Investors cheered SunEdison Inc's (NYSE: SUNE ) deal to jointly acquire First Wind for $2.4 billion with affiliated yieldco TerraForm Power Inc (NASDAQ: TERP ) . And with good reason. It's a truly transformational deal that takes SunEdison's business to new levels. TerraForm will benefit along the way, too, which is why it's shares rose even further than SunEdison's 30% or so advance.
SunEdison did solar
As SunEdison's name implies, it has historically been involved with solar power. It develops, finances, operates, and monitors solar energy "solutions" worldwide. At least that's what it did. Today, with the $2.4 billion agreement to buy First Wind, Sun Edison is expanding its offerings to include wind power.
(Source: Thomas R Machnitzki, via Wikimedia Commons)
Normally when a company announces a big acquisition its shares drop on the news. But SunEdison's purchase is transformational because it's no longer going to be just a solar company; it's turning itself into a renewable power company.
While that alone is a good story, it gets even better because First Wind is domestically focused while SunEdison's reach expands the globe. So SunEdison is not only buying a position in the U.S. wind power industry, but it can take the wind expertise it's acquiring into new markets. It's also worth noting that First Wind has been working on solar projects since last year, so this transaction augments SunEdison's core solar business, too.
Assuming consummation of the deal in early 2015, SunEdison has increased it installation guidance for next year by roughly 30%. Looking further out, the deal includes roughly 1.6 gigawatts of projects to be completed over the next three years and "an additional 6.4 GW of project development opportunities." And that doesn't even factor in the potential for expanding the wind business globally.
A win-win
But that's not the only good news coming from this transaction. TerraForm Power, a yield-co sponsored by SunEdison and created earlier this year, is set to acquire 521 megawatts of wind power as part of the purchase. TerraForm, designed to distribute cash to shareholders, has upped its 2015 dividend projection by a massive 44%, again assuming the deal closes in early 2015 as currently expected. No wonder shares of TerraForm advanced as much as 30% on the news, too.
(Source: Leaflet, via Wikimedia Commons)
Moreover, TerraForm is now in line to acquire both solar and wind power from its parent, called drop downs in industry lingo. This could easily speed up the pace of TerraForm's dividend growth beyond next year. Which, as it were, will increase the amount that SunEdison gets paid via its incentive distribution rights (payments based on how quickly TerraForm's dividend increases). It's no wonder that investors of both companies are clearly happy with the purchase.
Not your father's solar company
SunEdison CEO Ahmad Chatila noted, "The acquisition of First Wind transforms both SunEdison and TerraForm Power into diversified renewable energy companies and will make SunEdison the leading renewable power plant developer in the world." Hyperbole or not, this deal really does change SunPower's business and along with it TerraForm Power's future.
That said, there are risks inherent to the deal, such as the potential expiration of tax credits for building wind power in the United States that could be a headwind to domestic wind power growth. And then there's the $2.4 billion price tag. Right now that's being funded with short-term financing. SunPower is on the hook for roughly $1 billion now, with delayed payments of $510 million based on the completion of projects in First Wind's pipeline. TerraForm will cover the rest. New shares or additional debt will likely be issued, eventually, by each company.
But with SunPower's business refocused around renewable power instead of just solar, there's good reason to focus on the positives -- and to expect a broader set of acquisitions that let SunPower grow its business even more. This, in turn, would open TerraForm Power up to a more diversified collection of drop down assets, as well.
Investors looking for a diversified renewable power play appear to have gotten not one, but two new options -- one focused on growth (SunEdison) and the other on yield (TerraForm Power). There's clearly more to like at both companies today than there was just yesterday, so if you're into renewable investing, SunEdison and TerraForm Power should both be on your watch list if they weren't already.
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Andy Dean Photography/Shutterstock Open enrollment for insurance plans under the Affordable Care Act begins on Nov. 15. Between then and Feb. 15, you'll be able to enroll in a new health care plan, re-enroll in the one you picked for 2014, switch plans, and apply for subsidies, depending on your income. Crucially, as HealthCare.gov points out, "If you don't enroll in a health plan by Feb.15, 2015, the only way you can get health insurance for 2015 through the Marketplace is if you qualify for a Special Enrollment Period." And unless you have other health coverage, enrolling in Obamacare is the only way you can avoid having to pay the government's fee for failing to secure health care coverage. Hold Up a Sec -- What Was That About a Fee? To ensure that insurers have enough healthy persons in the system, paying premiums and offsetting the cost of taking care of those who get sick, Obamacare requires that everyone either sign up for health insurance -- or pay a fee (sometimes referred to as a "tax" or even a "penalty") to opt out. And the fee the government requires you to pay in 2015 for not signing up for insurance may be double or even triple what it was in 2014 during the slow ramp-up of the Affordable Care Act. There's a long list of exceptions. For example, if you meet the government's definition of being too poor to afford even Obamacare -- no penalty. If you're an American Indian -- no penalty. Or if you're in jail -- no penalty. (This is what we call a "mixed blessing.") Crunching the Numbers Those exceptions aside, in 2014, the first year in which fees were charged for opting out of Obamacare, opt-outers were required to pay either $95 per person or 1 percent of their income above a certain threshold. Whichever number worked out to be greater was the one you paid for forgoing health care insurance. In 2015, these fees jump to the greater of either $325 or 2 percent of income over the filing threshold. And that's just if you're single. If you have a family to provide for -- and insure -- then forgoing Obamacare could cost you as much as $975 (or 2 percent of income over the threshold). And in 2016, the numbers will jump again. Individuals will pay $695 (or 2.5 percent of income) for opting out of health insurance coverage. Families will pay up to $2,085 or 2.5 percent. Result: If you didn't pay attention to the Obamacare debate last year, this year it's more important than ever to study the math on whether you can afford to opt out. Unfortunately, the numbers can quickly get tricky. For example, you probably noticed mentions of a "threshold" above, right? Well, there's not just one threshold, but 10 that could apply to you, depending on your filing status and age. So your penalty can vary based on whether you are a single tax filer, a married couple filing jointly, a married couple filing separately, etc. The Internet to the Rescue! Fortunately, the good folks at insuranceQuotes.com, a subsidiary of Bankrate (RATE), have an online calculator that will help you do the math based on your replies to three short questions: How many adults are in your household? How many children are in your household? What is your estimated annual household income? The Obamacare Penalty Calculator will quickly estimate what your penalty should have been in 2014, and what it will probably rise to in 2015. A Few Examples, Please? Our pleasure. The calculator's pretty simple, so we won't spend a lot of time on this, but just to satisfy your interest, here are a couple examples: A single taxpayer earning an adjusted gross income of $33,422 a year -- which, according to the Internal Revenue Service, was the average earned by single filers in 2012 (the latest year for which the IRS has complete data) -- would have paid a penalty of $232.72 in 2014, rising to $462.44 in 2015 for refusing to buy insurance. The IRS estimates average adjusted gross incomes at $110,769 for married couples filing jointly. Such a couple, at such an income -- regardless of whether this couple has no children, one child or several children -- would have owed a family penalty of $904.69 for forgoing health insurance in 2014, rising to $1,803.38 in 2015. These are, of course, just examples. As Leo Tolstoy once wrote: "Every unhappy family is unhappy in its own way." To find out how unhappy you will be if you miss the deadline for signing up for health insurance, check out insuranceQuote's Obamacare penalty calculator. More from Rich Smith
Nick King for the Wall Street Journal