American solar company SunEdison announced Monday that, in collaboration with its subsidiary TerraForm Power, it is acquiring energy company First Wind in a deal worth $2.4 billion that will also result in SunEdison becoming the world’s largest renewable energy development company.
The acquisition has led SunEdision to raise its 2015 project installation guidance from 1.6–1.8 GW up to 2.1–2.3 GW. Subsidiary TerraForm has also raised its own 2015 guidance to $214 million and dividend guidance to $1.30 per share, a 44% increase over its current dividend rate of $0.90.
SunEdison is now in possession of 1.6 GW worth of pipeline and backlog projects, which have been added to TerraForm’s call right project list and are expected to be completed and begin operation in 2016–2017.
“The acquisition of First Wind transforms both SunEdison and TerraForm Power into diversified renewable energy companies and will make SunEdison the leading renewable power plant developer in the world,” said Ahmad Chatila, President and Chief Executive Officer of SunEdison.
“By bringing together First Wind’s proven development and operational capabilities and SunEdison’s global corporate infrastructure and renewable energy development and finance experience, we will be well-positioned to capitalize on the significant growth opportunities in the global wind power markets and drive returns to shareholders of both SunEdison and TerraForm Power.”
“This acquisition is immediately accretive and establishes TerraForm Power as a leading asset owner in the wind energy market while demonstrating the Company’s commitment to delivering on TerraForm Power’s diversified growth strategy,” said Carlos Domenech, President and Chief Executive Officer of TerraForm Power. “We are adding significant CAFD through a transaction with a greater than 9% levered cash-on-cash yield, increasing our dividend by 44% and expanding the potential drivers of our long-term growth.”
Topsy Turvy Share Prices
The news comes only a few weeks after SunEdison released its third quarter financial earnings, which showed an increase in revenue and an increase in the company’s earnings per share. The company’s share price took a substantial dive following the announcement, due to a less-than-impressive showing over the quarter, and general market instability, leaving many investors to worry about the company’s fourth quarter.
However, according to Yahoo Finance, SunEdison’s stocks have shot back up to levels above those before the end of the third quarter.
Here’s the 5-day view:
Unsurprisingly, TerraForm’s own stock price has jumped considerably over the past week as well.
Why First Wind?
“We are excited to become part of the SunEdison team,” said Paul Gaynor, Chief Executive Officer of First Wind. “This new strategic organization will allow us to join with SunEdison to develop and invest in new, long-term-contracted, well-sited and well-run renewable energy projects that deliver clean energy to homes and businesses across the country and internationally. We will be able to leverage our strength in development and operations, proven during the completion of 1.5 GW of wind projects over eight years, with two world-class companies.”
But while First Wind is obviously happy, what made SunEdison pick that company?
First Wind might focus a lot on wind energy, but it isn’t a stranger to solar, ranking as the 11th-largest utility-scale PV developer in the US, according to GTM Research analyst Cory Honeyman.
Furthermore, the acquisition of First Wind feeds SunEdison’s YieldCo, TerraForm, with new projects necessary to help the company continue growing and returning a solid revenue.
And needless to say, SunEdison believes that First Wind will add significantly more to the company’s bottom line than was paid for it.
SunEdison is no doubt ecstatic with this acquisition, and the possibilities it will add to its bottom line. Given the return already expected, any further growth the company makes as solar and wind development matures is only going to be a bonus.