SunEdison’s bankruptcy –Not a reflection of solar markets

SunEdison’s dizzying expansion rate and poor business acumen is the reason for its bankruptcy.
Published: Mon 25 Apr 2016

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Renewables poster child SunEdison has filed for bankruptcy and has left the UK residential solar market with its tail between its legs. While many believe that subsidy cuts in the UK market are causing companies to pack their bags, there are some that see the potential. One such company is Ecotricity, a leading renewable energy company in the UK, which has acquired SunEdison’s home residential solar business (a portfolio of 800 solar rooftop installations) for a “seven figure sum.”

Dale Vince, Ecotricity founder described the acquisition as “an exciting and important step for Ecotricity.” He added that as a company, they want to help more people generate their own power at home. ”This is our first step into the domestic solar market, and as the price of the technology continues to fall, we’re confident that it’s only a matter of time before we can resume the work SunEdison started and help more homes take advantage of solar power.”

He added:  “We see a big future for renewable technology of this scale in Britain – small wind and rooftop solar will allow more people to generate their own power at home, decentralising the energy sector and putting power in the hands of the people.” 

This is not Ecotricity’s first acquisition. The company, which now supplies nearly 200,000 customers from a fleet of wind and sun parks, last made an acquisition in 2014 when they rescued small windmill company Evance from administration – uniting Evance with other supply chain companies, Ecotricity formed a new small windmill company called Britwind.

SunEdison - a casualty of UK subsidy cuts?

The UK solar market has been plagued with uncertainty due to recently announced subsidy cuts. [Cutting the Renewables Subsidy Umbilical Cord.] As a result, a number of companies have gone bust. Examples include Leicester-based Mark Group, a home insulation and solar energy firm, and Climate Energy, amongst others. Many employees in the solar industry started losing their jobs shortly after the government’s decision in August. In October last year, experts predicted a job loss figure of 20,000 as a result of the cuts.

SunEdison had built a portfolio of nearly a thousand rooftop solar installations in the UK, through a product known as the Energy Saver Plan.  But, the company was quoted last year as saying that business was no longer viable due to the subsidy cuts. SunEdison told Greenpeace Energydesk: "We are extremely disappointed that the draconian policy proposals made by the government in August will essentially eliminate the solar PV market in the UK and have made our plans unviable."

Mr Vince, who still appears upbeat about the UK market, is convinced that SunEdison is the latest victim of the UK government’s cuts.

But, there are those who think that poor business acumen is probably to blame in the case of SunEdison.

Jenny Chase, chief solar analyst for Bloomberg New Energy Finance points out that the bankruptcy says more about SunEdison’s “relentless pursuit of growth” than the solar industry as a whole. Andrew de Pass, chief executive officer of Conergy agrees and says that SunEdison tried to grow too fast and took on too much debt.

September last year, SunEdison reported more than 800 projects in the pipeline or in backlog, and it had branched out from its core business of utility-scale solar in to wind power and residential solar. The company launched deals across the US as well as in Europe, Latin America and Asia.

The rapid growth required a lot of borrowing, and SunEdison’s debt level nearly doubled between September 2014 and September 2015, from $9 billion to $16.1 billion.

As investor skepticism grew, the company’s stock plummeted by 84%, from a high of $33.45 in July to $5.09 at the end of 2015. By the time the company filed for bankruptcy, the stock was trading at 34 cents a share.

In addition to the mammoth expansion rate, SunEdison is facing some legal strife. The company is being investigated by the U.S. Department of Justice and the U.S. Securities and Exchange Commission over the failed Vivint Solar deal. TerraForm Global, its other yieldco, is suing the company for breach of contract, alleging SunEdison misappropriated $231 million of TerraForm's cash. The company has delayed filing its annual report twice after identifying material weaknesses in its financial reporting controls. [Flying Blind and Crashing.]

Solar market hitting record figures

A number of industry players are quick to point out that SunEdison’s bankruptcy is not a reflection of the current solar market which is still experiencing major growth. Investment in the solar industry is impressive-it hit a record $329 billion last year, more than triple the investment of a decade ago, according to Bloomberg New Energy Finance.  

Governments across the globe continue to stimulate renewables development after agreeing in Paris in December to limit the emissions causing global warming. [COP21 Climate Agreement Sets Scene For Energy Sector.]

Rod MacGregor, co-founder of GlassPoint Solar says that the travails of one company will not stop the rise of solar power: “We stand at a watershed moment where solar technologies are both proven and economical in applications from rooftops to oilfields." [Renewables Costs Now Competitive With Fossil Fuels.]

"The future is brighter than ever," said Alan Russo, senior vice president of sales at REC Solar, a commercial solar installer backed by the U.S. utility Duke Energy Corp.

Further reading

The Telegraph-1,000 jobs lost as solar firms go into administration