TerraForm Buyout Would Lift Toronto-Based Brookfield Renewable’s Asset Base to 22 Gigawatts

Toronto-based Brookfield Renewable Partners is pitching a US$1.5-billion offer to buy out the remaining shares of TerraForm Power Inc., a move that would boost its global portfolio of renewable energy and energy storage assets from 18 to 22 gigawatts.

“We look at the renewable industry as a multi-decade opportunity that the entire planet is undertaking to transition to,” said Brookfield CEO Sachin Shah. “Very few companies are set up to be global, to have expertise in all the major technologies—wind, solar, distributed generation, hydro, and storage—and Brookfield Renewable is set up to do that.”

“We’re really doing this primarily because we think that if we merge the two companies, keep it all public, we have a bigger, stronger business from which to continue to grow in the renewable space,” he added.

Brookfield previously acquired 62% of TerraForm in 2017, the Globe and Mail reports. On Monday, TerraForm said it had formed a special board committee to review the unsolicited offer. If the committee accepts it, it will still have to be approved by the majority of the company’s minority shareholders.

Greentech Media says Brookfield’s holdings so far skew toward hydropower, with a large portfolio of projects in South America. The majority of TerraForm Power’s investments have been in wind, although one deal in the last year brought it 300 megawatts of behind-the-meter solar.

Shah said the transition to wind and solar will require new investment, and Brookfield Renewable is one of a handful of companies with the wherewithal to get it done.

“Electricity grids all around the world are transitioning away from fossil fuels, and the sheer amount of capital needed to transition is in the multi-trillions of dollars,” he told the Globe. “Therefore, if you’re an investor and you’re at the front end of transitioning electricity grids all around the world and you have one of the largest, most dominant companies in the space, and it’s a multi-trillion, multi-decade opportunity, that’s a pretty good place to be.”

He added that “we’re very fortunate. Lots of companies are facing many headwinds. And we get to have this great tailwind at our back.”

The Globe and Greentech both trace TerraForm back to yieldcos, an early- to mid-2010s financing strategy modelled on master limited partnerships (MLPs) in the U.S. fossil industry, were meant to offer renewables investors a reliable, long-term rate of return on their dollars. 

“But by mid-2015, the stocks had cratered—many down by half or more—as investors began to doubt both the business model and the macroeconomic outlook, particularly with oil prices in freefall,” the Globe recalls. “TerraForm Power and TerraForm Global—both spun off from SunEdison Inc.—led the downward spiral. TerraForm Power shares peaked at US$42.66 in March 2015, but fell to US$6.73 by October of that year.”

Brookfield acquired its initial majority stake in TerraForm Power at the same time that it bought up TerraForm Global. The latest deal “would further build on the trend of U.S. renewables operators being taken private or absorbed by larger investors—many of them institutional in nature, many of them Canadian,” Greentech writes. “In November, Pattern Energy, one of North America’s leading wind farm owners, agreed to be acquired by the Canada Pension Plan Investment Board.”