Great River Hydro’s Moore station in New Hampshire.Supplied
Hydro-Québec has struck a deal to buy Great River Hydro LLC and its hydropower generating stations in New England for about US$2-billion as the utility extends its footprint south of the border amid growing demand for renewable energy.
Canada’s biggest electricity producer said Wednesday it is buying 13 generating stations and three reservoirs with a total installed capacity of 589 megawatts (MW) located along the Connecticut and Deerfield rivers in the states of Vermont, New Hampshire and Massachusetts. The purchase, from Boston-based private equity firm ArcLight Capital Partners, is the utility’s biggest acquisition in its 78-year history.
Montreal-based Hydro-Québec, which generates the bulk of its power through a network of dams and hydroelectric stations in the province’s north, is trying to position itself as a key player in the efforts by U.S. states to transition away from fossil fuels.
Buying Great River Hydro will bolster the utility’s generating capability while adding a new stable of customers in what is already its biggest export market. Hydro-Québec has been selling electricity into New England since the 1980s and the region makes up about half the company’s exports.
“We want to increase our presence and our activities in neighbouring markets,” Hydro-Québec chief executive Sophie Brochu said on Montreal’s 98.5 FM Wednesday morning. “The northeastern U.S. is our backyard and ... it’s very rare that a renewable energy production asset of this size and quality becomes available.”
The company last year won a multibillion-dollar contract to deliver power to the city of New York. It is also working on a project that would carry Quebec hydropower via Maine to Massachusetts, but that remains in legal limbo after Maine voters rejected the project last year in a referendum.
Great River Hydro is based in Westborough, Mass., and produces about 1.6 terawatt hours of electricity every year, enough to power 213,000 homes. The company also holds about 30,000 acres of mostly conserved land that Hydro-Québec would take over if the deal is finalized – land that could be used in part to develop more renewable power like wind or solar.
The deal will generate additional revenue for Hydro-Québec as of the first year, the utility said. It said it will operate Great River as a distinct entity, keeping its current work force of 100 employees and their working conditions intact.
For ArcLight, selling now means a big potential return. The company bought the generating stations from TransCanada Corp. in 2017 for just over US$1-billion. “Together with management, ArcLight successfully transitioned Great River Hydro from a high-quality portfolio of assets to a standalone platform positioned for further growth,” ArcLight managing partner Dan Revers said in a statement.
Hydro-Québec spokesperson Lynn St-Laurent said the electricity market has changed significantly over the last five years. She said a lot more renewable energy production, like wind power, has been added, and their intermittent nature has boosted prices for the kind of backup power capacity Hydro-Québec and Great River can deliver.
Hydro-Québec is assuming about US$750-million of debt held by Great River as part of the transaction price and that debt will remain in place. It expects to finance the rest through general funds, including cash on hand.
Under previous chief executive Eric Martel, Hydro-Québec in 2016 vowed to expand internationally in a bid to counter what it predicted would be slowing growth from domestic sales. At the time, the company aimed to generate one-fifth of its profit from mergers and acquisitions investments by 2030.
Deals did not materialize the way Hydro-Québec hoped, partly because the utility found itself competing with pension funds and other global investors that were willing to pay much more for energy assets. In the end, Hydro-Québec struck only one major M&A-type investment agreement under Mr. Martel’s tenure and it was not an international one. That was a $661-million private placement in Longueuil, Que.-based Innergex Renewable Energy Inc.
Last summer, Innergex and Hydro-Québec jointly purchased two smaller hydroelectric generating stations in New York state for US$310-million. Several months later, Hydro-Québec struck a deal to buy electricity from Brookfield Renewable Partners LP unit Evolugen under a 40-year contract as the Quebec utility shores up its power supplies. Hydro-Québec said it would purchase the entire output of Evolugen’s Lièvre hydroelectric assets in Quebec, which have a capacity of 263 MW.
Under the pact, Hydro-Québec will also obtain Evolugen’s power transmission rights to the U.S. Northeast, allowing the utility to export more energy to New England.