In 2015, SunEdison was positioned to be the “first Renewable Energy Supermajor” with over 6 GW of solar and wind projects under operation and a pipeline of 8.1 GW of renewable energy projects. On July 20, 2015, SunEdison announced a $2.2 billion acquisition of Vivint Solar, a residential solar installer. Shortly after, SunEdison’s stock price went into free fall and plummeted from $33.45/share to $8.31/share. The company’s aggressive growth strategy now threatened to compromise its own operating model.
SunEdison’s core business is to develop large-scale solar and wind projects and then to sell these projects to third-parties or its “semi-captive yield companies” for a profit.  These projects require a significant capital investment upfront, but have no fuel costs and low operating costs over the project’s twenty-year life. In addition, large-scale projects produce reliable, high-margin cash flows through long-term power purchase agreements with electric utilities. SunEdison’s business model depends on acquiring, developing, and constructing energy projects in high-resource locations. As a result, the company relies on a large development pipeline to sustain its growth. Currently, SunEdison has 1.9 GW of projects that are under construction and 8.1 GW of projects in its development pipeline. In addition to organic development, SunEdison has tripled its project pipeline over the past year by aggressively acquiring other energy developers, including First Wind for over $2 billion in 2014.
SunEdison’s profitability depends on executing low-cost projects. The company’s operations are vertically integrated and the technical, construction, and business development teams support projects from early stage through operation. By reducing the development timeline for projects, the company is able to more accurately estimate project costs, win competitive bids for utility-scale generation, and deliver projects under budget. SunEdison has capitalized on falling solar panel prices through its own manufacturing operations and by partnering with low cost module suppliers to ensure that its projects have access to the cheapest panels available. Finally, SunEdison has used innovative financial engineering through yield companies in order to reduce its cost of capital and access new sources of funding before a key tax credit expires at the end of 2016.
On July 21, 2015, SunEdison announced that it would acquire Vivint, the second-largest residential solar installer in the country and its 523 MW portfolio of rooftop solar projects. The Vivint acquisition would provide SunEdison with a new team for originating rooftop solar projects through Vivint’s door-to-door sales model. In addition, SunEdison could use Vivint’s portfolio of rooftop solar projects to expand its own development pipeline and sustain the company’s ambitious levels of growth.
The Vivint acquisition, however, did not align with SunEdison’s operating model. SunEdison has achieved record growth by pursuing large, high-margin projects that were guaranteed by contracts with utilities. Vivint, on the other hand, focused on small-scale, low-margin projects with high customer acquisition costs. Vivint has competed successfully against other rooftop solar companies, such as SolarCity, by using a door-to-door salesforce to generate leads and close rooftop solar deals. By contrast, SunEdison’s internal teams are organized to take a utility-scale project from site selection to construction within two years. Once a project began construction, it would be at least nine months before the project was operating and could be sold to a third-party. Moreover, the business development and project finance teams at SunEdison did not work directly with customers or with small-scale projects. Instead, the business development team primarily focused on other developers and the project finance team negotiated with banks and tax equity investors to secure financing for individual projects. To support the Vivint sales model, SunEdison would need to completely overhaul its operating model or to create two distinct operating models within the company.
The Market Reacts
Today, SunEdison’s share price has fallen below $5 per share as the company struggles to integrate Vivint’s line of business into its operating model. At this point, SunEdison’s market cap of $1.25 billion is lower than its $2.2 billion acquisition of Vivint and it may be forced to walk away from the deal. After the market repudiated SunEdison’s acquisition spree, the company’s business model is now in jeopardy and it has recently announced plans to cut back significantly on growth. SunEdison will need to pursue a more disciplined path to growth in order to become the next energy supermajor.
 Conversations with SunEdison employees in May 2015.
 Conversations with SunEdison employees, May 2015.