SunEdison, Inc., the world’s largest renewable energy development company, and its yieldco TerraForm Power announced that TerraForm has signed a definitive agreement to acquire net ownership of 930 megawatt (MW) of wind power plants from Invenergy Wind LLC , the largest independent wind owner in the United States.
This acquisition is expected to add a sizeable, high-quality contracted power plant portfolio to the TerraForm Power and SunEdison family of companies, strengthening one of the largest and highest growth renewable power platforms in North America.
TerraForm Power intends to acquire net ownership of 460 MW of the wind power plants from Invenergy with the remaining 470 MW to be acquired by a new warehouse facility, for a combined $2.0 billion in aggregate consideration.
The acquired portfolio is comprised of seven contracted wind farms located in the United States and Canada. The assets have a weighted average remaining contract life of 19 years and an average counterparty credit rating of AA.
TerraForm took the opportunity to raise its prior 2016 dividend per share target of $1.53 to $1.70, a 26% year-over-year increase compared to 2015 annual guidance.
Invenergy will retain a 9.9 percent stake in the U.S. assets and will provide certain operation and maintenance services for these power plants.
The continuing partnership with Invenergy is expected to provide significant opportunities for future collaboration and growth. Invenergy is North America’s largest independent wind power generation company, and its portfolio of clean power projects includes operating facilities totaling approximately 6.6 gigawatts (GW), with another 2.5 GW under construction or contract. This transaction represents the transfer of approximately one-tenth of Invenergy’s total contracted portfolio.
“TerraForm Power’s acquisition of the Invenergy wind plants leverages the power of SunEdison’s platform which was enhanced with our acquisition of First Wind in January of 2015,” said Ahmad Chatila, SunEdison chief executive officer and TerraForm Power chairman. “The Invenergy transaction creates significant value for our shareholders through the accretion in our TerraForm Power ownership and the acceleration of our Incentive Distribution Rights (IDRs). Together with TerraForm Power, SunEdison’s development platform will change how energy is generated, distributed and owned around the world.”
“As an independent, privately-held company, this transaction is consistent with how we finance growth in our capital-intensive industry and reflects the strength of Invenergy’s business model,” said Jim Murphy, Invenergy chief financial officer and operating business group president. “Market interest in these wind projects was strong, reflecting the quality of these renewable energy assets, all of which have long-term power sale contracts.”
TerraForm expects to finance the direct acquisition of the 460 MW through a combination of cash on hand and new bond financing. TerraForm Power will also assume approximately $450 million in non-recourse project debt. These initial drop downs are expected to provide average CAFD of $71 million annually over the next 10 years. CAFD is “cash available for distribution”. Yieldcos such as TerraForm Power are bundles of renewable and/or conventional long-term contracted operating assets that generate predictable cash flows.
Building on the success of TerraForm Private (the first operating asset warehouse facility that TerraForm Power and SunEdison created for the Atlantic Power assets), the companies anticipate that the remaining 470 MW will be acquired by a new warehouse facility to be sponsored by SunEdison and third party equity investors, with assets dropping down to TerraForm Power in the future. The wind farms intended for the warehouse are expected to generate average unlevered CAFD of $70 million annually over the next 10 years.
Approvals and Timing
The companies anticipate closing by the fourth quarter of 2015.
Completion of the transaction is conditioned upon approval by the Federal Energy Regulatory Commission and the Public Utility Commission of Texas. The transaction is subject to the notification and reporting requirements under the Hart-Scott-Rodino Act and other customary closing conditions.
ST Staff Writers
This post was prepared by Solar Thermal Magazine staff.