SunEdison Shares Surge In Wake Of Q1’15 Earnings, New Yieldco, Acquisitions

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In a week with several big-name renewable energy companies releasing their first quarter earnings reports for 2015, SunEdison has outshone them all. Despite only steady Q1’15 results, SunEdison — the world’s largest renewable energy developer — also announced the acquisition of seven renewable energy portfolios in emerging countries, and the intention to form a second yieldco dedicated to emerging markets.

“As we described in our Capital Markets Day in February, SunEdison intends to act quickly to address the opportunity in emerging markets, where the majority of future global electric power infrastructure investments will be deployed,” said Ahmad Chatila, CEO of SunEdison.

As such, SunEdison shares jumped an impressive 12% in trading Thursday, following the announcements.

Steady Q1’15 Earnings

“During the first quarter, the team continued our exceptional record of balancing operational execution while accomplishing our strategic initiatives,” Chatila said. On the operations front, the team delivered 273 MW, a first quarter record, while also achieving new records in our pipeline, backlog, and projects under construction.”

SunEdison’s 273 MW was up from Q1’14’s 123 MW, and the company currently has a 2.9 GW backlog additions net of losses, 2.7 GW of gross pipeline additions, and another 774 MW currently under construction at the end of the quarter.

TerraForm Continues to Deliver

“Our asset ownership platform, TerraForm Power, increased its CAFD and dividend guidance as it reached 1.7 GW of operating assets,” Chatila continued. “In addition, we closed the First Wind acquisition, while making significant progress on our strategic emerging market initiatives.”

TerraForm continued to perform in the first quarter, finishing with 1,675 MW of operating assets, up 70% over the previous quarter. Subsequently, guidance for the yieldco has been increased, with an expected 2015 CAFD guidance of $225 million, and $1.35 dividend per share guidance for 2015, up from $1.30.

TerraForm Global

TerraForm Global will be SunEdison’s new yieldco, however, settings its sights on the emerging markets. SunEdison announced Thursday that it had publicly filed the registration of the company prior to a proposed initial public offering, and will be “formed to own and operate contracted clean power generation assets in attractive, high-growth emerging markets.”

At the same time, therefore, SunEdison also announced the acquisition of seven renewable energy portfolios and corporate platforms in Brazil, China, India, Peru, Chile, South Africa, and Uruguay — seven highly publicized emerging countries with impressive renewable energy markets. In total, the acquisition totals 757 MW of wind, solar, and hydropower projects, and secures an additional 1,918 MW of Third Party Right of First Offer projects.

SunEdison will acquire LAP Holdings, BV, a Latin America hydropower and wind development and O&M company, as well as two Chinese wind development and O&M companies from Honiton Energy Holding. SunEdison also secured $175 million of equity investments from Blackstone, Everstream, and Altai, and another $362 million non-recourse debt facility for emerging markets initiatives.

“In aggregate, these seven transactions bolster our emerging markets platform,” added Ahmad Chatila. “These acquisitions are the result of an extensive global search for the best development partners in each of our target markets – partners with operating fleets of high quality power plants with long-term contracts with creditworthy counterparties.  Our announcement today is the first stage in our plan to move rapidly to capitalize on the opportunity to provide clean, renewable, cost-efficient power to the fast-growing emerging markets.”

Yieldcos and Emerging Market Appeal

Considering that yieldcos did not exist as a clean-energy financing model even three years ago, their value is turning out to be obvious, and as SunEdison is proving, capitalizing on the boom of yieldcos in conjunction with the growth of emerging markets, just makes plain sense.

Clean energy experts speaking at the Bloomberg New Energy Finance annual conference in April predicted that the yieldco market is set to be worth $100 billion soon. In addition, emerging markets have been seen to be driving growth in both the wind and solar sectors — with the Global Wind Energy Council releasing a report in early April that highlighted the importance of Africa and Latin America.

“Wind power’s growth is increasingly driven by its competitive pricing, as well as because it enhances energy security, price stability and (especially in China) through the need to address the choking smog that is increasingly making major urban areas in the developing world unlivable,” said Steve Sawyer, GWEC Secretary General.

“The need for clean, sustainable indigenous power sources to fuel economic growth throughout Africa, Asia and Latin America is increasingly being met through wind power, and this will continue for the foreseeable future”.

Similarly, according to Cormac Gilligan, senior analyst for PV Inverters and Balance of System (BoS) for IHS, “strong growth in China, Japan, and emerging markets” will help push shipments of solar inverters to nearly 70 GW in 2018.

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Joshua S Hill

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