On July 20, SunEdison, the world's biggest renewable energy development firm, along with TerraForm Power, an owner and operator of clean energy power plants, announced the acquisition of Vivint Solar, a major supplier of residential solar systems in the U.S.
The merger will be worth approximately $2.2 billion in cash as the two major solar companies acquire the residential solar firm. Additionally, SunEdison has agreed to enter a power purchase agreement with TerraForm Power. Roughly 523 megawatts of solar power will be installed by Vivint Solar by the end of 2015, which will now all be moved over to SunEdison.
Through the $922 million power agreement, TerraForm Power will install the solar panels for residential solar protections through a "10-year average levered cash-on-cash yield of 9.5 percent," the release stated. Also, TerraForm Power will obtain future small commercial solar and completed residential projects from SunEdison's Residential and Small Commercial business unit.
SunEdison continues to grow
Ahmad Chatila, CEO of SunEdison and chairman of TerraForm Power, said the acquisition of Vivint Solar was the best plan of action for the company to transition its platform, and also, a logical move after obtaining the First Wind project in January 2015, the release stated.
"We expect the Vivint Solar transaction to create significant value for our stockholders through the accretion in our TerraForm Power ownership, the acceleration of our Incentive Distribution Rights and an immediate expansion of our capacity and bandwidth to grow our residential business in the U.S. and globally," Chatila added. "As of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1 gigawatt per quarter."
Carlos Domenech, CEO of TerraForm Power, also stated the expansion of residential solar projects in the company is an exciting process, which will help the solar company provide more power. Domenech added the company has been able to grow quickly and efficiently in the U.S.
According to the U.S. Securities and Exchange Commission, Vivint Solar installed more than 40,000 solar panel systems through March 2015. The company went public in the fourth quarter of 2014.
With cheaper solar panel manufacturing, the U.S. is able to install more renewable energy systems. This has led to a an increasing number of smaller solar power companies in the nation. However, major solar power companies such as Sunrun, Solar City and SunEdison continue to run the majority of projects.