TerraForm Power gives January deadline for bids, warns shareholders about its ability to continue


Yieldco TerraForm Power has made it clear for some time that it is up for sale, and there has been no shortage of companies that wish to fill the shoes of SunEdison as sponsor and/or buy out the yieldco.

And despite public offers by D.E. Shaw, Brookfield and Appaloosa, to date there has been little response from TerraForm as to which if any of the offers it will select, while it has allowed the offer of an expedited buy-out by Brookfield and Appaloosa to lapse.

However, today the owner of 3 GW of wind and solar assets has at least told us when it expects to make a decision. In a statement accompanying the filing of TerraForm’s long-overdue 10-K with financial regulators, the yieldco stated that it is asking bidders to provide firm pricing “by a defined date in early January 2017, with binding bids due shortly thereafter”.

The company says that it will then consider the bids, and if appropriate share them with shareholders. Apparently the first offer of a Brookfield/Appaloosa buyout did not make the cut, as it did not formally engage with Brookfield by November 21. However, Brookfield has now entered into a confidentiality agreement with TerraFrom, under which it will participate in the yieldco’s strategic review process.

These developments are the biggest news from TerraForm, but the filing of the accompanying form is also important. Both TerraForm Power and Global have been repeatedly threatened with de-listing from the NASDAQ stock exchange for the delay in filing their 10-K forms for 2015, with the two yieldcos blaming the mess of their finances cause by the collapse and bankruptcy of SunEdison.

And while the filing is progress for TerraForm, the details paint a picture of a struggling company. TerraForm brought in US$470 million in revenue in 2015, but reported losses of $208 million, $156 million of which came in the fourth quarter alone.

The source of these losses is harder to pin down, as the company had increases in several expense lines which well exceeded the scale of its revenue growth. In particular, the wind projects which the company acquired following SunEdison’s purchase of First Wind have brought in fewer revenues and higher operating expenses than the company’s solar projects.

General and administrative expenses also shot up, in part due to litigation. Finally, depreciation, accretion and amortization expenses for projects which the company acquired also increased.

If anything, these depressing financials for 2015 put TerraForm’s expectations of continued losses in 2016 into perspective, as the yieldco expects to only lose $105-$145 million on $664-679 million in revenue.

And it could still get worse. TerraForm notes in the 10-K filing that the company and its assets could potentially get swept into SunEdison’s bankruptcy process if creditors go after SunEdison assets transferred to TerraForm or SunEdison’s controlling stake in the company. As such, TerraForm warns that there is “substantial doubt about the Company’s ability to continue as a going concern”.

Fellow SunEdison yieldco TerraForm Global has not yet filed its annual report 10-K, which keeps it out of compliance with NASDAQ listing requirements. It remains to be seen if Global will meet the latest deadline set by financial regulators, or seek another extension.

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