Brookfield Renewable Partners has announced a deal to acquire securities that are convertible into equity in TransAlta Corp.’s hydro portfolio in Alberta.

The Brookfield Asset Management-sponsored yield company will invest $750 million in the 1,150 MW, 17-project portfolio through the purchase of the exchangeable securities.

Most of the hydro projects have power purchase agreements expiring in 2020, while the remainder are merchant. The oldest of the plants dates from 1911, while the most recent was brought online in 2000 (see table below).

The yieldco and its institutional partners have also agreed to increase their stake in TransAlta to 9% by buying shares in the open market over the next three years.

CIBC advised TransAlta on the deal while Davies Ward Phillips & Vineberg provided legal counsel. Torys was Brookfield’s legal adviser.

The initial $750 million investment is broken up into two tranches, each of which bears a coupon of 7% and will be convertible into equity after Dec. 31, 2024.

The first $350 million chunk, expected to close in May, takes the legal form of exchangeable debentures, while the remaining $400 million tranche will close in October 2020 in the form of redeemable preferred shares.

TransAlta will put $350 million of the proceeds toward its coal-to-gas transition strategy, $250 million toward share buy-backs over the next three years and the remainder toward project development and general corporate purposes.

Brookfield Renewables Partners sold a 25% stake in its 413 MW Canadian hydro portfolio to Investment Management Corp. of Ontario last November, advised by TD Securities and Torys (PFR, 11/30).


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