Solar technology company SunEdison Inc. SUNE and producer of wind energy, Gamesa Corp. have come together to facilitate the development of 1 gigawatt (GW) of wind energy projects by 2018. Both the companies have agreed to a 50% stake in the alliance.
Under the joint venture agreement, SunEdison will buy wind turbines from Gamesa. The company also stated that the project will be sold to an yieldco company – TerraForm Power Inc. TERP – once it is ready for commercial operation. On the other hand, Gamesa will provide equipment, and would be entrusted with the maintenance of the wind power plants.
Gamesa is Spain’s largest wind turbine manufacturer in the world. It has more than 31,200 MW installations in 51 countries. Its responsibilities also include the operation and maintenance of the wind turbines of over 20,700 MW installed capacity.
Benefits of the Alliance
The joint venture will help SunEdison to produce solar panels that will generate electricity at a lower cost and also reduce the loss of electricity during transmission. Moreover, this will help it expand its foothold across India and Mexico.
According to SunEdison’s executive vice president, "This agreement will accelerate SunEdison's drive to respond to rapid growth in global wind markets."
Per the International Energy Agency (IEA), global energy demand for electricity generation will increase 37% by 2040. Half of the demand will come from renewable energy, primarily from solar PV installations, which will overtake coal as the leading source of electricity.
Furthermore, 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 emerging countries.
SunEdison looks to capitalize on the opportunity in the growing renewable energy market and, in the process, boost its top line, going forward.
SunEdison reiterated its guidance of producing 2,100–2,300 MW solar and wind energy projects in 2015. The company revealed that the joint venture will generate higher cash flows and asset management revenues.
The company has been expanding clean energy capabilities through acquisitions, which should drive its long-term growth. We believe that the demand for clean energy will increase manifold over the long term, and being the world’s leading developer of renewable energy, SunEdison is well positioned to capitalize on this opportunity.
Our Take
Although SunEdison’s growing exposure in the renewable energy market is encouraging, any delay or inability to sell these projects at desired prices — which require considerable time and investment —could impact liquidity.
Going forward, the pricing environment and competition from SunPower Corp. SPWR and First Solar Inc. FSLR remain headwinds.
Currently, SunEdison has a Zacks Rank #3 (Hold).
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