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How SunEdison went from No. 1 to the edge of bankruptcy

Lucas Mearian | April 1, 2016
The renewable energy producer is not a canary in the coal mine for the industry.

"There's growth opportunities in more and more projects being added into the ownership of the yieldcos," Ogden said. "India is a good example of not only expanding their pipeline, but they were expanding their technology presence, too...looking to develop module manufacturing capacity."

SunEdison's deal to acquire Vivint Solar for $2.2 billion fell apart earlier this month when Vivint terminated the agreement, citing failure by SunEdison to meet its financial obligations.

SunEdison began in 1959 as a major supplier of silicon wafers, which are not only the basis for semiconductor chips but also solar cells used in photovoltaic panels.

While SunEdison sold off its semiconductor subsidiary in the last year to focus on being a renewable-energy corporation, it continued to use its expertise to manufacture solar modules.

Along with purchasing existing hydroelectric and solar power contracts overseas, SunEdison sought to either acquire or create new manufacturing operations in Latin America and China. The company produces fluidized bed reactors for making polysilicon wafers and crystalline silicon ingots, both crucial to the production of solar panels. "Ultimately, they transitioned into becoming a developer because it offered greater returns. It guaranteed them a revenu stream from products while still leveraging their experience as a [silicon] wafer producer," Ogden said.

What went afoul was that SunEdison tried to grow too quickly -- and in too many directions. Another problem: a skyrocketing amount of debt without the ability to show investors its value.

"SunEdison was doing really well a year ago until they decided that they can grow like a tech unicorn," Raj Prabhu, CEO of cleantech research firm Mercom Capital Group, said in an email reply to Computerworld. "They took on billions in debt and went on an acquisition binge on the assumption that their stock price will keep going up. Unfortunately, investors will look at solar yieldcos with skepticism after this. However, yieldcos are typically stable, conservative structures and several other companies have done them right."

When SunEdison's investments didn't pay off, SunEdison began pulling back. It closed polysilicon manufacturing plants in Texas and Malaysia in the second half of 2015 and it cancelled its purchase of Mark Group and Latin American Power.

"They were trying to draw back after expanding, but it was too late in the process," Ogden said.

The renewable energy industry is healthy

Even as SunEdison struggles under the potential of a bankcruptcy filing, the renewable power industry continues to thrive.

SunEdison's financial difficulties shouldn't have a "huge impact on the solar market as a whole," Prabhu said.

"We see this as an isolated incident of mismanagement and overreach by one company," he explained.

Solar energy industry jobs are growing at 20 times the national average. Since the first Solar Jobs Census in 2010, solar industry employment has grown by 86%, according to the Solar Jobs Census. There are now more than 705,000 jobs related to the solar power industry.

 

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