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SunEdison, world’s largest renewable energy firm, files for bankruptcy

Lucas Mearian | April 22, 2016
Its financial meltdown will have little effect on the renewable energy industry.

SunEdison, a pioneering manufacturer of silicon wafers and the world's leading renewable energy developer, filed for Chapter 11 bankruptcy protection today.

The move was not unexpected, as SunEdison incurred about $12 billion in debt after going on an acquisition binge over the past two years. Those acquisitions "drove its debt to unmanageable levels and sent investors running for the exits," said Jenny Chase, head of solar research at Bloomberg New Energy Finance.

According to its bankruptcy filing, the Maryland Heights, Mo.-based company had $20.7 billion in assets and $16.1 billion in liabilities as of Sept. 30, 2015.

Trading of SunEdison shares has been halted after prices plunged from a high of $33.44 last July to 34 cents on the New York Stock Exchange.

"Our decision to initiate a court-supervised restructuring was a difficult but important step to address our immediate liquidity issues," Ahmad Chatila, SunEdison's CEO, said in a statement. "The court process will allow us to right-size our balance sheet and reduce our debt, providing the opportunity to support the business going forward while focusing on our core strengths. It also will facilitate our continued work towards transforming the company into a more streamlined and efficient operator, shedding non-core assets as well as taking other steps to help us get the most value out of our technological and intellectual property."

While significant, SunEdison's financial meltdown will have little overall affect on the renewable energy industry, according to analysts.

"The bankruptcy says more about the company's strategic decisions than about the solar industry as a whole," Chase said. "Comparable companies SunPower and First Solar have managed a develop-and-sell business profitably over the past three years."

SunEdison was once the fastest growing company in the renewable energy market. In 2014, the company with about 7,200 employees pulled in $2.4 billion in revenue and had an operating income of $536 million. During the previous 12 months, shares of SunEdison had gained 175%, "placing it among the top performers in solar stocks," according to a MarketWatch investor bulletin at the time.

"SunEdison was doing really well a year ago until they decided that they can grow like a tech unicorn," said Raj Prabhu, CEO of cleantech research firm Mercom Capital Group.

In 2014, the solar and wind-power developer began an aggressive expansion. It created two "yield" subsidiaries, TerraForm Power and TerraForm Global. Yieldcos are companies that take over the operating assets of a larger company or companies in order to produce a steady stream of predictable revenue by managing long-term contracts. Those companies began aggressively buying up contracts.

In 2015, SunEdison announced it was buying U.K.-based Mark Group, a renewable energy installer. SunEdison also announced plans to acquire three renewable energy subsidiaries and seven existing renewable energy project contracts in China, India, South Africa, Uruguay and several South American counties.

 

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