SunEdison's Financial Status Unclear to Investors, Employees

  • Audit committee looking at `accuracy' of financial position
  • `It suggests to me that the writing could be on the wall'

Investors aren’t the only ones uncertain of SunEdison Inc.’s finances. Current and former employees have raised questions about the renewable-energy developer’s liquidity, and the company is now conducting an inquiry into its financial position.

The worst-performing clean-energy company said Monday that it initiated an internal inquiry late last year “based on allegations made by former executives” related to the accuracy of SunEdison’s financial status, according to a regulatory filing. Its internal audit committee is also looking at the “accuracy of its anticipated financial position,” in response to issues raised by a current and a former employee. To date, the committee has found no wrongdoing.

The inquiry reflects mounting uncertainty surrounding SunEdison’s books. The company spent billions last year buying wind and solar projects and developers around the world, amassing a portfolio of partially completed power plants that still require significant investment to complete. It’s not clear how the company plans to pay for that.

‘Precarious Position’

“It’s frustrating because you can’t get a grasp of what’s actually happening here,” Patrick Jobin, an analyst at Credit Suisse Group AG, said in an interview Tuesday. “I have never seen something so strange. The company’s in a precarious position.”

The disclosure dragged down SunEdison 24 percent to $1.50 at the close in New York. The shares have declined 93 percent in the past year, the most in the WilderHill New Energy Global Innovation Index of 104 companies.

“Since the meltdown in the stock, there’s been a lot of investor questions,” Sven Eenmaa, an analyst at Stifel Nicolaus & Co., said in an interview Tuesday. “It is pretty clear to me that the disclosures to the outside have not been sufficient. It does raise questions of internal controls.”

SunEdison said in a Jan. 7 presentation that it expected to have $619 million of cash on hand at the end of 2015. Of that amount, $563 million was committed to project development and $56 million was available for general corporate use. The company forecast having $1.37 billion in cash at the end of this year.

Ben Harborne, a SunEdison spokesman, declined to comment Tuesday.

SunEdison also said Monday it won’t be able to file its 2015 financial results on time, citing the internal inquiry, as well as “restructuring decisions previously disclosed and the additional turmoil in the energy sector.” The Maryland Heights, Missouri-based company plans to file its earnings within 15 calendar days of the due date.

‘Major Events’

SunEdison has already had a bumpy 2016. In January, David Tepper’s Appaloosa Management LP sued to block SunEdison’s proposed $1.9 billion acquisition of rooftop solar company Vivint Solar Inc. A judge in Delaware rejected Appaloosa’s request for an injunction last week, but said the hedge fund could request an expedited trial, and Appaloosa announced Monday that it would do so.

In February, SunEdison was temporarily blocked from transferring some assets while shareholders of Latin America Power BV seek more than $150 million in damages in connection with a spurned takeover bid. Later that month, Hawaiian Electric Co. canceled contracts for 148 megawatts of solar projects SunEdison is developing in the state -- projects that the company has planned to transfer to creditors, including D.E. Shaw & Co., upon completion. 

“You have all these major events,” Gordon Johnson, an analyst at Axiom Capital Management Inc., in an interview Tuesday. “It suggests to me that the writing could be on the wall.”

Downgrades, Suspension

Johnson downgraded SunEdison to sell Tuesday, pointing to the company’s “trivial” equity value. The disclosure of the investigation also prompted Colin W. Rusch, an analyst at Oppenheimer & Co., to downgrade SunEdison to the equivalent of hold. And Deutsche Bank AG suspended its rating, analyst Vishal Shah said in a note Tuesday, because “the liquidity situation of the company is difficult to assess.”

“We don’t know for certain everything, because they don’t disclose everything,” Johnson said. ‘But this is a company that’s in distress.”

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