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SunEdison, TerraForm Power to Acquire Residential Solar Installer for $2.2 Billion

July 20, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

SunEdison, Inc., Vivint Solar, and TerraForm Power, Inc. announced that SunEdison and Vivint Solar have signed a definitive merger agreement pursuant to which SunEdison will acquire Vivint Solar for approximately $2.2 billion, payable in a combination of cash, shares of SunEdison common stock and SunEdison convertible notes.

In connection with SunEdison's proposed acquisition of Vivint Solar, SunEdison has entered into a definitive purchase agreement with a subsidiary of TerraForm Power which, concurrently with the completion of SunEdison's acquisition of Vivint Solar, will acquire Vivint Solar's rooftop solar portfolio, consisting of 523 megawatts (MW) expected to be installed by year-end 2015, for $922 million in cash (TERP Purchase Agreement). The 523 MW of residential solar projects are expected to provide a 10-year average unlevered CAFD (cash available for distribution) of $81 million, and provide a ten-year average levered cash-on-cash yield of 9.5 percent.

In addition, TerraForm Power will acquire future completed residential and small commercial projects from SunEdison's expanded residential and small commercial (RSC) business unit.

The Vivint Solar management team will join SunEdison. SunEdison's existing RSC development business and the Vivint Solar team will be merged. The transaction expands SunEdison's RSC platform and is intended to accelerate SunEdison's existing business in the United States, United Kingdom and Australia.

The transaction provides, "an immediate expansion of our capacity and bandwidth to grow our residential business in the U.S. and globally," said Ahmad Chatila, SunEdison chief executive officer and TerraForm Power chairman. "As of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1 gigawatt per quarter."

Under the merger agreement, Vivint Solar stockholders will receive $16.50 per share, consisting of $9.89 per share in cash, $3.31 per share in SunEdison stock, and $3.30 per share in SunEdison convertible notes. The $2.2 billion acquisition price is based on approximately 115 million Vivint Solar shares outstanding after inclusion of employee stock options and restricted stock units that will vest upon the completion of the acquisition, the repayment of approximately $263 million of Vivint Solar debt and the payment of transaction costs. SunEdison expects that Vivint Solar will have approximately $100 million of cash on its balance sheet at the time of closing. SunEdison expects to issue approximately $370 million of its common stock and approximately $350 million of SunEdison convertible notes to Vivint Solar stockholders as merger consideration.

The number of SunEdison shares to be received by Vivint Solar stockholders in the merger will be determined based upon the volume weighted average price per share of SunEdison common stock for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to completion of the merger (the "Measurement Price"), subject to a collar. As a result of the collar, Vivint Solar stockholders will receive no more than 0.120 shares of SunEdison common stock and no less than 0.098 shares for each of their Vivint Solar shares. As part of the merger consideration, Vivint stockholders also will receive five-year notes convertible into SunEdison shares, which will be issued by SunEdison pursuant to an Indenture between SunEdison and a trustee. The convertible notes will be issuable only in registered form without coupons and will be direct, unsecured, senior obligations of SunEdison. The conversion price for these convertible notes will be 140 percent of the Measurement Price (but the Measurement Price may not exceed $33.62 or be lower than $27.51). The convertible notes will bear interest at a rate of 2.25% per year, payable semiannually in arrears in cash.

The merger requires the approval of Vivint Solar stockholders. 313 Acquisition LLC, which owns approximately 77 percent of the outstanding Vivint Solar shares, has entered into a voting agreement with SunEdison pursuant to which 313 Acquisition LLC has agreed, among other things, to vote in favor of the adoption of the merger agreement, subject to certain termination events, including, among others, termination of the merger agreement. In addition, 313 Acquisition LLC has also executed a lock-up agreement that imposes certain restrictions on its ability to sell or transfer directly or indirectly, any of the SunEdison convertible notes issued to it in the merger or any SunEdison common stock that is received upon a conversion of the SunEdison convertible notes for a specified period of time following the closing of the transaction.

SunEdison intends to fund the cash portion of the merger consideration primarily from the proceeds of a new $500 million secured debt facility and the completion of the $922 million sale of assets to TerraForm Power. However, completion of the merger with Vivint Solar is not conditioned on consummation of the new debt facility or of any other third-party financing or the completion of the asset purchase by TerraForm Power. If SunEdison were unable to obtain the funding needed to complete the merger at a time when all other conditions to the merger are satisfied, SunEdison could be liable for breach and be subject to customary remedies, including contract damages.

To support the merger transaction, SunEdison has entered into a commitment letter with Goldman Sachs Bank USA for a $500 million secured term loan facility to be provided to a wholly-owned, indirect subsidiary of SunEdison which will hold certain development assets of the expanded SunEdison RSC platform after the merger with Vivint Solar.

TerraForm Power has entered into a debt commitment letter with Goldman Sachs Bank USA for a $960 million unsecured bridge facility. The funding of the bridge facility is subject to the negotiation of definitive documentation and other customary closing conditions. The TERP Purchase Agreement is not conditioned on TerraForm Power's receipt of the new unsecured bridge facility or any other third-party financing.

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