July 18, 2014 / 3:16 PM / 3 years ago

UPDATE 1-Solar plant owner TerraForm rises 37 pct in debut

3 Min Read

* Co valued at $3.26 bln at day's high

* IPO raises $502.5 million (Adds details, background, updates shares)

July 18 (Reuters) - Shares of TerraForm Power Inc, created by SunEdison Inc to own and operate its solar power plants, rose as much as 37 percent in their market debut, valuing the company at about $3.26 billion.

TerraForm Power's IPO raised about $502.5 million after the offering of 20.1 million shares was priced at $25 per share, at the higher end of its expected price range.

The company's shares opened at $33.36 and rose to a high of $34.34 as of 1112 ET on the Nasdaq on Friday.

TerraForm will operate as a "yield co" - a way for solar companies to bundle their existing solar power plants and spin them off.

Yield cos own and operate solar assets under long-term power-purchase agreements with utilities, and any cash generated is paid out as dividends, with the remainder being re-invested in new plants.

Forming yield cos is becoming popular, mostly among solar firms seeking cheaper ways to finance their business and a couple of such IPOs recently have helped the energy sector account for more than a fifth of U.S. IPO volume in the quarter.

Total proceeds from U.S. IPOs rose to $21.5 billion in the second quarter from $11 billion in the first quarter. The energy sector accounted for 22 percent of that volume, according to PricewaterhouseCoopers.

The stock of Abengoa Yield Plc, a unit of Spanish renewable and engineering firm Abengoa SA, rose about 28 percent in their U.S. market debut last month. They are up 38 percent through Thursday's close.

Shares of NRG Yield Inc, which holds solar assets of power company NRG Energy Inc, have more than doubled since going public in July last year.

Terraform's loss widened to $720,000 in the three months ended March 31 from $491,000 a year earlier. Revenue quadrupled to $11.9 million.

The company expects a payout ratio of 85 percent of its cash available for distribution.

Goldman Sachs & Co Barclays and Citigroup were lead underwriters to the offering. (Reporting By Neha Dimri in Bangalore; Editing by Savio D'Souza)

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