Given the mess that the collapse of SunEdison made and the deep ties between the company and its yeildcos, it is remarkable that TerraForm Power is functioning as well as it is. TerraForm continues to operate as a public company despite massive delays in financial filings and legal and financial scrapping with its former sponsor.
And while the yieldco continues to emphasize that it is focused on maximizing value for shareholders, TerraForm’s overlapping business with SunEdison puts it in a difficult position, particularly as it pursues $1 billion in claims against the bankrupt company.
Today TerraForm Power published a presentation giving an overview of its draft settlement agreement, which had already been sent to certain investors on September 26. This is in line with statements by both sides that a negotiated settlement is preferable to a lengthy and costly court battle.
Under the settlement, SunEdison and all pre-transaction shareholders would receive equal value per share in the event of a sale, and SunEdison would make a one-time payment to adjust for unpaid minimum distributions to shareholders.
Additionally, all intercompany claims would be stipulated and settled. TerraForm’s would be paid under its claim for amounts that which is says that SunEdison was obligated to reimburse under its sponsorship arrangements, but would drop other claims.
It is unclear at this time how much the reimbursements under the sponsorship arrangements represent out of the $1 billion in claims that TerraForm holds against SunEdison.
This comes as TerraForm Power considers strategic alternatives for its business, including sale of the company or partial acquisition by a new sponsor. This follows renewable energy investor D.E. Shaw’s proposal two weeks ago to take over as the sponsor of TerraForm.
The yieldco says that it would like to have SunEdison’s participation in this process, but notes that this is not its only option.
“TerraForm Power will consider strategic alternatives that do not require a settlement with SunEdison or SunEdison stockholder approval, although these may not be as beneficial to all stockholders (considering SunEdison and public stockholders collectively) as a consensual strategic transaction accompanied by a fair settlement,” noted TerraForm Power in its presentation to SunEdison creditors.