Clean Energy ETFs in Focus on Sunrun-Vivint Solar Deal

In an effort to provide American’s with steady and clean energy, residential solar-panel installer Sunrun Inc. RUN agreed to buy a fellow solar company Vivint Solar VSLR for about $3.2 billion, including debt in all-stock deal. This represents the largest rooftop solar acquisition to date.

Under the terms, Vivint Solar shareholders will receive 55 cents a share of Sunrun for each share held, which represents a premium of more than 10% to Vivint Solar's closing price of Jul 6. Sunrun shareholders will own about 64% of the combined company while Vivint Solar shareholders will own the remaining 36%.

The combination will help Sunrun, the nation’s leading home solar installer, to grow its portfolio to more than 3 gigawatts and over 500,000 customers. It will add a complementary direct-to-home sales channel to Sunrun’s platform, increasing the reach of the company in a growing market (see: all the Alternative Energy ETFs).

The deal, which is awaiting approval of the stockholders of both companies and regulators, is expected to be completed in the fourth quarter. It is expected to deliver annual cost savings of about $90 million.

Market Impact

Following the news, shares of Sunrun gained 6.7% to close the day while VSLR was up 5.6% on elevated volume. This has put the spotlight on the clean energy ETFs. We have highlighted them below:

Invesco Solar ETF TAN

This ETF offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 28 stocks in the basket. Sunrun accounts for 5.1% share while Vivint Solar makes up for 3% allocation. American firms dominate the fund’s portfolio with nearly 43.5% share, followed by China (24.7%), Spain (8.7%) and Germany (7.7%). The product has amassed $653.8 million in its asset base and trades in a solid volume of around 436,000 shares a day. It charges investors 71 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Top-Ranked ETFs That Crushed the Market in 1H).

SPDR S&P Kensho Clean Power ETF CNRG

This ETF offers exposure to companies whose products and services are driving innovation behind the clean energy sector, which includes the areas of solar, wind, geothermal and hydroelectric power. It follows the S&P Kensho Clean Power Index and holds 40 stocks in its basket. Sunrun and Vivint Solar accounts for nearly 3% share each. The product has managed assets worth $31.8 million in its asset base while trades in average daily volume of 14,000 shares. It charges 45 bps in annual fees.

Invesco WilderHill Clean Energy ETF PBW

This product provides exposure to 42 U.S. companies engaged in the business of advancement of cleaner energy and conservation. Sunrun and Vivint Solar both account for 2.3% share each in the basket. PBW has AUM of $380.2 million and expense ratio of 0.70%. The ETF trades in average daily volume of 436,000 shares (read: 5 Sector ETFs That Beat the Market in June).

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Vivint Solar, Inc. (VSLR) : Free Stock Analysis Report
 
Invesco Solar ETF (TAN): ETF Research Reports
 
Invesco WilderHill Clean Energy ETF (PBW): ETF Research Reports
 
Sunrun Inc. (RUN) : Free Stock Analysis Report
 
SPDR SP Kensho Clean Power ETF (CNRG): ETF Research Reports
 
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