The $2 billion acquisition calls for the immediate acquisition of 460 MW with the remaining 470 MW to be acquired by a new asset warehouse to be sponsored by SunEdison and third-party equity investors. The companies anticipate closing by the fourth quarter.
Under the deal, TerraForm would acquire a majority stake in six wind farms in the U.S. and Canada. The 460 MW comprise the following: the 196 MW California Ridge in Illinois the 187 MW Rattlesnake (Texas) and Raleigh, a 78 MW wind farm in Ontario.
The wind farms included in the forthcoming 470 MW asset warehouse include the 190 MW Bishop Hill (Illinois) and Prairie Breeze I, II and III (Nebraska).
According to Invenergy, the wind farms have a weighted-average remaining contract life of 19 years and an average counterparty credit rating of AA. Invenergy will retain a 9.9% stake in the U.S. assets and will provide certain operation and maintenance services for these power plants.
Morgan Stanley acted as lead financial advisor to TerraForm Power. Citi served as joint financial advisor and also acted as lead financing structuring agent. Goldman Sachs acted as exclusive financial advisor to Invenergy. Orrick acted as lead legal counsel to TerraForm Power.
For Invenergy, the deal marks its largest-ever sale of assets and was driven by market opportunities relating to the window for production tax credit (PTC) eligibility, says Jim Murphy, Invenergy's chief financial officer and operating group vice president.Â Â
‘This is a capital-intensive business, and we were looking for additional capital for business opportunities in the 2015 and 2016 time frame for the PTC,’ Murphy explains. ‘We observed the dynamics in the marketplace and saw a new class of investors – the yieldcos.’
Ryan Moody, North American market analyst at MAKE Consulting, is bullish on the deal.
‘This is likely a positive situation for Invenergy judging roughly by the average dollar per megawatt of the deal and given that they can potentially achieve higher margins on development than asset operation.’
For its part, Invenergy says it will use the proceeds to fuel acquisitions and fund new project development.
Murphy was pleased that Invenergy still retains a small stake in the projects. Partial ownership, he says, ‘aids us in the development of new projects.’
The deal marks the latest in a flurry of activity for SunEdison. On July 2, SunEdison signed a long-term deal with Gamesa to co-develop up to 1 GW of installed capacity by 2018.
‘SunEdison secures wind assets with proven track records and long-term power contracts for reliable cashflows for distribution,’ Moody says. ‘This transaction will satisfy investors in the company's yieldco and continues SunEdison's impressive and unprecedented advance across global wind power markets.’