Slashdot Mirror
The World's Largest Renewable Energy Developer Could Go Broke (huffingtonpost.com)
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.
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.
...People are gonna claim it's proof that renewables don't work.
Solaren is going to put a solar array into space within the next 8 months.
https://en.wikipedia.org/wiki/...
Oh wait, just like all Space Nuttery: " the planned delivery date has been moved back to the end of the decade"
Guess we'll be using solar panels on the roof for the foreseeable, nah, for the entire future.
fueled by excessive debt and financial engineering
In Capitalist America, financials engineer YOU!
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
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
and their investors. But such is the nature of capitalism. Hopefully some others will try again but be a bit smarter about it.
Also we still need to dissolve the major banks that failed us some years ago. And GM.
Because they may both go bankrupt?
What does that say about Donald Trump?
You are welcome on my lawn.
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.
"Cars don't work" because GM went bankrupt.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
The YOLO crew have been harping on about $SUNE for weeks, they went full tilt, off tap. Crazy times.
https://www.reddit.com/r/walls...
GFY
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.
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.
- is paid two to three times as much per megawatt-hour as other solar power producers.
- has burned thousands of birds to death.
- has delayed loan repayments.
- is seeking over $500 million in grants to help pay off the guaranteed loans.
- burns natural gas for 4.5 hours each morning to get its mojo going.
Source: http://dailysignal.com/2016/03...
Ken
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 from an anonymous geek on a site like this.
Some mornings it's hardly worth chewing through the restraints to get out of bed.
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.
Contrary to the believes of most posts above, solar energy actually works, and it works to an extend that households could sell the excessive power back to the energy companies. Traditional energy companies thus lobby for banning of sales of power by individual households or corporations. Florida, which is supposed to have plenty sunshine for solar powering, are one of the four states imposed such ban for protection of monopolization. Well, they used "inefficient energy production" in lobbying. Sadly, Federal Government backed it, because solar panels were mostly made by China, and promotion of the use of solar panels would probably deepen the trade deficits.
Traditional energy companies ruled that renewable energy companies must not survive in US. You have better chance in other countries. RIP.
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.
There is an anonymous troll on this topic ignore him.
After all.. I won't know what to think until he tells me.. ;)
For example, Enercon has more than twice as much employees. And I am sure there are even bigger companies in China.
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 develop the tech the cost continues to fall. So if you build your plant with today's tech, there is a very good chance that in a few years a competitor will be able to destroy your return-on-investment with a new cheaper plant. If your plant has not paid back its capital costs in that time (and solar has the problem that it has long payback periods right now) then you have a white elephant. If you read the article you will see that this is exactly what investors now believe will happen, and hence are bringing forward the insolvency of those parts of the company. However, once the debts from construction are 'readjusted', the underlying plant will be able to produce profitable returns for the new owners. I'm pretty sure part of the reason for having a complex financial arrangement was so that this rather obvious issue could be hidden from retail investors, so I wouldn't accuse the MBAs from being retarded.
The same problem is going to happen with Elon Musk's giga-factory. I am reasonably certain this is why nobody else is joining him in making their own giga-factory, because they know that until the cost curve flattens out, the first few factories are going to be hopelessly outdated, and possibly unprofitable, before they ever return the initial funding spent to build them.
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 ringleaders will finish rolling around in their piles of cash only to find themselves being "recruited' to boards of directors and eventually executive positions again.
I wish I were exaggerating but I suspect that I am actually understating the depravity of what has and will happen.
Clinton is a square shooter. Clinton 2016!
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.
This isn't really a story about renewables or solar, but rather the economic forces behind growth and maturation in relatively new industries. When a new industry comes to market, it's not uncommon to have lots of small players each doing their thing. Over time, some companies will grow, some will go bankrupt, and others will be bought out as competition forces scaling in order to gain economic efficiency. In the early 1900s, there were over 300 different automobile manufacturers in the US. Now there are three, but that doesn't mean that we're making fewer cars, driving fewer miles, or that automobile manufacturers can't eek out a profit.
So, I agree with the original commenter that this news will probably be used by some to argue that renewables are "doomed", etc., but one look at installation growth ought to give food for thought.
Do you have any evidence to refute them?
People in cars cause accidents....accidents in cars cause people
...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 very well.
As the real estate people say: the three most important parts about installing solar are: location, location, location.
http://www.geoffreylandis.com
Maybe I am completely misunderstanding what has happened here [but I don't think so!]. This looks to be an awful lot like a re-run of Enron... "Energy Company"... Check Lots of Debt... Check Unusual Accounting/Business Model... Check Very interested to learn from anyone who may be able to clarify or disprove that, but if it is the case that this has a fair number of similarities, then we need to hold the regulators to account. Let's be honest, when regulators screw up, we end up paying for it, either through bankrupt pension or savings schemes, worthless shares, or the need for government bail-outs that have to be generated either from general taxation and/or by devaluing currency and/or by racking up vast amounts of national debt...
