TerraForm Power, Inc. (NASDAQ: TERP)
Shares of TerraForm Power have rallied 28% on news that the company has renegotiated a three party agreement on terms more favorable to TERP. The agreement comes after hedge fund manager David Tepper of Appaloosa Management took an activist position in TERP and publicized an aggressive letter to the company’s board. The letter denounced management for duplicitous actions and specified how the three-party deal was harmful to TERP shareholders. TerraForm investors have embraced Tepper’s involvement, running the stock up 46% since his letter went public on December 1.
SunEdison (SUNE), a developer of solar energy solutions, established TERP in 2014 as a yield company. The yieldco structure is modeled after REITs and MLPs. It gives the parent or ‘sponsor’ company an efficient way to separate assets with stable long-term cash flow from the sponsor company’s development operations, which are capital and debt intensive. Typically, the sponsor (SUNE) pushes long-term, high quality, commercial solar projects down to the yieldco (TERP) to operate and produce free cash flow. In the case of the current three-party agreement, SunEdison is in the process of acquiring residential solar installer Vivint Solar and plans to drop-down their solar installations to TERP. Appaloosa pointed out that in addition to departing from high quality commercial solar projects, the Vivint deal is over-priced and puts too much risk on TERP. The revised three party agreement reduces TerraForm’s upfront cost by $200 million and pushes more of the deal risk back to SunEdison. Yahoo Finance
TERP Technical Analysis
TerraForm Power was established and began trading publically at $33 per share in July 2014. The stock reached highs of $42.66 on April 15 and has since traded down to a low of $6.73 in late November. The recent move began on December 1 and has lifted the stock to Monday’s high of $12.25 before closing at $12.07. Yesterday’s action was at least partially driven by the Global Climate Agreement, which bumped the entire solar sector and could continue to influence buying for days or weeks. For a long trade I want the stock to remain above VWAP and the 9-day and 20-day moving averages on the five-minute chart. Resistance levels are near $12.50, $13.30, $14 and the 50-day moving average at $14.59. Short interest is 19% with almost half of that added in the past month so the stock has the potential for a fast squeeze. On weakness, I will be watching price action at support levels near $11.60, $11.40, $11 and $10.70.
About TerraForm Power, Inc.
TerraForm Power, Inc. (TerraForm Power), formerly SunEdison Yieldco, Inc., owns and operates contracted clean power generation assets. The Company operates the power generation assets of SunEdison, Inc. and its consolidated subsidiaries (SunEdison), and third parties. It focuses on acquiring solar and wind generation assets serving utility, commercial and residential customers. Its portfolio consists of solar and wind projects located in the United States, Canada, the United Kingdom, and Chile with an aggregate nameplate capacity of 1,507.3 Megawatts as of February 20, 2015. Its portfolio as of February 20, 2015 includes both solar generation facilities and wind power plants consisting of 1,223.4 Megawatts of nameplate capacity from utility-scale power plants and 283.9 Megawatts of nameplate capacity of commercial, industrial, Government and residential customers. It is the managing member of Terra LLC, and operates, controls and consolidates the business affairs of Terra LLC. Google Finance