BUZZ-SunEdison Inc: Down but not out

Thu Aug 13, 2015 9:32am EDT
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** SunEdison may have finally escaped a bear clutch

** Stock reversed course during a volatile Wed session to close in positive territory for first time in five days and is up another 9 pct on Thursday

** Co announced a JV with Dominion Resources

** RBC cuts stock's PT to $24 from $36, while reiterating an "Outperform" rating

** SUNE's harsh 60-pct selloff since its July 20 intra-day high, triggered by affiliate Terraform Global Inc's dismal IPO outcome, epitomizes the market dislocation in Yieldco sector

** But analysts say investors are ignoring industry fundamentals and tools sponsors can use to navigate through challenging environments

** Renewables's rapid growth (due to favorable economics rather than government policy), their very low current penetration globally, and developers' ability to achieve returns well above cost of capital seen driving Yieldcos growth, Morgan Stanley analysts write in note

** SunEdison could follow the MLP script and sell assets to its affiliates in exchange for additional stock, versus cash, which eliminates yieldcos' need to continually tap the equity markets

** SUNE has already shown willingness to lower prices of renewable projects it drops down into TerraForm Power Inc and could also modify its incentive distribution rights (IDRs) structure to boost sentiment   Continued...