TERRAFORM GLOBAL, INC. (NASDAQ:GLBL) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement and Voting and Support Agreement
On March 6, 2017, TerraForm Global, Inc., a Delaware corporation
(the Company), entered into an Agreement and Plan of
Merger (the Merger Agreement) with Orion US Holdings 1
L.P. (Parent), a Delaware limited partnership, an
affiliate of Brookfield Asset Management Inc.
(Brookfield), and BRE GLBL Holdings Inc., a Delaware
corporation and wholly owned subsidiary of Parent (Merger
Sub), providing for the merger of Merger Sub with and into
the Company (the Merger), with the Company surviving as a
wholly owned subsidiary of Parent. Concurrently with the
announcement of the Merger Agreement, Brookfield and TerraForm
Power, Inc. (TERP) announced the entry into a Merger and
Sponsorship Transaction Agreement, dated March 6, 2017 by and
among TERP, a Delaware corporation, Parent, and BRE TERP Holdings
Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (BRE TERP Holdings), to which BRE TERP Holdings
will be merged with and into TERP and TERP will survive the
merger as a subsidiary of Parent in which Parent will hold an
approximately 51% interest.
(the Company), entered into an Agreement and Plan of
Merger (the Merger Agreement) with Orion US Holdings 1
L.P. (Parent), a Delaware limited partnership, an
affiliate of Brookfield Asset Management Inc.
(Brookfield), and BRE GLBL Holdings Inc., a Delaware
corporation and wholly owned subsidiary of Parent (Merger
Sub), providing for the merger of Merger Sub with and into
the Company (the Merger), with the Company surviving as a
wholly owned subsidiary of Parent. Concurrently with the
announcement of the Merger Agreement, Brookfield and TerraForm
Power, Inc. (TERP) announced the entry into a Merger and
Sponsorship Transaction Agreement, dated March 6, 2017 by and
among TERP, a Delaware corporation, Parent, and BRE TERP Holdings
Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (BRE TERP Holdings), to which BRE TERP Holdings
will be merged with and into TERP and TERP will survive the
merger as a subsidiary of Parent in which Parent will hold an
approximately 51% interest.
The proposed Merger was approved by the board of directors of the
Company (the Board of Directors), following the
recommendation of its Corporate Governance and Conflicts
Committee (the Conflicts Committee). Completion of the
Merger is expected to occur, subject to satisfaction of closing
conditions, in the second half of 2017.
Company (the Board of Directors), following the
recommendation of its Corporate Governance and Conflicts
Committee (the Conflicts Committee). Completion of the
Merger is expected to occur, subject to satisfaction of closing
conditions, in the second half of 2017.
As a result of the Merger, each share of Class A common stock of
the Company, par value $0.01 per share (the Class A
Shares), issued and outstanding immediately prior to the
effective time of the Merger (other than Class A Shares that are
(i) owned by the Company, Parent or any of their direct or
indirect wholly owned subsidiaries and not held on behalf of
third parties, (ii) owned by stockholders who have perfected and
not withdrawn a demand for appraisal rights to Section 262 of the
Delaware General Corporation Law or (iii) held by any direct or
indirect wholly owned subsidiary of the Company that is taxable
as a corporation (the foregoing clauses (i) – (iii),
collectively, the Excluded Shares)), will be converted
into the right to receive per share Merger consideration equal to
$5.10 per Class A Share in cash, without interest.
the Company, par value $0.01 per share (the Class A
Shares), issued and outstanding immediately prior to the
effective time of the Merger (other than Class A Shares that are
(i) owned by the Company, Parent or any of their direct or
indirect wholly owned subsidiaries and not held on behalf of
third parties, (ii) owned by stockholders who have perfected and
not withdrawn a demand for appraisal rights to Section 262 of the
Delaware General Corporation Law or (iii) held by any direct or
indirect wholly owned subsidiary of the Company that is taxable
as a corporation (the foregoing clauses (i) – (iii),
collectively, the Excluded Shares)), will be converted
into the right to receive per share Merger consideration equal to
$5.10 per Class A Share in cash, without interest.
Concurrently with the execution and delivery of the Merger
Agreement, SunEdison, Inc. (SunEdison) and certain of its
affiliates executed and delivered a voting and support agreement
with Brookfield and the Company (the Voting and Support
Agreement) to which it agreed to vote or cause to be voted
any shares of common stock, par value $0.01 per share, of the
Company (each, a Share and, collectively, the
Shares) held by it or any of its controlled affiliates in
favor of the Merger and to take certain other actions to support
the consummation of the Merger and the other transactions
contemplated by the Merger Agreement. The foregoing description
of the Voting and Support Agreement does not purport to be
complete and is subject to, and qualified in its entirety by, the
full text of the Voting and Support Agreement attached hereto as
Exhibit 2.3, which is incorporated herein by reference.
Agreement, SunEdison, Inc. (SunEdison) and certain of its
affiliates executed and delivered a voting and support agreement
with Brookfield and the Company (the Voting and Support
Agreement) to which it agreed to vote or cause to be voted
any shares of common stock, par value $0.01 per share, of the
Company (each, a Share and, collectively, the
Shares) held by it or any of its controlled affiliates in
favor of the Merger and to take certain other actions to support
the consummation of the Merger and the other transactions
contemplated by the Merger Agreement. The foregoing description
of the Voting and Support Agreement does not purport to be
complete and is subject to, and qualified in its entirety by, the
full text of the Voting and Support Agreement attached hereto as
Exhibit 2.3, which is incorporated herein by reference.
The Merger Agreement includes a non-waivable condition to closing
that the Merger Agreement and the transactions contemplated by
the Merger Agreement be approved by holders of a majority of the
outstanding Class A Shares, excluding all Class A Shares held by
SunEdison or any of its affiliates (SunEdison Class A
Shares) and Parent or any of its affiliates.
that the Merger Agreement and the transactions contemplated by
the Merger Agreement be approved by holders of a majority of the
outstanding Class A Shares, excluding all Class A Shares held by
SunEdison or any of its affiliates (SunEdison Class A
Shares) and Parent or any of its affiliates.
Closing of the Merger also is subject to certain other
conditions, including the adoption of the Merger Agreement by
the holders of a majority of the total voting power of the
outstanding Shares entitled to vote on the Merger, receipt of
certain regulatory approvals, and the entry by the United
States Bankruptcy Court for the Southern District of New York
(the Bankruptcy Court) of orders authorizing and
approving the entry by SunEdison (and if, applicable,
SunEdisons debtor affiliates) into the Settlement Agreement,
the Voting and Support Agreement and any other agreement
entered into in connection with the Merger or the other
transactions contemplated by the Merger Agreement to which
SunEdison or any other debtor will be a party (the
Bankruptcy Court Order). In addition, Parents and Merger
Subs obligations to consummate the Merger are subject to the
requirement that certain litigation has been finally dismissed
with prejudice or the settlement thereof has been submitted for
court approval in a manner reasonably satisfactory to Parent to
agreements or stipulations containing releases reasonably
satisfactory to Parent, and all final approvals of courts or
regulatory authorities required for the settlements and
releases to become final, binding and enforceable; provided,
however, that in no event will a settlement of certain claims
made by a Renova Energia, S.A. include an aggregate payment by
the Company and its subsidiaries of greater than $3,000,000
(net of any amounts funded directly or indirectly by insurance
proceeds). In the event that this condition has not been
satisfied when all other conditions to closing are satisfied
(other than those that by their nature are satisfied or waived
at closing), Parent and the Company have agreed to negotiate in
good faith to adjust, or defer a portion of, the $5.10 in cash
per Class A Share otherwise payable to the terms of the Merger
Agreement so that this condition will be satisfied.
conditions, including the adoption of the Merger Agreement by
the holders of a majority of the total voting power of the
outstanding Shares entitled to vote on the Merger, receipt of
certain regulatory approvals, and the entry by the United
States Bankruptcy Court for the Southern District of New York
(the Bankruptcy Court) of orders authorizing and
approving the entry by SunEdison (and if, applicable,
SunEdisons debtor affiliates) into the Settlement Agreement,
the Voting and Support Agreement and any other agreement
entered into in connection with the Merger or the other
transactions contemplated by the Merger Agreement to which
SunEdison or any other debtor will be a party (the
Bankruptcy Court Order). In addition, Parents and Merger
Subs obligations to consummate the Merger are subject to the
requirement that certain litigation has been finally dismissed
with prejudice or the settlement thereof has been submitted for
court approval in a manner reasonably satisfactory to Parent to
agreements or stipulations containing releases reasonably
satisfactory to Parent, and all final approvals of courts or
regulatory authorities required for the settlements and
releases to become final, binding and enforceable; provided,
however, that in no event will a settlement of certain claims
made by a Renova Energia, S.A. include an aggregate payment by
the Company and its subsidiaries of greater than $3,000,000
(net of any amounts funded directly or indirectly by insurance
proceeds). In the event that this condition has not been
satisfied when all other conditions to closing are satisfied
(other than those that by their nature are satisfied or waived
at closing), Parent and the Company have agreed to negotiate in
good faith to adjust, or defer a portion of, the $5.10 in cash
per Class A Share otherwise payable to the terms of the Merger
Agreement so that this condition will be satisfied.
