Shares of solar energy system developer and installer SunEdison (NYSE:SUNE) jumped nearly 10% in Thursday’s shortened session after the company disclosed that it’s in talks for a substantial credit line as it powers ahead with an acquisition.
But that rise overlooks lowered installations guidance for the fourth quarter, which was tucked into Thursday’s business update from SunEdison, Axiom Capital analyst Gordon Johnson tells IBD. Last month, SunEdison had guided to 833-933 megawatts of solar installations in Q4 2015, but its new business update now sees total megawatts completed in the quarter at 450 million.
Johnson headlined a Thursday research report “FLASH: ‘Bah Humbug’ … SUNE Just Cut Its C4Q15 MW Delivered Guidance By ~50% (and is guiding C1Q16 down q/q) … On Christmas Eve!” The company is guiding Q1 2016 megawatts delivered “down incrementally, while leaving the full-year unchanged. On this, the stock is up 10% in today’s trading session,” he wrote.
The news comes the day after installer SolarCity (NASDAQ:SCTY) said that it will exit Nevada because the state on Tuesday slashed net metering rates that pay solar users for energy fed back to the grid. Rival Vivint Solar (NYSE:VSLR) — the installer that SunEdison is acquiring — had also this week threatened to leave Nevada. And all of this activity comes less than a week after Congress handed the solar sector a five-year extension to a key subsidy, the Investment Tax Credit (ITC), which underpins the industry.
SunEdison Updates Vivint Plan
On Thursday morning, SunEdison posted a detailed business update noting that it has “successfully renegotiated the Vivint Solar acquisition terms with Blackstone Group (NYSE:BX).” Under the new terms, which SunEdison first announced Dec. 9, the cash consideration has been cut by $2 a share, stock consideration has increased by 75 cents a share, and Blackstone is providing a $250 million unsecured loan to fund business growth.
The renegotiated terms “help improve liquidity for SunEdison,” the company said in its Thursday statement, noting that the transaction is still expected to close in Q1 and adding that its bank groups “remain fully committed” to a new $300 million Vivint non-recourse term loan and a $795 million TERP bridge.
TERP is TerraForm Power (NASDAQ:TERP), a SunEdison yield-company subsidiary that has come under fire from activist investor Appaloosa Management, which has demanded to see SunEdison’s books ahead of the Vivint acquisition.
SEC Filing Details Loan Talks
A SunEdison Form 8-K, filed Thursday with the Securities and Exchange Commission, states that since Dec. 10 the company “has been engaged in ongoing financing discussions with certain potential financing sources, including existing investors and lenders,” in particular “relating to a new up to $650 million second lien credit facility, a portion of the proceeds of which would be used to repay the Company’s existing second lien credit facility.”