SunEdison & Renova Unite to Build 1GW Solar Plant in Brazil
ZacksIn a bid to solidify its position in the Brazilian solar market, solar technology company SunEdison Inc. (SUNE - Analyst Report) announced a strategic alliance with local renewable energy company, Renova Energia S.A., to develop solar photovoltaic projects in the country. Under the 50–50 joint venture agreement, the companies will develop 1 GW (gigawatt) of solar projects over the years and the electricity generated will be supplied to the Brazilian Regulated Electricity Market.
Both the companies intend to install 106.9 MW (megawatt) of solar projects by 2017-end by building four utility plants in the Bahia State, Brazil. The project is part of the contract gained by Renova Energia in the country’s first renewable energy auction — 2014 Reserve Supply Auction — organized by the Brazilian Energy Commercialization Authority, Camara Comercializadora de Energia Electrica (CCEE) on Oct 31, 2014.
Per the agreement, SunEdison will be responsible for supplying solar modules and trackers which will be assembled in Brazil. The Brazilian Development Bank (BNDES) is financing the plant construction.
We believe that this partnership will enable SunEdison is to take advantage of the growth prospects and economic benefits in Brazil while strengthening its position in the solar market of the country.
According to Bloomberg, currently less than 1% of the total power in Brazil is produced through solar energy which the government intends to increase to 1.8% by 2023. Moreover, the country has no photovoltaic cell manufacturing plant.
Consequently, the Brazilian government has allowed solar energy developers to use imported components. However, from 2020 onward only indigenous components will be allowed. Per Bloomberg, SunEdison is investing around $30 million in a solar panel plant to build photovoltaic modules and tracking systems. The facility, expected to be operational in 2016, will have a capacity of 140 MW a year.
The agreement is one of several SunEdison has entered into in recent times to expand its presence internationally. Earlier, the company announced wins in both China and India.
Although SunEdison’s growing exposure in the solar energy market is encouraging, project development requires considerable time and investment. Hence, any delay or inability to sell these projects at desired prices could impact liquidity.
Going forward, increase in debt level and competition from SunPower Corp. (SPWR - Analyst Report) and First Solar Inc. (FSLR - Analyst Report) remain the headwinds.
Currently, SunEdison has a Zacks Rank #4 (Sell). Ambarella Inc. (AMBA - Snapshot Report) with a Zacks Rank #1 (Strong Buy) is a better-ranked stock and therefore worth considering.