TerraForm Power, an owner and operator of clean energy power plants and a yieldco of renewable energy developer SunEdison, has agreed to acquire seven contracted wind farms in the US and Canada with a generating capacity of 930 megawatts (MW) from Invenergy for $2 billion.
TerraForm intends to directly acquire 460MW from Invenergy, a US owner, developer and operator of clean energy projects, through a combination of cash on hand and bond financing. It will also assume approximately $450 million in non-recourse project debt. The remaining 470MW will be acquired through a new warehouse facility sponsored by SunEdison, TerraForm’s parent company, and third-party equity investors.
SunEdison has used the warehouse facility as a financing tool before. It did so most recently, at the end of June, forming the TerraForm Private Warehouse to hold the operating assets acquired from Atlantic Power.
TerraForm Private Warehouse is $525 million in aggregate size, with equity provided by Macquarie Capital, John Hancock, and SunEdison. Morgan Stanley, Citi, and Goldman Sachs led the structuring of TerraForm Private Warehouse and provided debt in the form of a seven-year term loan.
The assets acquired from Atlantic Power can be warehoused for a maximum period of seven years, while TerraForm Power has an exclusive call right over these assets, the firms said in a press release.
SunEdison and TerraForm did not provide details regarding the maximum period the Invenergy assets could be warehoused other than to say that the assets would be “dropping down to TerraForm Power in the future.” Neither company had responded to requests for comment at the time of writing.
“This transaction is expected to be immediately accretive to our shareholders, extend the visibility of our growth trajectory and unlock significant value as we aggregate a highly fragmented industry,” TerraForm chief executive Carlos Domenech said.
In addition to announcing the transaction, TerraForm also said it would be raising its prior 2016 dividend target of $1.53 to 2016 dividend per share (DPS) guidance of $1.70, a 26 percent year-on-year increase compared to 2015 annual guidance.
“TerraForm Power is also updating its long-term DPS growth target to a 20 percent CAGR [compound annual growth rate] from its current first quarter dividend, driven by the increased visibility and growth provided by this transaction,” the company said.
The transaction will enable Invenergy, which will retain a 9.9 percent stake in the US assets and will provide certain operation and maintenance services for those power plants, to further invest in its development pipeline.
Invenergy’s portfolio includes operating facilities totalling approximately 6.6 gigawatts (GW), with another 2.5GW under construction or contract. This transaction represents about one-tenth of Invenergy’s total contracted portfolio, according to the statement. The acquired assets have an average remaining contract life of 19 years and an average counterparty credit rating of AA, SunEdison and TerraForm said.
The companies expect the transaction to close in the fourth quarter of 2015.
Morgan Stanley served as lead financial advisor to TerraForm Power, while Citi served as joint financial advisor and also acted as lead financing structuring agent. Goldman Sachs acted as exclusive financial advisor to Invenergy.