Brazil-based Renova’s Partnership with SunEdison Shows Shift in Strategy

Sao Paolo, Brazil — Instead of owning and operating power plants, which deliver long-term, steady revenue streams, Renova Energia SA’s Thursday deal to sell assets to TerraForm Global Inc., a newly formed unit of U.S. developer SunEdison Inc., is the first step toward selling all its operating assets, according to a person involved in the deal who asked not to be identified because the plans are private.

The shift means Renova will receive payments when it finishes building projects, capital it can direct back into developing more power plants. It will also give Renova more financing options, making it better able to take advantage of opportunities for project development, the person said.

Thursday’s agreement initially covers 1.6 billion reais ($534 million) of assets including 336.2 megawatts in hydroelectric plants and wind parks. Renova has the option to receive cash or TerraForm Global shares, the Brazilian company said in a regulatory filing.

The agreement gives SunEdison the right to buy 1,870 megawatts of other Renova projects, according to SunEdison’s statement. SunEdison also signed a letter of intent to buy a 16 percent stake in Renova.

Yieldco Plan

TerraForm Global is structured as a so-called yieldco, a unit that owns and operates completed power plants. It’s the second such company formed by SunEdison. TerraForm Power Inc. began trading publicly in July. The new entity will focus on power plants in emerging markets.

SunEdison announced Thursday the purchase of 757 megawatts of wind, solar and hydro assets in developing nations, including Brazil, Peru, South Africa and Uruguay, as well as rights to buy other projects with 1,918 megawatts of capacity.

The deals with Renova are conditional on TerraForm Global’s initial public offering, which is seeking to raise as much as $700 million, Maryland Heights, Missouri-based SunEdison said in a filing Thursday.

“The move allows access to competitive capital,” said Mathias Becker, Renova’s president, said during an earnings conference call Thursday. “Brazil’s credit market is shy now.”

Renova, based in Sao Paulo, has about 800 megawatts of power plants that are already generating energy and 1.7 gigawatts of plants in different stages of development. Renova will also have a share in TerraForm Global, which is still being evaluated, said the person.

Copyright 2015 Bloomberg

Lead image: Brazil. Credit: Shutterstock



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