SunEdison Inc (NYSE: SUNE) recently filed for bankruptcy. This troublesome financial position of the solar giant plays a crucial role behind the Chapter 11 reorganization.
As of the 30th of September, the renewable energy developer stated that it had $20.7 billion in assets and $16.1 billion in liabilities. During the previous week, an audit committee reviewed SunEdison and has seen an overly optimistic culture at the company’s top management. The audit committee further stated that the solar energy developer’s cash forecasting efforts significantly lack controls. This clearly indicates that SunEdison is in an unstable position.
The renewable energy giant’s CEO Ahmed Chatila described SunEdison’s bankruptcy filing as a difficult but essential step. During a press release, the SunEdison CEO stated that,“Our decision to initiate a court-supervised restructuring was a difficult but important step to address our immediate liquidity issues.”
Ahmed Chatila was designated as the CEO of the MEMC Electronic Materials and after, bought the energy developer, SunEdison. Due to the company’s rapid expansion, SunEdison has been under huge debt, and this has been increasingly difficult to pay.
The GTM Research senior Vice President Shayle Kann, the balance sheet of the solar energy developer is “way out of line with any other solar company.” The senior Vice President further stated that even though SunEdison has acquired projects, it has done so too quickly and too soon.
Since the month of July last year, the shares of the solar giant have plunged by 90 percent as the adopted strategy to find growth through debt funding proved detrimental.
Seeking for bankruptcy protection will aid SunEdison in terms of easing its debt burden and offload some non-core activities. In addition, this would also enable the firm to come up with measures to maximize value from certain areas, including intellectual property ad technology.
With this, one cannot deny that 2016 has been quite a chaotic year for the solar energy giant. In the month of January, Appaloosa Management LP sued SunEdison as it planned flipping of the assets of Vivint to TerraForm Power Inc. The injunction request of Appaloosa was dismissed at first by a Delaware judge. However, the hedge fund, later on requested an expedited trial.
After this, in February, SunEdison was halted from making unusual alterations to its assets. The Latin America Power Company shareholders have also appealed for damages brought about by the unsuccessful takeover. These damages were worth approximately $150 million.
Later in the month of February, the Hawaiian Electric Co. officially invalidated its power purchase deals with the renewable energy developer. SunEdison was accused of not being able to meet financial deadlines. This purchase agreement was meant for 3 solar farms that are worth 148 megawatts in Hawaii.
Considering the different factors, it seems like the company is very likely to drown into further liabilities. Moreover, it could produce more obstacles when it comes to successfully completing the bankruptcy process. Finally, the company is currently facing a number of lawsuits—most of which are still pending.