San Francisco — In a surprising diversification move, SunEdison has launched into the wind sector and positioned itself to be the world’s largest renewable energy development company. Yesterday morning, SunEdison announced that it is joining with its indirect subsidiary TerraForm Power to purchase First Wind for US $2.4 billion, in a “very complex but very value added deal,” said Ahmad Chatila, the president and chief executive officer of SunEdison, based in Maryland Heights, Mo.
Based in Boston, First Wind is operating or building renewable energy projects in the Northeast, the West and Hawaii, with combined capacity of nearly 1.3 GW. The company had done some $7 billion worth of financing transactions prior to today’s deal. TerraForm Power is an indirect subsidiary of SunEdison that owns and operates clean power generation assets acquired from SunEdison and other international energy providers.
“For SunEdison, it adds 1.8 GW to our 2.9 GW backlog, it adds 8 GW to our 36 GW of opportunities, and it allows us to increase installation levels in 2015 to 2.2 GW from 1.7 GW,” Chatila said in a conference call this morning. “In 2016/17, it makes us 30 percent larger; but the most powerful result of the deal is the combined platform of SunEdison and TerraForm,” he said. The deal is expected to close during the first quarter of 2015.
As part of the purchase, TerraForm, based in Beltsville, MD, acquires 521 MW of operating wind and solar power plants, increasing the generation capacity of its operating portfolio by more than 50 percent, and providing greater geographic diversity in Maine, New York, Hawaii, Vermont and Massachusetts. The deal also provides TerraForm with $72.5 million in cash available for distribution. TerraForm Power also adds 1.6 GW to its list of call right projects scheduled for 2016-2017. TerraForm’s call right project list with SunEdison will double to 3.2 GW of solar and wind.
“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,” said Chatila.
Financing for the $2.4 billion deal included bridge financing to fund the transaction including $1.5 billion of non-recourse capital secured from six global banking institutions and First Reserve Infrastructure. As part of its upfront payment of $1.9 billion, SunEdison will issue a $340 million seller note. SunEdison will also pay $510 million through an earn-out as it completes wind projects.
The involved financial entities read like a Who’s Who for renewable energy finance. Morgan Stanley acted as lead financial advisor and provided a fairness opinion to SunEdison. Barclays acted as co-advisor to SunEdison and lead structuring agent on the financing. BofA Merrill Lynch acted as lead financial advisor to TerraForm in connection with the First Wind acquisition and lead structuring agent on the drop down warehouse credit facility. Citi acted as co-advisor to TerraForm. Lazard provided a fairness opinion to the Corporate Governance Committee of the TerraForm Board of Directors. Goldman Sachs acted as exclusive financial advisor to First Wind. And Marathon Capital acted as advisor to First Wind’s Board of Directors.
Lead image: Wind and Solar via Shutterstock