While i don't question that SunEdison is in dire straights, the link is for a filing by Terraform Global, a SunEdison spin-off (meant to assist in their financial engineering - IE rather than sell shares or issue debt at Sunsedison's level to finance new projects, they created Terraform and Terraform Global, raised capital for each of those, and used that money to buy and finance their projects.
It's really amazing how incompetent SunEdison could be - the gold rush in solar (at least in the US) in only now slowing down/risking coming to an end (though it could re-open if the pro-solar states revisit their incentives, or if the non-solar friendly states decide to get in on it and provide incentives). In Massachusetts, for instance, SunEd is very active in the large-scale installations that can see payback in 3-4 years, followed by 17-27 years of profit. Similar in CA, NJ, etc.
Yet somehow, SunEdison figured out a way to lose money. Good job!
We got one that can see!
It did exactly what the creator wanted, which was to maximize his money and screw everyone else.
Captcha: railed
It doesn't matter who goes bankrupt or not, as long as these installations get build. Many major projects have been completed through several bankruptcies (for instance the European Channel Tunnel). This is the perfect way to take money from the fossil banks with no strings attached. Banks need to be forced to loan out even more than they do today, because of course these fossil fuel credit institutions are not going to accelerate solar,wind etc on their own.
Yes, look up the words "amortization" and "depletion" in the dictionary. Then look up "subsidy". In their report, they are calling depletion (recognizing that you've used up your supply) a "subsidy".
It's just like the sites listing all of the dangers of dihydrogen monoxide (water). If you know what the words mean, their report is laughable, it reads like a parody of MDSolar.
Your Wikipedia page says you live in Ohio. Based on that the panels should pay for themselves in under a decade without any tax breaks. Do you have massive amounts of shade over your roof or something?
Yes, no, and yes.
Here's a map of solar availability in the United States:
http://cdn2.hubspot.net/hub/18...
I live in that green part, labelled "3.78 to 3.91 kW-hr/m^2/day". Not the absolutely worst part of America for solar availability (that would be the Northwest), but nowhere near the best. Compare this to the dark red part, labelled "6.65-6.78 kW-hr/m^2/day". So, right to start with, solar panels are going to produce about half as much power as they would produce in most of the southwest. Electricity costs in Ohio are about 11 cents per kilowatt hour, which is not incredibly low, but compared to say California, electricity would be 15 cents per kilowatt hour, or 18 cents per kilowatt hour in New York. (But the net-metering cost is about 6 cents per kilowatt hour, and our home electrical demand is low at noon most days, so net metering is probably the price to use).
Ten years is a very optimistic estimate for payback time. My quick calculation is that 11 years would be the rough payback time for the panels alone (purchased at a dollar a watt)-- but not the inverters and regulators, nor the installation costs, both of which will easily exceed a dollar a watt.
But, that might not be entirely a deal breaker if it were not for the main problem, which is that our lot is heavily shaded, and our house has neither a flat nor a south-facing roof.
Poor location for solar.
http://www.geoffreylandis.com
The bigger question I have, as a PV solar owner, is: Will the cost of electricity keep going up significantly? The cost/benefit worksheet my solar installer printed out to help sell me on the economics of buying this system factors in the assumption that the utility will keep increasing my rates by a certain percentage, annually.
That's a guess based on past history, and I don't think it's unreasonable. But there's also the possibility that the combo of newer nuclear power technologies going online AND lower costs on solar panels will make power prices hold steady in the future. (If it gets cheaper for you or I to put solar in our home, it also gets cheaper for the utility companies to build big, centralized solar farms for themselves. And they get better pricing because of quantity purchasing.)
Power plants are already doing a lot of conversion from coal burning to natural gas burning generators. That's because the natural gas turbines can easily be powered on or off as load requires it - vs. having to keep it running all day at enough capacity to handle any possible peak loads. As more people generate their own supplemental power and put some back onto the grid for credit, this becomes even more important for the power companies. So the price of coal "going up" will become pretty irrelevant to electric power generation ....
China will produce 50 percent of all energy from renewable sources by 2020.
It's not a question of "if"
It's a question of "how high".
Resistance is futile.
-- Tigger warning: This post may contain tiggers! --
That's the sort of dishonesty we always see on this subject. In THIS case, the key is right here:
"The company's fall isn't a referendum on the solar industry as a whole SunEdison's aggressive growth strategy fueled by excessive debt and financial engineering, analysts say."
See it? As each of these "green" energy companies fails, we are told it had nothing to do with what they had in common (the "green" garbage) .... "Look AWAY! Look over THERE!" is the plea. The problem is NOT that "green" energy does not work.... the problem is that it's not, and never has been, COST-EFFECTIVE or actually efficient. As a result, these companies always need to exist on a mountain of financial chicanery and piles of taxpayer subsidies. As soon as the financial funny-business comes to an end, and assuming no leftist politician has gotten them onto a government nipple by that time, they go belly-up, leaving wreckage (both physical and financial) in their wake.
