The semiconductor and solar technology provider MEMC Electronic Materials Inc. (WFR) recently announced that its subsidiary SunEdison has sold its 20 megawatt (MW) solar photovoltaic power plant to Southern Company (SO) and Turner Renewable Energy for an undisclosed sum. Situated in southern U.S., Southern Company operates as an electric utility company and is involved in the generation, transmission, and distribution of electricity through traditional as well as renewable sources. In an attempt to pursue the development of renewable energy projects in the U.S., the company got into a partnership deal with Turner Renewable Energy, which is a wholly owned subsidiary of Turner Enterprises. SunEdison's solar plant is the partnership's second big acquisition, the first being First Solar Inc.'s (FSLR) in March 2010.
This Las Vegas-based plant covering 154 acres was initiated in October 2011. The plant is expected to be operational by the end of September. Power generated from this plant will be purchased by NV Energy Inc. (NVE) under a long-term agreement of 25 years. NV Energy provides energy solutions to the citizens of Nevada State.
Earlier, SunEdison's solar plant in Rovigo, Italy was sold to First Reserve. The plant with a 70 MW capacity was sold for ¬276 million in October 2010.
This February, SunEdison sold a 30 MW plant to MetLife Inc. (MET) and Longsol Holdings US Inc. The plant was completed and fully operative in December 2011.
As of March 31, 2012, SunEdison had 146.6 MW of solar projects under construction, predominately in the U.S. Also, there are $274.7 million of worth projects in Italy, Spain and Bulgaria that are up for sale. MEMC's unit has a project pipeline of approximately 2.9 gigawatts (GW), which is slightly down from the 3.0GW of project pipeline as of December 31, 2011.
Currently, the solar industry is experiencing a significant downturn, which started in the second half of 2011. The sector is witnessing sharp reductions in the pricing of solar modules, solar cells, solar wafers and polysilicon (raw material for solar wafer). This has resulted in a decline in profitability for all solar companies, including MEMC.
While a recovery in the situation appears to be far away, SunEdison is trying its luck in the solar space with its broad exposure in India. In May, the company agreed to support a rural electrification program called Eradication of Darkness by developing solar generation power plants.
Tie-ups with Flextronics International Ltd. (FLEX) and Jusung Engineering Co. Ltd. could make SunEdison's solar ventures more cost efficient and profitable. But the increasing debt burden is likely to take a toll on the fundamentals, going forward.
Currently, MEMC has a Zacks #3 Rank, implying a short-term Hold recommendation.
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