SunEdison, Inc. (SUNE)

SUNE 
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SunEdison (SUNE)

Q1 2014 Earnings Call

May 08, 2014 8:00 am ET

Executives

Chris Chaney - Director of Investor Relations

Ahmad R. Chatila - Chief Executive Officer, President and Director

Brian Wuebbels - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Krish Sankar - BofA Merrill Lynch, Research Division

Stephen Chin - UBS Investment Bank, Research Division

Vishal Shah - Deutsche Bank AG, Research Division

Patrick Jobin - Crédit Suisse AG, Research Division

Shailender Randhawa - RBC Capital Markets, LLC, Research Division

Thomas Daniels - Goldman Sachs Group Inc., Research Division

Aditya Satghare - FBR Capital Markets & Co., Research Division

Timothy Radcliff - Morgan Stanley, Research Division

Y. Edwin Mok - Needham & Company, LLC, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the SunEdison First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Mr. Chris Chaney, Director of Investor Relations. Please go ahead.

Chris Chaney

Thank you, Mary. Good morning. Thank you everyone who's on the line for joining SunEdison's first quarter 2014 results conference call. With me today are Ahmad Chatila, President and Chief Executive Officer; and Brian Wuebbels, our Chief Financial Officer.

After my remarks, Ahmad will provide an overview of the significant events and commentary on the company's first quarter performance, and Brian will then review the financial results. Brian's discussion will reference slides we have made available in the Investor Relations section of our website at www.sunedison.com.

Our discussion today will refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures has been provided in our earnings press release financials published earlier this morning.

Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the press release and the slides published today for a more complete description.

And with that, I will now turn the call over to Ahmad.

Ahmad R. Chatila

Thanks, Chris. Good morning, everyone. Once again, our project completions were in line with our guidance metrics. Brian will walk through the quarter in more detail in a few moments. But first, I would like to briefly update you on the 3 components of long-term value creation that we have been discussing with you the past couple of quarters.

As we've said, to be the most valuable solar company, our megawatt growth rate must be healthy, the value per watt extracted from our installations must be high and we must have a balance sheet that supports making the transition from building and selling projects to building and operating them.

So first, our growth. We have grown our megawatts at greater than 90% per year since 2009. In the first quarter, we completed 150 megawatts of solar projects, in line with our target. This keeps us on track towards the record annual target we laid out at our recent Capital Markets Day.

Similar to our prior quarter, we held more on our balance sheet than we previously estimated in order to support our yield take off [ph]. I'll talk more about this in a moment. And while we completed 150 megawatts in Q1, we still exited the quarter with more than 450 megawatts under construction. There continues to be significant demand in the market for our projects. And our diversified pipeline grew once again and now stands at 3.6 gigawatts, up by about 170 megawatts from last quarter.

Second, retained value per watt. We said we would optimize value per watt and increase shareholder value by retaining certain value projects on the balance sheet and by using public vehicles. During the first quarter, we retained 74 megawatts on our balance sheet. This follows the 127 megawatts we retained in Q4. We retain more value when we hold projects, whether outright or in a yield vehicle, so we were opportunistic and again retained megawatts above our guidance during the quarter.

Retaining these projects during the quarter captured roughly $100 million of additional value, what we would have received had we sold them. So while we forgo higher short-term gross margin, giving up about $25 million in Q1 gross margin, we create higher long-term value of more than $120 million in those same projects for SunEdison shareholders.

As a reminder, the significant benefits to SunEdison from utilizing public vehicles, including lowering our cost of capital, capturing the sale of the project and eliminating much of the friction loss through negotiating output and degradation rates with a buyer. Cumulatively through the end of Q1, we have retained a total of 240 megawatts on our balance sheet, amounting to retained value of approximately $420 million.

The third component we -- will enable us to build greater value and a strong balance sheet. We continue to take actions to strengthen our balance sheet and ensure we have appropriate levels of cash and liquidity to support our growth. During the quarter, we closed on a $150 million project finance revolver with Deutsche Bank. The facility is expandable to $300 million. Also during the quarter, we closed $250 million non-recourse acquisition facility to acquire projects from third parties or projects developed by SunEdison for our yield vehicles. And finally, the Semiconductor IPO, which will further reinforce the strength of our balance sheet, remains on track pending market conditions.

So in summary, our progress continues as we drive the 3 business elements that will enable us to become the most valuable platform in the industry: rapid growth, high value per watt and a strong balance sheet. We are excited about our positioning and the opportunity ahead.

Read the rest of this transcript for free on seekingalpha.com