SunEdison in Talks With Yieldcos Over $3 Billion in Claims

  • Two TerraForms say bankrupt parent interfered with business
  • Raise issues with transfer rights on controlling shares

TerraForm Power Inc. and TerraForm Global Inc., the yieldcos founded and controlled by bankrupt clean-energy giant SunEdison Inc., have begun settlement talks with their parent over more than $3 billion of claims they assert against it.

Claims arise from SunEdison’s interference with the business of the two yieldcos, alleged breach of fiduciary duty, and the loss of business opportunities and increased costs of doing business that they’ve suffered as a result of SunEdison’s breaches of the agreements that created them, according to statements filed late Sunday.

Both companies lost a large part of their enterprise value “as a result of SunEdison’s catastrophic breach of its sponsorship and legal duties,” said Jack Stark, chairman of the yieldcos’ corporate governance and conflicts committee, in almost identical statements for both companies. Resolving the dispute in courts would be expensive and a settlement is in the interest of both sides, he said.

Terraform Global estimates its claims will be more than $2 billion, and Terraform Power estimates its will be more than $1 billion. Those are for corporate-level breaches, and don’t include project-level claims, which the yieldcos say they will file information on by Oct. 7.

Breaches Claimed

The TerraForms, in the statements filed Sunday, said “SunEdison’s failure to perform” under sponsorship arrangements put in place at the time of their initial public offerings constitutes a breach. If not remedied, the breaches mean TerraForm Power and TerraForm Global don’t have to live up to their obligations under the contracts, such as an agreement to give distributions on SunEdison’s controlling class B shares in its yieldcos. 

“Estimated amounts may change substantially as circumstances develop and damages are determined,” TerraForm Global said.

SunEdison, the yieldcos contend, has failed to meet the conditions necessary to receive distributions on the B units it owns in them. Perhaps more significant, the yieldcos say the transfer of the B units is prohibited by their corporate charters during or after SunEdison’s bankruptcy.

The TerraForm yieldcos are SunEdison’s most lucrative assets. They own operating wind and solar farms around the globe. SunEdison and the TerraForms are simultaneously working to sell the parents’ shares in the yieldcos; TerraForm Power has garnered interest from giants including BlackRock Inc., Brookfield Asset Management Inc. and Appaloosa Management LP, and Chinese clean-energy group Golden Concord Holdings Ltd. Last week, the TerraForms reiterated that they’re seeking to sell themselves.

The case is In re SunEdison Inc., 16-10992, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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