Troubled SunEdison should look at wind sale

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Richard Heap
April 8, 2016
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This content is from our archive. Some formatting or links may be broken.
Troubled SunEdison should look at wind sale

“Boy, that escalated quickly.”

It is the quote by Ron Burgundy in Anchorman that has been made famous by an internet meme. It could also easily refer to the fast-escalating problems for developer SunEdison.

If you have been reading A Word About Wind for the last 18 months then you will know all the background. In January 2015, SunEdison completed a $2.4bn buyout of First Wind to move into the wind sector, and it followed this up by announcing a series of other takeovers in wind, emerging markets and domestic solar.

It was an exciting and crazy period, and it is now falling apart.

Most of those deals have been aborted as SunEdison grapples with huge debts, which are currently around $12bn compared to its annual sales of $2.5bn; and the steep drop in investor demand for shares in either itself or its yieldcos, TerraForm Global and TerraForm Power. SunEdison is now on the verge of bankruptcy and facing a series of legal claims from creditors, including for $231m by First Wind’s former owners. It is also being sued by TerraForm Global and investigated by the US Justice Department.

Phew! So what next? Well, it is safe to say SunEdison is likely to file for bankruptcy in the coming weeks, and would face a long fight if it is to restructure as a stable and profitable business. But what role does wind play in the future of this solar giant?

Given that SunEdison is now focused on survival, it would make sense for it to sell working wind farms to help reduce its debts. This would open up some interesting investment deals.

The problem is that SunEdison owns more development-stage projects than working wind farms. When SunEdison and TerraForm Power bought First Wind, it was TerraForm that got the 500MW of working projects and SunEdison that got an 8GW project pipeline.

Now, SunEdison cannot force TerraForm to sell these projects, and TerraForm does not need to sell these projects for its own sake as it could carry on as a standalone business.

This leaves SunEdison with the option of selling development-stage projects, but we do not see this as a great choice either. Selling unbuilt projects like this would not help the company to make much impact on an $11bn debt pile. Our feeling is that SunEdison is more likely to want to hold onto the projects and
build them itself — if it survives long enough.

But again, this would not be easy as SunEdison has been losing key members of its wind team. The most high-profile of these departures was in February when its executive vice president Paul Gaynor, the former chief executive of First Wind, moved on. On that basis, wind may not have a future in SunEdison at all.

In fact, we think there is a strong possibility that SunEdison could look to exit wind by selling First Wind’s assets and development portfolio into a new company. It could even be that Gaynor’s exit from SunEdison in February is paving the way for such a move. This could herald the start of a new wind developer picking up where First Wind left off.

This may look like a long shot. It makes sense for SunEdison to diversify by working in the wind sector as well as solar; and selling First Wind would be a big admission of the folly of its acquisition-powered growth strategy. However, a sale like this would be a quick way to reduce its debts and to give the company more chance to focus on the solar sector and its main priority: survival.

Selling First Wind would be an embarrassing move, but we have gone far beyond that. For now, it is less important to save face and more important to save the business.

“Boy, that escalated quickly.”

It is the quote by Ron Burgundy in Anchorman that has been made famous by an internet meme. It could also easily refer to the fast-escalating problems for developer SunEdison.

If you have been reading A Word About Wind for the last 18 months then you will know all the background. In January 2015, SunEdison completed a $2.4bn buyout of First Wind to move into the wind sector, and it followed this up by announcing a series of other takeovers in wind, emerging markets and domestic solar.

It was an exciting and crazy period, and it is now falling apart.

Most of those deals have been aborted as SunEdison grapples with huge debts, which are currently around $12bn compared to its annual sales of $2.5bn; and the steep drop in investor demand for shares in either itself or its yieldcos, TerraForm Global and TerraForm Power. SunEdison is now on the verge of bankruptcy and facing a series of legal claims from creditors, including for $231m by First Wind’s former owners. It is also being sued by TerraForm Global and investigated by the US Justice Department.

Phew! So what next? Well, it is safe to say SunEdison is likely to file for bankruptcy in the coming weeks, and would face a long fight if it is to restructure as a stable and profitable business. But what role does wind play in the future of this solar giant?

Given that SunEdison is now focused on survival, it would make sense for it to sell working wind farms to help reduce its debts. This would open up some interesting investment deals.

The problem is that SunEdison owns more development-stage projects than working wind farms. When SunEdison and TerraForm Power bought First Wind, it was TerraForm that got the 500MW of working projects and SunEdison that got an 8GW project pipeline.

Now, SunEdison cannot force TerraForm to sell these projects, and TerraForm does not need to sell these projects for its own sake as it could carry on as a standalone business.

