Risks Related to our Relationship with SunEdison and the SunEdison Bankruptcy
We continue to rely on SunEdison for many important services, and the SunEdison Bankruptcy creates numerous risks and uncertainties for us.
We have historically relied significantly on SunEdison for important corporate, project, and other services, including many management services under the MSA (such as management, secretarial, accounting, banking, treasury, administrative, regulatory and reporting functions; recommending and implementing business strategy; maintenance of books and records; calculation and payment of taxes; and preparation of audited and unaudited financial statements), as well as asset management and O&M for most of our projects.
Because of this reliance on SunEdison, the SunEdison Bankruptcy has created substantial risks to our business, operations and financial condition.
As we transition away from utilization of SunEdison for these services, we face new risks associated with replacing SunEdison with new contract providers, internal systems, staff and operations.
Risks and uncertainties associated with our transition away from reliance on SunEdison include:
SunEdison’s decisions during bankruptcy, including what contracts it seeks to assume, assume and assign or reject or what dispositions it chooses to make, potential opposition to such decisions from SunEdison’s creditors and other parties in interest and the requirement that the bankruptcy court approve many of SunEdison’s decisions during bankruptcy, including the assumption, assumption and assignment or rejection of contracts by SunEdison and any transactions entered into by SunEdison outside the ordinary course of business;
SunEdison’s ability to confirm and consummate a plan of reorganization;
SunEdison’s ability to maintain or obtain sufficient financing sources for its operations during the pendency of the bankruptcy or to obtain sufficient exit financing;
the bankruptcy court’s rulings (including rulings on issues related to our pursuit of strategic alternatives, such as a merger or sale of substantially all of our assets, or any other alternative that would require stockholder approval) which, as a result of the bankruptcy court’s equitable powers, are difficult to predict with any certainty;
potential increased difficulty in retaining and motivating SunEdison’s key employees through the process of reorganization, and increased difficulty in attracting new employees;
the actions and decisions of SunEdison’s stakeholders, including creditors, regulators and other third parties; and
the resolution of intercompany claims between us and SunEdison.
The SunEdison Bankruptcy could result in a liquidation of SunEdison, which may have a material adverse effect on our business, results of operations and financial condition in light of our ongoing utilization of SunEdison for business and operational services and projects. A disorganized liquidation would increase the risk of a material adverse effect on our business.
We are transitioning away from our historical reliance on SunEdison for important corporate, project and other services, which involves management challenges and poses risks that may adversely affect our business, results of operations and financial condition.
Since the SunEdison Bankruptcy, we have been engaged in efforts to transition away from our historical reliance on SunEdison for corporate, project and other services, by seeking to identify alternative service providers and to establish and manage new relationships, as well as develop our own capabilities and resources in these areas. These efforts include creating a separate stand-alone organization, including, among other things, directly hiring employees and establishing our own accounting, information technology, human resources and other critical systems and infrastructure, and also include transitioning the project level operation and maintenance and asset management services to third party service providers. However, our efforts in this regard, although designed to mitigate risks posed by the SunEdison Bankruptcy, involve a number of new risks and challenges that may have a material adverse effect on our business, results of operations and financial condition.
We may be unable to contract with substitute service providers on terms similar to those provided by SunEdison or at all. The fees of substitute service providers or the costs of performing all or a portion of the services ourselves are likely be substantially more than the fees that we currently pay under the MSA, which are equal to 2.5% of the Company’s cash available for distribution to shareholders for each the years 2016, 2017 and 2018. In addition, in light of SunEdison’s familiarity with our assets, a substitute service provider may not be able to provide the same level of service.