TerraForm Power has signed off on an agreement with AltaGas that will see TerraForm acquire a high-quality, unlevered distributed generation platform with up to 320MW of capacity in the US. The total purchase price for the DG assets was US$720 million.
AltaGas’ portfolio includes 291MW of commercial and industrial solar assets, 21MW of residential solar assets and 10MW of fuel cells. These assets are diversified across 20 states and in the District of Columbia and with over 100 commercial and industrial customers and feature an average age of 3.5 years.
TerraForm Power’s plan is to extract incremental value from the portfolio by cross-selling additional products such as storage and backup generation to its commercial and industrial base, along with cutting operating and maintenance costs by leveraging the scale of what will be a combined 750MW distributed generation portfolio.
John Stinebaugh, CEO of TerraForm Power, said: “Following the close of this transaction, TerraForm Power is expected to own one of the largest portfolios of distributed generation in the United States. The acquisition will increase TerraForm Power’s average contract duration to 14 years and enhance its resource diversity. Furthermore, this demonstrates our strategy of recycling capital from stabilized assets with limited opportunities for further value creation into newly acquired assets that meet our return targets and have commercial and operational upside that we can extract through our integrated operating platform.”
TerraForm Power plans to initially fund this acquisition deal with a US$475 million bridge facility. Permanent financing is expected to be comprised of US$475 million of project-level debt on this unlevered portfolio that is sized to investment grade metrics and proceeds of US$245 million from the sale of minority interests in identified North American wind assets.