US-based renewables operator TerraForm Power has made a $1.2 billion offer to buy the whole of Saeta Yield, the Spanish renewables vehicle 48 percent owned by Global Infrastructure Partners and ACS.
The offer for Saeta Yield – equivalent to €12.20 per share, a 20 percent premium to Saeta’s pre-offer share price – will be funded via a $400 million equity offering, which Brookfield has agreed to backstop, as well as $800 million of liquidity. The latter will come from refinancings of TerraForm Power’s unlevered projects and cash released from Saeta’s assets.
The move would see TerraForm Power gain ownership of a 1.1GW solar and wind portfolio, boosting the current generating capacity of its assets by about 40 percent. The projects are predominantly concentrated in Spain, but Saeta has also expanded into Portugal and Uruguay in the past 12 months. Over 80 percent of Saeta’s revenues are backed by Spanish government tariffs with the remaining 20 percent contracted under long-term power-purchase agreements with an average remaining life of 15 years.
The proposal is the first attempt to expand the reach of TerraForm Power since Brookfield completed a $656 million deal for 51 percent of the company in October. The firm’s current 2.6GW portfolio is largely based in the US, where it owns 2.3GW of wind and solar projects. A further 145MW is based in Canada, 102MW in Chile and 11MW in the UK. Brookfield said following the close of the TerraForm Power deal that the vehicle will be its primary tool for acquisitions in North America and Western Europe.
GIP II and ACS each own about 24 percent of Saeta Yield in addition to a 5 percent holding by Morgan Stanley. The group raised €435 million in an IPO in February 2015 at a time when it owned just under 700MW of assets. The company has generated a 15 percent return since its listing, as at its last published results in June.
Saeta Yield in June outlined expansion plans to increase international assets’ revenues from the then 10 percent to almost 40 percent, eyeing further projects in Latin America. TerraForm Power, however, primarily sees the deal as an opportunity to “establish a scale presence in its target Western European market”. Saeta Yield’s projects have an average age of about six years.
TerraForm Power expects the deal to be completed in the second quarter of this year.