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Vivint Solar charts conservative path after SunEdison debacle

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Vivint Solar charts conservative path after SunEdison debacle

is in recovery mode following its aborted deal with disrupted sales andlimited the rooftop solar company's ability to raise capital.

The companyexpects to grow installations by approximately 13% this year, to 260 MW, downfrom 49% in 2015. Competitors SolarCityCorp. and Sunrun Inc.are targeting growth rates this year of about and , respectively.

"We'renow back to focusing on Vivint Solar as a standalone business. That does notmean everything is back to where it was before the transaction announcementnine months ago," Executive Vice President and CFO Dana Russell said April14 on a conference call with analysts.

VivintSolar terminated itsmerger agreement with SunEdison in March, almost eight months after the dealwas announced, because SunEdison failed to close on time. Despite early signsof trouble, Vivint Solar continued pursuing the deal because of concerns aboutits own ability to continue operating as a standalone business.

Monthsof negotiations and market scrutiny took a toll. Business slowed and costsincreased as Vivint Solar grew its workforce in anticipation of higher demandafter the merger, executives said. "The uncertainty and the disruptioncaused by the transaction cannot be understated and resulted inless-than-favorable productivity, maintaining an elevated cost structure andwas most pronounced in the underperformance of the sales team in the secondhalf of the year," Vivint Solar President and CEO Greg Butterfield said onthe call.

Afterexiting the deal, Vivint Solar was able to raise $200 million in debt, which is secured by cashflows from the company's portfolio of residential solar systems. Vivint Solarsaid it has enough committed tax equity to last at least through May and apipeline of tax equity funding from existing partners to operate through 2016.

Thecompany is attempting to lower its cost per watt this year to between $2.85 and$2.95 from $3.12 last year. SolarCity, the country's biggest rooftop solarcompany, reported costs of $2.71 per watt during the fourth quarter of 2015.

Tohold down costs, Vivint Solar plans to limit the number of small systems itinstalls while avoiding certain types of roofs. It will also look to increaseits prices in certain markets. Recently, the company cut about 300 people fromits installation business.

"Webelieve this will have some effect on our growth rates in the short term, butwe also believe this will add value to the company via prudent, responsible useof our funding and ultimately put the company in a position to grow and achievegreater success," Russell said. Management is "engaged in making thebusiness better than it was before" the SunEdison episode, he added.

VivintSolar "appears to be recovering well from the disruptions caused by theterminated transaction," DeutscheBank Securities Inc. analyst Vishal Shah wrote in an April 15 note."That said, much of 2016 growth plans depend on execution — both on salesand financing fronts."