MEMC Boosts Solar Power

The semiconductor and solar technology provider MEMC Electronic Materials Inc. (WFR - Analyst Report) recently announced that its subsidiary SunEdison has entered into an agreement with Deutsche Bank Securities, Inc. and Rabobank for an unsecured revolving credit facility of $300.0 million. The new debt has a maturity period of 3 years.

The fund will be used in developing ground and roof-top solar projects throughout the U.S. and Canada. MEMC is trying to leverage the solid increase in solar energy usage and is hopeful that its investments will eventually pay off. Accordingly, it will continue allocating capital carefully, thereby supporting long-term growth goals.

Presently, SunEdison has deployed more than 500 solar energy systems or 330 megawatts (MW) of installed solar capacity throughout the United States and Canada. The company’s solar project pipeline in North America remains strong and MEMC has mentioned that it will opt for additional financial support from banks and other sources to fund the pending projects.

In another recent development, MEMC announced that the SunEdison unit will be moving its headquarters to Belmont, California from Maryland to take advantage of state tax incentives. SunEdison has qualified for California’s solar energy property tax exclusion, which now covers sale-leaseback transactions.

SunEdison also announced that KGAL GmbH & Co. has acquired 33 MW of solar photovoltaic systems in Italy and Spain,, although SunEdison expects to continue operating the systems for the time being.

We see MEMC’s solar initiatives as a key driver for the long term. The company recently tied up with key players such as Flextronics International Ltd. (FLEX - Snapshot Report) and Jusung Engineering Co. Ltd. to make its solar ventures more cost efficient and profitable.

However, the ongoing overcapacity situation in the solar market will continue to impact pricing and profitability. Hence, we believe it will be hard for MEMC to significantly improve its earnings in the near to intermediate term.

Currently, MEMC has a Zacks #3 Rank, implying a short-term Hold recommendation.

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