All amounts in U.S. dollars unless otherwise specified.
-- Brookfield Renewable Energy Partners will be one of the world's largest,
listed pure-play renewable power businesses with approximately $13
billion of power generating assets
-- Accretive transaction for Brookfield Renewable Power Fund unitholders
and is expected to increase their annual distributable cash per unit on
average by more than 10% over the next five years
-- Annual distribution to be increased to $1.35 per unit, with a target
growth rate of 3% to 5% annually
-- Strong financial profile including a fully-contracted portfolio with an
average contract price of $89/MWh and average duration of 24 years
-- High quality and growing power portfolio representing 4,800 MW across
179 facilities in Canada, the United States and Brazil, focused
primarily on hydroelectric generation
-- Includes 2,000 MW development pipeline to support future growth
Brookfield Asset Management Inc. (TSX: BAM.A)(NYSE: BAM)
("Brookfield") and Brookfield Renewable Power Fund (TSX: BRC.UN)
("Fund") today announced a plan to combine the Fund and the power
generating assets owned by Brookfield's wholly-owned subsidiary,
Brookfield Renewable Power Inc. ("Brookfield Power"), to create
Brookfield Renewable Energy Partners L.P. ("BREP"), a global,
publicly-traded partnership focused on renewable power
generation.
Mr. Andre Bureau, Chairman of the Board of the Fund, stated
that, "In the nearly 12 years since its formation, the Fund, with
Brookfield Power as its manager, has earned a reputation as one of
the most successful Canadian income trusts generating total annual
unitholder returns in excess of 15%. We are excited to present this
transaction to the Fund's security holders as it increases the
sustainability and amount of distributions and provides them with
significantly greater growth prospects."
Mr. Richard Legault, Chief Executive Officer of Brookfield's
power operations, stated that, "The combination of these two
portfolios creates one of the world's largest pure-play renewable
power platforms. This exciting new company will rank among the very
best renewable businesses globally in terms of its quality of
assets, scale of operating platform, geographic diversification,
access to capital, and global reach. We intend to utilize this
entity to grow in the renewable energy business globally."
The Board of Trustees of Brookfield Renewable Power Trust formed
a special committee of trustees (the "Independent Committee"), each
of whom is independent of Brookfield Power and Brookfield, to
consider the proposed combination. The Independent Committee
concluded that the combination is in the best interests of the Fund
and the Fund's minority unitholders, and unanimously recommended
that the Board of Trustees approve the combination. The Board of
Directors of Brookfield Renewable Power Preferred Equity Inc. ("BRP
Equity"), the issuer of the Class A Preference Shares, Series 1
("Preferred Shares") (TSX: BRF.PR.A), has similarly approved the
combination and unanimously recommends that Preferred Shareholders
vote to approve the combination.
The Independent Committee retained independent financial, legal
and engineering advisors to assist in its consideration of the
proposed combination. CIBC World Markets Inc. ("CIBC") provided a
formal valuation of the trust units of the Fund and the limited
partnership units of BREP. CIBC also provided an opinion to the
Independent Committee that, as of the date of such opinion and
subject to the assumptions, limitations and qualifications
contained therein, the consideration to be received by the Fund's
unitholders pursuant to the Combination Agreement is fair, from a
financial point of view, to the unitholders of the Fund other than
Brookfield Power and its affiliates. The formal valuation and
fairness opinion provided by CIBC were two factors, among others,
that the Independent Committee considered in assessing the merits
of the proposed combination.
TRANSACTION SUMMARY
The following is a summary of the key elements of the proposed
transaction; full details will be contained in the materials sent
to security holders in connection with the meetings called to
approve the transaction.
-- All outstanding assets of the Fund, as well as Brookfield Power's
Brazilian, U.S. and Canadian power assets will be combined into a new
entity called Brookfield Renewable Energy Partners L.P. ("BREP"). The
combination will be effected by way of a plan of arrangement (the
"Arrangement") under the Business Corporations Act (Ontario).
-- Fund unitholders will receive one limited partnership unit of BREP for
every Fund unit held. The Fund's Canadian and U.S. unitholders will have
the opportunity to exchange their Fund units for BREP units on a tax-
deferred basis.
-- Following the combination, it is expected that BREP will have 265.2
million units outstanding on a fully-exchanged basis and that Brookfield
will, directly and indirectly, own 73% of BREP on a fully-exchanged
basis, and the existing public unitholders of the Fund will own 27% of
BREP.
