TerraForm Power, Inc. (Nasdaq:TERP), a global owner and operator of renewable energy power plants, today announced that it will acquire 77.6 MW DC of distributed generation solar power plants from the Capital Dynamics U.S. Solar Energy Fund, L.P. (the “Fund”), a closed-end private equity fund focused on solar energy across the U.S.
The distributed generation assets acquired from the Fund will further enhance the diversity and quality of TerraForm Power’s portfolio. The 39 solar power plants in the acquired portfolio are located in five U.S. states including California,Massachusetts, New Jersey, New York and Pennsylvania. The portfolio’s power purchase agreements have a weighted average remaining contract life of 19 years with a weighted average credit rating of A3/A-.
“This transaction demonstrates TerraForm Power’s momentum in delivering on our growth strategy and our ability to execute third-party acquisitions,” said Carlos Domenech, Chief Executive Officer of TerraForm Power. “These high quality assets are expected to provide TerraForm Power with an attractive levered cash-on-cash return of approximately 9% while adding further geographic and cash flow diversification. The transaction continues to cement our leadership position in the fragmented distributed generation marketplace.”
Mr. Domenech continued, “Today’s announcement underscores TerraForm Power’s ability to work with world-class partners in acquiring high quality portfolios. It also demonstrates TerraForm’s scalable capabilities in underwriting and managing large portfolios of power plants.”
Upon closing, the transaction is expected to provide approximately $21 million in unlevered Cash Available for Distribution in the 12-month period following the transaction closing. The transaction will be immediately accretive to CAFD per share.
TerraForm Power will pay $250 million in aggregate consideration to acquire the unlevered portfolio. The acquisition is expected to be funded through committed debt financing including an increase in TerraForm Power’s existing term loan facility by $275 million. Concurrent with this transaction, TerraForm Power will also increase the size of its existing revolving credit facility to $215 million. TerraForm Power expects that these capital increases will also fully fund the previously announced Hudson Energy acquisition.
“The increase in our secured revolving credit facility highlights TerraForm Power’s strong financial position,” said Alex Hernandez, TerraForm Power’s Chief Financial Officer. “This expanded facility, provided by our bank group, gives us a flexible capital source and additional liquidity to execute our growth strategy.”
The transaction is expected to close in the fourth quarter of 2014, subject to regulatory approvals and customary closing conditions.
Barclays and JP Morgan acted as exclusive financial advisors to TerraForm Power.