TerraForm Power and SunEdison announced that TerraForm Power has signed a definitive agreement to acquire net ownership of 930 MW of wind power plants from Invenergy Wind LLC (Invenergy), the largest independent wind owner in the United States. This acquisition is expected to add a sizeable, high-quality contracted power plant portfolio to the TerraForm Power and SunEdison family of companies, strengthening one of the largest and highest growth renewable power platforms in North America.
"This transaction is expected to be immediately accretive to our shareholders, extend the visibility of our growth trajectory and unlock significant value as we aggregate a highly fragmented industry,” commented Carlos Domenech, TerraForm Power's chief executive officer.
TerraForm Power intends to acquire net ownership of 460 MW of the wind power plants from Invenergy with the remaining 470 MW to be acquired by a new warehouse facility, for a combined $2.0 billion in aggregate consideration. Average unlevered CAFD of the acquired portfolio is anticipated to be $141 million annually over the next 10 years, generating a levered cash-on-cash return of approximately 8.4%.
TerraForm expects to finance the direct acquisition of the 460MW through a combination of cash on hand and new bond financing. TerraForm Power will also assume approximately $450 million in non-recourse project debt. These initial drop downs are expected to provide average CAFD of $71 million annually over the next 10 years.
Alongside with TerraForm Private, the companies anticipate that the remaining 470 MW will be acquired by a new warehouse facility to be sponsored by SunEdison and third party equity investors, with assets dropping down to TerraForm Power in the future. The wind farms intended for the warehouse are expected to generate average unlevered CAFD of $70 million annually over the next 10 years.
The acquisition leverages the power of SunEdison’s platform which was enhanced with its acquisition of First Wind in January 2015. Ahmad Chatila, SunEdison chief executive officer and TerraForm Power chairman, believes that the Invenergy transaction will create significant value for SunEdison’s shareholders through the accretion in TerraForm Power ownership and the acceleration of its Incentive Distribution Rights (IDRs).
Recently, TerraForm Power and SunEdison have acquired a large volume of wind power assets or portfolios. With the latest acquisition, TerraForm Power is raising its prior 2016 dividend target of $1.53 to 2016 dividend per share (DPS) guidance of $1.70, a 26% year-over-year increase compared to 2015 annual guidance. TerraForm Power is also updating its long-term DPS growth target to a 20% CAGR from its current first quarter dividend, driven by the increased visibility and growth provided by this transaction.
The acquired portfolio is comprised of seven contracted wind farms located in the United States and Canada. The assets have a weighted average remaining contract life of 19 years and an average counterparty credit rating of AA.
Invenergy will retain a 9.9% stake in the U.S. assets and will provide certain operation and maintenance services for these power plants. Inventory’s contracted portfolio totals approximately 6.6GW, with another 2.5GW under construction or contract. The transaction represents approximately one-tenth of Inventory’s portfolio.
The acquisition is anticipated to be closed by the fourth quarter of 2015.