-- Upon successful completion of the transaction, BREP intends to establish
an initial distribution of $1.35 per unit. The planned increase reflects
the anticipated strong cash flow and accretion provided by the
combination. It is further expected that the target annual growth in
distributions to unitholders will be 3% to 5%, while maintaining a
payout ratio in the range of 80% of distributable cash.
-- Subject to security holder approvals, subsidiaries of BREP will be
responsible for all obligations related to approximately C$1.1 billion
of unsecured public corporate bonds (the "Bonds") issued by Brookfield
Power, and C$250 million of Preferred Shares, and BREP will provide
guarantees of the Bonds and Preferred Shares. It is expected that
Standard & Poor's and DBRS will both reaffirm the current investment
grade ratings of the issuers of the Bonds and Preferred Shares following
the combination, and it is expected that BREP will be issued ratings
equivalent to the Fund's current ratings. There are no material changes
to the terms of the Bonds or the Preferred Shares.
-- Brookfield Power will enter into an Energy Revenue Agreement for all
uncontracted generation output in the United States at a price of
$75/MWh escalated annually at 40% of the increase in the Consumer Price
Index during the previous year, prior to contributing these assets to
BREP. In addition, Brookfield Power will amend its existing power
purchase agreements for the Fund's Ontario assets to increase the price
to an average of C$88/MWh from approximately C$68/MWh currently. All
third-party power purchase agreements for generating assets in Brazil
will be transferred to BREP. As such, BREP will possess a portfolio that
is virtually fully contracted. This will result in an average contract
duration for the entire portfolio of 24 years with highly creditworthy
counterparties.
-- BREP will assume ownership of all Brookfield Power's development
projects (approximately 2,000 MW of potential capacity) and will be
responsible for all future investment related to the further development
and construction of the existing development pipeline. Brookfield Power
will not receive an up-front payment for any project in its development
pipeline but will be paid only if such project is put into commercial
operation or sold and such payments will be based on a 50/50 sharing of
the value of the project in excess of a priority return on each party's
invested capital.
TRANSACTION BENEFITS
One of the largest, listed pure-play renewable platforms. On
completion of the combination, BREP will own one of the world's
largest, publicly-traded, pure-play renewable power portfolios with
4,400 MW of installed capacity and long term average generation of
17,000 GWh annually. The portfolio will include 168 hydroelectric
generating stations on 67 river systems and two wind farms. BREP
will also have three wind farms and four hydro facilities under
construction that will grow the aggregate capacity of the portfolio
to 4,800 MW and average annual generation to more than 18,000 GWh.
The portfolio will be diversified across ten power markets in
Canada, the United States and Brazil, providing significant
geographic and operational diversification.
Accretive transaction. The strategic combination is an accretive
transaction for the Fund's unitholders that is expected to increase
their annual distributable cash per unit by an average of 10% above
what would have otherwise been available for distribution during
the next five years. With a target payout ratio of 80% of
distributable cash, BREP is expected to have approximately $100
million of available cash per year to further invest in accretive
projects or acquisitions. Distributable cash is expected to improve
further in the long term with the reinvestment of surplus cash
flows.
Attractive distribution profile. BREP intends to continue the
Fund's highly stable, long-life cash flow profile sourced from
predominantly hydroelectric assets while supporting an attractive
dividend yield and growth target. BREP will initially pay an annual
distribution of $1.35 per unit effective with the fourth quarter
distribution payable in January 2012. BREP will target a
distribution payout ratio in the range of 80% of distributable cash
and pursue a long-term distribution growth rate target in the range
of 3% to 5% annually.
Stable, high quality cash flows with attractive long-term value
for limited partnership unitholders. BREP will have highly stable,
predictable cash flow sourced from a diversified portfolio of low
operating cost, long-life hydroelectric and wind power assets that
sell electricity under long-term, fixed price contracts with
creditworthy counterparties. Virtually all of BREP's generation
output will be sold pursuant to power purchase agreements, or PPAs,
to public power authorities, load-serving utilities, industrial
users or to Brookfield or its affiliates. The PPAs for BREP's
assets will have a weighted average remaining duration of 24 years,
providing long-term cash flow stability.
Focus on attractive hydroelectric asset class. BREP will benefit
from an asset class representing one of the longest life, lowest
cost and most environmentally preferred forms of power generation.
