This email pitch from Dr. Kent Moors for his Energy Advantage newsletter seems to have hit just about every inbox in North America. It has come in under a bunch of different subject lines, from “stunning breakthrough set to make OPEC obsolete” to “$5 stock make OPEC obsolete” to “Say ‘Goodbye’ to Your Electric Bill… Forever!” to “This could be the end for big oil” and “it all starts with a tiny grain of sand.”

But yes, all those subject lines and notes from a dozen different newsletters and pundits link to the same ad from Dr. Kent Moors which launches with an enticing spiel about how these tiny grains of sand are going to provide unlimited free energy.

This is an absurdly long sales pitch for Moors’ newsletter… when I print it out, it runs to 40 some pages, and he doesn’t actually get around to admitting that it’s solar power he’s talking about until page 13. And he goes to some length to push aside the concerns that many investors might have about solar by saying that it’s different now…

“Now, am I talking about solar energy? Are these energy particles the basis for what we call solar power?

“Well, yes and no…

“Technically speaking, this perpetual energy comes from the infinite power of the Sun.

“But this NEW GENERATION is completely different from what most folks imagine when they think of traditional solar power.

“I don’t know about you, but when I think of solar power, I think of expensive, cumbersome panels plastered all over my neighbor’s roof.

“And I think of liberals taxing me into oblivion so they can make everybody ‘green.’

“Rest assured, today’s new solar power has changed so much, it’s virtually UNRECOGNIZABLE.”

So yes, in the end he’s pitching some solar stocks — what are they?

A bit more of a taste from the ad to get you setarted:

“And while there will be numerous plays coming down the pike, you will NEVER have another opportunity like you have today – right now!

“You see, at the center of this energy revolution sits one tiny company that’s about to go from virtual obscurity to household name.

“Their revolutionary technology has completely transformed the way this fuel is harvested.

“At the same time, they have over 750 patents protecting their market share.

“To say this company is in the driver’s seat would be an understatement of epic proportions.

“At this moment, every major energy player on the planet is banging on their door looking for cheap energy.

“In fact, their client roster is a ‘who’s who’ of global energy players.”

I’ll try to spare you the long and drawn out spiel (you’ve already gotten it, I imagine, or you can see it here if you want the whole magilla), but let me try to pull out a few of the better clues about this “tiny company” at the “center of this energy revolution” so we can feed the Thinkolator and make sure we get the right answer…

“They’ve already locked in enormous long-term deals with the likes of Walmart, Google, the U.S. Department of Defense, and New York City.

“In addition, cities, companies and countries from around the globe – the biggest energy consumers on the planet – are rushing to harness this company’s innovative technology.

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“I’m talking about China, India, and even Saudi Arabia!

“Domination of this emerging sector is near certain… and early investors could see a potential 10, 15, 25 times their money BEFORE this even gets going full steam.”

OK, so that’s a few clues. More…

“This company is tiny.

“And with even a small piece of the potential $48 trillion flowing toward it, the expansion is going to be off the charts.

“We’re talking 80,000% potential growth. And that’s being conservative…

“And at this moment, they are preparing an announcement that will likely send their stock into orbit, delivering early investors 10, 15, even 25 times their money, for starters.”

He doesn’t say much more about what that “announcement” might be, but he does then move on to the chemical engineering advancements and technology that he says has allowed this company to help cut costs by “a mind-blowing 99%”…

“The company I’m recommending today has taken solar cells to a whole new level… helping bring the cost of solar power down by a stunning 99%.

“And the way it works is amazing.

“In fact, their patented technology turns grains of sand, right off the beach, into highly efficient, wafer-thin solar cells that deliver dirt-cheap energy.”

Isn’t that what they all do? Turn sand into purified silicon and polysilicon and slice it into wafers? Well, apparently this particular company has some improved technology… here’s how he describes it:

“During the process, very small particles of Si called “seeds” are suspended in a cloud of gas.

“Si in the gas attaches to other Si particles, forming larger and larger beads.

“These beads eventually drop out of the gas like rain….

“The beads are then melted and formed into wafer-thin slices of 99.99% pure Si…

“The technology is 1,000% more efficient than the industry standard.

