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Algonquin Power acquires of 480 MW of U.S. wind generation in $888MM deal
March 12, 2012
Source: Algonquin Power & Utilities Corp.
Algonquin Power & Utilities Corp. (APUC) (TSX: AQN) announced that Algonquin
Power Co. (APCo), APUC's renewable power generation subsidiary, has entered
into an agreement to acquire a 480 MW portfolio of four wind power projects
in the United States from Gamesa Corporación Tecnológica, S.A. (Gamesa) for
total consideration of approximately US$888 million.
The 480 MW wind portfolio consists of four facilities (the Projects), Minonk
(200MW), Senate (150MW), Pocahontas Prairie (80MW) and Sandy Ridge (50MW)
located in the states of Illinois, Texas, Iowa and Pennsylvania,
respectively. Pocahontas Prairie and Sandy Ridge have recently reached their
commercial operation dates (COD) in February 2012, and Senate and Minonk are
in construction with COD anticipated in Q4 2012.
Total annual energy production from the four facilities is expected to be
1,644 GW-hrs per year. The Projects are comprised of 240 Gamesa G9X-2.0 MW
wind turbines which are well suited to the wind regimes and have been proven
through the installation of over 3,200 MW of G90 turbines to date worldwide.
Significant operational benefits will be achieved from using the same wind
turbine generator for all four projects. The Projects each have entered into
a 20 year contract with Gamesa to provide operations, warranty and
maintenance services for the wind turbines and balance of plant facilities.
The Projects will be acquired through American Wind Portfolio Holdings LLC.
(AWPH), a newly formed partnership whose members include APCo (holding a 51%
controlling interest), Gamesa (holding a 49% interest) and certain tax
equity investors. Closing of the acquisition of the Projects is contemplated
to occur in two stages; closing of the acquisition of Pocahontas Prairie and
Sandy Ridge is expected to occur promptly following receipt of regulatory
approval (expected within 45 days) and the acquisition of Senate and Minonk
will occur following their respective CODs, expected in Q4 2012.
APCo intends to contribute ~US$269MM to AWPH to partially fund the
acquisition of the Projects; tax assisted equity investors will contribute
$US360MM. APCo intends to finance its investment with approximately 45% debt
and 55% equity. With respect to APUC's equity financing plans, Emera, Inc.
(Emera) has recently reaffirmed its support for the Strategic Investment
Agreement with APUC; up to $100 million of the equity financing required for
the transaction may be provided by Emera pursuant to this agreement, which
agreement is currently the subject of a regulatory approval process.
J.P. Morgan Energy Ventures Corporation (JPMVEC), the wholly owned
subsidiary of J.P. Morgan, has provided AWPH a commitment for long term,
fixed price power sales contracts (the Power Sales Contracts) with a
weighted average life of 11.8 years (Minonk and Sandy Ridge 10 years, Senate
15 years). Based on the JPMVEC purchase volume commitments, approximately
73% of energy revenues would be earned under the Power Sales Contracts. All
energy produced in excess of that sold under the Power Sales Contracts,
together with ancillary services including capacity and renewable energy
credits, will be sold into the energy markets in which the facilities are
located.
APCo believes that the earnings and cashflows meet our return expectations
for projects of this nature. The consolidation of AWPH is expected to be
accretive to earnings per share and cash flows per share.
"The acquisition of 480 MW of additional wind generation doubles APUC's
independent power generation portfolio", commented Ian Robertson, Chief
Executive Officer of APUC. "This substantial investment in our independent
power business is a continuation of the successful strategy to create
shareholder value through accretive growth. This acquisition and the
relationship established with Gamesa provide APCo with a significant
foothold in the U.S. wind energy market and APCo will benefit from APUC's
existing geographic presence through Liberty Utilities."
In addition to the agreement for the acquisition of the Projects, Gamesa and
APCo have entered into a joint development agreement pursuant to which they
will jointly pursue additional wind power development opportunities in the
United States and Canada. Under the terms of the joint development
agreement, APCo will be provided visibility into Gamesa's pipeline of
2,700MW of near and medium term wind power development opportunities in the
United States and Gamesa will have the opportunity to work with APCo to
advance and expand APCo's 325MW pipeline of contracted development projects.
"Our partnership with Algonquin Power has already been a great success that
has surpassed our expectations. We expect significant and successful
accomplishments in our joint activity over the next few years and are truly
proud and privileged to be working with them", commented Jorge Calvet,
Chairman and Chief Executive Officer for Gamesa.
Robertson continued, "We believe that working with Gamesa, a top global
manufacturer of wind turbine generators, will maximize the strengths of both
companies, provide opportunities for Algonquin to invest responsibly and
profitably in wind power generation assets and to maximize returns to both
Gamesa's and Algonquin's shareholders."
TD Securities Inc. acted as financial advisor to APUC with respect to the
transaction.
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