Each of the Company, Parent and Merger Sub has made customary
representations and warranties in the Merger Agreement. The
Company has also agreed to various agreements and covenants,
including, among others, and subject to certain exceptions, to
conduct its business in the ordinary course between execution
of the Merger Agreement and closing of the Merger and not to
engage in certain specified types of transactions during such
period.
representations and warranties in the Merger Agreement. The
Company has also agreed to various agreements and covenants,
including, among others, and subject to certain exceptions, to
conduct its business in the ordinary course between execution
of the Merger Agreement and closing of the Merger and not to
engage in certain specified types of transactions during such
period.
In addition, the Company is subject to a no change of
recommendation restriction limiting its ability to change its
recommendation in respect of the Merger except as permitted by
the Merger Agreement and a no shop restriction on its ability
to solicit alternative acquisition proposals from third parties
and to provide information to, and engage in discussions with,
third parties regarding alternative acquisition proposals.
recommendation restriction limiting its ability to change its
recommendation in respect of the Merger except as permitted by
the Merger Agreement and a no shop restriction on its ability
to solicit alternative acquisition proposals from third parties
and to provide information to, and engage in discussions with,
third parties regarding alternative acquisition proposals.
The Merger Agreement contains specified termination rights,
including the right for each of the Company and Parent to
terminate the Merger Agreement if the Merger is not consummated
by December 6, 2017 (subject to a three-month extension under
certain circumstances at the discretion of either the Company
or Parent). The Merger Agreement provides for other customary
termination rights for both the Company and Parent (including,
for Parent, if the Board of Directors changes its
recommendation in respect of the Merger) as more particularly
set forth in the Merger Agreement. The Company is required to
pay Parent a termination fee equal to $30 million following
termination of the Agreement in the following circumstances:
(i) the requisite stockholder approval has not been obtained by
the termination date, and an alternative acquisition proposal
to acquire the Company has been made or announced, and within
12 months of the termination of the Merger Agreement, the
Company enters into a definitive agreement or consummates any
alternative acquisition (as defined in the Merger Agreement),
in such case, net of any expense fee paid by the Company to
Parent in connection with the Merger; (ii) if either party
terminates the Merger Agreement because the Bankruptcy Court
Order has not been entered by the Bankruptcy Court by the date
provided for such approval in the Settlement Agreement, and
within 12 months of the termination of the Merger Agreement,
the Company enters into a definitive agreement or consummates
any alternative acquisition (as defined in the Merger
Agreement), in such case, net of any expense fee paid by the
Company to Parent in connection with the Merger; (iii) if
either party terminates the Merger Agreement because the
requisite stockholder approval has not been obtained or because
the Agreement has not been consummated by the termination date,
and at the time of termination, the Board of Directors has
changed its recommendation in respect of the Merger; or (iv) if
Parent terminates the Merger Agreement because the Board of
Directors has made and not withdrawn a change of recommendation
in respect of the Merger and at the time of Parents termination
the Company has not obtained the requisite stockholder approval
of the Merger or the Bankruptcy Court Order has not been
entered by the Bankruptcy Court. In addition, if the Merger
Agreement is terminated, under certain circumstances, the
Company has agreed to pay to Parent an $8 million expense
reimbursement fee.
including the right for each of the Company and Parent to
terminate the Merger Agreement if the Merger is not consummated
by December 6, 2017 (subject to a three-month extension under
certain circumstances at the discretion of either the Company
or Parent). The Merger Agreement provides for other customary
termination rights for both the Company and Parent (including,
for Parent, if the Board of Directors changes its
recommendation in respect of the Merger) as more particularly
set forth in the Merger Agreement. The Company is required to
pay Parent a termination fee equal to $30 million following
termination of the Agreement in the following circumstances:
(i) the requisite stockholder approval has not been obtained by
the termination date, and an alternative acquisition proposal
to acquire the Company has been made or announced, and within
12 months of the termination of the Merger Agreement, the
Company enters into a definitive agreement or consummates any
alternative acquisition (as defined in the Merger Agreement),
in such case, net of any expense fee paid by the Company to
Parent in connection with the Merger; (ii) if either party
terminates the Merger Agreement because the Bankruptcy Court
Order has not been entered by the Bankruptcy Court by the date
provided for such approval in the Settlement Agreement, and
within 12 months of the termination of the Merger Agreement,
the Company enters into a definitive agreement or consummates
any alternative acquisition (as defined in the Merger
Agreement), in such case, net of any expense fee paid by the
Company to Parent in connection with the Merger; (iii) if
either party terminates the Merger Agreement because the
requisite stockholder approval has not been obtained or because
the Agreement has not been consummated by the termination date,
and at the time of termination, the Board of Directors has
changed its recommendation in respect of the Merger; or (iv) if
Parent terminates the Merger Agreement because the Board of
Directors has made and not withdrawn a change of recommendation
in respect of the Merger and at the time of Parents termination
the Company has not obtained the requisite stockholder approval
of the Merger or the Bankruptcy Court Order has not been
entered by the Bankruptcy Court. In addition, if the Merger
Agreement is terminated, under certain circumstances, the
Company has agreed to pay to Parent an $8 million expense
reimbursement fee.
The representations, warranties and covenants of the Company
contained in the Merger Agreement have been made solely for
the benefit of Parent and Merger Sub. In addition, such
representations, warranties and covenants (a) have been made
only for purposes of the Merger Agreement, (b) have been
qualified by confidential disclosures made to Parent and
Merger Sub in connection with the Merger Agreement, (c) are
subject to materiality qualifications contained in the Merger
Agreement that may differ from what may be viewed as material
by investors and (d) have been included in the Merger
Agreement for the purpose of allocating risk among the
contracting parties rather than establishing matters as
facts. Accordingly, the Merger Agreement is included with
this filing only to provide investors with information
regarding the terms of the Merger Agreement, and not to
provide investors with any other factual information
regarding the Company or its business. Investors should not
rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state
of facts or condition of the Company or any of its
subsidiaries or affiliates. Moreover, information concerning
the subject matter of the representations and warranties may
change after the date of the Merger Agreement, which
subsequent information may or may not be fully reflected in
the Companys public disclosures. The Merger Agreement should
not be read alone, but should instead be read in conjunction
with the other information regarding the Company that is or
will be contained in, or incorporated by reference into, the
Forms 10-K, Forms 10-Q and other documents that the Company
files with the Securities and Exchange Commission (the
SEC).
contained in the Merger Agreement have been made solely for
the benefit of Parent and Merger Sub. In addition, such
representations, warranties and covenants (a) have been made
only for purposes of the Merger Agreement, (b) have been
qualified by confidential disclosures made to Parent and
Merger Sub in connection with the Merger Agreement, (c) are
subject to materiality qualifications contained in the Merger
Agreement that may differ from what may be viewed as material
by investors and (d) have been included in the Merger
Agreement for the purpose of allocating risk among the
contracting parties rather than establishing matters as
facts. Accordingly, the Merger Agreement is included with
this filing only to provide investors with information
regarding the terms of the Merger Agreement, and not to
provide investors with any other factual information
regarding the Company or its business. Investors should not
rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state
of facts or condition of the Company or any of its
subsidiaries or affiliates. Moreover, information concerning
the subject matter of the representations and warranties may
change after the date of the Merger Agreement, which
subsequent information may or may not be fully reflected in
the Companys public disclosures. The Merger Agreement should
not be read alone, but should instead be read in conjunction
with the other information regarding the Company that is or
will be contained in, or incorporated by reference into, the
Forms 10-K, Forms 10-Q and other documents that the Company
files with the Securities and Exchange Commission (the
SEC).
The foregoing description of the Merger Agreement, the Merger
and the transactions contemplated by the Merger Agreement
does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Merger
Agreement attached hereto as Exhibit 2.1, which is
incorporated herein by reference.
and the transactions contemplated by the Merger Agreement
does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Merger
Agreement attached hereto as Exhibit 2.1, which is
incorporated herein by reference.
Settlement Agreement
The Company also entered into a settlement agreement with
SunEdison and certain other parties named therein (the
Settlement Agreement) to which the Company and
SunEdison released all intercompany claims in connection with
the SunEdison bankruptcy (with certain exceptions). In
consideration for such release, SunEdison will exchange,
effective as of immediately prior to the effective time of
the Merger, all of the Class B Units (as defined in the
Merger Agreement) of TerraForm Global, LLC held by it or any
of its controlled affiliates for a number of Class A Shares
equal to 25% of the issued and outstanding Class A Shares (on
a fully diluted basis) measured as of immediately prior to
the effective time of the Merger (the Exchange). As a
result of and following completion of the Exchange, all of
the issued and outstanding shares of Class B common stock,
par value $0.01 per share, of the Company will be redeemed
and retired and all issued and outstanding IDRs (as defined
in the Merger Agreement) will be cancelled.
