Second Prize in the 'Sustainable Finance' track of the Oikos Case Writing Competition, organized by oikos International, Switzerland

The Fall of SunEdison-A Solar Eclipse?

Case Code: FINC125
Case Length: 12 Pages
Period: 2015-2016
Pub Date: 2017
Teaching Note: Available

Price: Rs.500
Organization: SunEdison
Industry: Solar Energy
Countries: U.S,World
Themes: -

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

In 2016, one of the largest renewable energy companies in the world, US-based SunEdison Inc., filed for bankruptcy when it couldn't service the debt it had raised to achieve aggressive growth. SunEdison had an illustrious past; it had grown to become the largest solar installation company in the US and a global renewable energy giant. By 2016, solar power had attained grid parity in some parts of the world and solar was reaching its peak growth in the developed world. Governments from the developed world, which were boosting solar power through tax rebates and subsidies were rolling back their incentivization schemes and resorting to stricter guidelines for green project funding.. On the other hand, there was tremendous growth potential in the emerging markets where millions still lived in the dark.

By 2016, one of the most contrasting features of the solar industry was that there was little innovation and differentiation and the market was still defining its business model. The industry had gone into consolidation mode and SunEdison preferred to grow inorganically. To tap the opportunity in emerging markets and win projects, SunEdison started offering rock bottom rates.

When SunEdison's balance sheet got heavier and the company couldn't raise further debts, it decided to form subsidiaries called Yieldcos. Yieldcos were essentially energy asset holding public listed companies which assured stable dividends (from sale of electricity which the solar assets generated). Yieldcos issued shares to raise capital using which a completed solar asset was bought from its parent (SunEdison). SunEdison used the capital for further growth.

In an industry where technological innovation was rare, financial innovation became the norm. The case describes SunEdison's fall from grace. It throws light on the economics of the solar business and the need for robust sustainable finance for renewable projects.

Issues

This case is designed to enable students to:

Introduce students to the Renewable Solar Energy Industry and its present day challenges
Understand the 'solar paradox' and illustrate the aggressive growth strategies adopted by solar developers
Understand the challenges in financing solar projects
Understand the concept of Yieldcos and their limitations as vehicles for raising capital for renewable projects
Understand the behavioral finance aspects which might come into play when conventional financial analysis falls short of giving an accurate picture

Introduction

Takeover of SunEdison

MEMC

Solar in Emerging Markets

Solar in Developed Economics

Solar Industry and Solar Economics

SunEdison Business Model