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UPDATE 2-SunEdison breaks even, to spin off some solar plants in 2014

Wednesday, 6 Nov 2013 | 12:51 PM ET

* Says may spin off some solar plants into a public entity

* Move to lower cost of capital, maximize returns

* Shares rise 8 pct

Nov 6 (Reuters) - SunEdison Inc broke even in the third quarter after posting two straight quarterly losses and said it could spin off some solar power plants next year into a new publicly listed company.

SunEdison shares rose 8 percent to $11.22 on Wednesday afternoon on the New York Stock Exchange.

The company is focusing on its higher margin business of developing solar farms and already has plans to spin off its semiconductor business in a $250-million initial public offering in the first quarter of 2014.

SunEdison said on Wednesday that it could drop some solar power plants into a new entity rather than sell them to customers, like it usually does.

"Basically it's a public vehicle that will be spun out and it's going to generate $40-$50 million in cash flow. It's just a way for them to maximize return potential for shareholders," S&P Capital IQ analyst Angelo Zino said.

U.S. companies are experimenting with innovative financing structures to lower cost of capital and maximize returns. For example, SolarCity Corp launched bonds backed by solar assets earlier this month.

"Now that we are starting to see some stability in the solar space, it's starting to create opportunities for companies to raise cheaper financing and new vehicles to raise capital to do more projects," Zino said.

He said other U.S. solar companies such as First Solar Inc and SunPower Corp could also look at innovative financing options in the coming months.

BREAKING EVEN

SunEdison said it expected to retain 100 megawatt (MW) to 105 MW of solar energy projects in 2013, higher than its previous estimate of 75 MW to 100 MW.

"When we retain (the projects), we can drop them into any of the various public vehicles that are available or that we will be developing," Chief Financial Officer Brian Wuebbels told analysts on a post-earnings conference call.

However, retaining projects could lower SunEdison's revenue as it will not be able to recognize revenue or margins associated with the sale of a project, Wuebbels said.

A 75 percent rise in SunEdison's solar energy business revenue helped the company break even on an adjusted basis in the third quarter ended Sept. 30. Analysts on average had expected a loss of 12 cents per share, according to Thomson Reuters I/B/E/S.

However, continued weakness in prices in the company's silicon wafer and solar businesses pushed it to a net loss.

Net loss was $108 million, or 47 cents per share, in the third quarter compared with a profit of $37 million, or 16 cents per share, a year earlier.

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