Yahoo Finance SunEdison Inc. (SUNE) Raises Capital to Fund Acquisition - Analyst Blog
In order to facilitate the funding of the recently announced strategic acquisition of First Wind, for $2.4 billion, solar technology company SunEdison Inc. (SUNE) has raised approximately $590 million.
The company secured $190 million of funds through a secondary offering of 12.9 million of its shares. Additionally, the company secured $400 million from a number of financial institutions for a two year loan with shares of its TerraForm power plant holding company.
SunEdison announced the acquisition of privately held wind power developer and operator, First Wind on Nov 17. SunEdison and its yieldco company TerraForm Power Inc. (TERP) had jointly signed a definitive agreement to acquire First Wind. The acquisition is expected to help SunEdison expand its foothold in the U.S. wind energy market.
SunEdison’s portion of the consideration will comprise an upfront payment of $1 billion and $0.5 billion of earn-outs, payable after the completion of certain backlog projects of First Wind. The company expects to complete the transaction by the end of first-quarter fiscal 2015. Post-acquisition, SunEdison will become the world’s leading renewable energy development company.
With the acquisition, SunEdison will get First Wind’s backlog project of more than 1.6 GW capacity, expected to be operational in 2016–2017. The company has already added this project to TerraForm Power’s call list. Furthermore, the company will get an additional opportunity of developing approximately 6.4 GW wind power projects. SunEdison intends to quickly finish these project developments and realize synergies.
The deal enabled SunEdison to raise its project installation guidance range for fiscal 2015 to 2.1 GW–2.3 GW from 1.6–1.8 GW. The company revealed that the acquisition will facilitate the generation of higher cash flows and asset management revenues, while shareholders will benefit through increased dividend from TerraForm.
Apart from this, SunEdison also entered into a strategic alliance with Indian conglomerate Adani Enterprises, which will expand its base in India. Under the joint venture agreement, the companies will invest approximately $4 billion to develop solar photovoltaic projects in Gujarat, India. We believe that SunEdison’s strategic decision to produce solar panels from low-cost production regions like India gives it an added cost advantage over its solar cell manufacturing peers.
SunEdison’s focus on expanding clean energy capabilities through acquisitions should drive its long-term growth. We believe that the demand for clean energy will increase manifold over the long term, and being the world’s leading developer of renewable energy, SunEdison is well positioned to capitalize on this opportunity.
Although SunEdison’s growing exposure in the renewable energy market is encouraging, any delay or inability to sell these projects at desired prices — which require considerable time and investment — could impact liquidity.
Competition from SunPower Corp. (SPWR) and First Solar Inc. (FSLR) further adds to its woes.
Currently, SunEdison has a Zacks Rank #5 (Strong Sell).
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