Today SunEdison and its TerraForm Power YieldCo subsidiary announced plans to acquire Vivint Solar in a $2.2 billion deal. The deal will help SunEdison become one of the biggest—not just renewable energy companies—but one of the biggest energy companies in the U.S., according to Greentech Media.
The news spurred Bloomberg call it a supermajor of the solar industry and noted that the company is purchasing Vivint Solar at a 52 percent premium compared to its closing stock price last week. The company is financing the deal with Goldman Sachs Group credit lines. It’s also selling $922 million in assets to TerraForm Power Inc.
“SunEdison Chief Executive Office Ahmad Chatila has been on a buying spree this year, snapping up wind, solar and hydroelectric assets around the globe. Vivint, the second biggest U.S. residential and commercial developer, will provide SunEdison and TerraForm with a U.S. growth engine that’s taking advantage of declining costs of solar energy,” Bloomberg reported.
"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."
Under terms of the announced deal TerraForm Power will acquire Vivint Solar’s 523 megawatts of rooftop solar, with a cash flow of $81 million netting a predictable 9.5 percent interest rate on average for 10 years. With the new deal both SunEdison and TerraForm Power upped their guidance for 2016 significantly. Under the new guidance SunEdison plans to have 4,200 megawatts to 4,500 megawatts in 2016. TerraForm upped its earnings guidance from $1.70 to $1.75 from 90 cents per share when TerraForm went public last year. It’s targeting earnings guidance of $2.05 per share in 2017.
TerraForm Power will acquire future completed residential and small commercial projects from SunEdison's expanded residential and small commercial (RSC) business unit under the agreement. Also, Vivint Solar’s management team will join SunEdison RSC unit to help expand its platform and grow SunEdison's business in the United States, United Kingdom and Australia.
"This transaction with SunEdison delivers to Vivint Solar's stockholders excellent value for the business we have built over the last four years," said Greg Butterfield, Vivint Solar's chief executive officer. "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. 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."Tweet