TerraForm Global sued its parent company SunEdison on Monday. Credit: SunEdison.
Updated: TerraForm Global has sued its struggling parent company, SunEdison, accusing it of misappropriating funding meant for completing and transferring renewable energy projects in both India and Uruguay.
TerraForm Global claimed that it gave US$231 million in cash to help SunEdison complete certain renewable energy projects in India and to secure a transfer of SunEdison’s equity interests in these projects, but SunEdison used the cash for its own means, according to a lawsuit filed in a Delaware Court.
SunEdison executives allegedly claimed that the India-based projects were “substantially completed” leading TerraForm Global to believe that the cash would be used to finish the projects and deliver them on time. The lawsuit filing claimed that the Indian projects were actually “under-funded and behind schedule”, meanwhile SunEdison diverted the funds to prop up its flagging liquidity position rather than to fund the projects in India as promised.
TerraForm Global said last week in an SEC filing that that SunEdison was at a "substantial risk" due to its "liquidity difficulties" and "will soon seek bankruptcy protection".
PV Tech contacted SunEdison to ascertain what stage its Indian projects had reached, but the firm was unable to provide comment.
TerraForm Global accused SunEdison of spending the US$231 million “to suit its own needs” and not being able to complete the India projects. Furthermore, SunEdison allegedly said the assets could only now be completed and transferred if TerraForm Global provides at least US$73 million in additional funding to refresh the equity and pay contractors that have been working on the projects.
A further lawsuit relating to the First Wind acquisition against Terraform was filed last week with the US SEC. Two investment companies, DE Shaw Composite Holdings and Madison Dearborn Capital Partners also claimed US$231 million in connection with the November 2014 acquisition by the yieldco.
In the event of its bankruptcy, SunEdison would owe that sum to both of them in earnout payments relating to the deal, DE Shaw and Madison Dearborn said. The pair believes that Terraform would be liable for this sum if the parent company goes into liquidation and are therefore seeking a declaratory judgement to determine that this would be the case.
Terraform said it would "vigorously defend" itself in the suit which it said was "without merit".
In the lawsuit filing, TerraForm Global also claimed that SunEdison will be unable to fulfil its contractual obligation to “drop down” various projects in Uruguay to TerraForm Global in exchange for the shares TerraForm Global had issued to SunEdison in relation to TerraForm’s IPO.
TerraForm Global claimed that SunEdison failed to complete or transfer the Uruguay projects by the original deadline of 31 December 2015 and only after several more deadline extensions did it emerge that SunEdison had failed to pay subcontractors and suppliers for the projects and had used funds from a construction loan to fund construction of the projects for other purposes, leaving a US$34 million shortfall in funding necessary to complete the projects.
TerraForm Global said that it learned in March that construction had ceased on the Uruguay projects because SunEdison had stopped funding the projects.
Yesterday reports emerged that Indian conglomerate Adani was considering purchasing SunEdison’s Indian solar assets.
In additional news, on 8 April Terraform Global said it had completed the aqcuisition of a 26.4MW plant in Uruguay in a deal that was first announced by SunEdison in May 2015. The yieldco paid around US$35.4 million in all to acquire a 100% stake in the Alto Cielo power plant.