“And the big thing: The cost…

“Again, traditional solar cells delivered energy at a cost of $76 per KWH.

“This company’s technology is so efficient, and creates such pure Si, they are supplying a utility company with solar at 5 cents per KWH.”

That’s not a fair or recent comparison, I expect, nor is it the work of solely this (or any) company, I think we should note. I’m not sure where he’s getting the $76 number, but it is true that solar module costs were about $76/watt back in 1977 (they’ve fallen to close to 50 cents/watt now, but were in the $5-10 range for most of the 1980s-early 2000s). That’s different from the cost per KWH that utilities are actually paying for electricity — but five cents per KWH is now pretty much the average cost of utility-scale solar projects. I think that’s where the number comes from, because later in the pitch he says “the cost of solar technology has plummeted from over $76 per watt to about 5 cents per watt” — which isn’t really accurate if you’re talking about the cost of modules, but, yes, we’ll stipulate that costs are way down throughout the solar power industry even as we argue that no one company is responsible for that 40-year drop in costs.

Photovoltaic electricity generation costs have fallen more than any other electricity generation costs over the past five years, and Warren Buffett’s Berkshire Hathaway has so far signed the cheapest solar power purchase agreement I’ve seen at under four cents per KWH from a Nevada solar farm. Costs have been coming down dramatically, with the two biggest impacts (if you ignore clean energy subsidies, which fluctuate) probably coming from both the falling cost of silicon and the falling cost of financing (solar power facilities don’t price their power based on the ongoing cost of fuel, because there isn’t any, they price it on what it costs to build the facility and how much it costs them to finance that construction — low interest rates may be as important as falling polysilicon prices).

So what is the “tiny company” Moors is touting with pronouncements like, “If you could only own one solar company for the next 10 years, this would be the one?”

We’ve got a bunch of clues in that miasma of hype we’ve gone through so far, but here’s one more:

“they signed a deal with Southern California Edison and PG&E, the nation’s two largest utility companies, to convert California’s power grid into solar.”

Uh oh. Is this maybe the worst-timed teaser pitch in history? The ads just started running early yesterday, as the stock was in the process of falling another 30%+ in a single day, part of a drop of 50% in just the past week following their earnings report… and, in total now, a drop of 90% since the peak in mid-July.

Yes, this is the stock that has almost singlehandedly destroyed a handful of hedge funds this year: SunEdison (SUNE).

Or maybe, reports the hopeful optimist, this is a well-timed pitch because the stock is bottoming out?

I don’t know — there is very little margin for error in SunEdison these days, largely because of the huge leverage they employed and the instability of the financial engineering platform on which they perched this company.

I used to know a little bit about SunEdison many years ago, back when they were MEMC Electronic Materials and were a producer of the high quality polysilicon wafers used in semiconductors and, later, solar panels. For a while there they had a nice pricing advantage, they got a good foothold on the wafer business partly because they were a serial acquirer, and demand was high… but the story has changed a bit in the years since then, they bought SunEdison back in 2009 and they’ve more recently moved to jettison the wafer production and become more of a “pure” solar company with a focus on large, utility-scale solar projects like those that SunEdison was just starting to complete six years ago, and before long they changed the name of the company to match this new focus.

And, with a push from the hedge fund guys starting a year or two ago, they tried to “create value” by committing to build huge projects but then spinning off their cash-flowing, stable assets into “yieldco” trading vehicles, companies that own solar power plant projects and the like but don’t really do anything other than pay for maintenance, collect checks, and spit out their cash to shareholders… and issue new shares to buy new projects from their “parent”… kind of like a MLP.

The figuring was that these “yieldco” companies, as they bought the solar power plants that were “dropped down” after SunEdison built them and signed long-term contracts for the power, would essentially be a cheap source of financing, because income investors would lap them up. And now, with SUNE sitting on a big ol’ pile of debt and the yieldcos trading with a dividend yield of 10%, there’s no cheap financing to be had and SUNE, now that they can’t roll over financing by selling stuff at a stiff price to the yieldcos, is essentially getting the equivalent of margin calls on the acquisitions they committed to earlier this year.

