TERRAFORM POWER, INC. (NASDAQ:TERP) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
Entry into a Material Definitive Agreement.
Merger and Sponsorship Transaction Agreement
On March 6, 2017, TerraForm Power, Inc., a Delaware corporation
(the Company), entered into a Merger and Sponsorship
Transaction Agreement (the Transaction Agreement) with
Orion US Holdings 1 L.P., a Delaware limited partnership
(Sponsor), and BRE TERP Holdings Inc., a Delaware
corporation and a wholly-owned subsidiary of Sponsor (Merger
Sub), providing for the merger of Merger Sub with and into
the Company (the Merger), with the Company as the
surviving corporation in the Merger (the Surviving
Corporation) in which Sponsor will hold an approximately 51%
interest. The Transaction Agreement provides that, at or prior to
the effective time of the Merger, the Company and Sponsor (or one
of its affiliates) will enter into a suite of agreements
providing for sponsorship arrangements as described in greater
detail below (the Sponsorship Transaction, and together
with the Merger and the other transactions contemplated by the
Transaction Agreement, the Transactions). Concurrently
with the announcement of the Transaction Agreement, TerraForm
Global, Inc., a Delaware corporation (GLBL), announced the
entry into an Agreement and Plan of Merger, by and among GLBL,
Sponsor and BRE GLBL Holdings Inc., a Delaware corporation and a
wholly-owned subsidiary of Sponsor (the GLBL Merger Sub),
to which GLBL Merger Sub will merge with and into GLBL and GLBL
will survive the merger as a wholly-owned subsidiary of Sponsor.
The Transaction Agreement was approved unanimously by the members
of the board of directors of the Company (the Board of
Directors) voting on the matter, following the unanimous
recommendation of its Corporate Governance and Conflicts
Committee (Conflicts Committee). Completion of the
Sponsorship Transaction is expected to occur, subject to
satisfaction of closing conditions, in the second half of 2017.
At the effective time 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 the Excluded Shares (as
defined in the Transaction Agreement)), will be converted into
the right to, at the holders election and subject to proration as
described below, either (i) receive $9.52 per Class A Share, in
cash, without interest (the Per Share Cash Consideration)
or (ii) retain one share of Class A common stock, par value $0.01
per share, of the Surviving Corporation (the Per Share Stock
Consideration, and, together with the Per Share Cash
Consideration (without duplication), the Per Share Merger
Consideration). The Per Share Stock Consideration will be
subject to proration in the event that the aggregate number of
Class A Shares for which an election to receive the Per Share
Stock Consideration has been made exceeds a certain maximum
number as described more fully in the Transaction Agreement, and
the Per Share Cash Consideration will be subject to proration in
the event that the aggregate number of Class A Shares for which
an election to receive the Per Share Cash Consideration has been
made exceeds a certain maximum number as described more fully in
the Transaction Agreement.
Immediately prior to the effective time of the Merger, the
Company will declare the payment of a special cash dividend
(the Special Dividend) in the amount of $1.94 per share,
as more particularly described in the Transaction Agreement.
Concurrently with the execution and delivery of the Transaction
Agreement, SunEdison, Inc. (SunEdison) executed and
delivered a voting and support agreement (the Voting and
Support Agreement), to which it has 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 Transactions.
The Transaction Agreement includes a non-waivable condition to
closing that the Transaction Agreement and the Transactions be
approved by holders of a majority of the outstanding Class A
Shares, excluding SunEdison, Sponsor, any of their respective
affiliates or any person with whom any of them has formed (and
not terminated) a group (as such term is defined in the
Securities Exchange Act of 1934, as amended).
Closing of the Merger is subject to certain additional
conditions, including the adoption of the Transaction Agreement
by the holders of a majority of the total voting power of the
outstanding Shares entitled to vote on the Merger, the
expiration or early termination of the waiting period
applicable to consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, 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 to which SunEdison or any
other debtor will be a party (the Bankruptcy Court
Order), and other customary closing conditions.
