David Einhorn Comments on SunEdison


SUNE ( SUNE ), formerly known as MEMC, is a developer of solar power plants for businesses and utilities. The declining cost of solar energy combined with the rising cost of conventionally produced electricity should position SUNE as a winner. The company has built a large pipeline of attractive projects secured by credit-worthy buyers of electricity. Until recently, the good business was mixed in with two bad ones: manufacturing wafers for semiconductor companies, and assembling commodity solar modules for developers. Historically, the company's poor balance sheet forced it to sell many of its solar development projects at discounted prices to raise capital.

The company has now exited the solar module assembly business and is in the process of monetizing its semiconductor wafer business through an IPO. Later this year, we expect the company will IPO a newly-created Yieldco, which will house its most attractive solar projects rather than selling them to third parties. NRG Yield Inc. is a comparable company that trades at 12x EBITDA and has a 3% dividend yield. Were Yieldco to trade at 9x EBITDA and a 5% dividend yield it would imply a value for the solar business of ~$34 per share. SUNE expects to run its development business close to breakeven in future periods. Adding in the value of the soon-to-be IPO'ed semiconductor business and subtracting a modest amount of corporate net debt would suggest a sum of the parts value for SUNE of ~$35 per share. Our average entry price is $15.55 and SUNE shares ended the quarter at $18.84.

From Greenlight Capital's first quarter 2014 investor letter by David Einhorn ( Trades , Portfolio ).About GuruFocus: GuruFocus.com tracks the stocks picks and portfolio holdings of the world's best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world's best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .

This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: SUNE



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