TerraForm shares surge after IPO

Shares of TerraForm Power, SunEdison’s yieldco spinoff, exploded off their mark on their first day of trading in New York, giving the solar asset owner a market valuation of $3.43bn by midday on Friday.

Late Thursday, SunEdison announced that the 20.1 million shares up for grabs would be sold at $25, higher than the $23-$25 range it had indicated previously – and the initial $19-$21 it had suggested.

The $25 price tag left TerraForm Power’s total raise just north of $500m.

But even at $25, investors smelled a deal, with shares – trading under the ticker symbol TERP – surging by 36% to about $34 by midday on 18 July.

TerraForm’s $3.43bn market valuation narrowly edges out the $3.32bn valuation held by NextEra Energy Partners, the yieldco launched several weeks ago by NextEra Energy Resources.

TerraForm will start life with 808MW of operating solar capacity on its books, 557MW of it in the US, and the remainder spread across Canada, the UK and Chile.

TerraForm has Right of First Offer on an additional 1.1GW of SunEdison-owned capacity over the next few years, and beyond that it will continue to buy generation assets, including expanding into wind, natural gas, geothermal and hydroelectric.

By comparison, NextEra Energy Partners, trading under the ticker symbol NEP, has 990MW of capacity, 30% of it solar and the rest wind.

TerraForm is the first pure-play solar yieldco to list in the US, following several similar – though far smaller – PV yieldcos to list in London over the last year and a half.

Its market cap also makes it more valuable than Pattern Energy, which became the first pure wind yieldco to list in the US last year, and is currently valued by the markets at $2.7bn.

In its first rating for a yieldco, Moody’s recently assigned a Ba3 corporate family rating to TerraForm Power Operating LLC, and gave it a “stable” outlook.