There is no financing condition to the consummation of the
Transactions. to the Transaction Agreement, the Company has
agreed to provide cooperation as reasonably requested by
Sponsor in Sponsors efforts to obtain debt financing that is to
be made available to the Company from and after the closing of
the Merger. to an executed debt commitment letter delivered by
lenders party thereto (the Lenders), such Lenders have
committed, upon the terms and subject to the conditions set
forth therein, to provide the amount of financing set forth
therein to repay, refinance, redeem, defease or otherwise
repurchase certain Company indebtedness. Sponsor has also
delivered to the Company the Guaranty, dated as of March 6,
2017, to which Brookfield Infrastructure Fund III-A (CR), L.P.,
a limited partnership organized under the laws of Delaware,
Brookfield Infrastructure Fund III-A, L.P., a limited
partnership organized under the laws of Delaware, Brookfield
Infrastructure Fund III-B, L.P., a limited partnership
organized under the laws of Delaware, Brookfield Infrastructure
Fund III-D, L.P., a limited partnership organized under the
laws of Delaware, and Brookfield Infrastructure Fund III-D
(CR), L.P., a limited partnership organized under the laws of
Delaware (collectively, the Guarantors) have guaranteed
certain obligations of Sponsor under the Transaction Agreement.
Sponsor and the Company have made customary representations and
warranties in the Transaction Agreement. The Company has also
agreed to various agreements and covenants, including, subject
to certain exceptions, to conduct its business in the ordinary
course of business between execution of the Transaction
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 and no shop restriction on its
ability to solicit alternative business combination proposals
from third parties and to provide information to, and engage in
discussions with, third parties regarding alternative business
combination transactions, except as permitted under the terms
of the Transaction Agreement. The Company may not terminate the
Transaction Agreement to accept an alternative business
combination and is required to hold a shareholder vote on the
Transaction Agreement even if the Board of Directors withdraws
its recommendation to vote in favor of the Merger. Sponsor has
also made certain covenants in respect of the operation of the
business of Brookfield and its affiliates in a manner that
would not impair the ability of Brookfield and its affiliates
to perform their sponsorship obligations from and after the
effective time of the Merger.
The Transaction Agreement contains specified termination
rights, including the right for each of the Company or
Sponsor to terminate the Merger Agreement if the Merger is
not consummated by December 6, 2017, subject to extension
until March 6, 2018 to obtain required regulatory approvals.
The Transaction Agreement also provides for other customary
termination rights for both the Company and Sponsor, as well
as a mutual termination right in the event that the
Settlement Agreement is terminated in accordance with its
terms. In the event the Transaction Agreement is terminated
by either the Company or Sponsor due to the failure to obtain
the requisite stockholder approvals or the termination of the
Settlement Agreement or failure to obtain the Bankruptcy
Court Orders, and the Board of Directors did not change its
recommendation to the Companys stockholders to approve the
Merger, the Company will pay to Sponsor all reasonable and
documented out-of-pocket expenses incurred in connection with
the Transaction Agreement and the Transactions, in an amount
not to exceed $17,000,000. The Transaction Agreement further
provides that upon termination of the Transaction Agreement
under certain other specified circumstances, the Company will
be required to pay Sponsor a termination fee of $50,000,000
(it being understood that in no event will the Company be
required to pay any combination of such out-of-pocket
expenses and such termination fee aggregating to more than
$50,000,000).