The apologists for this garbage are exactly the same as the apologists for all the forms of Marxism: when asked why Communism always fails, they'll invariably answer that it just has not been tried the right way yet or that the wrong people tried it. When asked about "green" energy failures, they always insist that these are isolated incidents where the wrong people did it the wrong way. In both cases, these seemingly religious-fanatic supporters demand, evidence aside, that their beliefs are true and will provide mankind with utopia if only the right people are permitted to implement them the right way and if they are allowed to properly punish the evil non-believers (capitalists, in the case of Marxism, and fossil fuels industries in the case of green energy).
The other fraud they always roll out is the "subsidy" argument: they insist that fossil fuels are unfairly benefiting from subsidies (they are NOT, they are getting normal business tax breaks) while they insist that the actual subsidies the "green" companies are getting are not big enough. How is this a fraud? A subsidy is when the government takes somebody else's money and gives it to you because it likes you or what you are doing. A tax break is when the government decides to take less of your money from you. These are fundamentally different things and it's extremely dishonest to try to conflate them.
You have no idea how modern business works.
You can potentially keep operating as-is under bankruptcy protection, but do you actually think the creditors who issued all that debt will be keeping the original owners on board so the original owners who just fucked you out of your debt repayment can sell their bankrupt company to their friends???? NO!
The creditors will most likely restructure the company and do whatever they hell they want to try to turn a profit on their investment. Usually this means getting rid of this people who started the original problems - ie,The board and exisitng ownership. You can't just magically declare bankruptcy from your creditors, absolve all of your wrongdoing and sell your shithole to someone else for a personal profit :)
So, um, that's a no on evidence? You're conflating normal accounting rules with special tax breaks given to a business - almost as if you're trying to be obtuse on purpose...hmmmm http://www.realclearpolitics.c...
People in cars cause accidents....accidents in cars cause people
That article rants about two things, section 199 and the foreign tax deduction. Since you either don't care to spend two minutes looking up what those are, or your Google-fu is weak, I'll explain them for you.
Section 199 of the tax code is designed to discourage offshoring work to China and India. It applies to businesses which do any of the following within the US (or mostly within the US):
The manufacture, production, growth, or extraction by the taxpayer of tangible personal property (things). This encompasses all tangible property (except land and buildings).
Create computer software or sound recordings.
The production of films
The production of electricity, natural gas, or water
The construction of real property (buildings)
The services of architecture/engineering
In other words, most businesses that do their work in the US, rather than having it made/done elsewhere and only marketed in the US.
Explain to me how a tax provision that applies to any manufacturing, film production, software programming, music, construction, etc is magically a "special break for oil companies". They lied to you, bro.
Secondly, the article talks about the foreign tax deduction. The US taxes companies a bit more on foreign activities than any other country, but this deduction gets us a bit closer to what every other country in the world does. Suppose Ford, a multinational company headquartered in the US, has a factory in Australia, where they have Australian workers making Australian cars which are sold in Australia. Of course, they pay Australian income tax on these Australian dollar profits. If Ford were headquartered in other country, that would be the end of it. Because they are headquartered in the US, they have to pay double income tax on the Australia sales - first in Australia, then again in the US.
Before th deduction was added, in some cases that double taxation could create a total tax rate close to 100%. They might pay 10% income tax in Melbourne, 25% to Australia, 35% to the US, and 15% to the state. So 85% tax rate altogether. The deduction says that if they earned $100 in Australia and pay $35 in Australian income tax, they "only" get double taxed on the remaining $65. That applies to all businesses and natural persons. Absolutely nothing special about energy companies there. It simply says that anyone who pays foreign income tax gets double-taxed on the remaining money rather than being double-taxed on the total.
To me, "financial engineering" is pretty much synonymous with "complete and utter bullshit and thinly disguised fraud".
Sometimes it is that.
But sometimes it's just knowing the rules so well that you can optimize otherwise-unimportant decisions to maximize profit.
For example, if I know I'm going to need to sell some stock so I can pay for my kid's college education, do I sell the shares that I bought over a year ago, do I sell the ones that I paid the most money for, or does it really matter? In the absence of capital-gains taxes and the ability to count losses against ordinary taxable income, it wouldn't matter. But if you live in a country where stock held over a year is held more favorably and where you can reduce your taxes by "realizing" a capital loss, the simple decision of "oh, just sell as many shares as you need to fund your kid's education, it doesn't matter which shares you sell" now becomes an opportunity to do some financial engineering to lower your tax bill.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
NG is dirt cheap now. But I can't see into the future.
Nuclear will always be expensive, and run by big companies. Same with fusion, if they ever actually do it.
would they still be alive if they didn't get involved in the market? Lots of good products turn to crap when the company starts trading shares. :/
as I understand it a company can have great things going for it but if the share price falls they get pulled down with it.
There used to be a rule about not trading on a stock that's falling, unless it moved up first, "the Uptick rule"
thanks to clinton and friends we don't have the up tick rule
i.m.o. once you are in the market you've sold your soul.