Debt-hit SunEdison Now Open to Partnership Model
Solar developer to rope in minority partners for its solar & wind power projects
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.”