The renewable power arm of Brookfield Asset Management Inc. BAM-T reaped nearly US$1-billion in proceeds by selling stakes in three assets that produce wind and hydro power over the past week, reflecting a more stable environment for interest rates that has paved the way for energy companies to trade hands more often.
The Toronto-based asset manager said Tuesday that it has a deal to sell its 25-per-cent stake in First Hydro Co., a British-based energy generation and facility, to the Quebec-based pension fund Caisse de dépôt et placement du Québec. The rest of the company is owned by French utility Engie SA.
Brookfield has also agreed to sell Saeta Yield, which develops and operates wind and solar power in Spain and Portugal, to Abu Dhabi Future Energy Company PJSC – Masdar, a renewable energy company based in the United Arab Emirates. The sale gives Saeta an implied enterprise value of US$1.4-billion, including debt.
And in the third transaction, the company sold a 25-per-cent stake in Shepherds Flat, a 338-turbine wind farm in Oregon, to alternative asset manager GCM Grosvenor. Brookfield will stay on as an owner, and managing director Jeh Vevaina said the company still sees ways to “further enhance value at Shepherds Flat,” working with GCM.
The specific financial terms of the three transactions were not disclosed. But when combined, they reaped more than US$2-billion in equity proceeds to Brookfield and its investment partners at a 24-per-cent internal rate of return, of which nearly US$1-billion flows to Brookfield’s renewable energy business.
“We’ve significantly enhanced our capital recycling activities” and had record proceeds from asset sales so far this year, said Connor Teskey, chief executive officer of Brookfield’s renewable power and transition unit, at an event for investors in Toronto on Tuesday.
“There is a very robust bid” for good assets that generate cash, he said.
Like other asset managers, Brookfield typically sells some of the assets that it has revamped and owned for a longer period of time, freeing up capital to invest in new transactions. But Brookfield held off selling most of the assets that fit that profile in 2023 as a result of high interest rates and uncertainty about future borrowing costs, which put a damper on deal making.
Earlier this year, when borrowing costs steadied and central banks started to cut benchmark rates, Brookfield launched the three sale processes that culminated this week, as interest from buyers came back.
Brookfield has also been an active buyer of renewable power assets. The signature transaction this year was a US$6.1-billion deal with co-investor Temasek Holdings Ltd., a Singaporean state-owned investment firm, to acquire 53 per cent of French renewable energy provider Neoen and take the company private. The acquisition is expected to close in the first half of next year.
Brookfield is betting that there will be massive demand for clean energy at a time when large corporate entities feel pressure to strip carbon out of their operations. Mr. Teskey said that the voracious demand for power from the largest technology companies as they build out artificial intelligence and cloud computing data centres, combined with the falling cost of renewable energy, are expected to be major drivers of growth.
“The sourcing of power is the bottleneck on the critical path to growth for the largest and fastest and fastest-growing companies around the world: The large tech companies,” he said. “In order to get your data centres permitted and built, you need to bring a power solution.”