BREP's predominantly hydroelectric portfolio will be unique
compared to other listed renewable power platforms and its scale
and quality will provide significant scarcity value to
investors.
Well positioned for global growth mandate. BREP will be
Brookfield's primary vehicle through which it will acquire
renewable power assets on a global basis. Its established operating
and project development platforms, strategic relationship with
Brookfield and enhanced capitalization are expected to
competitively position BREP to grow its renewable power business.
Upon its formation, BREP will have strong organic growth potential,
having been transferred Brookfield Power's 2,000 MW development
pipeline for no up-front payment.
Enhanced financial profile. BREP will possess significant scale
and strong cash flows providing enhanced support and coverage for
distributions to holders of the Bonds, Preferred Shares and limited
partnership units. On a pro forma basis, BREP will have
approximately $13 billion of power generating assets and a
conservative leverage profile with consolidated debt-to-total
capitalization of 39%. Approximately 80% of BREP's obligations will
be non-recourse and its corporate debt will have a weighted average
term of 10 years. BREP will have the ability to make tax-deferred
distributions in the form of return of capital to Canadian and U.S.
unitholders. The combination of Brookfield Power and the Fund into
BREP is expected to improve the tax profile of the Fund well beyond
2014, which is when the Fund's currently available tax shelter is
otherwise expected to be fully utilized.
Enhanced liquidity and access to capital. BREP's enhanced scale,
significant increase in capitalization and expected continued sound
investment-grade ratings from two major rating agencies will
enhance its ability to secure and fund new transactions globally.
As such, BREP is expected to be uniquely positioned to become a
premium vehicle for investors seeking to invest in the renewable
power sector. BREP has applied to have its units listed for trading
on the TSX and intends to apply to have its units listed for
trading on the NYSE, which is expected to enhance BREP's liquidity,
deepen its investor base and improve its ability to fund
growth.
PARTNERSHIP STRUCTURE, GOVERNANCE AND MANAGEMENT
As a publicly traded partnership, BREP is expected to benefit
from a proven ownership structure which has been successful for
infrastructure-like assets and is well suited to support BREP's
long-term growth strategy and objectives.
Through its ownership position in BREP, Brookfield will have a
very significant economic interest in BREP and will be strongly
aligned with other unitholders in maximizing its success. In
addition, a wholly-owned subsidiary of Brookfield will be the
general partner of BREP. The general partner will have a board
consisting of seven directors, the majority of whom will be
independent.
Pursuant to a master services agreement, Brookfield will provide
executive oversight of the business and will second senior officers
to BREP, including the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer. The seconded individuals
include the same executives who have successfully overseen and
grown Brookfield's power operations, including the Fund, since the
1990s. In addition to providing individuals to act as senior
officers, Brookfield will provide services relating to acquisitions
and dispositions, financings, business planning and strategy, and
oversight and supervision of various day to day management and
administration activities. In exchange for providing these
services, Brookfield will be entitled to a base management fee
equal to $20 million annually plus 1.25% of the increases in total
capitalization of BREP (effectively market capitalization plus
preferred equity plus recourse debt) following closing. Brookfield
will also be entitled to an incentive-based distribution linked to
growth in distributions to limited partners.
Pursuant to a relationship agreement, BREP will become the
primary vehicle through which Brookfield will acquire renewable
power assets on a global basis.
Preferred Shares
If the Preferred Shareholders approve the Arrangement, no
additional action by the Preferred Shareholders will need to be
taken and the Preferred Shares will continue to be listed for
trading on the Toronto Stock Exchange. The Preferred Shares are
expected to benefit from enhanced financial coverage and to retain
their current investment grade ratings following the combination.
The Board of Directors of BRP Equity has unanimously recommended
that Preferred Shareholders vote to approve the combination.
Formal Valuation and Fairness Opinion by CIBC
The Independent Committee retained CIBC to be its financial
advisor and to provide a formal valuation of the trust units of the
Fund and the limited partnership units of BREP. The valuation
determined that as at September 12, 2011, and subject to the
assumptions, limitations and qualifications contained therein, the
fair market value of the limited partnership units of BREP ranged
from C$5,701 million to C$7,292 million (or C$21.50 to C$27.50 per
unit) and the fair market value of the trust units of the Fund
ranged from C$2,284 million to C$2,828 million (or C$21.00 to
C$26.00 per trust unit). CIBC has also provided an opinion to the
Independent Committee that, as of the date of such opinion and
subject to the assumptions, limitations and qualifications
contained therein, the consideration to be received by the Fund's
unitholders pursuant to the Arrangement is fair, from a financial
point of view, to unitholders of the Fund other than Brookfield
Power and its affiliates.
