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SunEdison Inc (SUNEQ) Yieldco May Have Buyer in D.E. Shaw

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SunEdison Inc (NASDAQ:SUNEQ) may have a buyer for one of its yieldcos. D.E. Shaw, a New York hedge fund, has submitted a bid for TerraForm Power Inc (NASDAQ:TERP). A regulatory finding released on Tuesday shows that D.E. Shaw wants to replace the bankrupt solar firm as the operating sponsor of TerraForm Power. This comes as the yieldco confirmed in September that is looking to arrange a sale.

Will SunEdison Inc be Replaced by D.E. Shaw?

On Oct. 21, D.E. Shaw Renewable Investments (DESRI), the clean energy unit of the $38 billion hedge fund, made a bid to become the operating sponsor of TerraForm Power. This is a yieldco that was started and controlled by the bankrupt solar firm in order to manage its global green energy projects.

SunEdison Inc (SUNEQ)

D.E. Shaw has proposed to manage the solar firm’s solar and wind farms and reorganize its project portfolio. Bryan Martin, the managing director, wrote in a letter that it aims to “re-establish a growth objective, including by overseeing and executing acquisitions and divestitures of projects.”

The letter also stated that the hedge fund is ready to give TerraForm a right of first offer on a bulk of current and future DESRI projects. The hedge fund added that it would approve of a sale of the yieldco “at a fair price that properly reflects” its “intrinsic value.”

Right now, D.E. Shaw owns more than six percent of TerraForm Power’s Class A shares.

“Unfortunately, a sale on such terms may not be currently possible. We believe that TerraForm Power’s current stock price reflects a significant discount to intrinsic value due to the company’s association with SunEdison’s financial distress, as well as TerraForm Power’s current operational and financial ailments.”

The bid did not help TerraForm shares. The stock slipped nearly four percent this week. Year-to-date, TerraForm shares have risen close to four percent. It has a market cap of $1.82 billion. The yieldco owns and operates solar and wind farms in the United Kingdom, the U.S., Canada and Chile.

SunEdison shares soared 20 percent on Wednesday.

Will SunEdison Inc Seek Out Other Suitors?

SunEdison has been open in a sale of the yieldcos. This past summer, the bankrupt solar firm welcomed offers for both TerraForm Power and TerraForm Global Inc (NASDAQ:GLBL). It is presently working with both firms to manage a sale, while the yieldcos noted that they’re looking to sell themselves.

Over the past couple of months, a number of suitors have shown interest. The likes of BlackRock Inc., Brookfield Asset Management, Concord Holdings Ltd. and Appaloosa Management are interested in presenting an offer.

Experts have said that the bidders may either want all of the assets or just SunEdison’s Class B shares. At the same time, SunEdison is mulling over keeping its shares and restructuring around its stake.

Ultimately, any sale of any of the parties involved may be difficult. There are numerous financial woes, lawsuits and investigations occurring it may pose as challenges.

By taking over TerraForm Power, DESRI could expand upon its current 26 utility-scale wind and solar projects in North America. DESRI has a total of more than 1,300 megawatts of aggregate capacity. And this wouldn’t be the first time that D.E. Shaw and SunEdison have worked together on a deal.

In July, SunEdison sold its stake in a 150 MW California solar plant for $80 Million to D.E. Shaw.

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Andrew Moran

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