TerraForm Power Believes It Has Sufficient Liquidity to Operate
Comment of the Day

April 22 2016

Commentary by Eoin Treacy

TerraForm Power Believes It Has Sufficient Liquidity to Operate

This note by Will Daley for Bloomberg may be of interest to subscribers. 

Even if some SUNE obligations are not fulfilled, TERP expects to continue operating

Defaults may now exist under many of TERP’s non-recourse project-debt financing pacts (or such defaults may arise in the future) due to SUNE bankruptcy filing, delays in preparation of audited financial statements

Defaults “are generally curable"; TERP will work with its project lenders to obtain waivers and/or forbearance agreements

No assurances can be given that waivers, forbearance agreements will be obtained


Eoin Treacy's view

SunEdison rallied impressively from its 2012 lows following the adoption of a quickstep leveraged strategy aimed at acquiring or building solar energy power plants while simultaneously divesting of the completed assets into two MLPs. This saddled the parent with the risk of acquisition and building without holding onto the residual cash flows from a working utility once completed. The strategy was predicated on the rapid pace of solar installations persisting indefinitely. They do not appear to have factored in the role a drop in oil prices would have on that business model. 

The question now is will Terraform Global (GLBL) and Terraform Power (FERP) be able to survive when one of the primary sources of liquidity has disappeared. Their chart patterns exhibit base formation characteristics which suggests at least some investors are willing to give them the benefit of the doubt. Continued support building is going to depend on whether they can sustain their dividends which at 14.4% and 13% respectively might be hard to achieve. 

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