What: Shares of renewable energy yieldco TerraForm Power Inc. (NASDAQ:TERP) fell 21% in May as investors began to question the company's ability to survive.
So what: Moody's said in May that as many as 10 of TerraForm Power's projects have been financed with debt that's tied to the health of SunEdison, which is now bankrupt. On top of that, there's a string of lawsuits between SunEdison and its two TerraForm yieldcos that could take months, if not years, to resolve.
The drop in shares during May can probably be attributed to the market realizing that TerraForm Power isn't going to be a quick recovery, despite having long-term contracts in an attractive part of the energy market.
Now what: There are so many unknowns for TerraForm Power that there's no reason to jump into shares right now. The technical default on debt, which bondholders filed for in late May, also leaves questions about what the yieldco may have to give up to stay in business. Maybe the dividend will fall, cash reserves will be added to projects, and bankruptcy is in the cards? I just don't see this playing out well for TerraForm Power in the near future and there are better options in the yieldco space with high dividend yields and a much lower chance of losing everything for investors.