SunEdison, Inc., and TerraForm Power, Inc., have signed a definitive agreement to acquire First Wind, one of the leading developers, owners and operators of wind projects in the US. With the purchase, SunEdison is poised to become the leading global renewable energy development company.
The transaction is immediately accretive to TerraForm Power and is expected to deliver $72.5 million in unlevered cash available for distribution (“CAFD”) in 2015. Pro forma for the transaction, TerraForm Power raises its 2015 CAFD guidance to $214 million and 2015 dividend guidance to $1.30 per share, a 44% increase over its current $0.90 dividend rate. The transaction is expected to close during the first quarter of 2015, subject to usual and customary conditions and regulatory approvals.
Through the acquisition, SunEdison expects to accelerate the rate of project development and realize significant synergies and growth opportunities by integrating First Wind’s wind platform into its own global project development and finance platform.
“The acquisition of First Wind transforms both SunEdison and TerraForm Power into diversified renewable energy companies and will make SunEdison the leading renewable power plant developer in the world,” said Ahmad Chatila, president and CEO of SunEdison, a leading global solar developer. “By bringing together First Wind’s proven development and operational capabilities — and SunEdison’s global corporate infrastructure and renewable energy development and finance experience — we will be well-positioned to capitalize on the significant growth opportunities in the global wind power markets and drive returns to shareholders of both SunEdison and TerraForm Power.”
Paul Gaynor, CEO of First Wind, said the new strategic organization will allow enable the development and investment in new, long-term-contracted, well-sited and well-run renewable energy projects that deliver clean energy to homes and businesses across the country and internationally. “We will be able to leverage our strength in development and operations, proven during the completion of 1.5 GW of wind projects over eight years, with two world-class companies,” he stated.
Likewise, for TerraForm — a global owner and operator of renewable energy power plants — the acquisition establishes the company as a leading asset owner in the wind energy. “We are adding significant CAFD through a transaction with a greater than 9% levered cash-on-cash yield, increasing our dividend by 44% and expanding the potential drivers of our long-term growth,” said Carlos Domenech, president and CEO of TerraForm Power.
Following are key terms of the deal:
- SunEdison will purchase more than 1.6 GW of pipeline and backlog projects, which have been added to TerraForm Power’s call right project list and are expected to be operational in 2016-2017. Included in the transaction is an additional 6.4 GW of project development opportunities.
- TerraForm Power acquires 521 MW of contracted wind generation assets from First Wind and adds 1.6 GW to its list of call right projects scheduled for drop down in 2016-2017. The acquisition increases the generation capacity of TerraForm Power’s operating portfolio by more than 50% and provides further geographic diversity in Maine, New York, Hawaii, Vermont and Massachusetts. In addition, subsequent to the acquisition, TerraForm Power’s call right project list with SunEdison will double to 3.2 GW of solar and wind projects.
- Total consideration for the acquisition of First Wind is up to $2.4 billion, comprising $1.9 billion in upfront consideration and a $510 million earn-out. SunEdison’s portion of the total consideration is $1.5 billion, which entails an upfront consideration of $1.0 billion and the earn-out. As part of its upfront consideration, SunEdison will issue a $340 million seller note. The earn-out will be payable by SunEdison subject to completion of certain projects in First Wind’s backlog. TerraForm Power will acquire First Wind’s operating portfolio for an enterprise value of $862 million.
- Concurrently, SunEdison will put in place a $1.5 billion non-recourse warehouse financing facility, for projects expected to be dropped down into TerraForm, which will provide certainty of financing for the Company to complete the build-out of its backlog and pipeline projects, including those acquired from First Wind. SunEdison has raised its 2015 project installation guidance from 1.6-1.8 GW to 2.1-2.3 GW.
TerraForm Power and SunEdison have secured fully committed bridge financing to support the aggregate First Wind transaction consideration, refinance TerraForm Power’s existing indebtedness, and fund future growth through the drop down warehouse facility.
SunEdison shareholders are expected to benefit from increased project development cash flow, asset management revenues, and dividend payments from TerraForm Power. The transaction also will accelerate the timing and enhance the visibility of SunEdison’s receipt of incentive distribution rights (“IDRs”) from TerraForm Power, and increase the value of SunEdison’s yieldco platform.