The news yesterday that U.S. renewable energy company SunEdison is to acquire residential solar firm Vivint Solar sent a wave of anticipation cascading through the industry.
The agreement which will combine a payment in shares, cash and debt that held Vivint Solars sale value at 52% more than its Friday share price was leveraged with the use of SunEdison yieldco vehicle TerraForm Power, which will merge with Vivint Solar and purchase $922 million worth of Vivint Solar assets from SunEdison.
The deal is SunEdisons second seismic shopping spree this year following its acquisition of First Wind in February and marks a definitive step into the U.S. residential solar sector. Ash Sharma, senior solar analyst at IHS, told pv magazine that the move spells great news for the industry.
"Competition is healthy, and I believe this move will just add to the potential success of the U.S. residential market," he said.
Those thoughts were echoed by Deutsche Banks Vishal Shah, who remarked in a post-conference call note yesterday that, overall, "we view this as a positive [development] for companies such as SolarCity [which operates in the same space as Vivint Solar] as well as the entire solar sector. We also expect SolarEdge to be a beneficiary of this transaction as it likely accelerates the ongoing migration from Enphase to SolarEdge products at Vivint Solar."
Indeed, SolarCity CEO Lyndon Rive had already expressed his happiness at the deal, remarking yesterday: Vivint Solar hasnt invested at all in policy it was disappointing. Solar is a disruptive technology, we are fighting the monopolies all the time and we need the entire industry support."
On yesterdays SunEdison conference call, held following the announcement, company CEO Ahmad Chatila said that the acquisition gives SunEdison "unabated growth" and huge bandwidth to expand in the U.S. for the next 20 years.
The terms of the deal see Goldman Sachs lending SunEdison and TerraForm $1.46 billion to finance it, with Vivint Solar shareholders to receive $16.50 per share a significant price point above the companys Friday closing price of $10.88 a share. Following the announcement of the deal, Vivint Solars stock rose 40% in morning trading in the U.S. Shares of SolarCity rose by 8.4%.
Yieldco in action
TerraForm Powers involvement as the yieldco in the deal made the acquisition possible, and is a signal of the solar industrys maturing financial landscape. The clean energy company will raise $800 million through the sale of bonds for the deal, and is seeking as much as $1.19 billion in an initial public offering (IPO), the company confirmed on Monday.
"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," said Vivint Solar CEO Greg Butterfield on yesterdays conference call.
This injection of SunEdisons might into the U.S. residential solar market will accelerate its development. In Q1 2015, the Solar Energy Industries Association (SEIA) revealed that 437 MW of solar PV capacity was added across the U.S. residential rooftop sector a 76% year-over-year increase and a sign of a transitioning market that has been led by SolarCity, Vivint Solar and Sunruns financing and installation models.
An estimated three million new rooftop PV systems are expected to be deployed across the U.S. over the next five years, and to capture this growth companies are seeking ways to raise large funds in order to offer attractive finance models and aggressive marketing campaigns to would-be customers.
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