DBRS Comments on Brookfield Renewable Energy Partners LP’s Acquisition of Western Wind Energy Corp.

DBRS today notes that Brookfield Renewable Energy Partners LP (BREP or the Company; rated BBB (high) and Under Review with Developing Implications) has announced its successful acquisition of Western Wind Energy Corp. (WWind). As of February 22, 2013, approximately 35.4 million common shares of WWind that are held by shareholders independent of BREP have been acquired for a total cost of approximately $93 million. Including approximately 11.4 million shares previously owned by BREP, BREP’s total ownership interest in WWind is now approximately 66.1%.

Pursuant to the successful tender of more than 50% of the common shares held by independent shareholders for $2.60 per share (the Offer), the Offer has been extended and will now expire at 5:00pm (EST) on March 7, 2013. If 90% of the outstanding shares are acquired under the Offer, BREP will acquire the remaining common shares of WWind using compulsory acquisition provisions under British Columbia corporate law. If less than 90% of the outstanding shares are acquired under the Offer, a subsequent acquisition transaction will be effected to acquire the remaining common shares.

WWind is a renewable energy production company with 165 megawatts (MW) (net) of wind and solar generation facilities in the states of Arizona and California that have both fixed and short run avoided cost pricing contracts. WWind owns and operates three wind generation facilities in California, comprised of the 120 MW Windstar, 4.5 MW Windridge facilities in Tehachapi and the 30 MW Mesa wind generation facility. WWind also owns and operates the 10.5 MW Kingman integrated solar and wind facility in Arizona. Other assets include three wind and one solar power projects in various stages of development.

DBRS assesses rating impact of the proposed transaction based on its effect on the Company’s business and financial risk profiles. Overall, DBRS views this acquisition as having no material impact on the current BBB (high) rating. The Company remains Under Review with Developing Implications, pending permanent financing for the White Pine Hydro acquisition (see DBRS press release “DBRS Places Brookfield Renewable Energy Partners LP Under Review with Developing Implications,” dated December 31, 2012).

(1) Business Risk Profile – Neutral
DBRS views the acquisition as neutral with respect to BREP’s existing business risk profile. While the acquisition allows the Company to further diversify and grow its renewable power portfolio, these benefits are relatively modest due to the small size of the acquisition compared to BREP’s existing portfolio of approximately 5,300 MW installed capacity as of yearend 2012.

(2) Financial Risk Profile – Neutral
Based on preliminary review of the acquisition and BREP’s funding strategy, DBRS views the impact on BREP’s financial risk profile as neutral. The acquisition will have marginal impact on BREP’s credit metrics, given the size of the transaction relative to BREP’s existing financials. DBRS expects the Company to fund the acquisition with a prudent mix of debt and equity and its deconsolidated debt-to-capital ratio to remain below 20% once permanent financing is put in place.

Notes:
All figures are in Canadian 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.