Sun Edison, TerraForm Power & TerraForm GlobalD2015]/2015-12/TSNR100/09/RR_3003272836.pdf · TERP/OW – TERP is our top pick within the SunEdison ecosystem. TERP will report 3Q results

www.jpmorganmarkets.com

North America Equity Research04 November 2015

Equity Ratings and Price Targets

Mkt Cap Rating Price TargetCompany Ticker ($ mn) Price ($) Cur Prev Cur PrevSunEdison, Inc. SUNE US 2,362.08 7.98 OW n/c 21.00 n/cTerraForm Power, Inc. TERP US 2,349.63 18.57 OW n/c 35.00 n/cTerraForm Global, Inc. GLBL US 948.78 8.00 N n/c 14.00 n/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 03 Nov 15.

Sun Edison, TerraForm Power & TerraForm Global3Q15 Preview: Investors Seek Liquidity, Transparency and Simplification

Alternative Energy, Applied and Emerging Technologies

Paul Coster, CFA AC

(1-212) 622-6425

[email protected]

Bloomberg JPMA COSTER <GO>

Mark Strouse, CFA

(1-212) 622-8244

[email protected]

Paul J Chung

(1-212) 622-5552

[email protected]

J.P. Morgan Securities LLC

See page 15 for analyst certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

3Q results could be pivotal for SUNE and the TerraForms if the sponsor company is able to demonstrate immediate and material progress in improving gross margin on project sales and in preserving cash for future development. In the absence of the YieldCos, temporary or otherwise, investors need data that will confirm the depth and liquidity of the third-party market for solar and wind projects, they seek greater transparency around SUNE’s project-level IRR assumptions, and they want more details regarding the structure of the financing warehouses and the accounting treatment of project sales into these entities. SUNE stock could respond favorably to a restructuring or termination of pending acquisitions, such asVivint Solar, if doing so enhances the firm’s liquidity position, in our view. Investors are less focused on SUNE’s growth pipeline or backlog at this time and they will be forgiving if the sponsor leaves the TerraForm YieldCos to execute independently for the next couple of quarters. We rate SUNE and TERP Overweight, and we rate GLBL Neutral.

TERP/OW – TERP is our top pick within the SunEdison ecosystem. TERP will report 3Q results on 11/9. The conference call will begin at 4:30pm ET; dial-in: 844-464-3939, code 71586060. With enough liquidity on hand to fund the FY16 DPS guidance, we look for the company to quietly execute on its pipeline without the need to revisit the capital markets. We believe investor focus is centered on the company's cost of capital and project IRR methodology so any incremental information regarding project details could be a positive for the stock. Our December 2016 price target is $35, based on a DCF.

SUNE/OW – SUNE will report 3Q results on 11/9. The conference call will be held the following morning (11/10) at 8:30am ET. With the YieldCo business model temporarily shuttered owing to the dilutive effect on DPS growth from low stock prices/high yields, the firm is now operating under a revised strategy that enables continued growth, bolsters cash flow, resolves liquidity concerns, improves transparency and retains strategic flexibility to re-activate the GP/LP business model when circumstances permit. We look for MW shipment guidance to be reiterated and for gross margins to improve compared to 1H15 owing to the completion of the low-margin UK pass-through business. Our December 2016 price target is $21, based on a SOTP.

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Paul Coster, CFA(1-212) [email protected]

GLBL/N – GLBL will report 3Q results on 11/10. The conference call will begin at 7:30am ET; dial-in: 855-835-3565, code 71587645. We maintain our Neutral rating on GLBL owing to our view that, to the extent that SUNE has resource (pricing concessions, PIK transfers) with which to re-build confidence in the YieldCo drop-down business-model, we believe the parent's focus will be on Terraform Power (TERP/OW), initially, not GLBL. We are lowering our GLBL estimates for 3Q to reflect timing of completion for projects announced, though we still expect the initial portfolio to be complete by year-end 2015. With the stock trading at a ~15% dividend yield, we look for management to discuss potentially buying back stock with excess liquidity, rather than buying projects that typically have a 11% unlevered cash-on-cash yield. Our December 2016 price target is $14, based on a DCF.

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SunEdison, Inc.

Overweight

Company DataPrice ($) 7.98Date Of Price 03-Nov-15 52-week Range ($) 33.45-6.56Market Cap ($ mn) 2,362.08Fiscal Year End DecShares O/S (mn) 296Price Target ($) 21.00Price Target End Date 31-Dec-16

SunEdison, Inc. (SUNE;SUNE US)

FYE Dec 2014A 2015E 2016E 2017EPF EPS ($)Q1 (Mar) (0.27) (1.36)A (0.67) (0.58)Q2 (Jun) 0.12 (0.89)A (0.47) (0.45)Q3 (Sep) (0.68) (0.73) (0.42) (0.40)Q4 (Dec) (0.16) (0.62) (0.45) (0.44)FY (0.96) (3.53) (2.00) (1.86)Revenue FY ($ mn) 2,484 1,724 3,422 3,660EBITDA FY ($ mn) (179) (326) 233 268Source: Company data, Bloomberg, J.P. Morgan estimates.

