SunEdison, TerraForm Power pay $2.2bn for Vivint Solar

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Leading U.S. renewable energy company SunEdison has today revealed that it has signed a deal to acquire residential solar company Vivint Solar for $2.2 billion via a definitive merger agreement with yieldco, TerraForm Power.

The proposed acquisition of Vivint Solar by SunEdison will see its subsidiary TerraForm Power acquire Vivint Solar’s 523 MW rooftop solar PV portfolio for around $922 million from SunEdison. TerraForm Power owns and operates solar power plants across the U.S., and expects the Vivint Solar portfolio to provide a 10-year average unlevered CAFD (cash available for distribution) of $81 million, and a further cash-on-cash yield of 9.5%.

All future completed residential and small commercial solar projects conducted by SunEdison’s expanded residential and small commercial unit (RSC) will also be acquired by TerraForm Power. This additional spending power will be steered towards expanding TerraForm Power’s rooftop solar portfolio across the U.S., and will enable the company to offer long-term contracts and a diverse asset base that will benefit the U.S. residential and small commercial solar industry.

IHS senior director for solar research told pv magazine that he is not at all surprised to see SunEdison continue its push into residential solar. "It seems like a wise move to try to diversify away from utility-scale solar in the U.S., which has a very uncertain future. Residential solar on the other hand, looks much more likely to be viable post-ITC in the US.," the analyst said.

"I would expect SunEdison to be successful in the sector – it already has a solid brand in the U.S. solar industry, coupled with a secure supply chain, access to low-cost capital and now a large portfolio and pipeline of residential solar projects."

Team reshuffle

SunEdison will welcome Vivint Solar’s management team, and will merge the rest of its team with SunEdison’s existing RSC team, expanding it to enable greater international growth to the U.K. and Australia, and wider coverage of the U.S. residential market.

Ahmad Chatila, SunEdison CEO and chairman of TerraForm Power, called the acquisition the next logical step in the company’s expanding platform, particularly following the acquisition at the beginning of the year of First Wind.

"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 bandwitdth to grow our residential business in the U.S. and globally."

Chatila added that organic growth and recent acquisitions – Vivint Solar included – will put the company on track to deploy in excess of 1 GW of solar PV per quarter.

Recent data from GTM Research revealed that Vivint Solar owns 11% market share of the U.S. residential solar sector, second behind SolarCity, which controls 34% of the growing market. For Vivint Solar CEO Greg Butterfield, the transaction represents an unprecedented opportunity to expand and capture a greater share of the market.

"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," Butterfield said.

Carlos Domenech, CEO of TerraForm Power, added: "Vivint Solar’s profile of cash available for distribution is attractive and aligned with TerraForm’s growth profile, and the team has proven its ability to scale rapidly and successfully."

Following the announcement, SunEdison revised upwards its 2016 annual guidance from 4.2 GW to 4.5 GW, while TerraForm Power raised its 2016 dividend per share guidance from $1.70 to $1.75 – a 30% year-over-year increase compared to 2015 annual guidance.