SunEdison Surges Most in 14 Years on Sale of India Projects

  • Solar farms are in operation now or will be done next quarter
  • Proceeds of $231 million used to pay down Deutsche Bank loan

SunEdison Inc. jumped the most in 14 years after agreeing to sell 425 megawatts of projects in India to TerraForm Global Inc. for $231 million and using the proceeds to pay down debt.

SunEdison rose 37 percent to $4.12 at the close in New York, the biggest gain since October 2001. Even with that surge, the company has declined 79 percent this year, making it the worst performer on the 20-member BI Global Large Solar Energy index.

About $150 million of the sale price was paid Nov. 20 and a portion of that was used to pay down a margin loan to Deutsche Bank AG, according to a regulatory filing Tuesday. The purchase price excludes project debt, which will be assumed by TerraForm Global, said John Lamontagne, a spokesman for SunEdison. Some of the projects are already operating and the rest will be completed in the first quarter of 2016, he said.

That Deutsche Bank loan dates to January and was secured by a lien on shares in SunEdison’s TerraForm Power Inc. holding company. Chief Executive Officer Ahmad Chatila said the obligation may be one of the factors affecting the developer’s performance.

“We believe a significant portion of the recent volatility around the company and its subsidiaries has been attributed to the margin loan,” he said in a statement.

Project Debt

The $231 million price equates to about 54 cents a watt, excluding the debt TerraForm Global is assuming. Lamontagne declined to say how much debt is included in the deal.

The average price for solar panels on the spot market is about 66 cents a watt, according to data compiled by Bloomberg New Energy Finance. Including installation costs and other components needed to build a solar farm, the sale looks cheap, said Jeffrey Osborne, an analyst at Cowen & Co. He estimates utility-scale solar farms sell for $1.25 per watt to $2.25 per watt depending on location and leverage.

“The price per watt here barely covers the module costs per watt, let alone inverters and installation so there must be some liabilities or risk along with the sale,” Osborne said Tuesday in an e-mailed response to questions. “There are so many new projects popping up in India that there isn’t really a market for existing ones, so I think selling to a third party may have taken some time.”

Investors fled SunEdison as the world’s largest renewable energy developer faced increasing concerns that its growth plans were forcing it to borrow too much. Chatila has responded with a series of strategic changes to cut costs, slow growth and reduce debts, including a shakeup Monday that replaced the CEO of TerraForm Global and TerraForm Power with SunEdison’s Chief Financial Officer Brian Wuebbels.

Paying down the loan will improve the company’s finances, according to Sven Eenmaa, an analyst at Stifel Nicholas & Co.

“They are removing some of the risks from their balance sheet,” he said in an interview. “Investors will react positively to that.”

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