Process more advanced in Canada; still weighing Irish sale; Brookfield remains interested in TerraForm despite poison pill
Brookfield Renewable Partners LP is weighing the sale of its Ontario and Irish wind farm portfolios as low interest rates create an attractive market for such assets.
The publicly traded subsidiary of Brookfield Asset Management Inc. has three wind farms in Ontario and 20 in Ireland and Northern Ireland, according to its website.
After building up its portfolio of wind farms in Canada over the past 10 years the Toronto-based company plans to test the market to see if it can get a premium for the assets, Shachin Shah, chief executive officer of Brookfield Renewable, said.
“We have an obligation to see if those assets are attractive to others,” Shah said on a conference call. The sales process is more advanced in Canada, while the company is still weighing whether to proceed with the sale of its Irish assets, Shah said.
Brookfield Renewable posted a loss of $19 million or 11 cents a unit, in the second quarter, down from profit of $35 million or 7 cents a unit, for the same period last year on lower power generation. Its funds from operations were flat year over year at $170 million, or 61 cents a unit, and below the 67 cents a unit expected by analysts, according to data compiled by Bloomberg.
The units fell 0.6 percent to C$40.52 in Toronto Thursday for a market value of C$12.01 billion ($9.22 billion).
Shah said Brookfield also remains interested TerraForm Power Inc. Brookfield and its partner Appaloosa Management LP joined forces last month to bid for a stake in the company held by SunEdison Inc. that would have given the partners control of the company. Brookfield and Appaloosa currently hold about 22 percent of the company’s Class A shares.
The bid prompted TerraForm to announce a so-called poison pill that would prevent buyers from gaining a controlling stake while undervaluing the rest of the company. TerraForm is now planning a formal auction in September to sell itself, people familiar with the matter said last week.
Shah acknowledged the poison pill precludes Brookfield from buying more shares in TerraForm at this point. SunEdison, the clean-energy giant that filed the year’s biggest bankruptcy in April with $16.1 billion of liabilities, had said it was looking to sell its Class B stake in TerraForm, which give it roughly 84 percent of the voting rights at Terraform despite only owning about 35 percent of the total shares outstanding.
"We think it’s a portfolio of very high-quality assets," Shah said. "We think we would be a really good sponsor for that business, and we would be beneficial to all the shareholders there who are involved."
Brookfield would be a good buyer for the business because of its operating expertise and the fact that it has operations in the same geographies of TerraForm, Shah said.
"Obviously, we feel that it needs sponsorship in light of what is happening with its parent," Shah said. "Beyond that, it’s up to the company and its current sponsor what ultimately their process will be and we are going to be happy participants in that."