D.E. Shaw proposes to take over as TerraForm sponsor

Of all the pieces of the former SunEdison empire, TerraForm Power is perhaps the biggest jewel, with nearly 3 GW of solar and wind projects, mostly in the United States. The first solar yieldco has also suffered substantially following the bankruptcy of its sponsor, and holds $1 billion in claims against SunEdison.

TerraForm has been openly looking for a buyer for months, and there has been no shortage of interest. Hedge fund manager David Tepper has long been scheming to buy the company on the cheap, but the failure of collaboration between his Appaloosa Investments and Brookfield Asset Management seems to have put a damper on these plans.

However, any sale of the company is problematic, given unresolved lawsuits and debts. In light of these challenges hedge fund D.E. Shaw, itself a significant renewable energy asset owner, has come up instead with a new solution: to take over as the sponsor of TerraForm Power.

D.E. Shaw has outlined its proposal in a letter which was revealed in a regulatory filing this morning, which would involve D.E. Shaw Renewable Investments (DESRI) overseeing operations of TerraForm’s projects, their financing and capitalization, working to de-leverage projects, and “reorganizing the TerraForm Power project portfolio to re-establish a growth objective”.

Additionally, TerraForm would have a right of first offer on existing and future D.E. Shaw projects. D.E. Shaw currently holds 26 utility-scale wind and solar projects in North America with a combined total of over 1.3 GW of capacity, and recently completed construction of the largest utility-scale solar project in the Midwest.

D.E. Shaw is not new to this business. The investment firm was the former sponsor of First Wind before it was acquired by SunEdison, and additionally is the sponsor of Deepwater Wind, the company which built North America’s first offshore wind farm in waters off the coast of Rhode Island.

David Shaw and various D.E. Shaw subsidiaries currently own 25% of the shares of TerraForm Power, which gives the company a significant stake in whatever happens to the TerraForm. “I’m sure because they have a large stake in the company, they are probably looking at what is good for them,” Mercom Capital CEO Raj Prabhu told pv magazine. “It’s in their best interest to make this a success.”