Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TerraForm Power NY Holdings, Inc. | terp8-ksaetatransactionfeb.htm |
| EX-99.1 - EXHIBIT 99.1 - TerraForm Power NY Holdings, Inc. | exhibit991toterpsaetatrans.htm |
| EX-10.4 - EXHIBIT 10.4 - TerraForm Power NY Holdings, Inc. | exhibit104toterpsaetatrans.htm |
| EX-10.3 - EXHIBIT 10.3 - TerraForm Power NY Holdings, Inc. | exhibit103toterpsaetatrans.htm |
| EX-10.2 - EXHIBIT 10.2 - TerraForm Power NY Holdings, Inc. | exhibit102toterpsaetatrans.htm |
| EX-10.1 - EXHIBIT 10.1 - TerraForm Power NY Holdings, Inc. | exhibit101toterpsaetatrans.htm |
Saeta Acquisition
TERRAFORM POWER
FEBRUARY 2018
Exhibit 99.2
2
Cautionary Statement Regarding Forward-Looking Statements
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements involve estimates, expectations, projections,
goals, assumptions, known and unknown risks, and uncertainties and typically include words or variations of words such as “expect,” “anticipate,” “believe,” “intend,” “plan,” “seek,”
“estimate,” “predict,” “project,” “goal,” “guidance,” “outlook,” “objective,” “forecast,” “target,” “potential,” “continue,” “would,” “will,” “should,” “could,” or “may” or other comparable terms
and phrases. All statements that address operating performance, events, developments or financial performance that TerraForm Power expects or anticipates will occur in the future
are forward-looking statements. They may include estimates or forecasts of expected net income (loss), revenues, earnings, adjusted EBITDA, adjusted revenue, cash available for
distribution (CAFD), dividend growth, cost saving initiatives, capital expenditures, liquidity, capital structure, future growth, and other financial performance items (including future
dividends per share), descriptions of management’s plans or objectives for future operations, products, or services, or descriptions of assumptions underlying any of the above.
Forward-looking statements provide TerraForm Power’s current expectations or predictions of future conditions, events, or results and speak only as of the date they are made.
Although TerraForm Power believes its expectations and assumptions are reasonable, it can give no assurance that these expectations and assumptions will prove to have been
correct and actual results may vary materially.
By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking
statements. Factors that might cause such differences include, but are not limited to, risks related to the expected timing and likelihood of completion of the tender offer for the shares
of Saeta Yield, S.A. (“Saeta”), including the timing or receipt of any governmental approvals, risks related to our financing of the transaction, including our ability to issue equity on
terms that are accretive to our shareholders and our ability to implement our permanent funding plan, risks related to the integration of Saeta and realization of the benefits of the
transaction, risks related to the number of the shares of Saeta that are tendered, including the risk that we are unable to acquire all of the shares of Saeta and are subject to minority
shareholder protection rights, the risk that any announcement of the transaction could have on an adverse impact on the market price of our common stock, risks related to entering
new international jurisdictions, including related to our increased exposure to foreign currency fluctuation and risks and costs associated with the hedging of the Euro, risks related to
Brookfield sponsorship, including our ability to realize the expected benefits of the transaction with Brookfield, risks related to wind conditions at our wind assets or to eather
conditions at our solar assets, risks related to potential events of default at our project financings, risks related to delays in our filing of periodic reports with the SEC, risks related to
the effectiveness of our internal controls over financial reporting, pending and future litigation, our ability to integrate the projects we acquire from third parties or otherwise and realize
the anticipated benefits from such acquisitions, the willingness and ability of counterparties to fulfill their obligations under offtake agreements, price fluctuations, termination
provisions and buyout provisions in offtake agreements, our ability to enter into contracts to sell power on acceptable prices and terms, including as our offtake agreements expire,
our ability to successfully identify, evaluate and consummate acquisitions, government regulation, including compliance with regulatory and permit requirements and changes in
market rules, rates, tariffs, tax rules, environmental laws and policies affecting renewable energy, operating and financial restrictions placed on us and our subsidiaries related to
agreements governing indebtedness, the condition of the debt and equity capital markets and our ability to borrow additional funds and access capital markets, as well as our
substantial indebtedness and the possibility that we may incur additional indebtedness going forward, cash trapped at the project level, including the risk that such project-level cash
may not be released up to us in a timely manner, risks related to the proposed relocation of our headquarters, our ability to compete against traditional and renewable energy
companies, and hazards customary to the power production industry and power generation operations, such as unusual weather conditions and outages.
