Brookfield Asset Management Inc. is bringing its trademark operating style to green power businesses shaken by a backer in bankruptcy protection, the latest large Canadian investor to boost its stake in alternative energy.
The Toronto-based asset manager said on Tuesday it would invest $1.4-billion (U.S.) in two renewable-energy companies, helping to separate them from beleaguered Missouri-based solar company SunEdison Inc., which is in the process of restructuring. Brookfield's large, and long-awaited, deals to invest in solar and wind operators TerraForm Power and TerraForm Global come as Canadian institutional investors look to buy renewable-power assets.
Brookfield plans to cast off SunEdison's long shadow and make the TerraForm businesses appear a lot more like its other sponsored arms. As part of the transaction for TerraForm Power, Brookfield Renewable Partners LP plans to commit about $500-million, and could help the TerraForm companies source new projects.
"We intend to be the largest shareholder from the public-equity class, and show the market that, really, our invested capital is alongside theirs and it's less about fees and our sponsorship structure, and much more about having capital at risk," said Sachin Shah, senior managing partner at Brookfield, in an investor call explaining plans to first stabilize and then grow TerraForm Power.
Other large Canadian institutions have been active buyers in the renewable energy space. Pension fund Alberta Investment Management Corp. said in February that it would buy U.S. solar-power-utility company FTP Power LLC, often called sPower, for $853-million (U.S.), alongside investment partner AES Corp.
That follows moves by the Public Sector Pension Investment Board and the Ontario Teachers' Pension Plan to boost their stake in global renewable-energy and water-infrastructure company Cubico Sustainable Investments Ltd. a few months ago. And also on Tuesday, the Caisse de dépôt et placement du Québec said it would make a $90-million (Canadian) loan to help build the Mont Sainte-Marguerite wind farm project, which will develop and operate 46 turbines.
Brookfield is buying international wind and solar plant operator TerraForm Global for approximately $787-million (U.S.), and taking on $455-million in net debt. The company has more than 40 energy projects across emerging markets such as Brazil, South Africa and China.
Brookfield will also boost its stake in clean-energy producer TerraForm Power to 51 per cent from 34 per cent, and is set to pay $622-million for 65 million shares. Another $500-million line of equity will be offered by Brookfield to help grow the company. The business operates more than 500 wind and solar clean-energy power installations, largely in the United States, but also in Canada, Britain and Chile.
SunEdison, a fast-growing solar panel installer, filed for bankruptcy protection nearly one year ago, having become overloaded with debt through the course of many acquisitions. TerraForm businesses relied on SunEdison for aid in sourcing assets, for asset-management services and for operations and maintenance at many plants. TerraForm Power said it has been negotiating exclusively with Brookfield since Jan. 20, although talks between the companies date back months before that.
The deal is expected to close in the second half of the year, pending shareholder, regulatory and other approvals. The next step for Brookfield will be to help navigate the separation of the TerraForm businesses from SunEdison, and identify opportunities to grow cash flow and margins.
"We think the right approach is to internalize operating expertise, lower the cost structure and really drive the business forward, but with institutional, operational knowledge. And we think we can help in that regard," Mr. Shah said.