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Look at the both the Docket and news reports for firm offers. When you add them all up +86% of their April 2 Pipeline Report is to be purchased for less than $450MM. Strip out South Africa (POC 0%), Norway (POC 0%) and Chile and what do you have left in the portfolio? The only remaining assets of value on their books are TERP and GLBL which are not doing so well and are up for auction. At the end of the day there will be nothing left except a big bag of debts.
No clue? On Aug 5th TERP terminated its option to buy the nearly completed 120 MW Commanche Solar in Colorado with its 25-year PPA. The PPA is price competitive with natural gas which makes the project a money loser out of the gate given its construction cost. We accountant types look for real economic substance in each deal. Nobody is going to wait 10-15 years hoping for project profits to kick in. Just another loser in the SUNE pipeline.
The development and operation of merchant energy projects is an esoteric business particularly when lining up financing for those projects. Getting tax equity and non-recourse debt are very difficult challenges. The former CEO and CFO had no experience in that business or the power industry in general. The failure of the Company was due to their lack of industry experience and/or incompetence. The absence of any accounting controls didn't help. Buying high and selling low will put anybody in bankruptcy eventually.
Not so fast. Easy come, easy go. http://www.extremetech.com/extreme/225692-tesla-kills-off-its-10-kwh-powerwall-the-chemistry-wasnt-there
Tesla is quickly going down the same path as SUNE. They can't meet their own projections. They can't generate profits or positive operating cash flow. The more cars they make the more money they lose. They need a constant inflow of debt and equity to stay in business. Acquiring Solar City is a recipe for disaster. Adding two negatives don't equal a positive.
SUNE has not received anything yet from the India sale and will not until the deal is approved in both US Bankruptcy Court and the India court(s). They have pending legal issues in India for failure to meet performance deadlines. The deal as most recently reported shows it covers 350 MW of operating projects and 950 MW of pipeline projects. Since most of SUNE's operating projects are in GLBL, GLBL will get the most of the cash. Your hypothesis on potential future sales also leaves out the current stalking horse agreement with NRG for 2,100 MW of projects (40% of the project pipeline) which may net SUNE only $144 million. If you use your extrapolation method on the rest of the portfolio that gets them maybe another $200 million. Fire sales are always tough to take when the seller HAS TO SELL.
Good to know your perspective. It explains a lot about the content of your comments. I, on the other hand, am a numbers cruncher. I seek everything in the details and minutiae. If they add up I go long. If they don't add up I go short. SUNE was a gift from July thru December. Their numbers never made sense to me. I wish you the best of luck with your optimism because it is going to take an infinite amount to survive SUNE.
It would behoove you to take some Intermediate Accounting courses to learn GAAP treatment and forensic analysis of financial statements. The MOR Balance Sheet is puffed up without any substance behind it. The increase in equity from 9/30/2015 is nothing more than SUNE's accounting system running amok. For example, how do you explain a company with $17.5 billion in assets generating less than $7 million in revenue in 6 weeks? Or how SUNE is showing consolidated $1.3 million in interest expense for the period yet the interest rates on the $1.3 billion DIP loans are +8% which would be approximately $11.7 million for the 6 week period? When the numbers don't foot and make sense then something is seriously wrong with the reporting so it should be dismissed.
The equity you reference doesn't exist except as PIC as I mentioned. There were no stock sales and there were no asset sales or the +$5 billion in cash would have been used to pay down debt and recorded as profit, i.e. elimination of Accumulated Deficit and reported as Retained Earnings. The MOR financial statements are dysfunctional as previously reported by the Company that there new system didn't work. The only report you can believe in the MOR are the cash flows.
The telltale signs SUNE’s bankruptcy is terminal: 1) all assets are on the auction block. Reported cash bids of $422 million cover 86% of 4/2/2016 Project Pipeline. TERP and GLBL are to be put up for bid in Sep; 2) the company’s accounting problems are not being fixed. The last MOR was replete with disclaimers including non-compliance with GAAP. The Income Statement and Balance Sheet don’t foot and line items such as Intercompany Receivables and Paid-In-Capital defy definition; 3) the Company has underperformed and underspent on every cash flow projection since its filing. Projects under development are not being funded as forecast and support funding for sub dividends and interest expense has been pulled. The Company has accumulated $190 million in new Payables since it filed its petition. Any work done on credit for projects will be netted from cash proceeds on sales; and 4) little notice has been given to the new CEO’s incentive comp plan which states the objective is to “sell all” or almost all of the Company’s assets by October. Any notion that the Company has high value assets which were not disclosed in bankruptcy is ludicrous since it would be treated as fraud by the Court.
