Brookfield’s Yieldco Buying Spree

Last week, Bloomberg reported on a rumor that Brookfield Asset Management (BAM) was in talks to buy Abengoa’s (ABGOY) stake in its former YieldCo Atlantica Yield (ABY). Atlantica had been looking for a new sponsor for well over a year since parent Abengoa filed for bankruptcy.

Purchasing Yieldcos (companies that own clean energy infrastructure and use the cash flows to pay large dividends to shareholders) is not new to Brookfield. Not only has BAM long sponsored Brookfield Renewable Partners, LP (BEP), a limited partnership that has essentially been a Yieldco since before the term was invented, but it is in the process of wrapping up the purchase of bankrupt SunEdison’s former Yieldcos, Terraform Power (TERP) and Terraform Global (GLBL).

Terraform Global

The smaller, Terraform Global is to be purchased outright for $5.10 a share.On October 3rd, the bankruptcy court cleared one of the final hurdles preventing GLBL from putting the matter to a shareholder vote by approving a settlement regarding directors and officers insurance.

Terraform Power

The Terraform Power purchase is farther along, with the merger having already been put to a shareholder vote, with the deadline for submitting shares recently extended to October 12th.Shareholders should make sure to participate in this tender offer and elect to take their compensation in shares rather than cash.This is because the cash compensation is worth less than the current share price, and shareholders who do not submit their shares will be assigned shares or cash based on the remaining after as many as possible shareholders who do make an election have been allocated the cash or shares of their choosing.

To understand the value of the cash or stock election, we need to consult the merger agreement.There we see that at the time of the merger, TERP will issue a special dividend of $1.97 per share.51% of the outstanding shares will then be purchased for $9.52 cash, while the remaining 49% will remain TERP stock.

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Disclosure: Long GLBL, TERP, ABY, BEP, NYLD/A.  Short CAFD.





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