SunEdison, a pioneering manufacturer of silicon wafers and the world's leading renewable energy developer, has filed for Chapter 11 bankruptcy protection.
The move was not unexpected, as SunEdison incurred about $US12 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 $US20.7 billion in assets and $US16.1 billion in liabilities as of September 30, 2015.
Trading of SunEdison shares has been halted after prices plunged from a high of $US33.44 last July to $US0.34 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 7200 employees pulled in $US2.4 billion in revenue and had an operating income of $US536 million. During the previous 12 months, shares of SunEdison had gained 175 per cent, "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.
Those moves -- relentless and unfocused pursuit of growth through which it invested vast amounts of borrowed money - distinguished SunEdison from other renewable energy companies.
"Not all of its ventures succeeded, which is inevitable in the project development business, but SunEdison's win-to-loss ratio was evidently insufficient. It borrowed a lot of money and lost it -- or at least tied it up in projects at various degrees of completion," she said.
For example, 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," said Tyler Ogden, an analyst with Lux Research. "It guaranteed them a revenu stream from products while still leveraging their experience as a [silicon] wafer producer."
There is plenty of value left to cash in on in SunEdison's project pipeline, which ultimately comprises cash-generating assets not linked to the continued existence of SunEdison, according to Chase. However, the company's investors will need time to do the due diligence in placing a value on those projects correctly before handing over cash for them, she added.
"Some projects, like the portfolio in Andhra Pradesh, India...may be difficult to build at a profit due to the extremely competitive prices they were bid at," Chase said.
SunEdison said it has secured commitments for new capital totaling up to $300 million in debtor-in-possession financing from a consortium of first and second lien lenders.
Chatila said the financial reorganization of his company will result in "an even better position over the long term to utilize our capabilities in the renewable energy sector in service of our customers, business partners, and employees."
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