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SunEdison to Sell Renewable Yieldco Stakes to Brookfield

  • Canadian asset manager needs court approval to finish deal
  • Yieldcos agreed to settlements with insolvent parent SunEdison

SunEdison Inc. took a major step forward in its bankruptcy reorganization, agreeing to relinquish its control of its two yieldco units to Canada’s biggest alternative asset manager and to clear up some of the litigation brought by the affiliates.

Brookfield Asset Management Inc. agreed to increase its existing stake in TerraForm Power Inc. to 51 percent, acquiring the additional shares at $11.46 a piece, according to a statement on Tuesday. That would give the yieldco a market value of $1.7 billion. The asset manager also will pay $787 million in cash and assume about $455 million in net debt for control of TerraForm Global Inc. 

The deals would help untangle SunEdison from two of its biggest affiliates that helped bring down the world’s biggest renewable energy developer in April. The complexity of SunEdison’s relationships with the yieldcos had raised corporate governance concerns and drew criticism from creditors. 

“Brookfield is the Warren Buffett of the energy world,” Greg Jones, an analyst at CreditSights Inc., said in an interview before the decision was announced. “They gravitate toward issues of distress and can provide capital. They have an asset management side. No one else is positioned like that.”

Brookfield has said it already owns about 34 percent of TerraForm Power. The yieldco’s shareholders will have the option of being paid in cash or $1.94 per existing share plus one share in TerraForm Power post-closing under the terms of the agreement, the companies said.

Brookfield confirmed in January that it was in exclusive talks to buy shares in the two yieldcos for a combined value of as much as $2.46 billion. A deadline for those talks to finish passed on Monday.

SunEdison said it supports the transactions announced Tuesday, which must be approved by the U.S. bankruptcy court.

“This agreement with Brookfield is the culmination of our efforts to separate our operations from SunEdison and to position TerraForm Power for future success,” Peter Blackmore, TerraForm Power’s chairman and interim chief executive officer, said in the statement. “With the support of Brookfield as TerraForm Power’s sponsor, we will gain additional resources to continue to expand our portfolio and increase cash flow on a per share basis.”

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

TerraForm Power, which owns wind and solar farms in OECD countries including the U.S. and the U.K., said in December that it had a $1 billion claim against SunEdison. TerraForm Global, which owns assets in emerging markets including Brazil and India, said that month that its unsecured claims against its parent exceed $2 billion.

The bankruptcy has been costly to the two yieldcos, which are based in Bethesda, Maryland, since they bought many of their wind and solar farms from SunEdison. Until recently, the TerraForms relied on SunEdison for accounting, information technology, operation and maintenance of renewable assets. The yieldcos only recently have begun filing overdue quarterly reports to the Securities and Exchange Commission.

SunEdison filed for bankruptcy in April, listing $16.1 billion in liabilities. It controls the yieldcos through its stakes in their Class A and Class B shares. The value of their common stock has fluctuated during the case, raising questions about the worth of SunEdison itself and stoking disputes among shareholders and creditors.

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

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