U.S. solar energy and wind company SunEdison Inc., whose aggressive acquisition strategy has saddled it with nearly $12 billion of debt, is at “substantial risk” of bankruptcy, one of its two publicly listed units warned Tuesday.
A bankruptcy would rank among the largest involving a nonfinancial company in the past 10 years, according to bankruptcydata.com.
SunEdison’s shares — already reeling from a Wall Street Journal report Monday that said the company was being investigated for overstating its cash position — fell as much as 60 percent to a record low of 50 cents.
In January 2015, SunEdison acquired First Wind, which built multiple projects in Maine. In December, the company sold its Oakfield and Bingham wind projects in order to have cash on hand.
It also is part of a joint proposal with Emera Maine and Central Maine Power for new transmission projects that would connect to other proposed wind farms. Three southern New England states would pay for the transmission projects in order to help meet state renewable energy goals.
Spokesmen for Emera and CMP were not immediately available to comment on what a bankruptcy reorganization by SunEdison would mean for the joint proposals that also involve projects by EDP Renewables.
TerraForm Global Inc., one of two SunEdison “yieldcos,” said it would join its parent and fellow yieldco TerraForm Power Inc. in delaying its annual report for 2015.
However, the company said it did not rely substantially on SunEdison for funding or liquidity and that it would have sufficient liquidity to support its operations, even if its parent sought bankruptcy protection.
TerraForm Global’s annual report was due by March 30.
Yieldcos are publicly traded subsidiaries that hold renewable energy assets, including assets bought from their parents. They are backed by long-term power purchase contracts with utilities, allowing them to pay regular dividends.
TerraForm Global, whose shares fell as much as 23 percent to a record low of $1.92, said SunEdison may not transfer to it some solar energy projects in India, for which TerraForm Global has paid $231 million, and may not complete other deals.
“If SunEdison does not perform under these agreements, it could have a material adverse effect on TerraForm Global,” TerraForm Global said in a regulatory filing.
SunEdison declined to comment.
Although solar project developers such as SunEdison continue to benefit from robust demand for solar energy, their shares along with those of other solar companies have been hit by investor concerns — largely dismissed by analysts — that demand could fall because of weak oil prices.
Material weaknesses
SunEdison, based in Belmont, California, has problems of its own, however.
The company, which has delayed filing its annual report twice, said this month it had identified material weaknesses in its financial reporting controls.
According to a loan agreement filed with regulators, SunEdison could breach a covenant if it does not file its annual report within 90 days after the end of each fiscal year — in this case, March 30.
The company also is being investigated by the U.S. Securities and Exchange Commission to see whether it had exaggerated its liquidity position, the Journal reported Monday.
Vivint Solar Inc. scrapped a deal to be bought by SunEdison this month, citing concerns about SunEdison’s finances.
SunEdison had debt of $11.67 billion as of Sept. 30. Excluding its yieldcos, the company had $7.9 billion of debt, and cash and cash equivalents of $1.3 billion.
“At this point, SunEdison has really kinda run out of options,” S&P Global Intelligence analyst Angelo Zino told Reuters.
Raymond James analyst Pavel Molchanov said TerraForm Power and TerraForm Global were legally separate companies and would not follow SunEdison into bankruptcy.
“However, there is a close historical relationship between the parent company and these yieldcos and therefore some dislocation in the event of parent bankruptcy should be expected,” he said in an email.
TerraForm Power’s shares fell as much as 14 percent to $7.28.
TerraForm Global said it was in talks with lenders of its revolving credit facility to obtain an extension on a covenant that requires it to file its annual report on time.
TerraForm Global said the credit facility was not critical to the continuation of its business.
The company had about $1 billion in cash and $500 million available under its revolving credit facility, according to a presentation posted on SunEdison’s website on Nov. 10.
Up to Monday’s close of $1.26, SunEdison’s shares had dropped about 95 percent in the past 12 months, valuing the company at about $400 million.
TerraForm Power and TerraForm Global did not respond to requests for comment.
BDN staff writer Darren Fishell contributed to this report.