Sunedison Inc. (fka SUNEQ)

[OTCdoc]

The recent solar ITC extension has dramatically improved the health of the US solar industry. Whereas the solar tax credit was previously slated to decrease to 10% in 2017, the ITC is now slated to remain at 30% until 2019. What's more, the solar ITC will only decline to 26% in 2020 and 22% in 2021 (the ITC will stabilize at 10% in the year 2022 and beyond). The new solar ITC plan is clearly a far cry from the original and will likely propel the solar industry to new heights.

The solar ITC extension will be particularly beneficial to SunEdison (NYSE:SUNE). As SunEdison is primarily involved in the utility-scale solar sector, which is currently far more susceptible to subsidy changes, an ITC extension is the best possible outcome for SunEdison. SunEdison is currently experiencing one of its most difficult periods given the rapid decline in investor confidence. This makes the recent solar ITC extension all the more important for SunEdison's success.

Business Model Strengthened Overnight

While SunEdison has involved itself in a growing number of businesses, the company's core business still revolves around the utility-scale solar sector. As much of SunEdison's business model is focused on constructing and selling utility-scale solar projects, an ITC extension should dramatically increase the value of SunEdison. SunEdison should witness a dramatic uptick in demand for utility-scale projects in the US solely as a result of the ITC extension, putting the company in a great position.

Perhaps most importantly, the ITC extension will make SunEdison's strategy of selling projects to its yieldcos far more viable. As SunEdison's yieldcos TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL) partially rely on selling equity to buy SunEdison's projects, the ITC extension should be invaluable as it raises both these yieldcos' valuations (due to increase investor confidence in solar stocks). At higher valuations, these yieldcos can raise more money.

Not surprisingly, both these yieldcos have experienced a huge upsurge in valuation upon news of an ITC extension. As SunEdison's yieldcos can better afford to buy SunEdison's projects at higher valuations, SunEdison's project selling business is also improved. As such, the ITC extension should help SunEdison reverse its current downward spiral. Despite the fact that SunEdison has nearly doubled in value over the past few weeks, the company still has more room to grow given its current positive circumstances.





Source: SunEdison

Refocusing Business

SunEdison has already started cutting back on more peripheral businesses like energy storage and has even started scaling back on its international expansion plans. In fact, the company recently terminated its $250 million deal with Brazilian renewable energy company Renova. Given the current nervous investor atmosphere in regards to solar (especially on the financing front), SunEdison's more conservative approach seems appropriate. By winning back investor confidence, SunEdison should be able to raise capital more easily for future projects. The ITC extension only strengthens SunEdison's improving situation.

Conclusion

Given SunEdison's market penetration and growth, the company appears to have much more upside. While there are many safer utility-scale solar plays like First Solar (NASDAQ:FSLR) and SunPower (NASDAQ:SPWR), SunEdison is a good investment despite its risks.
http://seekingalpha.com/article/3768096-sunedisons-fortunes-have-dramatically-improved