This leaves SunEdison with the option of selling development-stage projects, but we do not see this as a great choice either. Selling unbuilt projects like this would not help the company to make much impact on an $11bn debt pile. Our feeling is that SunEdison is more likely to want to hold onto the projects and
build them itself — if it survives long enough.

But again, this would not be easy as SunEdison has been losing key members of its wind team. The most high-profile of these departures was in February when its executive vice president Paul Gaynor, the former chief executive of First Wind, moved on. On that basis, wind may not have a future in SunEdison at all.

In fact, we think there is a strong possibility that SunEdison could look to exit wind by selling First Wind’s assets and development portfolio into a new company. It could even be that Gaynor’s exit from SunEdison in February is paving the way for such a move. This could herald the start of a new wind developer picking up where First Wind left off.

This may look like a long shot. It makes sense for SunEdison to diversify by working in the wind sector as well as solar; and selling First Wind would be a big admission of the folly of its acquisition-powered growth strategy. However, a sale like this would be a quick way to reduce its debts and to give the company more chance to focus on the solar sector and its main priority: survival.

Selling First Wind would be an embarrassing move, but we have gone far beyond that. For now, it is less important to save face and more important to save the business.

“Boy, that escalated quickly.”

It is the quote by Ron Burgundy in Anchorman that has been made famous by an internet meme. It could also easily refer to the fast-escalating problems for developer SunEdison.

If you have been reading A Word About Wind for the last 18 months then you will know all the background. In January 2015, SunEdison completed a $2.4bn buyout of First Wind to move into the wind sector, and it followed this up by announcing a series of other takeovers in wind, emerging markets and domestic solar.

It was an exciting and crazy period, and it is now falling apart.

Most of those deals have been aborted as SunEdison grapples with huge debts, which are currently around $12bn compared to its annual sales of $2.5bn; and the steep drop in investor demand for shares in either itself or its yieldcos, TerraForm Global and TerraForm Power. SunEdison is now on the verge of bankruptcy and facing a series of legal claims from creditors, including for $231m by First Wind’s former owners. It is also being sued by TerraForm Global and investigated by the US Justice Department.

Phew! So what next? Well, it is safe to say SunEdison is likely to file for bankruptcy in the coming weeks, and would face a long fight if it is to restructure as a stable and profitable business. But what role does wind play in the future of this solar giant?

Given that SunEdison is now focused on survival, it would make sense for it to sell working wind farms to help reduce its debts. This would open up some interesting investment deals.

The problem is that SunEdison owns more development-stage projects than working wind farms. When SunEdison and TerraForm Power bought First Wind, it was TerraForm that got the 500MW of working projects and SunEdison that got an 8GW project pipeline.

Now, SunEdison cannot force TerraForm to sell these projects, and TerraForm does not need to sell these projects for its own sake as it could carry on as a standalone business.

This leaves SunEdison with the option of selling development-stage projects, but we do not see this as a great choice either. Selling unbuilt projects like this would not help the company to make much impact on an $11bn debt pile. Our feeling is that SunEdison is more likely to want to hold onto the projects and
build them itself — if it survives long enough.

But again, this would not be easy as SunEdison has been losing key members of its wind team. The most high-profile of these departures was in February when its executive vice president Paul Gaynor, the former chief executive of First Wind, moved on. On that basis, wind may not have a future in SunEdison at all.

In fact, we think there is a strong possibility that SunEdison could look to exit wind by selling First Wind’s assets and development portfolio into a new company. It could even be that Gaynor’s exit from SunEdison in February is paving the way for such a move. This could herald the start of a new wind developer picking up where First Wind left off.

This may look like a long shot. It makes sense for SunEdison to diversify by working in the wind sector as well as solar; and selling First Wind would be a big admission of the folly of its acquisition-powered growth strategy. However, a sale like this would be a quick way to reduce its debts and to give the company more chance to focus on the solar sector and its main priority: survival.

Selling First Wind would be an embarrassing move, but we have gone far beyond that. For now, it is less important to save face and more important to save the business.

“Boy, that escalated quickly.”

It is the quote by Ron Burgundy in Anchorman that has been made famous by an internet meme. It could also easily refer to the fast-escalating problems for developer SunEdison.

If you have been reading A Word About Wind for the last 18 months then you will know all the background. In January 2015, SunEdison completed a $2.4bn buyout of First Wind to move into the wind sector, and it followed this up by announcing a series of other takeovers in wind, emerging markets and domestic solar.

It was an exciting and crazy period, and it is now falling apart.

Most of those deals have been aborted as SunEdison grapples with huge debts, which are currently around $12bn compared to its annual sales of $2.5bn; and the steep drop in investor demand for shares in either itself or its yieldcos, TerraForm Global and TerraForm Power. SunEdison is now on the verge of bankruptcy and facing a series of legal claims from creditors, including for $231m by First Wind’s former owners. It is also being sued by TerraForm Global and investigated by the US Justice Department.

