Two years ago, the solar power company SunEdison was in a crisis.
Its shares had plunged to about $1.50 each, reaching five-year lows, as Chinese solar panels undercut US offerings. Credit rating agencies had downgraded its outlook. And an activist hedge fund, Altai Capital, had emerged with a big stake.
But from that low, SunEdison managed to turn itself around. It is building both solar panels and power-generating projects around the world while its stock hovers near 52-week highs.
Ask SunEdison’s chief executive, Ahmad R. Chatila, what helped spur one of the most surprising turnarounds in recent history, and he will make a surprising concession. It was willingly inviting an executive from Altai, Steve Tesoriere, onto the company’s board, giving him leeway to push for big changes to its strategy and representing investors’ voices in a way the company had not done in the past.
“Having a constructive dialogue with shareholders in the boardroom is something I think everyone would gain something out of,” Chatila said.
Activist investors who buy up stakes in companies and push for sometimes radical business changes have gained power and prominence in corporate America in recent years, winning battles and gaining board seats.
But by inviting one into its board — and letting him take a big role in reshaping its strategy — SunEdison took a step few companies are willing to take.
The bet appears to be working. SunEdison shares closed Thursday at $22.66, valuing the solar power company at more than $6 billion. Analysts have praised the company for its new, sophisticated approach to its business, including a bit of financial engineering that drastically cut the costs of developing new solar power assets.
“It’s clear to us that our participation at the board level helped accelerate a number of initiatives that drove the company’s market value and access to capital,” Tesoriere said.
Shares in SunEdison have risen 177 percent over the past 12 months, making it one of the best performers in the industry.
Analysts have praised the company’s strategy and success. An analyst at Deutsche Bank, Vishal Shah, wrote in a recent research note that SunEdison appeared poised to grow faster than competitors and at a lower cost. “I think it’s one of the best in its class,” Shah said in an interview.
SunEdison’s success is a far cry from how the company stood in summer 2012. Then called MEMC Electronic Materials and known primarily for making silicon wafers for computer chips, the company struggled to support its budding solar-power arm in the industrywide crisis that had taken down Solyndra and other peers.
Two big credit rating agencies had downgraded the company’s debt. Months earlier, it had laid off 1,300 workers, about 20 percent of its employees.
Faced with few good options, Chatila and his management team decided to bring Tesoriere into their fold, arguing to the board that the drastic change could yield big benefits.
Tesoriere soon focused on two major initiatives. One was separating the company’s solar power and semiconductor businesses, believing that a sharp division between the two would provide focus and help draw in new investors.
Tesoriere also championed a bit of financial engineering that had been widely used in the energy industry. SunEdison would essentially place its solar projects into a publicly traded company, known in industry argot as a yieldco, in which it would own a big stake. (In late May, SunEdison filed paperwork to take public that new company, known as TerraForm Power, in an initial public offering.) The new entity can tap the stock markets for money to support SunEdison’s projects at a much lower cost.