Credit Suisse: SunEdison-Vivint Good For Solar, Indicates Asset Appreciation And More Consolodation

Credit Suisse analyst Patrick Jobin followed up on the big Vivint Solar Inc VSLR buyout news this week with a report discussing the impact of the deal on the solar power industry. Jobin sees the deal as good news and believes that it demonstrates the value of residential solar power.

Details
SunEdison Inc SUNE and TerraForm Power Inc TERP will be buying Vivint for $2.2 billion. SunEdison will be contributing $1.277 billion to the deal, and Terraform will be contributing $922 million in exchange for 523 MWs of residential solar assets. Vivint shareholders will be receiving $16.50 per share, a 52 percent premium to last week’s closing share price.

Other positive developments
In addition to the buyout news, SunEdison raised its 2016 volume guidance and launched the IPO for its emerging market YieldCo. TerraForm had some news of its own, increasing its 2016 dividend guidance.

Jobin sees the terms of the deal and all of the related news involving the three companies as positive for the industry and the parties involved. “In our view, the transaction reaffirms our constructive stance on the residential solar growth opportunity, structurally higher return outlook, monetization opportunities for assets at 7-8% unlevered IRRs including SRECs/renewals, and further validates the attractiveness of the vertically integrated model for companies with scale,” Jobin explains.

Outlook
Credit Suisse believes that the Vivint acquisition adds about $3 per share of value to SunEdison’s stock, and the firm raised its target price for SunEdison from $42 to $45. Credit Suisse has Outperform ratings on the stocks of Vivint, SunEdison and TerraForm.