- Both companies signed amendments with lenders March 30
- SunEdison bankruptcy `would have a material adverse effect'
TerraForm Global Inc. and TerraForm Power Inc., yieldcos founded and controlled by renewable-energy developer SunEdison Inc., obtained extensions until April 30 to file their 2015 annual reports, a sign they may have more clout with lenders than their teetering parent.
Lenders including Goldman Sachs Group Inc. and Barclays Plc agreed in amendments signed March 30 to extend the due date, TerraForm Global and TerraForm Power said in separate filings Monday. Terms weren’t disclosed.
Both TerraForm yieldcos -- publicly traded holding companies that buy and operate wind and solar farms -- rely on SunEdison for financial reporting. The failure of SunEdison to file its 2015 annual report has also prevented them from doing so. SunEdison’s annual report was due to its lenders by March 30. The agreements with TerraForm and TerraForm Global show that lenders are willing to negotiate with the companies that are perceived as being in a stronger position than their parent.
That doesn’t mean that a potential SunEdison bankruptcy will leave them unscathed. TerraForm Power said Monday that a SunEdison bankruptcy may trigger defaults on some of the financings backing its power projects.
SunEdison fell 51 percent to 21 cents at the close in New York. TerraForm Power was down 7.7 percent and TerraForm Global was down 6.8 percent.
SunEdison’s delayed 2015 report has put it at risk for technical defaults on at least $1.4 billion in loan and credit facilities, which require the company to file the report within 90 days of the end of its fiscal year, or March 30. SunEdison has twice postponed filing its the report, citing a “material weakness” in its internal accounting system and an internal probe into its financial position.
While TerraForm Global and TerraForm Power managed to gain some wiggle room, they will face fallout if SunEdison files for bankruptcy protection after amassing $11.7 billion in debt by Sept. 30. TerraForm Power, in its filing Monday, reiterated that “there is a substantial risk that SunEdison will soon seek bankruptcy protection” due to the parent’s “liquidity difficulties.” TerraForm Global said the same thing last week.
‘Material Adverse Effect’
TerraForm Power acknowledged Monday that a SunEdison bankruptcy “would have a material adverse effect” given its reliance on the parent, though it “believes” that it would have sufficient liquidity to support its operations.
A SunEdison bankruptcy could trigger defaults in many of TerraForm Power’s non-recourse project financings, because the parent is a party in most of these deals, sometimes as project operator. “These defaults are generally curable,” TerraForm said in the Monday filing. “If SunEdison files for bankruptcy, we will work with our project lenders to obtain waivers and/or forbearance agreements as we seek to cure such defaults, however no assurances can be given that such waivers/forbearance agreements will be obtained.”
TerraForm Power also said it hasn’t identified any “significant” power purchase agreements that include provisions that would permit a counterparty to terminate the contract if SunEdison files for bankruptcy protection.
Brian Wuebbels, TerraForm Power’s and TerraForm Global’s chief executive officer, resigned last week. He is also exiting as chief financial officer of SunEdison.
Hydro Deal Terminated
In its filing Monday, TerraForm Global also disclosed that it had terminated an agreement to acquire a hydroelectric plant in Brazil from Renova Energia SA, a Sao Paulo-based renewable-energy developer.
TerraForm Global had agreed to buy the Espra hydroelectric plant in July, as part of an acquisition of 336.2 megawatts of power that also included two wind farms in Brazil. In September, TerraForm closed the acquisition of the Salvador and Bahia wind farms, which have about 294 megawatts of capacity. It paid $116.7 million in cash and transferred more than 20 million shares of its Class A common stock.
On Friday, TerraForm Global paid Renova $10 million to terminate the Espra acquisition. The yieldco estimates that the plant would have provided about $4 million to $5 million annually in cash available for distribution.