Preemptive Acquisitions by SunEdison Point to Growing Investment in Emerging-Market Renewables

With its $2 billion acquisition of assets from North American renewable power plant operator Invenergy Wind this week, SunEdison is making a landmark deal.

It is but the latest in a series of moves that suggest a preemptive strategy by SunEdison to get a material portfolio of global renewable-energy assets together so it can float an emerging-markets yieldco in the U.S.

A year ago this month, SunEdison rolled out its first yieldco developed-market IPO in the guise of TerraForm Power. That IPO debuted in July 2014 at $25 per share; today it is trading for almost $40. (Yieldcos explained, via Bloomberg: “An increasingly common way for renewable-energy developers to raise capital at lower costs. Developers sell new projects to their yieldco, using the proceeds to fund additional plants. Revenue from selling power provides funds for the yieldco to buy more plants as they are built and also pay dividends to investors.”)

The company’s Invenergy acquistion, announced Monday, builds enormously on its purchase this past November of First Wind for $2.4 billion. The two deals combined give SunEdison a sizable development pipeline for wind energy. They also mean SunEdison controls one of the largest renewable energy portfolios in the world. Both are very material transactions that presage how Western equity and debt capital will now flow rapidly into the global renewable infrastructure sector. The company is setting a pace others are bound to follow.

All told over the past several months, SunEdison has acquired a portfolio of 757 megawatts of renewable-energy assets (wind, solar and hydro) through nine transactions in seven emerging markets (Brazil, Chile, China, India, Peru, South Africa and Uruguay). It has more than twice that amount—1.9 gigawatts—of renewable-energy projects in the pipeline. And SunEdison has made a believer out of big-money investors, having attracted a $175 million equity stake in the seven-market deal from the private equity firm the Blackstone Group and two others. The company also landed $362 million in acquisition finance to support that move.

Here’s a snapshot of some of the deals SunEdison has made in the past several weeks alone:

• A memorandum of understanding (July 2) with the Spanish wind-turbine maker Gamesa to build up to 1 gigawatts of wind-powered electricity in target markets that include India and Mexico.
• Acquisition (June 16) of Continuum Wind Energy, a Singapore company that owns 242 megwatts of wind-powered generation in the Indian states of Maharashtra and Gujarat.
• That seven-portfolio acquisition (May 7) noted above, which includes 150 megawatts of wind-powered assets from Honiton Energy Holding (China) and102 megawatts of assets (India) owned by Fersa Energias Renovables of Spain.
• An equity investment in Imergy Power Systems (U.S.), and the purchase of 1,000 energy-storage units from the company for installation across India.

SunEdison’s acquisition of Invenergy and its many renewable-energy holdings in the U.S. and Canada is a landmark deal, to be sure, that will help drive private-sector investment in solar.

But there is much, much more to come in the solar sector as a whole—in developed and underdeveloped countries alike.

Tim Buckley is IEEFA’s director of Energy Finance Studies, Australasia.