SunEdison subsidiary sues parent company
Case could speed up SunEdison’s slide into bankruptcy
One of the two key subsidiaries of embattled renewable energy firm SunEdison has sued its parent company over what it describes as a failure to transfer ownership of certain energy projects — a development that could accelerate SunEdison’s slide into bankruptcy.
TerraForm Global (GLBL) filed a lawsuit against SunEdison (SUNE) in Delaware accusing the parent company of paying $231 million for India renewable energy projects that SunEdison failed to deliver.
The legal action adds to the compounding woes for Maryland Heights, Mo.-based SunEdison, which is facing a U.S. Justice Department investigation into its accounting practices and is widely expected to file for Chapter 11 bankruptcy within weeks.
But this legal case is particularly unusual because it’s a family affair. TerraForm Global is part of SunEdison’s “yieldco” relationship, in which the renewable power company holds a controlling interest in subsidiaries that glean income from the energy projects it develops.
“SunEdison’s executives represented that the India projects were substantially completed and caused Global to believe that the cash would be used to finish the projects and to deliver them on time,” TerraForm Global lawyers said in the lawsuit. “In fact, the projects were underfunded and behind schedule, and SunEdison instead diverted the funds to prop up its flagging liquidity position rather than to fund the projects in India as promised.”
A SunEdison spokesman said the company does not comment on pending legal issues.
The lawsuit, disclosed Tuesday in an SEC filing by TerraForm Global, came about after SunEdison informed TerraForm Global that it would not complete the India projects, according to the complaint.
SunEdison, which holds 34% of TerraForm Global stock, is facing dwindling cash and a likely bankruptcy filing. The stock rose 23% to 26 cents on Monday. Earlier in the session the shares traded as low as 21 cents.
SunEdison is the No. 2 solar-installation firm in the U.S. with market share of 4.2%, according to IBISWorld. Founded in 1984, the firm develops renewable power projects, such as linked solar panels, that are distributed to its subsidiaries in exchange for a flow of dividends gleaned from selling power to utility customers.