUNE, and many, potential surprises which are awaiting us during the proceedings. One such a concern is around the First Wind’s acquisition and outstanding amounts of $500M being owed by SunEdison. All of the assets are currently in TERP portfolio and some being under the development by SUNE. Further, there are of course conditions in PPAs having SunEdison as guarantor and obligations by TERP to buy assets when they are completed. In my opinion, all legal agreements will remain binding even after SunEdison is under receivership. This particular situation can put a bill for $580M in front of TERP, thankfully reduced to this amount by asset sales to JPM joint venture. As of Q3, TERP owed $91M to SUNE for solar projects in construction, money not shown on the balance sheet. SUNE was going to finance $60M in current debt for some of the construction loans for those projects on behalf of TERP. It will be highly unlikely to see such payment while the $91M obligation will be called up. I think for both companies, paying own bills will have to become the new reality. TERP has also paid $42M for projects yet to be constructed and as stated in 8-K filed by GLBL about $231M paid for Indian projects, may require legal proceedings to extract them. Just looking at some of those activities when rethinking the shape of the pro forma balance sheet after Invenergy transaction, TERP cash resources, hence its liquidity will be dramatically different. I would also suspect that dividend payments could be suspended for GLBL and continue to be suspended for TERP until all the obligations to sponsor are reviewed, and the creditors have fully exploited underlying conditions. Of course, I cannot begin fully understand all of those considerations without seeing financial statements, but depending on the type of the bankruptcy executed by SUNE, each will have quite a range of outcomes. While there are no changes to past financial statements, confirmed by SEC filings of each yieldco, I suspect future financials are more than enigma and cannot be extrapolated based on existing data. The fact there is not a person in any of the yieldcos to speak on behalf of the companies to protect their interests is severely discomforting. The only thing which will do the speaking will be the legal framework and perhaps David Tepper protecting his investment in TERP. Both yieldcos do not have own operating management, outside of figureheads constituting its board of directors, now without a leadership of the CEO. Those are the same people who in words of Tepper had failed their fiduciary duty. Faced with the banks demanding money, I do not expect heroism from the same group. Finally, the timeline to clear the dust could take months and will exhaust both companies. Those conditions are unfortunate, certainly a lot of good money has been put to work in both yieldcos, based on the hope of independence, still I hope that independence will save both of them at the end. Outside of these two companies, I consider everything else in solar to get stronger not weaker when SunEdison is no more. The industry has own weak points like current fear of glut and potential reductions of FiT in Japan and China, but those are under very controllable conditions. The existing leadership has never been associated with SunEdison. Leaders of the industry are First Solar (FSLR), JinkoSolar (JKS), Canadian Solar (CSIQ) looking at the profitability levels of 2015. There are also yieldcos which are renewable, with a lot of strength, one particular I like is Pattern Energy (PEGI), but there are few more choices for consideration for those who would like diversification. SunEdison not being around will probably create more work for others, and opportunity may knock to take over some of its projects by the companies mentioned above. Since the pipeline for SunEdison was extensive, project development may get some higher ASP depending on the party involved in the bidding. I imagine that credit rating, bankability and global status of the developer may become an important part of the development process, in a similar way module manufacturing has transitioned, based on the glut of 2012/2013. Today fewer companies represent top manufacturers as a direct result of bankruptcies due to glut. Fewer companies will offer more concentration for current and future renewable investors. Those companies will be certainly more capable. The greater public will have a lot more understanding what to avoid if the similar scenario was to repeat elsewhere adding a caution for those companies that would consider SunEdsion’s path.
  2. The last couple of weeks were seemingly not good for already struggling SunEdison (NYSE:SUNE). In a couple of instances, corporate entities have used language pointing to potential insolvency of the company. In both cases, this perception had an immediate consequence. One led to the cancellation of PPA agreements opening SunEdison to a review of $336M bond elimination made with Madison and Shaw. Plants used as fixed assets to pay in part the obligation have no longer contract for electricity, creating a need for replacement or other means to fill the gap for both lenders. In a second, as reported by Bloomberg, New York State Supreme Court Justice Charles Ramos on Feb. 11 granted the request from Latin America Power (LAP) investors to block any asset transfer pending a Feb. 25 hearing on whether the hold should continue throughout arbitration of the dispute. Quoting Law360: “The investors told Justice Ramos that SunEdison and its affiliated companies are widely acknowledged to be in such deep financial trouble that attachment is warranted before the arbitration concludes, which they say will take a year or more: SunEdison Inc.’s CEO announced to its investors that it would no longer transfer or ‘drop down’ assets to its yieldcos and that instead SunEdison would dispose of assets by transferring them to unidentified third-party ‘affiliates’ and ‘warehouses,’” the suit said. “Such assets, once transferred, will be ‘ring fenced’ from respondents’ creditors and will likely be unavailable to satisfy an arbitration award against respondents.” The order reads below: "Respondents are hereby restrained and enjoined from concealing, transferring or removing their assets, accounts or other property that may be subject to attachment, without fair consideration or in the ordinary course of business," What adds peculiarity to this is the fact LAP is owned by Partia, a private company owned by Blackstone Group (NYSE:BX). Yes, no mistake the same company, which owns the majority of Vivint Solar (NYSE:VSLR), a company in the process of merging with SunEdison. TerraForm Power (NASDAQ:TERP) is also under the same order. SunEdison committed TerraForm to the purchase of Vivint’s assets, to complete the merger transaction along SunEdison commitments. Since merger, in my opinion, is not considered