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Renewable Energy’s Collusion and Cronyism Should Not Punish Worthy Shareholders at SunEdison

It appears as if Obama and corporate Democrats worked so hard to get the public excited about solar energy that they gave money away to the wrong people who may now have jeopardized the future of the DOE

SunEdison (SUNE) Renewable Energy’s Collusion and Cronyism and How Obama’s Handouts Will Dismantle the DOE

It appears as if Obama and corporate Democrats worked so hard to get the public excited about solar energy who gave money away to the wrong people and may eliminate the future of the Department of Energy.

Americans are going solar not because they are treehuggers, though trees are important, but because they are cost-cutters. Solar isn’t just for the green crowd anymore — it’s for the green eyeshade crowd, too.” These remarks are from President Obama at the 2015 Clean Energy Summit in Las Vegas. He gave these remarks in the blistering sun of Las Vegas and the point did not go unnoticed to Obama. He added: “I noticed you got a lot of sun around here…solar industry now employs twice as many Americans as mining coal.” Following the speech, the administration announced a series of actions to encourage solar power construction, offering an additional $1 billion in loan guarantee authority accessible in a federal program for innovative versions of residential rooftop solar systems. However, this is not the first time Obama and his administration had worked hard to stoke clean, renewable energy.

As the Obama Administration settled into office, members of the administration and those close to the President orchestrated billions in taxpayer dollars and incentives into SunEdison (SUNEQ) and its subsidiaries only to see it all melt in bankruptcy. The reason has little to do with the potential of clean energy and solely to do with corruption and collusion. Many newspapers, websites and blogs have lamented the vaulting ambition of SunEdison, but few have gotten right the orchestrated liquidation of assets that only lined the pockets of the wealthy and well-connected, while the shareholders are kept out of the court room.

Sun Edison has received over $2 billion from the Department of Energy in incentives and stimulus funds. The Department of Energy funded projects in five states and another project in Kearney, New Jersey (via The DOE hand-picked these projects because of board members connected to SunEdison and its subsidiaries.

In 2015, SunEdison bought a sagging heap of wind turbines called First Wind. First Wind received $778 million in taxpayer dollars at the guidance of CEO Paul Gaynor, a former Enron executive. First Wind has already proven adept at gaining favor in local policy. The company did this in Maine when they added Chief Utilities Regulator Kurt Adams, to the payroll (Adams received $1.3 million in compensation) via Bangor Daily News. First Wind was accustomed at using government insiders to gain special treatment.

In a 2010, First Wind withdrew an IPO due to lack of investor interest. The company continually lost money and was considered by all means toxic. So, it caught some by surprise when the upstart SunEdison paid $1.9 billion for First Wind – buying out the likes of D.E. SHAW and Madison Dearborn Partners. Why are D.E. Shaw and Madison Dearborn Partners important? Well, because Larry Summer was on the payroll of D.E. Shaw and Obama’s Chief of the National Economic Council and Rahm Emanuel’s, Obama’s Chief of Staff, second largest donor happened to be Dearborn Partners. Even in Emanuel’s last reelection bid as Mayor of Chicago, the loyal donors of Madison Dearborn gave him $858,800 in contributions.

Ahmad Chatila, President and Chief Executive Officer of SunEdison said of the deal, “This acquisition enhances SunEdison’s global offering and adds a talented wind development and asset management team. By combining SunEdison’s leading solar development platform with First Wind’s platform, SunEdison is well positioned to drive significant growth in global renewable energy markets, and deliver immediate shareholder value.” The deal announced Sun Edison to the world and First Wind’s heaving debt was all but forgotten.

Skies were blue for about a year until it was obvious SunEdison had absorbed too much debt. This is when D.E. Shaw and Madison Dearborn Partners came back to sue SunEdison and the funds in Terraform Power, a yieldco of SunEdison, immediately triggered as a deferred payment from the buyout of First Wind. “By all reports, SunEdison is on the verge of bankruptcy,” D.E. Shaw and Madison Dearborn said in the suit. “That bankruptcy will trigger substantial contractual payment obligations.”

Now, as SunEdison buys whole entities – First Wind and Vivint, who I will discuss momentarily – and drops assets into its yieldcos, Terraform Power and Terraform Global, while dumping only debt into SunEdison. Yet, in a separate lawsuit, Terraform Global sues SunEdison for $231 million in funds for renewable energy projects in India. Upon completion, the projects would be owned by Terraform Global.

Legal woes continued to mount as SunEdison’s other large acquisition of rooftop solar installer, Vivint Solar Inc. fell through. Vivint was owned by the Blackstone Group headed by Steve Schwarzman (who is now Chairman of Trump’s Strategic Policy Forum). Prior to the deal between the two, Blackstone took Vivint public and the price started to fall, so SunEdison, in a spending spree, opted to buy Vivint for $1.9 billion. The deal quickly fell through as SunEdison lost financing. Following the deal, SunEdison was sued by billionaire David Tepper’s Appaloosa Management LP. Appaloosa owned a 9.5% stake in TerraForm Power and filed the suit contending the acquisition would be better for SunEdison than its yieldco.

As part of the bankruptcy, Terraform Power and Global were kept out of the proceedings in order to sell themselves. Canada’s Brookfield Asset Management seems the most likely to acquire the yieldcos at a fraction of their true cost. The two have signed an exclusive deal in connection to a business combination. A number of other big investors have previously expressed interest in buying SunEdison’s yieldcos, including units of D.E. Shaw, BlackRock, AES Corp., and China’s Golden Concord Holdings. A deal like this would leave SunEdison shareholders with only the assets that are currently still held by the Debtor. This saga will continue to unfold as shareholders fight for an equity committee.

SunEdison, the once promising jewel of Obama’s renewable energy revolution, is now “hopelessly insolvent,” according to Homer Parkhill of Rothschild Inc., who is advising the company on the sale process. SunEdison will come up nearly $1 billion to $2.5 billion short of covering all of its debts, the judge said; making it “substantially unlikely” shareholders will avoid significant financial discomfort. The question is how did we get here and what do these disasters mean for the future of renewable energy?

Trump’s nominee for the DOE is Rick Perry. Before Perry’s hearing, the administration published a report looking to make deep cuts to the department (via The Hill) -” At the Department of Energy, [the Trump administration] would roll back funding for nuclear physics and advanced scientific computing research to 2008 levels, eliminate the Office of Electricity, eliminate the Office of Energy Efficiency and Renewable Energy and scrap the Office of Fossil Energy, which focuses on technologies to reduce carbon dioxide emissions.” This is also not taking into account Perry’s infamous quip about scrapping the DOE in 2011. Many believe the Trump team will keep funding nuclear energy and go bare bones on everything else. Scientists around the country see the future of physics research in the hands of Rick Perry and shudder. It appears as if Obama and corporate Democrats worked so hard to get the public excited about solar energy that they gave money away to the wrong people who may now have jeopardized its future.

This article was written with the help of many SunEdison shareholders We are not paid to write about SUNE.

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