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Posted 31st January 2017

Key Questions and Answers About Vortex Acquiring TerraForm Power’s Full Solar Portfolio

The European energy platform Vortex has agreed to acquire 100% of a 365 MW operational solar PV power portfolio in the UK, which is currently owned by TerraForm Power. Vortex, managed by the private equity arm of EFG Hermes, entered into the sale and purchase agreement in the first week of January,

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Key Questions and Answers About Vortex Acquiring TerraForm Power’s Full Solar Portfolio

Key Questions and Answers About Vortex Acquiring TerraForm Power’s Full Solar Portfolio
The European energy platform Vortex has agreed to acquire 100% of a 365 MW operational solar PV power portfolio in the UK, which is currently owned by TerraForm Power. Vortex, managed by the private equity arm of EFG Hermes, entered into the sale and purchase agreement in the first week of January, with the closing of the transaction subject to certain conditions being met. Here we present some of the important questions and answers surrounding this large acquisition in the renewable energy sector.

What’s Being Bought?
The entirety of TerraForm Power’s 365 MW operational solar PV power portfolio is made up of 24 operational assets, making it one of the largest in the UK. The average asset age is two years with an estimated useful life of c. 30 years, and the whole transaction has attracted an Enterprise Value of c. £470 million ($581 million).

Every solar plant is also eligible for the UK government backed Renewable Obligation Certificate (ROC) and 14-year power purchase agreements (PPA). This represents a huge investment for Vortex, following on from some of their previous acquisitions they have invested $1.4 billion in the European renewables market since 2014.

How Will the Acquisition Work?
Lightsource have partnered with EFG Hermes as a technical partner for operations and management services once the acquisition is complete, while Tenaga Nasional Berhad (TNB) has subscribed into Vortex to fund half of the equity share of the transaction. This will be beneficial for both parties, as industry expertise, extra funding and investment should lead to a successful acquisition and post-acquisition process.

Lightsource are Europe’s largest developer of solar PV projects and have over 1.3 GW of assets under their management. Their knowledge and expertise will be used in the post-acquisition process, while TNB gain an opportunity to invest in a large solar power business in the UK, growing their international expansion. It will also help out with the £300 million project finance debt facility. 

What Does It Mean for Vortex?
Vortex has grown from a newcomer to a major player in the past three years, with this latest acquisition achieving further growth. It is a platform managing 822 MW in net capacity across the UK, France, Spain, Belgium and Portugal already, with this additional purchase making it one of the largest renewable energy focused investment managers in Europe. It also demonstrates their merchant banking strategy effectively using their balance sheet to support core businesses.

And TerraForm Power?
For TerraForm Power this sale is extremely helpful for them to meet its breakeven forecast in 2017. The firm is aiming for revenues of $570 to $670 million this year and it hopes to achieve this by selling off a large proportion of its UK assets, of which this signals the start. TerraForm Power’s operating sector expect to receive around $208 million from the sale, with the proceeds used to enhance its liquidity position and reduce net debt.

Will This Affect Anything Else?
Such a large sale will have an effect on currency values, with millions of British pounds and US dollars changing hands. This won’t happen until the acquisition is confirmed, at which point any forex traders using FxPro should monitor the acquisition closely, as such a large currency exchange will have an impact on the value of both currencies.

Categories: Finance, M&A, Strategy


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