With the YieldCo business model temporarily shuttered owing to the dilutive effect on DPS growth from low stock prices/high yields, the firm is now operating under a revised strategy that enables continued growth, bolsters cash flow, resolves liquidity concerns, improves transparency and retains strategic flexibility to re-activate the GP/LP business model when circumstances permit. We look for MW shipment guidance to be reiterated and for gross margins to improve compared to 1H15 owing to the completion of the low-margin UK pass-through business.

We look for 570 MW completions during 3Q (including 60 sold to third-parties). We look for revenue of $456mm and gross margin of 22.0%. We look for FY15-16 MW shipment guidance to be reiterated and for the gross margin and opex/watt outlook to remain at ~$0.35 and $0.17 in FY16, respectively.

Investment Thesis, Valuation and Risks

SunEdison, Inc. (Overweight; Price Target: $21.00)

Investment Thesis

Long-term growth in wind and solar generating capacity seems inevitable

Demand for wind and solar power originates in falling unit cost/watt, growing demand for electricity in emerging nations, and government policy that seeks to de-carbonize the global economy. BNEF estimates that ~$6 trillion will be invested in wind and solar capacity over the next 25 years. SUNE, as a leading global developer of renewable generating capacity, will participate in this growth opportunity through development and sale of systems and through ownership of wind and solar farms, realizing gross profit from sales, and cash flows from ownership of operating assets.Global wind and solar generating capacity should reach about 1.4TW as soon as 2020, yielding up to ~$170 billion of cash available for distribution (CAFD).

Capital constraints are a serious risk, but we think the recent sell-off is overdone

Owing to access of third party funds via warehouse facilities, SUNE has the ability to develop projects for future sale or drop-down to the YieldCos, without near-term constraint. The sell-off in TERP and GLBL shares does, however, reduce the value of the YieldCo currency for acquisitions of the completed projects, weighing on their ability to deliver DPS growth commitments at the YieldCo level owing to dilution. This equity “death-spiral” is part catalyzed by negative sentiment regarding all dividend yielding instruments (pending Fed interest rates rising) and the impact of weak energy prices on the whole MLP/YieldCo space, in our view. We think the

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liquidity issues can be remedied over time, and investor sentiment can turn positive very quickly regarding the quality of the asset pipeline and the visibility into future growth it yields (as it did post the October - December 14 sell-off). We also believe that SUNE can improve the YieldCos’ currencies by taking payments-in-kind (PIK) instead of cash for project drop-downs and dividends or by using equity at-the-money (ATM) follow-ons. We would take advantage of this sell-off to build positions in the entire SUNE group of stocks.

We prefer TerraForm Power within the SunEdison “ecosystem”

Within the SunEdison “ecosystem”, our rank order of preference for the stocks is TerraForm Power (TERP/OW/$35 price target), SunEdison (SUNE/OW/$21 price target), followed by TerraForm Global (GLBL/N/$14 price target). We believe that TERP offers a predictable cash flow stream and will be supported by SunEdison during times of capital markets turmoil (i.e., current conditions). That said, during more favorable market conditions, we would favor SUNE owing to its effective control over TERP as well as the upside provided by IDR payments. GLBL is our third pick within the ecosystem owing to elevated emerging markets risks at present (i.e., Brazil), though we believe this risk can be mitigated as the portfolio diversifies and the underlying projects become more seasoned.

Valuation

Maintain Overweight. We believe the stock is significantly undervalued based on our sum of the parts DCF analysis. We peg 2016 year-end fair value at $21.00 based on an if-converted share count of 391mm shares.

Table 1: Discounted cash flows for the DevCo and GP yield a $21.00 Price Target

Source: J.P. Morgan estimates. Share count is based on 'if-converted' share count relating to 2018 convertible debt, 2021 convertible debt, and perpetual convertible debt.

Risks to Rating and Price Target

Rising interest rates could weigh on valuations. If interest rates rise then the discount rate for valuing wind and solar assets will rise, potentially dampening returns. Of course, this is not specific to SUNE/TERP/GLBL, nor to the YieldCos, but we expect the market to be volatile for a while as investors re-calibrate return expectations.

Sustained low gas prices could impede growth in renewables. A significant and sustained drop in fossil fuel prices, particularly natural gas, could slow adoption of wind and solar power in several key markets, Europe and North America. The withdrawal of subsidies ahead of expectations could also lead to slower than expected adoption of renewables. Failure to meet expectations regarding the cost of wind and solar could also slow adoption relative to expectations.

