Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2017 and our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2018 and other disclosures included in this Quarterly Report on Form 10-Q. References in this section to “we,” “our,” “us,” or the “Company” refer to TerraForm Power, Inc. and its consolidated subsidiaries. The results shown herein are not necessarily indicative of the results to be expected in any future period.
TerraForm Power, Inc. (“TerraForm Power”) owns and operates a high-quality, diversified portfolio of solar and wind assets located primarily in North America and Western Europe and underpinned by long-term contracts, totaling more than 3,600 megawatts (“MW”) of installed capacity. TerraForm Power’s goal is to acquire operating solar and wind assets in North America and Western Europe and it is sponsored by Brookfield Asset Management Inc. (“Brookfield”), a leading global alternative asset manager with over $285 billion in assets under management.
TerraForm Power’s objective is to deliver an attractive risk-adjusted return to its shareholders. We expect to generate this total return with a regular dividend, which we intend to grow at 5 to 8% per annum, that is backed by stable cash flows.
TerraForm Power is a holding company and its only material asset is an equity interest in TerraForm Power, LLC, or “Terra LLC.” TerraForm Power is the managing member of Terra LLC and operates, controls and consolidates the business affairs of Terra LLC.
Information regarding recent developments appears in Item 1. Business in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed on March 7, 2018. Recent developments that have occurred subsequent to March 7, 2018 are discussed within this Item 2.
Acquisition of Saeta
On June 12, 2018, the Company completed the acquisition of the greater than 95% of the outstanding shares of Saeta Yield, S.A.U. (“Saeta”) for an aggregate consideration of $1.12 billion (the “Tendered Shares”). With greater than 90% of the shares of Saeta being acquired, the Company pursued a statutory squeeze out procedure under Spanish law to procure the remaining approximately 4.72% of the shares of Saeta, for $54.6 million, which closed on July 2, 2018. Saeta is a Spanish renewable power company with 1,028 megawatts (“MW”) of wind and solar facilities (approximately 250 MW of wind and 778 MW of solar) located primarily in Spain.
The Company funded the $1.12 billion purchase price of the Tendered Shares with $650.0 million of proceeds from the private placement of its Class A common stock to Orion Holdings and BEP as discussed in Note 12. Stockholders’ Equity, along with approximately $471 million from its existing liquidity, including (i) the proceeds of a $30.0 million draw on its Sponsor Line (as defined in Note 8. Long-term Debt), (ii) a $359.0 million draw on the Company’s Revolver (as defined in Note 8. Long-term Debt), and (iii) approximately $82 million of cash on hand. The Company funded the additional purchase price of $54.6 million and certain acquisition costs with the proceeds of an additional draw on its Sponsor Line.
Long-Term Service Agreements for Wind Fleet
On August 10, 2018, the Company executed an 11-year Framework Agreement with General Electric (“GE”) that, among other things, provides for the roll out, subject to receipt of third party consents, of project level, long-term service agreements (collectively, the “LTSA”) for turbine operations and maintenance as well as other balance of plant services across the Company’s 1.6 GW North American wind fleet.