DBRS Comments on BREP’s Acquisition of 488 MW Portfolio in Brazil

DBRS Limited (DBRS) notes today that Brookfield Renewable Energy Partners L.P.’s (BREP or the Company, rated BBB (high)) has announced its acquisition of a 488 megawatt (MW) multi-technology renewable portfolio in Brazil (the Transaction). DBRS does not expect the Transaction to have a material impact on BREP’s rating, given the Company’s track record of prudently financing acquisitions and the high level of contracted output from the portfolio. DBRS notes that BREP’s rating is currently supported by a highly contracted and diversified asset portfolio. Pro forma the Transaction, BREP’s contracted output is expected to remain above DBRS’s 80% threshold and its portfolio diversification is expected to improve modestly. As a result, the Transaction is expected to support the Company’s current business risk profile.

DBRS also notes that BREP’s current rating reflects DBRS’s expectation that BREP will maintain its deconsolidated debt-to-capital ratio below the 20% threshold. Given BREP’s track record, DBRS expects the Company to finance the Transaction in a prudent manner to maintain its ratio within this threshold. Should BREP’s deconsolidated debt-to-capital deteriorate materially beyond the 20% threshold as a result of the Transaction, any additional acquisitions and/or unforeseen cash shortfalls going forward, however, this could result in a negative rating action.

The enterprise value of the Transaction is approximately $935 million, and net of assumed long-term non-recourse debt, the equity purchase price is approximately $545 million. BREP is expected to fund the Transaction with its institutional partners and maintain an economic interest in the portfolio of approximately 40%. The portfolio consists of 163 MW of hydro, 150 MW of wind and 175 MW of biomass and has an average contract duration of ten years. The Transaction is expected to close in Q1 2015, subject to regulatory approvals.

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

The applicable methodology is Rating Companies in the Independent Power Producer Industry (August 2014), which can be found on our website under Methodologies.