Value ($m) Sharecount (m) Value Per Share If-converted Sharecount (m) Value Per Share

DevCo $5,168 322 $16.04 391 $13.21

TERP IDRs $2,253 322 $6.99 391 $5.76

TERP $2,120 322 $6.58 391 $5.42

GLBL IDRs $175 322 $0.54 391 $0.45

GLBL $849 322 $2.64 391 $2.17

Recourse Obligations ($2,331) 322 ($7.24) 391 ($5.96)

SUNE $8,234 322 $25.56 391 $21.05

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SUNE needs access to the capital markets to maintain growth. SUNE is encumbered with ~$3.5 billion of debt and ~$6 billion of non-recourse loans and other obligations, constraining growth somewhat despite the ability to use warehouse facilities to construct and hold projects for future drop-down. The YieldCos have sufficient liquidity (about $1 billion) to fund planned DPS growth through 2016, but are thereafter severely limited in their ability to buy assets from the sponsor (or third parties) unless TERP and GLBL escape the ongoing equity “death-spiral” (lower stock prices mean more shares must be issued to fund acquisition of drop-down assets, which is dilutive to DPS prospects).

Wind and solar asset performance could fall short of expectations. Transalta and Pattern Energy have recently reported wind levels that are below historical norms, leading to electricity output that is lower than expected. In some regions, we have seen examples of grid operators curtailing wind and solar farms, which can also lead to lower energy output than expected, and therefore lower CAFD. Also, some of the wind and solar projects could encounter technical problems, not currently anticipated. Subsidies, feed-in-tariffs, and other types of government support can be withdrawn, changing the NPV on projects. Finally, some of SUNE’s projects are located in relatively high-risk locations (e.g. GLBL’s wind farms in Brazil), exposing the company to foreign exchange and sovereign risks.

Execution issues may arise. Investors have expressed concerns that the company is trying to do too much too quickly. This came to a head with the recent Vivint acquisition, which coincided with the GLBL IPO process and followed a sequence of intense M&A transactions, including the First Wind and Invenergy deals. It seems some investors believe that the YieldCo DPS growth commitments are excessive, and that the firm will be unable to sustain growth-rate beyond the next three years, owing in part to the IDR burden on the YieldCos. Some investors have expressed the view that cash-on-cash unlevered yield, and/or IRR on certain projects is not accretive given the recent increase in cost of equity.

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TerraForm Power, Inc.

Overweight

Company DataPrice ($) 18.57Date Of Price 03-Nov-15 52-week Range ($) 41.67-13.83Market Cap ($ mn) 2,349.63Fiscal Year End DecShares O/S (mn) 127Price Target ($) 35.00Price Target End Date 31-Dec-16

TerraForm Power, Inc. (TERP;TERP US)

FYE Dec 2014A 2015E 2016E 2017EAdjusted EBITDA ($ th)Q1 (Mar) 5,375 52,319A 135,778 211,760Q2 (Jun) 20,131 107,646A 177,373 260,338Q3 (Sep) 47,205 111,972 208,167 289,247Q4 (Dec) 36,223 110,543 222,372 210,181FY 108,934 382,479 743,691 971,526DPS FY ($) 0.45 1.35 1.75 1.90Dividend Yield FY 2.4% 7.3% 9.4% 10.2%Revenue FY ($ th) 125,864 493,037 918,061 1,202,746Source: Company data, Bloomberg, J.P. Morgan estimates.

We look for 3Q CAFD of $62.3mm and EBITDA of $112.0mm on revenue of $144.8mm (Street: $112.3mm EBITDA/$144.6mm revenue).

With enough liquidity on hand to fund the FY16 DPS guidance, we look for the company to quietly execute on its pipeline without the need to revisit the capital markets.

We believe investor focus is centered on the company's cost of capital, further details regarding warehouse economics, and project IRR methodology. By providing any incremental information regarding these issues, we believe the company could help restore confidence to the business model.


TerraForm Power, Inc. (Overweight; Price Target: $35.00)

Investment Thesis

TerraForm Power (TERP) is a growth-oriented, dividend-paying company that owns and operates a diverse portfolio of contracted clean power generation assets, mainly solar and wind, that yield high-quality, tax-shielded cash flows, acquired initially from SunEdison, the parent company, or “sponsor.” Owing to depreciation and NOLs, we do not expect TERP to pay taxes for at least 10 years. The company’s mandate is to operate in low-risk environments, with low country risk, low regulatory risk, and low counterparty risk. We think the combination of dividend yield, growth, and clean tech exposure will appeal to a broad swath of MLP/YieldCo, technology, energy, and SRI investors. We also believe the firm’s rapidly developing acquisition strategy can yield CAFD and dividend upside, relative to expectations.

Valuation

The stock is currently yielding 9.4% based on FY16E dividend per share of $1.75, which looks compelling compared to the average yield of 4.3% since IPO. TERP’s spread versus 10-year US treasuries is now ~850bps compared to an average of 200bps since IPO, also compelling, in our view.

Our Dec 2016 price target is $35 based on our DCF analysis. Our price target implies a yield of ~5.4% based on our forecast FY17 dividend of $1.90. We think a premium valuation is justified by the backdrop of forecast solar PV growth, the strength of the sponsor, and the visibility into growth yielded by call rights and ROFO.