The representations, warranties and covenants of the Company
contained in the Transaction Agreement have been made solely
for the benefit of Sponsor and Merger Sub. In addition, such
representations, warranties and covenants (a) have been made
only for purposes of the Transaction Agreement, (b) have been
qualified by confidential disclosures made to Sponsor and
Merger Sub in connection with the Transaction Agreement, (c)
are subject to materiality qualifications contained in the
Transaction Agreement which may differ from what may be
viewed as material by investors, (d) were made as of the date
of the Transaction Agreement, the closing date or such other
date as is specified in the Transaction Agreement and (e)
have been included in the Transaction Agreement for the
purpose of allocating risk between the contracting parties
rather than establishing matters as facts. Accordingly, the
Transaction Agreement is included with this filing only to
provide investors with information regarding the terms of the
Transaction 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 Transaction Agreement, which subsequent information may
or may not be fully reflected in the Companys public
disclosures. The Transaction 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).
In addition, the Transaction Agreement provides that, at or
prior to the effective time of the Merger, the Company will
enter into (a) the Master Services Agreement (the
MSA) by and among the Company, TerraForm Power, LLC
(TERP LLC), Terraform Power Operating, LLC (TERP
Operating LLC), Brookfield Asset Management Inc.
(Brookfield) and certain affiliates of Brookfield
(collectively, the MSA Providers) to which the MSA
Providers will provide certain services to the Company and
its subsidiaries commencing at the effective time of the
Merger, (b) a revolving credit line agreement,
substantially consistent with the term sheet as agreed
between Sponsor and the Company as of the date of the
Transaction Agreement, (the Sponsor Line Agreement)
by and among the Company and Brookfield (the Sponsor
Line Provider) to which the Sponsor Line Provider will
commit up to a $500 million revolving unsecured credit line
to the Company, (c) the Relationship Agreement (the
Relationship Agreement) by and among the Company,
TERP LLC, TERP Operating LLC and Brookfield, to which,
among other things, Brookfield will provide the Company and
its subsidiaries with a right of first offer on certain
wind and solar assets in North America and other
Organisation for Economic Co-operation and Development
(OECD) nations that have been developed by Sponsor
(the ROFO Pipeline), on the terms set forth therein
and (d) the Registration Rights Agreement (the
Registration Rights Agreement) by and among the
Company and Sponsor providing Sponsor with registration
rights with respect to its shares in the Surviving
Corporation (together with the IDR Transfer Agreement, MSA,
Sponsor Line Agreement, Relationship Agreement and
Registration Rights Agreement, collectively, the
Ancillary Agreements and individually, each an
Ancillary Agreement). The Transaction Agreement also
requires the Company to issue to Sponsor additional Class A
Shares in respect of any losses to the Company arising out
of certain specified litigation matters upon the final
resolution of such matters.
Further, at the effective time of the Merger, the governing
documents of the Surviving Corporation, including its
by-laws and certificate of incorporation, will be amended
and restated to be substantially consistent with the
governance terms agreed to between Sponsor and the Company
as of the date of the Transaction Agreement.
The foregoing description of the Transaction Agreement, the
Ancillary Agreements and the Transactions does not purport
to be complete and is subject to, and qualified in its
entirety by, the full text of the Transaction Agreement
attached as Exhibit 2.1 hereto and incorporated herein by
reference.
Settlement Agreement
The Company also entered into the Settlement Agreement to
which SunEdison will exchange, effective as of
immediately prior to the record time for the Special
Dividend, all of the Class B Units (as defined in the
Transaction Agreement) of TERP LLC held by it or any of
its controlled affiliates for 48,202,310 Class A Shares
(the Exchange Shares) (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. In addition, also as part of the
settlement, SunEdison agreed to deliver the outstanding
incentive distribution rights of TERP LLC (the
IDRs) held by SunEdison or certain of its
affiliates to Brookfield and in connection therewith,
concurrently with the execution and delivery of the
Transaction Agreement, the Company, TERP LLC, BRE
Delaware, Inc. (the Brookfield IDR Holder) and
SunEdison and certain of its affiliates have entered into
an Incentive Distribution Rights Transfer Agreement (the
IDR Transfer Agreement), to which certain
SunEdison affiliates will transfer all of the IDRs to
Brookfield IDR Holder at the effective time of the Merger
on the terms and conditions set forth in the IDR Transfer
Agreement. The Company will also authorize and issue to
SunEdison a number of additional Class A Shares (the
Additional SunEdison Shares, together with the
Exchange Shares, the SunEdison Shares), such that,
immediately prior to the effective time of the Merger,
SunEdison will hold an aggregate number of Class A Shares
equal to 36.9% of the Companys Fully Diluted Share Number
(as defined in the Transaction Agreement).