SunEdison and certain other parties named therein (the
Settlement Agreement) to which the Company and
SunEdison released all intercompany claims in connection with
the SunEdison bankruptcy (with certain exceptions). In
consideration for such release, SunEdison will exchange,
effective as of immediately prior to the effective time of
the Merger, all of the Class B Units (as defined in the
Merger Agreement) of TerraForm Global, LLC held by it or any
of its controlled affiliates for a number of Class A Shares
equal to 25% of the issued and outstanding Class A Shares (on
a fully diluted basis) measured as of immediately prior to
the effective time of the Merger (the Exchange). As a
result of and following completion of the Exchange, all of
the issued and outstanding shares of Class B common stock,
par value $0.01 per share, of the Company will be redeemed
and retired and all issued and outstanding IDRs (as defined
in the Merger Agreement) will be cancelled.
The foregoing description of the Settlement Agreement does
not purport to be complete and is subject to, and qualified
in its entirety by, the full text of the Settlement
Agreement attached hereto as Exhibit 2.2, which is
incorporated herein by reference.
not purport to be complete and is subject to, and qualified
in its entirety by, the full text of the Settlement
Agreement attached hereto as Exhibit 2.2, which is
incorporated herein by reference.
Overview of Principal Events Leading to the Merger
Agreement with Brookfield
Agreement with Brookfield
On March 6, 2017, following the recommendation of the
Conflicts Committee, the Board of Directors (i) determined
that the Merger is fair to, and in the best interests of,
the Company and its stockholders, (ii) approved and
declared advisable the Merger Agreement and the Merger and
the other transactions contemplated by the Merger
Agreement, and resolved to recommend that the holders of
Shares approve the Merger Agreement and the Merger and the
other transactions contemplated by the Merger Agreement,
and (iii) directed that the Merger Agreement be submitted
for adoption and approval by the Companys stockholders.The
Board of Directors recommendation marks the completion of a
strategic review process that was initiated by the Board of
Directors and the Conflicts Committee in May 2016. This
review process was initiated as part of an effort to
preserve and protect stockholder value in connection with
the disruption caused by SunEdisons voluntary filing for
bankruptcy protection to Chapter 11 of the U.S. Bankruptcy
Code on April 21, 2016 (the SunEdison bankruptcy)
and included governance, operations and business
performance initiatives deemed especially critical because
SunEdison provided all personnel and services to the
Company (other than those operational services provided by
third parties).
Conflicts Committee, the Board of Directors (i) determined
that the Merger is fair to, and in the best interests of,
the Company and its stockholders, (ii) approved and
declared advisable the Merger Agreement and the Merger and
the other transactions contemplated by the Merger
Agreement, and resolved to recommend that the holders of
Shares approve the Merger Agreement and the Merger and the
other transactions contemplated by the Merger Agreement,
and (iii) directed that the Merger Agreement be submitted
for adoption and approval by the Companys stockholders.The
Board of Directors recommendation marks the completion of a
strategic review process that was initiated by the Board of
Directors and the Conflicts Committee in May 2016. This
review process was initiated as part of an effort to
preserve and protect stockholder value in connection with
the disruption caused by SunEdisons voluntary filing for
bankruptcy protection to Chapter 11 of the U.S. Bankruptcy
Code on April 21, 2016 (the SunEdison bankruptcy)
and included governance, operations and business
performance initiatives deemed especially critical because
SunEdison provided all personnel and services to the
Company (other than those operational services provided by
third parties).
From May to August 2016, management of the Company
developed a business plan for the Company to operate
independently of SunEdison. The Conflicts Committee and
Board of Directors reviewed in detail the Companys business
plan under various scenarios, including the attendant
execution risks. The business planning process addressed
multiple areas, including the Companys business model,
growth prospects, dividend targets, organization design,
investment strategy, capital structure, competitive
position, project operations, corporate costs and other
factors. The Companys financial advisors evaluated the
strategic and financial implications of the Companys plan
to operate on a stand-alone basis (without a sponsor), and
its resulting competitive position in the global market for
renewable energy assets.
developed a business plan for the Company to operate
independently of SunEdison. The Conflicts Committee and
Board of Directors reviewed in detail the Companys business
plan under various scenarios, including the attendant
execution risks. The business planning process addressed
multiple areas, including the Companys business model,
growth prospects, dividend targets, organization design,
investment strategy, capital structure, competitive
position, project operations, corporate costs and other
factors. The Companys financial advisors evaluated the
strategic and financial implications of the Companys plan
to operate on a stand-alone basis (without a sponsor), and
its resulting competitive position in the global market for
renewable energy assets.
Following completion of a stand-alone business plan
reflecting the absence of SunEdisons sponsorship and
support, the Board of Directors, based upon the
recommendation of the Conflicts Committee, expanded the
strategic review process to include an exploration and
evaluation of all potential strategic alternatives to
maximize stockholder value, including potential
transactions to secure a new sponsor or to sell the
Company. In particular, the Company, acting on the
authority or recommendation of the Conflicts Committee,
undertook the following initiatives over this year-long
process:
reflecting the absence of SunEdisons sponsorship and
support, the Board of Directors, based upon the
recommendation of the Conflicts Committee, expanded the
strategic review process to include an exploration and
evaluation of all potential strategic alternatives to
maximize stockholder value, including potential
transactions to secure a new sponsor or to sell the
Company. In particular, the Company, acting on the
authority or recommendation of the Conflicts Committee,
undertook the following initiatives over this year-long
process:
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Developed an emergency plan to provide continuity
in the Companys operations and cash flows following the disruption in services provided by SunEdison, and retained AlixPartners LLP to provide consulting services in planning and operational functions necessary to preserve the Companys business; |
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Amended the limited liability company agreement
of its operating subsidiary to give an independent conflicts committee the exclusive power to manage and control business decisions relating to or involving SunEdison (in light of the directors serving on the Board of Directors being subject to removal by SunEdison); |
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Delegated to the Conflicts Committee, given the
potentially conflicting interests of SunEdison, oversight of the strategic review process, with a mandate to be guided solely by consideration of the best interests of all of the Companys stockholders and to ensure interactions with SunEdison were conducted on an arms-length basis; |
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Increased the directors on the Board of Directors
from seven to ten, seven of whom satisfy NASDAQs independence standards and four of whom are independent of both SunEdison and TERP; |
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Elected to the Conflicts Committee directors who
are independent of both SunEdison and TERP; |
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Required that all decisions with respect to any
strategic transaction, including the Merger, be made following a determination that the decision would be in the best interests of all of the Companys stockholders and with the consent of a majority of the independent directors; |
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Engaged financial and legal advisors, including
Centerview Partners LLC (Centerview), as joint financial advisor with TERP, and Greentech Capital Advisors (Greentech), as independent financial advisor, as well as Sullivan Cromwell LLP, as legal advisor, in addition to Greenberg Traurig, LLP, the Conflicts Committees legal advisor, and Robbins, Russell, Englert, Orseck, Untereiner Sauber LLP, as legal advisor to the independent directors who are not also directors of TERP; |
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Developed a process and protocol for
collaborating with SunEdison in the strategic alternatives process on an arms-length basis, with the goal of permitting the Company to maximize value for its public stockholders, particularly in light of SunEdisons voting power and the need to obtain the Bankruptcy Courts approval for any SunEdison voting decision regarding a strategic transaction; |
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Developed a business plan and forecasts assuming
the Company would continue as a stand-alone entity (without a sponsor) and addressing multiple areas, including growth prospects, dividend targets, organizational design, investment strategy, capital structure, competitive position, project operations and corporate costs (the Stand-Alone Plan); |
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Engaged in a detailed review of the Stand-Alone
Plan, including key execution risks and financial analyses, in consultation with financial and legal advisors, with a view towards determining whether it was advisable to pursue such a plan or to pursue a strategic alternatives process which could lead to a whole Company sale or the selection of a new sponsor to facilitate the Companys growth; |
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Analyzed and filed proofs of claims against
SunEdison and negotiated the Settlement Agreement on a timeline parallel to the pursuit of strategic alternatives following the determination by the Conflicts Committee that a settlement with SunEdison on an arms-length basis would likely increase the value that could be obtained for all stockholders in a potential strategic transaction; and |
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Conducted a strategic alternatives process in
which: |
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In the first phase, approximately 190 different
parties were contacted, of which more than 30 entered into non-disclosure agreements, resulting in the submission of preliminary non-binding indications of interest by ten different parties, including five strategic bidders and five financial bidders; |
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In the second phase, bidders were provided
access to a virtual data room, a draft merger agreement, management presentations and meetings, resulting in the submission of offers from five different parties, including two financial bidders, two strategic bidders and Brookfield; |