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DCF Assumptions

Equity Cost of Capital: 9.0%

Debt Cost of Capital: 6.5%

Tax Equity Cost of Capital: 9.0%

% Capex Funded by Equity: 25.0%

% Capex Funded by Debt: 45.0%

% Capex Funded by Tax Equity: 30.0%

WACC: 7.9%

Perpetuity Growth Rate: 1.0%

Table 2: 2015-2024 DPS Forecast and DCF-Based Price Target

$ per share

Source: J.P. Morgan estimates.


Interest-rate risk With renewable YieldCo dividends in the 5.0-11.0% range, we think TERP is at risk of re-rating if interest rates rise in 2016. We note that a 25bp increase in our WACC assumption would result in a ~$1.00 decrease in share price based on our DCF assumptions. We believe TERP’s strong dividend growth prospects mitigate the risk somewhat.

Downside risk to our revenue, EBITDA, and CAFD expectationsProjects could be delayed or fail to deliver against customer specifications. In these circumstances, the firm’s ability to deliver ~20% dividend growth (2015-2019) likely would be compromised and the stock re-priced. Investors run the risk of CAFD/unit dilution if the company uses equity to fund projects more aggressively than currently forecast.

Longer term, the ability to sustain dividend growth could diminishThe withdrawal of solar incentives (e.g., reduction in US ITC tax to 10% of fair market value) is scheduled for January 1, 2017. Also, price-based competition could increase for generating assets, and it could simply become more difficult to deliver growth as the overall portfolio expands.

Some acquired assets could fail to deliver contracted energy The firm has acquired a diverse array of assets, including wind turbine farms, some of which may have obsolete technology, could fail, or the energy output could fall short of expectations as the asset ages, leading to unanticipated investment to replace or re-energize the system.

2H14E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E

Dividend per A share $0.45 $1.35 $1.75 $1.90 $1.99 $2.09 $2.20 $2.31 $2.42 $2.55 $2.57

y/y growth 29.2% 8.7% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 1.0%

Total Distribution Coverage Ratio 1.5x 2.1x 2.1x

PV of Dividend per unit $14.53

PV of Terminal Value $20.59

YE16 Price Target $35.00

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Replacement cost of assets could weigh on future CAFD, relative to expectationsThe cost of re-energizing or replacing projects post PPA could be higher than anticipated, capex that could weigh on long-term CAFD growth expectations.

Other company-specific risksWhile partly mitigated by diversification, other company-specific risks includepotential counterparty default, fluctuating exchange rates (~30% of revenue in non-US currencies), and risks specific to the PPAs (e.g., re-sets in the UK projects, REC and ROC valuation).

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TerraForm Global, Inc.

Neutral

Company DataPrice ($) 8.00Date Of Price 03-Nov-15 52-week Range ($) 14.44-6.12Market Cap ($ mn) 948.78Fiscal Year End DecShares O/S (mn) 119Price Target ($) 14.00Price Target End Date 31-Dec-16

TerraForm Global, Inc. (GLBL;GLBL US)

FYE Dec 2015E(Prev)

2015E(Curr)

2016E(Prev)

2016E(Curr)

2017E(Prev)

2017E(Curr)

2018E

Adjusted EBITDA ($ mn)Q1 (Mar) - - 107 102 192 195 322Q2 (Jun) - - 132 127 242 231 353Q3 (Sep) 36 28 156 152 280 268 389Q4 (Dec) 89 74 159 173 270 291 418FY 125 102 555 555 985 985 1,483DPS FY ($) 0.46 0.46 1.16 1.16 1.17 1.17 1.20Dividend Yield FY 5.7% 5.7% 14.5% 14.5% 14.6% 14.6% 15.1%Source: Company data, Bloomberg, J.P. Morgan estimates.

We are adjusting our 3Q estimates to reflect the timing of project acquisitions, post-IPO. Though we are lowering our estimates, we believe the initial portfolio remains on track for completion by year-end. We look for 3Q CAFD of $13.9mm (down from $22.3mm) and EBITDA of $27.8mm (from $36.2mm) on revenue of $35.6mm (from $45.1mm) (Street: $29.9mm EBITDA/$39.7mm revenue).

With enough liquidity on hand to fund the FY16 DPS guidance, we look for the company to quietly execute on its pipeline without the need to revisit the capital markets. We believe investor focus is centered on the company's cost of capital, and project IRR methodology. By providing any incremental information regarding these issues, we believe the company could help restore confidence to the business model.


TerraForm Global, Inc. (Neutral; Price Target: $14.00)

Investment Thesis

GLBL provides growth and yield investors with an opportunity to participate in the long-term growth of CAFD originating from the rapidly expanding cumulative capacity in wind and solar generating capacity in emerging markets.

Valuation

Our Dec-16 price target is $14.00, based on a DCF, using what we believe are conservative assumptions. This 2016 PT would imply a forward year (2017) dividend yield of 8.4%, which seems conservative relative to the peer group. We believe the closest comps within the YieldCo space are TerraForm Power (TERP/OW), 8point3 Energy (CAFD/OW), and NextEra Energy Partners (NEP/NC).

