Debt-hit SunEdi­son Now Open to Part­ner­ship Model

So­lar de­vel­oper to rope in mi­nor­ity part­ners for its so­lar & wind power projects

The Economic Times - - Companies - Bha­rani.Vaitheesvaran @times­group.com

Chen­nai: Debt-laden so­lar de­vel­oper SunEdi­son will shift from the to­tal equity own­er­ship model of so­lar farm devel­op­ment in In­dia and take mi­nor­ity equity part­ners for over 750 MW of so­lar and wind projects it will de­velop over the next two years at a cost of .₹ 4,950 crore ($750 mil­lion) in the coun­try.

These are for projects for which SunEdi­son has not be­gun con­struc­tion yet. As most PPAs al­low equity part­ner­ships up to 49%, the com­pany hopes to push ahead with its In­dia plans through this route de­spite press­ing liq­uid­ity is­sues back home for the Mis­souri,US-based de­vel­oper. SunEdi­son’s liq­uid­ity is­sues came to light with its US-listed sub­sidiary Ter­raform Global tak­ing it to court over its In­dian as­sets, spark­ing spec­u­la­tion that SunEdi­son is look­ing sell its projects in In­dia.

“Ear­lier, one of our equity part­ners was our yieldco and would ac­quire projects af­ter com­mer­cial oper­a­tions are reached. Cur­rently, our yieldco is not trad­ing well be­cause the energy mar­kets in the US are com­pletely down. So, we need to look at al­ter­na­tive equity part­ners now,” said an of­fi­cial for the Asian mar­kets of SunEdi­son, re­fer­ring to its US-listed sub­sidiary Ter­raform Global.

Ter­raform, which raised $675 mil­lion in its IPO last year in the US, is wor­ried the In­dian as­sets it should own will get caught in a pos­si­ble debt re­duc­tion. SunEdi­son may ex­e­cute by fil­ing for bank­ruptcy pro­tec­tion in the US.

Re­quest­ing to re­main uniden­ti­fied, the of­fi­cial con­firmed talks were on with many so­lar power de­vel­op­ers and in­vestors in the In­dian mar­ket for part­ner­ships, re­fus­ing to com­ment over ne­go­ti­a­tions with peer Adani Power. “Aditya Birla So­lar did an equity part­ner­ship with Abraaj Cap­i­tal, which is what Greenko did with GIC of Sin­ga­pore and Re­New did with Abu Dhabi In­vest- ment Au­thor­ity and Gold­man Sachs. It’s just about rais­ing cap­i­tal to con­tinue to grow.”

SunEdi­son is scout­ing for in­vestors to par­take of the 30% of project cost, which is typ­i­cally equity re­quired to kick-start fu­ture projects. It hopes to gal­vanise cash from in­vestors up to .₹ 750 crore ($115 mil­lion) in the next two years so that it can spread its cap­i­tal ex­pen­di­tures across projects in In­dia, in­clud­ing an ag­gres­sive 500 MW in Andhra Pradesh that will earn just .₹ 4.63 a unit sold to the util­ity. Each project, set up as a sep­a­rate cor­po­rate en­tity to ac­com­mo­date equity and debt in­vestors, will have 70% of the cap­i­tal cost brought in by lenders.

It is con­fi­dent that a lighter cashre­quire­ment through equity fi­nanc­ing al­lows head­room for In­dian ex­pan­sion de­spite an $8-bil­lion debt stock­pile.

Af­ter a high-oc­tane ac­qui­si­tion spreesincemid-2014,SunEdis­on­sold its In­dia projects to­talling a ca­pac­ity of 425 MW to Ter­raform Global, which pre­paid $231mil­lion for com­plete own­er­ship of these so­lar plants. Ac­cord­ing to Ter­raform’s Nas­daq fil­ing re­cently, SunEdi­son had wanted an ad­di­tional .₹ 467 crore ($70 mil­lion) more to re­pay ven­dors. Frus­trated, Ter­raform has sued the par­ent com­pany at the Court of Chancery, State of Delaware, for not trans­fer­ring equity for the $231 mil­lion paid and mis­rep­re­sent­ing SunEdi­son’s fi­nances to secure that deal. Ter­raform seeks di­rec­tions from the court to SunEdi­son to pro­tect its equity in­ter­ests in a “con­struc­tive trust” a method to pro­tect an asset for its in­tended owner.

SunEdi­son is unfazed. “The Chap­ter 11 of the Bank­ruptcy Code is for the com­pany to re­struc­ture its bal­ance sheet and emerge with a re­or­gan­ised cap­i­tal struc­ture that al­lows the com­pany to thrive again. Many cor­po­ra­tions such as GM and Chrysler have gone through Chap­ter 11 to cut debt bur­den. In such a process, some obli­ga­tions may not be met. So, pre-emp­tively, Ter­raform Global is try­ing to pro­tect these In­dian as­sets,” said the of­fi­cial.

Ac­cord­ing­toVivekJain,an­an­a­lyst with In­dia Rat­ings and Re­search, “If you look at the bids, most were up­wards of .₹ 4.8 a unit. When­ever there is bid­ding, only the play­ers here for the long-haul sur­vive. So, this is def­i­nitely not a death knell for so­lar.”

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