Solar technology company SunEdison Inc. (SUNE) has reportedly entered into a strategic alliance with Indian conglomerate Adani Enterprises, which will expand its base in India. Under the joint venture agreement, the companies will put up approximately $4 billion to develop solar photovoltaic projects in Gujarat, India.
This initiative will not only have a positive impact on the lives of people in Gujarat but also provide a clean and renewable source of power. As per reports, the project will create nearly 20,000 jobs in the area. The construction is expected to take three years.
The partnership will help SunEdison to produce solar panels that will create electricity at lower cost and also reduce loss of electricity during transmission. We believe that SunEdison’s strategic decision to produce solar panels from low-cost production regions like India gives it an added cost advantage over its solar cell manufacturing peers.
The company also claims that the electricity generated through its photovoltaic power plants are cheaper than the electricity generated through fossil fuels in the country.
India: Land of Opportunities
With the U.S. government imposing anti-dumping duties on the import of Chinese solar panels, companies like SunEdison, Trina Solar Ltd. (TSL) and ReneSola Ltd. (SOL) have shifted their focus to the solar markets of neighboring countries like Japan and India.
The new Prime Minister Narendra Modi’s Vibrant Gujarat Summit ambitiously plans to make India shine as much as European countries that use solar power and enhance its solar energy capacity by 33 times to 100,000 megawatts (MW). Moreover, India intends to increase its renewable energy share to at least 15% from the present 6% by 2020. Presently, India’s solar power capacity is below 2.7 gigawatts (“GW”).
The government now expects to add about 15 GW of solar power capacity by the first quarter of 2019. According to the original National Solar Mission target, India had planned to add about 9 GW from 2014 to 2017, and another 10 GW between 2018 and 2022.
These projections have put India on the radar of solar power companies. Also, per WSJ, the central government of India along with five state governments has a target to set up 25 solar parks.
Given its eagerness to achieve the solar objectives and contribute toward a cleaner and sustainable environment, the Indian government has made it easier for global solar players to enter the market. SunEdison looks to capitalize on the opportunity in the growing solar market in India, and in the process boost its top line, going forward.
However, there is no dearth of competition from local solar power providers. Companies such as Reliance Power, Tata Power, NTPC and Torrent Power are striving to gain traction in this segment. Moreover, any delay or inability to sell these projects at desired prices could affect liquidity. Going forward, the pricing environment and competition from SunPower Corp. (SPWR) and First Solar Inc. (FSLR) remain headwinds.
To add to its woes, SunEdison reported wider-than-expected loss for the third-quarter fiscal 2014. The company’s non-GAAP loss per share of 68 cents was significantly greater than the Zacks Consensus Estimate of a 24-cent loss and compared unfavorably with breakeven results in the year-ago quarter. It is worth noting that the company has underperformed the Zacks Consensus Estimate in three out of the four trailing quarters with an average negative earnings surprise of 142.3%.
Currently, SunEdison has a Zacks Rank #5 (Strong Sell).
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