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The World's Largest Renewable Energy Developer Could Go Broke (huffingtonpost.com) 292

An anonymous reader quotes a report from The Huffington Post: There is a "substantial risk" that SunEdison may file for bankruptcy, the world's largest renewable energy developer said in a regulatory filing on Tuesday. The company's fall isn't a referendum on the solar industry as a whole, as much as it is on SunEdison's aggressive growth strategy fueled by excessive debt and financial engineering, analysts say. SunEdison "just thought they were smarter than everyone else," said David Levine, the founder and CEO of Geostellar, a solar energy marketplace that has done deals with the company.
SunEdison loaded up a total of $11 billion in debt to develop or acquire renewable energy projects. The company's shares have fallen steeply since they hit a high of $30 in July. They were at just $1.26 before the filing. The stock immediately dropped another 40 percent when the market opened after the filing, and the company was trading at just $0.59 by Tuesday lunchtime.
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The World's Largest Renewable Energy Developer Could Go Broke

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  • by fredgiblet ( 1063752 ) on Tuesday March 29, 2016 @09:50PM (#51804539)
    ...People are gonna claim it's proof that renewables don't work.
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Because it is. The taxes from fossil fuels and the economy they fuel are the only thing that makes the Green scam possible.

    • Re: (Score:2, Troll)

      by x0ra ( 1249540 )
      remind me the fate of Solyndra ?
      • by K. S. Kyosuke ( 729550 ) on Tuesday March 29, 2016 @10:14PM (#51804671)
        Yes, Solyndra and this - the evidence that the market works and bad business plans properly fail.
        • My brother has been watching these stocks and was telling me about them the other day... I however was not totally listening but he mentioned he was buying stock in a related company that had dropped from $86 to under $2 but would jump back up afterward I don't remember if it was a partner or a parent company.

      • Because no market has ever, EVER had multiple companies fail. Ever. In all of history.
        • by haruchai ( 17472 ) on Tuesday March 29, 2016 @10:50PM (#51804835)

          Certainly not the one that supposedly built America's middle class, the automotive industry.
          Well, except for the ~500 listed at https://en.wikipedia.org/wiki/... [wikipedia.org].

          But apart from those few, not at all.

        • by KGIII ( 973947 )

          I trust that was sarcasm and that you're not retarded. It looks like it might be sarcasm but it also looks like you might mean what you say. My sarcasm meter is bounding back and forth and I just got it calibrated the other day. It's even got new batteries in it.

          But, assuming you are not being sarcastic... I carefully read the post you replied to, then I carefully reread your post, and I'm not actually sure what it is you're either trying to say or trying to prove. I sense you're trying to be witty and seem

          • I'm not trying to prove anything. I'm literally just saying that people will use it as an argument regardless of the real reasons for the failure. I find it amusing how many people take it as advocacy for that viewpoint when it's, IMO, clearly not.
        • true, there have been plenty who got too excited and lost sight of the big picture and expanded too quickly - looks like the bean counters weren't up to scratch
    • by Applehu Akbar ( 2968043 ) on Tuesday March 29, 2016 @10:08PM (#51804643)

      Curiously, this story was not posted by mdsolar.

      • by OzPeter ( 195038 )

        lol .. where are my mod point when I need them

    • It isn't that they don't work.
      it's that they aren't as mature as other industries.

      They'll get there. it just takes time.

      • by x0ra ( 1249540 )
        ooth, time is really something we don't have...
      • They ate mature, it is just one flipping business plan that failed. There are hunderts of other companies which do renewables.

        • It isn't that they don't work.
          it's that they aren't as mature as other industries.

          They ate mature, it is just one flipping business plan that failed. There are hunderts of other companies which do renewables.

          Closer.

          In case you haven't noticed, the energy market is in a major upheaval. SunEdison is in trouble because of their 2-billion dollar purchase of Vivint. Vivint is in trouble because their business model, selling residential panels on a fixed-price-for-electricity basis, is in trouble because the price of energy has been dropping, and their business has turned into the equivalent of subprime loans.

          This particular failure isn't a technology maturity problem-- it's a problem of a business model being blin

    • Of course they are, just like they do with all the fracking companies that did the same thing. Oh wait.......

    • by Anonymous Coward on Tuesday March 29, 2016 @10:37PM (#51804783)

      ...People are gonna claim it's proof that renewables don't work.

      As an electrical engineer that works for a company that installs solar systems, they don't work. Well, when you add the government subsidies, that we all pay for in taxes, they're only bad instead of horrible.

      • It's really hard to compete in an unfair market. When your competition is given 10s of billions in tax breaks annually and allowed to pollute with impunity... Those gov subsidies to solar are pennies in the dollar compared to what Fossil fuel gets every single year
        • by funwithBSD ( 245349 ) on Tuesday March 29, 2016 @10:55PM (#51804873)

          You kidding?

          Tax breaks paid for 60% of my solar system. The only way it made economic sense.

          • by Anonymous Coward

            Even then considering you only make a few tens of dollars a month in power, you still won't make enough back to pay for the panels before they need replacement.

            For my system, if the panels survive 23 years, I'll finally be out of the red.

            • by KGIII ( 973947 ) <uninvolved@outlook.com> on Wednesday March 30, 2016 @02:04AM (#51805549) Journal

              I have solar and wind. I do not have them as a cost saver. I have them because I like electricity. My home is in NW, Maine. I am not shitting you when I say that my mains connection is a backup. Come winter, it's not usual to go as long as a week without power. There's nothing important past me and, even though I'm not far from the fat pipes of juice that come in from Canada, I'm pretty much out of luck until every other person gets their power back.

              I was not in that specific area during the Ice Storm of 98 (January, I believe) but I've been there for two since. The longest was almost two weeks without power. During the 98 episode, they didn't have power for almost a month.

              In fact, about six miles beyond my house is a guy who has still has no power. Of course, he's never had power. The lines go by his house and he still doesn't want power. He does have dial-up internet, I do believe. He was not interested in DSL. Curious sort of guy. Bad hygiene, I guess he was doing post-doc work when his brain kind of snapped, and he's been living off the grid in a cabin that his family owns since the early 1970s. Smart as all hell. He has some solar and a generator. Mostly survives off the land. Cuts a bit of my wood and hunts my deer and fishes my fishies. I'm quite okay with it. He's been over more than once - I've owned the new house since 2008. I was in for Christmas.

              At any rate, I make more than enough electricity to push some into the grid. They only give credits for the power - not money. I can sell, trade, or gift the credits. I can donate them to a charitable organization or to a State organization (of some types) and get a reduction in tax burden. As it was just updated with extra panels and a second turbine, I'm going to wait a full year and then I'll donate the credits to the local elementary school. I like 'em. The kids call me Mr. David. As some of them are getting to be adults now, I find it rather amusing to hear the young adults call me Mr. David.

              They use a piece of land that I own, it's an old and nonworking sandpit for their keg parties and for shooting. They police their brass. They even came and borrowed my truck, trailer, and tractor once year - they went out and cleaned up all the junk that people had left there over the years. They cleaned up old fridges, cars, burnt out cars, and (oddly) a giant (ocean going) lobster boat that was sans-trailer. I have no idea how the boat got there, it was there when I bought the place and nobody has fessed up yet.

              At any rate, that's enough of a novella. ;-) I didn't buy solar to make money back. I don't care that it isn't the cheapest. That I have turbines, and really good ones, you can guess that money was not the objective. I did it because it was the right choice for me to make. I like having electricity and the wind, so far as we know, has never quite stopped where the turbines are. It's all automated, I don't need to worry about a thing. You could say I did it to be green. Sort of? Not really... I just like having electricity. It's not even remotely uncommon to lose power there.

              (I am not there. I will be there within the next month, probably.)

          • The only way fossil fuels make sense is that they don't have to capture their CO2 release. And the billions in tax breaks to the oil companies...
          • by religionofpeas ( 4511805 ) on Wednesday March 30, 2016 @03:10AM (#51805763)
            Price of solar panels has dropped by more than 60% in the last decade, and the end is not in sight. Pretty soon the system you paid with tax breaks will cost less new without tax breaks. On the other hand, price of oil, coal and gas will go up in the future.
        • Huh, I wonder what those tax breaks are? And I guess coal plants aren't having to install even better scrubbers and such...
        • Re: (Score:3, Insightful)

          by ooloorie ( 4394035 )

          It's really hard to compete in an unfair market. When your competition is given 10s of billions in tax breaks annually and allowed to pollute with impunity... Those gov subsidies to solar are pennies in the dollar compared to what Fossil fuel gets every single year

          You got it backwards. Fossil fuels are heavily taxed and regulated. And subsidies to fossil fuels are next to nothing, as opposed to solar, which is heavily subsidized.

          • by mspohr ( 589790 ) on Tuesday March 29, 2016 @11:43PM (#51805143)

            Fossil fuels receive $5.3 Trillion in subsidies annually.
            Subsidies for fossil fuels amount to $1,000 a year for every citizen living in the G20 group of the world’s leading economies, despite the group’s pledge in 2009 to phase out support for coal, oil and gas.
            https://www.imf.org/external/p... [imf.org]

            • Re: (Score:3, Insightful)

              by KGIII ( 973947 )

              You might want to read that study and see what they're calling subsidies. Then, with solar panels, how about we discuss the materials and manufacturing methods as well as the material acquisition and the energy consumed in their production. Oh, lets limit those to just the ones in production - not the more esoteric ones slated to come a few years down the road that use even rarer materials that are even more difficult to mine and refine.

              This is not an argument against solar. This is an argument for open and

              • Then, with solar panels, how about we discuss the materials and manufacturing methods as well as the material acquisition and the energy consumed in their production.

                The materials used in common silicon PV panels are mostly silicon, plus some tiny bits of others. Whether you produce them in a clean or dirty way has nothing to do with the technology itself. That's purely a matter of choice and regulation, similar to mining coal or uranium, or materials for your new phone. The cost of the energy used by their production is already reflected in the price of the solar panels.

          • Any data to prove your claims?
        • Re: (Score:3, Informative)

          by KGIII ( 973947 )

          What are you calling subsidies for fossil fuels? Have you actually looked at the taxes paid by fossil fuels? Have you ever looked to see how much of what you pay at the pump goes to taxes (chances are pretty good that it is posted on/near the pump, actually).

          Oil companies don't really get any special subsidies. They pay taxes on profit, not income, just like every other business. They closes thing they get to a subsidy is what the government buys from them for their own use, for the reserve, and what they g

          • by evilviper ( 135110 ) on Wednesday March 30, 2016 @08:02AM (#51806413) Journal

            They closes thing they get to a subsidy is what the government buys from them for their own use, for the reserve, and what they give out to poor people to heat.

            Last I heard (2013), oil companies were getting on the order of $5.1 billion in subsidies for exploration. https://newrepublic.com/articl... [newrepublic.com]

            Categorization of oil under the tax code as a form of domestic manufacturing eligible for a 6% deduction of net income, claiming foreign royalty payments as a credit against American taxes, and deducting numerous costs associated with the drilling process is absolutely an insane handout that other energy suppliers are excluded from. http://www.cnn.com/2012/03/29/... [cnn.com]

            By comparison, research and development for solar energy was given only $302 million; and wind energy just $123 million. http://www.reuters.com/article... [reuters.com]

            • by raymorris ( 2726007 ) on Wednesday March 30, 2016 @09:07AM (#51806635) Journal

              That article, or summary really, is based on a report from an advocacy group which is frankly lying to you.

              The largest component that they are calling a "subsidy" is when a government owns a profitable energy company, so the government is getting paid. Their primary example is one making very healthly 14% return on investment . When the government is making a lot of money from a socialized company, that's kinda the opposite of subsidy.

              In the US, their top two "subsidies" are that oil companies use the exact same correct accounting as every other company, recording revenue and costs of that revenue in the same period. (Called Generally Accepted Accounting Principles) . Your advocacy group, Oil Change International, breaks that down into two components. First, amortization of capital investment. Suppose your business has $2 million on Monday, and no other assets, so it's worth $2 million. On Tuesday, you buy a $1 million oil rig, which is producing as expected. So now you have $1 million cash plus a $1 million oil rig. How has the total value of the business changed? It hasn't. You still have $2 million worth of stuff. Buying an asset that will last a long time isn't the same as throwing money away, so you don't deduct the $1 million cost all in one year. Fast forward 10 years. The oil rig equipment is getting old and worn out. You could sell it for $200,000. You still have the same $1 million cash, plus you have an oil rig that's now worth $200,000. You didn't make any money selling oil, so all the company has is $1 million cash and $200,000 worth of equipment. How much is the business worth now? It's worth $1.2 million, $800,000 less than before. That's amortization- recognizing that equipment gets less valuable as it gets old and worn out, so you spread the cost over the useful life of the asset.

                  You WANT companies to correctly amortize the assets on their books. If they don't, they are LYING to investors, primarily people who are saving for retirement. When they don't amortize costs correctly you get Enron.

              Depletion is the same thing, but for assets that "run out" rather than "wear out". Suppose you start with $100 million. Your company has $100 million cash and nothing else, so it's worth $100 million. You spend that $100 million dollars to set up operations on an oil field which has ten years worth of oil underground. Now how much is the company worth? Still $100 million, because it owns the $100 oil field operation. Go forward five years. You've used up half the oil. How much is the oil field worth now? Half the oil is gone, so it's worth half as much. That's depletion. That's correct, standard accounting in any industry; most industries call it "inventory". There's no subsidy there, simply correctly writing down what things are actually worth, then paying taxes based on those correct numbers.

      • by Anonymous Coward

        This. I'm in Seattle and moss growth has completely ruined my panels even with the 30% (IIRC) federal tax credit I got. So far this year I've only sold back about $200 worth of power. It takes a hell of a longtime to pay off my $20k investment at that rate. I have to get on my roof and power wash almost monthly.

      • Could you elaborate further on WHY they don't work? I'm not seeing much explanation here.

        I mean they cost X to produce, they are likely to generate Y electricity over the course of their lifetime. Perhaps small time individual household installs are stupid / not cost effective? (Are you Aussie by any chance... our Govt....oh boy)

        That being said, exceedingly large scale installations, one would (surely!?) assume that a solar park, once established correctly, is capable of at least paying more than the cost

      • Re: (Score:3, Interesting)

        by Khyber ( 864651 )

        "As an electrical engineer that works for a company that installs solar systems, they don't work."

        Yea, no wonder you posted as AC. Your systems must be absolute fucking garbage.

        Meanwhile, people that listen to me enjoy no power bill for about a two year's worth of power bills off the bat. Most of them get loans from the bank, pay off their loans in five years, and enjoy (for their purposes) limitless power.

        No subsidies. Just good sourcing, proper testing, and proper engineering. Something you fail at if you

      • ...People are gonna claim it's proof that renewables don't work.

        As an electrical engineer that works for a company that installs solar systems, they don't work. Well, when you add the government subsidies, that we all pay for in taxes, they're only bad instead of horrible.

        As an electrical engineer that works on solar systems, they do work. The economic payback, however, depends sensitively on location (and electricity price, which also depends on location.)

        A real problem is that a lot of people want to install solar because they want to install solar, not because they are in a particularly good spot. For my northern-Ohio, tree-shaded house, not very good economics. In the best location, however (high solar availability; high daytime electrical prices), solar economics work

    • by EEPROMS ( 889169 ) on Tuesday March 29, 2016 @10:39PM (#51804797)
      This has nothing to do with solar panels, in this case the directors (like many retarded MBA's coming out of US universities) went with the 5 year insane growth model that just doesn't work with solar power production. If I was going to blame anyone it would be US universities training students to be bad business managers.
      • Please note I'M not saying that's the case, I just said that other people would.
        • by KGIII ( 973947 )

          You're not new here. If you point it out, it means you believe it. If you mention it, it means you support it.

          "That person reminds me of Stalin."
          "So, you support killing millions of people in a purge?"
          "No, I didn't even say I liked Stalin."
          "So you're a fan of Khrushchev and Chairman Mao, I bet you stick a finger in your ass while you whack off about the Cultural Revolution."
          "What? No, Mao was just as much a monster."
          "Sure, I knew you were a Khmer Rouge follow. Fucking fascist!"
          "You got me, you're right."
          "Do

          • Yeah, I was weirded out a bit when people started responding like I was saying that was a correct position.
      • That's not really fair. The problem with solar energy is that it suffers from a similar problem to the old conundrum about using rockets to travel to another galaxy. Essentially, because rocket technology gets better every time you build a rocket, later rockets will keep overtaking older rockets enroute. So, the argument goes, there is no point building a rocket today, because it will be caught by a newer rocket before it ever reaches the destination.

        In the same way, the problem with solar is that as you de

      • by Livius ( 318358 )

        Bankruptcy is not the same as failure.

        I mean, it is for ethical people, of course, but business managers consider it success.

    • Comment removed based on user account deletion
    • "Cars don't work" because GM went bankrupt.

    • After all.. I won't know what to think until he tells me.. ;)

  • fueled by excessive debt and financial engineering

    In Capitalist America, financials engineer YOU!

  • by Anonymous Coward on Tuesday March 29, 2016 @10:16PM (#51804695)

    Your source is Huffingtonpost.com

    So it can't be true.

    (Just doing what the people that hate foxnews do ALL THE TIME.)

    Effin idiots.

    This comment we be hidden in 3, 2, 1...

  • Being in so much debt means they are already Broke, where they could go is Out of Business
  • by swb ( 14022 ) on Tuesday March 29, 2016 @10:51PM (#51804841)

    You have an aggressive growth plan, capitalized by debt that makes sense when your model is backed by subsidies.

    Your debt starts to become due, but when you go to refinance it and there's some question as to whether the subsidies will continue (or its known for sure they will end), they crunch your numbers and find out that your entire business model is basically built on subsidies, and without them you are not at all profitable.

    It turn out that in order to install solar panels and make any money doing it, not only do you need a huge subsidy for every install, you need the power company to pay retail rates for reverse metering for the next 20 years, too.

    Once the subsidies go away and the power company only has to pay wholesale rates for reverse metering, well, solar power isn't really profitable at all unless the "profit" includes Excel-crashing giant models that suppose some kind of society-wide savings from improved environmental conditions and third order savings calculated on sheets 87, 88, and 89 of your model.

    • by Aighearach ( 97333 ) on Tuesday March 29, 2016 @10:58PM (#51804885)

      Nice attempt at an underpants gnome, but you left out the ... in the middle.

      At the start you acknowledge that the context is an "aggressive growth plan capitalized by debt," but then you just do some handwaving and end up at "It turn out that in order to install solar panels and make any money doing it, not only do you need a huge subsidy..." which is just a load of crap that doesn't in any way follow from this situation.

      You're just trolling with anti-PV nonsense.

      The only thing this situation proves is that if you use "financial engineering" (as opposed to traditional credit ratings and collateral) in order to get loans, and you fall slightly behind your predicted performance, then you crash and burn very quickly. It says nothing about the profitability of projects that limit themselves to the installation size they can afford based on the collateral that they actually have and normal, non-engineered, honest financials.

    • by CaptainLard ( 1902452 ) on Tuesday March 29, 2016 @11:08PM (#51804971)

      Nope!

      Federal subsidies were just renewed in full for 3 years so this has nothing to do with any expiration, just an overly ambitious business model. In fact, even if you removed all subsidies from residential solar installations (currently the most expensive per watt) you'd still break even before the panel warranty on production runs out in a lot of places. That price has fallen almost 30% over the past 3 years thanks partly to the last subsidy. When this renewal is done most of the country should have the option for a residential install with a break even point in under 10 years...with zero subsidy! Non-sarcastic thanks, government!

      • by kenh ( 9056 )

        When this renewal is done most of the country should have the option for a residential install with a break even point in under 10 years...with zero subsidy! Non-sarcastic thanks, government!

        Your "no subsidy" claim is based, I assume on consumer solar panel installations being able to sell their surplus electricity at a premium to the electric company that has no real need for it... That is the hidden subsidy that makes solar affordable

        • Your assumption is incorrect! My electricity provider will start instituting a grid use fee on new residential installs, which will of course push the break even point out a year or two, but you still end up with comparatively free electricity and another disappearing subsidy that don't matter no mo! Meanwhile rechargeable batteries continue to get cheaper and denser at about 6%/year. So in those same places that solar makes sense today I'd be surprised if in the next 5-7 years there isn't an affordable who

        • by Cyberax ( 705495 )
          If you live in a sunny state then you'll get to breakeven in about 15 years now even without feed-in tariffs and subsidies, just by offsetting day-time air conditioning use. Subsidies and/or feed-in tariffs simply make it more profitable.
    • It turn out that in order to install solar panels and make any money doing it, not only do you need a huge subsidy for every install, you need the power company to pay retail rates for reverse metering for the next 20 years, too. Once the subsidies go away and the power company only has to pay wholesale rates for reverse metering, well, solar power isn't really profitable at all unless the "profit" includes Excel-crashing giant models that suppose some kind of society-wide savings from improved environmental conditions and third order savings calculated on sheets 87, 88, and 89 of your model.

      This is mind-bogglingly distorted view of reality, given the multi-decade price crash of the technology. It wouldn't have worked like this fifteen years ago and it won't work like this fifteen years from now either. Only now do you find yourself at the "works but only with some subsidies" price point.

  • by jeff4747 ( 256583 ) on Tuesday March 29, 2016 @11:52PM (#51805177)

    You go ahead and borrow a giant pile of money to build assets - in this case, the "renewable energy projects". Then you declare bankruptcy, and sell those projects to your friend/family member's company that just so happens to be willing to buy them....at a substantial discount from what they cost to build.

    Then you join that other company and continue to get the profits from those projects.

  • by kenh ( 9056 )

    Hey look, in other news, the largest solar install is proving unworkable:

    Here’s the story so far. Ivanpah:
    - is owned by Google, NRG Energy, and Brightsource, who have a market cap in excess of $500 billion.
    - received $1.6 billion in loan guarantees from the Department of Energy.
    - is paid four to five times as much per megawatt-hour as natural gas-powered plants. [wsj.com]
    - is paid two to three times as much per megawatt-hour as other solar power producers.
    - has burned thousands of birds [eenews.net] to death.
    - has delayed l [wsj.com]

  • If you're going to buy into the equity of a publicly traded company (buy shares), read the quarterly financial statements. Things like amount of debt, debt service, actual income v. accounts receivables, etc. should let you know that something like this was on the way. If they don't, people should go to jail. In reality, the books are cooked, and no one goes to jail. Proposed solutions vary widely, but none have worked out so far. I'd offer some advice, but you'll be crazy to listen to investment advice
  • Isn't it a...baffling coincidence... how the phrase 'financial engineering' seems to go very well with either massive fraud or going bankrupt on a truly epic scale? I guess merely calling it 'engineering' doesn't actually give you any of the appreciation for evaluating and mitigating design risks that real engineers have.
  • Perhaps the government could find a way to keep them up and running. Alternative energy is in everyone's best interests and a firm aggressively pushing alternate energy is of great public value regardless of their financial abilities.
  • Coincidence that barrel went from $120 to $20? Suddenly renewable energy market is struggling and electric/hybrid car doesn't look that appealing. We live in illusion of the free market.
    • Re: (Score:3, Insightful)

      by zapadnik ( 2965889 )

      The drop in the price of oil is due to:
      1) Saudi Arabia making oil so cheap so that its aggressive rival Iran is weakened 2) Saudi Arabia making oil so cheap to put North American fracking operations out of business 3) North American fracking operations supplying so much oil and gas that the US was poised to be an energy exporter.

      We do live an illusion of a Free Market (voluntary exchange producing win-win trades) because many Governments introduce all sorts of tricks to change the voluntary win-win aspe

  • For example, Enercon has more than twice as much employees. And I am sure there are even bigger companies in China.

  • The sad part is that not only will the MBAs who reached into their pants and declared themselves bigger than everyone else keep their massive paycheques and massive bonuses, but the worst culprits will chest bump with the MBAs who run the bankruptcy accounting company who will then pay them massive "retention bonuses".

    The actual engineering types who tried to make this all function will be soon informed that severances and whatnot won't be paid to the levels in their contracts.

    Then the super ringleader

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