SunEdison Inc and TerraForm Global Inc have entered into an agreement for the former to sell the latter a series of projects located in India for $231 million. The projects have a generating capacity of 425 megawatts (Mw).
A portion of the purchase price was paid on November 20 and the remainder would be payable by December 7, 2016. SunEdison utilised a portion of the proceeds from the sale to partially pay down its margin loan, according to the company.
“This transaction provides higher yields replacing lower-yielding IPO (initial public offering) projects that were intended to be acquired through M&A (merger and acquisition) and is consistent with our strategy to focus on organic growth provided by our sponsor,” said Brian Wuebbels, chief executive of TerraForm Global.
Pashupathy Gopalan, SunEdison’s president of Asia-Pacific and Sub-Saharan Africa, said on Tuesday the company was looking at various options including selling of the assets.
Traditionally, ‘yieldco’ has been the major source for capital, but in the past few months, this avenue had slowed down in the US market. Globally, the company sells around 10 per cent of its portfolio on an average, says Gopalan.
A ‘yieldco’ is a company set up by a ‘sponsor’ or a ‘parent company’. The sponsor — in this case, SunEdison — will sell cash-flow yielding operating assets to the yieldco (TerraForm Global), which might come out with an IPO and get itself listed.
Gopalan said the company would look at adopting the warehouse concept, which prevails in other parts of the world. The concept is the company would develop projects, after which either it would rope in an investor or sell the project to a third party. So far, the company has developed and sold projects worth $3 billion globally.
Among the investors who have partnered with the company in warehouse projects outside India are Goldman Sachs, JP Morgan, and First Reserve.
The fund-raising is to support the firm’s plan to add 2 Gw of new projects in India over the next 18 months to two years. This would require investments to the tune of $2 billion. Of this, $1.4 billion will be from the lending market and $600 million would be equity component, which will be funded through yieldco, from outside investors and from the proceedings of the assets sold.
The company which earlier said that it would look at inorganic route aggressively has decided to go slow and focus more on organic.
While the Continuum sale has been called off, the company has said it has finished acquired Spanish developer Fersa's 100 Mw wind assets in Karnataka and Rajasthan.
On the Adani project in India, which, according to market sources is not taking off as expected, Gopalan said he cannot comment on it since its been looked after by the other team in the US.
Gopalan said that India is an important market for SunEdison globally around 20-25 per cent global business is in India, which is the largest pie for the US-based renewable major. ." We continue to be enthusiastic about Indian market", he said.