TerraForm Power disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new
information, data, or methods, future events, or other changes, except as required by law. The foregoing list of factors that might cause results to differ materially from those
contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties which are described in TerraForm Power’s
Form 10-K for the fiscal year ended December 31, 2016 including the risk factors identified therein, as well as additional factors it may describe from time to time in other filings with
the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list
to be a complete set of all potential risks or uncertainties. The information presented in this presentation does not represent a complete picture of the financial position, results of
operation or cash flows of TerraForm Power, is not a replacement for full financial statements prepared in accordance with U.S. GAAP. In addition, this presentation contains
projections of TerraForm Power’s CAFD and proforma CAFD figures giving effect to the Saeta transaction, which are not measures under generally accepted accounting principles in
the United States. TerraForm Power believes these measures are useful to investors but the use of these measures is subject to inherent limitations and these measures should not
be considered in isolation from or as a substitute for the applicable U.S. GAAP measure.
Exhibit 99.2
3
1. If requested by TERP, Brookfield has agreed to provide a backstop for up to $400 million of the equity offering if the offering price equals the five-day volume weighted average price
(VWAP) as of close of market on February 6, 2018, of $10.66 per share
2. Weighted on Net MW, as of January 31, 2018
Saeta Acquisition | Executive Summary
• TerraForm Power has announced that it will commence a voluntary tender offer to acquire 100% of the
outstanding shares of Saeta Yield, S.A. (“Saeta”)
‒ TERP’s offer will be €12.20 in cash per share of Saeta
‒ Tender offer is irrevocably supported by Saeta shareholders who together own more than a 50% interest and
have committed to sell into the offer
‒ Purchase price of the ~50% interest will be approximately $600 million
‒ If TERP successfully acquires 100% of Saeta in tender offer, total purchase price will be ~ $1.2 billion
‒ TERP intends to finance the transaction with a $400 million equity offering, fully backstopped by Brookfield1,
with the balance funded from available liquidity
• Saeta is a leading European owner and operator of wind and solar assets, located primarily in Spain with 778
MW of wind and 250 MW of solar
• 100% of Saeta’s revenues are generated under very stable regulatory or contractual frameworks with
investment grade counterparties
• Transaction highlights
‒ Increases size of TERP’s portfolio by ~40%2 and establishes a scale presence in Western Europe
‒ Expected to be highly accretive to TERP’s CAFD
‒ Accelerates deleveraging of TERP’s balance sheet
• TERP has increased its dividend to $0.76 per share (on an annual basis), a 6% increase over its previous
target of $0.72 per share, and reconfirms its dividend growth target of 5-8% per annum
• The tender offer is expected to close in the second quarter of 2018, subject to certain conditions, including
obtaining regulatory approvals
Exhibit 99.2
4
Highly accretive • Pro forma FY 2017 adjusted CAFD per share accretion of 24%
• Levered IRR in excess of TERP’s target return
High quality asset
base in attractive
target market
• 100% owned, recently constructed assets in Western Europe
• 778 MW onshore wind and 250 MW concentrated solar
• Average age of six years and remaining useful life in excess of 25 years
Stable and
predictable cash
flows
• 100% of revenues generated under stable frameworks with investment grade counterparties
• 80% of revenues are regulated with limited resource and market price risk; remaining 20% are under
long term power purchase or concession agreements
• Average remaining regulatory/contractual term of 15 years
Multiple value
levers
• Opportunity to enhance value by reducing G&A and operating and maintenance costs
• Ability to increase cashflow by extending maturities of Saeta’s project debt, which fully amortizes with
~5 years of remaining regulatory/contract life
Accelerate
achievement of
deleveraging
objective
• Accelerates deleveraging of its corporate debt to cash flow ratio towards its 4.0x and 5.0x target
• Furthers TERP’s long term plan to establish an investment grade balance sheet
Saeta Acquisition | Transaction Highlights
This transformative transaction demonstrates TERP’s ability to grow accretively, expand
its geographic footprint, and accelerate the deleveraging of its balance sheet with