Timetable and Approvals
The transaction will require approval by 66 2/3% of Fund
unitholders and a majority of unitholders other than Brookfield and
related persons present at the meeting in person or by proxy and
Ontario court approvals. In addition, Brookfield will seek approval
from 66 2/3% of the holders of Preferred Shares and Brookfield
Power's unsecured bondholders, which are conditions to closing.
Meeting materials containing details of the proposed transaction
are expected to be mailed to security holders of the Fund, BRP
Equity and Brookfield Power as soon as practicable. It is
anticipated that meetings of security holders to seek the approvals
referred to above will be held in October and November of 2011.
The transaction is also subject to obtaining typical regulatory,
governmental, corporate or contractual consents, assignments and
approvals. The transaction is expected to close in the fourth
quarter of 2011.
In connection with the proposed transaction, Heenan Blaikie LLP
acted as legal counsel and Hatch Ltd. provided engineering advice
to the Independent Committee, and Torys LLP acted as legal counsel
to Brookfield Power.
Supplemental information relating to the transaction is
available at www.brpfund.com and www.brookfieldpower.com.
This news release shall not constitute an offer to sell or a
solicitation of an offer to buy the limited partnership units of
BREP or any other securities, and shall not constitute an offer,
solicitation or sale in any state or jurisdiction in which such an
offer, solicitation or sale would be unlawful. The securities to be
offered by BREP have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any state securities laws and may not be
offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the U.S.
Securities Act. BREP intends to offer and sell its securities in
the United States pursuant to the exemption from registration set
forth in Section 3(a)(10) of the U.S. Securities Act.
Conference Calls
A conference call for Fund unitholders will be held today at
9:00 a.m. (EDT). A presentation containing supplemental information
relating to the transaction can be downloaded from the Fund's
website at www.brpfund.com. To participate in the conference call,
please dial 1-800-319-4610 toll-free in North America, or for
overseas calls please dial 1-604-638-5340 at approximately 8:50
a.m. (EDT). The conference call will also be webcast live on the
Fund's website at www.brpfund.com, where it will be archived for
future reference. A telephone replay will be archived and available
through October 13, 2011. To access this rebroadcast, please call
1-800-319-6413 or 1-604-638-9010 (passcode 1557#).
A conference call for Brookfield Power bondholders will be held
today at 1:00 p.m. (EDT). A presentation containing supplemental
information relating to the transaction can be downloaded from the
Fund's website at www.brpfund.com. To participate in the conference
call, please dial 1-800-319-4610 toll-free in North America, or for
overseas calls please dial 1-604-638-5340 at approximately 12:50
p.m. (EDT). The conference call will also be webcast live on the
Fund's website at www.brpfund.com, where it will be archived for
future reference. A telephone replay will be archived and available
through October 13, 2011. To access this rebroadcast, please call
1-800-319-6413 or 1-604-638-9010 (passcode 2285#).
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This news release contains forward-looking statements and
information within the meaning of the Canadian securities laws.
Forward-looking statements may include estimates, plans,
expectations, opinions, forecasts, projections, guidance or other
statements that are not statements of fact. Forward-looking
statements in this news release include statements regarding the
proposed combination of assets of Brookfield Power and the Fund, as
well as the creation and structure of Brookfield Renewable Energy
Partners and its anticipated ratings, the anticipated benefits of
the transaction, the quality of BREP's assets and the resiliency of
the cash flow they will generate, BREP's anticipated financial
performance, the future growth prospects and distribution profile
of BREP, the listing and liquidity of the BREP units, BREP's access
to capital and the approval, successful completion and timing of
the transaction. Forward-looking statements can be identified by
the use of words such as "will", expected", "intend", "continue",
and targets, or variations of such words and phrases. Although
Brookfield, Brookfield Power and the Fund believe that BREP's
anticipated future results, performance or achievements expressed
or implied by the forward-looking statements and information are
based upon reasonable assumptions and expectations, they can give
no assurance that such expectations will prove to have been
correct. The reader should not place undue reliance on
forward-looking statements and information as such statements and
information involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of BREP to differ materially from anticipated future
results, performance or achievement expressed or implied by such
forward-looking statements and information.
