Bethesda, Maryland-based TerraForm Power Inc. (NASDAQ: TERP), the renewable energy yieldco of bankrupt SunEdison, said it agreed to sell a portfolio of 24 operating solar energy projects in the United Kingdom representing 365 MW to Vortex, a renewable energy platform managed by the private equity arm of EFG Hermes, in a deal valued at $580 million.
The portfolio is one of the largest solar projects in the UK and was assembled by TerraForm Power in 2014 and 2015.
TerraForm expects to receive approximately $208 million of proceeds from the sale, which reflects an implied multiple of 16x expected 2016 EBITDA. Upon completion, TerraForm Power expects to reduce non-recourse project debt on its balance sheet by approximately $370 million.
“The TerraForm Power Board and management team continues to execute on our key strategic initiatives, including fleet optimization and deleveraging, and this transaction demonstrates our progress in positioning the Company for value creation,” said Peter Blackmore, Chairman and Interim CEO of TerraForm Power. “Given the strong demand for operational United Kingdom solar plants, we are pleased to capitalize on the opportunity to monetize the high-quality portfolio of solar plants that our team has assembled and strengthened over the last two years and generate significant value for our shareholders.”
“The United Kingdom is a key contributor to Europe’s solar market,” added Karim Moussa, EFG Hermes Head of Private Equity. “This Portfolio offers us an attractive entry point with a long-term investment proposition in the country. Our existing asset base in Vortex paid superior cash yields to our investors to date. We are delighted to add this high quality Portfolio to the platform and bring in the United Kingdom’s premier solar developer as our technical partner.”
With a current footprint spanning seven countries in the Middle East and North Africa, EFG Hermes started in Egypt and has grown over 30 years to become the region’s leading investment bank. EFG Hermes’ private equity arm is one of the Arab world’s leading private-equity groups with a special focus on investing in infrastructure, particularly renewable energy, healthcare and consumer products.
Vortex intends to refinance the existing non-recourse project debt facility with a new upsized facility and will enter into new contracts with Lightsource Renewable Energy, a leading service provider in the United Kingdom, for operations & maintenance and management services.
The deal is expected to close in the first half of 2017, subject to certain conditions precedent. After close, TerraForm Power will continue to own an 11 MW operating solar plant in the United Kingdom, which it expects to divest in the future.
Citi served as exclusive financial advisor and Linklaters LLP acted as counsel to TerraForm Power. Watson Farley & Williams acted as counsel to Vortex Solar.
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.
As reported by ExitHub last September, both yieldcos had engaged Centerview Partners and AlixPartners as their financial advisors to explore an exit, 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.