as an ordinary course of business, and since the transaction itself has been part of the lawsuit brought by Appaloosa Fund, managed by David Tepper questioning its fairness, there is an apparent collision course of the temporary restraining order against the merger. Appaloosa lawsuit if successful would enjoin TerraForm Power from merger agreement, yet SunEdison would be still obligated to buy Vivint. If Judge Ramos decided not to extend the order, under TerraForm enjoining, SunEdison would certainly become responsible for the $799M obligation of that transaction, adding to potential insolvency. It appears that Blackstone owned brands are in conflict, and it is naive to assume the conclusion that this outcome would be a surprise to lawyers seeking arbitration. So what is the game plan here? In my view, restraining order is in place to protect SunEdison from merging with Vivint if TerraForm got enjoined. I suspect that order would be extended under those circumstances and relinquished by some mutual resolution if Appaloosa lost. Since the order is to be argued on February 25th, and, at least, one analyst believes that that deliberation of Appaloosa case will be accelerated to come within the week of Feb. 16 when it was originally heard, this gives enough time for the temporary restraining order to come off or to be held. The situation would be complicated if Appaloosa case did not come before Feb. 25. Order if lifted would return conditions to a prior state, having no point. This is why I suspect order will not be lifted without Appaloosa ruling. Would such order be modified or already allow the merger? I think it would be judicially difficult to argue the same transaction as fair in one court while being deliberated in another court as potentially unfair. This could have an undesired outcome if TERP injunction were granted. It is clear, by the definition of the order to protect assets of SunEdison from disappearing. The merger does the opposite. All above seems to show Blackstone’s concern about SUNE facing merger without TERP transaction, but bringing risk to Vivint’s future, which does not appear to be in good shape as well? I think Blackstone wants to control the game, and this is the move to ensure the game is still played. If TerraForm is enjoined, a case can go to trail. While this happens, Vivint assets could be sold to third parties. Restraining order buys time to do so and makes the injunction harmless. When all is sorted out SunEdison is still able to merge with Vivint, probably handing more game pieces to Blackstone and perhaps take steps to extract money from yieldcos. It can pull out its commitments to Interest Payment Agreements with both, GLBL and TERP, saving about $180M and $38M in this order. It can ask for loans considered as an investment and costs carried to be paid back, producing cash injection of $87M from GLBL and $15M from TERP. Finally, it can sell equity in TerraForm Power as control over it would become gun-shy under the injunction. The value of those shares could dramatically increase if injunction is granted, also helping elimination of the gap in $336M agreement.
  3. The NDRC intended point support PV companies LDK Suntech list 2012-09-30 08:44:04 Source: China Financial Network www.fecn.net the keep abreast of 0 On September 25, the China Securities Journal reported that the National Development and Reform Commission recently-intensive organization of various functional departments research to develop support for the photovoltaic industry development views, as one of the most important financial support, the CDB recently completed on further strengthening the financial and credit support photovoltaic The healthy development of industry recommendations, will focus on ensuring the "six six small 12 PV companies credit line, the rest of the photovoltaic business loans will be subject to the strict control. On September 27, an industry's leading corporate finance department official confirmed to reporters that "six six small list of 12 companies," six ", including: LDK Solar LDK, energy, Suntech, Yingli, Trina light and crystalline Australia. "Six" include: Artes Jingke sun power, Sunergy, Xinao and ReneSola. Another investment profession CDB selection principle of the enterprise, the enterprise prior to the depth of cooperation with the CDB, the power game between the provinces also have an impact on the results. According to previous reports, 12 companies recognized by the CDB, "six" is the leading become the size and brand strength, "six" refers to the science and technology enterprises with independent intellectual property. An industry analyst evaluation of the list is "very tricky." In his view, this list basically includes the industry the most advantage of the enterprise, and can be seen, the CDB selected enterprise or outside The listed companies in the main, these enterprises have a high degree of international influence. According to statistics, the shortlisted companies had most of the CDB had the depth of cooperation. Enterprise has shortlisted six "list, Suntech previously obtained the CDB credit line of 50 billion yuan; Yingli the CDB credit line of 36 billion yuan; Trina Solar to obtain the CDB credit line of 30 billion yuan ; JA had obtained the CDB credit line of 30 billion yuan; GCL Jiangsu Zhongneng CDB won $ 6.2 billion and 2.53 billion yuan loans; LDK Solar CDB won 60 billion yuan credit. The list of six small Artes with CDB signed a five-year period of approximately $ 93.8 million loan agreement; Sunergy CDB won a $ 160 million credit support. In this list, the most contentious than the the LDK Solar finalists. LDK Solar PV companies CDB maximum credit, but as of the end of July, liabilities of up to 88.10%, net operating cash flow -10.74 billion, the financial situation is worrying. Together with its January-July 2012, gross margin was -9.16%, -16.05% July monthly gross margin, sales revenue and increased costs upside down. Net loss of 1.349 billion yuan in January-July 2012, single-month net loss in July than in June, an increase of 267 million yuan, a net loss of a tendency to expand. The leading enterprises in the industry insiders told reporters, The CDB current published list is just to show that attitude, follow a clear policy is the key. CDB cooperation with enterprises, or value the quality of the project. The not selected enterprises also does not mean you can not cooperation with the CDB. There are a lot of companies are also in this list, but also with the CDB had cooperation. Industrial Solar has received the CDB behavior period of 10 years 41 million yuan loan; Ultra-day sun CDB € 1 billion credit support; the Hina Group won the CDB 300 billion line of credit; Hareon and overseas wholly owned subsidiary of application does not exceed EUR 48 million loan to the National Development Bank. http://finance.fecn.net/2012/0930/88597.html