TransAlta Renewables Announces the Acquisition of 303 MW Portfolio including 274 MW of Wind from TransAlta Corporation

Rhea-AI Summary

TransAlta Renewables has entered agreements to acquire three renewable energy assets from TransAlta for $439 million. The acquisition includes a 100% interest in the Windrise wind project in Alberta, a 49% economic interest in the Skookumchuck wind facility in Washington State, and a 100% economic interest in the Ada cogeneration facility in Michigan. This acquisition is expected to enhance the company's position in the renewables sector and contribute approximately $45 million in annual EBITDA, extending the average contracted life of its fleet from 10 to 12 years.

Positive

• Acquisition adds 303 MW to installed capacity.
• Estimated annual EBITDA contribution of approximately $45 million.
• Long-term contracted portfolio with an average remaining contract life of 19 years.

Negative

• Acquisition value of $439 million may strain financial resources.
• Construction risks at Windrise including cost overruns and delays.

CALGARY, AB, Dec. 23, 2020 /PRNewswire/ - TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX: RNW) announced that it had entered into definitive agreements for the acquisition of three assets from TransAlta Corporation ("TransAlta") (TSX: TA) consisting of:

• a 100 per cent direct interest in the 207 MW Windrise wind project located in the Municipal District of Willow Creek, Alberta;
• a 49 per cent economic interest in the 137 MW Skookumchuck wind facility in operation located across Thurston and Lewis Counties in Washington State; and
• a 100 per cent economic interest in the 29 MW Ada cogeneration facility in operation located in Ada, Michigan.

"We are pleased to announce our acquisition of Windrise and economic interests in the Skookumchuck wind and Ada cogeneration assets.  This enhances our position in the renewables sector in both Canada and the US, launches on-site generation in the US and further extends the contracted duration of our cashflows for ongoing distributions to our shareholders as we continue to target an 80 to 85 per cent payout ratio for our common share dividends," said John Kousinioris, President of TransAlta Renewables.

The total acquisition price for the portfolio of assets is $439 million, which includes the remaining construction costs for the Windrise wind project. The Company will fund the cash consideration for the acquisition and remaining construction costs with the proceeds from the South Hedland project financing completed earlier this year.  The transaction will close in separate tranches early in 2021 subject to the satisfaction of certain closing conditions; however, the economic benefit of the transaction will be deemed effective as at January 1, 2021.

Investment Highlights

• Total acquisition value of $359 million payable as of December 31, 2020 along with the obligation to fund the balance of remaining construction costs for the Windrise wind project;
• Adds 303 MW of net power to installed capacity;
• Long-term contracted portfolio with an average remaining contract life of 19 years with high investment-grade counterparties;
• Increases the average contracted life of the fleet from 10 years to 12 years; and
• Annual EBITDA contribution of the assets to the Company is estimated at approximately $45 million, inclusive of production tax credits.

All figures quoted are in Canadian dollars.

Portfolio Overview

Windrise is a 207 MW wind project under construction located in Municipal District of Willow Creek, Alberta.  The wind facility has an executed Renewable Support Agreement with the Alberta Electric System Operator to provide wind electricity to the province for a 20-year term.  The project is on track to reach commercial operation during the second half of 2021. 

Skookumchuck is a 137 MW wind facility in operation located across Thurston and Lewis Counties in Washington State. The wind facility began commercial operations on November 7, 2020 and has a 20-year power purchase agreement with Puget Sound Energy Inc.  TransAlta Renewables will acquire an economic interest in the 49 per cent ownership of TransAlta Corporation (net of tax equity) through a tracking share structure.  Income distributions to the Company will be net of cash and tax attributes provided to the tax equity investor. 

Ada is a 29 MW cogeneration facility in operation located in Ada, Michigan. The cogeneration facility began commercial operations in 1991 and has a power purchase agreement and steam sale agreement for a remaining five-year period with Consumers Energy and Amway.  TransAlta Renewables will acquire the economic interest from TransAlta Corporation in the asset through a tracking share structure.

About TransAlta Renewables Inc.
TransAlta Renewables is among the largest of any publicly traded renewable independent power producers ("IPP") in Canada. Our asset platform and economic interests are diversified in terms of geography, generation and counterparties and consist of interests in 23 wind facilities, 13 hydroelectric facilities, seven natural gas generation facilities, one solar facility, one natural gas pipeline, and one battery storage project, representing an ownership interest of 2,537 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of Wyoming, Massachusetts, Minnesota and the State of Western Australia. Our objectives are to (i) provide stable, consistent returns for investors through the ownership of, and investment in, highly contracted renewable and natural gas power generation and other infrastructure assets that provide stable cash flow primarily through long-term contracts with strong counterparties; (ii) pursue and capitalize on strategic growth opportunities in the renewable and natural gas power generation and other infrastructure sectors; (iii) maintain diversity in terms of geography, generation and counterparties; and (iv) pay out 80 to 85 per cent of cash available for distribution to the shareholders of the Company on an annual basis.

Cautionary Statement Regarding Forward-Looking Information
This news release contains forward-looking statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "propose", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information relating to: the Company's acquisition of the Windrise wind project and economic interests in the Ada cogeneration facility and the 49% interest in the Skookumchuck facility; the timing of closing the acquisition and satisfaction of closing conditions; the benefits of the transaction, including the extension of the contracted duration of cashflows; and the annual EBITDA contribution to TransAlta Renewables' results. These forward-looking statements are based on a number of assumptions considered by the Company to be reasonable as of the date of this news release, and are subject to a number of risks and uncertainties that may cause actual performance, events or results to differ materially from those contemplated by the forward-looking statements, which include: construction risks at Windrise, including cost overruns or project delays, including those that may be caused by force majeure or related to COVID-19; competitive factors in the renewable power industry; technology risks; changes in economic and market conditions; changes in laws and regulations; and other risks and uncertainties discussed in the Company's Annual Information Form and Management's Discussion and Analysis, filed under the Company's profile with the Canadian securities regulators on www.sedar.com. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this news release. The Company undertakes no obligation to update or revise any forward-looking information except as required by law.

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SOURCE TransAlta Renewables Inc

FAQ

What is the total value of the acquisition by TransAlta Renewables from TransAlta?

The total value of the acquisition is $439 million.

What assets are included in the acquisition by TransAlta Renewables?

The acquisition includes the Windrise wind project, an economic interest in the Skookumchuck wind facility, and the Ada cogeneration facility.

When is the acquisition expected to close?

The transaction will close in separate tranches early in 2021, subject to certain closing conditions.

How will the acquisition impact TransAlta Renewables' EBITDA?

The acquisition is expected to contribute approximately $45 million annually to TransAlta Renewables' EBITDA.

What is the significance of the Windrise wind project for TransAlta Renewables?

Windrise will enhance TransAlta Renewables' presence in the renewables sector and is expected to begin commercial operations in the second half of 2021.