Dive Brief:
- SunEdison, the biggest renewables developer in the world, expanded its joint venture with Dominion Resources by adding the 265 MW Three Cedars solar project in Utah to its partnership with Dominion on Utah's 420 MW Four Brothers solar project.
- The two projects’ combined 685 MW — fully-financed and being developed by SunEdison — is contracted for under a 20 year power purchase agreement with PacifiCorp, a subsidiary of Warren Buffett’s Berkshire Hathaway Energy. They are expected online by mid-2016, in time to qualify for the 30% federal investment tax credit.
- Dominion's total investment will be $830 million for 50% of the cash equity and 99% of the tax equity in Four Brothers and Three Cedars. SunEdison is expected to sell its 50% interest to TerraForm Global, its yieldco subsidiary.
Dive Insight:
The first purchase by a new SunEdison “warehouse” investment vehicle was a third solar deal with Dominion. The "strategic partnership" between SunEdison and institutional investors advised by J.P. Morgan Asset Management will pay $300 million for 33% of a 425 MW portfolio of Dominion solar projects.
The 24 projects, in California, Connecticut, Georgia, Indiana, Tennessee and Utah, are expected to provide steady returns over the extended terms of their power purchase agreements with local electricity providers. Fifteen went online in 2013 or 2014 and the rest are completed or will be online this year, in time to qualify for the federal ITC.
A warehouse fund buys and owns large wind and solar projects from the global utility-scale developer, freeing up SunEdison’s capital. Because the projects have a forecastable guaranteed generation and a contract guaranteeing remuneration for the production, investors are assured a guaranteed return. The fund can then sell the projects to TerraForm for monetization through bond offerings when the yieldco can optimize its purchase.