We assume little dividend growth through FY18E, then inclining to 5% annually beginning in FY19E as capital markets may be more supportive of growth. Our WACC of 12.4% is based on a 14% cost of equity (60% of total structure), and 10% cost of debt (40% of total). We assume a 1% perpetuity growth rate. Our price target implies a yield of 8.3% using our FY16 dividend estimate, 8.3% based on our FY17 estimate, and 8.6% based on our FY18 estimate.

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GLBL DCF

Source: J.P. Morgan estimates.


Liquidity. GLBL emerged from a difficult IPO process with much lower proceeds than originally envisaged. IPO, private placement debt proceeds and available cash yielded $2.6 billion of sources, and a net cash position of near zero after paying off debt and acquiring the initial portfolio. GLBL has about $485 million of net liquidity from revolving credit for drop down acquisitions, which is sufficient to fund CAFD and DPS growth through mid 2016 to hit the first 20% DPS growth target of ~$1.30. The firm can probably eke out about $250 million of additional acquisitions using project and HoldCo debt (Debt/EBITDA stands about 4.7x and can probably stretch to about 5.5x), but plan A will be to revisit the equity markets if GLBL yield falls to 7% or lower in the next 12 months. Separately, many investors are monitoring the liquidity of the sponsor (now ~$3bn with the warehouse funding announced on 8/17), to evaluate its ability to deliver finished projects and inject liquidity into the YieldCo. In this context, some investors feel the IDR burden is excessive for GLBL and a re-set, higher MQD, or longer forbearance period is justified. We believe the IDR burden is not material to cost of capital in the next two years.

The Equity Death-Spiral is front-and-center risk. The YieldCo’s commitment to a target DPS growth rate depends on its ability to issue new equity at a low cost to fund the acquisition of MW assets and associated CAFD without excessive DPS dilution. If the stock declines, then more shares must be issued to acquire a MW of capacity and associated CAFD, which is dilutive to DPS relative to prior expectations. This can lead to the kind of equity “death spiral” encountered in July-September 2015, where falling stock prices feed lower growth expectations, which lead to falling stock prices, and so on. This loss of confidence, unhinged from the fundamental reality of asset quality and pipeline growth prospects, can persist until the point at which the stock trades at asset value (ex growth) or confidence returns. Of course, the flip side to this death-spiral is the virtuous cycle, in which rising stock prices lessen the dilutive effect of issuing equity for future acquisitions, which allows the company to post DPS growth at or above expectations. Recent swings in sentiment have been somewhat mystifying, but we think illustrate the risks associated with an early-stage asset class that is currently largely owned by hedge-funds, not longer-term investors.

Wind or solar asset performance could fail to meet expectations owing to sustained periods of unusual weather activity, curtailments by the off-taker, system outages, and natural disaster, which could lead to lower-than-expected revenues. Wind assets, in particular, have generally exhibited volatility around expected levels, factoring in seasonality, and we note that ~59% of the GLBL initial portfolio is

2H15E FY16E FY17E FY18E FY19E FY20E FY21E FY22E FY23E FY24E FY25E

Dividend per A share $0.46 $1.16 $1.17 $1.20 $1.26 $1.33 $1.39 $1.46 $1.54 $1.61 $1.63

y/y growth 0.9% 3.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 1.0%

Class A Distribution Coverage Ratio 2.7x 2.4x 2.4x

PV of Dividend per unit $7.97

PV of Terminal Value $5.66

YE16 Price Target $14.00

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represented by wind, and 70% of the call rights portfolio. This risk is topical because recent reports from NextEra and Pattern Energy, both YieldCos, have revealed wide negative variance to wind level norms in the Western region of the United States on a 2015 YTD basis, associated with the El Nino. Separately we note that some grid operators and utilities are unable to completely integrate renewables into the grid, leading to curtailment in instances where the grid is unable to accommodate peaky wind and solar energy. China increased wind curtailments to 15% of capacity in 1H15, for instance. Curtailment of solar farms in Japan in 2014 also shed a light on what can happen if the grid is poorly architected.

Country-specific risk. GLBL exposes investors to country-specific risks that might include rampant inflation, volatile foreign exchange rates, capricious capital controls, ineffective or absent rule-of-law, unreliable regulatory frameworks and so on. Brazil, for instance, represents 24% of GLBL's initial portfolio, and a bigger 45% portion of the near-term call rights list. Brazil was recently downgraded by Moody’s to Baa2, citing weak economic performance and a higher debt burden. The country has a high and rising inflation rate (CPI at 8% in 2015) and the Real has fallen about 45% versus the US Dollar over the last year. GLBL hedges 100% of CAFD on a 3 year rolling basis at a cost of about 2% of CAFD, mitigating some of the risk associate with the ~70% of non-dollar denominated PPAs. CAFD forecasts also factor in a 3% average withholding tax leakage across the portfolio.