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Through negotiation, Brookfield submitted a
proposal, described in further detail in the Companys Current Report on Form 8-K filed by the Company on January 23, 2017; |
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In weighing various strategic alternatives, the
Board evaluated the value offered to stockholders, transaction certainty and speed to closing in considering various bidders; |
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Brookfield was deemed to offer the highest per
share cash price at $4.15 (on a pre-settlement basis), offered two different sponsorship proposals, and has a history of closing renewable energy acquisition transactions and obtaining prompt regulatory approvals. As a result, the Board of Directors, following the recommendation of the Conflicts Committee, agreed to negotiate exclusively with Brookfield with respect to a business combination until 11:59 p.m. New York City time on March 6, 2017; |
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During the exclusivity period, the Company
developed a sponsorship business plan and forecasts in collaboration with Brookfield, including a potential asset acquisition pipeline, cash flow projections and capital structure details, as well as assumptions regarding costs and fees. The Company reviewed the business plan under Brookfields sponsorship, including key execution risks and financial analyses, in consultation with financial and legal advisors, with a view towards determining whether a sponsorship plan would yield greater value for the Companys stockholders than the Stand-Alone Plan or a sale of the Company for cash; |
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Following completion of the sponsorship model
described above, Brookfield withdrew its sponsorship proposal, noting among other things that the sponsorship model was unlikely to be successfully received in the marketplace; |
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Several weeks into the exclusivity period
with Brookfield, the Company also received an unsolicited offer from Party A for $4.52 per Class A Share, subject to satisfactory completion of due diligence and other conditions; |
|
o
|
During exclusivity with Brookfield, the Board
of Directors, following the recommendation of the Conflicts Committee, negotiated with Brookfield and improved its offer to $4.45 per Class A Share (without giving effect to the reduced number of outstanding shares that would result from the Exchange) and which Brookfield confirmed was its best and final offer; |
|
o
|
The $4.45 per Class A Share (pre-settlement
price) offered by Brookfield provided existing Class A stockholders with $5.10 in cash after giving effect to the SunEdison settlement, which provides current Class A stockholders with 75% of the total consideration offered to all stockholders; |
|
o
|
SunEdison stated that it would not support
the Settlement Agreement if the Company entered into a transaction with Party A; |
|
o
|
The Board of Directors and the Conflicts
Committee each expressed serious concerns as to whether Party A would finalize a transaction at the value it had indicated in its letter and about the certainty and timing of closing; |
|
o
|
The Board of Directors evaluated the
certainty of signing and closing with Brookfield, which had completed extensive due diligence, its likely ability to gain regulatory and other approvals, and the fully financed nature of its proposal, as well as the economic value offered to stockholders; and |
|
o
|
The terms of the Merger Agreement, the
Settlement Agreement and the Voting and Support Agreement were robustly negotiated by the Company, were approved by the Board of Directors following the recommendation of the Conflicts Committee, and were executed substantially concurrently on March 6, 2017. |
The Conflicts Committees and Board of Directors
Reasons for the Merger
Reasons for the Merger
In evaluating the Merger Agreement and the Merger,
the Conflicts Committee and the Board of Directors
compared a variety of alternatives and considered
numerous factors, including the following
non-exhaustive list of material factors and benefits
of the Merger, each of which the Conflicts Committee
and the Board of Directors believed supported their
respective determinations that a sale for cash at
$5.10 per share was superior to other strategic
alternatives or the Stand-Alone Plan:
the Conflicts Committee and the Board of Directors
compared a variety of alternatives and considered
numerous factors, including the following
non-exhaustive list of material factors and benefits
of the Merger, each of which the Conflicts Committee
and the Board of Directors believed supported their
respective determinations that a sale for cash at
$5.10 per share was superior to other strategic
alternatives or the Stand-Alone Plan:
|
the fact that the price offers an attractive
valuation for the Company; |
|
the fact that while the Stand-Alone Plan
could provide the Companys stockholders the opportunity to participate in potential future increases in the trading value of the Companys stock and, in the longer term, payment of dividends, it was subject to significant risks: |
|
o
|
In the Stand-Alone Plan the combination of
the structural challenges described below, a small market capitalization and an emerging market geographic business focus made it unlikely that the equity trading value of Class A Shares would exceed the cash per share Merger consideration; |
|
o
|
In the Stand-Alone Plan the Company would
be subject to risks and costs arising out of: |
|
the lack of an asset acquisition pipeline
or visible growth trajectory, including the need to identify suitable renewable energy projects for investment; |
|
an uncertain capability to compete for
stabilized, equity yield generating infrastructure as a stand-alone entity relative to competitors, given the Companys potentially high cost of capital, operational challenges and failure to close certain transactions; |
|
project operating risks, including
irradiance/wind resource, curtailment, availability, operation and maintenance costs and merchant pricing; |
|
a limited ability to attract and retain
personnel, including to develop new projects and to operate and optimize existing fleet operations; |
|
a business model that focuses exclusively
on emerging markets (as compared to a traditional yieldco focus on developed markets) with exposure to emerging market macroeconomic and political risks as well as the risks associated with interest rate increases and fluctuations in currency exchange rates (including potentially negative effects on CAFD (as defined below) by reducing the Companys ability to repatriate cash) and the challenges of re-investing free cash flow of a specific currency in attractive development projects of the same currency; |
|
the uncertainty of investors appetite for
the Companys equity securities in light of the significant erosion in stockholder value since the Companys initial public offering; |
|
the requirement that the Company would need
to cure defaults and comply with high yield covenants in its existing debt, making it difficult to pay dividends or reinvest cash; |
|
existing noteholders willingness to accept
a tender at a lower premium than the make-whole amount; and |
|
the need for the Company to refinance its
corporate debt and obtain new project debt on existing assets on favorable terms; |
|
the Companys financial condition and
reputation in the power industry, its high cost of capital and the uncertainty of its ability to access capital markets, combined with the Conflicts Committees and the Board of Directors assessment of macroeconomic factors and uncertainty around forecasted economic conditions, both in the near and the long term, and within the renewable power industry in emerging markets countries in particular; |
|
the opinions of Centerview and Greentech,
each dated March 6, 2017, to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth in each respective opinion, that the Merger consideration of $5.10 per Class A Share in cash to be received by the holders of the Class A Shares in the Merger is fair from a financial point of view, as of the date of such opinion, to such holders (other than Parent and its subsidiaries), as will be disclosed in the proxy statement that the Company intends to file with the SEC as described below under Additional Information and Where to Find It; |
|
the financial condition and reputation of
Brookfield and its and Parents ability to pay the Merger consideration of $5.10 per Class A Share in cash out of cash on hand sources without a financing condition to the Merger; |
|
the belief that Brookfield, as a seasoned
and well-known operator in the renewable energy industry, may be able to obtain certain regulatory approvals necessary to close the Merger quicker than other potential bidders; |
|
the fact that the terms of the Merger
Agreement require the adoption of the Merger Agreement by the holders of a majority of the outstanding Shares as well as the approval of the Merger Agreement and the transactions contemplated by the Merger Agreement by the holders of a majority of the outstanding Class A Shares excluding SunEdison and its affiliates and Brookfield and its affiliates (which is a non-waivable condition to closing); and |
|
the fact that several weeks into
exclusivity, Brookfield withdrew its sponsorship offer, such that the Conflicts Committee and the Board of Directors were choosing only between the Stand-Alone Plan and a whole-company sale. |
In view of the variety of factors considered in
connection with their respective evaluation of
the Merger Agreement and the Merger and the other
transactions contemplated by the Merger
Agreement, neither the Conflicts Committee nor
the Board of Directors found it practicable to,
and neither the Conflicts Committee nor the Board
of Directors did, quantify or otherwise assign
relative weights to the specific factors
considered in reaching their respective
determination and their respective
recommendation. In addition, individual directors
may have given different weights to different
factors. Neither the Conflicts Committee nor the
Board of Directors undertook to make any specific
determination as to whether any factor, or any
particular aspect of any factor, supported or did
not support their respective ultimate
determination. Each of the Conflicts Committee
and the Board of Directors based its respective
recommendation on the totality of the information
presented.
connection with their respective evaluation of
the Merger Agreement and the Merger and the other
transactions contemplated by the Merger
Agreement, neither the Conflicts Committee nor
the Board of Directors found it practicable to,
and neither the Conflicts Committee nor the Board
of Directors did, quantify or otherwise assign
relative weights to the specific factors
considered in reaching their respective
determination and their respective
recommendation. In addition, individual directors
may have given different weights to different
factors. Neither the Conflicts Committee nor the
Board of Directors undertook to make any specific
determination as to whether any factor, or any
particular aspect of any factor, supported or did
not support their respective ultimate
determination. Each of the Conflicts Committee
and the Board of Directors based its respective
recommendation on the totality of the information
presented.
