When First Wind’s investors first looked to cash out of the company several years ago, they tried the IPO route. Their plans for an initial public offering were shelved in 2010, but the option remained under consideration.
Now that SunEdison has arrived, Boston-based First Wind’s backers have found a clearer path to the exit. The Missouri-based solar development company and its power plant holding company, affiliate TerraForm Power, unveiled a deal on Monday to buy First Wind for up to $2.4 billion. That’s a nice reward for First Wind’s private equity backers, Madison Dearborn Partners and D.E. Shaw & Co.
For SunEdison and TerraForm, this gives the firms an important foothold into the U.S. wind business: First Wind operates a number of wind farms in the Northeast and Hawaii. Terraform will buy First Wind’s operating wind and solar projects with combined capacity of 521 megawatts, a portfolio valued at $862 million in this deal. SunEdison, meanwhile, acquires the platform for running the wind farms and developing future projects for $1 billion up-front and up to $510 million in additional payments, depending on the completion of certain projects in First Wind’s pipeline. (First Wind’s generating capacity exceeds 1,000 megawatts when projects under construction are included.)
Gaynor tells me that discussions about becoming a freestanding public company or spinning out the existing wind-farm projects into a separate public firm continued for some time. But in the end, Gaynor says key investors decided that the wait to fully recoup their investments in First Wind would be too long – potentially as long as three to five years – with another IPO.
“We’ve hit a critical mass, in terms of the cycle of the company,” says Gaynor, whose firm generated roughly $250 million in revenue last year. “We were always thinking about what was the right next step for us to take.”
It’s easy to bemoan the fact that we missed the opportunity for Boston to have another major public company based here that would be a top player in its industry, an agenda-setter watched across the country. Sometime in early 2015, the First Wind signs will be replaced by SunEdison’s over at the Leather District headquarters. This kind of exit is never easy on our collective ego.
But Gaynor says there’s a lot to like about this move. He says First Wind’s 225-person workforce will join an international player in the energy business, one with all sorts of new career paths, once the deal closes in early 2015. And Gaynor says he expects the nearly 80-person Boston team will continue to grow under SunEdison’s ownership, with Boston becoming the de facto “wind headquarters” for SunEdison. The signs will change next year, but the address won’t: Gaynor says there are several years remaining on First Wind’s headquarters lease, and much of the infrastructure there would be tough to move.
Gaynor says he first met with Carlos Domenech, the CEO of TerraForm, to talk about how to bring the two companies together over the summer. The potential to combine two powerhouses in wind and solar became quick to envision. Gaynor says it was particularly important to find a buyer whose culture was compatible with First Wind’s. SunEdison, Gaynor says, met that criterion.
“We were very impressed by Paul and his team, and the company they have built,” Domenech tells me. “This is a seminal moment in the history of renewables, not just for our companies, but really for the industry.”