Monday, July 20, 2015

Why SunEdison is buying Vivint Solar for $2.2 billion

Clean power giant SunEdison continues its expansion plans, snapping up a large player in the growing market for rooftop solar panels.

Clean energy company SunEdison announced on Monday morning that it plans to acquire Vivint Solar, one of the largest U.S. companies that installs solar panels on home rooftops. SunEdison plans to pay $2.2 billion in the deal in a combination of cash and shares of SunEdison common stock and convertible notes.
The news sent Vivint Solar’s stock up over 40% in morning trading. Vivint Solar went public in late 2014 on the New York Stock Exchange and has financed and installed over 40,000 solar panel systems as of the end of March 2015.
SunEdison’s subsidiary TerraForm Power is acquiring the actual solar projects of Vivint Solar, both the ones already built and future projects in development. TerraForm Power is a yieldco, which is a publicly-traded company that bundles together the assets of clean energy projects based around the long term and predictable revenue generated by the reoccurring energy payments.
The deal is the latest move by SunEdison to aggressively expand across the clean energy industry and it highlights the quickly growing market for rooftop solar panel systems. In recent months, SunEdison acquired wind energy projects in India, and also First Wind, one of the largest wind energy developers in the U.S.
The news also shows how as the market for home solar panels grows, it will face increased consolidation. Bigger companies, with larger war chests, will more effectively battle for the valuable rooftops that can cost effectively go solar.

A SolarCity Installation As Earnings Figures Are Released
A SolarCity Corp. employee carries a solar panel during an installation at a home in the Eagle Rock neighborhood of Los Angeles, California, U.S., on Wednesday, May 7, 2014. SolarCity Corp., the largest U.S solar-power provider by market value, is expected to announce quarterly earnings figures after the close of U.S. financial markets on May 7. Photographer: Patrick T. Fallon/Bloomberg via Getty ImagesPhotograph by Patrick T. Fallon — Bloomberg via Getty Images

In the early 2000’s, SunEdison, led by entrepreneur Jigar Shah, was the pioneer of the business model that offers residential customers little or no money down on rooftops solar panel systems. The model generates money by charging customers a monthly energy bill like a utility does. Before this method became popular, customers had to mostly pay up front for solar panels, which could cost tens of thousands of dollars.
A decade later, many solar companies are using this model, including Vivint Solar, SolarCity, Clean Power Finance and Sunrun. SolarCity is the largest solar financier and installer in the U.S.

With the announcement of the news, SunEdison  SUNE 1.24%  also said that it’s raising its 2016 annual guidance of 2,800 to 3,000 megawatts of clean energy projects under development, to 4,200 to 4,500 megawatts under development. That’s a 50% increase.
The acquisition requires approval by Vivint Solar stockholders and will face reporting requirements. The deal is expected to close in the fourth quarter of 2015.

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