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Canadian Power - Mergers & Acquisitions

The onset and continuation of the COVID-19 pandemic caused a global disruption to M&A activity in 2020. Unsurprisingly, the Canadian power sector saw a marked decline, with an aggregate domestic deal value of US$1.4 billion in 2020, compared ith US$7.4 billion in 2019.

Inbound investments in Canada by US and non-US foreign parties in 2020 similarly declined from 2019 figures. In 2020, there were no reported foreign inbound investments in the Canadian power sector from US sources and US$82 million in foreign inbound investments from non-US sources. By contrast, in 2019, aggregate deal values for US and non-US foreign investments in Canada were US$1.4 billion and US$1.3 billion, respectively.


Foreign investments in the power sector by Canadian companies also fell from 2019 figures. In 2020, the aggregate deal value was US$9.4 billion, compared with US$13.4 billion in 2019. In 2020, the most significant region for outbound investment by Canadian companies was Asia, followed by the United States, Oceania/Australia, Europe and Latin America, Mexico and the Caribbean.

Domestic Investments by Canadians

Based on deal value, the major players in the 2020 Canadian power M&A market were Hydro-Québec and TransAlta Renewables Inc. (“TransAlta Renewables”).

The largest deal by value was Hydro-Québec’s acquisition of a 19.9% stake in Innergex Renewable Energy Inc. (“Innergex”) for US$497 million. Innergex is a publicly listed Canadian energy company, headquartered in Longueuil, Québec, that develops, acquires, owns and operates renewable power generating facilities. This transaction will enable Innergex to use US$38 million to develop its 200 MW Hillcrest solar project located in Brown County, Ohio. McCarthy Tétrault acted as counsel to Innergex.

Another significant transaction in 2020 was the agreement by TransAlta Renewables to acquire a portfolio of three projects from TransAlta Corporation for US$341 million, including the remaining construction costs for the 207 MW Windrise wind project located in Willow Creek, Alberta. The three projects include the Windrise wind project, a 49% economic interest in the operating 137 MW Skookumchuck wind facility located in Thurston County and Lewis County in Washington State and a 100% economic interest in the operational 29 MW Ada cogeneration facility located in Ada, Michigan. This transaction is expected to close in separate tranches in early 2021.

Other domestic transactions included the following:

CSE Utility Management Inc., 2158815 Ontario Inc. and the management of Cricket Energy Holdings Inc. (“Cricket”) acquired Cricket, a Canadian provider of smart home energy/metering solutions and consulting services, from Fengate Capital Management Ltd. and OZZ Electric Inc. for over US$200 million.

Canadian Utilities Limited agreed to acquire Pioneer Pipeline from Tidewater Midstream and Infrastructure Ltd. and TransAlta Corporation for US$191 million. The Pioneer Pipeline is a natural gas pipeline from the Tidewater Brazeau River facility to the Keephills and Sundance Generating Stations in Alberta.

Boralex Inc. acquired a 49% stake in three wind farms in Québec from Caisse de dépôt et placement du Québec (“CDPQ”) for US$93 million.

Heartland Generation Ltd. (“Heartland”) acquired a 30% stake in the Muskeg River Cogeneration Station, a natural gas–fired station located in Fort McMurray, Alberta, from SaskPower International for US$29 million. Heartland’s acquisition was backed by Energy Capital Partners, LLC.

Foreign Investments by Canadians

Unlike recent years, the most significant region for foreign investment by Canadian companies in the power sector in 2020 was Asia, with an aggregate deal value of US$4.4 billion. The next leading regions for power-sector investment by Canadian businesses were the United States (US$4.2 billion), Oceania/Australia (US$699 million), Europe (US$87 million) and Latin America, Mexico and the Caribbean (US$47 million). As with 2018 and 2019, there were no reported investments by Canadian companies in 2020 in Africa.


By deal value, the leading transactions in 2020 by Canadian companies investing in the power sector in foreign jurisdictions included the following:

CDPQ and Cathay Private Equity Ltd. Co. agreed to acquire a 50% stake in the 605 MW Greater Changhua 1 Offshore Wind Farm from Ørsted A/S for US$2.7 billion. The 605 MW Greater Changhua 1 Offshore Wind Farm is located off the coast of Changhua County, Taiwan.

