Brookfield Renewable Energy Partners LP, one of Canada's largest green energy firms, is dramatically expanding its Brazilian operations with the purchase of hydro, wind and biomass projects in that country.
Brookfield is buying 488 megawatts of power-generating facilities from Energisa SA, a large Brazilian power distributor. The purchase will broaden Brookfield's Brazilian portfolio, which currently consists of 35 hydro-electric generating stations producing 670 MW of power.
Brookfield is paying about $615-million for the portfolio, and taking on about $435-million of debt associated with the assets, for a total value of slightly more than $1-billion. But not all the money is coming out of its own coffers – it is working with a number of institutional investors that are picking up part of the purchase. Brookfield will end up with a 40 per cent equity interest in the portfolio, although it will manage the operations.
That's the model Brookfield used earlier this year when it bought a portfolio of 17 wind energy projects in Ireland worth roughly $1-billion, including debt.
Chief executive officer Richard Legault said in an interview that Brookfield has bought projects from Energisa before, so when the Brazilian firm put this portfolio up for sale to generate capital, his firm moved quickly to buy it.
Brookfield has only hydro projects in Brazil, so this diversifies the portfolio into wind and biomass, something it has wanted to do for some time "but on the right terms and conditions," he said.
It is also the company's first move into biomass-generated power anywhere in the world. The Brazilian plants use residue from crushed sugar cane to produce steam that generates electricity.
Mr. Legault said it is possible that what the company learns from these projects could potentially inform other biomass purchases elsewhere, but he noted that Brazil is unique in that it has a lot of sugar cane residue for biomass generation, and there are few similar fuel sources in other countries.
Over all, Brookfield's global portfolio is still heavily weighted toward hydro power, with about 200 hydroelectric plants in Canada, the United States and Brazil. It has wind farms in Canada, the U.S., Ireland, and now Brazil. Mr. Legault said the company also is considering adding some solar projects, which he acknowledged is the "fastest growing renewable technology in the world," although hydro will remain the largest portion of its mix.
Geographically, Brookfield is particularly keen to expand further in Europe, Mr. Legault said, and the firm is working on potential purchases there. "We are seeing lots of transactions and deal flow in Europe," he said, "It is just [a matter of determining] what is the right one for us."
Brookfield isn't the only Canadian renewable energy company looking farther afield for expansion. Montreal-based Boralex Inc. has solar and wind operations in France in addition to wind and hydro plants in North America. Northland Power Inc. of Toronto has a 60-per-cent stake in the huge Gemini offshore wind farm planned for the North Sea off the coast of the Netherlands, and an 85-per-cent share of the Nordsee project off Germany's north coast. Vancouver-based Alterra Power Corp. owns geothermal plants in Iceland, as well as hydro, wind and geothermal operations in Canada and the United States.
Analyst John MacIlveen of Jacob Securities Inc., said Brookfield has projected significant increases in its cash flow, along with higher dividends. Consequently, the company "needs larger deals like this to maintain that growth rate."
But the company is a "disciplined buyer," he said, and the Brazil deal fits into that model.