Hydropower-Focused Brookfield Sees More Sunshine in Future

Written by Brian Eckhouse. This article first appeared in Bloomberg News. 

Brookfield Asset Management Inc., the owner of just a half-megawatt of solar power, is going all in on sunshine.

Eight months after agreeing to acquire almost 4 gigawatts of solar and wind power from fallen clean-energy giant SunEdison Inc., Brookfield is now said to be in advanced talks to buy a 41.5 percent stake in Atlantica Yield Plc, which owns about 1.4 gigawatts of renewable-energy assets.

The deal would be another step in Brookfield’s path to diversify a portfolio that’s heavily weighted toward hydropower. The acquisition of Abengoa SA’s stake in Atlantica would also be its third play for a yieldco this year, after announcing in March plans to buy all of TerraForm Global Inc. and SunEdison’s controlling stake in sister yieldco TerraForm Power Inc.

“For Brookfield, it’s a story about growing an already-sizable North America wind and hydro bundle into a one of the world’s largest and most diverse clean-energy packages,” Nathan Serota, a New York-based analyst at Bloomberg New Energy Finance, said in an email Thursday.

Yieldcos own operating solar and wind farms, selling electricity to help fund dividends to investors. The model was popular with clean-energy developers when it emerged starting in about 2013, but has lost favor in the past few years. That’s opened the door for some strategic acquisitions. The TerraForm deals are expected to close by year-end.

TerraForm Power said Friday that stockholders had approved the sale to Brookfield and the transaction would close Oct. 16.

A Brookfield spokeswoman declined to comment on the company’s clean-energy strategy. An Atlantica Yield official declined to comment Thursday.

Brookfield’s views on solar power have shifted. The company has watched the industry evolve in recent years and now sees solar as a cost-effective source of power.

Energy Transformation

“We are in the midst of a real transformation in the energy markets with decarbonization, with thermal assets out of favor, with coal plants shutting down,” and solar power is a key part of that transition, Sachin Shah, chief executive officer of Brookfield Renewable Partners, said during a Sept. 27 analyst day event. “We are now at that inflection point where solar has parity relative to other technologies, meaning that you could build a solar plant on a utility scale at the same cost as a gas plant.”

Canada’s biggest alternative-asset manager previously had remained on the solar sidelines — “the economics not having been right,” Ann Dai, a New York-based analyst at Keefe Bruyette & Woods Inc., said in an email.

“They keep capital on hand for large-scale opportunities such as these and they’re willing to be patient and wait for the right assets to come along,” she said.

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