Sunedison Inc (NYSE:SUNE)’s contribution to Greenlight Capital’s performance was as much as Apple’s contribution. Einhorn had nearly $1 billion invested in Apple at the beginning of the first quarter, whereas his SunEdison position was slightly more than half of that. Here is what Einhorn said about SunEdison:
“SUNE shares rallied 23% during the quarter. At the analyst day in February, the company said that it would begin generating significant free cash flow sooner than the market had anticipated, and expected to exit 2016 at a run rate of $3 of cash EPS. The strong outlook was driven by rapid growth in dividends received from Terraform Power (TERP), the company’s renewable energy-focused affiliate, and a consequent acceleration in the timing of incentive distribution rights which SUNE expects to receive as TERP’s sponsor.”
Einhorn initiated a position in Sunedison Inc (NYSE:SUNE) during the first quarter of 2014. Here is what he said in the 2014 Q1 investor letter:
“SUNE, formerly known as MEMC, is a developer of solar power plants for business and utilities. The declining cost of solar energy combined with the rising cost of conventionally produced electricity should position SUNE power as a winner. The company has built a large pipeline of attractive projects secured by credit-worthy buyers of electricity. Until recently, the good business was mixed in with two bad ones: manufacturing wafers for semiconductor companies, and assembling commodity solar modules for developers. Historically, the company’s poor balance sheet forced it to sell many of its solar development projects at discounted prices to raise capital.
The company has now exited the solar module assembly business and is in the process of monetizing its semiconductor wafer business through an IPO. Later this year, we expect the company will IPO a newly-created Yieldco, which will house its most attractive solar projects rather than selling them to third parties. NRG Yield Inc. is a comparable company that trades at 12x EBITDA and has a 3% dividend yield. Were Yieldco to trade at 9x EBITDA and a 5% dividend yield it would imply a value for the solar business of ~$34 per share. SUNE expects to run its development business close to breakeven in future periods. Adding in the value of the soon-to-be IPO’ed semiconductor business and subtracting a modest amount of corporate net debt would suggest a sum of the parts value for SUNE of ~35 per share. Our average entry price is $15.55 and SUNE shares ended the quarter at $18.84.”
Last October David Einhorn shared his updated thesis at the Robin Hood Conference. He reduced his price target to $32 but Sunedison Inc (NYSE:SUNE) was trading at half of that level when he was preparing his presentation. A complete copy of this presentation can be downloaded here.
