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TerraForm yieldcos eye 'independence' by new year

TerraForm Power and TerraForm Global, the US-based yieldcos whose fates were greatly complicated by the bankruptcy of controlling shareholder SunEdison, expect to become “operationally independent” by January. 

The yieldcos this week warned investors that they expect to suffer large net losses in 2016 and will have “substantially lower” cash available for distribution (CAFD) to their yield-seeking investors than was expected before SunEdison’s bankruptcy filing this spring.

But Peter Blackmore, chairman and interim chief executive of both yieldcos, insists they are making “significant progress” in disentangling themselves from SunEdison, and expect to be operating on a fully independent basis within two months.

The ownership picture still remains unclear, however.

Canada’s Brookfield Asset Management is looking to buy the two yieldcos, and a number of other players – including US hedge fund D.E. Shaw, China’s Golden Concord Holdings, and funds managed by BlackRock – are known to be interested.

Some, like D.E. Shaw, have offered to act as the sponsor company for the yieldcos, “dropping down” finished wind and solar projects in the way that Pattern Development does with its yieldco Pattern Energy or NRG Energy does with NRG Yield.

SunEdison, too, may try to reorganise around its yieldcos, which are its most valuable remaining assets. Last week NRG Energy closed on its acquisition of a 1.5GW pipeline of renewables projects from SunEdison.

Despite their recent challenges, TerraForm Power and Global remain among the most valuable pure-play renewables operators listed on US stock markets, with a combined market valuation of more than $2.5bn.

Currently trading around $13, TerraForm Power’s stock price has risen by 50% over the past six months, although it remains far off its $42 peak in mid-2015. 

TerraForm Power, which owns 3GW of mostly US-based wind and solar capacity, expects to report a full-year loss of $105m-$145m on adjusted revenues of $697m-$712m, with an adjusted EBITDA of $517m-$532m.

TerraForm Global, which owns 947MW of developing-world-based renewables capacity, expects a net loss of $11m-$51m on revenues of $215m-$242m, with an adjusted EBITDA of $153m-$180m.

The yieldcos say their CAFD figures will come in much lower than previously forecast because of problems stemming from SunEdison’s bankruptcy, including the loss of financial and operational support from their parent and increased debt-servicing costs.

But Blackmore insists the TerraForms are sailing towards a new era.

“I am proud of the work our team has done to navigate the challenges that were beyond our control,” he says. “The board and management team continue to successfully execute on our strategy and make significant progress towards achieving our objectives and independence.”

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