With news reports warning that the solar giant SunEdison could declare bankruptcy as early as this week, the fate of a trio of the company’s stalled solar projects on Oahu remains uncertain.

Hawaiian Electric Co. nixed three deals with SunEdison in February for solar farms in Kalaeloa, Mililani and Waipio that were supposed to generate up to 112 megawatts of power.

Its justification included concerns that SunEdison’s downward spiral made it unlikely the company would be able to complete the projects in a timely manner, if at all.

D.E. Shaw, a global investment and technology development firm that is also a creditor of SunEdison, has been seeking to take over the projects — but it needs an assist from HECO to do so.

The company asked HECO to bring the deals back to life so the investment firm could take over ownership of all three projects.

Public Utilities Chairman Randy Iwase, shown here during regulatory hearings in February, ordered an investigation into the Hawaiian Electric Co. over three solar projects it nixed.
Public Utilities Chairman Randy Iwase, shown here during regulatory hearings in February, ordered an investigation of the Hawaiian Electric Co. over three solar projects it nixed. Cory Lum/Civil Beat

D.E. Shaw’s Managing Director Bryan Martin promised HECO CEO Alan Oshima his company would quickly buy the projects from SunEdison, if the utility made it possible. And to assure HECO, Martin offered to forfeit $5 million of an interconnection deposit if financing wasn’t put into place quickly.

HECO didn’t bite. But Oshima did say that Hawaiian Electric was open to sitting down and talking with D.E. Shaw to address possible bankruptcy-related concerns his company had.

The head of HECO suggested in a letter that the two companies meet in early April, and that D.E. Shaw should put forward a formal proposal to allow the deal to go forward despite HECO’s concerns SunEdison could soon end up before a bankruptcy judge.

Martin recently responded in an April 4 letter — that has since been filed with the Public Utilities Commission — to suggest that the looming bankruptcy of SunEdison might mean that the best way forward is to simply wait a few weeks.

Martin wrote to the head of HECO that “we would like to take you up on your offer to meet, but would like to meet later in April, when there is a substantial chance your concerns regarding potential challenges to a sale (after a bankruptcy) will have been alleviated.”

HECO spokesman Darren Pai said the utility remains “willing to discuss any proposal from D.E. Shaw or any other potential purchaser of the projects from bankruptcy,” and that HECO has agreed to delay the planned meeting until the end of the month.

“However, we have emphasized that before any such meeting takes place, we need to see a formal proposal that addresses our concerns about a possible SunEdison bankruptcy and (that) provides enhanced terms and conditions that benefit our customers.”

Scrutiny Of HECO’s Decision-Making

Time may or may not resolve Hawaiian Electric’s concerns, but the company is facing ongoing pressure over its decision to kill the three solar deals by regulators at a time when all agree that ramping up renewable capacity is crucial.

The Public Utilities Commission released an internal report Tuesday focusing on why HECO cancelled the deals.

While energy regulators do not have the authority to decide on a private company’s internal dealings, they can decide that its actions are or are not in the public interest — and they might have an opportunity to bring consequences to bear in the future.

PUC Chairman Randy Iwase has repeatedly expressed consternation that the cancellation of the SunEdison contracts could make it impossible for HECO to meet the renewable energy generation goals the utility has committed to by the year 2020.

That’s when 30 percent of the island’s energy portfolio is supposed to come from renewable sources.

In March, Iwase ordered regulatory staff to investigate HECO’s decision-making in regard to the cancelled deals and its choice, thus far, not to directly engage with D.E. Shaw to bring the projects back to life.

The investigation aimed to bring together “the relevant facts and circumstances surrounding HECO’s decision to terminate” the power contracts, and to “provide Staff’s preliminary assessment of whether HECO’s decision was supported by those facts and circumstances.”

The commission staff examined whether Hawaiian Electric was open to a possible deal with D.E. Shaw, which is a company on sound financial footing with experience in the state, or if it was, for some reason, just looking to get out of the solar deals.

Commission staff concluded, in their report, that SunEdison’s financial difficulties were not “to be ignored or taken lightly,” but that “the record does not … demonstrate that HECO aggressively pursued negotiations with Shaw in order to complete the sales transactions.”

PUC staff also tagged HECO for not aggressively pursuing an analysis of the risks associated with a sale of the projects to D.E. Shaw, as well as not looking for ways to minimize the risks of moving forward with the projects regardless of SunEdison’s financial circumstances.

“The problem, in the staff’s view, is that the formal, detailed analysis by qualified bankruptcy attorneys or other qualified parties to make that conclusion has never been undertaken,” the report states.

PUC staff concluded that HECO may have “the discretion to determine whether or not to terminate” its contracts, but that the commission is tasked with assessing whether or not that decision was in the public interest.

HECO will, the report added, “have a full opportunity to – and, indeed, will be required to – provide additional information with respect to the termination of the (deals) in any such proceeding to demonstrate that its actions here were in the public interest, and that any costs associated with, or attributable to, that decision are appropriate.”

From the information it has seen, the commission’s staff concluded, “the actions taken by HECO cannot be viewed as serving the best interests of the State or the people of Hawaii.”

Iwase said Wednesday that HECO’s concerns about SunEdison’s possible bankruptcy are “reasonable, acceptable, understandable,” but he remains troubled by decisions that have likely slowed Oahu’s shift toward more renewable energy generation.

“The unfortunate thing about that is we now have to wait for the bankruptcy court… to approve any sale to D.E. Shaw,” Iwase said. “Here’s the irony: The (three solar deals) are dead. … D.E. Shaw would have to go back to Hawaiian Electric and say we’d like to do these three projects and we’d start the whole thing all over again.”

That process, he said, would take 20 to 30 months. “That’s getting into year 2020 territory.”

Read past Civil Beat coverage of the issue here.

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