DBRS Places Brookfield Renewable Energy Partners LP Under Review with Developing Implications

DBRS has today placed Brookfield Renewable Energy Partners LP’s (BREP or the Company) Issuer Rating and related ratings Under Review with Developing Implications. This rating action follows the announcement of the Company’s acquisition of White Pine Hydro Investments, LLC (White Pine or the Portfolio) from a subsidiary of NextEra Energy Resources, LLC (the Acquisition). The total enterprise value of the Acquisition is approximately $760 million (including $700 million of non-recourse debt) and is expected to close in the first quarter of 2013, subject to various regulatory approvals. The rating action largely reflects some uncertainties associated with a timely and prudent financing strategy.

The Portfolio has 19 hydroelectric facilities and eight upstream storage reservoir dams in Maine (the U.S. northeast region), with a total of 351 megawatts (MW) of generating capacity. The facilities in the Portfolio have licences with the U.S. Federal Energy Regulatory Commission (FERC) that mostly expire after 2025, and all output from the facilities is sold into the New England power market. This Acquisition would increase BREP’s installed capacity in New England to nearly 1,000 MW and the Company’s total generation assets to approximately 5,651 MW.

Business Risk Profile -- Modestly Negative
Based on its preliminary review, DBRS views the proposed acquisition as modestly negative with respect to BREP’s existing business risk profile. Upon completion of the transaction, the Company’s contracted generation output will decrease from 99% under contract to approximately 91% (on a fully consolidated basis), increasing BREP’s exposure to the currently low wholesale pricing environment.

Financial Risk Profile -- Neutral to Negative
The Company intends to initially finance the total acquisition price with cash on hand ($252 million as at September 30, 2012) and credit facilities ($854 million available as at September 30, 2012). DBRS expects the Company to refinance the holding company-level credit facility with a prudent mix of non-recourse project level debt, equity from BREP and contributions from institutional partners in the first half of 2013. The Company has a deconsolidated debt-to-capital ratio of 19% as of June 30, 2012. Should BREP’s expected financing strategy deviate from the aforementioned timeframe and deconsolidated leverage increase to above 20%, there could be negative credit implications.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Non-Regulated Electric Generation Industry (May 2011),which can be found on our website under Methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.