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.
Overview of Principal Events Leading to the Transaction
Agreement with Brookfield
On March 6, 2017, following the unanimous recommendation
of the Conflicts Committee, the members of the Board of
Directors voting on the matter unanimously (i) determined
that the Merger is fair to, and in the best interests of,
the Company and its stockholders, approved and declared
advisable the Transaction Agreement and the Transactions
and resolved to recommend that the holders of Shares
approve the Transaction Agreement and the Transactions
and (ii) directed that the Transaction Agreement be
submitted to the holders of Shares for their adoption and
approval.
The Board of Directors recommendation marks the
culmination of a strategic review process that was
initiated by the Board of Directors and Conflicts
Committee in anticipation of and in response to
SunEdisons financial and operating difficulties, which
culminated in SunEdisons voluntary filing for
bankruptcy protection to Chapter 11 of the U.S.
Bankruptcy Code on April 21, 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 financial distress, 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). 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:
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;
Strengthened corporate governance by amending
the limited liability company agreement of its
operating subsidiary to provide 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);
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;
Increased the number of directors on the Board
of Directors from seven to nine; eight of the
Companys current directors satisfy NASDAQs
independence standards and five are independent
of both SunEdison and GLBL and serve on the
Conflicts Committee;
Mandated that all decisions with respect to any
strategic transaction, including the
Transactions, 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;
Engaged financial and legal advisors, including
Centerview Partners LLC (Centerview) as
joint financial advisor with GLBL and Morgan
Stanley, Inc. (Morgan Stanley) 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 Hughes Hubbard Reed LLP, as legal
advisor to the directors who are not also
directors of GLBL and, following the
appointment of such directors to the Conflicts
Committee, as legal advisor to the Conflicts
Committee;
Implemented a stockholder protection rights
plan in July 2016, after consultation with
legal and financial advisors and after the
Board of Directors, following the
recommendation of the Conflicts Committee,
determined doing so would be in the best
interests of the Company and its stockholders
because it would maximize the Companys options
in its strategic review process;
Developed a process and protocol for
collaborating with SunEdison in the strategic
alternatives process on an arms-length basis,
with a goal of permitting the Company to
maximize value for its public stockholders as
compared to a separate process or a delayed
process, including by giving the Company the
ability to jointly decide with SunEdison the
structure and organization of the strategic
alternatives process and any potential
transaction, 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;
Developed business plans and forecasts
assuming the Company would continue as a
stand-alone entity (without a sponsor) either
on a stabilization basis without acquisitions
or on a growth case assuming the ability to
achieve approximately $10.8 billion in
acquisitions over 10 years and addressing
multiple areas, including growth prospects,
dividend targets, organizational design,
investment strategy, capital structure,
competitive position, project operations and
corporate costs and engaged in a detailed
review of the stand-alone plans, including
key execution risks and financial analyses,
in consultation with financial and legal
advisors, with a view toward determining
whether it was advisable to pursue such a
stand-alone plan or to pursue a strategic
alternatives process;
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 and engaged in a
review of the sponsorship 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 a stand-alone plan or other strategic
alternatives;
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
alternative; and
Conducted a strategic alternatives process
in which:
o
In the first phase, approximately 96
different parties were contacted, of which
35 entered into non-disclosure agreements,
resulting in the submission of preliminary
non-binding indications of interest by nine
different parties, including three
strategic bidders and six financial
bidders;
o
In the second phase, bidders were provided
access to a virtual data room, a draft
sponsorship term sheet and management
presentations, resulting in the submission
of offers from three different parties,
including one financial bidder, one
strategic bidder and Brookfield:
