PV developer SunEdison and its yieldco, TerraForm Power, are to acquire US residential PV provider Vivint Solar for around US$2.2 billion.
Under the proposed deal, which will be payable in a combination of cash, SunEdison common stock shares and convertible notes, a TerraForm Power subsidiary will acquire Vivint Solar's US$922 million rooftop solar portfolio, which includes 523MW of capacity expected to be complete by the end of this year.
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The 523MW of residential solar projects are expected to provide a ten-year average unlevered Cash available for Distribution (CAFD) of US$81 million, and provide a ten-year average levered cash-on-cash yield of 9.5%.
TerraForm Power will also acquire future residential and small-scale commercial projects from SunEdison’s expanded residential and small commercial (RSC) business arm.
Vivint Solar’s management team will join SunEdison. Meanwhile, SunEdison's existing RSC development business and the Vivint Solar team will be merged.
SunEdison said that the transaction is intended to accelerate its existing business in the US, UK and Australia.
Ahmad Chatila, SunEdison chief executive officer and TerraForm Power chairman, said: “We expect the Vivint Solar transaction to create significant value for our stockholders through the accretion in our TerraForm Power ownership, the acceleration of our Incentive Distribution Rights and an immediate expansion of our capacity and bandwidth to grow our residential business in the US and globally.
“As of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1GW per quarter.”
Greg Butterfield, Vivint Solar's chief executive officer, said: “SunEdison and TerraForm Power have built a unique model that recognises the value of long-term, predictable, contracted cash flows from our residential solar portfolio while providing access to a broad pool of financing at an attractive cost of capital.”
To support the transaction, SunEdison has entered into a commitment letter with Goldman Sachs Bank USA for a US$500 million secured term loan facility to be provided to a wholly-owned, indirect subsidiary of SunEdison which will hold certain development assets of the expanded SunEdison RSC platform after the merger with Vivint Solar.
Meanwhile TerraForm Power has entered into a debt commitment letter with Goldman Sachs Bank USA for a US$960 million unsecured bridge facility.
SunEdison also revised its guidance for the delivery of 4.2 to 4.5GW in 2016, up 50% year-on-year from its previous 2016 guidance of 2.8 to 3GW.