GREEN ENERGY CHRONICLES
John's latest update on graft, corruption and waste in the energy sector.
SunEdison: A Timeline of the Biggest Corporate Implosion in US Solar History
We are witnessing the end, or perhaps the remaking, of SunEdison, briefly the world's largest renewables developer -- and now the destroyer of a massive $10 billion in stock market value. We've seen epic failure at Suntech, Solyndra and the like -- but this is in a different league.
In 2014, SunEdison jumped into deep YieldCo waters with TerraForm Power and TerraForm Global. The company made a series of large, questionable acquisitions in First Wind and Vivint, as well as a slew of lesser corporate additions.
SunEdison has not reached GAAP profitability in more than five years and lost almost $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 load has returned with a vengeance.
It takes a very special type of ineptitude to fail on such a massive scale in what is, by most metrics, a healthy, capital-rich, high-growth renewables market. Other comparable vertically-integrated solar companies with YieldCos such as First Solar and SunPower have managed their capital, acquisitions and personnel in a much more well-paced and judicious fashion. It's evident in their steady growth, global pipeline and actual profits.
SunEdison shares closed at $1.78 Friday, giving the company a market cap of $560 million. Its shares peaked at over $32 in July 2015.
Breaking SunEdison story from Reuters:
This is a frightening clip from February last year. SunEdison CEO tells CNBC that his company is at least 25% undervalued.
SunEdison CEO: We are 25-30% Undervalued
SunEdison CEO Ahmad Chatila was excited to speak about the growth potential of First Wind, SunEdison's $2.4 billion wind developer acquisition, during today's analyst call.
Stock markets like excitement and growth potential -- and to that end, SunEdison stock was up 29.3 percent on the big news today. Here are five slides out of the thousands shown this morning that tell a good part of the story.
"We think 2017 will be a lot larger than 2016."
Here's the growth story: "The ITC issue in the U.S.? We're going to plow through it," said the CEO, adding, "We're going to continue to increase our volumes. We think 2017 will be a lot larger than 2016."
He continued, "We took advantage of this deal to punch above our weight in a big way."
Why First Wind?
First Wind CEO Paul Gaynor said that what SunEdison and its YieldCo bought were "high-quality assets," meaning the projects are located in areas with high electricity prices and states needing to meet RPS requirements. He said the firm has "a mindset of long-term ownership. [...] We develop projects to own them, and that's the mindset we're going to take forward."
He suggested that the "marriage" of SunEdison's international in-country development and policy expertise with First Wind's domain knowledge could create an international platform "that can really set this company on fire."...
Yes indeed Paul. You did one HELL of a job setting it on fire. Congratulations!
I've written about organized crime regarding renewables (verifiably) and carbon fraud, which is still an ongoing problem in the EU. Now I will touch a bit on cronyism and fascism. This also has also been referred to corporatism and many are unaware of how that works. In the financial world we pay taxes and someone else spends it. Somehow, the same folks keep getting the money whether they lose or win. You pay for it and get no benefit while they have no skin in the game.
And now the interview with Paul Gaynor:
Paul Gaynor, CEO of First Wind
(NECN) - On This Week in Business, Paul Gaynor, the CEO of First Wind talks about the upturn in the IPO market and his meeting in Washington this week with Treasury Secretary Geithner and Energy Secretary Chu about the role stimulus money has played in helping his business.
TerraForm Power And NRG Yield: Introducing The Yieldcos
Yieldcos are the newfangled craze to whet the appetite of yield-chasing investors. Yieldcos carry a significant interest rate risk and their inherent risk profile makes them unsuitable for long-term investors. Yieldcos are also a great tool for sponsor companies to retain profits and socialize losses.
This explosive memo authored by White House advisers Carol Browner, Ron Klain, and Larry Summers explains how "double-dipping" by wind developers is resulting in the total government subsidy for loan guarantee recipients exceeding 60% against small private equity, as low as 10%. The appendix included with the memo is excerpted below. The full memo can be accessed by selecting the link at the bottom of this page...
Appendix: Shepherds Flat Loan Guarantee
The Shepherds Flat load guarantee illustrates some of the economic and public policy issues raised by OMB and Treasury. Shepherds Flat is an 845-megawatt wind farm proposed for Oregon. The $1.9 billion project would consist of 338 GE wind turbines manufactured in South Carolina and Florida and, upon completion it would represent the largest wind farm in the country. The sponsor's equity is about 11% of the project costs, and would generate an estimated return on equity of 30%.
Double dipping: The total government subsidies are about $1.2 billion.
Federal 1603 grant
|State tax credit||
|Accelerated depreciation on Federal
and State taxes
|Value of loan guarantee||
|Premium paid for power from state renewable electricity standard||
Skin in the game: The government would provide a significant subsidy (65+%) while the sponsor would provide little skin in the game (equity about 10%).
A who's who list of Barack Obama contributors and recipients of his $787 billion stimulus program.
First Wind – Received $232 million in stimulus funds. An audit revealed 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. Largest shareholder of First Wind.
Larry Summers: Part owner of First Wind. Obama’s Chief Economic Advisor.
It's just a misunderstanding (no it isn't)
Sunedison Summary and Greenlight Capital
David Einhorn gaining board seats could spark a catalyst. On a SOTP parts basis, shares appear to be worth over $15 per share. Managerial changes and asset sales should act as additional catalysts for unlocking shareholder value.
David Einhorn's Greenlight Capital (NASDAQ:GLRE) will add a former partner from the hedge fund to the board of SunEdison (NYSE:SUNE). Effective immediately, Claire Gogel will join the board of SunEdison. According to filings, Greenlight Capital will look to sell various assets or the company outright. SunEdison also agreed to a deal with Greenlight not to issue equity for two years without the approval of almost all members of the board.
The market is fed up with SunEdison and slammed the company over 90% in only the last six months. Is this decline justified? Is there no value to this company? Will Einhorn be able to unlock shareholder value?
Einhorn's presence and recent board activity tell us that he sees the exceptional value or he would've left months ago. Let's see if there is a potential opportunity in SunEdison at current levels.
One man that is a player in this mix that both Barb and I have written about is Patrick Wood III. He is at Sun Power (among others) and we are keeping a close watch on developing issues. Here is an article from a short while back.
On Wednesday, SunPower, a solar panel manufacturer based in San Jose, Calif., accused a leading renewable energy developer of stealing trade secrets.
In a federal lawsuit filed in California, SunPower claims that SunEdison, a solar developer based in St. Louis, MO, obtained access to proprietary business information from former SunPower employees who joined SunEdison between 2011 and 2014.
SunEdison hired 20 employees from SunPower in the U.S., Spain and Italy between 2011 to 2014, according to the complaint filed on Wednesday in the U.S. District Court for the Northern District of California.
The information allegedly purloined by SunEdison included “distribution channel strategy information, market research, sales roadmaps and other highly confidential documents,” according to Bloomberg.
The lawsuit is indicative of the rapidly escalating intensity of competitive shaping the solar power industry.
Patrick Wood III
Finally, a clip from CNBC last week on the future of the solar industry.
Is the solar industry sizzling out?
D.R. Barton from Money Map Press says news of SunEdison's bankruptcy risk is an isolated incident, and does not represent the larger solar industry.
From last week: