SunEdison Inc. SUNE recently announced that construction of the 22.6 megawatt (MW) DC Seven Sisters solar project has begun in Utah. The project includes seven separate solar power plants, of which four are located in Beaver County and the other three in iron County.
The company further stated that the electricity generated from these plants will be purchased by Rocky Mountain Power — a division of PacifiCorp — under seven separate 20-year power purchase agreements.
SunEdison has added all these plants on the Call Right Projects List for its yieldco company, TerraForm Power Inc. TERP. These will be operated and maintained by SunEdison Services.
The rising demand for cheap and clean energy globally is benefiting this world’s leading solar technology company. This demand is expected to increase manifold over the next few years due to environmental concerns and depleting natural resources.
According to Bloomberg, global solar and wind energy project installations in 2015 are likely to increase to 52,000 MW and 60,000 MW, respectively. SunEdison is well positioned to capitalize on this opportunity.
Furthermore, we are encouraged by the company’s sustained focus on expanding clean energy capabilities through acquisitions and strategic alliances which should drive long-term growth.
The company’s most recent notable buyout is that of Solar Grid Storage LLC — a leader in deploying combined energy storage and solar PV systems. With this acquisition, SunEdison has now become the world’s first renewable energy company to offer solar and wind energy as well as energy storage facilities.
Apart from this, SunEdison entered into a strategic alliance with Indian conglomerate, Adani Enterprises, to grow its Indian footprint. Per the agreement, the companies will invest approximately $4 billion to develop solar photovoltaic projects in Gujarat, India. 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 peers.
Despite the positives, we recognize that solar projects require considerable time and investment and any delay or inability in selling these projects at desired prices could affect the company’s liquidity.
The pricing environment and a highly leveraged balance sheet are the other concerns plaguing SunEdison. Apart from this, the company faces competition from the likes of SunPower Corp. SPWR and First Solar Inc. FSLR.
Currently, SunEdison has a Zacks Rank #3 (Hold).
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