transactions originated through Brookfield’s sponsorship
Exhibit 99.2
5
Saeta Acquisition | Saeta Portfolio Overview1
Net MW 1,028 MW
Wind 778 MW
Concentrated Solar 250 MW
Number of Sites 24
% IG Counterparties 100%
18+ years,
29%
14-18
years,
26%
11-14 years,
45%
Average
15 years
Spain
Wind
53%
Spain CSP
24%
Portugal
Wind
14%
Uruguay
Wind
9%
9-10 years,
14%
6-9 years,
35%
3-6 years,
42%
1-3 years,
9%
Average
6 years
76% wind
24% solar
Remaining Contract LifeAsset AgeCapacity (MW)
Summary Statistics Spain
789 MW
Portugal
144 MW
Uruguay
95 MW
1. Derived from Saeta’s publicly available disclosures
Exhibit 99.2
6
<10 years
12%
10-15 years
45%
15-20 years
25%
20+ years
18%
Saeta Acquisition | TERP Portfolio Overview (Post-Acquisition)
Significant resource diversity2
Recently constructed2
Long-Term Offtake Contracts1
Solar
27%
Solar
(Regulated)
6%
Wind
54%
Wind
(Regulated)
13%
3.6 GW
Fleet
<2 years
15%
2-5 years
52%
>5 years
33%
1. Average remaining offtake contract length is net MW-weighted, as of 12/31/2017
2. Weighted on Net MW. As of January 25, 2018
Average
age of
5 years
Solar: US 25%
Solar: Canada 2%
Solar: Europe 7%
Solar: Chile 3%
Wind: US
Midwest 16%
Wind: US
Northeast 11%
Wind: US Texas
11%
Wind: US Hawaii 2%
Wind: Canada 2%
Wind: Spain 15%
Wind: Portugal 4%
Wind: Uruguay 3%
Meaningful
Portfolio
Effect
Large-scale, diversified portfolio2
~14 years1 of contracted cash flow with significant resource diversity
Average
~14 years
Remaining
Exhibit 99.2
7
1. Capital structure changes include reduction of the drawn revolver balance, repayment/refinancing non-recourse term loan, and high yield note refinancing
2. CFOA represents consolidated net cash from operating assets, excluding non-recurring items such as acquisitions, upfinancings, and any dividends paid
3. Guidance CFOA is €77-81M; analysis assumes an exchange rate of 1.24 USD/EUR
4. Saeta’s guidance excludes the full-year impact of the Uruguay and Portugal acquisitions, and the €199M refinancing of Manchasol 2, which resulted in a decrease in the asset’s cost of debt.
Based on Saeta management guidance in the 9M 2017 results presentation, adjusting for the full-year impact of these items results in a $6.7M (€5.4M) increase to CFOA
5. CAFD impact includes only incremental full-year interest expense assuming a 4.75% interest rate
6. Assumes a ~4% full-year average interest rate
7. Incremental management fee based on 1.25% of market cap growth assuming ~38M of incremental shares, a $0.76 DPS and a 6% dividend yield
8. $400M of equity based on an issuance at $10.66/share (the five-day volume-weighted average price (VWAP) as of close of market on February 6, 2018)
• Pro forma FY 2017 adjusted CAFD per share implies ~24% accretion over TERP’s standalone
FY 2017 CAFD per share guidance
‒ TERP’s FY 2017 CAFD guidance (midpoint): $118M (includes impact of asset sales and capital structure
changes)1
‒ Saeta’s FY 2017 cash flow from operating assets (CFOA)2 guidance (midpoint): $105M (includes impact of
asset acquisitions and capital structure changes)3,4
‒ Transaction-specific CAFD impacts include $350M of incremental project financings5, $450M in HoldCo
borrowings6, an increased BAM management fee7, and the issuance of ~38M shares to fund the acquisition8
Saeta Acquisition | Pro Forma Accretion
$0.80/Share
148M Shares$0.61/Share
148M Shares
$0.99/Share
186M Shares
CAFD / Share Accretion ~24%
4
Exhibit 99.2
8
$0.76
$0.96
$0.20
Target 2018 DPS 2022 DPS
Saeta Acquisition | Dividend Growth
Increase 2018 DPS by 6% to $0.76 per share
Reconfirm target annual dividend growth at 5-8%
Anticipate that payout ratio will fall below 80% to 85% in near term
~6%
CAGR
Opportunistic acquisitions originated by Brookfield would be upside to this plan
• Increasing Payout Ratio
• Margin Improvement
• Investment of Retained Cash Flow
• Modest Amount of Equity for
Accretive Investments
Exhibit 99.2
9
• Prior to funding the transaction, TerraForm Power has over $1 billion of liquidity under
committed facilities, including $500 million under its corporate credit facility, which has been
upsized to $600 million, and $500 million under the sponsor line with Brookfield
• Assuming a $1.2 billion acquisition price, TERP intends to execute a funding plan comprised
of the following sources:
‒ A $400 million equity offering, which Brookfield has agreed to backstop in order to provide a
minimum issuance price equal to TerraForm Power’s 5-day VWAP immediately prior to
announcement of the transaction1;
‒ The remaining $800 million will be financed with available liquidity, which Terraform Power
intends to refinance with a combination of project financings of its unencumbered assets and
