Another company in the government-subsidized “green” industry goes boom

Saturday, April 2, 2016
Posted in category Corporatocracy

SunEdison, the world’s largest renewable energy developer and the largest solar stock in the U.S. by market capitalization, is kaput. I want you to note the last paragraph of the following quote from the article (in bold). Yes, the WSJ said it.

“Solar-energy company SunEdison Inc. plans to file for bankruptcy protection in comingweeks, adramatic about-face for a company whose market value stood at nearly $10 billion in July.

The company is preparing a chapter 11 filing and is in talks with two creditor groups to obtain a loan to fund its operations during the process, according to people familiar with the matter. Creditors are likely to take control of the company and its portfolio of power projects, the people said.

SunEdison, whose stock has plunged in recent months, would rank among the largest financial collapses in recent years. The company, based about 20 miles outside St. Louis, used a combination of financial engineering and cheap debt to grow to be one of the country’s biggest developers of renewable-power plants.”

In 2014, even Baron’s had noted that the company’s market capitalization was heavily reliant on tax benefits from the company’s yieldcos. Barron’s calculated that more than half of the value created by one of SunEdison’s yieldcos came from tax benefits. The yieldcos are “publicly-held subsidiaries that own SunEdison’s finished solar projects and pay out most of the projects’ cash flow, tax-free, thanks to tax breaks available to owners of renewable power plants,” Barron’s said.

This company had rapidly over-expanded by means of hasty acquisitions. It also sold off its stable semiconductor subsidiary to throw all of its eggs in the government’s favored “renewable energy” industry. Here’s the socialist scheme that failed: British Prime Minister David Cameron, in mid-2015, announced that the Brit government would cut off homeowner-subsidized electric bills for homes using forms of solar power, causing SunEdison to end its free installation program for these subsidized solar users, a program for which the company made lots of $$$ by betting on the continued subsides. SunEdison then exited most of its British business. Tell me you are surprised.

This is corporate state shenanigans + financial engineering on a grand scale, wholly subsidized by political (in this case, “green”) policy. There is a place for renewable energy to grow and thrive, and alleviate dependence on traditional energy means. However, until government political policy stops favoring this industry and distorting the entire marketplace for these products, growth is falsely inflated, demand is overstated, price signaling is distorted, and corporate executives are baited into malinvestments in order to pump up the bottom line to make their Wall Street cheerleaders content.

These government subsidies completely remove innovation and corporate fiduciary responsibility and make bloated, reckless corporate entities, such as SunEdison, throw all of their eggs in one gigantic betting pool supported by cheap money and government handouts.

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One Response to Another company in the government-subsidized “green” industry goes boom

  1. Töad King says:

    April 2nd, 2016 at 11:24 am

    Bernie Sanders will save us from corporate welfare pigs such as SunEdison. Oh, wait….

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