Struggling renewables firm SunEdison has successfully stopped court action by US-based hedge fund, Appaloosa Management to block its yieldco, TerraForm Power from acquiring US PV installer, Vivint Solar.
Updated: Struggling renewables firm SunEdison has successfully stopped court action by US-based hedge fund, Appaloosa Management to block its yieldco, TerraForm Power from acquiring US PV installer, Vivint Solar.
The Appaloosa action threatened to potentially bankrupt SunEdison if the legal case had successful as the company was obligated under agreement to purchase Vivint, yet its own finances would have been severely depleted and further limit its liquidity.
SunEdison said in a statement: "We are gratified that the court denied the injunction and now we look ahead to continuing to navigate current market conditions."
In a research note to investors, Deutsche Bank analyst, Viahal Shah said or court case success: “The Appaloosa case was one of the biggest overhangs on SUNE shares and a favorable decision clears the way for SUNE to close the VSLR transaction as well as should enable the company to focus on execution. In terms of timing, we expect the VSLR deal to be closed by March 18 and post the close, we really see one of two scenarios playing out - either SUNE finds a buyer for VSLR operating assets or TERP will be required to buy these assets. We believe there is a high probability that SUNE is able to find a buyer for these assets which would be a significant positive for both TERP and SUNE, in our view.”
Impairment charges on assets closing and sold
In a separate financial filing SunEdison reiterated that it expected one-time impairment and restructuring charges totalling US$437 million in its fourth quarter, 2015 financial results due to closing down its polysilicon plant in Pasadena, Texas and selling Malaysian wafer facility to Longi Silicon Materials.
The company expects to report US$202 million of non-cash impairment charges for the closure of the polysilicon plant as well as charges of US$139 million for the termination of long-term supply contracts. Decommissioning activities for Pasadena are expected to take place in 2016, which include restructuring charges of US$16 million in fourth quarter financial results and report other restructuring charges of US$6 million related to employee severance (around 180 jobs) associated with the Pasadena facility.
The Kuching, Malaysia wafer facility will cost US$80 million in asset write downs with a non-cash impairment charge of US$26 million in the fourth quarter of 2015.
Charges of US$9 million will also be included that related to contract termination obligations and employee severance payments.
Revised asset-lite model
As part of the deal with Longi acquiring the Malaysian facility, SunEdison would receive US$63 million, of which US$18 million would be paid after purchasing a total of 1GW PV modules from Longi under a separate supply agreement.
The company has also announced a manufacturing partnership with Chinese state-owned enterprise, Jinneng Group to build a 1.5GW integrated n-type monocrystalline heterojunction production facility in Shanxi, China.