SunEdison Gets $75M from JPM Capital for Solar Projects - Analyst Blog

Zacks Equity Research
Updated

SunEdison Inc. (SUNE) recently announced that it has secured a $75 million investment from JPM Capital Corporation for its $175 million solar energy development fund. Post the announcement, shares of SunEdison closed 1.40% higher in yesterday’s trading session.

SunEdison further revealed that TerraForm Power Inc. (TERP) will invest $100 million to the fund. The whole fund will be utilized by TerraForm to buy up to 60 megawatts (MW) of SunEdison’s solar projects developed in 2014 and 2015.

TerraForm is a subsidiary of SunEdison which acts as a yieldco of the parent company. Yieldco companies are formed to buy operating assets from the parent company to generate higher cash flows. SunEdison separated TerraForm earlier this year in a public offering. Currently, SunEdison owns a 65% stake in TerraForm.

We believe that this debt financing agreement will help in accelerating growth of the company’s project portfolio. Also, this financing would increase the confidence of prospective project partners.

Prior to this, the company secured a $117 million fund from Barclays and Citi to finance its solar projects in the United States. Earlier, SunEdison also closed a $146 million non-recourse debt financing from International Finance Corporation (IFC), the Central American Bank for Economic Integration (CABEI) and the OPEC Fund for International Development (OFID) to fund its 81.7 MW of solar project development in Honduras.

The rising demand for clean energy globally is benefiting SunEdison. This is evident from the recent solar power supply contract won in Brazil and Chile. Moreover, last month, SunEdison entered into a definitive agreement to acquire privately held wind power developer and operator, First Wind. The acquisition is expected to help SunEdison in expanding its foothold in the U.S. wind energy market.

SunEdison’s focus on expanding clean energy capabilities through acquisitions should drive its long-term growth. We believe that the demand for clean energy will increase manifolds over the next few years due to environmental concerns and depleting natural resources. SunEdison being the world’s leading developer of solar energy is well positioned to capitalize on this opportunity.

Nevertheless, solar projects require considerable time and investment and any delay or inability in selling these projects at desired prices could affect liquidity, in our opinion.

The pricing environment and a highly leveraged balance sheet remain the other concerns for SunEdison. Competition from SunPower Corp. (SPWR) and First Solar Inc. (FSLR) further adds to the woes.

Currently, SunEdison has a Zacks Rank #5 (Strong Sell).


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