Canada income fund to acquire stake in 45-MW Pingston

Great Lakes Hydro Income Fund intends to acquire from Brookfield Renewable Power Inc. a 49.9 percent interest in half of a joint venture that owns the 45-MW Pingston hydro project in British Columbia and in a 189-MW wind farm in Ontario.

The proposed acquisitions are expected to cost C$130 million (US$108 million), of which 49.9 percent would be financed through issuance of units in the fund to the public. Additionally, C$65 million (US$54.2 million) of shares in Brookfield are to be exchanged for fund units. The income fund announced the plan Dec. 15.

Definitive agreements for the fund’s proposed acquisitions could be comopleted Jan. 6, 2009. All regulatory approvals are expected to be received before Feb. 28. Following closing, expected in the first quarter of 2009, Brookfield will own a 50.01 percent interest in the fund.

Pingston hydro, near the town of Revelstoke, B.C., and the Prince wind farm, northwest of Sault Ste. Marie, Ontario, annually generate an average of C$42 million (US$35 million) in earnings before interest, taxes, depreciation, and amortization. The two assets also generate C$13 million (US$11 million) of distributable cash flow annually.

Pingston is owned and operated as a joint venture between Brookfield and Canadian Hydro Developers Inc., with each party holding a 50 percent interest. (HNN 10/11/07) The project originally was commissioned as a 30-MW facility in 2003; a 15-MW expansion was added in 2004.

Pingston is subject to an operations and maintenance agreement between Canadian Hydro and Brookfield Energy Marketing Inc. The operations and maintenance agreement is to remain in force for the life of the project. BEMI is responsible for managing and administering Pingston’s revenues, selling the power generated, and administering contract terms.

In connection with the acquisitions, the fund has entered into an agreement with a syndicate of underwriters led by CIBC World Markets Inc. and RBC Capital Markets. The underwriters agreed to purchase 4.69 million fund units for C$16 (US$13.5) per unit for gross proceeds of C$75 million (US$62.7 million).

Concurrent with the offering, Brookfield will subscribe for about C$10 million (US$8.4 million) of fund units at the issue price. Once the acquisitions close, Brookfield will maintain its 50.01 percent interest in the fund, and the fund will indirectly own 50 percent of Pingston and more than 99 percent of Prince wind.

The income fund owns, operates, and manages more than two dozen hydroelectric stations on eight river systems in British Columbia, Ontario, and Quebec in Canada, and in New England in the United States. Brookfield Renewable Power owns 50.1 percent of the fund’s outstanding units. (HNN 7/11/06)

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