SunEdison offloads 425 MW Indian solar assets to TerraForm, pays down margin loan

In actions that are likely to satisfy the ‘boring’ tag SunEdison CEO Ahmad Chatila called for following a chastening set of Q3 results earlier this month, the U.S. energy company is to drop-down 425 MW of its solar assets in India to its yieldco TerraForm Power as a means of boosting its flagging balance sheet.

The move will raise a total of $231 million for SunEdison, a portion of which the company has already used to partially pay down an outstanding margin loan. Much of the purchase price was paid on November 20, according to a SunEdison statement, with the remainder payable on or before December 7 2016.

"This transaction provides higher yields replacing lower-yielding IPO projects that were intended to be acquired through M&A and is consistent with our strategy to focus on organic growth provided by our sponsor," said TerraForm Global CEO Brian Wuebbels. "We are pleased to add these accretive assets with 20-year contracted cash flows to TerraForm Global’s portfolio."

With a further 800 MW of solar capacity underdevelopment, and the recently secured, record-low price contract for a 500 MW solar plant in Andhra Pradesh under its belt, India has become a leading source of investment for SunEdison as the company looks to tap into a government-backed initiative to install 100 GW of solar PV capacity in India by 2022.

While declining to comment specifically on any impending Indian solar fire-sale, SunEdison Asia Pacific president Pashupathy Gopalan did tell reporters that one strategy the company is employing as it seeks to restructure is the offloading of some solar projects.

"To grow you need capital," he said. "Our balance sheet does not have the necessary capital.” Gopalan hinted that this rumored divestment from India would only be temporary, adding: "We continue to expand in India. It will become a country of even more importance for us."

However, the president did confirm that SunEdison has canceled a proposed deal to purchase Continuum Wind Energy – a renewable energy developer with a particular focus on India’s wind sector.

Not a reflection on India’s market

Earlier this week SunEdison announced that it had terminated the contract of Carlos Domonehc Zornoza, who was president and CEO of SunEdison yieldco TerraForm Power, CEO of TerraForm Global and executive VP of SunEdison. The move was accompanied by a board-level shuffle, triggered by months of ongoing strategy shifts designed to ward off further declines in revenue and profit that began in the summer.

"To gain back investor confidence, SunEdison has to restructure quickly," Mercom Capital CEO Raj Prabhu told pv magazine. Speaking today regarding SunEdison’s latest activity, Prabhu told pv magazine that the drop-down is more a nod towards SunEdison’s own internal troubles rather than a reflection on the Indian solar market.

"Based on SunEdison’s restructuring plan, this was kind of expected," he said. "We just didn’t know what projects would be put up for sale. The company has a liquidity problem, and simply does not have enough cash. But I would stress that these actions in no way reflect the Indian solar market currently."

Pays down margin loan

SunEdison also confirmed today that it had "repaid substantially" the amount due on a margin loan agreement arranged with Deutsche Bank. Approximately $5 million remains outstanding, largely relating to cash collateralized and accrued and unpaid interest.

"We believe a significant portion of the recent volatility around the Company and its subsidiaries has been attributed to the Margin Loan," said Ahmad Chatila, SunEdison president and Chief CEO. "As we shared with you yesterday, we are taking aggressive steps to align our operations, leverage our existing platform and capitalize on our organic development opportunities as we enhance our cash flow to drive value for our shareholders."

Update: This article was modified on November 24 at 1:35 PM Eastern Time (U.S.) to remove part of Raj Prabhu’s quote, as Prabhu had made these statements before he had learned of certain aspects of the sale.