"We are excited to announce the addition of Comber to the Fund," said Richard Legault, President and CEO. "Comber is a natural fit within the Fund’s portfolio and complements its strategy focused on high-quality, contracted Canadian renewable power assets. This acquisition will bring the Fund’s total wind portfolio to more than 400 megawatts by the end of 2011, and will be financially accretive while providing value-added diversification and tax attributes in the process."
"We are also encouraged by recent hydrology trends which have resulted in improved generation levels at the end of the quarter and significant improvement in our reservoir levels which positions us well for the fourth quarter," added Mr. Legault.
COMBER WIND PROJECT ACQUISITION
The Fund today announced a definitive agreement to acquire the Comber Wind energy project in southwestern Ontario from BRPI. The wind farm represents an investment of $567 million and the Fund has secured the financing to complete the transaction.
In considering the acquisition, a special committee of the Board of Trustees, each of whom is independent of BRPI and Brookfield (the "Independent Committee") was formed to review the transaction. The Independent Committee retained PricewaterhouseCoopers LLP as independent and qualified financial advisors, Heenan Blaikie LLP as independent legal advisors, and GL Garrad Hassan as independent engineering advisors, to assist in its evaluation of the transaction. PricewaterhouseCoopers LLP provided a fairness opinion to the Independent Committee that the transaction is fair, from a financial point of view, to the unit holders of the Fund, other than BRPI, which holds a 34% interest in the Fund on a fully exchanged basis. The transaction is subject to customary closing conditions and the receipt of all regulatory approvals.
The wind turbines project is already under construction and is located in close proximity to the Fund’s existing Gosfield Wind Farm. The wind energy project is expected to have an installed capacity of 166 megawatts (MW) and annual generation of 537 GWh when it commences operation in late 2011. Comber benefits from a 20-year power purchase agreement with the Ontario Power Authority pursuant to the province’s Feed-in Tariff Program.
Siemens will supply 72 2.3 MW wind turbines for the project while Mortenson Company, an experienced contractor of wind farms and the builder of Gosfield Wind Farm, will lead the construction of balance of plant infrastructure and turbine installation.
Third Quarter Results
As previously indicated on October 4, 2010, the Ontario and Québec regions experienced below-average inflows throughout most of the third quarter. While conditions in the last several weeks of the quarter showed improvement and reservoirs began to recover, total generation of 881 gigawatt hours ("GWh") was well below the long-term average of 1,540 GWh. Generation in the New England and British Columbia regions was in line with their long-term averages and wind generation of 108 GWh was above the long-term average of 102 GWh, reflecting improved wind conditions at Prince Wind Farm. The Gosfield Wind Farm entered commercial operations in mid-September and contributed 5 GWh in the quarter.
Third quarter revenues were $51.4 million as compared to $76.8 million in the prior year, reflecting significantly lower generation partially offset by a higher guaranteed rate for generation from the Fund’s Lièvre and Mississagi facilities. Income before non-cash items, issuance costs and contract amendment payment, was $2.7 million as compared with $37.4 million in the prior year. Year to date, revenues increased to $230.0 million from $200.2 million in the first nine months of 2009, and income before non-cash items, issuance costs and contract amendment payment was $83.5 million as compared to $100.7 million for the same period last year.
Third quarter distributions to unitholders were $34.1 million or 33 cents per unit as compared to $27.4 million or 31 cents per unit in the same period last year. Distributions increased year-over-year as a result of the additional units issued in connection with 2009 acquisitions and an increase in the Fund’s monthly distribution in February 2010.
LIQUIDITY, CAPITAL PROGRAM AND HYDROLOGY AND CREDIT FACILITIES
In light of the hydrological conditions experienced year-to-date, the Fund continues to prudently monitor and manage its capital program and liquidity position to provide continued stability in anticipation of a return to normal conditions. In 2010, the Fund plans to spend $23.0 million on sustaining capital expenditures, a reduction of $3.9 million from prior expectations. Due to the flexibility of the Fund’s asset base and long-term capital plan, the Fund is able to defer certain capital projects without compromising operations, safety or the environment. Larger-scale projects have not been affected and are continuing as planned. Major maintenance spending for 2010 has similarly been reduced by $1.8 million to $5.5 million.
BRPI has also increased to $40 million from $25 million the amount available under the Fund’s hydrology reserve facility, whose purpose is to provide a temporary source of funds when hydrology is well below expectations. The facility was enhanced to reflect the Fund’s growing asset base and higher contract prices and removes annual sub-limits while covering all of the Fund’s hydroelectric facilities. During the third quarter the Fund accessed $8.0 million from the facility. The Fund also has hydrology insurance in the amount of $10 million, which is accessible when generation falls below 90% of long-term average. The Fund expects to claim the full amount under the policy in 2010.
The Fund is in the final stages of securing a $250 million revolving credit facility from a syndicate of Canadian banks. The facility will be available for a period of three years, extendable each year for an additional 12 months at the Fund’s request, and is intended to be used primarily to fund growth opportunities.
At September 30, 2010, the Fund had cash, short-term investments and a deposit with a related party totalling $21.7 million. Accordingly, with its cash, enhanced hydrology reserve facility and anticipated credit facility totalling more than $303 million, the Fund’s liquidity position remains strong and will support its objectives with respect to growth, capital investment and cash distributions to unitholders.
A conference call for investors and media to review the third quarter results for 2010 will be held on Wednesday, November 10, 2010 at 10:00 a.m. (EST). To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191 toll-free in North America, at 9:50 a.m. (EST). For those unable to participate in the conference call, a taped rebroadcast will also be available through November 12, 2010. To access this rebroadcast, please call 1-800-642-1687 toll-free in North America, and enter the passcode 16674853. The conference call will also be webcast live on the Fund’s website at www.brpfund.com, where it will be archived for three months.
Brookfield Renewable Power Fund is a premier Canadian income fund and one of the largest power income funds in North America with more than 1,700 megawatts of power generating capacity and average annual production exceeding 6,500 gigawatt hours.
The Fund produces electricity exclusively from environmentally friendly and renewable resources. The Fund indirectly owns or holds interests in 42 high quality hydroelectric generating stations and two wind farms in four distinct geographic regions across North America: Québec, Ontario, British Columbia and New England.
Brookfield Renewable Power Inc., which comprises all of the power operations of Brookfield Asset Management, owns approximately 34% of the Fund’s outstanding units on a fully exchanged basis.