Counterparty risk. Nearly 90% of CAFD originates in PPAs with government-related entities or government-regulated Utilities, which are generally good credits within the target EM countries. These credits are however unknowns to most US equity investors, but better understood by emerging market bond investors. Some equity investors will look to the TerraForm Global bond yield as a measure of the sovereign and counterparty risk. The TerraForm Global 9.75% bonds are currently trading at 12.0% yield.

LAP deal terminated. The SunEdison decision to not proceed with acquisition of LAP assets, which includes Hydro systems in Peru, could leave GLBL with a gap in the initial portfolio, which could lead to 2016 CAFD and DPS falling short of expectations.

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SunEdison, Inc.: Summary of FinancialsIncome Statement - Annual FY14A FY15E FY16E Income Statement - Quarterly 1Q15A 2Q15A 3Q15E 4Q15E

Revenues 2,484 1,724 3,422 Revenues 323A 455A 456 490

COGS (2,263) (1,379) (2,841) COGS (289)A (352)A (356) (382)

Gross profit 222 345 582 Gross profit 34A 103A 100 108

R&D (62) (57) (74) R&D (5)A (17)A (17) (18)

SG&A (566) (918) (568) SG&A (193)A (259)A (259) (207)

Other operating expenses - - - Other operating expenses - - - -

Operating income (537) (683) (60) Operating income (217)A (173)A (176) (117)

EBITDA (179) (326) 233 EBITDA (133)A (51)A (100) (42)

Non-operating Income / (expense) (780) (640) (568) Non-operating Income / (expense) (190)A (180)A (130) (140)

Pretax income (1,316) (1,323) (628) Pretax income (407)A (353)A (306) (257)

Income taxes 36 352 0 Income taxes 106A 105A 77 64

Tax rate (2.7%) (26.6%) 0.0% Tax rate (26.0%)A (29.7%)A (25.0%) (25.0%)

Minority interest/other 92 (88) (28) Minority interest/other (67)A (7)A (7) (7)

Net income - recurring (1,180) (1,071) (656) Net income - recurring (372)A (263)A (237) (200)

Diluted shares outstanding 269 304 328 Diluted shares outstanding 273A 296A 322 324

EPS (incl stock comp) (0.96) (3.53) (2.00) EPS (incl stock comp) (1.36)A (0.89)A (0.73) (0.62)

EPS (excl stock comp) - - - EPS (excl stock comp) - - - -

Days of sales outstanding (DSOs) 85.1A 68.9A 72.3 80.2

Days of inventory outstanding (DIOs) 34.0A 28.5A 31.6 27.0

Balance Sheet and Cash Flow Data FY14A FY15E FY16E Ratio Analysis FY14A FY15E FY16E

Cash and cash equivalents 944 1,975 1,983 Sales growth 15.4% (30.6%) 98.6%

Accounts receivable 472 389 786 EBITDA growth 598.3% (4.0%) (140.3%)

Inventories 226 0 0 EPS growth (3.4%) (19.5%) (43.2%)

Current assets 2,788 4,506 5,171

Gross margin 8.9% 20.0% 17.0%

PP&E 7,074 12,780 17,319 EBITDA margin (21.3%) (29.5%) 6.0%

Goodwill / intangibles - - - Net margin (10.4%) (62.2%) (19.2%)

Total assets 11,500 20,775 25,979

Debt / EBITDA NM NM 57.8

Short-term debt 1,080 2,401 2,401 Net debt / Capital (book) 99.3% 73.8% 50.1%

Current liabilities 3,145 4,677 5,105

Return on capital employed (ROCE) (9.4%) (6.7%) (0.3%)

Long-term debt 6,120 9,155 9,441 Return on equity (ROE) (28.2%) (29.7%) (8.2%)

Total liabilities 10,015 15,054 15,768 Return on assets (ROA) (2.8%) (6.6%) (2.8%)

Shareholders' equity 1,485 5,722 10,211

Cash flow from operations (770) (1,430) (513)

Capex (230) (257) (240)

Free cash flow (583) (980) (184)

Free cash flow / share (2.17) (3.23) (0.56)

Cash flow from investing activities (2,640) (7,414) (4,832)

Cash flow from financing activities 3,802 9,940 5,353

Source: Company reports and J.P. Morgan estimates.

Note: $ in millions (except per-share data).Fiscal year ends Dec

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TerraForm Power, Inc.: Summary of FinancialsIncome Statement - Annual FY14A FY15E FY16E Income Statement - Quarterly 1Q15A 2Q15A 3Q15E 4Q15E

Revenues 125,864 493,037 918,061 Revenues 70,515A 130,046A 144,768 147,708

COGS (18,447) (103,062) (171,930) COGS (20,463)A (22,583)A (26,782) (33,234)

Gross profit - - - Gross profit - - - -R&D - - - R&D - - - -

SG&A (40,128) (52,215) (34,354) SG&A (15,966)A (22,378)A (7,962) (5,908)

Other operating expenses 0 (49,979) (89,631) Other operating expenses (14,158)A (7,268)A (12,305) (16,248)

Operating income 6,114 110,721 350,920 Operating income (11,963)A 39,681A 58,631 24,372

