TerraForm Global Cancels Globeleq Deal Amid Shift in Strategyby
Announced acquisition of Globeleq Mesoamerica Energy in June
`Acquisition didn’t make sense anymore,' analyst says
TerraForm Global Inc., a power-plant holding company controlled by SunEdison Inc., canceled a deal this week to buy a Central American renewable-energy developer, a move that reflects the two struggling companies’ reshaped ambitions.
SunEdison, the worst-performing clean energy company, announced in June plans to acquire Globeleq Mesoamerica Energy and its portfolio of projects in Honduras, Costa Rica and Nicaragua. TerraForm Global said Thursday the deal was off after some lenders to the assets didn’t issue consents before a March 12 deadline.
The acquisition came near the tail end of SunEdison’s almost $3 billion buying spree that made it the biggest clean-power developer in the world. It also became the most indebted in the industry, and investors started raising questions about its balance sheet, helping trigger a share selloff. TerraForm Global and sister yieldco holding company TerraForm Power Inc. have also slumped, spurring a shift in strategy.
“The basis of the acquisition didn’t make sense anymore,” Michael Morosi, an analyst at Avondale Partners LLC, said in an interview Friday. “SunEdison is refocusing on its core markets.”
Brett Prior, head of investor relations at TerraForm Global and TerraForm Power, declined to discuss the canceled deal Friday, and SunEdison spokesman Ben Harborne didn’t immediately provide answers to questions.
When the Globeleq acquisition was announced, TerraForm Global was a unit of SunEdison. It sold shares in an initial public offering July 31.
Under the terms of the Globeleq deal, SunEdison would get its development pipeline and TerraForm would get its portfolio of power plants in Central America.
“It was one of the last deals of yieldco 1.0 vintage,” Morosi said. “Object No. 1 now is shore up the house, which is to keep the parent as strong as possible.”
The move also reflects SunEdison’s current financial status. The company’s debt has surged, the shares are down more than 90 percent from a year ago, it’s been unable to file its earnings report on time and analysts have said it may have trouble arranging new financing. That may also be affecting the two TerraForm units.
“They may have an uphill task getting approvals for deals they want to complete because of SunEdison’s financial situation,” said Swami Venkataraman, a vice president at Moody’s Corp. “The parent is perceived to be close to insolvency.”