Following the First Wind model, SunEdison is losing money hand over fist while taking on astronomical debt. Apparebntly they hope to make up for their unprofitability with volume. This paid off for FW because Paul Gaynor found the proverbial 'Greater Fool' in SunEdison. But will SunEdison ever find a greater fool to bail them out? It's not likely.
August 8th, 2015 by Joshua S Hill
SunEdison shares have plummeted after the world’s largest clean energy developer reports record growth, 1.9 GW of projects under construction, and the recent close of financing on a 300 MW wind farm in Texas.
Bloomberg Business has described analysts as “scratching their heads” in the wake of the biggest drop in SunEdison’s shares in almost 14 years. They quote Mahesh Sanganeria at RBC Capital Markets, who sent a note to clients on Thursday: “We have been receiving a lot of calls on today’s sell-off of SunEdison. We expected the stock to react positively.”
The company announced its second quarter earnings on Thursday, revealing a record 404 MW delivered in the quarter, versus guidance of 300 to 340 MW. SunEdison also has 1.9 GW of projects currently under construction, is up 1.1 GW quarter-over-quarter, has an 8.1 GW pipeline, a 5.6 GW backlog, and guidance for 2016 of between 4.2 to 4.5 GW. Net sales were up ($455 million) on both the previous quarter ($323 million) and a year earlier ($431 million), and the company’s first yieldco — TerraForm Power — has $65 million Q2 cash available for distribution, at $0.335 DPS.
However, it was the company’s $263 million net loss (attributable to shareholders) that appears to be the only takeaway from the company’s second quarter earnings, with shares plunging 25% at the close of trading — the company’s biggest decline since September 2001.
Reports are that investors are afraid of the net loss, which is in part due to the number of acquisitions the company has made over the past quarter. SunEdison acquired the India-based Continuum Wind Energy and the Central American Globeleq Mesoamerica Energy (GME). On top of that, SunEdison and TerraForm acquired a 521 MW wind energy portfolio from Atlantic Power, and a 930 MW wind energy portfolio from Invenergy. In the first quarter, the company announced the closure of SunEdison and TerraForm’s acquisition of First Wind.
This acquisition spree has apparently sent shivers through SunEdison investors, concerned at the net loss attributable to shareholders. However, Bloomberg Business spoke to SunEdison’s chief strategy officer, Jul... that the market may not recognize the benefit of investing so much revenue in future growth. “Earnings per share is not a good measure,” she said. “That will come back to the company over many years.”