Renova Energia SA is opting for a new strategy in efforts to generate quick returns and accelerated growth. Instead of operating and owning power plants, which offers long-term, constant revenue streams, the company’s agreement to sell assets to Sunedison Inc (NYSE:SUNE)’s newly formed unit TerraForm Global Inc. marks the first step towards liquidating all its operating assets.
The significance
The new shift of strategy to sell Sunedison unit indicate that Renova will get payments when it ends building projects. It can then direct capital back into development of additional power plants. It will also offer Renova with surplus financing alternatives, making it well placed to take benefit of project development. The deal initially constitutes $534 million of assets covering 336.2 MW in wind parks and hydroelectric plants. The company has an alternative to receive TerraForm Global shares or cash.
The entity
The newly formed unit, TerraForm Global, known as yieldco owns and operates finished power plants. It is in fact the second such unit formed by SunEdison. The new unit will primarily focus on power plants in growing markets.
The deal
The deal provides Sunedison Inc (NYSE:SUNE) the right to acquire 1,870 megawatts of other significant Renova projects. It also finalized a letter of intent to acquire a 16% stake in Renova. The company purchased 757 megawatts of solar, wind, and hydro assets in several developing nations, including Uruguay, South Africa, Brazil and Peru as well as rights to acquire other projects with 1,918 MW of capacity.
The expert view
Mathias Becker, Renova’s president said that the latest measures enables access to competitive capital as credit market of Brazil is shy now. The deal between Renova and SunEdison unit is conditional on TerraForm Global IPO, which intend to raise funds of up to $700 million. Renova could have a stake in TerraForm Global, an option which is still being assessed.