Certain Company Projections
The Company does not, as a matter of course,
publicly disclose detailed financial forecasts as
to future performance, earnings or other results
due to the difficulty of predicting economic and
market conditions and accurately forecasting the
Companys performance, particularly for extended
periods, other than limited financial metrics
from time to time as part of the Companys ongoing
efforts to communicate with investors regarding
the Companys business continuity and progress
toward operational independence from SunEdison.
Management of the Company prepared an unaudited
forecast contemplating a scenario in which the
Company would transition to an emerging markets
independent power producer business model through
continued development of in-house growth and
project operations capabilities, reduction of
dividend payout ratio targets to sustainable
levels and growth through third party
acquisitions. We refer to this forecast as the
Management Stand-Alone Plan. In the Management
Stand-Alone Plan, management of the Company
employed assumptions based on the performance of
its current project portfolio, the Companys
ability to manage its current liabilities, and
the Companys ability to raise and deploy capital
in its target markets in the future.
publicly disclose detailed financial forecasts as
to future performance, earnings or other results
due to the difficulty of predicting economic and
market conditions and accurately forecasting the
Companys performance, particularly for extended
periods, other than limited financial metrics
from time to time as part of the Companys ongoing
efforts to communicate with investors regarding
the Companys business continuity and progress
toward operational independence from SunEdison.
Management of the Company prepared an unaudited
forecast contemplating a scenario in which the
Company would transition to an emerging markets
independent power producer business model through
continued development of in-house growth and
project operations capabilities, reduction of
dividend payout ratio targets to sustainable
levels and growth through third party
acquisitions. We refer to this forecast as the
Management Stand-Alone Plan. In the Management
Stand-Alone Plan, management of the Company
employed assumptions based on the performance of
its current project portfolio, the Companys
ability to manage its current liabilities, and
the Companys ability to raise and deploy capital
in its target markets in the future.
The internal financial forecasts summarized
below (the Forecasts) were prepared by
or at the direction of and approved by
management for internal use in connection with
the Companys exploration and evaluation of
strategic alternatives to maximize stockholder
value, including transactions to secure a new
sponsor or a sale of the Company.
below (the Forecasts) were prepared by
or at the direction of and approved by
management for internal use in connection with
the Companys exploration and evaluation of
strategic alternatives to maximize stockholder
value, including transactions to secure a new
sponsor or a sale of the Company.
While the Forecasts were prepared in good faith
by management, no assurance can be made
regarding future events and the disclosure of
these Forecasts should not be regarded as an
indication that the Company, the Board of
Directors, the Conflicts Committee, their
respective advisors or any other person
considered, or now considers, the Forecasts to
be a reliable prediction of future results, and
the Forecasts should not be relied upon as
such. The Forecasts cover multiple years and
prospective financial information by its nature
becomes subject to greater uncertainty with
each successive year. In addition, the
Forecasts were prepared at a prior period in
time and reflect estimates, assumptions and
business decisions as of the time of
preparation, all of which are subject to
change. The estimates, assumptions and business
decisions made by management upon which the
Forecasts are based involve judgments with
respect to, among other matters, future
industry performance, general business,
economic, regulatory, market and financial
conditions, many of which are difficult or
impossible to predict accurately, are subject
to significant operational, economic,
competitive or other third party risks and
uncertainties, and are beyond the Companys
control. Management of the Company has limited
visibility into the likelihood of the
occurrence and potential magnitude of the
material risks to the Companys performance in
the unpredictable operating environment
surrounding the Company, and as a result faces
challenges in being able to accurately forecast
the Companys performance and predict the
effectiveness of initiatives designed to enable
the Company to operate as an independent
Company (with or without a sponsor) and to
improve the performance of the business and
revenue. There can be no assurance that the
estimates and assumptions made in preparing the
Forecasts will prove accurate, that the
projected results will be realized or that
actual results will not be significantly higher
or lower than projected results. The Forecasts
also reflect estimates, assumptions and
business decisions that do not reflect the
effects of the Merger (or any failure of the
Merger to occur), or any other changes that may
in the future affect the Company or its assets,
business, operations, properties, policies,
corporate structure, capitalization and
management.
by management, no assurance can be made
regarding future events and the disclosure of
these Forecasts should not be regarded as an
indication that the Company, the Board of
Directors, the Conflicts Committee, their
respective advisors or any other person
considered, or now considers, the Forecasts to
be a reliable prediction of future results, and
the Forecasts should not be relied upon as
such. The Forecasts cover multiple years and
prospective financial information by its nature
becomes subject to greater uncertainty with
each successive year. In addition, the
Forecasts were prepared at a prior period in
time and reflect estimates, assumptions and
business decisions as of the time of
preparation, all of which are subject to
change. The estimates, assumptions and business
decisions made by management upon which the
Forecasts are based involve judgments with
respect to, among other matters, future
industry performance, general business,
economic, regulatory, market and financial
conditions, many of which are difficult or
impossible to predict accurately, are subject
to significant operational, economic,
competitive or other third party risks and
uncertainties, and are beyond the Companys
control. Management of the Company has limited
visibility into the likelihood of the
occurrence and potential magnitude of the
material risks to the Companys performance in
the unpredictable operating environment
surrounding the Company, and as a result faces
challenges in being able to accurately forecast
the Companys performance and predict the
effectiveness of initiatives designed to enable
the Company to operate as an independent
Company (with or without a sponsor) and to
improve the performance of the business and
revenue. There can be no assurance that the
estimates and assumptions made in preparing the
Forecasts will prove accurate, that the
projected results will be realized or that
actual results will not be significantly higher
or lower than projected results. The Forecasts
also reflect estimates, assumptions and
business decisions that do not reflect the
effects of the Merger (or any failure of the
Merger to occur), or any other changes that may
in the future affect the Company or its assets,
business, operations, properties, policies,
corporate structure, capitalization and
management.
Important factors that may affect actual
results and cause the Forecasts to not be
achieved include risks and uncertainties
described below under the section titled
Cautionary Statement Regarding Forward-Looking
Statements and in the Companys filings with the
SEC. None of the Company, Brookfield or any of
their respective affiliates, advisors,
officers, directors or representatives has made
or makes any representation to any Company
stockholder or any other person regarding the
information included in the Forecasts or the
ultimate performance of the Company compared to
the information included in the Forecasts or
that the Forecasts will ultimately be achieved.
In light of the foregoing factors and the
uncertainties inherent in the Forecasts, the
Companys stockholders are cautioned not to
place undue, if any, reliance on the Forecasts.
The Company does not intend to update or
otherwise revise the Forecasts for any reason
or purpose, even in the event that any or all
of the assumptions on which the Forecasts were
based are no longer appropriate.
results and cause the Forecasts to not be
achieved include risks and uncertainties
described below under the section titled
Cautionary Statement Regarding Forward-Looking
Statements and in the Companys filings with the
SEC. None of the Company, Brookfield or any of
their respective affiliates, advisors,
officers, directors or representatives has made
or makes any representation to any Company
stockholder or any other person regarding the
information included in the Forecasts or the
ultimate performance of the Company compared to
the information included in the Forecasts or
that the Forecasts will ultimately be achieved.
In light of the foregoing factors and the
uncertainties inherent in the Forecasts, the
Companys stockholders are cautioned not to
place undue, if any, reliance on the Forecasts.
The Company does not intend to update or
otherwise revise the Forecasts for any reason
or purpose, even in the event that any or all
of the assumptions on which the Forecasts were
based are no longer appropriate.
The Forecasts include certain financial
measures that do not conform to U.S.
Generally Accepted Accounting Principles,
which we refer to as GAAP, including adjusted
earnings before interest, taxes, depreciation
and amortization (Adjusted EBITDA) and
cash available for distribution (CAFD)
(each as further described below). This
information is included because management
believes these non-GAAP financial measures
could be useful in evaluating the business,
potential operating performance and cash flow
of the Company. Non-GAAP financial measures
should not be considered in isolation from,
or as a substitute for, financial information
presented in compliance with GAAP, and
non-GAAP financial measures as presented in
the Forecasts may not be comparable to
similarly titled amounts used by other
companies in the industry.
measures that do not conform to U.S.
Generally Accepted Accounting Principles,
which we refer to as GAAP, including adjusted
earnings before interest, taxes, depreciation
and amortization (Adjusted EBITDA) and
cash available for distribution (CAFD)
(each as further described below). This
information is included because management
believes these non-GAAP financial measures
could be useful in evaluating the business,
potential operating performance and cash flow
of the Company. Non-GAAP financial measures
should not be considered in isolation from,
or as a substitute for, financial information
presented in compliance with GAAP, and
non-GAAP financial measures as presented in
the Forecasts may not be comparable to
similarly titled amounts used by other
companies in the industry.