EBITDA 67,289 287,781 622,146 EBITDA 19,928A 77,817A 97,719 92,318

Non-operating Income / (expense) (91,228) (108,498) (255,676) Non-operating Income / (expense) (71,742)A (9,333)A (16,336) (11,087)

Pretax income (85,114) 2,223 95,244 Pretax income (83,705)A 30,348A 42,295 13,285

Income taxes 4,689 (2,015) 0 Income taxes 45A (1,214)A (846) 0

Tax rate (5.5%) 90.6% 0.0% Tax rate (0.1%)A 4.0%A 2.0% 0.0%

Minority interest/other 0 7,845 0 Minority interest/other 55,544A (11,699)A (18,000) (18,000)

Net income - recurring (80,425) 8,053 95,244 Net income - recurring (28,116)A 17,435A 23,449 (4,715)

Diluted shares outstanding 42 64 78 Diluted shares outstanding 50A 58A 73 74

EPS (incl stock comp) (1.90) 0.13 1.23 EPS (incl stock comp) (0.57)A 0.30A 0.32 (0.06)

EPS (excl stock comp) (1.64) 0.14 1.43 EPS (excl stock comp) 0.23A (0.08)A 0.22 (0.18)

Days of sales outstanding (DSOs) 44.0A 39.4A 33.3 32.4

Days of inventory outstanding (DIOs) - - - -


Cash and cash equivalents 468,554 1,152,319 77,572 Sales growth 620.5% 291.7% 86.2%

Accounts receivable 31,986 72,842 44,902 EBITDA growth 903.3% 251.1% 94.4%

Inventories - - - EPS growth - (106.7%) 869.0%Current assets 612,404 1,330,638 227,951

Gross margin - - -

PP&E 2,327,803 4,182,081 7,620,805 EBITDA margin 86.5% 77.6% 81.0%

Goodwill / intangibles 361,673 515,688 515,688 Net margin (55.0%) 1.9% 12.1%

Total assets 3,378,018 6,164,127 8,500,164

Debt / EBITDA 14.7 8.0 5.7

Short-term debt 80,133 322,115 322,115 Net debt / Capital (book) 62.9% 43.0% 59.6%

Current liabilities 183,903 461,860 477,915

Return on capital employed (ROCE) 0.8% 2.8% 5.3%

Long-term debt 1,517,962 2,748,395 3,900,395 Return on equity (ROE) (8.9%) 0.4% 3.4%

Total liabilities 1,837,759 3,445,152 4,613,207 Return on assets (ROA) (3.5%) 0.2% 1.5%

Shareholders' equity 1,540,259 2,718,975 3,886,957

Cash flow from operations 82,578 265,000 410,466

Capex (1,495,572) (711,652) (3,709,950)

Free cash flow (1,326,718) (322,413) (3,043,808)

Free cash flow / share (31.43) (5.07) (39.25)

Cash flow from investing activities (1,528,025) (1,736,954) (3,709,950)

Cash flow from financing activities 1,913,121 2,156,115 2,224,737


Note: $ in thousands (except per-share data).Fiscal year ends Dec

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TerraForm Global, Inc.: Summary of FinancialsIncome Statement - Annual FY14A FY15E FY16E Income Statement - Quarterly 1Q15A 2Q15A 3Q15E 4Q15E

Revenues - 128 680 Revenues - - 36 92

COGS - (17) (103) COGS - - (4) (13)

Gross profit - 111 577 Gross profit - - 31 80R&D - - - R&D - - - -

SG&A - (9) (22) SG&A - - (4) (6)

Other operating expenses - - - Other operating expenses - - - -

Operating income - 47 337 Operating income - - 4 44

EBITDA - 102 555 EBITDA - - 28 74

Non-operating Income / (expense) - (38) (148) Non-operating Income / (expense) - - (13) (25)

Pretax income - 9 189 Pretax income - - (9) 18

Income taxes - (6) (18) Income taxes - - (3) (3)

Tax rate - 64.6% 9.5% Tax rate - - (33.8%) 16.5%

Minority interest/other - - - Minority interest/other - - - -

Net income - recurring - 3 171 Net income - recurring - - (12) 15

Diluted shares outstanding - 119 183 Diluted shares outstanding - - 119 119

EPS (incl stock comp) - 0.03 0.93 EPS (incl stock comp) - - (0.10) 0.13

EPS (excl stock comp) - 0.03 0.93 EPS (excl stock comp) - - (0.10) 0.13

Days of sales outstanding (DSOs) - - 16.2 6.2

Days of inventory outstanding (DIOs) - - - -


Cash and cash equivalents - 49 893 Sales growth - - 430.9%

Accounts receivable - 13 13 EBITDA growth - - 444.8%

Inventories - - - EPS growth - - 3300.5%Current assets - 125 969

Gross margin - 86.6% 84.8%

PP&E - 3,145 4,904 EBITDA margin - 79.5% 81.6%

Goodwill / intangibles - - - Net margin - 2.6% 25.2%

Total assets - 3,328 5,931

Debt / EBITDA - 10.1 4.2

Short-term debt - 40 40 Net debt / Capital (book) - 64.1% 34.2%

Current liabilities - 273 501

Return on capital employed (ROCE) - 1.1% 7.2%

Long-term debt - 988 2,303 Return on equity (ROE) - 0.3% 6.7%

Total liabilities - 1,303 2,847 Return on assets (ROA) - 0.2% 3.7%

Shareholders' equity - 2,025 3,083

Cash flow from operations - 254 617

Capex - (2,844) (1,976)

