SunEdison, TerraForm End $250 Million Deal, $4 Billion Overhang

SunEdison Inc. (NYSE: SUNE) announced Wednesday morning that it has terminated a $250 million purchase of a 16% stake in Brazilian renewable energy firm Renova Energia. The termination also eliminates drop-down sales that SunEdison and TerraForm Global Inc. (NASDAQ: GLBL) had planned. However, the previously announced 50-50 joint venture between Renova and SunEdison to develop, own and operate one gigawatt of utility-scale solar photovoltaic projects in Brazil remains.

The big savings, however, come from termination of the backlog agreement, which would have committed TerraForm Global to acquire some $4 billion in 12 new projects in Brazil:

These projects were in various stages of planning and development, and this former commitment was subject to significant conditions, along with satisfactory due diligence, regulatory approvals and certain third party consents, and each project was to also meet certain technical and operational requirements. If the significant conditions and other contingencies described above were met and all 12 projects were acquired, the aggregate consideration for these projects was projected at approximately $4 billion. The projects were intended for a subsequent sale by SunEdison to TerraForm Global, Inc. as call rights projects. On December 1, 2015, the Backlog Agreement was terminated, and TerraForm Global’s call rights list has been decreased by 2.7 gigawatts of projects as a result.

Tuesday, hedge fund Appaloosa Management released a letter from its president, David Tepper, to SunEdison’s board of directors questioning SunEdison’s proposed acquisition of Vivint Solar Inc. (NASDAQ: VSLR) and the impact that will have on TerraForm Power Inc. (NASDAQ: TERP), the yieldco SunEdison set up to own and operate domestic U.S. power projects.

SunEdison’s stock climbed 9.4% on Tuesday to close at $3.49, and it traded up a penny in the premarket session Wednesday morning. The stock’s 52-week range is $2.55 to $33.45.

Shares of TerraForm Global traded down about 2.5% Wednesday morning, after closing Tuesday at $4.41, also a daily gain of 9.4%. The company came public in late July of this year, and the stock’s post-IPO range is $4.00 to $14.10.

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