The Forecasts were not prepared with a view
toward public disclosure, soliciting proxies
or complying with GAAP, the published
guidelines of the SEC regarding financial
projections and forecasts or the guidelines
established by the American Institute of
Certified Public Accountants for preparation
and presentation of financial projections and
forecasts. Neither the Companys independent
registered public accounting firm nor any
other independent registered public
accounting firm has examined, compiled or
otherwise performed any procedures with
respect to the prospective financial
information contained in these forecasts and,
accordingly, neither the Companys independent
registered public accounting firm nor any
other independent registered public
accounting firm has expressed any opinion or
given any other form of assurance on such
information or its achievability, and assumes
no responsibility for, and disclaims any
association with, the prospective financial
information.
toward public disclosure, soliciting proxies
or complying with GAAP, the published
guidelines of the SEC regarding financial
projections and forecasts or the guidelines
established by the American Institute of
Certified Public Accountants for preparation
and presentation of financial projections and
forecasts. Neither the Companys independent
registered public accounting firm nor any
other independent registered public
accounting firm has examined, compiled or
otherwise performed any procedures with
respect to the prospective financial
information contained in these forecasts and,
accordingly, neither the Companys independent
registered public accounting firm nor any
other independent registered public
accounting firm has expressed any opinion or
given any other form of assurance on such
information or its achievability, and assumes
no responsibility for, and disclaims any
association with, the prospective financial
information.
The following tables present in summary form
certain of the financial measures projected
in the Forecasts:
certain of the financial measures projected
in the Forecasts:
Management Stand-Alone Plan – ($mm,
except Dividends Per Share)
except Dividends Per Share)
|
Revenue
|
$245
|
$276
|
$298
|
$300
|
$311
|
$323
|
$329
|
$333
|
$347
|
$362
|
|||||||||
|
() Cost of Operations
|
($50)
|
($54)
|
($58)
|
($59)
|
($61)
|
($64)
|
($66)
|
($69)
|
($72)
|
($74)
|
|||||||||
|
() Corporate General
Administrative |
($36)
|
($21)
|
($21)
|
($20)
|
($21)
|
($21)
|
($22)
|
($22)
|
($23)
|
($23)
|
|||||||||
|
() Depreciation Amortization
|
($52)
|
($61)
|
($68)
|
($69)
|
($73)
|
($76)
|
($80)
|
($84)
|
($88)
|
($92)
|
|||||||||
|
() Stock-based Compensation
|
($4)
|
($4)
|
($4)
|
($4)
|
($4)
|
($4)
|
($4)
|
($4)
|
($4)
|
($4)
|
|||||||||
|
Operating Income
|
$103
|
$137
|
$148
|
$148
|
$153
|
$157
|
$157
|
$154
|
$161
|
$169
|
|||||||||
|
() Interest Expense
|
($100)
|
($93)
|
($78)
|
($75)
|
($72)
|
($71)
|
($69)
|
($67)
|
($65)
|
($63)
|
|||||||||
|
() Other Project
Expenses(1) |
($0)
|
($2)
|
($4)
|
($6)
|
($8)
|
($13)
|
($13)
|
($18)
|
($18)
|
($19)
|
|||||||||
|
( /-) Gain / (Loss) on
Extinguishment of Debt |
($19)
|
($48)
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|||||||||
|
(Loss) Income Before Income Tax
Expense |
($16)
|
($6)
|
$66
|
$67
|
$73
|
$74
|
$75
|
$68
|
$78
|
$87
|
|||||||||
|
( /-) Income Tax Benefit /
(Expense)(2) |
$6
|
$2
|
($27)
|
($27)
|
($29)
|
($30)
|
($30)
|
($27)
|
($31)
|
($35)
|
|||||||||
|
Net (Loss) Income
|
($10)
|
($4)
|
$40
|
$40
|
$44
|
$44
|
$45
|
$41
|
$47
|
$52
|
|||||||||
|
Net (Loss) Income
|
($10)
|
($4)
|
$40
|
$40
|
$44
|
$44
|
$45
|
$41
|
$47
|
$52
|
|||||||||
|
( /-) Income Tax Expense /
(Benefit)(2) |
($6)
|
($2)
|
$27
|
$27
|
$29
|
$30
|
$30
|
$27
|
$31
|
$35
|
|||||||||
|
( ) Depreciation Amortization
|
$52
|
$61
|
$68
|
$69
|
$73
|
$76
|
$80
|
$84
|
$88
|
$92
|
|||||||||
|
( ) Stock-based Compensation
|
$4
|
$4
|
$4
|
$4
|
$4
|
$4
|
$4
|
$4
|
$4
|
$4
|
|||||||||
|
( ) Interest Expense
|
$100
|
$93
|
$78
|
$75
|
$72
|
$71
|
$69
|
$67
|
$65
|
$63
|
|||||||||
|
( ) Other Project
Expenses(1) |
$0
|
$2
|
$4
|
$6
|
$8
|
$13
|
$13
|
$18
|
$18
|
$19
|
|||||||||
|
( ) Non-recurring Operating
Expenses |
$14
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|||||||||
|
( /-) Loss/(Gain) on
Extinguishment of Debt |
$19
|
$48
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|||||||||
|
Adjusted EBITDA
|
$173
|
$202
|
$220
|
$220
|
$230
|
$238
|
$241
|
$242
|
$253
|
$264
|
|||||||||
|
Adjusted EBITDA
|
$173
|
$202
|
$220
|
$220
|
$230
|
$238
|
$241
|
$242
|
$253
|
$264
|
|||||||||
|
() Project Interest Payments
|
($41)
|
($52)
|
($64)
|
($61)
|
($60)
|
($59)
|
($57)
|
($56)
|
($54)
|
($52)
|
|||||||||
|
() HoldCo Interest Payments
|
($76)
|
($61)
|
($14)
|
($14)
|
($12)
|
($12)
|
($12)
|
($12)
|
($11)
|
($11)
|
|||||||||
|
() Debt Principal
Payments(3) |
($10)
|
($18)
|
($29)
|
($37)
|
($42)
|
($47)
|
($52)
|
($56)
|
($62)
|
($67)
|
|||||||||
|
() Cash Tax Payments
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|||||||||
|
( /-) Project Cash Flow
Adjustments(4) |
$8
|
($13)
|
($15)
|
($17)
|
($17)
|
($23)
|
($22)
|
($25)
|
($24)
|
($25)
|
|||||||||
|
( /-) HoldCo Cash Flow
Adjustments(5) |
$9
|
($2)
|
($2)
|
($2)
|
($2)
|
($2)
|
($2)
|
($2)
|
($2)
|
($2)
|
|||||||||
|
Adjusted CAFD
|
$63
|
$55
|
$95
|
$90
|
$97
|
$95
|
$96
|
$91
|
$99
|
$107
|
|||||||||
|
Dividends Per Share
|
$0.00
|
$0.06
|
$0.21
|
0.20
|
$0.21
|
$0.21
|
$0.21
|
$0.20
|
$0.21
|
$0.23
|
|||||||||
|
Other Key Metrics:
|
|||||||||||||||||||
|
CAFD From Acquisitions
|
$0
|
($1)
|
($2)
|
$0
|
$6
|
$13
|
$20
|
$27
|
$33
|
$41
|
|||||||||
|
HoldCo Debt
|
$564
|
$233
|
$209
|
$205
|
$201
|
$196
|
$192
|
$188
|
$184
|
$180
|
|||||||||
|
Consolidated Debt
|
$1,145
|
$984
|
$939
|
$943
|
$947
|
$943
|
$936
|
$922
|
$909
|
$896
|
|||||||||
|
Unrestricted Cash
|
$467
|
$135
|
$150
|
$150
|
$150
|
$150
|
$150
|
$150
|
$150
|
$150
|
|||||||||
|
Project Acquisitions (MW)
|
111
|
111
|
23
|
59
|
64
|
62
|
63
|
60
|
66
|
70
|
|||||||||
|
Shares Outstanding (End of
Period) |
177.1
|
178.0
|
178.9
|
179.8
|
181.1
|
182.8
|
184.6
|
186.3
|
188.0
|
189.7
|
|
(1)
|
Includes project-level taxes, fees,
withholding taxes and other project specific adjustments. |
|
(2)
|
The Company has assumed an average
effective tax rate of 40%. The actual effective tax rate in some of these years may differ from this rate primarily due to the recording and/or release of a valuation allowance on certain tax benefits attributed to the Company and to lower statutory income tax rates in the Company’s foreign jurisdictions. The Company expects to generate NOLs and has NOL carryforwards that can be utilized to offset future taxable income. As a result, the Company does not expect to pay significant United States federal income tax in the near term. |
|
(3)
|
Includes project and HoldCo level
principal payments. |
|
(4)
|
Includes project-level maintenance
capital expenditures, changes restricted cash, distributions to non-controlling interests, taxes, fees, withholding taxes and other project specific adjustments. |
|
(5)
|
Include gains and losses from FX
hedging settlements and other HoldCo adjustments. |
Definitions of Certain Financial Terms
Adjusted EBITDA
The Company defines Adjusted EBITDA as
net income (loss) plus depreciation,
accretion and amortization, non-cash
affiliate general and administrative
costs, acquisition related expenses,
interest expense, gains (losses) on
interest rate swaps, foreign currency
gains (losses), income tax (benefit)
expense and stock compensation expense,
and certain other non-cash charges,
unusual, non-operating or non-recurring
items and other items that the Company
believes are not representative of the
Companys core business or future
operating performance. The Companys
definitions and calculations of these
items may not necessarily be the same as
those used by other companies. Adjusted
EBITDA is not a measure of liquidity or
profitability and should not be
considered as an alternative to net
income, operating income, net cash
provided by operating activities or any
other measure determined in accordance
with GAAP.
