TerraForm Power became one of the largest distributed generation businesses in the US when it acquired the Arcadia portfolio from AltaGas. Besides a 291 MW distributed solar portfolio, the deal included 10 MW of fuel cells and 21 MW of residential solar. TerraForm took out a non-recourse holdco bridge loan to finance the deal.
The yield company agreed to pay $720 million for the portfolio, which is contracted under power purchase agreements with an average remaining life of about 17 years. The deal increased the size of TerraForm Power’s distributed generation portfolio to about 750 MW.
The company said at the time that it intended to use the assets as a springboard to cross-sell storage and back-up generation services to its commercial and industrial customers.
TerraForm Power acquired the assets through a vehicle called TerraForm Arcadia Holdings, obtaining a $475 million bridge loan which it used in addition to cash drawn under its existing revolving credit facility to fund the acquisition initially.
The one-year senior secured bridge loan was priced at an initial spread of 100 bp over Libor.
TerraForm Power intended to sell minority interests in certain North American wind assets to raise a further $245 million to use as part of the permanent funding of the acquisition.
The sale of the distriuted generation assets came about as the result of an auction process. AltaGas hired Scotiabank and Greentech Capital Advisors to market the business in the first quarter of 2019, catching the eyes of financial as well as strategic investors. The portfolio for sale had included combined-heat-and-power assets alongside the residential solar and fuel cell projects.
AltaGas had itself come to own the assets as a result of its $8.4 billion acquisition of gas utility holding company WGL Holdings.
Sellers: AltaGas, WGL Holdings
Buyer: TerraForm Power (Brookfield Asset Management)
Enterprise value: $720 million
Total debt: $475 million
Closing date: September 25, 2019
Joint lead arrangers: HSBC, Natixis, Royal Bank of Canada, Sumitomo Mitsui Banking Corp
Sell-side financial advisers: Scotiabank, Greentech Nomura
Borrower’s counsel: Skadden
Lenders’ counsel: Milbank
Independent engineer: AWS Truepower (UL)
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