MEMC's Solar Unit Wraps Up Rovigo - Analyst Blog

SunEdison, the solar energy development division of MEMC Electronic Materials Inc. (WFR), recently announced the final receipt of €230 million from First Reserve Corp. for the sale of a 70 megawatt (MW) photovoltaic (PV) power plant in Italy, near the town of Rovigo. In October 2010, First Reserve made an initial payment of €46 million to SunEdison.

In October, SunEdison sold its solar plant in Rovigo, Italy, to First Reserve for a total consideration of €276 million, through a joint venture established between First Reserve and SunEdison. In May, SunEdison agreed to form a joint venture with First Reserve Corp., the world's leading private equity firm in the energy industry to fund current and future acquisitions totaling $1.5 billion of solar photovoltaic energy projects. 

Rovigo plant, which is one of the largest single operating solar power plants in Europe, was designed and developed in less than ten months. SunEdison received the final approval from the Italian government to develop this photovoltaic solar power plant in March 2010.

The development and sale of the Rovigo power plant was a major achievement for SunEdison in 2010. Rovigo is expected to serve as a European model for large-scale, alternative energy projects and be environment-friendly. SunEdison developed the project jointly with financing partner, Banco Santander.  

After the success of its Rovigo project, the solar energy unit of MEMC is presently working with project investors to develop the required finance structures, contacting local government agencies to understand their renewable energy goals and the consequent demand.

We remain encouraged by SunEdison's solar initiatives. We believe the consistent efforts in this area will lower costs facilitating faster adoption of solar technology in the years to come.

But the solar industry remains highly dependent on subsidy or tariff programs. Hence, any significant reduction in subsidy programs will lead to earnings pressure on the company's solar-wafer and solar installation business.  

Moreover, the company's high debt burden and muted semiconductor demand are also causes for concerns.  Currently, we have a Zacks #3 Rank (short-term Hold recommendation) on MEMC shares. We also reiterate our long-term Neutral rating.