11 December 2015

SunEdison sweetens Vivint deal with $123m of savings

SunEdison has revised the terms of its much-criticised $2.2 billion acquisition of Vivint Solar, in a move that has been well received by shareholders.

Renewables giant SunEdison originally announced the deal in July, saying it planned to pay for residential rooftop solar firm Vivint Solar using a mix of cash, debt and equity.

The cash portion of the deal was to come from a simultaneous 'drop-down' of 523MW of Vivint Solar's operational and expected-to-be operational assets to SunEdison's yieldco Terraform Power when the deal was executed.

TerraForm was set to pay $922 million for these assets, but its shareholders balked at the deal, claiming the price was too high.

A new deal has now been proposed between Vivint and SunEdison, which appears to have appeased some of the critics.

Under the new terms, TerraForm will buy a smaller initial portfolio – 470MW of operational assets, compared with the 523MW of operational and planned assets previously. And it will also pay a cheaper price per watt, of $1.70, compared with $1.86 in the original deal.

The revised terms will mean that TerraForm Power will pay $799, which is $123 million less than originally planned, including $30 million from the reduced price per watt.

SunEdison also altered the total amount of residential solar assets TerraForm Power would be required to purchase in future, to 400MW in 2016 and 450MW in the four subsequent years.

The original terms of the deal required the yieldco to buy of 434MW of residential solar assets a year.

SunEdison will not be able to access a $300 million term loan it needs to partially fund the acquisition unless TerraForm Power agrees to buy these assets over the next five years.

It expects to pay the term loan back by December 2016. When the loan is repaid, TerraForm Power will no longer have a requirement to purchase future rooftop installations.

The move to revise the terms comes weeks after shareholders in the yieldco – a listed company, spun-off from a renewables developer, which owns operational renewable assets and uses most of the cash proceeds from these assets to pay dividends – led by billionaire and founder of Appaloosa Management David Tepper complained the deal favoured its parent.

Since the acquisition was announced both SunEdison and TerraForm Power's share prices have tumbled, losing over 80% and 75% of the market capitalisation, respectively.

However, both rallied on news of the new terms. TerraForm Power traded $11.19 per share up from $8.66, with SunEdison trading up $4.09 from $3.44.