Party A, a strategic bidder, proposed a
whole company transaction for $10.10 per
Class A Share;
Party B, a financial bidder, proposed a
sponsorship transaction resulting in the
acquisition of a maximum of 33% of the
outstanding equity of the Company
(including shares to be issued to settle a
litigation claim by Party A against the
Company) for $13.00 per Class A Share; and
Brookfield, which offered $11.50 per Class
A Share for a sponsorship transaction or a
whole company transaction (with the Company
only) and $12.50 per Class A Share for a
double sponsorship transaction or a double
whole company transaction (in each case, if
the second transaction was with GLBL);
o
Through negotiation, the Board of
Directors, in each case, following the
recommendation of the Conflicts Committee,
sought to improve the terms of the three
cash offers, but was unable to do so,
ultimately determining that the Brookfield
proposal, although it was less than the
offer included in the letter Brookfield
sent to the independent directors on
November 18, 2016, indicating its interest
in offering $13.00 per Class A Share in a
whole company or sponsorship transaction,
appeared to offer superior value as
compared to the other two offers;
o
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 February 21, 2017, which was
subsequently extended to March 6, 2017;
o
During the exclusivity period with
Brookfield, the Company negotiated certain
improvements to the economic terms of
Brookfields proposal; and
o
The terms of the Transaction Agreement and
the terms of the Settlement Agreement were
robustly negotiated by the Company, were
approved unanimously by members of the
Board of Directors voting on the matter,
following the unanimous recommendation of
the Conflicts Committee, and were executed
substantially concurrently as of March 6,
2017.
The Conflicts Committees and Board of Directors
Reasons for the Transactions
In evaluating the Transaction Agreement and the
Transactions, 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
Transactions, each of which the Conflicts
Committee and the Board of Directors believed
supported their respective determinations that
the Transactions, resulting in a sponsorship of
the Company, were superior to other strategic
alternatives or a stand-alone alternative:
the fact that while the stand-alone
business plans could provide the Companys
stockholders the opportunity to
participate in 100% of the potential
future increases in trading value of the
Companys stock, the stand-alone business
plans were subject to significant risks:
o
a transition from a sponsored yieldco
model to a sponsorless yieldco model was
unproven and investor reception for such
a model was uncertain, in particular
because:
there was a projected lag in the Companys
dividend growth under the stand-alone
business plan as compared to that of
comparable companies; and
the likelihood that the Companys share
price would be depressed or volatile
until management could establish a track
record of outperforming the stand-alone
business plan;
o
the lack of an asset acquisition pipeline
or visible growth trajectory, including
the need to identify suitable markets for
investment and a lack of readily
discernible paths to strategic
partnerships;
o
assuming development of an asset
acquisition pipeline, an uncertain
capability, in the absence of a reputable
and financially credible sponsor, to
compete for stabilized, yield generating
infrastructure as a stand-alone Company
relative to competitors, given the
Companys potentially high cost of
capital, negative operational history and
track record of failed transactions;
o
the Companys ability to successfully
execute the initial asset sales
required to fund deleveraging, which
was essential to achieve competitive
equity yields and more attractive
interest rates under the stand-alone
business plans, was uncertain, and
after completing such initial asset
sales, the Company would still remain
more levered than its peers;
o
the uncertainty of investors appetite
for the Companys equity securities in
the absence of a reputable and
financially credible sponsor in light
of the erosion in stockholder value
since the Companys initial public
offering;
o
the uncertain ability of the Companys
existing management to efficiently
manage the Companys existing portfolio
due to the fact that only since the
launch of the strategic alternatives
process had the Company pursued
contracts with third parties for
services or opted to bring services
in-house for operations and maintenance
and asset management;
o
the Companys ability to execute various
aspects of the stand-alone business
plans depended on the Companys ability
to retain management and key personnel,
including to develop, operate and
optimize fleet; and
o
the uncertainty surrounding the
Companys ability to successfully
execute the management growth plan, and
managements advice that fully achieving
the results contemplated by that plan
was highly unlikely;
