TransAlta Renewables invests in hydro facility, other assets and takes on investor

Ragged Chute hydro

TransAlta Renewables Inc. has agreed to invest in TransAlta Corp.’s 7-MW Ragged Chute hydro facility, Sarnia Cogeneration plant and Le Nordais wind farm, which have a combined total capacity of 611 MW.

Per a press release, “TransAlta Renewables’ investment will consist of the acquisition of securities which will track the net distributable profits of the portfolio.” Total value of this investment is about $540 million, and as part of the transaction TransAlta Renewables will issue $175 million in common shares to TransAlta and $215 million in convertible unsecured subordinated debentures.

To finance the cash portion of the investment, TransAlta Renewables “has entered into a $150 million bought deal offering co-led by CIBC Capital markets and TD Securities Inc., as joint bookrunners, for the sale of 15,385,000 subscription receipts.” Once the transaction is approved by shareholders [a special meeting is scheduled for Jan. 6, 2016], one common share in the capital of the company will be issued for each subscription receipt held.

“This transaction represents the execution of our second acquisition of assets from TransAlta in 2015 and is in-line with our strategy of acquiring high quality assets with stable cash flows at accretive valuations,” said Brett Gellner, president of TransAlta Renewables.

The generation assets are located in Ontario and Quebec in Canada. Ragged Chute is on the Montreal River in northern Ontario and began operating in 1991. It generates an average of 43,700 MWh of electricity annually.

In addition, TransAlta has entered into an agreement with Alberta Investment Management Corporation (AIMCo) for the sale of $200 million of TransAlta Renewables common shares. As part of the deal, AIMCo has “a pre-emptive right to purchase such number of common shares of the company in respect of any future offerings of common shares, or securities convertible into common shares, in order to allow AIMCo to maintain its proportionate shareholdings in the company, provided that AIMCo’s ownership remains above a specific threshold.” AIMCO is a diversified institutional investment manager with more than $85 billion of assets under management and is responsible for the investments of 27 pension, endowment and government funds in Alberta.

Per the website, TransAlta Renewables owns 1,830 MW of installed generating capacity in seven operating regions, with 29 of its 36 facilities being renewable and 12 of those 29 being hydropower.

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