US renewables yieldco TerraForm Power Inc (NASDAQ:TERP) unveiled today that DE Shaw Renewable Investments LLC (DESRI) has made a non-binding proposal to become the company’s operating sponsor.
DESRI, part of the DE Shaw group, has sent a letter to Centerview Partners LLC, Morgan Stanley & Co LLC and Rothschild & Co SCA on October 21, outlining its preliminary proposal for TerraForm Power, which is currently controlled by bankrupt firm SunEdison (OTCMKTS:SUNEQ).
DESRI says that its proposal would not require SunEdison or other TerraForm Power stockholders to sell their company stakes at a significant discount to intrinsic value.
“We believe that TerraForm Power’s current stock price reflects a significant discount to intrinsic value due to the Company’s association with SunEdison’s financial distress, as well as TerraForm Power’s current operational and financial ailments,” DESRI says in the letter. The suitor adds that selling the yieldco now would eliminate the upside value that could be realised by stabilising the business and restoring distribution growth.
DESRI believes that becoming the operating sponsor of TerraForm Power could also help avoid a potentially protracted sale process and, at the same time, allow SunEdison to emerge from bankruptcy sooner than expected.
Its responsibilities as TerraForm Power’s operating sponsor would include overseeing the operations as well as the financing and capitalisation of individual projects within its portfolio. It will also be in charge of reorganising the portfolio, including by overseeing and executing acquisitions and sales of projects.
DESRI’s own renewables portfolio currently includes 26 utility-scale wind and solar projects in North America with a combined capacity of more than 1,300 MW. It says that its team is “intimately familiar” with a large portion of the yieldco’s assets because of its previous sponsorship of First Wind Holdings LLC, a wind projects developer that was acquired by SunEdison and TerraForm Power in early 2015. Moreover, DESRI adds that it is prepared to offer the yieldco a right of first offer (ROFO) on a portion of its existing and future projects.
The suitor is asking for access to key non-public information that would allow it to evaluate TerraForm Power’s current cost structure and subsequently negotiate definitive terms of a deal.
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First Wind's 51-MW Kaheawa park in Hawaii. Author: Jim Larrison. License: Creative Commons, Attribution 2.0 Generic
