Why SunEdison’s Bankruptcy Doesn’t Throw Shade on Solar
The headquarters of SunEdison is shown in Belmont, California in this April 6, 2016 file photo. REUTERS/NOAH BERGER/FILES
SunEdison filed for bankruptcy yesterday, following a buying spree that sunk the renewable energy company deep into debt.
In its Chapter 11 filing, the company said it had assets of $20.7 billion and liabilities of $16.1 billion, making it the biggest US bankruptcy in more than a year, Bloomberg reports.
SunEdison CEO Ahmad Chatila called the decision to file for bankruptcy protection a “difficult but important step to address our immediate liquidity issues.” In a statement, Chatila said the reorganization will make the company more “streamlined and efficient … shedding non-core assets as well as taking other steps to help us get the most value out of our technological and intellectual property. As a result of this process, we expect that SunEdison will be in an even better position over the long term.”
SunEdison says it has secured $300 to finance day-to-day operations during the reorganization.
Its two publicly-traded companies, TerraForm Power and TerraForm Global, are not part of the bankruptcy. These two firms are known as “yieldcos,” created to buy wind and solar farms from SunEdison, thus providing fresh capital that can be used to build new project. SunEdison’s yieldcos allowed it to make major deals, including buying First Wind, UK energy provider Mark Group, and trying to acquire Vivint Solar for $2.2 billion, which ultimately collapsed last month.
While it’s a big blow to the renewable energy sector, solar executives and observers say the bankruptcy is not a reflection of the industry as a whole.
“A negative outlook of the solar industry as a whole is misguided, as the fundamentals of distributed generation solar have never been better: electricity rates continue to rise and solar continues to get cheaper,” said solar software provider Sighten CEO Conlan O’Leary in an email. “Much of the recent turmoil can be attributed to a maturation and disaggregation of the solar value chain as capital and technology are democratized by new financing products and independent software tools. We’re seeing a more level playing field emerge and companies without a focused strategy and clear value proposition will face significant challenges.”
In an interview with Reuters, Shayle Kann, senior vice president and renewable energy research firm GTM Research, echoes O’Leary: “SunEdison had a balance sheet that is way out of line with any other solar company. The projects themselves are good. They just bought too much too quickly.”
While SunEdison’s purchases led to its financial woes, solar executives are quick to point to recent conventional energy company bankruptcies brought on by low prices and demand. Last week Peabody Energy, the world’s largest privately owned coal company, filed for US bankruptcy protection, joining a several other major coal producers to file for bankruptcy in the past couple years, including Alpha Natural Resources, Patriot Coal and Arch Coal.
Meanwhile investors last year pumped a record $330 billion into solar and wind projects despite low fossil fuel prices. Earlier this week San Francisco adopted an ordinance requiring solar installations on new commercial and residential buildings with 10 or fewer floors. And the Paris climate agreement, signed by more than 160 countries today, will undoubtedly mean more renewable energy projects and clean energy investments globally.
As Alan Russo, senior vice president of sales and marketing at REC Solar, a commercial solar installer, says: this is a great time to be a solar company — a financially responsible one, that is. Duke Energy, the largest utility in the US, owns the majority interest in REC Solar. “For strongly backed, responsible solar companies who are prepared to understand and address customer needs, the future is brighter than ever.”