In a rare move for a Canadian green-energy firm, Brookfield Renewable Energy Partners LP is staking out a foothold in Ireland, part of a plan to make a big move into the European market.
Brookfield, the largest publicly traded hydro- and wind-power player based in Canada, is buying a portfolio of 17 wind projects in Ireland for $680-million (U.S.), plus the assumption of $280-million in debt.
The projects are the wind assets of Bord Gais Eireann, an agency owned by the Irish government that is selling its energy businesses. Two other companies in a consortium with Brookfield are buying BGE's gas distribution business and its gas and electricity supply arm.
The BGA wind projects generate about 320 megawatts of power, in eight counties in Ireland and Northern Ireland – about 15 per cent of all the wind capacity on the island. Another 125 MW of wind is under construction, and a further 300 MW is planned for future development.
This marks the first foray into Europe for Brookfield, which has almost 200 hydroelectric power plants in Canada, the United States and Brazil, along with three wind farms in Canada and another eight in the United States.
Brookfield chief executive officer Richard Legault said the company sees Ireland as an entry point for further acquisitions in Europe. In an interview, he said the company has considered diversifying for some time, and looked as far afield as Australia and India.
But it concluded that Europe was the right place to go because of the region's support programs for renewables, and because assets there are less expensive to purchase after the economic downturn. "There is less competition for each opportunity," he said.
Brookfield is most likely to look for further acquisitions in the northern parts of Europe, such as Germany, Britain and France. It will most likely start with wind, but may also try to purchase some hydroelectric projects, Mr. Legault said. "There is significant potential for hydro," he said, although the fact that most hydroelectric assets are currently held by government entities "could make it challenging."
Very few renewable energy companies in Canada operate on multiple continents. Montreal-based Boralex Inc. has solar and wind operations in France in addition to its wind and hydro plants in North America. Northland Power Inc. of Toronto has a 60-per-cent stake in the huge Gemini offshore wind farm planned for the North Sea, off the coast of the Netherlands. And Vancouver-based Alterra Power Corp. owns geothermal plants in Iceland, as well as hydro, wind and geothermal operations in Canada and the United States.
Juan Plessis, an analyst at Canaccord Genuity in Vancouver, said Brookfield has talked about expanding in Europe for a couple of years, so it's not a surprise that it has now followed through. It also has experience in foreign markets such as the United States and Brazil, he noted.
The Irish assets provide a strong foothold, and will give Brookfield personnel who are familiar with the European market, Mr. Plessis said. With Europe still intent on shifting further to renewable sources of power and away from coal and nuclear, there are definitely expansion opportunities in other countries. "I like that they are taking this step in a relatively small fashion," he added.
From a financial basis, Brookfield easily has the wherewithal to make an acquisition of this size, Mr. Plessis said, and the risks are low because most of the electricity output from the Irish wind farms is sold under long-term government contracts.
Brookfield said it will finance the Irish transaction with the help of its institutional partners such as pension funds and sovereign funds; about 40 per cent of the money will come out of its own pocket.