SunEdison and TerraForm Power announced to acquire Vivint Solar, a U.S.-based provider of residential solar systems. A definitive merger agreement has been signed in pursuit of the acquisition worth of US$2.2 billion. The proposed deal is payable in a combination of cash, shares of SunEdison common stock and Sunedison convertible notes, and TerraForm Power will acquire Vivint Solar’s rooftop solar portfolio for US$922 million in cash.
By the end of 2015, Vivint Solar’s rooftop solar portfolio is expected to reach 523MW. All those residential solar projects are expected to provide a 10 year average unlevered CAFD of $81 million, and provide a ten-year average levered cash-on-cash yield of 9.5%. In addition to the rooftop portfolio, TerraForm Power will acquire future completed residential and small commercial projects from SunEdison's expanded residential and small commercial (RSC) business unit. The addition of residential and small commercial projects and cash available for distribution (CAFD) to TerraForm Power is expected to provide greater visibility and predictability to CAFD growth and dividend per share accretion at TerraForm Power.
The Vivint Solar management team will join SunEdison. SunEdison's existing RSC development business and the Vivint Solar team will be merged. The transaction expands SunEdison's strong RSC platform and is intended to accelerate SunEdison's existing business in the United States, United Kingdom and Australia.
Ahmad Chatila, SunEdison chief executive officer and TerraForm Power chairman, said, "We expect the Vivint Solar transaction to create significant value for our stockholders through the accretion in our TerraForm Power ownership, the acceleration of our Incentive Distribution Rights and an immediate expansion of our capacity and bandwidth to grow our residential business in the U.S. and globally. As of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1GW per quarter."
"SunEdison and TerraForm Power have built a unique model that recognizes the value of long-term, predictable, contracted cash flows from our residential solar portfolio while providing access to a broad pool of financing at an attractive cost of capital,” said Greg Butterfield, Vivint Solar's chief executive officer. “We are excited to join the SunEdison residential and small commercial team."
Vivint Solar’s profile of cash available for distribution is attractive and aligned with TerraForm’s growth profile, the team has also proven its ability to scale. TerraForm Power’s CEO, Carlos Domenech, therefore believes the acquisition will create substantial value for its stockholders.
To support the merger transaction, SunEdison has entered into a commitment letter with Goldman Sachs Bank USA for a $500 million secured term loan facility to be provided to a wholly-owned, indirect subsidiary of SunEdison which will hold certain development assets of the expanded SunEdison RSC platform after the merger with Vivint Solar. The funding of the term facility is subject to customary conditions, including the negotiation of definitive documentation and other customary closing conditions.
TerraForm Power has entered into a debt commitment letter with Goldman Sachs Bank USA for a $960 million unsecured bridge facility. The funding of the bridge facility is subject to the negotiation of definitive documentation and other customary closing conditions. The TERP Purchase Agreement is not conditioned on TerraForm Power's receipt of the new unsecured bridge facility or any other third-party financing.
Also, SunEdison initiated 2016 annual guidance of 4.2GW to 4.5GW along with the announcement. The new guidance represents a 50% increase from its prior outlook of 2.8GW to 3GW. TerraForm Power raised 2016 dividend per share guidance by 30% y-o-y up to US$1.7~US$1.75, compared to 2015 annual guidance. The company also initiates 2017 dividend per share guidance of US$2.05, up from its prior target of US$2.00.