Brookfield, Investors Differ Over Value of SunEdison Yieldco

  • Company offers $13 a share, or $1.8 billion, for TerraForm
  • TerraForm trades above offer, suggesting it may not be enough

Brookfield Asset Management Inc., Canada’s largest alternative asset manager, is prepared to offer $13 a share to acquire TerraForm Power Inc., valuing the yieldco at about $1.8 billion. That may not be enough.

TerraForm, a yieldco that’s seeking to untangle itself from bankrupt parent SunEdison Inc., traded above that level in New York on Friday, suggesting investors think Brookfield may face competition. The shares closed at $13.62.

“The market is clearly suggesting that there could be more value than what’s reflected in the offer,” Michael Morosi, an analyst at Avondale Partners LLC in Nashville, said in an interview. “There are certainly parties that could and are likely to pay more.”

TerraForm’s market value has slumped in the past 18 months as SunEdison’s fortunes waned after a $2.6 billion buying spree of wind and solar projects left it overextended. Sachin Shah, Brookfield’s senior managing partner and chief executive officer of Brookfield Renewable Partners, said its valuation is fair given the current state of the market, noting that it’s 49 percent above the closing price on June 28, the day before Brookfield initially disclosed its holdings.

In a filing on Friday, Brookfield said it’s also prepared to make an offer for another SunEdison yieldco, TerraForm Global Inc., for an undisclosed sum. The asset manager said it’s prepared to act as interim sponsor for both yieldcos for as long as six months under the assumption that if its proposal was accepted, it would continue in that role.

‘Attractive Opportunities’

“We firmly believe these proposals represent unique, extremely attractive opportunities for TERP and GLBL shareholders, as well as the creditors of SunEdison,” Shah said in a letter to the companies’ boards, using the stock tickers for the two TerraForm companies. He said TerraForm Power and TerraForm Global should act quickly to avoid further “diminution of value,” and is seeking a response by the end of business hours Monday.

SunEdison founded and controls the TerraForm yieldcos, which own operating wind and solar farms. Spokesmen for the TerraForm yieldcos and SunEdison didn’t return calls seeking comment. A representative for Brookfield declined to comment.

QuickTake Q&A: Yieldcos, Fuel for Energy Projects, Draw Scrutiny

Brookfield and billionaire David Tepper’s Appaloosa Management LP are prepared to enter into a binding agreement, subject to due diligence, by Dec. 6 for an all-cash offer for TerraForm Power, according to the letter. Alternatively, Brookfield would make an all-cash offer for a 50 percent to 60 percent stake, in connection with a long-term agreement where Brookfield would become a financial sponsor.

The latest disclosure comes days after TerraForm Power said it’s again seeking an extension from bondholders over its failure to file its 2015 annual report. The delay, which puts the company at risk of default, is the result of TerraForm Power’s reliance on SunEdison’s reporting systems. SunEdison’s filings are also delinquent.

Bondholders

In the third quarter, the TerraForm yieldcos managed to convince bondholders to extend the deadline to file the 2015 report and their first-quarter reports to Dec. 6. TerraForm Power said Nov. 15 that it’s seeking extensions under its 2023 and 2025 bond packages, which would waive any and all defaults “as a result of the expiration of the August waiver.”

In bankruptcy court Thursday, SunEdison acknowledged that it may need to reorganize around its yieldcos, which are two of its most valuable assets.

Brookfield and Appaloosa, which collectively hold about 34 percent of TerraForm Power’s Class A shares, attempted to take control of the company earlier this year by offering to acquire SunEdison’s stake in the company, kicking off a formal auction for the company. The asset manager, however, has declined to participate in the auction.

Besides Brookfield, D.E. Shaw & Co., Golden Concord Holdings Ltd., and funds of BlackRock Inc. have expressed interest in TerraForm Power.

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