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TerraForm played down the impact of the chapter 11 filing by SunEdison buts its original S-1 filing warned of risks. Source: SunEdison.

TerraForm played down the impact of the chapter 11 filing by SunEdison buts its original S-1 filing warned of risks. Source: SunEdison.

TerraForm Power has moved to allay fears that it could become entangled in SunEdison’s chapter 11 bankruptcy proceedings, however, its original IPO filing warned of the risks of losing its sponsor.

In an SEC filing posted on Thursday, the yieldco reiterated that it and sister-company TerraForm Global were separate entities and that none of its “significant” power purchase agreements with the offtakers of its projects included a break provision in the event of bankruptcy at SunEdison.

“TerraForm Power and its sister company, TerraForm Global, Inc. (NASDAQ:GLBL), are not part of the SunEdison bankruptcy filing and have no plans to file for bankruptcy themselves,” the statement said. “TerraForm Power and TerraForm Global are publicly listed companies that are separate legal entities and are traded separately on Nasdaq. The equity interests of TerraForm Power and TerraForm Global in their respective wind and solar power plants that are legally owned by their respective subsidiaries are not available to satisfy the claims of creditors of SunEdison.

“While TerraForm Power’s relevant review remains ongoing, the Company has not identified any significant power purchase agreement that includes a provision that would permit the offtake counterparty to terminate the agreement in the event of a SunEdison bankruptcy.”

Challenges

While immediate financial implications would appear not to be a concern for TerraForm, it has acknowledged potential challenges in its day to day running.

“TerraForm Power believes that it has sufficient liquidity to operate its business. Although SunEdison’s bankruptcy will present challenges, TerraForm Power expects to continue to operate in the ordinary course and to meet its financial obligations on a timely basis.

“SunEdison has been, and is expected to continue to be, an important partner for TerraForm Power, as SunEdison affiliates provide asset management and operations and maintenance (O&M) services to many of TerraForm Power’s power plants. TerraForm Power anticipates that SunEdison will continue to provide these asset management and O&M services for TerraForm Power’s power plants following the filing.”

It also said it expects “that SunEdison generally will continue to fulfill its obligations to provide corporate level support to TerraForm Power”.

A larger potential risk for TerraForm could come from SunEdison’s role as a guarantor of project debt financing but the yieldco said any defaults arising from SunEdison’s filing were “curable”.

“TerraForm Power will work with its project lenders to obtain waivers and/or forbearance agreements as it seeks to cure such defaults, however no assurances can be given that such waivers and/or forbearance agreements will be obtained,” it said.

Agreements

In TerraForm Power’s oroginal S-1 IPO filing, it warned of the risks of losing SunEdison as its management services provider.

“If our Sponsor terminates the Management Services Agreement or defaults in the performance of its obligations under the agreement, we may be unable to contract with a substitute service provider on similar terms or at all, and the costs of substituting service providers may be substantial. In addition, in light of our Sponsor’s familiarity with our assets, a substitute service provider may not be able to provide the same level of service due to lack of pre-existing synergies. If we cannot locate a service provider that is able to provide us with substantially similar services as our Sponsor does under the Management Services Agreement on similar terms, it would likely have a material adverse effect on our business, financial condition, results of operation and cash flows.”

Under the terms of the agreement, TerraForm, or SunEdison, can cancel the Management Services Agreement, the Licencing agreement and a deal that sees SunEdison make the interest payments of TerraForm’s term loan, with 30 days notice following bankruptcy.

Tags: sunedison, terraform, terraform power, us, usa, finance

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