What: Shares of renewable energy developer SunEdison Inc jumped as much as 14% today after the company announced a new partnership.
So what: SunEdison announced after the market close yesterday that it will partner with Dominion Resources to build 240 MW of solar projects in Utah. Under the terms of the deal, Dominion will invest $500 million for 99% of the tax equity and 50% of the cash equity of the project and SunEdison will retain the rest. When combined with $250 million of financing, the project is fully funded without additional cash needed from SunEdison.
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Now what: This is a good ownership structure for SunEdison, which wants to add long-term cash flows to its business but doesn't have a lot of capital to contribute to the projects themselves. If the company can find ways to finance projects like this in the future, especially with utility partners, it could provide a lot of upside with relatively little downside risk for investors.
SunEdison has a lot of work to do in proving that it can create a profitable business, and shares are still off more than 50% from their 52-week high, but partnerships like this are a step in the right direction.
The article Why SunEdison Inc's Shares Jumped 14% Today originally appeared on Fool.com.
Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.