Phew! So what next? Well, it is safe to say SunEdison is likely to file for bankruptcy in the coming weeks, and would face a long fight if it is to restructure as a stable and profitable business. But what role does wind play in the future of this solar giant?

Given that SunEdison is now focused on survival, it would make sense for it to sell working wind farms to help reduce its debts. This would open up some interesting investment deals.

The problem is that SunEdison owns more development-stage projects than working wind farms. When SunEdison and TerraForm Power bought First Wind, it was TerraForm that got the 500MW of working projects and SunEdison that got an 8GW project pipeline.

Now, SunEdison cannot force TerraForm to sell these projects, and TerraForm does not need to sell these projects for its own sake as it could carry on as a standalone business.

This leaves SunEdison with the option of selling development-stage projects, but we do not see this as a great choice either. Selling unbuilt projects like this would not help the company to make much impact on an $11bn debt pile. Our feeling is that SunEdison is more likely to want to hold onto the projects and
build them itself — if it survives long enough.

But again, this would not be easy as SunEdison has been losing key members of its wind team. The most high-profile of these departures was in February when its executive vice president Paul Gaynor, the former chief executive of First Wind, moved on. On that basis, wind may not have a future in SunEdison at all.

In fact, we think there is a strong possibility that SunEdison could look to exit wind by selling First Wind’s assets and development portfolio into a new company. It could even be that Gaynor’s exit from SunEdison in February is paving the way for such a move. This could herald the start of a new wind developer picking up where First Wind left off.

This may look like a long shot. It makes sense for SunEdison to diversify by working in the wind sector as well as solar; and selling First Wind would be a big admission of the folly of its acquisition-powered growth strategy. However, a sale like this would be a quick way to reduce its debts and to give the company more chance to focus on the solar sector and its main priority: survival.

Selling First Wind would be an embarrassing move, but we have gone far beyond that. For now, it is less important to save face and more important to save the business.

“Boy, that escalated quickly.”

It is the quote by Ron Burgundy in Anchorman that has been made famous by an internet meme. It could also easily refer to the fast-escalating problems for developer SunEdison.

If you have been reading A Word About Wind for the last 18 months then you will know all the background. In January 2015, SunEdison completed a $2.4bn buyout of First Wind to move into the wind sector, and it followed this up by announcing a series of other takeovers in wind, emerging markets and domestic solar.

It was an exciting and crazy period, and it is now falling apart.

Most of those deals have been aborted as SunEdison grapples with huge debts, which are currently around $12bn compared to its annual sales of $2.5bn; and the steep drop in investor demand for shares in either itself or its yieldcos, TerraForm Global and TerraForm Power. SunEdison is now on the verge of bankruptcy and facing a series of legal claims from creditors, including for $231m by First Wind’s former owners. It is also being sued by TerraForm Global and investigated by the US Justice Department.

Phew! So what next? Well, it is safe to say SunEdison is likely to file for bankruptcy in the coming weeks, and would face a long fight if it is to restructure as a stable and profitable business. But what role does wind play in the future of this solar giant?

Given that SunEdison is now focused on survival, it would make sense for it to sell working wind farms to help reduce its debts. This would open up some interesting investment deals.

The problem is that SunEdison owns more development-stage projects than working wind farms. When SunEdison and TerraForm Power bought First Wind, it was TerraForm that got the 500MW of working projects and SunEdison that got an 8GW project pipeline.

Now, SunEdison cannot force TerraForm to sell these projects, and TerraForm does not need to sell these projects for its own sake as it could carry on as a standalone business.

This leaves SunEdison with the option of selling development-stage projects, but we do not see this as a great choice either. Selling unbuilt projects like this would not help the company to make much impact on an $11bn debt pile. Our feeling is that SunEdison is more likely to want to hold onto the projects and
build them itself — if it survives long enough.

But again, this would not be easy as SunEdison has been losing key members of its wind team. The most high-profile of these departures was in February when its executive vice president Paul Gaynor, the former chief executive of First Wind, moved on. On that basis, wind may not have a future in SunEdison at all.

In fact, we think there is a strong possibility that SunEdison could look to exit wind by selling First Wind’s assets and development portfolio into a new company. It could even be that Gaynor’s exit from SunEdison in February is paving the way for such a move. This could herald the start of a new wind developer picking up where First Wind left off.

This may look like a long shot. It makes sense for SunEdison to diversify by working in the wind sector as well as solar; and selling First Wind would be a big admission of the folly of its acquisition-powered growth strategy. However, a sale like this would be a quick way to reduce its debts and to give the company more chance to focus on the solar sector and its main priority: survival.

Selling First Wind would be an embarrassing move, but we have gone far beyond that. For now, it is less important to save face and more important to save the business.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.