This week eyes were again on SunEdison Inc., the world’s biggest clean-power developer, as it navigates the complexities of a financial restructuring. The company is talking with creditors though it said the discussions are ongoing and there’s “no assurance” they will result in a deal over its financing.
The company and its first-and second-lien lenders entered into a confidentiality pact on March 17 for the financing transactions in a potential bankruptcy filing, the company disclosed in a filing to the Securities and Exchange Commission, which included a 34-page slide presentation to creditors.
The company may need a $310m loan to fund it through a potential bankruptcy process, according to the March 17 presentation. The company said it expects to reduce headcount by 50% from its October 2015 base and make additional non-labor savings of $150m.
The renewable-energy company, already teetering on the brink of bankruptcy, missed a bond payment this month. SunEdison was supposed to pay $2.6m April 1 on its 2% convertible bonds, which are due in 2018, according to data compiled by Bloomberg. SunEdison has a grace period through May 1. The trustee, Wilmington Trust Corp., confirmed April 11 that the payment was missed, according to data compiled by Bloomberg. Ben Harborne, a SunEdison spokesman, declined to comment April 13.
The fallout from SunEdison has affected its publicly traded yieldcos, TerraForm Power Inc and TerraForm Global Inc. Invesco Ltd., one of the largest investors in TerraForm Power, sold more than half of the Class A shares it held.
Indeed, the SunEdison case has resonated even further afield. Indian lenders are becoming increasingly reluctant to finance solar-power projects by foreign companies as bankruptcy threatens the American giant, creditors familiar with the matter said last week. Lenders in Asia’s No. 3 economy are hesitating as record-low Indian solar tariffs stoke concern that projects could struggle financially, the three people said, asking not to be identified citing the sensitivity of the topic.
That’s a threat to Prime Minister Narendra Modi’s goal of a roughly $100bn expansion of solar power, aided by foreign investment, a target he set for energy security and to curb fossil-fuel pollution. Indian bankers are sensitive to heightened risk as they grapple with the nation’s worst bad-debt pile up in more than a decade after infrastructure investments soured.
Meanwhile, SunEdison is seeking to sell as much as 1GW of unfinished projects in India. TerraForm Global, its yieldco focusing on emerging markets, in a lawsuit filed April 3 in Delaware alleged SunEdison misused $231m earmarked for projects in India.
In other investment news, Greencoat U.K. Wind said it wants to raise as much as GBP 100m ($141m) by selling new shares in order to repay loans and fund potential acquisitions.
The infrastructure fund with a focus on wind energy wants to sell as many as 300m new shares priced at 105 pence apiece, according to a regulatory filing on April 14. The GBP 80m to GBP 100m expected to be raised by the sale will allow the fund to grow at a “reasonable rate,” Greencoat partner Stephen Lilley said by telephone. Greencoat has a self-imposed leverage limit of 40% and it is currently just over 38%, Lilley said.
In conventional power, coal investments continue to be questioned, as Norway’s $860bn sovereign wealth fund unveiled the first list of miners and power producers to be excluded from its portfolio following a ban on coal investments.
The 52 companies being barred include American Electric Power Co. Inc., China Shenhua Energy Co. Ltd., Whitehaven Coal Ltd., Tata Power Co. and Peabody Energy Corp., according to a statement from Norges Bank Investment Management, the unit of Norway’s central bank that manages the world’s biggest wealth fund. The exclusions are based on new criteria introduced by the government in February impacting companies that base at least 30% of their activities or revenues on coal.
Buffett-watchers had clean power in their sights last week after it was disclosed that Warren Buffett’s MidAmerican Energy Co. is planning a $3.6bn wind farm in Iowa with a capacity of 2,000MW. The Wind XI project would be the largest economic development project in the state’s history, Iowa Governor Terry Branstad said in a statement. MidAmerican is filing a request for the wind farm with the state’s Utilities Board.
The changes being wrought by investment shifts in the energy sector surfaced again when France’s CFDT union said Total SA may combine its gas, renewable and power activities as part of a reorganisation by the French oil company.
Total will present its plans to employees on April 19, including the creation of a Gas, Renewables and Power division and another called Total Global Services, the union said on its website. Total currently has three business segments, including Upstream that comprises exploration and production and the gas division. Marketing & Services operates gas stations and develops solar and biomass energies, while Refining & Chemicals also includes crude trading and shipping activities. A spokeswoman for Total didn’t immediately respond to a call seeking comment.
Finally, solar has been marking up some firsts of late, with India becoming the largest customer of Chinese solar cells and modules for the first time in January, accounting for nearly a fourth of exports as developers rush to meet Prime Minister Modi’s targets, according to data from Bloomberg New Energy Finance.
Fortum Oyj made India its cornerstone investment in what may become a billion-euro effort by the Finnish energy company to develop a gigawatt-sized portfolio of wind and solar power.
The company will spend as much as EUR 400m ($457m) to build solar power installations in India, Fortum said. The company is also looking to expand its renewable energy footprint in other Asian markets as it seeks to invest a EUR $9bn pile of cash.
“India is the first country Fortum has decided to enter, as the country offers one of the best solar resources and a sound government support for the development of the solar sector,” the company said.
Meanwhile, solar tariffs have reached new lows in India according to research by Bloomberg New Energy Finance. Solar costs are also lower in Germany, the government hailed results from its fourth test auction of solar power, where bidders drove prices to record lows, as proof markets can make renewable power more competitive.
The 125MW auction of utility-scale power drew bids equivalent to 540MW with the winners offering 7.41 euro cents ($0.84) per kWh, Germany’s Federal Network Regulator said. The previous three auctions of utility-scale power drew winning bids of 9.2 cents, 8.5 cents and 8 cents.
And it’s not just bidders cutting prices. For the first time in three years, First Solar Inc. in the US is making panels for less than China’s biggest producer, justifying more than $3bn in loan guarantees from the US government. After investing $775m in technology, First Solar is producing panels for as little as 40 cents a watt, or about 15% less than China’s Trina Solar Ltd. In 2019, First Solar’s module cost could be as low as 25 cents a watt, according to analysts’ models.
“The Chinese have hit a wall in terms of polysilicon costs and technology,” Jeffrey Osborne, a Cowen & Co. analyst in New York, said in an interview. “There aren’t a lot of levers left for them to pull and their labor costs are rising.”