Algonquin to buy Spanish co’s US wind farms for $888 mln

March 12, 2012 by  
Filed under Green Energy News


Fri Mar 9, 2012 1:54pm EST

* Says deal to help gain foothold in US wind energy market

* Acquired portfolio consists of four facilities

* Sees total annual production of 1,644 gigawatt-hours per
yr

* Projects have 20-year contract with seller Spain’s Gamesa

By Bhaswati Mukhopadhyay

March 9 (Reuters) – Algonquin Power and Utilities Corp
will buy a 480 megawatt portfolio of U.S. wind power
projects from Spanish wind turbine maker Gamesa for
$888 million to gain a significant foothold in the country’s
wind energy market.

The United States, once the world’s top wind power market,
ceded the mantle to China in 2010 as a weak economy halted
growth, but business has picked up since the middle of last
year.

The global wind power capacity will more than double to 450
gigawatts in 2015 from 194.4 gigawatts at the end of 2010,
according to a Global Wind Energy Council forecast.

The Canadian company, which operates a portfolio of more
than $1.2 billion of renewable energy assets in North America,
had tripped on some of its earlier buyout attempts.

It had to bow out of the deal to buy a stake in
U.S.-based wind farm operator First Wind Holdings earlier this
year, while late last year Western Wind Energy asked
shareholders to snub Algonquin’s “low-ball” offer.

The company said the portfolio it was buying from Gamesa
consisted of four facilities — Minonk, Senate, Pocahontas
Prairie and Sandy Ridge, in the states of Illinois, Texas, Iowa
and Pennsylvania, respectively.

“If you look at the footprint of these generating stations,
they are located sort of outside our existing footprint and so,
we will get the benefit of further diversification,” Chief
Executive Ian Robertson said on a conference call.

The company expects the total annual production from the
four facilities to be 1,644 gigawatt-hours per year.

“I think this (deal) moves them pretty far down the field in
terms of expanding on power development projects,” analyst Ian
Tharp of CIBC World Markets told Reuters.

“On the face of it, 480 megawatts at $888 million comes out
to $1.85 million a megawatt,” Tharp said. “It looks quite good.”

The acquisition doubles Algonquin’s independent power
generation portfolio, the CEO said.

In a similar U.S.-focused deal last month, independent power
producer Atlantic Power Corp acquired a majority stake
in Canadian Hills LLC, which owns a 300 megawatts windpower
project in Oklahoma.

GAMESA CONTRACT

Algonquin said the four projects have a 20-year contract
with Gamesa to provide operations, warranty and maintenance
services for the wind turbines.

“Only about 73 percent of the revenue from these
projects is under long-term contract, so there is still some
merchant risk — which means you are selling power in the real
time or day-ahead power markets — in these contracts that
Algonquin will need to manage over time,” CIBC’s Tharp said.

The company, which last month entered into a 25-year power
purchase agreement with Saskatchewan Power Corp for its upcoming
177 megawatt Chaplin Wind project, plans to finance its
investment with about 45 percent debt and 55 percent equity.

The projects will be acquired through American Wind
Portfolio Holdings LLC, a newly formed partnership in which
Algonquin holds 51 percent interest and Gamesa 49 percent.

Gamesa said the sale would add $35 million to earnings
before interest and tax (EBIT), excluding operation and
maintenance.

TD Securities was adviser to Algonquin, which reported a 63
percent drop in fourth-quarter adjusted profit late on Thursday.

Algonquin shares fell 15 Canadian cents to C$6.20 on Friday
on the Toronto Stock Exchange.

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