Brookfield Renewable Energy Partners L.P. (“Brookfield”) acquired the remaining 38% stake in TerraForm Power, Inc., a US-based owner and operator of clean power generation assets, not already owned by Brookfield and its affiliates for US$1.4 billion.

Ontario Teachers’ Pension Plan and Abu Dhabi Investment Authority agreed to acquire an undisclosed stake in Equis Development Pte. Ltd., a Singapore-based developer, constructor, owner and operator of energy and waste infrastructure assets, for US$1.3 billion.

Brookfield agreed to acquire the solar business of Exelon Generation Company, LLC (“Exelon Generation”), a US-based energy company, for US$810 million, in a deal expected to close in the first half of 2021. Exelon Generation’s solar business includes 360 MW of generation in operation or under construction located across 600 sites throughout the United States.

OMERS Administration Corporation acquired a 19.99% stake in TransGrid from Wren House Infrastructure Management Limited for US$699 million. TransGrid is the Australia-based owner and operator of the high voltage electricity transmission network in New South Wales and the Australian Capital Territory, Australia.

Algonquin Power & Utilities Corp. agreed to acquire a 51% stake in four onshore wind facilities in Texas from RWE AG for US$600 million. The four wind facilities are the Stella (201 MW), Cranell (220 MW), Raymond East (200 MW) and Raymond West (240 MW) wind farms.

Other 2020 Power Sector Transactions of Note

NRG Energy, Inc. agreed to acquire Direct Energy (“Direct Energy”) from Centrica PLC (“Centrica”) for US$3.6 billion. The sale includes substantially all of Direct Energy’s North American energy supply, services and trading business, a portion of which is located in Canada. McCarthy Tétrault acted as Canadian counsel to Centrica and Direct Energy. This transaction closed on January 5, 2021.

Blackstone Group L.P. (via Blackstone Energy Partners) acquired NRStor C&I L.P. (“NRStor C&I”), a commercial and industrial energy storage company headquartered in Toronto, Ontario, and now known as Aypa Power from Fengate Capital Management Ltd., Lake Bridge Capital II, Inc. and certain principals. McCarthy Tétrault acted as counsel to NRStor C&I.

Potentia Renewables Inc. (“Potentia”) acquired from Dream Asset Management Corporation an indirect interest in a 67 MW portfolio of operating renewable energy projects consisting of three ground-mount solar projects in Ontario (totaling 43 MW) and four operating wind farms in Nova Scotia (totaling 24 MW). Potentia develops, owns and operates renewable energy assets and is the largest rooftop solar company in Canada. The acquisition was financed by Stonebridge Financial Corporation (“Stonebridge”). McCarthy Tétrault acted as counsel to Stonebridge.

Elemental Energy Inc. (“Elemental Energy”) acquired the 27 MW St. Lawrence Wind Farm, located in St. Lawrence, Newfoundland and Labrador, from EGPNA REP Wind Holdings, LLC. Elemental Energy subsequently amalgamated its two wind farm projects located in Newfoundland, St. Lawrence Wind Corp. and Fermeuse Wind Power Corp., to form Right Coast Wind Corp. McCarthy Tétrault acted as counsel to Elemental Energy.

VINCI Energies S.A. (“VINCI Energies”) acquired Transelec Common Inc. (“Transelec Common”). Transelec Common is a Canadian company that constructs, manages and maintains network infrastructure, including electrical, telephone, signage cable, wind turbine and street lighting networks. McCarthy Tétrault acted as counsel to VINCI Energies.

2021 Trends

Despite a decrease in overall deal activity over the past year, a consistent theme seen across many industries, there is optimism that 2021 could present a return to a more active M&A market in the power space. We have seen an increase in acquisitions by financial sponsors, which we expect to be a continuing trend. The significant amount of dry powder available to financial sponsors, the result of both a very successful fundraising market in recent years as well as the overall decline in available opportunities for capital deployment in 2020, means there could be substantial appetite for acquisitions in 2021.

In addition, power assets and, in particular, renewable power assets, are poised to continue to see growing demand in 2021. A focus on ESG (Environmental, Social and Governance) factors, an increasingly formalized priority for investors, has thrust renewable energy and other “green” industries into a new spotlight. Specific environmental impact investors and the growing focus of diversified asset managers on ESG priorities (take for example, Brookfield Asset Management’s hiring of Mark Carney as Head of ESG and Impact Fund Investing in August 2020) may result in an ever more heated market for quality renewable power assets.



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