NEW YORK (TheStreet) -Shares of SunEdison (SUNE) and its subsidiary TerraForm Power (TERP) surged on Tuesday as investors applauded the companies plan to acquire wind energy operator First Wind for $2.4 billion.
The acquisition is expected to be immediately accretive to TerraForm once the deal closes in early 2015. With the purchase, SunEdison acquires the "leading independent wind development and asset management company and becomes the leading global renewable energy development company," according to a press release.
With the deal, SunEdison will purchase over 1.6 gigawatt (GW) of pipeline and backlog projects, which have been added to TerraForm Power's call right project list. The projects are expected to be operational in between 2016 and 2017. The transaction also adds an additional 6.4 GW of project development opportunities, the release said. SunEdison raised its 2015 project installation guidance from 1.6-1.8 GW to 2.1-2.3 GW, it said in the release.
SunEdison shares were surging 25.4% to $20.82. TerraForm's stock also rose 28.2% to $33.15. Here's what analysts had to say.
Josh Baribeau, Canaccord Genuity (Buy; $30 PT)
Though this comes a bit earlier than we anticipated, we have long expected both companies to eventually diversify out of solar. We do not really view this as a shift in business model, as the company's major objective still remains to acquire and develop cash flow-producing energy assets. This transaction is fully aligned with our positive investment thesis that the companies will accelerate organic and inorganic opportunities beyond investor expectations. SunEdison raised its installation guidance and Terraform raised its CAFD and dividend guidance strongly.
We continue to like the solar macro globally, despite some recent policy risks and what we believe are temporary declines in traditional energy prices; however, wind and potentially other renewables help SunEdison expand its total addressable market and hedge against solar's cyclicality.
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