SunEdison is one of the biggest players in the U.S. solar industry and for a time was the fastest growing renewables firm in America. But its fortunes have dimmed quite a bit in recent months as today the company stares down more than $12 billion in debt and the looming threat of bankruptcy.
As its stock price has plummeted, SunEdison has started selling off various subsidiaries around the world, shedding a Japanese asset in February, and as Reuters reports the company is currently working to sell stakes in various Indian solar projects:
SunEdison Inc is in talks to sell minority stakes in its Indian solar projects to Finland’s Fortum, two sources said, as the U.S. firm seeks funds to finish proposed plants in India amid concerns about its finances at home…SunEdison said in an email it was in discussions for equity partners in its projects but declined to name any investor. The company has around 600 MW of projects constructed and financed in India, with plans to build another 1,700 MW in the coming year, according to one of the sources.
Bankruptcy for the once rising star no longer seems a question of “if,” but rather “when.” And, as Reuters details, the company just admitted that an independent auditing committee found issues with the way the company has managed its cash:
The committee said in a regulatory filing that management’s assumptions about the company’s cash forecasts were overly optimistic and it did not respond appropriately when forecasts were not met.
“These accounting issues are a side issue … SunEdison’s fundamental problem is the excessive leverage, which is why there is a high likelihood of bankruptcy within weeks,” Raymond James analyst Pavel Molchanov said.
The audit stopped short of accusing SunEdison of fraud, but the sort of eco-mania that pushed the optimistic solar firm to ignore firm economic realities isn’t much better for shareholders that have seen the price of the company’s stock plunge 99 percent over the past year. And SunEdison isn’t the only solar company struggling—the stock price of Elon Musk’s SolarCity has fallen nearly 50 percent from a December high, and solar stock indexes have had a torrid 2016.
So why are investors now so wary of the solar industry? The collapse in oil prices hasn’t helped the renewable energy source, because while solar might not directly compete with oil as a source of electricity generation, the fact that the fossil fuel (along with its cousin natural gas) is currently plentiful and cheap makes the kinds of subsidies necessary to prop up renewables like solar a lot less politically justifiable.
Which leads to the next big concern for solar: the fight over net metering—a producer-friendly subsidy that guarantees the ability for suppliers to sell excess power back to the grid—going on at the state level here in America. Net metering generally favors solar producers while putting a strain on utilities, and many states (like Nevada) are looking at reworking this arrangement. If that goes, however, so too goes the economic viability of many of these solar projects. It’s no wonder stock prices are falling.
SunEdison’s march towards bankruptcy has plenty to do with its own specific brand of mismanagement, but it also evinces a deeper truth about the current state of the U.S. solar industry. Yes, it’s growing, but it’s doing so on the back of generous government subsidies. Buy into the hype at your own risk.