net income (loss) plus depreciation,
accretion and amortization, non-cash
affiliate general and administrative
costs, acquisition related expenses,
interest expense, gains (losses) on
interest rate swaps, foreign currency
gains (losses), income tax (benefit)
expense and stock compensation expense,
and certain other non-cash charges,
unusual, non-operating or non-recurring
items and other items that the Company
believes are not representative of the
Companys core business or future
operating performance. The Companys
definitions and calculations of these
items may not necessarily be the same as
those used by other companies. Adjusted
EBITDA is not a measure of liquidity or
profitability and should not be
considered as an alternative to net
income, operating income, net cash
provided by operating activities or any
other measure determined in accordance
with GAAP.
CAFD
The Company defines cash available for
distribution or CAFD as adjusted EBITDA
of Global LLC as adjusted for certain
cash flow items that the Company
associates with the Companys operations.
Cash available for distribution
represents adjusted EBITDA (i) minus
deposits into (or plus withdrawals from)
restricted cash accounts required by
project financing arrangements to the
extent they decrease (or increase) cash
provided by operating activities, (ii)
minus cash distributions paid to
non-controlling interests in the Companys
renewable energy facilities, if any,
(iii) minus scheduled project-level and
other debt service payments and
repayments in accordance with the related
borrowing arrangements, to the extent
they are paid from operating cash flows
during a period, (iv) minus
non-expansionary capital expenditures, if
any, to the extent they are paid from
operating cash flows during a period, (v)
plus or minus operating items as
necessary to present the cash flows the
Company deems representative of the
Companys core business operations, with
the approval of the Audit Committee of
the Board of Directors.
distribution or CAFD as adjusted EBITDA
of Global LLC as adjusted for certain
cash flow items that the Company
associates with the Companys operations.
Cash available for distribution
represents adjusted EBITDA (i) minus
deposits into (or plus withdrawals from)
restricted cash accounts required by
project financing arrangements to the
extent they decrease (or increase) cash
provided by operating activities, (ii)
minus cash distributions paid to
non-controlling interests in the Companys
renewable energy facilities, if any,
(iii) minus scheduled project-level and
other debt service payments and
repayments in accordance with the related
borrowing arrangements, to the extent
they are paid from operating cash flows
during a period, (iv) minus
non-expansionary capital expenditures, if
any, to the extent they are paid from
operating cash flows during a period, (v)
plus or minus operating items as
necessary to present the cash flows the
Company deems representative of the
Companys core business operations, with
the approval of the Audit Committee of
the Board of Directors.
| Item 8.01 |
Other Events.
|
On March 6, 2017, the Company issued a
press release announcing its entry into
the Merger Agreement. A copy of the press
release is attached hereto as Exhibit
99.1 and is incorporated herein by
reference.
press release announcing its entry into
the Merger Agreement. A copy of the press
release is attached hereto as Exhibit
99.1 and is incorporated herein by
reference.
FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K and the
other documents referenced therein and
the Companys filings with the SEC contain
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, or developments that
the Company expects or anticipates will
occur in the future are forward-looking
statements. They may include financial
metrics such as estimates of expected
adjusted earnings before interest, taxes,
depreciation and amortization, cash
available for distribution, earnings,
revenues, capital expenditures,
liquidity, capital structure, future
growth, financing arrangement and other
financial performance items (including
future dividends per share), descriptions
of managements plans or objectives for
future operations, products, or services,
or descriptions of assumptions underlying
any of the above. Forward-looking
statements are based on the Companys
current expectations or predictions of
future conditions, events, or results and
speak only as of the date they are made.
Although the Company believes its
respective 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.
other documents referenced therein and
the Companys filings with the SEC contain
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, or developments that
the Company expects or anticipates will
occur in the future are forward-looking
statements. They may include financial
metrics such as estimates of expected
adjusted earnings before interest, taxes,
depreciation and amortization, cash
available for distribution, earnings,
revenues, capital expenditures,
liquidity, capital structure, future
growth, financing arrangement and other
financial performance items (including
future dividends per share), descriptions
of managements plans or objectives for
future operations, products, or services,
or descriptions of assumptions underlying
any of the above. Forward-looking
statements are based on the Companys
current expectations or predictions of
future conditions, events, or results and
speak only as of the date they are made.
Although the Company believes its
respective 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, the expected timing and
likelihood of completion of the Merger,
including the timing, receipt and terms
and conditions of any required
governmental approvals of the Merger
that could cause the parties to abandon
the transaction; the occurrence of any
event, change or other circumstances
that could give rise to the termination
of the Merger Agreement; the risk of
failure by the Bankruptcy Court to
confirm the Settlement Agreement, the
Voting and Support Agreement and any
other agreement entered into in
connection with the Merger or the other
transactions contemplated by the Merger
Agreement to which SunEdison or any
other debtor will be a party; the risk
of failure of the holders of a majority
of the outstanding Shares to adopt the
Merger Agreement and of the holders of
a majority of the Class A Shares other
than SunEdison and its affiliates and
Brookfield and its affiliates to
approve the Merger Agreement and the
transactions contemplated by the Merger
Agreement; the risk that the parties
may not be able to satisfy the
conditions to the Merger in a timely
manner or at all; risks related to
disruption of management time from
ongoing business operations due to the
Merger; the risk that any announcements
relating to the Merger could have
adverse effects on the market price of
the Companys common stock; the risk
that the proposed transaction and its
announcement could have an adverse
effect on the Companys ability to
retain and hire key personnel and
maintain relationships with its
suppliers and customers and on its
operating results and businesses
generally; the Companys relationship
with SunEdison, including SunEdisons
bankruptcy filings; risks related to
events of default and potential events
of default arising under project-level
financings and other agreements due to
various factors; risks related to the
Companys failure to satisfy continued
listing requirements of NASDAQ; the
Companys ability to acquire projects at
attractive prices as well as to
integrate the projects the Company
acquires from third parties or
otherwise realize the anticipated
benefits from such acquisitions,
including through refinancing or future
sales; actions of third parties,
including but not limited to the
failure of SunEdison to fulfill its
obligations and the actions of the
Companys bondholders and other
creditors; price fluctuations,
termination provisions and buyout
provisions in offtake agreements;
delays or unexpected costs during the
completion of projects the Company
intends to acquire; regulatory
requirements and incentives for
production of renewable power;
operating and financial restrictions
under agreements governing
indebtedness; the condition of the debt
and equity capital markets and the
Companys ability to borrow additional
funds and access capital markets; the
impact of foreign exchange rate
fluctuations; the Companys ability to
compete against traditional and
renewable energy companies; hazards
customary to the power production
industry and power generation
operations, such as unusual weather
conditions and outages or other
curtailment of the Companys power
plants; departure of some or all of
SunEdisons employees, particularly key
employees and operations and
maintenance or asset management
personnel that the Company
significantly relies upon; pending and
future litigation; and the Companys
ability to operate the Companys
business efficiently, including to
manage the transition from SunEdison
information technology, technical,
accounting and generation monitoring
systems, to manage and complete
governmental filings on a timely basis,
and to manage the Companys capital
expenditures, economic, social and
political risks and uncertainties
inherent in international operations,
including operations in emerging
markets and the impact of foreign
exchange rate fluctuations, the
imposition of currency controls and
restrictions on repatriation of
earnings and cash, protectionist and
other adverse public policies,
including local content requirements,
import/export tariffs, increased
regulations or capital investment
requirements, conflicting international
business practices that may conflict
with other customs or legal
requirements to which we are subject,
the inability to obtain, maintain or
enforce intellectual property rights,
and being subject to the jurisdiction
of courts other than those of the
United States, including uncertainty of
judicial processes and difficulty
enforcing contractual agreements or
judgments in foreign legal systems or
incurring additional costs to do so.
Many of these factors are beyond the
Companys control.
