SunEdison Grows in Chile with 350 MW Solar Power Project - Analyst Blog

The rising demand for cheap and clean energy globally is benefiting the world's leading solar technology company, SunEdison Inc. (SUNE). The company recently announced that it has been awarded a contract to supply 570 gigawatt (GW) hours every year by the Chilean National Energy Commission.

In this regard, SunEdison will build 350 megawatt (MW) of solar photovoltaic power plants across Chile by investing more than $700 million. The company intends to add this project to its yieldco company TerraForm Power Inc. (TERP).

Further, under a 15-year power purchase agreement, the energy generated through SunEdison's solar projects will be purchased by local commercial energy companies. Per the agreement with the Chilean Energy Commission, SunEdison will have to supply 190 GW hours per year during the daytime block starting 2016. Thereafter from 2017, the company will be responsible for supplying another 380 GW hours every year during the daytime block.

We believe that the recent deal win will enable SunEdison to strengthen its position in the Chilean solar market. The company claims that the electricity generated through its photovoltaic power plants are 10–25% cheaper than the electricity generated through fossil fuels in the country.

SunEdison is continuously looking for opportunities to enhance its footprint in the Chilean energy market where less than 5% of electricity is generated through non-renewable resources. In September this year, the company signed an agreement to supply 69.5 MW of power produced by its Javiera solar photovoltaic project to Los Pelambres mine owned by Chile's largest private mining group, Antofagasta Minerals S.A.

The agreement is one of several that SunEdison has entered into in recent times to expand its presence internationally. Last month, in a bid to solidify its position in the Brazilian solar market, SunEdison announced a strategic alliance with local renewable energy company, Renova Energia S.A., to develop solar photovoltaic projects in the country.

We believe that the demand for clean energy will increase manifolds over the next few years, and being the world's leading developer of solar energy, SunEdison is well positioned to capitalize on this opportunity.

Nevertheless, solar projects require considerable time and investment and any delay or inability in selling these projects at desired prices could affect liquidity, in our opinion.

The pricing environment and a highly leveraged balance sheet remain the other concerns for SunEdison. Competition from SunPower Corp. (SPWR) and First Solar Inc. (FSLR) further adds to the woes.

Currently, SunEdison has a Zacks Rank #4 (Sell).