Wind

More

Canadian pension fund PSP to buy largest stake in Pattern Energy

Canada’s Public Sector Pension Investment Board will acquire nearly 10% of the shares of Pattern Energy, becoming the wind-focused US yieldco’s largest shareholder, in a deal Pattern says underscores growing investor confidence in the renewables sector.

PSP Investments, among Canada’s largest pension investment managers, will acquire 8.7 million shares of Pattern Energy from its privately held sponsor company, worth $206m at their closing price of $23.69 on Friday.

PSP Investments will also co-invest $500m in projects being acquired by Pattern Energy, including stakes in the recently completed Meikle wind farm in British Columbia and the Mont Sainte-Marguerite project in Quebec due for completion later this year.

PSP is part of a growing body of Canadian investment funds and energy companies moving aggressively into renewables. San Francisco-based Pattern, whose shares are listed in both the US and Canada, is a sizeable player in the wind markets of both countries.

Canada's renewable powerhouses are on the march

Read more

Pattern Energy was the 11 th largest owner of US wind capacity at the end of 2016, with 1.8GW, according to data compiled by the American Wind Energy Association. The yieldco owns 2.6GW of renewables capacity overall, and has targeted 5GW by 2020.

“This relationship grants us access to a portfolio of projects and a source of new assets in renewables, and we believe it will provide good and stable returns for our contributors and beneficiaries,” says Patrick Samson, PSP Investment’s managing director for infrastructure investments, noting that renewables are “the fastest growing market of power generation”.

Shares of Pattern Energy rose 3.4% in early trading Monday on the news, to $24.50, their highest point since mid-2015.

For much of the past two years, Pattern's shares have traded below their 2013 initial public offering price of $22, amid persistent investor concerns about renewables yieldcos in the wake of SunEdison's bankruptcy.

But the tides have been turning for yieldcos this year, with Pattern’s shares up more than 28% in 2017.

Pattern Energy invests in Pattern Development 2.0

PSP’s investment comes as part of a flurry of deals and reshuffling within the Pattern family of companies, which includes the publicly listed yieldco Pattern Energy and two privately held developers – Pattern Development 1.0 and Pattern Development 2.0, which are owned by US private-equity firm Riverstone Holdings.

Late last year a single development company – Pattern Development, known as Pattern Energy's "sponsor" – was split into two companies: Pattern Development 1.0 and Pattern Development 2.0.

Pattern Development 2.0 owns the bulk of the early- and mid-stage renewables projects in the development portfolio, while Pattern Development 1.0 has held the controlling stake in Pattern Energy and most of the late-stage projects expected to be sold – or “dropped down” – to the yieldco.

The thinking behind separating Pattern Development 2.0 into its own early-stage development company was that it would be easier to raise capital for new projects and expand the development pipeline.

Pattern 'not interested' in offshore wind in current market

Read more

Since the creation of the separate development companies, Pattern Energy has signaled the likelihood that it would invest directly in Pattern Development 2.0.

On Monday Pattern Energy confirmed it will make an “initial” $60m investment into Pattern Development 2.0 – giving it a 20% stake – with an option to invest up to $300m and acquire the entire company. In doing so, Pattern would tie together the early-stage development and project operations activities into a single publicly-listed company.

As a result of the transaction, PSP will indirectly become an owner of Pattern Development 2.0 through its stake in Pattern Energy.

Meanwhile, Pattern Development 1.0 will "gradually wind up its business", selling its remaining projects to Pattern Energy over time, the company says.

“Pattern Energy’s investment in the development business allows us to improve our margins and secure access to a tremendous pipeline of new projects,” says chief executive Mike Garland, chief executive of both Pattern Energy and the development companies.

Pattern Energy’s direct investment in Pattern Development 2.0 comes alongside a $724m package of long-term capital commitments announced for the developer from an entity managed by Riverstone, which includes money from pension, sovereign wealth, endowments, family office, and investment funds.

Pattern Development 2.0 says it has expanded its project pipeline to 10GW, encompassing wind, solar, transmission and storage projects in the US, Canada and Mexico.

Latest