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Vivint Solar Hits Its Apex on SunEdison Deal

The solar industry continues to shine both domestically and globally, despite falling prices for traditional fossil fuels.

Utah-based Vivint Solar, Inc. (VSLR) has grown quickly over the last few years and is now one of the largest U.S. residential solar installation companies. It has around 523 megawatts of contracted rooftop solar assets built or under development.

Vivint went public in late 2014, and has financed and installed over 40,000 solar panel systems as of the end of March 2015.

Before the Opening Bell this past Monday, Vivint’s stock surged on the announcement that it was being acquired by clean energy giant SunEdison, Inc. (SUNE) and its subsidiary, TerraForm Power.

Reaching For the Sun: Price of Vivint Solar Stock

SunEdison and TerraForm Power plan to pay $2.2 billion in a combination of cash and shares of SunEdison common stock and convertible notes.

The deal, which highlights how quickly the market is growing for rooftop solar panel systems, is expected to be a trifecta of success – a win for all parties.

Sharing the Light

For clean power giant SunEdison, the deal helps its expansion plans in the solar energy space both for residential and commercial buyers.

TerraForm Power is in the position to acquire actual solar projects from Vivint Solar, both the ones already built and projects in development. It can do so as the company is structured as a yieldco, meaning it’s a publicly traded company that bundles together the assets, in this case, of clean energy projects based around the long-term and predictable revenue generated by the reoccurring energy payments.

And, of course, Vivint and its shareholders are receiving $16.50 per share as part of the deal.

Ahmad Chatila, the CEO of SunEdison and Chairman of TerraForm Power, related that buying Vivint is part of the companies’ plan to become a major power provider.

“SunEdison’s acquisition of Vivint Solar is a logical next step in the transformation of our platform after the successful execution of our First Wind acquisition in January 2015,” said Chatila in a statement.

“[As] of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1 gigawatt per quarter,” he went on.

SunEdison also raised its 2016 annual guidance for production to between 4,200 and 4,500 megawatts – a 50% increase!

But SunEdison goes far beyond just energy production. The company has become a full-fledged financial services company, offering everything from asset management, to billing and reporting, to tax and audit services.

The Pioneer Outsourcer

SunEdison became a household name in the early 2000s as it was the first company to successfully introduce the “solar-as-a-service” model developed by the well-publicized entrepreneur Jigar Shah.

Shah’s model offered residential customers rooftops solar panel systems with little or no money down. The model generates income by charging customers a monthly energy bill, similar to any other utility.

Prior to the introduction of this model, solar customers were required to pay upfront for their solar panels, which, at that time, cost upwards of tens of thousands of dollars and can still be a hefty investment for today’s homeowners.

The model became such a success that in 2009, the large silicon wafer and solar module producer, MEMC Electronic Materials (an arm of Monsanto [MON]), acquired SunEdison, demonstrating how lucrative this new potential model could become. MEMC later decided to focus growing its business around clean energy. Thus, in recent years, it adopted the name of SunEdison.

Solar Sector Having Its “Day in the Shade”

Now, over a decade later, many solar companies have replicated this model to share the space with Vivint, including SolarCity Corp. (SCTY), the U.S. leader in both solar financing and installation, as well as privately held Clean Power Finance and Sunrun.

SunEdison also recently acquired a wind energy project in India, along with First Wind, one of the largest wind energy developers in the United States.

Plus, the U.S. solar panel industry broke records in the first quarter of 2015 in terms of the total number installed. The industry reached 437 megawatts of solar panels on home rooftops, a 76% increase from Q1 2014, according to the Solar Energy Industry Association.

Over the next five years, another three million new home rooftop solar systems are expected to be installed in the United States. The biggest companies are trying to expand vertically across the sector, structuring additional kinds of businesses in order to lower their costs.

In sum, this new acquisition reflects increased consolidation in a growing market. The bigger companies with deep pockets will continue to fight for rooftop space that can apply solar panels more effectively and economically than ever before.

The acquisition requires approval by Vivint stockholders and will face reporting requirements. But the deal is expected to close in the fourth quarter of 2015.

Good investing,

Shelley Goldberg

Shelley Goldberg

, Senior Correspondent

View More By Shelley Goldberg