During the quarter, we re-initiated a position in TerraForm Power, Inc. (TERP), a dividend growth-oriented company formed to own and operate contracted clean power generation assets acquired from parent company SunEdison, the third largest worldwide solar energy developer. The company is a part of a new class of investments, known as a “yieldcos,” which are similar to traditional energy master limited partnerships. These “yieldco” businesses are comprised of long-lived assets contracted with creditworthy counterparties, stable cash flows, favorable tax attributes, and predictable growth driven by assets “dropped down” by the parent company due to the yieldco’s lower cost of capital. During the quarter, the companies announced a transformational acquisition to acquire First Wind for $2.4 billion, which serves to diversify the platform into wind energy as well as accelerate its growth. With 24% CAGR in dividend per share now expected through 2019, we think TerraForm is an attractive total return investment in the rapidly growing global renewable energy sector. (Rebecca Ellin)
From Ron Baron (Trades, Portfolio)’s Baron Focused Growth Fund Q4 2014 Quarterly Report.
