Investors cheered SunEdison Inc's (NASDAQOTH:SUNEQ) deal to jointly acquire First Wind for $2.4 billion with affiliated yieldco TerraForm Power Inc (NASDAQ:TERP). And with good reason. It's a truly transformational deal that takes SunEdison's business to new levels. TerraForm will benefit along the way, too, which is why it's shares rose even further than SunEdison's 30% or so advance.

SunEdison did solar
As SunEdison's name implies, it has historically been involved with solar power. It develops, finances, operates, and monitors solar energy "solutions" worldwide. At least that's what it did. Today, with the $2.4 billion agreement to buy First Wind, Sun Edison is expanding its offerings to include wind power.

(Source: Thomas R Machnitzki, via Wikimedia Commons)

Normally when a company announces a big acquisition its shares drop on the news. But SunEdison's purchase is transformational because it's no longer going to be just a solar company; it's turning itself into a renewable power company.

While that alone is a good story, it gets even better because First Wind is domestically focused while SunEdison's reach expands the globe. So SunEdison is not only buying a position in the U.S. wind power industry, but it can take the wind expertise it's acquiring into new markets. It's also worth noting that First Wind has been working on solar projects since last year, so this transaction augments SunEdison's core solar business, too.

Assuming consummation of the deal in early 2015, SunEdison has increased it installation guidance for next year by roughly 30%. Looking further out, the deal includes roughly 1.6 gigawatts of projects to be completed over the next three years and "an additional 6.4 GW of project development opportunities." And that doesn't even factor in the potential for expanding the wind business globally.

A win-win
But that's not the only good news coming from this transaction. TerraForm Power, a yield-co sponsored by SunEdison and created earlier this year, is set to acquire 521 megawatts of wind power as part of the purchase. TerraForm, designed to distribute cash to shareholders, has upped its 2015 dividend projection by a massive 44%, again assuming the deal closes in early 2015 as currently expected. No wonder shares of TerraForm advanced as much as 30% on the news, too.

(Source: Leaflet, via Wikimedia Commons)

Moreover, TerraForm is now in line to acquire both solar and wind power from its parent, called drop downs in industry lingo. This could easily speed up the pace of TerraForm's dividend growth beyond next year. Which, as it were, will increase the amount that SunEdison gets paid via its incentive distribution rights (payments based on how quickly TerraForm's dividend increases). It's no wonder that investors of both companies are clearly happy with the purchase.

Not your father's solar company
SunEdison CEO Ahmad Chatila noted, "The acquisition of First Wind transforms both SunEdison and TerraForm Power into diversified renewable energy companies and will make SunEdison the leading renewable power plant developer in the world." Hyperbole or not, this deal really does change SunPower's business and along with it TerraForm Power's future.

That said, there are risks inherent to the deal, such as the potential expiration of tax credits for building wind power in the United States that could be a headwind to domestic wind power growth. And then there's the $2.4 billion price tag. Right now that's being funded with short-term financing. SunPower is on the hook for roughly $1 billion now, with delayed payments of $510 million based on the completion of projects in First Wind's pipeline. TerraForm will cover the rest. New shares or additional debt will likely be issued, eventually, by each company.

But with SunPower's business refocused around renewable power instead of just solar, there's good reason to focus on the positives -- and to expect a broader set of acquisitions that let SunPower grow its business even more. This, in turn, would open TerraForm Power up to a more diversified collection of drop down assets, as well.

Investors looking for a diversified renewable power play appear to have gotten not one, but two new options -- one focused on growth (SunEdison) and the other on yield (TerraForm Power). There's clearly more to like at both companies today than there was just yesterday, so if you're into renewable investing, SunEdison and TerraForm Power should both be on your watch list if they weren't already.