11/20/14: A Windfall for SunEdison

By Igor Greenwald • November 20, 2014

The Energy Strategist has increased the buy below target for #17 Best Buy SunEdison (NASDAQ: SUNE) to $25 following the First Wind acquisition and the stock’s subsequent rally. For details, please see portfolio update in the Nov. 19 Energy Letter.

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Denis Wong

11/20/14 ‐ 1:49pm ET November 20, 2014 at 1:49pm ET

Great analysis!
To what extent does SUNE benefit from the dropdowns to TERP? How does it compare with arrangements that ETE and KMI have with its yieldcos? Control, percentages, length of contract, etc.? Thanks, Denis Wong

Igor Greenwald

12/04/14 ‐ 1:06pm ET December 4, 2014 at 1:06pm ET

Thank you for your kind words and I apologize for getting to this question late, crazy times in energy! SunEdison’s incentive distribution rights are broadly comparable to those of MLP general partners. Specifically, they provide to SUNE: 15% of TERP’s per share quarterly distributions between 33.86 cents and 39.5 cents; 25% between 39.5 and 45.14 cents, and 50% above 45.14 cents. Current TERP dividend is short of the first tier, but based on a projection released in conjunction with the recent First Wind acquisition announcement, TERP should be in the first tier next year, second tier in early 2017 and maximum IDR tier later that year. A Cowen analyst recently pegged the net present value of SunEdison’s IDR stream at $5 to $10 per SUNE share; he doesn’t think this value is baked into the current price.

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