• Developer is the worst-performing clean-energy company
  • Partially reverses `transformative' First Wind deal, cuts debt

If this has a familiar ring, it ought to.

In January 2015, SunEdison Inc. bought 2.1 gigawatts of wind and solar assets, part of the company’s multibillion-dollar, six-continent push to become the world’s biggest clean-power developer. A year later, SunEdison is planning to hand four of those solar projects right back to the previous owners in a deal that will let it wipe out $336 million in debt.

SunEdison announced in December it would shed the projects as it worked to improve its balance sheet. The company outlined Wednesday details of the four assets, in Hawaii and Utah, and the handover. The developer lost 85 percent of its market value in the past year while piling up $11.7 billion in debt. Investors, meanwhile, have expressed concern its growth spurt came too quickly and at too great a cost.

The deal “was a mutually beneficial solution to deleverage our balance sheet,” SunEdison spokesman Ben Harborne said in an e-mailed statement Wednesday.

The assets were purchased by SunEdison in January 2015 as part of its $1.9 billion acquisition of First Wind Holdings LLC from DE Shaw & Co LP, Madison Dearborn Partners LLC and Northwestern University. When the acquisition was announced, Chief Executive Officer Ahmad Chatila called it “transformative.”

The four solar farms are part of a portfolio of more than 1 gigawatts of solar projects that will be turned over to DE Shaw, Madison Dearborn and Northwestern in exchange for extinguishing exchangeable notes held by the three entities. SunEdison also agreed to give them 12.2 million shares of its TerraForm Power Inc. yieldco unit. Executives and spokesmen for DE Shaw and Madison Dearborn declined to comment.

‘Looks Odd’

The four projects returning to their prior owners are the Kawailoa solar farm with 65 megawatts of capacity, the 64-megawatt Waipio plant and the 19-megawatt Milani II solar farm -- all in Hawaii -- as well as 50 percent of the 420-megawatt Four Brothers project in Utah. None of them are in operation, nor are any of the other assets included in the new deal, Harborne said.

“Clearly, it looks odd,” Angelo Zino, an analyst at S&P Capital IQ, said in an interview. “But given the situation that they’ve put themselves in, where they’ve built up so much debt and the unfavorable market conditions, they’re almost forced to sell assets that they recently acquired.”

‘Asset-managment Mentality’

The deal shows a shift at SunEdison, to what Michael Morosi, an analyst at Avondale Partners, calls an “asset-management mentality.”

“Would SunEdison have preferred to take all these projects to fruition? Yes,” Morosi said in an interview. “That would have maximized their earnings on a per-watt basis. But they needed liquidity and they needed capital, and this was the most effective way to do it. It’s not dilutive, and it doesn’t raise debt.”

SunEdison agreed to transfer the TerraForm shares to DE Shaw, Madison Dearborn and Northwestern, in exchange for canceling $121 million of notes. The rest of the notes, worth $215 million, will be extinguished when the solar assets are handed over, which is expected later this year.

The planned transfer of more than 1 gigawatt of assets is one of several moves SunEdison has made in recent weeks to reassure investors about liquidity. Earlier this month it announced a multi-part deal to improve the balance sheet, by taking on new debt and issuing new shares, while getting rid of some existing debt and adding to its liquidity. It’s the worst-performing member in the past year of the WilderHill New Energy Global Innovation index of 104 clean-energy companies.

“SunEdison’s in an interesting position,” said Zino of S&P Capital IQ. “They’ve had to be a little more innovative in finding ways to pay down debt or enhance their liquidity position.”

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