TerraForm (NASDAQ: TERP), a subsidiary of the largest clean energy developer in the world, SunEdison (NYSE: SUNE), has announced that it is going to buy seven wind farms from US-based Invenergy Wind LLC. The wind farms have total capacity of 930 mw. Incidentally, Invenergy is the largest producer of wind energy in the US.
The company has already acquired 500 mw in wind power plants and 21 mw in solar power plant capacity from First Wind last year. SunEdisonn and TerraForm paid $2.4 billion for the company.
The new deal with Invenergy is worth a cool $2 billion. Invenergy will retain 9.9 % in the assets and will continue to maintain and operate some of the facilities. But wait! There is a catch. 460 mw will be bought directly by TerraForm. 470 mw will accrue sometime later.
TerraForm shares rise on news, indicating markets have taken the news positively
Terraform shares rose by 3.5% after the news broke, climbing to $38.86. Sun Edison's shares also went up by 3.2% to $29.90. TerraFarm has already raised its 2016 dividend to $1.70 from $1.53. This is an increase of 26% over and above estimated by TerraFarm in its 2015 annual estimate. The deal is expected to close in the fourth quarter of 2015 (it comprises approximately 10% of Invenergy's total renewable energy assets in the US).
In a press release, Invenergy said that there was strong market interest for their wind power projects, a reflection of their quality. He also said that all the projects they sold to TerraForm had power sale contracts.
Wind energy a big business in the US
The US has one of the highest installed renewable energy capacity in the world. Wind energy forms a large part of this capacity. In the fourth quarter of 2014, the US had installed 65879 mw in wind energy capacity.
Wind energy make up 31% of the new energy capacity installed in the last five years. The power produced by these wind energy plants is enough to power 18 million homes. Most of that capacity is located on the eastern part of the US.
SunEdison and other large renewable energy companies such as NRG Energy Inc. (NYSE: NRG) and NextEra Energy Inc (NYSE: NEE) have hived off large parts of their renewable energy assets into new companies like TerraFarm. These new companies sell power to companies and utilities under long-term contacts and pay regular dividends to their shareholders.