Solar technology company,
) recently completed the acquisition of a 50% stake in Silver Ridge
Power, LLC (SRP), a subsidiary of The AES Corporation, for $178.6
million in cash.
SunEdison had announced the acquisition of SRP on Jun 17, 2014. It
will now have 50% ownership of 336 megawatt (MW) solar power
projects and a 40% stake in a 183 MW solar power facility. The
facility, scheduled to be completed in 2016, will be built by
Tenaska Imperial Solar Energy Center West. The remaining 50% of SRP
is held by an affiliate of Riverstone Holdings LLC, which SunEdison
plans to buy post the completion of the Tenaska Imperial Solar
Energy Center West.
These acquisitions and strategic partnerships in different solar
power projects not only increase SunEdison's total project count
but also expand its geographic reach.
Recently, SunEdison also closed a non-recourse debt financing
agreement worth approximately $190 million for the construction of
the 72.8 megawatt (MW) Maria Elena solar project in northern Chile.
Maria Elena, to be constructed in Antofagasta, will be the largest
PV solar power plant in Latin America and the first of its kind in
Chile. This move will strengthen the company's position in Chile.
Moreover, SunEdison announced a strategic alliance with local solar
wafer manufacturer, Huantai Group, to develop solar power projects
in China. Under the five-year agreement, the companies will jointly
develop 1.7 gigawatt (GW) solar projects.
Thus, we believe that the current strategy bodes well for SunEdison
and will help it to emerge as a pure-play solar project developer.
Moreover, the solar power project company plans to utilize the
proceeds to deleverage its balance sheet.
It is worth noting that SunEdison reported an 11.3% year-over-year
decline in revenues from its semiconductor business in the
last-reported quarter. At the same time, the solar business did
exceptionally well, growing 86.8% year over year.
Though SunEdison's growing exposure to the solar energy market is
encouraging, project development requires considerable time and
investments. Hence, any delay or inability in selling these
projects at desired prices could have an impact on liquidity.
Moreover, SunEdison has a highly leveraged balance sheet. The
company exited the first quarter with cash, cash equivalents and
restricted cash of $526.6 million compared with $643.6 million in
the previous quarter. Long-term debt (excluding current portion)
was $3.49 billion.
Going forward, the pricing environment and competition from
First Solar Inc.
) remain headwinds.
Currently, SunEdison has a Zacks Rank #4 (Sell).
) with a Zacks Rank #2 (Buy) is a better-ranked stock and therefore
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
MICRON TECH (MU): Free Stock Analysis Report
FIRST SOLAR INC (FSLR): Free Stock Analysis
SUNEDISON INC (SUNE): Free Stock Analysis
SUNPOWER CORP-A (SPWR): Free Stock Analysis
To read this article on Zacks.com click here.