Brookfield Renewable Partners LP and its institutional partners completed the acquisition of a 51% interest in TerraForm Power Inc., adding more than 2,600 MW of solar and wind assets primarily in the U.S., according to an Oct. 16 release.
Brookfield Renewable will own a 16% stake in TerraForm Power for its $203 million share of the total commitment of $656 million. The partnership funded its commitment through available liquidity.
The transaction is immediately accretive to Brookfield Renewable shareholders and is expected to contribute 6% accretion, or $40 million, to its funds from operations on a run-rate basis. The acquisition also represents what Brookfield Renewable calls its "first meaningful investment" into solar and distributed generation and provides a platform for further growth in those sectors.
"The TerraForm Power acquisition is an attractive entry-point for us into the quickly-expanding solar and distributed generation sectors, and its high quality revenue streams will deliver immediate accretion to our shareholders," said Sachin Shah, CEO of Brookfield Renewable.
Brookfield Renewable also continues to make progress on its pending acquisition of TerraForm Global Inc.
TerraForm Power will remain a Nasdaq-listed public company under the new sponsorship of Brookfield Asset Management Inc., and will be Brookfield's primarily vehicle for acquisitions of operating solar and wind assets in North America and Western Europe.
Looking ahead, the yieldco is aiming to deliver total annual return of 12% to its shareholders, comprised of a strong dividend yield, supported by a payout ratio of 80% to 85% of cash available for distribution; and is targeting annual dividend growth of 5% to 8%. The company, which has access to 3,500-MW right of first offer pipeline, is targeting 2018 dividend of 72 cents per share.
In connection with the merger completion, Brookfield Managing Partner John Stinebaugh has become new CEO of TerraForm Power, replacing interim CEO Peter Blackmore.
Additionally, Matthew Berger was named CFO of TerraForm Power, replacing Rebecca Cranna who was removed from her position as executive vice president and CFO. Berger most recently served in Brookfield Property Group as executive vice president and CFO of IDI Gazeley.
Regarding the results of the consideration election, TerraForm Power said the elections of the stock option were oversubscribed and that the proration ratio was 62.6%, meaning that stockholders electing to receive 100% of their merger consideration in stock retained 62.6% of their shares of class A common stock in the merger and received cash consideration in respect of 37.4% of their shares.
As of immediately following the merger completion, TerraForm Power has 148,224,429 shares of its class A common stock outstanding.