Bethesda, Maryland-based TerraForm Power Inc. (NASDAQ: TERP) and its sister company TerraForm Global Inc. (NASDAQ: GLBL), the two renewable energy yieldcos of bankrupt SunEdison, said they have initiated a process to explore and evaluate potential strategic alternatives, including a merger or sale of their entire business.
“We have decided that exploring all possible alternatives to maximize that value is in the best interests of all our stockholders,” said Peter Blackmore, interim chief executive of TerraForm Power and TerraForm Global. “We are open to considering a transaction involving a new sponsor that would contribute to the stabilization and future growth” of the two companies, he added.
The yieldcos’ previous sponsor, SunEdison, is operating under Chapter 11 bankruptcy protection since April 21, 2016. Therefore, many decisions made by SunEdison, such as how to vote its shares in TerraForm Power and Terraform Global to approve a merger or sale of substantially all of their assets, may require the approval of the U.S. Bankruptcy Court for the Southern District of New York.
“We have been working closely with SunEdison on disposition alternatives,” Blackmore said.
Yieldcos are commonly used in the renewable energy industry, to own operating assets that produce a predictable cash flow, primarily through long term contracts, while protecting investors against regulatory changes and other associated risks.
The TerraForm yieldcos, which were spun off from SunEdison, were at the epicenter of its financial engineering prior to its bankruptcy filing. TerraForm Power’s IPO was completed in 2014, followed by TerraForm Global in 2015.
TerraForm Power owns clean power generation assets in developed global markets, including solar and wind projects in the US, Canada, the UK and Chile. The company has a current market capitalization of $1.68 billion.
TerraForm Global owns clean power generation assets in high-growth emerging markets, including solar and wind projects in Asia, Africa and Latin America. The company has a market capitalization of $438.83 million.
Both yieldcos have engaged Centerview Partners and AlixPartners as their financial advisors and Sullivan & Cromwell LLP as their legal advisor.
In addition, TerraForm Power has engaged Morgan Stanley, while TerraForm Global has engaged Greentech Capital Advisors, as their respective financial advisors.