Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Brookfield Asset Management Gets Deeper Into the Solar Game

Last month, Brookfield Asset Management (NYSE: BAM  )  announced it had reached agreements to bring a pair of green-energy yieldcos into its portfolio.

Canada's largest asset manager -- working with spinoff Brookfield Renewable Partners  (NYSE: BEP  ) , in which it holds a majority stake -- is purchasing TerraForm Global (NASDAQ: GLBL  ) outright and boosting its existing stake in the related TerraForm Power (NASDAQ: TERP  )  to 51%.

This will bolster the renewable energy portfolio of the Brookfield family of companies, which have been active in the segment for years. Is the deal worth the money it's laying out for the purchase, however? Let's unpack it to find out. 

Partnering on the deal

Brookfield Asset Management has agreed to pay around $787 million and assume roughly $455 million in TerraForm Global's debt, in the deal. This puts its total commitment at around $1.24 billion. Brookfield Renewable Partners will contribute about $500 million in financing. Asset Management is to assume full ownership of TerraForm Global, plus become TerraForm Power's sponsor with the expanded stake.

Asset Management has not yet stated whether the two yieldcos will be shifted into Renewable Partners' asset portfolio, although that seems like the most logical development.

Two columns of solar panels stretching into green hills in the background.


The boards of directors of both TerraForm Power and TerraForm Global have approved the proposed transactions. The two deals are expected to close in the second half of this year.

The twin yieldcos are spinoffs of the once high-flying renewable energy purveyor SunEdison. They were cleaved into separate, publicly traded companies in 2014 and 2015. Subsequently, SunEdison filed for bankruptcy protection in April 2016.

Water, wind, and sun

Brookfield Asset Management is an old player in the renewable power game, stretching back decades. It readily points out that, thanks to Brookfield Renewable Partners, it is the world's largest operator of hydroelectric assets, with more than 200 such facilities on this continent and in South America. 

In 2006, Asset Management made the logical jump into modern renewables, specifically wind power. These days Renewable Partners operates over 35 such facilities, which have enough capacity (1,600 megawatts) to provide electricity to more than 300,000 homes.

Still, hydro is the Brookfield family's core renewable; around 86% of its clean power portfolio is in the category.

Meaning that the purchase of the TerraForms will broaden and expand that list of assets considerably. TerraForm Power alone has nearly 3,000 megawatts of net capacity, based on ownership. This total is more or less evenly divided between solar and wind. Around 84% of that capacity is situated in North America.

TerraForm Global is smaller, with just under 920 megawatts through its operations in South America (Brazil and Uruguay), Asia (India, China, Malaysia, and Thailand), and South Africa. 61% of its portfolio is wind, with solar comprising the remainder.

This Fool's take

Brookfield Asset Management didn't specify how it would fund the deal. Regardless, it's well within the company's immediate financial means, as it held over C$10 billion ($7.5 billion) in cash and short-term investments at the end of its Q4 2016.

If it goes the borrowing route to any degree, the yieldcos won't add much to an already high pile -- Brookfield Asset Management had nearly C$92 billion ($69 billion) in debt at that time. Glancing at the profit and loss statement, we can see that the company's total interest expense clocked in at almost C$4.3 billion ($3.2 billion) during the fiscal year; if the deal is funded by loans, they won't move that number much higher.

Plus, Asset Management is saving a chunk of change with Renewable Partners' $500 million or so contribution. The latter says that "it expects to fund [this] through current liquidity."

If we make a crude calculation based on the approximate price per megawatt of net capacity purchased for that $1.24 billion sticker price, Brookfield is paying roughly $0.32 to control the pair of TerraForms. Considering that the deal gives it control of more than twice its renewables capacity at present, that looks like a very attractive price.

10 stocks we like better than Brookfield Asset Management
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Brookfield Asset Management wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 4014346, ~/Articles/ArticleHandler.aspx, 4/29/2017 1:35:43 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
Change down DOW 20940.5 -40.8 -0.2%
Change down S&P 500 2384.2 -4.6 -0.2%
Change down NASD 6047.6 -1.3 0.0%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/28/2017 4:01 PM
BAM $36.95 Up +0.10 +0.27%
Brookfield Asset M… CAPS Rating: ****
BEP $30.47 Down -0.11 -0.36%
Brookfield Renewab… CAPS Rating: ****
GLBL $4.75 Up +0.05 +1.06%
TerraForm Global (… CAPS Rating: ***
TERP $12.59 Up +0.04 +0.32%
TerraForm Power CAPS Rating: **

Article registration testing

Revisit this page

Clear article's cache and revisit this page

Or, visit the current page, forcing Test ID to article:interrupt:106919 and

Tookie Value = 01896150015419887200029759671845