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, the expected timing and
likelihood of completion of the Merger,
including the timing, receipt and terms
and conditions of any required
governmental approvals of the Merger
that could cause the parties to abandon
the transaction; the occurrence of any
event, change or other circumstances
that could give rise to the termination
of the Merger Agreement; the risk of
failure by the Bankruptcy Court to
confirm the Settlement Agreement, the
Voting and Support Agreement and any
other agreement entered into in
connection with the Merger or the other
transactions contemplated by the Merger
Agreement to which SunEdison or any
other debtor will be a party; the risk
of failure of the holders of a majority
of the outstanding Shares to adopt the
Merger Agreement and of the holders of
a majority of the Class A Shares other
than SunEdison and its affiliates and
Brookfield and its affiliates to
approve the Merger Agreement and the
transactions contemplated by the Merger
Agreement; the risk that the parties
may not be able to satisfy the
conditions to the Merger in a timely
manner or at all; risks related to
disruption of management time from
ongoing business operations due to the
Merger; the risk that any announcements
relating to the Merger could have
adverse effects on the market price of
the Companys common stock; the risk
that the proposed transaction and its
announcement could have an adverse
effect on the Companys ability to
retain and hire key personnel and
maintain relationships with its
suppliers and customers and on its
operating results and businesses
generally; the Companys relationship
with SunEdison, including SunEdisons
bankruptcy filings; risks related to
events of default and potential events
of default arising under project-level
financings and other agreements due to
various factors; risks related to the
Companys failure to satisfy continued
listing requirements of NASDAQ; the
Companys ability to acquire projects at
attractive prices as well as to
integrate the projects the Company
acquires from third parties or
otherwise realize the anticipated
benefits from such acquisitions,
including through refinancing or future
sales; actions of third parties,
including but not limited to the
failure of SunEdison to fulfill its
obligations and the actions of the
Companys bondholders and other
creditors; price fluctuations,
termination provisions and buyout
provisions in offtake agreements;
delays or unexpected costs during the
completion of projects the Company
intends to acquire; regulatory
requirements and incentives for
production of renewable power;
operating and financial restrictions
under agreements governing
indebtedness; the condition of the debt
and equity capital markets and the
Companys ability to borrow additional
funds and access capital markets; the
impact of foreign exchange rate
fluctuations; the Companys ability to
compete against traditional and
renewable energy companies; hazards
customary to the power production
industry and power generation
operations, such as unusual weather
conditions and outages or other
curtailment of the Companys power
plants; departure of some or all of
SunEdisons employees, particularly key
employees and operations and
maintenance or asset management
personnel that the Company
significantly relies upon; pending and
future litigation; and the Companys
ability to operate the Companys
business efficiently, including to
manage the transition from SunEdison
information technology, technical,
accounting and generation monitoring
systems, to manage and complete
governmental filings on a timely basis,
and to manage the Companys capital
expenditures, economic, social and
political risks and uncertainties
inherent in international operations,
including operations in emerging
markets and the impact of foreign
exchange rate fluctuations, the
imposition of currency controls and
restrictions on repatriation of
earnings and cash, protectionist and
other adverse public policies,
including local content requirements,
import/export tariffs, increased
regulations or capital investment
requirements, conflicting international
business practices that may conflict
with other customs or legal
requirements to which we are subject,
the inability to obtain, maintain or
enforce intellectual property rights,
and being subject to the jurisdiction
of courts other than those of the
United States, including uncertainty of
judicial processes and difficulty
enforcing contractual agreements or
judgments in foreign legal systems or
incurring additional costs to do so.
Many of these factors are beyond the
Companys control.
The Company disclaims any obligation
to 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 the Companys Form 10-K
for the 2015 fiscal year and Forms
10-Q for the first, second and third
quarters of 2016, as well as
additional factors it may describe
from time to time in other filings
with the SEC or incorporated herein.
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.
to 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 the Companys Form 10-K
for the 2015 fiscal year and Forms
10-Q for the first, second and third
quarters of 2016, as well as
additional factors it may describe
from time to time in other filings
with the SEC or incorporated herein.
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.
ADDITIONAL INFORMATION AND WHERE TO
FIND IT
FIND IT
This communication may be deemed to
be solicitation material in respect
of the proposed acquisition of the
Company by Parent. In connection with
the proposed acquisition, Parent and
the Company intend to file relevant
materials with the SEC, including the
Companys proxy statement on Schedule
14A. STOCKHOLDERS OF THE COMPANY ARE
URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE
COMPANYS PROXY STATEMENT, BECAUSE
THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and security
holders will be able to obtain the
documents free of charge at the SECs
website, http://www.sec.gov. The
Companys stockholders will also be
able to obtain, without charge, a
copy of the proxy statement and other
relevant documents (when available)
by directing a request by mail or
telephone to TerraForm Global, Inc.,
7550 Wisconsin Avenue, 9th Floor,
Bethesda, Maryland 20814: (240)
762-7700, or from the Companys
website,
https://www.terraformglobal.com/.
be solicitation material in respect
of the proposed acquisition of the
Company by Parent. In connection with
the proposed acquisition, Parent and
the Company intend to file relevant
materials with the SEC, including the
Companys proxy statement on Schedule
14A. STOCKHOLDERS OF THE COMPANY ARE
URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE
COMPANYS PROXY STATEMENT, BECAUSE
THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and security
holders will be able to obtain the
documents free of charge at the SECs
website, http://www.sec.gov. The
Companys stockholders will also be
able to obtain, without charge, a
copy of the proxy statement and other
relevant documents (when available)
by directing a request by mail or
telephone to TerraForm Global, Inc.,
7550 Wisconsin Avenue, 9th Floor,
Bethesda, Maryland 20814: (240)
762-7700, or from the Companys
website,
https://www.terraformglobal.com/.
PARTICIPANTS IN SOLICITATION
The Company and its directors and
executive officers may be deemed to
be participants in the solicitation
of proxies from the holders of the
Companys common stock in respect of
the proposed transaction.
Information about the directors and
executive officers of the Company
and the interests of such
individuals will be set forth in
the proxy statement for the Merger,
which will be filed with the SEC.
You may obtain free copies of the
proxy statement as described in the
preceding paragraph, when it is
available.
executive officers may be deemed to
be participants in the solicitation
of proxies from the holders of the
Companys common stock in respect of
the proposed transaction.
Information about the directors and
executive officers of the Company
and the interests of such
individuals will be set forth in
the proxy statement for the Merger,
which will be filed with the SEC.
You may obtain free copies of the
proxy statement as described in the
preceding paragraph, when it is
available.
| Item 9.01 |
Financial Statements and
Exhibits. |
(d) Exhibits.
|
Exhibit No.
|
Description
|
|
|
2.1
|
Agreement and Plan of Merger,
dated as of March 6, 2017, by and among TerraForm Global, Inc., Orion US Holdings 1 L.P. and BRE GLBL Holdings Inc. |
|
|
2.2
|
Settlement Agreement, dated
as of March 6, 2017, by and among TerraForm Global, Inc. a Delaware corporation, TerraForm Global LLC a Delaware limited liability company, TerraForm Global Operating, LLC a Delaware limited liability company and SunEdison, Inc. |
|
|
2.3
|
Voting and Support Agreement,
dated March 6, 2017, by and among Orion US Holdings 1 L.P., a Delaware limited partnership, BRE GLBL Holdings Inc., a Delaware corporation, SunEdison, Inc., a Delaware corporation, SunEdison Holdings Corporation, a Delaware corporation, and TerraForm Global, Inc., a Delaware corporation. |
|
|
99.1
|
Press release, dated March 7,
2017. |
|
|
99.2
|
Investor Presentation.
|
About TERRAFORM GLOBAL, INC. (NASDAQ:GLBL)
TerraForm Global, Inc. is a renewable energy company. The Company owns and operates clean energy power plants. The Company’s segments include Solar, Wind and Corporate. The Company serves a range of utility, commercial, industrial, residential and government customers through energy production with over 40 projects across approximately 70 sites in various markets. The Company’s projects include Brakes, ESP Urja, Boshof, Silverstar Pavilion, NSM Sitara, Dunhuang, Salvador, Hanumanhatti, Focal, Alto Cielo, Witkop and others. The Company’s over 917 megawatts (MW) portfolio enables around the clock energy production. The Company’s solar and wind projects are located across various regions, including Brazil, India, South Africa, China, Thailand, Malaysia and Uruguay. The Company is a subsidiary of SunEdison, Inc. The Company’s subsidiaries include TerraForm Global, LLC and TerraForm Global Operating, LLC. TERRAFORM GLOBAL, INC. (NASDAQ:GLBL) Recent Trading Information
TERRAFORM GLOBAL, INC. (NASDAQ:GLBL) closed its last trading session up +0.68 at 4.93 with 253,290 shares trading hands.
