SunEdison, Georgetown's Solar Electric Provider, Called Hedge Fund Hotel

The list of hedge funds long SunEdison Inc (NYSE:SUNE) reads off like the who’s who of the hedge fund industry. In first place is David Einhorn‘s Greenlight Capital, which owned 24.8 million shares of the solar company at the end of June. SunEdison is Einhorn’s second largest equity position after Apple. In second place is Dan Loeb’s Third Point, which held 12.4 million shares at the end of the second quarter, making the solar company Loeb’s sixth largest equity position. In third place is Larry Robbins’s Glenview Capital, which owned 11.4 million shares. Overall, 93 out of over 730 elite funds owned a stunning $5.68 billion worth of the company’s stock (representing 69.10% of the float) at the end of June, up from $4.44 billion a quarter earlier. 

 It is likely that Einhorn is quite unhappy with the value of his investment as the stock price has declined from $33.45 in July to about $9.00 per share today. That is a 73 percent decline in three months!  Many retail stock analysts are recommending that investors sell the stock due to the uncertainty about the future.

SunEdison spins off their solar generating plants to a seperate company called a "yieldco" by signing long-term contracts with users like Georgetown.  This "yieldco" is supposed to provide consistent dividends to shareholders.  SunEdison's "yieldco" is called TerraForm Power, Inc and it had to borrow the money to purchase the power plants from SunEdison.  Of course SunEdison had to backstop the loans since TerraForm initially had no assets or insufficient assets to back the loans.

A CreditSights report concludes it is possible SunEdison to be dragged down by TerraForm and the added burden of posting cash collateral for the margin loan that was backed by stock.  More reporting can be found here. SunEdison also plans on terminating 15 percent of their employees as they strive to survive as a going concern.

Here are more excerpts from the link about SunEdison:

"Amid a surge in debt and increasingly negative operating cash-flow, the plunge in stock (asset) price may have triggered a cross-collateral margin call of around $315 million. Furthermore,mass layoffs are on the cards as the CEO attempts to "optimize" the business".

 "the more we find the more negative we get on the sponsor company of TerraForm Power".

The citizens/rate-payers of Georgetown are entitled to know the risk to them through the City if SunEdison fails to perform up to the terms of the contract.  However, the City refuses to release the contract to its citizens and has been unwilling to identify the risks to the City as well as any mitigation strategies.