cash to be released from Saeta’s assets
Saeta Acquisition | Funding Plan
HoldCo
42%
Non-
recourse
58%
TERP Standalone Leverage Breakdown
(9/30/2017)
HoldCo
36%
Non-
recourse
64%
Post-Acquisition Leverage Breakdown
Pro Forma2
1. If requested by TERP, Brookfield has agreed to provide a backstop for up to $400 million of the equity offering if the offering price equals the five-day volume weighted average price
(VWAP) as of close of market on February 6, 2018, of $10.66 per share
2. Non-recourse includes $350 million of non-recourse project-level debt utilized in funding the Saeta acquisition
Exhibit 99.2
10
Appendix
Exhibit 99.2
11
Saeta Acquisition | Spanish Tariff Summary
Mitigant Description
Tariff Deficit Under
Control
• Historical deficit debt being repaid (€2.5 billion/year) with current power system annual surplus of
~€500 million1
Revision Dynamics
• Regulation allows government discretion over revision parameters (i.e., spread over 10-yr bond) every
6-years to set a “reasonable rate of return”
European Renewables
Targets
• Reduction in regulated returns would compromise 8 GW2 of new greenfield projects awarded at 2017
auctions
Lawsuits from 2014
Reform
• Government has already created reserves to address future settlements stemming from lawsuits from
2014 subsidy reform
• Spanish regulated return is a key value driver, but existing risks have been effectively
mitigated
‒ Spanish revenues account for ~80% of total Saeta revenues and are 100% regulated
‒ Regulated return revisions every 6-years with next revision in 2020
‒ Underwriting assumes a downward revision by 2020
• Risk of downward revision in 2020 of regulated return is mitigated by:
1. Source: CNMC’s Report on the Current Status of the Debt of the Electrical System
2. Source: European Commission (http://europa.eu/rapid/press-release_IP-17-4542_en.htm)
Exhibit 99.2
12
• Regulatory regime remunerates renewables through a guaranteed return on deemed investment (RAB model)
to be revised every 6 years based on Spanish bond plus a spread
‒ Regulated return takes into account the economic cycle, electricity demand, and Spanish treasury bond
outlook, providing a “reasonable return” for these activities
‒ Revised every 6 years, with the next review due in 2020
• Remuneration comprises a capacity payment (€/MW) on top of merchant revenues and is determined by
applying the regulated return to the Net Asset Value (NAV) of a theoretical reference plant
‒ NAV is based on standard cost and generation parameters of an average plant differentiated by region and
COD
‒ Capacity top-up value is the difference between merchant revenues forecasted by the regulator and the total
revenues required to reach regulated returns
• Determined ex-ante and valid for a 6-year period with minor look-back adjustments in year 3 to account
for difference between power price and peaking discount outturn versus government forecasts
Saeta Acquisition | Spanish Tariff Mechanics
Market Payment Component Regulated Payment Component
Electricity Sold @ Pool
Remuneration to Investment (Rinv)
top-up payment over electricity sales, to reach guaranteed RoR
Regulated
Revenues
• Paid in hourly market
• Renewable facilities sell
electricity to the market
• Received on a monthly basis: Fixed amount per installed capacity (€/MW)
• Intended to cover investment costs that cannot be recovered through the sale
of electricity to the market in order to reach the guaranteed regulated return
Exhibit 99.2
13
Saeta Acquisition | Spanish Tariff Debt Overview
Historical Tariff Deficit / Surplus and cumulated debt (€bn)1
Source: Spanish Regulator (CNMC)
• Spain’s electricity tariff debt, which peaked in 2013, has since enjoyed a surplus as system costs have now
been brought in line with revenues
‒ Spain’s tariff debt accumulated through 2013 as full system costs were not passed through to consumers
‒ From 2013 to 2015, the Government implemented four key measures to rebalance system costs and revenues
• Moratoria on subsidies for new renewables since early 2012
• Increased access tariffs to consumers
• Cutting tariffs and subsidies: (i) reductions of subsidies to renewable and cogeneration plants by replacing
feed-in-tariffs with a regulated return model; (ii) a downward revision to returns for distribution and transmission
assets; (iii) and cuts to capacity payments to conventional generators
• New taxes: (i) generation tax on all generators, (ii) tax on gas/coal commodities, (iii) technology-specific taxes for
nuclear and hydro
1. Source: CNMC’s Report on the Current Status of the Debt of the Electrical System
-5
0
5
10
15
20
25
30
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014 2016
Deficit / Surplus Cumulated Debt
Exhibit 99.2