SunEdison and TerraForm turn to wind generation in US$2.4 billion deal

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Major PV energy provider SunEdison and its yield co, TerraForm Power, have made a surprise entry into the wind generation market with a US$2.4 billion deal to purchase US-based First Wind.

As a result, SunEdison said it was raising its 2015 project installation guidance from a range of 1.6GW to 1.8GW to 2.1GW to 2.3GW and automatically acquired over 1.6GW of pipeline and backlog projects in the wind sector and an 8GW increase of total pipeline opportunities. 

“The acquisition of First Wind transforms both SunEdison and TerraForm Power into diversified renewable energy companies and will make SunEdison the leading renewable power plant developer in the world,” said Ahmad Chatila, President and Chief Executive Officer of SunEdison. “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.”

According to SunEdison the deal would also mean that the First Wind acquisition establishes TerraForm Power as a major asset owner in the wind energy market.

With respect to financial details, SunEdison said that the US$2.4 billion acquisition would be funded by bridge financing, comprised of US$1.9 billion in upfront consideration and a US$510 million in earn-out.

Upfront, SunEdison plans to issue a US$340 million seller note, while the earn-out would be paid on the completion of a number projects in First Wind's pipeline backlog. TerraForm Power however would acquire First Wind's operating portfolio for an enterprise value of US$862 million.

A US$1.5 billion non-recourse warehouse financing facility is to be established by SunEdison for projects that are expected to be dropped down into the TerraForm YieldCo. 

The deal also means that TerraForm acquires 521MW of contracted wind generation assets from First Wind and adds 1.6GW to its list of call right projects scheduled for drop down in 2016-2017. The acquisition was said to increase the generation capacity of TerraForm’s operating portfolio by more than 50%. The deal also includes 21MW of solar power assets.

Paul Gaynor, Chief Executive Officer of First Wind said: “This new strategic organization will allow us to join with SunEdison to develop and invest in new, long-term-contracted, well-sited and well-run renewable energy projects that deliver clean energy to homes and businesses across the country and internationally. We will be able to leverage our strength in development and operations, proven during the completion of 1.5 GW of wind projects over eight years, with two world-class companies.”

The transaction is expected to close during the first quarter of 2015.

First Wind is a private company with 1.3GW of renewable energy projects under various forms of development. However, low cost finance provided by SunEdison and Terraform would enable faster construction and higher potential project yields than otherwise expected if the company remained an independent developer and owner operator. First Wind's main wind assets are in Maine, New York, Hawaii, Vermont and Massachusetts.

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