Overview: Greenlight Capital's 2Q positions

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Part 6
Overview: Greenlight Capital's 2Q positions PART 6 OF 7

Why Greenlight Capital ups its stake in SunEdison

Greenlight Capital and SunEdison

David Einhorn’s Greenlight Capital initiated new positions in Civeo Corp. (CVEO), AerCap Holdings NV (AER), Time Inc. (or TIME), and Chemtura Corp. (CHMT). It added to its positions in SunEdison Inc. (SUNE) and Lam Research (LRCX).

Why Greenlight Capital ups its stake in SunEdison

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Greenlight almost doubled its position in SunEdison Inc. (SUNE). Currently, it accounts for 6.71% of the fund’s 2Q14 portfolio. The position was increased in 1Q14 as well.

SunEdison is a major developer and seller of photovoltaic energy solutions. It’s a global leader in the development, manufacture, and sale of silicon wafers to the semiconductor industry. Its solar business develops, finances, installs, and operates distributed power plants. It delivers predictably priced solar energy and services for its commercial, government, and utility customers.

Einhorn’s 1Q14 investor letter elaborated on the thesis that “The declining cost of solar energy combined with the rising cost of conventionally produced electricity should position SUNE as a winner. The company has built a large pipeline of attractive projects secured by credit-worthy electricity buyers. Until recently, the good business was mixed in with two bad ones—manufacturing wafers for semiconductor companies and assembling commodity solar modules for developers. Historically, the company’s poor balance sheet forced it to sell many of its solar development projects at discounted prices to raise capital.” The letter further added that “The company has now exited the solar module assembly business and is in the process of monetizing its semiconductor wafer business through an IPO.”

SunEdison completes IPOs of semiconductor business and yieldco TerraForm Power

Einhorn’s latest investor letter said that the company successfully completed the initial public offerings (or IPOs) of its semiconductor unit SunEdison Semiconductor (or SEMI) and yieldco TerraForm Power Inc. (or ERP).

The enhancement of its solar portfolio through acquisitions and the creation of an incentive distribution rights structure should help unlock additional value from TERP.

Deutsche Bank had forecasted in June that “the emergence of five to six publicly traded Yieldcos over the next 12–18 months to act as a robust growth enabler as we expect a significant amount of low-cost capital to chase projects, driving improved project economics and greater amount of new project development” for the solar sector.

Posts narrower net loss, high revenues sequentially 

SunEdison’s net sales for 2Q14 were $214.9 million—up 4.3% sequentially, but down 11.9% year-over-year (or YoY) on lower volumes and pricing. Adjusted earnings before interest, taxes, depreciation, and amortization (or EBITDA) was $20.1 million—up 34% sequentially and down 21.2% compared to 2Q13 adjusted EBITDA of $25.5 million.

It posted a narrower net loss of $41.2 million and an adjusted earnings per share (or EPS) of $0.16 per share—up from a net loss of $102.9 million in the same quarter last year.

Management added, “Demand grew and our average selling price increased sequentially despite the competitive market environment. Also, lower costs and improved plant utilization contributed to higher gross profit compared to the prior quarter.”

The Solar Energy segment saw an increase in net sales. Semiconductor Materials net sales decreased due to semiconductor wafer price and volume decreases. SunEdison said the decreases were the result of competitive pressures from softness in the semiconductor industry.

At the end of 2Q14, SunEdison said it has 475 megawatts (or MW) of solar projects under construction compared to 504 MW as of December 31, 2013. The projects under construction are predominately located in the United States, UK, South Africa, Canada, and Chile. It said it has a project pipeline of ~4.3 gigawatts (or GW) as of June 30, 2014. This represents a 0.9 GW increase from the 3.4 GW of project pipeline as of December 31, 2013.


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