Free cash flow - (2,577) (1,225)

Free cash flow / share - (21.56) (6.68)

Cash flow from investing activities - (2,836) (1,976)

Cash flow from financing activities - 2,482 2,203


Note: $ in millions (except per-share data).Fiscal year ends Dec

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Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Important Disclosures

Market Maker: JPMS makes a market in the stock of TerraForm Global, Inc..

Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc..

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc. within the past 12 months.

Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of SunEdison, Inc., TerraForm Power, Inc..

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc..

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc..

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: SunEdison, Inc., TerraForm Power, Inc..

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: SunEdison, Inc., TerraForm Power, Inc..

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking services from SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc..

Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc..

Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or servicesother than investment banking from SunEdison, Inc., TerraForm Power, Inc..

Other Significant Financial Interests: J.P. Morgan owns a position of 1 million USD or more in the debt securities of SunEdison, Inc., TerraForm Power, Inc., TerraForm Global, Inc..

Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

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Date Rating Share Price ($)

Price Target ($)

31-Aug-15 OW 10.40 24.00

08-Sep-15 OW 12.94 23.00

29-Sep-15 OW 6.66 19.00

09-Oct-15 OW 9.25 21.00


Price Target ($)

12-Aug-14 N 32.17 35.00

20-Oct-14 OW 27.77 30.00

29-Oct-14 NR 27.04 --

29-Dec-14 OW 30.41 37.00

19-Feb-15 OW 32.89 38.00

24-Feb-15 OW 34.45 40.00

17-Apr-15 OW 42.07 45.00

19-Jun-15 OW 37.60 48.00

07-Jul-15 OW 39.47 49.00

26-Aug-15 OW 21.75 41.00

29-Sep-15 OW 14.16 35.00

0

13

26

39

52

Price($)

Feb12

Nov12

Aug13

May14

Feb15

Nov15

SunEdison, Inc. (SUNE, SUNE US) Price Chart

OW $19

OW $23

OW $24OW $21

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 31, 2015.

0

13

26

39

52

65

Price($)

Jul14

Oct14

Feb15

May15

Sep15

TerraForm Power, Inc. (TERP, TERP US) Price Chart

NR OW $40 OW $49

OW $30 OW $38 OW $48 OW $35

N $35 OW $37 OW $45 OW $41


Break in coverage Oct 29, 2014 - Dec 29, 2014.

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Price Target ($)

26-Aug-15 OW 8.59 17.00

29-Sep-15 N 6.82 14.00

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

Coverage Universe: Coster, Paul: 3D Systems Corporation (DDD), 8point3 Energy Partners LP (CAFD), Canadian Solar (CSIQ), Cree (CREE), Cubic Corp (CUB), DTS, Inc. (DTSI), Diebold, Incorporated (DBD), DigitalGlobe, Inc. (DGI), Dolby Laboratories, Inc. (DLB), Enphase Energy Inc. (ENPH), Fabrinet (FN), First Solar, Inc (FSLR), Garmin Ltd. (GRMN), GoPro, Inc. (GPRO), Logitech International (LOGI), NCR Corporation (NCR), Nice Systems (NICE), Ormat Technologies (ORA), Outerwall Inc (OUTR), Plantronics Inc (PLT), Rambus Inc. (RMBS), SolarCity (SCTY), Stratasys, Ltd. (SSYS), SunEdison, Inc. (SUNE), SunPower Corporation (SPWR), Synaptics Inc. (SYNA), TASER International Inc. (TASR), TTM Technologies (TTMI), TerraForm Global, Inc. (GLBL), TerraForm Power, Inc. (TERP), Trimble Navigation (TRMB), Veeco Instruments (VECO), Verint Systems, Inc. (VRNT), Zebra Technologies (ZBRA), iRobot Corporation (IRBT)

J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2015

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 45% 43% 12%IB clients* 52% 49% 35%

JPMS Equity Research Coverage 45% 47% 8%IB clients* 69% 66% 54%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

0

7

14

21

28

Price($)

Jul15

Jul15

Aug15

Sep15

Oct15

Nov15

TerraForm Global, Inc. (GLBL, GLBL US) Price Chart

N $14

OW $17


Initiated coverage Aug 26, 2015.

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19



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"Other Disclosures" last revised October 17, 2015.

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Sun Edison, TerraForm Power & TerraForm GlobalD2015]/2015-12/TSNR100/09/RR_3003272836.pdf · TERP/OW – TERP is our top pick within the SunEdison ecosystem. TERP will report 3Q results