Canada income fund to acquire 15 hydro projects from Brookfield

Great Lakes Hydro Income Fund intends to acquire 15 Canadian hydroelectric projects totaling 387 MW and one proposed wind project from Brookfield Renewable Power Inc. for C$945 million (US$813 million).

Great Lakes, which is owned 50.01 percent by Brookfield Renewable parent Brookfield Asset Management Inc., also plans to increase its market capitalization and change its name to Brookfield Renewable Power Fund. The transactions were approved by both entities’ boards and announced July 6, 2009.

Great Lakes and Brookfield Renewable said the deal includes sale of “substantially all” of Brookfield’s Canadian renewable power generation business not already owned by Great Lakes. Brookfield has more than 165 generating facilities, mostly hydro, totaling 4,100 MW, in Canada, the United States, and Brazil.

“As part of a strategic repositioning approved by its board, Brookfield will invest in Canadian contracted renewable power generating assets through the fund as its exclusive platform for such investments,” Brookfield Renewable said. “Brookfield and the fund will maintain the fund’s current focus on producing stable cash flows from high-quality, long-life renewable power assets.”

Great Lakes said the transaction is to expand its renewables platform to 42 hydroelectric facilities and two wind farms with combined capacity of nearly 1,700 MW. (HydroWorld 12/19/08) Reflecting increased power prices, Brookfield also is to increase the price it currently pays for power generation from Great Lakes’ Lievre hydro operations in Quebec totaling 249 MW and its Mississagi hydro operations in Ontario totaling 499 MW.

Great Lakes is to pay consideration to Brookfield Renewable of C$945 million (US$813 million), including C$365 million (US$314 million) in cash, payable out of the net proceeds of a C$185 million (US$159 million) offering of subscription receipts and a C$195 million (US$168 million) concurrent private placement of subscription receipts. The total consideration also includes a C$200 million (US$172 million) senior unsecured note of the fund to be issued to Brookfield Renewable and issuance to Brookfield Renewable of 25.5 million trust units of the fund at the weighted average price of the subscription receipt issued, representing an aggregate of C$380 million (US$327 million).

Brookfield Renewable is to purchase 50 percent of the newly issued units, increasing its investment in the fund to C$1 billion (US$862 million) and maintaining its 50.01 percent ownership of the fund.

Great Lakes identified the hydro project acquisitions as: Great Lakes Power Ltd.’s 12 hydro projects totaling 349 MW on the Magpie, Michipicoten, Montreal, and St. Mary’s rivers in northern Ontario; Hydro-Pontiac’s Waltham and Coulonge projects totaling 28 MW on the Noire and Coulonge rivers in Quebec; and 10-MW Valerie Falls on Seine River in Ontario.

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