 "SunEdison bankruptcy will not hit India ops: Pashupathy Gopalan")
Renewable energy firm SunEdison has filed for bankruptcy protection in the US. Pashupathy Gopalan, president, India, tells T E Narasimhan reasons for the decision to file for bankruptcy. He says this will not impact Indian operations and the company will go ahead with 1.7-Gw additional capacity in two years. The company expects to finalise its $200-million raising plan in a month. Excerpts:
What are the key factors that led the company to file for bankruptcy?
The capital market in the US for the companies across the energy value chain has been extremely unprecedented in terms of how bad they have been. Recently one of the largest coal companies, Peabody, filed for Chapter 11. Many companies have been affected. It started with public markets being really tough with energy due to oil prices going lower and lower. At some point, the common investors who have invested into energy, started selling and redeeming profit when they started losing money. If I have to point out one reason, this is the reason.
For us, now it’s a unique situation. Once you file Chapter 11, essentially you are getting the protection of the court to re-negotiate the debt. Creditors come to a re-organised company with a balance sheet in a right size and obligations are revised. Then you will emerge out of this as a normal company. That’s the course of Chapter 11.
SunEdison has also announced $300-million debtor and projection funding. We have filed the plan for court approval. It was a difficult decision, but we need to re-organise and restructure the company to be more effective.
How is it that India operations would remain unaffected, as they were dependent on the global operations financially?
Legally, this is (Chapter 11) for specific entity in the US. Our primary goal of Chapter 11 is to ensure the business can continue doing what it supposed to do. The idea is not to be disruptive to the business.
India is not affected because we are not an entitiy that is filing or an entity which has any of these issues. We will continue our normal course of business and go on to develop and build the projects.
SunEdison has seven years of experience in India. We have a built a team of more than 250 people, who have experience in developing solar projects not only in India but outside, also to the tune of around one Gw (gigawatt). Everybody in the market recognised that we are one of the best solar energy developers and our plants perform extremely well.
Then we have 1.7 Gw of projects to develop and build in India over the next two years. It’s a massive capacity in solar. It has become a very interesting possibility to have someone (investors) come in and invest.
In the current circumstance, how bullish you are on raising equity to support your investment plans?
Historically, everything the company built with 100 per cent SunEdison's equity. Now we are saying we are open and we will do projects with partners. This is no different from what most other developers are doing in India.
I am confident that we can strike partnerships and in the next one month, we will finalise something. It is also a golden opportunity for investors that have been looking at investing in the Indian renewable energy sector.
The credibility we have created and the quality of power plant we created to the tune of 600-650 Mw (megawatt); they are testimony of our capability.
How much does SunEdison plan to raise as equity?
Around $150-200 million. In a month or two, we will finalise plans to take the 1.7 Gw of projects forward. There is a change in our strategy to look for additional source of equity because of the liquidity challenges which we are having at the parent level.
Analysts have said SunEdison will likely offload their projects considering their financial situation, or these projects may get cancelled and re-auctioned. What is your view?
We have signed a power purchase agreement (PPA), in which there is a certain deadline to deliver the project. In some cases, where there is land and PPA and in some cases it is simply PPA. Each time, when we sign the PPA, we have given bank guarantees typically in the range of Rs 30 lakh a Mw.
We have put more than Rs 500 crore of bank guarantee outstanding where we have to deliver the projects in the next 18 months. If we don't deliver, we will loose the money. No company wants to loose such big money and that is why the company is looking at raising equity.
SunEdison wanted to make India as HQ for South Asia operations. What happened to the plan?
In the last six months, I have been focussing a lot more on India. In other geographies, we are exploring various alternatives. For instance in Japan, the company exited. We will take a strategic view.
Given the current circumstances, how optimistic are you on Indian operations?
India is one of the largest geographies and second most important for us, after the US.
What are the key factors that led the company to file for bankruptcy?
The capital market in the US for the companies across the energy value chain has been extremely unprecedented in terms of how bad they have been. Recently one of the largest coal companies, Peabody, filed for Chapter 11. Many companies have been affected. It started with public markets being really tough with energy due to oil prices going lower and lower. At some point, the common investors who have invested into energy, started selling and redeeming profit when they started losing money. If I have to point out one reason, this is the reason.
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When do you see things will come back to normal?
For us, now it’s a unique situation. Once you file Chapter 11, essentially you are getting the protection of the court to re-negotiate the debt. Creditors come to a re-organised company with a balance sheet in a right size and obligations are revised. Then you will emerge out of this as a normal company. That’s the course of Chapter 11.
SunEdison has also announced $300-million debtor and projection funding. We have filed the plan for court approval. It was a difficult decision, but we need to re-organise and restructure the company to be more effective.
How is it that India operations would remain unaffected, as they were dependent on the global operations financially?
Legally, this is (Chapter 11) for specific entity in the US. Our primary goal of Chapter 11 is to ensure the business can continue doing what it supposed to do. The idea is not to be disruptive to the business.
India is not affected because we are not an entitiy that is filing or an entity which has any of these issues. We will continue our normal course of business and go on to develop and build the projects.
SunEdison has seven years of experience in India. We have a built a team of more than 250 people, who have experience in developing solar projects not only in India but outside, also to the tune of around one Gw (gigawatt). Everybody in the market recognised that we are one of the best solar energy developers and our plants perform extremely well.
Then we have 1.7 Gw of projects to develop and build in India over the next two years. It’s a massive capacity in solar. It has become a very interesting possibility to have someone (investors) come in and invest.
In the current circumstance, how bullish you are on raising equity to support your investment plans?
Historically, everything the company built with 100 per cent SunEdison's equity. Now we are saying we are open and we will do projects with partners. This is no different from what most other developers are doing in India.
I am confident that we can strike partnerships and in the next one month, we will finalise something. It is also a golden opportunity for investors that have been looking at investing in the Indian renewable energy sector.
The credibility we have created and the quality of power plant we created to the tune of 600-650 Mw (megawatt); they are testimony of our capability.
How much does SunEdison plan to raise as equity?
Around $150-200 million. In a month or two, we will finalise plans to take the 1.7 Gw of projects forward. There is a change in our strategy to look for additional source of equity because of the liquidity challenges which we are having at the parent level.
Analysts have said SunEdison will likely offload their projects considering their financial situation, or these projects may get cancelled and re-auctioned. What is your view?
We have signed a power purchase agreement (PPA), in which there is a certain deadline to deliver the project. In some cases, where there is land and PPA and in some cases it is simply PPA. Each time, when we sign the PPA, we have given bank guarantees typically in the range of Rs 30 lakh a Mw.
We have put more than Rs 500 crore of bank guarantee outstanding where we have to deliver the projects in the next 18 months. If we don't deliver, we will loose the money. No company wants to loose such big money and that is why the company is looking at raising equity.
SunEdison wanted to make India as HQ for South Asia operations. What happened to the plan?
In the last six months, I have been focussing a lot more on India. In other geographies, we are exploring various alternatives. For instance in Japan, the company exited. We will take a strategic view.
Given the current circumstances, how optimistic are you on Indian operations?
India is one of the largest geographies and second most important for us, after the US.