Many commenters here have compared SUNE’s bankruptcy to American Airlines. If you are going to use an airline bankruptcy for comparison Pan Am is the more appropriate example.
Your missing line item is "Paid-in-Capital". The only definition for PIC is the additional funds received in excess of "Par" on the issuance of stock. To my knowledge there have been no filings indicating that more stock was issued after 9/30/15.
Be very careful with that add-on strategy. When the Enron bankruptcy was settled with shareholders years after its initial filing of CH. 11 the only stockholders that received any value were those "of record" pre-petition. Good Luck!
If you want to cherry pick quotes from the article then start at the top with "Even before filing for bankruptcy in April, SunEdison had been suffering from the weight of multiple lawsuits." Any company can get sued but poorly run companies get sued more often. Just add the lawsuits to the checklist of signs a company is going down the drain due to consistently poor performance and incompetent management.
TMF's assessment is spot on. As for SUNE's top quality product some of its customers think otherwise: https://pv-magazine-usa.com/2016/08/08/cap-sues-sunedison-alleging-poor-quality-pv-modules/
Simple Explanation: Every energy project is set up under a single legal entity, e.g. LLC, where the project is funded by equity, debt and construction creditors as a project is developed/constructed. When SUNE sells a project it is selling only its equity interest in the LLC free and clear of all of its third party liens as equity owner. NRG's recent stalking horse bid of $144 million cash is for SUNE's equity in 2,093 MW of projects. SUNE must then repay any lender/creditor from whom it borrowed to fund its equity for those projects. To date, SUNE has PSA's for 4,528 MW of projects for $422.5 million in cash. Those funds will go to its DIP lenders until the $1.3 billion loans, accrued interest and expenses are repaid.
Old news. Follow the Court docket. It is number 942. Another stalking Horse PSA for $144 million. And its 2,096 MW not 1,700MW. That's 40% of the April 2, 2016 Pipeline portfolio. At these rates the whole portfolio will be lucky to clear $650 million.
The Balance Sheet accompanying the May 2016 MOR is meaningless. The operative term in MOR is “Operating” performance. Only the Income Statement and Cash Flows matter since they provide the Court with a quantitative summary of how SUNE is doing compared to its forecasts. The B/S is a concoction. Assets suddenly increased $7.4 billion due to a new line item called “Intercompany Receivables”. There should be a net account on the other side of the ledger called “Intercompany Payables”. Paid-In-Capital increased $4 billion since 9/30/15. Did SUNE do a new stock issue since 9/30/15? The “Accumulated Deficit” declined by $678 million. Did SUNE suddenly become profitable since its last 10Q filing? There is really nothing significant in the MOR cash flows that were not picked up for the period reported in the 6/6/16 SEC filing.
Compare notes? Following today's Docket 942 filing (Stalking Horse) I have a pipeline of 5,257 MW as of 4/2/16 per SEC filing of 3/17/16. Stalking Horse takes out approximately 2,000 MW and the India sale takes out another 1,400 MW. If both deals close 65% of the pipeline goes away for $250 million, less cash to release vendor liens. That leaves 1,857 MW in the pipeline more than half of which is either zero or n/a POC(%). Even if they received cash of $1 million per MW for the balance of the portfolio they still come up short $1.5 billion to the lenders and $2 billion to creditors. So it looks like the sale of TERP and GLBL is their last hope. Thoughts?
"Premium" is a nebulous term. It can mean almost anything. Cash above book value, cash above outstanding debt or even gross cash on sale before net of cash on hand. In the absence of specificity it is meaningless. You are also not including the GLBL sale of all their India assets in your analysis. As of their last filing they had 300 MW of operating projects in country. It is quite likely that SUNEQ gets no cash in this sale.
Unless there are rules for the Court to make a decision within a specified time period, the OEC motion will not get decided for some time. The judge needs to see that the DIP and secured creditors get paid in full. This is going to take many, many months. If successful, then SUNE has to come up with a plan/agreement with unsecured lenders/creditors and a new business plan. And, it has to do this while cash outflows exceed cash inflows. The yieldco Interest Expenses were covered in the original DIP cash flows. SUNE has now rejected that support most likely due to failing cash flow projections. Your other conclusions about SUNE are on target.
