Analyst Reaction by Jenny Chase,
BNEF’s Head of Solar Insight
– SunEdison’s bankruptcy says more about the company’s strategic decisions than about the solar industry as a whole. Comparable companies SunPower and First Solar have managed a develop-and-sell business profitably over the past three years.
– What has distinguished SunEdison has been the relentless and unfocused pursuit of growth, in which it has invested vast amounts of borrowed money. Not all of its ventures succeeded, which is inevitable in the project development business, but SunEdison’s win to loss ratio was evidently insufficient. It borrowed a lot of money and lost it – or at least tied it up in projects at various degrees of completion, which it needs to sell to realise the gains and pay back creditors. On the eve of the bankruptcy filing, these projects were for sale.
– There is plenty of value in the project pipeline, which ultimately comprises cash-generating assets not linked to the continued existence of SunEdison. However, investors will take time to do the due diligence to value these projects correctly before handing over cash for them. Some projects, like the portfolio in Andhra Pradesh, India at the lowest-ever tariff of INR 4.63/kWh ($70/MWh), may be difficult to build at a profit due to the extremely competitive prices they were bid at.
– Bloomberg New Energy Finance suspects that if yieldcos are to make a return, they will need to have a management team that is not directly affiliated with a developer, and which investors trust to serve their interests exclusively.
– Ultimately this makes no difference to Bloomberg New Energy Finance’s new build forecasts, although it might prompt developers to be less ambitious with their assumptions when bidding in solar tenders. This may mean a temporary end to the stream of records for ‘lowest tender price bid’ as companies try not to offer solar electricity below cost.
For further information, please visit http://www.bloomberg.com/news/articles/2016-04-21/sunedison-files-for-bankruptcy-after-acquisition-binge