Back to top

Analyst Blog

The semiconductor and solar technology provider MEMC Electronic Materials Inc. recently announced that its subsidiary SunEdison will sell a 20 megawatt (MW) solar photovoltaic power plant to Riverside Public Utilities for an undisclosed sum. Riverside Public Utilities is a municipal body set up for delivering electricity and water to the citizens of the City of Riverside, California.

SunEdison plans to contract the proposed solar plant on a site owned by Metropolitan Water District, located in the western Riverside County. Construction is set to commence by 2014 and the plant is expected to be operational by 2015.

Power generated from the plant will considerably reduce the burden on non-renewable sources of energy. Also, the solar plant’s close proximity to the energy distribution centers will lead to lowering of transmission cost.

Apart from Riverside Public Utilities, SunEdison’s rich experience has prompted Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E) to opt for its solar energy services. The MEMC unit will hand over 48 MW and 18.5 MW of solar power generating plants to SCE and SDG&E, respectively. Financial details of the deals were not made public.

Earlier this year, SunEdison sold a 20 MW solar photovoltaic power plant to Southern Company (SO - Analyst Report) in July and a 30 MW plant to MetLife Inc. (MET - Analyst Report) in February.

SunEdison currently has 116.8 MW of solar projects under construction. Moreover, a 13.6 MW project is ready for sale in Spain. As per recently concluded third quarter 2012 results, SunEdison has a project pipeline of approximately 2.9 gigawatts (GW), slightly down from 3.0 GW at the end of fiscal 2011.

Though pricing in the solar industry has lacked luster over the past few quarters, there are indications that demand for solar panel installations will ramp in the coming quarters. A report published by GTM Research and Solar Energy Industries Association in June indicated that the U.S. solar panel market could grow 75.0% this year. Hence, it can be inferred that pricing would improve leading to a better profitability.

We see MEMC’s solar initiatives as a key driver for the long term. But its debt-laden balance sheet keeps us concerned.

Currently, MEMC has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.