SunEdison to acquire Vivint Solar for $2.2 billion
A sizable definitive merger agreement was signed between renewable energy development company SunEdison and residential solar systems provider Vivint Solar for a reported $2.2 billion. But there is more: In connection with SunEdison’s proposed acquisition of Vivint Solar, SunEdison has entered into a definitive purchase agreement with a subsidiary of TerraForm Power which will then acquire Vivint Solar’s rooftop solar portfolio, consisting of 523 MW expected to be installed by year-end 2015, for $922 million in cash (TERP Purchase Agreement).
SunEdison made a few other acquisitions recently, too.
The 523 MW of residential solar projects are expected to provide a 10-year average unlevered CAFD of $81 million and provide a 10-year average levered cash-on-cash yield of 9.5 percent.
“SunEdison’s acquisition of Vivint Solar is a logical next step in the transformation of our platform after the successful execution of our First Wind acquisition in January 2015,” said Ahmad Chatila, SunEdison chief executive officer and TerraForm Power chairman. “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 U.S. and globally. As of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1 gigawatt per quarter.”
In addition, TerraForm Power will acquire future completed residential and small commercial projects from SunEdison’s expanded residential and small commercial (RSC) business unit. The addition of RSC projects and cash available for distribution (CAFD) to TerraForm Power is expected to provide greater visibility and predictability to CAFD growth and dividend per share accretion at TerraForm Power. The rooftop solar portfolio is expected to add a growing, high-quality, long-term contracted and geographically diverse asset base to the SunEdison family of companies, strengthening one of the largest and highest-growth global renewable power platforms in the world.
The Vivint Solar management team will join SunEdison. SunEdison’s existing RSC development business and the Vivint Solar team will be merged. The transaction expands SunEdison’s strong RSC platform and is intended to accelerate SunEdison’s existing business in the United States, United Kingdom and Australia.
“SunEdison and TerraForm Power have built a unique model that recognizes 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,” said Greg Butterfield, Vivint Solar’s chief executive officer. “We are excited to join the SunEdison residential and small commercial team which has successfully developed a wide range of channels complementing those at Vivint Solar, both in the U.S. and globally.”
SunEdison intends to fund the cash portion of the merger consideration primarily from the proceeds of a new $500 million secured debt facility and the completion of the $922 million sale of assets to TerraForm Power. However, completion of the merger with Vivint Solar is not conditioned on consummation of the new debt facility or of any other third-party financing or the completion of the asset purchase by TerraForm Power. If SunEdison were unable to obtain the funding needed to complete the merger at a time when all other conditions to the merger are satisfied, SunEdison could be liable for breach and be subject to customary remedies, including contract damages.
2016 Guidance
Along with this announcement, SunEdison initiated 2016 annual guidance of 4,200 MW to 4,500 MW, a 50 percent increase from its prior outlook of 2,800 MW to 3,000 MW. TerraForm Power is raising its prior 2016 dividend per share guidance of $1.70 to $1.75, a 30 percent year-over-year increase compared to 2015 annual guidance. TerraForm Power is also initiating 2017 dividend per share guidance of $2.05, up from its prior target of $2.00.