This is either a horrible time to buy, because there is a substantial risk of the company actually defaulting on debt and having even more serious issues, or a great time to buy because they’ve bottomed out and they do still own a lot of valuable power plants, and will be building more. I haven’t scoured the books, but even the analysts are having trouble modeling the outcome — not unlike Valeant, this is a shocking drop for a stock that was built to please hedge funds, who always believe that more value can be “unlocked” by some new financial structure or strategy, and showed so much strength and momentum just months ago.

SUNE was a $5 billion company a year ago, and (very briefly) a $10 billion company back in July, and now the market cap is under a billion dollars and still falling (well, OK, it’s up a few percent so far today — but do you know what it takes to recover from a 90% drop? That’s right, a gain of 900%… you don’t see those very often).

And they have $10 billion in long-term debt and another $3 billion in the minority interests that presumably represent their holdings in Terra Power and Terra Global, the two yieldcos… which also are worth far less than they were a few months ago. I don’t know if Dr. Kent Moors follows a stop loss strategy with his Energy Advantage newsletter recommendations, but if he does this might be one of those odd cases where a position could have been stopped out at the very moment that the teaser ad is beginning its heavy circulation (if you’re a subscriber, I’d be curious to hear if there was a response to today’s drop — which, unlike the earnings drop a week ago, was not caused by a known-in-advance catalyst)

And yes, if you’re dotting your i’s and crossing your t’s and want to make sure the Thinkolator is right, Google did provide about $145 million of financing for one of SunEdison’s projects, their Kern County solar plant in California that was subsequently dropped down to Terra Power (TERP). Presumably that money is part of the debt SunEdison is carrying on the books, though the debt may have all dropped down to TERP as well. Not sure how they account for debt or if SUNE still has a controlling stake in TERP.

And yes, SUNE does also have about 750 patents, and they claim to have a technology, much as Moors describes, for creating high purity silicon — they think it will let them get module costs down to 40 cents per watt, which would be 10-20% cheaper than what the cheapest high-volume producers in China have been able to do so far… they describe that process, which they call Fluidized Bed Reactor Technology (FBR), in general terms on their website here.

More hype from Moors, in case you’re running low:

“Think of an octopus, an ever-expanding octopus with 750 arms, reaching around the globe, into every country, every utility company, every corporation…

“Every aspect of the rapidly expanding solar sector… and pulling out big fat profits.

“They are so integrated in every phase of solar that they’re bound to expand in direct proportion to the niche itself.

“It is impossible to project how far they could go, because we’ve simply never seen a situation like this before.”

That’s probably true, it’s impossible to project how far they could go — but one possibility, and it’s not a non-trivial possibility given their huge debt service obligations, is that it could go to zero. I don’t know what the covenants are on their debt, if any, but from what I read they can’t currently afford to pay the debt service from their existing cash flow, so something has to give. They either have to find new buyers for their new solar projects, either the yieldcos or someone else (and the yieldcos aren’t in any shape to pay a decent price right now), or they need financing from some other source. With the stock at $3 it is tempting to assume that there is enough value to protect at least a little sliver of equity like that from being wiped out — and there probably is, but the risk is still high when the balance sheet swings so far over to debt. If things do bounce back, or if the fear subsides over SUNE (and some analysts are certainly standing up for them and think the stock should still be well over $10, though even Deutsch Bank, which defended their $28 target a week ago, cut it to $16 this week), then the rise in the share price could be phenomenal… leverage has taken them down so far, but it cuts both ways — if things turn, that leverage could also send them flying higher. There was no mention of “bottom fishing” in the teaser pitch from Dr. Moors, but that’s what you’d be trying to do if you buy SUNE here… sometimes it works, sometimes what you thought was the bottom (like $5 for SUNE last week?) turns out to not be so solid.

Your money, so it’s your call — what do you think? Expecting SUNE to recover? Think they’ll dominate the solar industry with their utility-scale projects and their new FBR process? Let us know with a comment below.

(And yes, I know Dr. Moors also teased a couple other solar picks in this ad — but I’m out of time, I’ll get to them for you tomorrow.)