SunEdison to buy into Dominion solar projects; partner on Three Cedars project

Dominion Resources (NYSE: D) announced Sept. 8 that it has agreed to enter into a partnership with SunEdison Inc. (NYSE: SUNE) under which it would sell 33% of its ownership in 425 MW of solar generating capacity for approximately $300 million, subject to working capital and certain other adjustments.

Under the terms of the agreement, SunEdison has a future option to buy all or a portion of Dominion’s remaining 67% ownership. Included in the agreement are 24 projects in California, Connecticut, Georgia, Indiana, Tennessee and Utah. Fifteen of the projects entered service in 2013 and 2014. The remaining projects either have been completed or have expected in-service dates in 2015. All have long-term power purchase agreements with local electricity providers.

Dominion said it expects to pay down debt with the cash proceeds from this deal. The transaction will require approval by the Federal Energy Regulatory Commission.

Thomas F. Farrell II, chairman, president and chief executive officer, said: “We began acquiring and developing long-term contracted solar projects in 2013 to build the knowledge and expertise in constructing, owning and operating utility-scale solar power before bringing that technology to Virginia. Meanwhile, during the past decade Dominion has worked to reduce risk and divest non-core assets and businesses. Our focus is shifting from constructing contracted solar to constructing utility solar in Virginia, where we expect to develop 400 megawatts of generating capacity by 2020.”

New Three Cedars project subject to a separate deal

Dominion also announced that it has agreed to enter into a joint venture with SunEdison to develop the 210-MW (ac) Three Cedars Solar project in Utah. Dominion and SunEdison each will have a 50% interest in Three Cedars. SunEdison will oversee construction and day-to-day operation of the facility once it has come online, which is expected in 2016. Three Cedars is expected to qualify for the federal Investment Tax Credit. Dominion will receive the majority of the federal tax benefits from the projects for the first several years, including the investment tax credit.

Three Cedars consists of three sites located in Iron County, Utah. It has secured 20-year power purchase agreements, interconnection agreements and engineering, procurement and construction contracts.

This announcement marks the expansion of a joint venture recently announced regarding Dominion’s investment in the 420 MW (dc) Four Brothers solar project in Utah. Similar to Four Brothers, the Three Cedars project is contracted under long-term power purchase agreements for 20 years with PacifiCorp, a subsidiary of Berkshire Hathaway Energy. The project is now under construction and fully financed with an expected commercial operation date of mid 2016.

Under the expanded joint venture, Dominion will invest about $320 million to acquire 50% of the cash equity and 99% of the tax equity in Three Cedars, including funding of construction. SunEdison expects to fully finance the $80 million balance of the capital for Three Cedars through a loan from Deutsche Bank through construction and long-term ownership. Dominion’s aggregate investment in the joint venture is about $830 million to acquire 50% of the cash equity and 99% of the tax equity in Four Brothers and Three Cedars, including funding of construction.

SunEdison’s 50% interest in both the Four Brothers and Three Cedars projects are on the Call Right Projects List for TerraForm Power Inc. (Nasdaq: TERP), a global owner and operator of clean energy power plants.

“We are excited to expand our partnership with Dominion to a total of 685 megawatts of solar in Utah,” said Paul Gaynor, executive vice president of SunEdison EMEA & Americas. “Our joint ventures with Dominion demonstrate the market appetite for SunEdison’s high-quality, long-term contracted assets. SunEdison power plants put hundreds of people to work, create real and lasting benefits for local residents, and deliver clean energy to Utah homes at a competitive price.”

Separately, SunEdison and J.P. Morgan Asset Management‘s Infrastructure Investments Group on Sept. 8 announced a strategic partnership to fund renewable energy projects in both operating and construction stages, an initial investment of which will be a 33% interest in a 425 MW (ac) portfolio of diverse, domestic solar assets owned by Dominion.

SunEdison develops, finances, installs, owns and operates renewable power plants, delivering predictably priced electricity to its residential, commercial, government and utility customers. Corporate headquarters are in the United States with additional offices and technology manufacturing around the world.

Dominion is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 MW of generation, 12,200 miles of natural gas transmission, gathering and storage pipeline, and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems with 928 billion cubic feet of storage capacity and serves utility and retail energy customers in 13 states.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.