Not long ago, SunEdison (SUNE) was widely considered to be Wall Street's favorite clean energy company. But now it's facing a likely bankruptcy after it buckled under $12 billion in debt from an acquisition binge of solar and wind farms.
One of the publicly traded offshoots of SunEdison warned in a filing with the Securities and Exchange Commission that the risk was substantial that its corporate parent would need to seek bankruptcy protection because of its "liquidity difficulties."
The Missouri-based company has already delayed issuing its annual report twice. It had a March 30 deadline to release the document or face a potential default unless it can renegotiate the terms of at least $1.4 billion in loans and credit facilities with its lenders, according to Bloomberg. A spokesman for SunEdison declined to comment for this story.
"They have dug themselves too big of a hole," said Angelo Zino, an analyst with S&P Global Market Intelligence, who rates the stock as a "hold." He added that bankruptcy could come in "matter of days or weeks. They are at a point of essentially no return here."
Solar companies have struggled with the plunge in oil prices and the consequent tumble in prices for natural gas, which recently overtook coal as the most common fuel for power generation.
Further complicating the picture for SunEdison was its decision to create two separate publicly traded companies, known as "yieldcos," to house its assets. That strategy failed after SunEdison wound up purchasing too many outside projects, according to Michael Morosi, an analyst with Avondale Partners, who has a "neutral" rating on the stock.
"The notion of a yieldco ... is perfectly viable," he said. "The problem with the yieldco strategy as executed by SunEdison was that they didn't use it for its intended purpose. If you look at the total capacity owned by its two yieldcos ... the company itself only developed about 20 percent of those projects. They basically went out and acquired a bunch of third-party assets and used up all the capital they had raised for the yieldcos to purchase them."
SunEdison has been shut out of the debt and equities markets, and has failed to find buyers for its project. Its shares reached a peak of $32 in May. Then Wall Street analysts raised questions about the company's planned $1.9 billion acquisition of Vivint Solar (VSLR). The deal was first negotiated down and then canceled by the seller after SunEdison failed to close the transaction by the agreed-upon date. Vivent has filed suit over the situation.
SunEdison also is in hot water with the New York Stock Exchange for failing to filed its form 10-K for 2015. Billionaire David Tepper's Appaloosa Management has filed a separate action seeking the overhaul of the management team at SunEdison yeildco TerraForm Power, arguing that controlling shareholder SunEdison had taken advantage of the company.
Shares of SunEdison, which have plunged nearly 90 percent since January, plummeted further today, shedding nearly 8 percent in the wake of the abrupt resignation of the resignation of Brian Wuebbels as CEO of both yieldcos TerraForm Power and TerraForm Global. SunEdison closed on Thursday at 54 cents.
S&P analyst Zino, for one, is bullish on the solar industry and recommends investors buy shares of SunEdison rivals First Solar (FSLR) and SunPower (SPWR). Demand remains strong from utilities, power-intensive business such a data centers and for home use. According to the Solar Energy Industries Association, the U.S. installed a record 7,260 megawatts of capacity in 2015, bringing the total to 27.4 gigawatts, and the association expects the industry to more than double 2015's installed total this year.