Speculations about SunEdison Inc. SUNE selling the remaining stake in its one-time wholly owned subsidiary, SunEdison Semiconductor Limited SEMI, got some merit after the latter announced the commencement of a secondary offering last week. The main highlight of the announcement was the sale of shareholders’ shares in the offering.
Per the Jun 24 announcement, SunEdison Semiconductor will offer approximately 15.9 million shares to the public at $18.25 each. The offering is anticipated to close on Jul 1.
The number of shares represents the cumulative stakes of SunEdison (10.6 million shares) and Samsung Electronics Co. Ltd. (5.3 million shares). Therefore, it is speculated that these two companies will offload their entire stake in the silicon wafer manufacturing company.
SunEdison is currently the world’s leading renewable energy developer. In May last year, the company divested its semiconductor business and got it listed on the Nasdaq Global Select Market. The divestment was prompted by lower-than-expected demand for its semiconductor wafers and enabled it to focus more on its core solar power business.
Solar project sales have picked up as a result of increased photo voltaic (PV) installations across the U.S., China, Japan, India, Middle East, Africa, Latin America, Australia and Southeast Asia. Therefore, sale of the remaining stake, i.e. 10.6 million shares, in the semiconductor business will raise nearly $193 million which it can invest across various countries.
The rising global demand for cheap and clean energy due to environmental concerns and depleting natural resources is benefiting SunEdison. According to Bloomberg, global solar and wind energy project installations in 2015 are likely to increase to 52,000 megawatts (MW) and 60,000 MW, respectively. Of this, a significant portion is expected to be in the emerging countries and SunEdison is well positioned to capitalize on this.
Over the past several months, SunEdison has been aggressively investing across emerging markets, particularly India. In fact, in June, SunEdison announced its intention to expand its Indian base by investing approximately $15 billion through 2022. The company plans to develop 15 gigawatts (GW) solar and wind projects in the country.
It is worth mentioning that in January, the world’s leading renewable energy developer entered into a strategic alliance with the Indian conglomerate, Adani Enterprises, to expand its base in India. Under the agreement, the companies will invest approximately $4 billion to develop solar PV projects in Gujarat.
The partnership would help SunEdison to produce solar panels that will produce electricity at lower cost and reduce electricity loss during transmission.
Additionally, in May 2015, the company acquired seven renewable assets in Brazil, China, India, Peru, Chile, South Africa and Uruguay for a total of $537 million, further strengthening its portfolio in the growing renewable energy market.
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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