SunEdison Yieldco TerraForm IPO Surges in Trading Debut

Jul 18, 2014 4:41 pm ET

(Updates with closing share price in second paragraph.)

July 18 (Bloomberg) -- TerraForm Power Inc., a business to own and operate solar farms built by SunEdison Inc., soared 32 percent in its initial public offering today.

TerraForm closed at $33.09 trading under the ticker TERP on the Nasdaq Global Select Market. The company raised $501.6 million in its IPO, pricing 20.06 million common units at $25 each, St. Peters, Missouri-based SunEdison said in a statement. The IPO sold another $65 million in a private placement, which along with $371.2 million from the IPO will be used to pay off debt and acquire solar farms from SunEdison, according to the statement.

The so-called yieldco model is an increasingly common way for renewable-energy developers to raise capital at lower costs. Developers sell new projects to their yieldco, using the proceeds to fund additional plants. Revenue from selling power provides funds for the yieldco to buy more plants as they are built and also pay dividends to investors.

TerraForm Power will initially have a portfolio of 524 megawatts of solar farms in the U.S., Canada, the U.K. and Chile, the company said on May 28. Proceeds of its offerings will be used for expenses and also to buy buy projects from SunEdison and other companies.

Most yieldco IPOs have outperformed other energy stocks. NRG Energy Inc. and TransAlta Corp. formed similar yieldcos last year and have risen more than 27 percent and 7.2 percent, respectively, since their IPOs. Abengoa Yield Plc has risen more than 38 percent since it began trading on June 13. The S&P 500 Energy Index has climbed 10 percent this year.

Goldman Sachs Group Inc., Barclays Plc, Citigroup Inc. JP Morgan Chase & Co. and Macquarie Group Ltd. are underwriting the TerraForm IPO.