The renewable power sector just got a lot larger, as Great Lakes Hydro Income Fund bought $945-million of hydro dams and wind farms from parent Brookfield Asset management
Great Lakes cut a deal that will see the company pick up 16 power projects, and fund the acquisition by selling $380-million of subscription receipts. Half of this equity will be purchased by Brookfield , to maintain its 50.1 per cent stake in the trust. After this deal, Great Lakes is expected to sport a $1.6-billion market capitalization.
Scotia Capital and CIBC World Markets will lead a bought deal financing that will see $185-million of Great Lakes subscription receipts sold at $15.10 each. This paper flips into Great Lakes units once the power plant purchase closes. The trust will also issue $200-million of unsecured debt to pay for the acquistion.
As part of this purchase, Great Lakes also firmly stated that it will convert from a trust to a corporate structure before a new tax regime takes hold on Jan 1, 2011. Great Lakes said: 'With the completion of the proposed transaction, the fund expects to be well-positioned to maintain its current cash distributions after its conversion to a corporation."
The planned purchase will allow the trust to maintain its $1.25 per unit annual distribution by boosting cash flow to about $100 million, Great Lakes said
After this acquisition closes, Great Lakes will be renamed Brookfield Renewable Power Fund, a branding exercise meant to clearly establish the companies under the Brookfield umbrella.