TerraForm deal closes chapter on SunEdison’s UK market exploits

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The news today relating to TerraForm Power’s sale of its UK solar portfolio will undoubtedly be regurgitated, often verbatim, across media outlets, accompanied by gleeful quotes from the victorious parties now in control of the asset ownership, management and operations.

However, the real story is not about TerraForm. Nor is it about the new asset owner (Vortex and EFG Hermes) or the O&M (Lightsource). It has been no secret that these opportunities have been up for grabs for some time, and the final decision could easily have seen other names instead of Vortex and Lightsource.

The real story is about SunEdison, its foray into downstream solar farm development and subsequent efforts to move into overseas markets with a global footprint.

While we could write chapter-and-verse about just what happened to take a legacy semiconductor wafer supplier (MEMC) into a company trading renewable energy assets through brokers in the city, the deal today effectively calls time on SunEdison’s hitherto drive to be a major player in UK solar.

SunEdison came into the UK market once others had shown there were bountiful returns on offer from solar farms, if you brought one thing to the table – money.

The UK operations were based out of a slick office in Oliver’s Yard in Shoreditch, London, and were effectively a satellite of the European base in Madrid. The company rapidly set out to partner with existing project developers, but mainly was involved in buying shovel-ready sites that would be built by sub-contractors arriving in the UK from Spain.

While of course there was the not-unexpected accompaniment of doing their bit for climate change, this was a clinical and highly-efficient cash generation exercise, with the end goal appearing to be one where the yieldco arm (through TerraForm) would effectively have a gilt-edged government-backed long-term revenue stream of UK taxpayer money.

The tactic worked a treat at the time for SunEdison, over 350MW ended up with Terraform. But then two things happened. SunEdison’s debt snowballed, investor confidence was lost and the company ended up filing for Chapter 11 bankruptcy protection. And just for good measure, the UK government culled incentives for large-scale solar farms.

Indeed, at this time, SunEdison was starting to outline its plans for further UK market growth from the rooftop segment, with acquisitions and partnerships fuelling plans for third-party ownership and PPA-based models just starting to emerge.

Fast forward to today, we have 365MW of the UK solar assets being sold off by TerraForm, signalling the UK part of a broader sales activity across SunEdison and TerraForm that ranges from polysilicon to GCL Poly, wafering to the likes of LONGi Silicon Materials, and other downstream project rights and completed solar farm deals.

So what do we know about the 365MW of assets now held by Vortex and managed by Lightsource?

A total of 12 project developers were behind the original solar farm applications. About half of the sites were acquired by SunEdison as (primary) shovel-ready sites. The other sites were acquired on the secondary market once completed by other companies.

From an operations standpoint, the breakout is less complex. Aside from SunEdison’s sub-contracted lead-EPC activities, only two other EPCs were behind the site builds, each being an established mainland Europe global player.

Returning however to the deal with Vortex today, what we basically have is another example of secondary UK solar asset trading. Vortex is now the fifth largest solar farm owner in the UK by megawatt size, and one of the largest portfolios has now been snapped up.

Many other deals on the secondary market have been done in the past six months, and there are plenty others in the mix right now. In this respect, what we are seeing is the continued consolidation of asset owning, managing and operating being taken up by the eventual stakeholders of the UK’s first major push into solar deployment.