Brookfield Renewable, together with its institutional partners (Brookfield), announced that it has agreed to acquire Duke Energy Renewables (DER). DER is a fully integrated developer and operator of renewable power assets in the United States with 5.9 GW of operating and under construction wind, utility scale solar, and storage assets. DER also has a 6.1-GW development pipeline. Brookfield is paying US$1.05 billion in equity proceeds (approximately US$265 million net to Brookfield Renewable) for DER. Factoring in the assumption of debt and other interests, the total cost of DER is around US$2.8 billion.
The acquisition solidifies Brookfield as one of the largest renewable energy businesses in the United States, making the company well positioned to benefit from a highly supportive regulatory backdrop and growing demand for renewable energy from commercial and industrial buyers. Brookfield said that the deal is immediately accretive to funds from operations (FFO). The company expects the acquisition to generate strong going-in cash flows, which are expected to be at least 3% accretive to 2024 FFO with approximately 90% of cash flows contracted with a weighted average 13-year remaining life. The main benefit is that Brookfield will be able to share platform costs with DER and then leverage its existing partnerships with commercial buyers to secure higher value contracts.
“With this acquisition, we are adding a scale operating renewable platform located in highly attractive markets that we expect will immediately contribute meaningful cash flows with significant upside from potential asset repowering and synergies,” said Connor Teskey, CEO of Brookfield Renewable. “We are also adding to our pipeline of renewable development projects with almost 90,000 MW of operating and development assets.”
“On the back of significant outperformance of our growth targets, where over the last 18 months we have closed or agreed to invest up to US$21 billion (US$3.9 billion net to Brookfield Renewable), we have agreed to a bought deal and concurrent private placement, raising aggregate equity proceeds to Brookfield Renewable of US$650 million, said the company in a statement. “With this offering, we believe we remain well positioned to fund our long-term growth targets through a mix of corporate debt, upfinancings of existing hydro assets, and proceeds from asset recycling initiatives. So far this year, we are tracking ahead of our plans, having successfully executed approximately US$600 million (US$400 million net to Brookfield Renewable) in capital recycling initiatives, and advanced other processes which we expect could generate meaningful additional proceeds when closed in the coming quarters. With the expected benefit of our growth initiatives, the majority of which we expect to come on-line over the next 12 months, and our funding approach, we believe that we remain well-positioned to deliver results in-line with our track record of double digit annual FFO per unit growth.
Brookfield Renewable stock dropped more than 5% because of the US$650 million equity offering. The company’s limited partnership units are being offered at a price of US$30.35 per unit and its exchange shares are being offered at a price of US$33.80 per unit. These prices are a discount to where both securities were trading before the announcement.
