A struggling global portfolio is eclipsing SunEdison’s mega solar dreams.The world’s largest renewable energy developer is significantly downsizing its India footprint by monetising its entire 400 mw of solar capacity that is expected to come on stream by early next year. Investment bank Goldman Sachs has been mandated to manage the sale as the Belmont, California-headquartered SunEdison Inc is looking to prune its global portfolio and cut costs after expanding at a frenzied pace through a series of global mergers and acquisitions (M&As) of over $6 billion in less than a year, said people aware of the matter.
Preliminary feelers have gone out to several global and local renewable energy companies and green energy-focussed private equity funds, they said. The company is said to be expecting a valuation of $500-600 million for the assets.This development also comes immediately after SunEdison pulled out from buying Continuum Wind earlier this month, which would have been its boldest bet in India. The Continuum buyout, announced in June, would also have been the largest clean tech M&A in the country till date. Even though the deal value was never disclosed officially, sources involved estimated size to be Rs 3,700-3,900 crore. There was no response to emails sent to SunEdison and Continuum Wind on Monday as of press time. Goldman Sachs declined comment.
The fundamental reason why SunEdison is in distress globally has been its inability to raise as much money as expected by listing TerraForm Global in Nasdaq this July. TerraForm Global, established as a yieldco to acquire renewable energy assets in emerging markets, raised only $675 million by selling 45 million shares at $15 a share in its initial public offering (IPO), pricing a reduced number of shares below the original range of $19-21 a share. The shortfall triggered a slump in its share, which is down 65% since listing, and has put severe pressure on cash flow and liquidity. This in turn jeopardised growth and acquisition plans, including Continuum, which were to be funded with the IPO money.
The yieldco model has become increasingly common in the renewable energy industry. Developers need capital for new projects, so they create a separate, publicly traded unit to buy assets once they’re completed. The yieldco’s function is to collect revenue from selling electricity, helping fund the purchase of more power plants.”They have made significant commitments to acquire assets globally. That has increased their credit risk and with the IPO bombing, they need to unlock some value for their investors in the US. Their equity shares have bottomed out, their bond prices have shot up. They are already having a hard second look at their existing portfolio and cutting losses,” said an analyst tracking developments.
SunEdison had said in October it would cut 15% of its 7,260-strong global workforce. It has already terminated a $700-million deal to buy renewable energy firm Latin American Power, which operates assets in Chile and Peru. Plans to absorb its Vivint Solar unit are also reportedly in trouble. To soothe investor nerves, SunEdison has said it will simplify business structure by centralising global business development and operations.