John’s latest update on corruption, bribery and waste in the energy sector.
We’re seeing the end, or perhaps the overhaul, of SunEdison, briefly the world’s largest renewable energy developer – and now the destroyer of a massive $ 10 billion market value. We’ve seen epic failures at Suntech, Solyndra and others – but it’s in a different league.
In 2014, SunEdison jumped in deepwater YieldCo with TerraForm Power and TerraForm Global. The company has made a series of significant and questionable acquisitions in First Wind and Vivint, as well as a series of smaller business additions.
SunEdison has not achieved GAAP profitability for more than five years and lost nearly $ 1 billion in the first three quarters of 2015. When SunEdison’s stock was at its peak, the company raised debt rather than equity, and that debt came back with a vengeance.
It takes a very special kind of ineptitude to fail on such a massive scale in what is, by most indicators, a healthy, capital-rich, high-growth renewable energy market. Other comparable solar companies vertically integrated with YieldCos such as First Solar and SunPower have managed their capital, acquisitions and people in a much smarter and more paced manner. This is evident in their steady growth, global pipeline, and real profits.
Shares of SunEdison closed at $ 1.78 on Friday, giving the company a market cap of $ 560 million. Its shares peaked at over $ 32 in July 2015.
Reuters SunEdison story break:
This is a spooky clip from February of last year. SunEdison’s CEO told CNBC his company is at least 25% undervalued.
SunEdison CEO: We’re 25-30% Undervalued
SunEdison CEO Ahmad Chatila was delighted to discuss the growth potential of First Wind, the $ 2.4 billion wind developer acquisition of SunEdison, on today’s conference call.
Stock markets love the excitement and the potential for growth – and to that end, SunEdison stock was up 29.3% on Big News today. Here are five slides out of the thousands presented this morning that tell a good part of the story.
“We think 2017 will be a lot bigger than 2016.”
Here is the story of the growth: “The ITC problem in the United States? We will go through it, ”said the CEO, adding:“ We will continue to increase our volumes. We think 2017 will be much more important than 2016. “
He continued: “We have taken advantage of this agreement to greatly exceed our weight.”
Why First Wind?
CEO of First Wind Paul Gaynor said what SunEdison and its YieldCo purchased were “high quality assets,” meaning the projects are located in areas with high electricity prices and states must meet RPS requirements . He said the company had “a long-term ownership mindset. […] We are developing projects to own them, and this is the mentality that we are going to adopt. “
He suggested that “marrying” SunEdison’s international development and policy expertise in the country with First Wind’s domain knowledge could create an international platform “that can really set this business on fire. . ” …
Yes indeed Paul. You made a hell of a job setting it on fire. Congratulations!
I wrote on organized crime concerning renewable energies (verifiably) and carbon fraud, which is still in progress problem in the EU. I will now talk a bit about cronyism and fascism. It has also been brought up to corporatism and many do not know how it works. In the financial world, we pay taxes and someone else spends them. Either way, the same people keep making money whether they lose or win. You pay for it and don’t get any benefits until they have a skin in the game.
And now the interview with Paul Gaynor:
Paul Gaynor, CEO of First Wind
(NECN) – In This Week in Business, Paul Gaynor, CEO of First Wind, talks about the recovery in the IPO market and his meeting in Washington this week with Treasury Secretary Geithner and Secretary of the Treasury. ‘Chu Energy on the role that the stimulus money has played in helping his business.
TerraForm Power and NRG Yield: Presentation of Yieldcos
Yieldcos are the new craze to whet the appetite of investors looking for yield. Yieldcos carry significant interest rate risk and their inherent risk profile makes them unsuitable for long-term investors. Yieldcos are also a great tool for corporate sponsors to hold onto profits and socialize losses.
This explosive note written by White House advisers Carol Browner, Ron Klain and Larry Summers explains how “double dipping” by wind developers results in a total government subsidy for loan guarantee recipients exceeding 60% compared to small private capital, as low as 10%. The annex to the note is extracted below. The full memo can be accessed by selecting the link at the bottom of this page …
Annex: Lump-sum loan guarantee for shepherds
The Shepherds Fixed Charge Guarantee illustrates some of the economic and public policy issues raised by the OMB and the Treasury. Shepherds Flat is a proposed 845 megawatt wind farm for Oregon. The $ 1.9 billion project would include 338 GE wind turbines manufactured in South Carolina and Florida and, when completed, would represent the largest wind farm in the country. The promoter’s equity represents approximately 11% of project costs and would generate an estimated return on equity of 30%.
Double soaking: Total government grants are approximately $ 1.2 billion.
Federal grant 1603
|State tax credit||
|Federal accelerated depreciation
and state taxes
|Loan collateral value||
|Premium paid for electricity from the state’s renewable electricity standard||
Skin in the game: The government would provide a large subsidy (65 +%) while the sponsor would provide little in-game skin (roughly 10% equity).
A list of Barack Obama’s contributors and beneficiaries of his $ 787 billion stimulus package.
First Wind – Received $ 232 million in stimulus funds. An audit found that the money only created 125 jobs.
David Shaw: Founder of DE Shaw. Obama bundler and one of the top 3 donors to the Democratic Party. First shareholder of First Wind.
Larry Summers: Party owner of First Wind. Obama’s chief economic adviser.
It’s just a misunderstanding (No, this is not the case)
Summary of Sunedison and Greenlight Capital
David Einhorn winning board seats could trigger a catalyst. Based on the SOTP coins, the shares appear to be worth over $ 15 per share. Management changes and asset sales are expected to act as additional catalysts to unlock shareholder value.
Greenlight Capital by David Einhorn (NASDAQ:GLRE) will add a former hedge fund partner to SunEdison’s board of directors (NYSE:SUNE). With immediate effect, Claire Gogel will join SunEdison’s board of directors. According to deposits, Greenlight Capital will seek to sell various assets or the business outright. SunEdison also agreed to an agreement with Greenlight not to issue equity capital for two years without the approval of nearly all of the board members.
The market is fed up with SunEdison and has criticized the company over 90% in the past six months alone. Is this decrease justified? Is there no value for this business? Will Einhorn be able to unlock shareholder value?
Einhorn’s presence and recent board activity tells us that he sees exceptional value or that he would have left months ago. Let’s see if there is a potential opportunity in SunEdison at current levels.
One man who stars in this mix that Barb and I have written about is Patrick Wood III. He’s with Sun Power (among others) and we’re closely monitoring the development of issues. Here is an article from a while back.
SunPower, a solar panel maker based in San Jose, Calif., Accused a major renewable energy developer of stealing trade secrets on Wednesday.
In a federal lawsuit filed in California, SunPower claims that SunEdison, a solar developer based in St. Louis, MO, gained access to proprietary business information from former SunPower employees who joined SunEdison between 2011 and 2014.
SunEdison hired 20 SunPower employees in the United States, Spain and Italy between 2011 and 2014, according to the lawsuit filed Wednesday in U.S. District Court for the Northern District of California.
The information allegedly stolen by SunEdison included “information on distribution channel strategy, market research, sales roadmaps and other highly confidential documents,” according to the report. Bloomberg.
The lawsuit is indicative of the rapid intensification of competition that is shaping the solar energy industry.
Patrick wood iii
Finally, a CNBC clip from last week on the future of the solar industry.
Is the solar industry booming?
Money Map Press’s DR Barton says the news of SunEdison’s risk of bankruptcy is an isolated incident and does not represent the solar industry as a whole.
From last week: