Ponzi Power: US Wind Power Company – Sun Edison – Implodes
STT has likened it to the great corporate Ponzi schemes, pointing out, just once or twice, that the wind industry is little more than the most recent and elaborate effort to fleece gullible investors, in a list that dates back to “corporateinvestment classics”, like the South-Sea Bubble and Dutch tulip mania.
In the wind industry, the scam is all about pitching bogus projected returns (based on overblown wind “forecasts”) (see our posts here andhere and here and here); claiming that wind turbines will run for 25 years, without the need for so much as an oil change (see our posts hereand here and here); and telling investors that massive government mandated subsidy schemes will outlast religion (see our posts here andhere and here).
In Britain, Wind Prospect Group stopped paying dividends to its bond holders and prevented them from cashing them in to recover their capital outlay:
In Australia, one of the wind industry’s BIG players – Pacific Hydro – managed to rack up an annual loss of $700 million, in 2014; in circumstances where the subsidy scheme – on which its profits depend – hadn’t changed at all (see our post here).
Following that well-established trend is US wind power outfit, Sun Edison; whose shares have plummeted from US$32 to a faction of a single greenback, is on the verge ofbankruptcy. Oh dear, how sad, never mind.
Share Price Plunges for Operator of Maine Wind Farms Amid Bankruptcy Concerns
29 March 2016
The operator of several wind energy facilities in Maine could be headed for bankruptcy. But Sun Edison officials say the turbines will keepspinning, and providing taxes and other benefits [read misery ed.] to host communities.
Since hitting a high of $32 per share last June, Sun Edison’s stock has been on a downward spiral, and has now dipped well below $1 a share following reports that it faces a substantial risk ofbankruptcy while securities regulators investigate itsbusiness practices.
But even if Sun Edison does file for bankruptcy or is restructured, company spokesman John LaMontagne says that does not pose a risk for host communities in Maine.
That’s because the plants themselves are actually owned by separate entities.
“All of those projects have existing contracts to deliver wind energy to utilities around New England,” he says. “So therefore they have certain revenues which ensure the projects will be able to meet their obligations in terms of community benefits, taxes and whatever else.”
Sun Edison operates six wind plants in Maine, including one under construction in Bingham. It has also proposed two new big projects as part of a major effort to ship new renewable energy to southern New England.
But LaMontagne said he could not comment on how those might be affected by Sun Edison’s financial issues.
SunEdison’s Subsidy-Fueled Collapse
4 April 2016
The company burned no fossil fuels but plenty of taxpayer dollars.
That’s the takeaway from the looming failure of SunEdison, a company that touts itself as the “largest global renewable energy development company.” Once a darling of Wall Street and the green Left because of SunEdison’s portfolio of wind and solar projects, the company’s stock is now in free fall. Furthermore, two related companies that were spun off from SunEdison — TerraForm Global and TerraForm Power — also appear to be in financial distress. On March 30, Brian Wuebbels, the CEO of both TerraForm companies, resigned effective immediately. If all that weren’t enough, the company is also under investigation by both the Justice Department and the Securities and Exchange Commission about its finances and the disclosures it made to investors.
Last summer, SunEdison’s shares were selling for more than $30, and famous Wall Street investors, including David Einhorn and Daniel Loeb, were holding the stock. But by Friday afternoon, the company’s shares were trading for about 49 cents apiece, and Bloomberg writer Brian Eckhouse was reporting that the company was “teetering on the verge of bankruptcy.”
Why is SunEdison on the verge of failure? The short explanation is simple: It tried to grow too big, too fast. Over a 19-month period it went on a $2.6 billion acquisition binge. It paid too much for the companies it bought and now it can’t pay back its creditors. SunEdison has twice delayed the release of its 2015 annual report and appears to be intechnical default on at least $1.4 billion inloans and credit facilities.
To be sure, this isn’t a new story. The annals ofbusiness history are filled with companies that failed because they borrowed too heavily and didn’t have enough cash to pay back their creditors. But the remarkable thing about SunEdison is how much cash it was able to get from state and federal taxpayers during its low-emissions trip to bankruptcy court.
Before getting to the subsidies, a quick history. SunEdison was founded in 2003 by solar-energy promoter Jigar Shah, who is no longer an officer or board member at SunEdison. Shah was an early entrant in the domestic solar market, which has since grown at an astonishing rate. In 2003 the U.S. had about 73 megawatts of solar-energy capacity. By 2014, that figure had increased to 18,280 megawatts. During his time at SunEdison, Shah helped the company grow through the implementation of 20-year power-purchase deals that assured investors and buyers of long-term electricity delivery from renewable-energy projects.
Shah deserves some credit as a promoter. He also deserves a smidgen of credit for his new-found belief that solar subsidies should be eliminated. That said, it’s abundantly obvious that his company’s growth was fueled by hefty federal and state subsidies. That can be seen by looking at Subsidy Tracker, a project of Good Jobs First, a Washington, D.C.–based nonprofit that promotes “corporate and government accountability in economic development.” According to Subsidy Tracker, SunEdison has garnered some $650 million in federalgrants and tax credits. SunEdison ranks number 13 on Good Jobs First’s list of the top 100 recipients of grants and tax credits doled out by federal authorities since 2000.
The biggest federal handouts — two of them totaling $200 million — were made in 2010 and 2011 to a subsidiary of SunEdison, First Wind, for the Milford Wind project in Utah. In addition to the federal subsidies, SunEdison got $30 million in subsidies from various state authorities, including $21 million from governmental entities in New York. On top of that, SunEdison also received $846 million in federal loans,loanguarantees, tax-exempt federal bonds, and federal insurance. The total government support for SunEdison comes out to $1.5 billion.
That’s a figure worth considering, given that on Friday, the market capitalization of SunEdison — that is, the value of all of its outstanding stock — was about $176 million. Thus, federal and state taxpayers have shelled out roughly eight times as much money in subsidies andloanguarantees as SunEdison is now worth.
Alas, SunEdison isn’t the only example of how federal taxpayers have helped prop up poor management in the “clean energy” sector. Earlier this week, the Spanish energy company Abengoa SA filed for Chapter 15 protection in U.S.bankruptcy court in Wilmington, Del., claiming some $16.5 billion in debt. Like SunEdison, Abengoa has been a leading promoter of solar projects in the U.S. According to Subsidy Tracker, Abengoa has received $986 million in federalgrants and tax credits, as well as another $7.8 million in state and local subsidies. The bulk of that sum — about $841 million — was for solar projects. But the company has also collected about $122 million in federal grants for biofuel projects in Kansas, Illinois, and Nebraska. Several of Abengoa’s biofuel plants have already been shuttered, including a plant in Hugoton, Kans., that was supposed to be making cellulosic ethanol (that is, alcohol made with non-food feedstocks). Abengoa was able to build the Hugoton plant thanks to a $97 million federal grant and a $132 million federal loan guarantee.
In all, Abengoa got some $2.6 billion in federal loans and loan guarantees as well as $986 million in federal grants and tax credits. Thus, between the collapse of Abengoa and the looming bankruptcy of SunEdison, federal taxpayers have shelled out some $5 billion in direct grants and loan guarantees to lousy management teams in subsidy-dependent businesses that would never have grown to their current size had they not been able to binge on taxpayer cash.
Critics of the federal government’s support for “clean energy” companies have repeatedly claimed that the government shouldn’t be “pickingwinners.” To that, I can only say that the evidence — from the failed solar company Solyndra and failed battery companies like Ener1 and A123 to SunEdison and Abengoa — proves that the government hasn’t in fact, been pickingwinners. Quite the opposite.