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SunEdison shares plunge after bankruptcy warning

Solar news
Solar news

US solar company SunEdison, whose aggressive acquisition strategy has saddled it with more than $11billion of debt, is at “substantial risk” of bankruptcy, one of its two publicly listed units warned on Tuesday.

SunEdison’s shares – already reeling from a Wall Street Journal report that the company was being investigated for overstating its cash position – fell as much as 43% in pre-market trading.

TerraForm Global, one of two SunEdison “yieldcos”, said it would join its parent and fellow yieldco TerraForm Power in delaying its annual report for the year ended December 31.

However, the company said it did not rely substantially on SunEdison for funding or liquidity and that it would have sufficient liquidity to support its operations even if its parent sought bankruptcy protection.

TerraForm Global’s annual report was due by March 30.

Yieldcos are publicly traded units that hold renewable energy assets, including assets bought from the parent company.

TerraForm Global, whose shares fell as much as 30% to $2.05, said SunEdison may not transfer to it 425 megawatts of solar energy projects in India, for which TerraForm Global has paid $231million, and also may not complete other deals.

“If SunEdison does not perform under these agreements, it could have a material adverse effect on TerraForm Global,” TerraForm Global said in a regulatory filing.

Raymond James analyst Pavel Molchanov said TerraForm Power and TerraForm Global were legally separate companies and would not follow SunEdison into bankruptcy.

“However, there is a close historical relationship between the parent company and these yieldcos and therefore some dislocation in the event of parent bankruptcy should be expected,” he said in an email.

TerraForm Power’s shares fell as much as 13.2% to $7.35.

TerraForm Global said it was in talks with lenders of its revolving credit facility to obtain an extension on a covenant that requires it to file its annual report on time.

TerraForm Global said the credit facility was not critical to the continuation of its business.

SunEdison, which has delayed filing its annual report twice, said this month it had identified material weaknesses in its financial reporting controls.

The company is also being investigated by the U.S. Securities and Exchange Commission to see if it had exaggerated its liquidity position, the Journal reported on Monday.

Vivint Solar scrapped a deal to be bought by SunEdison this month, citing concerns about SunEdison’s finances. SunEdison had debt of $11.67 billion as of Sept. 30.

Up to Monday’s close of $1.26, SunEdison’s shares had dropped about 95% in the past 12 months, valuing the company at about $400 million.

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