SunEdison Delays Earnings Citing Weak Accounting Controls

  • Yieldco SunEdison controls also defers 10-K report to SEC
  • Cancelled Vivint deal has been weighing on SunEdison shares

SunEdison Inc. plunged after announcing that a “material weakness” in its internal accounting system means there will be another delay to the overdue filing of its annual earnings report.

The Maryland Heights, Missouri-based company blamed “deficient information technology controls” from a new system it installed and said a board committee probing the accuracy of its statements has been unable to finish its work, according to a statement Wednesday. TerraForm Power Inc., a yieldco SunEdison controls, also delayed its earnings report.

“To date, the additional procedures performed as a result of the material weaknesses identified and the investigation by the audit committee have not resulted in the identification of any material misstatements or restatements of the company’s audited or unaudited consolidated financial statements or disclosures for any period previously reported by the company,” SunEdison said.

The latest blow follows the cancellation of a landmark deal to buy Vivint Solar Inc., which was intended to make SunEdison an energy superpower and expand its reach deeply into the burgeoning rooftop solar market in the U.S.

SunEdison fell 15 percent to $1.78 at 9:32 a.m. in New York. TerraForm fell 11 percent.

Report Overdue

Investors had expected that SunEdison would file by Tuesday its annual 10-K statement to the Securities and Exchange Commission. The company first delayed its results on Feb. 29, when it announced an internal audit committee had started an inquiry late last year “based on allegations made by former executives.”

KPMG is SunEdison’s independent external accounting firm.

TerraForm attributed the delay of its earnings report to its management services arrangement with SunEdison and suggested a further delay may threaten its ability to retain its listing on the Nasdaq. 

“Our financial reporting and control processes rely to a significant extent on SunEdison systems and personnel,” TerraForm said in a statement Wednesday. “As a result, if there are control deficiencies at SunEdison, including with respect to the systems we utilize, it is necessary for us to assess whether those deficiencies could affect our financial reporting.”

Listing Threat

The yieldco said its failure to file its 10-K by March 15 prompted a director at Nasdaq Listing Qualifications to say it isn’t in compliance with marketplace rules, which require the timely filing of periodic reports with the Securities and Exchange Commission. TerraForm says it has until May 16 to submit a plan to Nasdaq about how it plans to regain compliance with the listing requirements.

“If we are still unable to file our Form 10-K by May 16, 2016, then we intend to submit a compliance plan on or prior to that date,” TerraForm said in the statement.

SunEdison’s shares surged during an expansion spree and peaked at more than $32 a share before the Vivint deal was announced in July. Concern about the scale of debts SunEdison was racking up along with the complexity of its deals have spooked investors and weighed on the shares since.

Vivint Deal

As the Vivint deal came under scrutiny, both companies’ shares fell. SunEdison is down more than 90 percent since the deal was announced, making it the worst performing clean-energy company, and Vivint has slumped more than 75 percent. SunEdison’s debt climbed to $11.7 billion at the end of the third quarter, from $6.3 billion a year earlier.

The deal faced vocal criticism and legal challenges from investors, and was renegotiated in December. When SunEdison failed to meet some deadlines, Vivint canceled the transaction on March 7.

SunEdison said one of the reasons it didn’t complete the purchase was that it had trouble lining up financing. That echoes questions that analysts have been asking for months, about the company’s liquidity and how it planned to fund not only the Vivint deal, but also the power projects under development worldwide. The 10-K statement due to be filed would provide detail on the company’s standing on those issues.

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