Hawaii Questions Cancellation of SunEdison Solar Contracts

  • Hawaiian Electric `acted too hastily' in canceling power deals
  • Potential SunEdison bankruptcy complicates deals, utility says

Hawaii regulators are questioning the state’s biggest utility’s decision to cancel contracts for three solar farms under development by the embattled renewable-energy company SunEdison Inc.

Staff of the Hawaii Public Utilities Commission concluded that Hawaiian Electric Co. “acted too hastily and without an in-depth analysis of any perceived bankruptcy concerns” when it canceled the SunEdison contracts in February, according to a report Tuesday.

The report determined that Hawaiian Electric didn’t take advantage of some opportunities to advance the projects, questioning the utility’s contention that terminating the deals would best serve its customers.

“There appeared -- and appears -- to be no urgency on the part of HECO to at least attempt to have these three projects go forward,” the report concluded. “Commission staff’s position is that the actions taken by HECO cannot be viewed as serving the best interests of the state or the people of Hawaii.”

A key part of the dispute is SunEdison’s financial condition. The world’s largest clean-energy developer is inching toward bankruptcy, with $11.7 billion in debt at the end of September, and faces potential defaults on at least $1.4 billion in loans and credit facilities. Multiple parties are investigating the company’s finances, including an internal audit committee, the U.S. Department of Justice and the U.S. Securities and Exchange Commission.

Ben Harborne, a SunEdison spokesman, didn’t immediately return an e-mail seeking comment on the report.

Missed Milestones

Hawaiian Electric in February said SunEdison had missed some important milestones in developing the three solar farms, which have a total of 148 megawatts of capacity. The utility also cited “SunEdison’s apparently precarious financial condition” in its decision to cancel the power-purchase agreements.

The utility disputed the commission’s report, in part because a potential SunEdison bankruptcy may complicate efforts to complete the solar farms.

“We respectfully disagree with the conclusions of the PUC staff,” Darren Pai, a Hawaiian Electric spokesman, said in an e-mail Tuesday. “We acted in the best interests of our customers to preserve options to develop viable renewable energy projects.”

‘Well Qualified’

SunEdison was planning to transfer the solar farms to D.E. Shaw & Co. and two other creditors, as part of a December deal to extinguish $336 million in debt. D.E. Shaw, a New York-based hedge fund managing more than $37 billion, said in March said it was still interested in acquiring the projects. A spokesman for D.E. Shaw declined to comment Tuesday.

The report noted D.E. Shaw’s interest, pointing out that the hedge fund “appears to be well qualified to finance, construct and operate the projects.”

Hawaiian Electric responded that because D.E. Shaw is a creditor of SunEdison, transferring the projects could later be questioned during bankruptcy proceedings.

“There is a risk that a bankruptcy court would view any exclusive deal to transfer the projects just prior to bankruptcy to D.E. Shaw as an unfair preference or fraudulent conveyance,” Pai said.

Before it's here, it's on the Bloomberg Terminal.