December 1, 2015 / 2:32 PM / 4 years ago

UPDATE 1-TerraForm, SunEdison cancel Brazil power deal worth $3.45 bln

* Deal was to involve share swap worth $3.45 billion

* SunEdison moved to cancel purchase of Renova stake

* Companies blame adverse local market conditions (Adds details of cancellation, comments from companies, context)

By Marcelo Teixeira and Luciano Costa

SAO PAULO, Dec 1 (Reuters) - Renewable energy company TerraForm Global Inc is pulling out of an agreement to take control of projects accounting for 2,200 megawatts of generation capacity due to adverse market conditions in Brazil, companies involved in the deal said on Tuesday.

TerraForm, a unit of U.S.-based SunEdison Inc, was negotiating to take control of generation assets from Brazilian renewable energy company Renova Energia SA in a share swap valued at 13.4 billion reais ($3.45 billion).

The deal started to wane when SunEdison decided not to proceed with a contract to buy a 15 percent stake in Renova.

SunEdison was expected to transfer about $250 million in its own shares to buy the Renova stake from Rio-based power company Light SA. The deadline for it to decide to proceed with the deal was on Monday, but SunEdison declined, Light said.

The stake sale was a condition for the larger TerraForm deal to go ahead, Renova Chief Financial Officer Cristiano Corrêa de Barros said in a filing with the local market regulator.

Light said in a separate filing that it had been negotiating with SunEdison to conclude the deal, but adverse market conditions caused the talks to stall. The company did not elaborate about those conditions.

Companies building new power generation capacity in Brazil are suffering from high financing costs at private banks and reduced availability of lower-cost government-backed credit.

Some companies are cancelling plans to build wind farms and other projects due to the high cost of capital.

Light said it would still try to sell its 15 percent stake in Renova to other interested companies.

Renova said that although the phase 2 of the TerraForm partnership did not materialize, phase 1 was still valid. It consisted of a sale of small hydropower plants and some wind projects.

Renova also said it would have to resize its future investments because of the cancellation of the deal and current market conditions. (Reporting by Luciano Costa and Marcelo Teixeira; Editing by Lisa Von Ahn)

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