After many years of conducting research on developments in the solar energy field but not identifying an appropriate long-term investment vehicle, we initiated positions in SunEdison, Inc. (SUNE, Financial) and its yield-co subsidiary, TerraForm Power, Inc. (TERP, Financial), taking advantage of the decline in solar stocks in sympathy with the fall in oil prices to build positions at price levels we found attractive.
SunEdison is one of the world’s largest developers of solar energy projects and, in our view, one of the most diverse in terms of technology, end market exposure and geography. SunPower development projects span the utility, commercial and industrial and residential markets. And its project portfolio and pipeline is truly global in nature.
The company is currently far along in transforming its business model from one based on “building and selling” solar projects to one focused on “building and owning” these projects. We believe this transformation will enable the company to roughly triple the retained value of each solar project. With solar energy accounting for less than 1% of global electricity production, we believe the opportunity ahead for SunEdison is vast.
The solar energy market is growing rapidly as prices have come down – due to both overcapacity for solar modules and technological innovation – and solar is achieving “grid parity” in many parts of the world with coal and natural gas.
