Sunedison Inc (NYSE:SUNE) has been the favorite stock for hedge fund manager, David Einhorn for quite some time now. He recommended the investors to buy solar stocks, Sunedison Inc (NYSE:SUNE) and Sunedison’s TerraForm Power Inc (NASDAQ:TERP) in the Robinhood investors conference. Sunedison CEO, Ahmad Chatila talked on CNBC about his views on the solar industry and involvement of hedge fund managers.
David Einhorn was impressed with the yieldco potential of Sunedison Inc (NYSE:SUNE), even before he announced the stock as his top pick. Sunedison has filed Confidential S-1 for emerging markets and TerraForm Power Inc (NASDAQ:TERP), built by Sunedison to own and operate solar farms had a successful debut in US market. The yieldco model adopted by Sunedison helps in raising capital at lower cost.
Chatila mentioned that there might be two more yieldco’s in the near future, one for OECD and another for emerging markets. He added that it might take some time to do more yieldco’s since it needs more volume and growth. He mentioned that some yieldco in residential sector might be possible but he feels that it is few years away.
The main attraction part in yieldco for investors is the dividend part. There is obvious risk side of satisfying the investors with dividend payoff. Chatila thinks that there are ways to counter that risk.
“I think we can absorb some interest rate increase. May be around 200-300 bips. […] We have a very high growth so if you think about it, it’s a very attractive proposition,” Chatila said about evading the risks.
In the last 2-3 years solar cost has gone down by 50-60% and the Sunedison Inc (NYSE:SUNE) has some further plans for cost reduction in future, through new technologies and plants in China. But the reducing cost might raise a concern with Investors.
“So, Lower cost helps a developer like us. We are about brand and consisting cash flows and signing contracts and building a business model, more of a software. We are not a module player, we try to control the cost of modules, but we are not a module player. If you are purely a module player then you are commodity player and you can see it in all commodities, steel, memory chips,” Chatila said about cost reduction.
Altai Capital managed by Rishi Bajaj, Toby Symonds and Steve Tesoriere was a long time shareholder of Sunedison Inc (NYSE:SUNE). David Einhorn’s Greenlight Capital joined the mix recently and there are a couple of other hedge funds like Leon Cooperman’s Omega Advisors and Barry Rosenstein’s Jana Partners, which also have significant holding in the company.
Chatila mentioned that he is very happy to have hedge fund managers among the shareholders and the board. He feels that the company had a tough transition and had hard time making the board understand about it. With the inclusion of hedge fund managers in board meeting, he thinks that the process is getting more transparent and clear.