SunEdison Finds No Material Misstatements or Fraud

SunEdison Inc. on Thursday said an internal investigation found the solar-energy company lacked certain accounting controls, but it uncovered no material misstatements or evidence of fraud.

Shares in the company, which have lost 93% of their value since the start of the year, rose to 61 cents apiece in premarket trading, a jump from its Wednesday close of 37 cents.

SunEdison in March disclosed an investigation by the U.S. Justice Department and said it had received an inquiry from the Securities and Exchange Commission over disclosures to investors about cash on hand. SunEdison in February delayed filing its annual financial statements, citing concerns about the accuracy of its financial condition, and said that it had launched an internal investigation.

On Thursday, the company said it had completed the internal probe. In a regulatory filing, SunEdison said "certain assumptions underlying the cash forecasts…were overly optimistic," and that it lacked sufficient controls over its management of cash flow, "including extensions of accounts payable and the use of cash committed for projects."

Despite the findings, SunEdison said it identified no material misstatement in historical financial statements, as well as "no substantial evidence to support a finding of fraud or willful misconduct of management."

The company found one instance of wrongdoing by a former nonexecutive employee, in connection with negotiations to terminate its acquisition of Vivint Solar Inc. SunEdison said it terminated the employee, whom it didn't name, "promptly after the company became aware of the wrongdoing."

SunEdison said it would implement improved cash-forecasting systems "with the requisite controls to manage, monitor and fully communicate changes in outlook directly to the board." Management will also provide the board with more transparency over cash flow, the company said, adding that "the recent hiring of a chief financial officer designee will act as a remedy."

The Wall Street reported earlier this month that SunEdison was likely headed for bankruptcy. The Maryland Heights, Mo., company had grown to a market value of $10 billion last year, using a combination of financial engineering and cheap debt to become one of the country's biggest developers of renewable-power plants. Its value as of Wednesday's close was about $120 million.

SunEdison's aggressive borrowing and the swift deterioration of its "yieldco" financing strategy caught it in a financial squeeze. SunEdison's two yieldcos, TerraForm Global Inc. and TerraForm Power Inc., raise money from public investors to buy power projects from developers, then sell power to utilities under long-term contracts.

Investors initially rewarded the yieldco structure, attracted by high dividend payouts during a time of ultralow interest rates, but expectations of rising rates damped their enthusiasm. Meanwhile, tumbling oil prices pushed energy stocks broadly lower, and capital-market turbulence stoked concerns about SunEdison's ability to continue financing acquisitions.

Earlier this month, TerraForm Global accused its parent of diverting funds and Brian Wuebbels, SunEdison's former chief financial officer and the chief executive of TerraForm, resigned from TerraForm. He left SunEdison in March.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

April 14, 2016 09:05 ET (13:05 GMT)

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