Great Lakes Hydro Income Fund will pay C$945 million ($815 million) for its biggest shareholder's Canadian power operations in a deal aimed at positioning itself for a conversion into a corporation by 2011, it said on Monday.
Under the deal, Great Lakes will buy 15 hydroelectric facilities and one wind farm, which is under development, from Brookfield Asset Management Inc, and issue C$380 million subscription receipts to help fund the transaction.
Brookfield will acquire half of the newly issued units, boosting its capital invested in the trust to C$1 billion and maintaining its ownership at 50.01 percent.
Units of Gatineau, Quebec-based Great Lakes were up 16 Canadian cents at C$16.09 on the Toronto Stock Exchange before being halted for the announcement. Brookfield shares fell 36 Canadian cents to C$19.41.
After the transaction, Great Lakes will be renamed Brookfield Renewable Power Fund and will be positioned to convert to a corporation in January 2011, the company said.
That is when the Canadian government is set to remove the tax advantages that had fostered the creation income trusts through October 2006.
The restructuring will allow the operation to maintain its C$1.25 per unit annual distribution by boosting cash flow to about C$100 million, Great Lakes said.
It will expand its assets to 42 hydro facilities and two wind farms with total capacity of 1,700 megawatts. The new generation stations are located in Quebec and Ontario.
It plans to fund the deal with a C$185 million bought-deal financing of receipts, and a C$195 million private placement of receipts.
Great Lakes said it will also issue a C$200 million senior unsecured note and 25.6 million trust units to Brookfield at a value equal to the weighted average receipt offering price.
($1=$1.16 Canadian) (Reporting by Jeffrey Jones; editing by Rob Wilson)