You have your facts twisted. According to the Court Docket in SUNE's most recent financial summary they had $4.5 billion in liabilities and $102 million in assets. In the same report they stated that as of the CH. 11 filing date they had less than $2 million in unrestricted cash on hand. In order to get to less than $2 million in cash from the end of 3Q2015, after deconsolidating TERP and GLBL from the 10Q, SUNE blew through $870 million in cash when you add in the $231 million they stole from GLBL. SUNE's problem is they can't generate operating cash flow. That is why they are being liquidated.
I believe that MM is using "Shareholder" in the wrong context. He is assuming SUNE's shareholders are to be considered during asset sales when the inherent meaning is that the third party co-owners of the projects (i.e. shareholders of the projects) are the parties that need protection from SUNE's travails. Today's announcement that SUNE will no longer fund the yielcos interest expense is a further indication of SUNE's downward spiral.
FL: My condolences. You have lost a special friend and don't want to let go. I can't ease your pain so you must go thru the mourning process along with all the others who still believe all renewable companies are infallible. When you learn to stop reading the press and start getting into the weeds (e.g. the Notes contained in SEC financial filings, quarterly FERC reports, EIA "Production Reports" and state filings for new projects) you will soon learn what I have been trying to teach you. It is all about cash flow. SUNE never had it from the day they got into the renewables business. Just like the mortgage crisis, when the lenders pull the plug you got nothing left but the crumbs.
KeyBank was a longstanding major partner with First Wind in underwriting its wind project development and it rolled over its relationship to SUNE for those same uncompleted projects. It has a very large financial stake in promoting any proposal which protects it from risks associated with its guarantees. As a quasi insider I am surprised a regulatory agency doesn't slap them down for promoting outcomes which are not in the interest of the recognized secured lenders in the Bankruptcy Court.
First Wind did not build nor did it ever own California Ridge Wind. Invenergy developed the project and sold it to TERP in July 2015. The only wind projects that First Wind developed that sell energy in Califonia are in Utah and Washington under very rich long-term PPA's. In fact, the Utah project was built by financing the deal by the Southern California Public Water system which floated bonds to pre-pay 100% of the energy costs over the term of the PPA. First Wind couldn't get any bank or investors to fund the deal. First Wind won an award the year the deal closed for creative financing. When you look at SUNE revenues you have to net out the cash from the Cash Flow Statement since they already got the cash up front.
My advice to you and all the other "longs" is to accept that SUNE is going the Enron path. CH 11 allows the company to maximize sale proceeds where CH 7 would have created fire sales. It took Enron 5 years to liquidate. Companies succeed and perpetuate themselves based on generating free operating cash flow. The smart lenders and market will give a company 12-18 months to meet plan and show positive results. Then they pull the plug and cut off new funds. There are sound renewable companies out there that are growing organically. Stop wasting your time on SUNE. They are finished.
BTW. Want a tip? Tesla Motors is losing money fast and burning thru cash at an unsustainable rate. If they do not hit their production and sales projections over the next 1-2 quarters the big money players will pull their support. Short time?
Your opinion on yieldcos the other day is fundamentally flawed. Project developers seek the maximum sale price of completed projects to achieve the highest profit margin while yieldcos want to pay the lowest price possible to maximize their ROI. In addition, the vast majority of energy projects involve passive tax equity investors who get most of the free operating cash flow after debt service for the first 7-10 years. So in effect, yieldcos controlled by a developer can/will be a dumping ground for projects a developer cannot sell in the open market at a profitable margin.
When SUNE purchased First Wind they acquired a company that had never shown positive annual operating cash flow (see their S-1’s) or a net profit and had an Accumulated Deficit of $647 million as of April 2014. Many projects from that purchase are in the Northeast, have no PPA’s which mean they get paid market energy rates which are now the lowest level in over a decade, were dumped into TERP. There is an inherent conflict of interest between a developer and its yieldcos which is why TERP’s current third party controlling stockholders are seeking total independence from SUNE.
First HECO in Hawaii, now San Diego has cancelled their PPA with SUNEQ for non-performance. Look for a cascade of PPA cancellations to follow as the periodic contract performance reviews are conducted. Southern California Edison has their Imperial Valley review next month. Given the premium rates above current market bids on new PPA's the value of Sunedison's projects under construction are not looking to good. http://www.sandiegouniontribune.com/news/2016/jul/25/sun-edison-update/