Factors that could cause actual results to differ materially
from those contemplated or implied by forward-looking statements
include, but are not limited to the risk that the conditions
precedent to be met, and the regulatory and third party approvals
to be obtained, for the combination to occur, are not met or
obtained, the fact that BREP units will not be eligible for
inclusion on any index, changes to hydrology at BREP's
hydroelectric stations or in wind conditions at BREP's wind energy
facilities, the risk that counterparties to BREP's contracts do not
fulfill their obligations, and as BREP's contracts expire, it may
not be able to replace them with agreements on similar terms,
BREP's operations being highly regulated and exposed to increased
regulation which could result in additional costs, the risk that
BREP's concessions and licenses will not be renewed, the risk that
a portion of BREP's hydroelectric portfolio is subject to
re-contracting and may become subject to price risk, the risk that
BREP may fail to comply with the conditions in, or may not be able
to maintain, its governmental permits, the risk that future
acquisitions may subject BREP to additional risks, the risk that
BREP may experience equipment failure, and other risks and factors
detailed from time to time in Brookfield Power's and the Fund's
public filings including the meeting materials to be sent to
security holders in connection with the combination. We caution
that the foregoing list of important factors that may affect future
results is not exhaustive. Except as required by law, neither
Brookfield, Brookfield Power nor the Fund undertakes any obligation
to publicly update or revise any forward-looking statements or
information, whether written or oral, that may be as a result of
new information, future events or otherwise.
Non-GAAP Measures
This press release contains references to "distributable cash",
which does not have a standardized meaning prescribed by GAAP and
is therefore unlikely to be comparable to similar measures used by
other companies. Management believes that distributable cash is a
useful supplemental measure that may assist investors in assessing
the financial performance and the cash generated that is available
to unitholders for distribution. Distributable cash is based on
100% of net earnings, excluding major maintenance expenses,
adjusted to account for non-cash transactions such as depreciation,
amortization and future taxes. This figure is reduced by a capital
asset reserve to arrive at distributable cash. Distributable cash
should not be considered as the sole measure of performance and
should not be considered in isolation from, or a substitute for,
analysis of the financial statements prepared in accordance with
GAAP.
About Brookfield Renewable Power Fund
Brookfield Renewable Power Fund (www.brpfund.com) is a premier
Canadian income fund and one of the largest power income funds in
North America with more than 1,700 megawatts of power generating
capacity and average annual production exceeding 6,500 gigawatt
hours.
The Fund produces electricity exclusively from environmentally
friendly and renewable resources, including 42 high quality
hydroelectric generating stations and two wind farms in four
distinct geographic regions across North America: Quebec, Ontario,
British Columbia and New England.
Brookfield Renewable Power Inc., which comprises most of the
power operations of Brookfield Asset Management Inc., owns
approximately 34% of the Fund's outstanding units on a fully
exchanged basis. The Fund's units are listed for trading on the
Toronto Stock Exchange under the symbol BRC.UN.
About Brookfield Renewable Power Inc.
Brookfield Renewable Power Inc., wholly-owned by Brookfield
Asset Management Inc., has more than 100 years of experience as an
owner, operator and developer of hydroelectric power facilities.
Its total portfolio includes more than 170 generating facilities
with approximately 4,400 megawatts of capacity. It also has a
significant hydroelectric and wind project pipeline. Brookfield
Renewable Power's operations are primarily located in North America
and Brazil. For more information, please visit Brookfield Renewable
Power's website at www.brookfieldpower.com.
About Brookfield Asset Management Inc.
Brookfield Asset Management Inc. is a global alternative asset
manager with approximately $150 billion in assets under management.
It has over a 100-year history of owning and operating assets with
a focus on real estate, infrastructure, power and private equity.
It has a range of public and private investment products and
services, which leverage its expertise and experience and provide
it with a distinct competitive advantage in the markets where it
operates. Brookfield is co-listed on the New York and Toronto Stock
Exchanges under the symbol BAM and on NYSE Euronext under the
symbol BAMA. For more information, please visit
www.brookfield.com.
Contacts: Investors: Zev Korman Director, Investor Relations and
Communications Brookfield Renewable Power (416) 359-1955
zev.korman@brookfield.com Katherine Vyse SVP, Investor Relations
Brookfield Asset Management (416) 369-8246
katherine.vyse@brookfield.com Media: Andrew Willis SVP,
Communications & Media (416) 369-8236
andrew.willis@brookfield.com
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