It wasn’t really a good year for SunEdison, Inc. (NYSE:SUNE) stock investors. However, since entering December, SunEdison’s stock started its way back up. How long will the momentum last? By looking at what the company has done recently, SunEdison’s stock investors could be rewarded.
SUNE Stock: Extinguishing $336 Million of Debt
On Wednesday, December 30, the company announced that its subsidiary Seller Note LLC would extinguish $336 million exchangeable notes due in 2020. In exchange, holders of the debt would get interest in certain renewable energy assets under development and a specified number of shares of TerraForm Power, Inc. (NASDAQ:TERP), one of SunEdison’s yieldcos. (Source: “SunEdison Announces Agreement to Extinguish $336 Million of 2020 Exchangeable Notes,” SunEdison, Inc., December 30, 2015.)
Some might say that the decision to extinguish debt reflects SunEdison’s urgent need for cash. But that’s not the case here, as the notes are due in 2020. Those could be a problem. The company is looking at the balance sheet in the long-term and by deleveraging the balance sheet, SunEdison can operate without too much restriction.
Also on Wednesday, SunEdison announced that it and Terra Nova Renewable Partners (a partnership SunEdison formed with institutional investors) have acquired a 33% stake in a 336-megawatt portfolio of operating solar power plants from Dominion Resources, Inc. (NYSE:D) for $180 million, plus an adjustment for working capital. This acquisition is first in a two-part deal for 24 projects with a total capacity of 567 megawatts. The second phase of the deal is expected to close in early 2016. (Source: “Terra Nova Renewable Partners, A Partnership Between SunEdison And Clients Advised By J.P. Morgan Asset Management – Global Real Assets, Buys 33 Percent Stake In 336 Megawatt DC Solar Portfolio From Dominion,” SunEdison, Inc. web site, December 30, 2015.)
SUNE Stock: Listening to Investors
The neat thing about SunEdison is that the company listens to its investors. Back in July, SunEdison announced that it would buy residential solar system company Vivint Solar, Inc. (NYSE:VSLR) for around $1.9 billion in cash, stocks, and notes. Including debt, the deal was valued at $2.2 billion.
After the deal was announced, investors expressed concerns that the company might be paying too much cash. SunEdison listened and announced earlier this month that the deal for Vivint has been amended. The cash portion has been reduced and Blackstone Group LP will be providing a $250-million credit facility to fund business growth. (Source: “SunEdison And Vivint Solar Reach Agreement To Amend Definitive Merger Agreement To Acquire Vivint Solar; Blackstone-Sponsored Vehicle To Become Key Stakeholder And Commits To Provide $250 Million Credit Facility,” SunEdison, Inc. web site, December 9, 2015.)
SunEdison’s CEO Ahmad Chatila noted that he and the company believe that considering the current and recent market volatility, the new agreement is a good compromise that meets the best interests of all involved. Under the amendment, the cash portion of the deal will be reduced by $2.00 per share, while the stock consideration will increase by $0.75 per share.
The Bottom Line on SUNE Stock
The macro environment for renewable energy companies has become much better in recent weeks. In early December, at the United Nations COP 21 Summit in Paris, 196 countries signed an agreement to limit the rise in global mean temperatures to two degrees Celsius (3.6 degrees Fahrenheit) by the end of the century. A few days later, the U.S. House of Representatives and the U.S. Senate passed the omnibus spending bill, which includes an extension of federal tax credits for those who install renewable energy systems in their homes and offices.
As one of the largest renewable energy companies in the world, SunEdison could see fruitful returns on its wind and solar projects—and so might investors of SUNE stock.