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 in the absence of a
reputable and financially credible
sponsor, 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 particular;
Brookfield and Sponsor can utilize
their reputation in the power industry
as seasoned, well-known operators and
their capacity as a sponsor to provide
the Company with operational, financial
and investment expertise that will
stabilize the Companys growth and
strengthen operations over time;
the alignment of Brookfields and the
Companys financial incentives through a
51% cornerstone investment in the
common stock, the IDR Transfer
Agreement and Brookfields annual MSA
fee will provide the Company with
services and foster economic growth;
the belief that, notwithstanding the
additional costs associated with
sponsorship, a sponsorship with
Brookfield will provide a lower cost of
capital for the Company in the medium
and long term, providing it with the
ability to successfully pursue a high
quality and diversified portfolio of
renewable assets;
the fact that Brookfield will provide
the Company and its subsidiaries
access to wind and solar assets in
North America and Western Europe
through Sponsors ROFO Pipeline;
the belief that Brookfields
large-scale operations and strong
financial performance will provide
the Company with advantaged access to
capital, larger investment
opportunities, the ability to grow
its fleet size and pay greater
dividends;
the belief that the Company can
leverage the strength of Brookfields
renewable power businesses globally
to develop future development
pipelines and renewable power
projects;
the certainty of realizing value in
cash combined with the ability to
benefit from potential future
increases in the trading value of the
Companys public float if a
stockholder elects to retain stock;
the opinions of Centerview and Morgan
Stanley, respectively, 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
applicable Per Share Merger
Consideration, together with the
Special Dividend, 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
Sponsor 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 of Brookfield
and Sponsor and Brookfields ability
to pay all amounts required to
consummate the Transactions,
including the Per Share Cash
Consideration, out of its cash on
hand and to financing arrangements
committed in the Debt Commitment
Letter, without a financing condition
to the Merger and with the payment
and other obligations of Sponsor
guaranteed by the Guarantors to the
Guaranty;
the belief that Brookfield, as a
seasoned and well-known operator in
the renewable energy industry, may be
able to promptly obtain certain
regulatory approvals necessary to
close the Transactions more quickly
than other potential bidders; and
the fact that the terms of the
Transaction Agreement will require
the adoption of the Transaction
Agreement by the holders of a
majority of the outstanding Shares as
well as the approval of the
Transaction Agreement by the holders
of a majority of the Class A Shares
excluding SunEdison, Sponsor, their
respective affiliates or any person
with whom any of them has formed (and
not terminated) a group (as such term
is defined in the Securities Exchange
Act of 1934, as amended) (which is a
non-waivable condition to closing).
In view of the variety of factors considered
in connection with their respective
evaluation of the Transaction Agreement and
Transactions, 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 long term
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 unaudited forecasts to
contemplate two different scenarios, which
we refer to as the Management Stabilize
Case and the Management Growth Case. In the
Management Stabilize Case, management of
the Company employed assumptions based on a
scenario in which the Company would use
existing cash and proceeds from asset sales
to delever the business to a level
consistent with that of peers, and
thereafter would face challenges pursuing
growth opportunities due to an inability to
compete for and fund acquisitions. In the
Management Growth Case, management of the
Company employed assumptions based on a
scenario in which the Company would use
existing cash and proceeds from asset sales
to delever the business to a level
consistent with that of peers, and
thereafter would successfully pursue growth
through acquisitions of assets funded with
equity and debt. The cases provided are
illustrative of potential standalone
company outcomes and do not necessarily
reflect a base case view. The Management
Growth Case is intended to illustrate a
scenario wherein the Company is able to
successfully navigate in an unproven
sponsorless yieldco structure. Management
does not consider this a probable scenario.
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.
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 Transactions
(or any failure of the Transactions 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