SunEdison share price down, agrees to acquire FirstWind and take the top power spot

SunEdison Inc announced it will purchase privately-owned FirstWind, expanding its portfolio types of renewable-energy and turning into the world’s largest developer of wind and solar power.

SunEdison said it will share the acquisition with its 64% owned TerraForm Power unit. The parent company will spend $1 billion for obtaining a portfolio of wind power development projects, with a promise for another $510 million in the future based on the performance of the business. Meanwhile, TerraForm will pay $862 million to take control over the operating wind farms located in the states of Vermont, New York, Maine and Hawaii.

The agreement will make SunEdison “by far” the worlds largest developer of new renewable energy projects, excluding some large hydropower dam developers, said the company.

“The reason why we’re doing it is really it doubles our served available market,” said CEO Ahmad Chatila. “Now we have combined with the best team in wind.” He also said that the purchase is “transformative” and going to accelerate both companies “engine” for renewable project development.

FirstWinds acquisition will attribute 521 megawatts to the power portfolio of TerraForm with another 1.6 gigawatts planned in 2016 and 2017. SunEdison will develop the additional projects and pass them to its subsidiary. After the deal TerraForm will add 4.6 gigawatts of installments distributed between wind and solar by the end of 2017.

“We are in the business of packaging electrons into long-term contracts,” TerraFroms CEO Carlos Domenech said. “Wind is a great asset class and we see tremendous growth potential. For us this is a logical expansion into renewables.”

TerraForm said it will issue a wave of new shares worth about $700 million to cover its part of the FirstWind deal. The move will reduce SunEdinsons stake to around 52%. The subsidiary is under the “yieldco” corporate form, that pays high dividends and has become extremely popular among the renewable energy industry. This kind of corporate structure allows developers to raise capital at lower cost by selling finished projects to their subsidiaries.

SunEdison also announced plans to develop wind power projects overseas, the company mentioned it is looking for more developed countries like Canada, the U.K., Chile, India and Mexico.

SunEdison lost 1.89% on Monday and closed at $16.61 in New York, marking a one-year increase of 26.31%. The company is valued at $4.50 billion. According to the Financial Times, the 16 analysts offering-12 month price targets for have a median target of $25.50, with a high estimate of $35.00 and a low estimate of $5.00. The median estimate represents a 53.52% increase from the last price of $16.61.