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SunEdison looks to sell US projects totaling almost 1.7GW to NRG

Bankrupt SunEdison is looking to sell 14 PV projects located in five US states totaling nearly 1.7GW of nameplate generation capacity to NRG Energy, one of the largest solar portfolios offered for sale globally this decade.

If a bankruptcy court overseeing reorganisation of SunEdison approves the sale, NRG Energy could add to its already large holdings of utility-scale solar projects in the US and potentially challenge industry leader NextEra Energy Resources.

The projects include Jupiter (329MW) in California; Buckthorn (200MW) in Texas; Enterprise, and Escalante 1-3 (108MW each) in Utah; Granite Mountain East and Iron Springs (each 104MW); Iron Mountain West (65.5MW) in Utah and five projects in Hawaii totaling 241MW.

The Hawaii projects include Kawailoa (66MW), Waiawa (65MW), Waiawo (64MW), Mililani South I (27MW) and Mililani (19MW).

SunEdison filed for Chapter 11 bankruptcy protection on 21 April. In its filing, it said it had assets of $20.7bn and liabilities of $16.1bn as of 30 September 2015.

On Tuesday, SunEdison filed papers with the US Bankruptcy Court for the Southern District of New York detailing how it proposes to auction its holdings in subsidiary companies that build, own and operate the facilities.

It wants to sell ownership in those assets and three US wind farm projects totaling 684MW nameplate generating capacity to NRG Energy for $144m, subject to potential higher bids.

They are County Line (449MW) and Somerset (85MW) in Maine, and Rattlesnake (150MW) in Washington State.

According to the 370-page motion for an order approving the sale submitted by SunEdison to the court, the developer wants to declare NRG Renew – NRG Energy’s renewable energy unit – the so-called stalking horse, or lead bidder in a sale process.

By establishing a minimum acceptable bid, the Stalking Horse Agreement, together with bidding procedures, “promotes competitive bidding and allows the debtors to maximize the value received through a sale of the equity interests while stabalizing the business in the short-term,” SunEdison argued in its motion for approval.

NRG Energy could obtain as much as an additional $44m after the sale closes if certain project-related milestones are met, according to the court papers.

Its creditors have also agreed, subject to court approval, that NRG Energy could collect a $5.5m breakup fee and a $4.5m expense reimbursement if another bidder should prevail.

The proposed sale process would set a 6 September deadline for bids, a 9 September auction and 15 September court hearing for it to approve the winning bid.

Rothschild, appointed by the court to oversee any sale of assets, contacted 346 potential buyers, of which 254 entered into non-disclosure agreements and 112 were interested in part or all of the projects, according to the court papers.

They show that 34 parties submitted bids for one or more of the projects, with 10 tabling a bid for projects in Utah (whether alone or as part of a larger portfolio bid for a number of assets).

Rothschild will continue to market the assets until the bid deadline.

SunEdison argued that its debtors believe that the sale of the equity interests to NRG Energy or any other prevailing purchaser at the auction will maximize the value of the debtors’ estates for the “benefit of all their creditors, their stakeholders and other parties in interest.”

Urgency

In a separate declaration supporting the sale, SunEdison’s law firm Skadden argued that the former high-flying renewable energy developer “must move with haste to attract other viable bidders before the value of the business declines further.”

It specifically mentions the Buckthorn project as facing an April 2017 commercial operation date for start of electricity production for sale to the City of Georgetown in Texas under a 25-year off-take agreement.

Failure to reach COD by 25 October 2017 would constitute a “termination event under the applicable PPA,” and daily delay damages between the scheduled COD of 28 April 2017 and the final COD of 25 October 2017 are significant,” Skadden noted.

In order to meet the final COD and obtain construction financing, Buckthorn’s owner must issue a Final Notice to Proceed by early October this year at the latest.

“Should the FNTP not be timely issued and the COD not ultimately reached, it is unlikely that the Debtors will be able to monetize the Buckthorn Project and obtain value from that project for their constituents,” Skadden warned.

Last year, Buckthorn gained national attention when SunEdison signed the PPA for the project’s entire nameplate capacity with Georgetown, helping it become the first city of any appreciable size in oil-drenched Texas to embrace renewable energy for all its power needs.

That decision was even more notable as city officials and residents are largely conservative Republicans, who generally oppose President Barack Obama’s climate-change and environmental initiatives.

While the Utah projects do not face the same “imminent threats and time sensitivities” as Buckthorn, Skadden argued that it is in the interest of the debtors to consummate a sale now.

 

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