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TerraForm Power looking to sell stakes in North America wind farms

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TerraForm Power looking to sell stakes in North America wind farms

TerraForm Power Inc. is looking to sell minority stakes in North American wind farms to recycle capital for more lucrative investments, CEO John Stinebaugh said Aug. 9.

Speaking on the company's second-quarter earnings call, Stinebaugh would not identify which assets are going on the market. The company, whose power plant portfolio included 1,614 MW of wind farms in North America as of March 31, wants to sell minority stakes so it can continue operating the assets and collect fees for doing so.

"The overriding strategy that we've got is to sell assets that are stabilized where we've extracted pretty much all of the operational upside in terms of being able to reduce costs, in terms of being able to improve performance, and we have got a stable cash flow stream going forward that is in high demand by the institutional market," Stinebaugh said. "We think that by selling those kinds of assets ... we can then reinvest that capital in investments where we can earn higher returns and we can leverage our operating platform for further upside."

A deal is not likely to close until early 2020, the CEO added.

TerraForm Power aims to grow shareholder dividends by 5% to 8% annually through 2022. The company can achieve its target without issuing new equity by improving margins — renegotiating power plant service agreements, for example — and through "modest" organic growth and acquisitions, Stinebaugh said.

In July, TerraForm Power said it is buying about 320 MW of distributed generation assets from subsidiaries of AltaGas Ltd. The deal, which mostly comprises solar systems in the U.S. commercial and industrial market, would increase TerraForm Power's fleet of distributed generation assets by 78% to about 750 MW.

"What we're looking to do is basically comb through the 750-MW portfolio of [distributed generation] that we've got and identify opportunities to deploy storage, potentially back-up generation, potentially expansions or repowering of existing solar arrays," Stinebaugh said. "Over the next six months, we're going to try to scope out the opportunity and prioritize what we think the magnitude of that opportunity is."

TerraForm Power said net losses narrowed in the second quarter to $16.8 million, or a loss of 2 cents per share, from $27.6 million, or a loss of 13 cents per share, a year earlier. Analysts expected second-quarter earnings of 6 cents per share, according to the S&P Global Market Intelligence consensus estimate.

Cash available for distribution, which influences how much a company such as TerraForm Power can pay in dividends, increased 57% year over year in the second quarter to $47 million. The company declared a third-quarter dividend of about 20 cents per share.

TerraForm Power "continued the brisk cadence of platform evolving in [the second quarter] while demonstrating the benefit of geographic and technological diversity," analysts at Oppenheimer & Co. Inc. said, noting that weak wind performance in the U.S. was partially offset by stronger results in Europe.