SunEdison: Color on Wind Acquisition
- Brean Capital (From 11/18) note SUNE and its yieldco, Terraform Power (TERP) announced a definitive agreement to acquire First Wind for $2.4B. As a result, SUNE raised its 2015 project installation and CAFD from TERP guidance and indicated its timetable for receiving Incentive Distribution Rights (IDR's) from TerraForm Power has been accelerated. Firm views the acquisition as transformative and should improve the Company's overall risk profile relative to its peers. Maintain Buy rating and $23 target.
- FBR Capital (From 11/18) notes transaction marks the entry of SunEdison into the wind sector, and should transform the company from being a pure solar developer to a more diversified operator of renewable energy assets. Based on firm's existing portfolio estimates for 2017, and assuming SunEdison successfully adds about 2.1GW of wind assets and drops them into TerraForm, the pro forma asset mix would be about 60% solar and 40% wind. At the first glance, FBR estimates that the operating assets were acquired at a discount to some other recent transactions, while the cash value paid for the pipeline should generate a low double digit ROI, assuming only 2.1GW of assets are successfully developed by 2017.
- Needham Research notes it likes the deal as it: 1) substantially increases SUNE's TAM with a proven team; 2) accelerates growth with faster project construction; 3) enables SUNE (and TERP) to become the largest renewable energy developer; and 4) increases value creation for SUNE through TERP. Needham sees the increased leverage on its balance sheet as an incremental risk, but mgmt should be able to navigate any issue given its proven track record in financing. Reiterate Buy and raise tgt to $28.