TransAlta Renewables, part of the TransAlta Corporation, plans to invest $540m in three Canadian projects owned by TransAlta Corporation.
The three projects consist of a wind farm, TransAlta's Sarnia Cogeneration Plant and the Ragged Chute hydro facility which consists of approximately 611 MW of highly contracted power generation assets located in Ontario and Quebec. This investment will add to its existing ownership of 16 wind and 1 hydroelectric power generation facilities. The company also holds economic interests in TransAlta’s Wyoming Wind Farm and Australian Assets.
As part of the acquisition, TransAlta will also receive securities, which will track the net distributable profits of the Portfolio. TransAlta Renewables will issue $175 million in common shares to TransAlta and $215 million in convertible unsecured subordinated debentures.
The offering should close about December 2, 2015, while the transaction should officially close in January 2016 if all goes ahead.
CIBC Capital Markets and TD Securities Inc. are joint book runners for the sale. TransAlta is entering into a $150m bought deal with the two firms to help finance the cash part of the investment for the sale of 15,385,000 subscription receipts at a price of $9.75per Subscription Receipt. Once shareholders have approved the transaction, each holder of subscription receipts will automatically receive one common share in the capital of the company for each subscription receipt.
On top of this, TransAlta Renewables also announced that they had entered into another deal with Alberta Investment Management Corporation (AIMCo) whereby they would sell of $200m of their shares to AIMCo. This deal should close by the end of the month.
AIMCo is an investment management company with more than $85b of assets under management. It is also responsible for the investments of 27 pension, endowment and government funds in Alberta.
"This Transaction represents the execution of our second acquisition of assets from TransAlta in 2015 and is in-line with our strategy of acquiring high quality assets with stable cash flows at accretive valuations," said Brett Gellner, President of TransAlta Renewables. "The enhanced cash flow per share from this Transaction supports a dividend increase of $0.04 per share to $0.88 per share annually upon completion of the Transaction, which is in addition to the further dividend increase of approximately 6% to 7% we expect when South Hedland is fully commissioned in mid-2017.”
Upon completion of the AIMCo investment TransAlta will own approximately 65% of the outstanding shares of TransAlta Renewables. TransAlta's interest will be reduced to approximately 64% if the over-allotment option is exercised in full.