PORTLAND, Maine — SunEdison’s plan to buy wind developer First Wind for $2.4 billion would place its Maine wind projects in the portfolio of the world’s largest renewable energy company.
The deal also would hasten a shift in how renewable energy projects are financed.
If the deal closes as planned early next year, First Wind’s turbines would become part of a relatively new trend in renewable power that allows a company to turn its promise of regular returns from long-term electricity buyers into cash it could invest in new projects.
The investment from SunEdison also displaces Emera’s stake in First Wind, leaving the Nova Scotia-based power company with cash that it could invest in new power generation assets in New England.
I’ll gladly pay you in 20 years for a wind turbine today. Part of the difficulty in financing renewable energy projects, as with any new technology, is that it can take many years to receive a return on the upfront investment that not only includes construction but also research, site location work and — as we know in Maine — legal fees.
SunEdison is part of a shift in financing renewable power projects that involves splitting off projects that are operating and generating revenue from the parent company. SunEdison spun off the company TerraForm, making it public in July for that purpose.
TerraForm buys SunEdison’s completed renewable power projects and makes them available to investors, cashing out some of the value of those projects to support continued development of new projects. The parent company, SunEdison, also gets revenue by owning a majority stake in the power generation units that have long-term purchasing agreements.
First Wind would put wind in the sails of the solar developer. SunEdison has been a turnaround story over the last two years, and analysts see the public offering from TerraForm and the First Wind purchase as a boon for the company.
Analyst Shayle Kann with GTM Research told The New York Times the acquisition will help TerraForm appeal to investors looking for a bigger grouping of projects. Specifically, the company said it projects being able to complete 2.2 gigawatts of generation capacity in the next year, up from 1.7 gigawatts it planned before announcement of the deal.
As of the deal’s announcement, only wind projects were in the development pipeline for Maine, but First Wind’s forays into solar power projects in Hawaii and Utah and SunEdison’s experience in that realm could mean those types of projects are proposed here as well.
In September, SunEdison raised $145 million in equity financing from Google for its 82-megawatt Regulus solar project, scheduled to begin operating later this year.
Of the company’s approximately 500 megawatt pipeline for 2015, the company expects wind projects in Maine will make up about 148 megawatts through the Oakfield Wind project now under construction.
In an investor conference Tuesday, SunEdison projected it would bring the contested 185-megawatt Bingham project and its Hancock Wind projects online in 2016.
It listed its Weaver Wind, Molunkus Wind, Somerset Wind and the Bowers Mountain projects as components in its development fleet, with an expected commercial operation date of 2017. State regulators have denied a permit for the 48-megawatt Bowers Wind project, but First Wind appealed that decision to the state’s top court in July.
At the end of Tuesday, TerraForm power’s stock price rose about 27 percent, up nearly $7 to $32.75. Investors in parent company SunEdison responded similarly to the news, with the stock up almost 30 percent, or $4.87, to $21.48 on Tuesday.
The deal unwinds Emera and First Wind’s legal entanglements. With the SunEdison deal, Emera plans to sell its stake in First Wind, avoiding further legal challenges to that arrangement by two parties that say the relationship between a power generator and the parent company of a Maine utility violates rules of the region’s deregulated power markets.
In backing out of that partnership, Emera would get about $223 million that could end up going back into power investments in New England.
Dina Bartolacci Seely, a spokeswoman for Emera, said the company wasn’t seeking to sell its stake of a joint venture with First Wind, but the situation arose and it plans to put that money toward other investments after the deal closes. Whether that’s in New England is unclear.
“New England is a really big part of our energy strategy right now, and there could be a redeployment of that capital in New England,” Bartolacci Seely said. “That’s not unlikely but not certain, since there are no specific projects in mind.”
Angels or demons? Paul Williamson, director of the Maine Ocean and Wind Industry Initiative, said the deal stands to mean more investment in wind power projects in Maine.
“First Wind will benefit from [SunEdison’s] financing strength and state will benefit from the investment,” Williamson said.
Chris O’Neil, policy director for the wind-energy opposition organization Friends of Maine Mountains, said his group is cautious about what the deal could mean for the pace of wind project development in the state.
“First Wind is the devil that we know, and we’re cautious about this devil that we don’t know,” O’Neil said.