Atlantic Power Corp. (NYSE: AT) (TSX: ATP) said Nov. 16 that it has agreed with Veolia Environnement SA to acquire all of the outstanding shares of Ridgeline Energy Holdings Inc., currently a wholly-owned subsidiary of Eolfi SA, a European renewable power development company majority owned by Veolia.
“The Acquisition will add interests in three wind projects totaling 150 net MW, two in operation and one completing construction by year end,” said Barry Welch, President and CEO of Atlantic Power. “These projects have 20-year and 25-year power purchase agreements (‘PPAs’) with investment grade off-takers, and are expected to generate $9 to $12 million of operating cash flow per year starting in 2013. In addition, the Company will acquire Ridgeline’s development pipeline, which includes approximately 1,000 MW of solar and wind projects. The Ridgeline team will add substantial experience in renewable project acquisition, development, construction and asset management to the Company. The Ridgeline acquisition strengthens our ability to execute development stage projects which is one of our target growth areas. It also complements our other growth area, operating project acquisitions, as exemplified by the Capital Power Income LP transaction completed a year ago. In combination with cash flows from our existing diversified portfolio of assets, these growth initiatives will continue to support our dividend.”
Ridgeline Energy has a wind and solar development pipeline of more than 20 projects in the U.S. totaling about 1,000 MW. Planned development expenditures in 2013 are focused on near-term opportunities where PPAs can be obtained quickly, including solar sites where investment tax credits remain available and construction could be completed as early as the first quarter of 2014, Atlantic Power noted.
Wind development viability will depend on continued support from renewable portfolio standards in more than 30 states and a possible extension of production tax credits, said the company. While the amount of development expenditures could vary significantly depending on ongoing progress with the pipeline projects, Atlantic Power’s current estimate is that the net impact of those investments along with cash flow from the operating projects will be approximately neutral in 2013 to 2015, and significantly accretive thereafter.
This acquisition will increase Atlantic Power’s ownership interest in the Rockland project to a 50% managing member interest from 30%, and add a 12.5% interest in Ridgeline’s 125-MW Goshen North project. As part of the acquisition of Ridgeline, Atlantic Power will also acquire 100% of Meadow Creek, a 120-MW wind project currently under construction in Idaho, with a commercial operation date (COD) expected in December 2012.
As part of the acquisition, Atlantic Power said it will integrate Ridgeline’s team of over 30 employees, which has a broad set of competencies essential for the successful identification, resource assessment, development, construction and operation of large-scale renewable power projects. Ridgeline was responsible for developing Idaho’s first utility-scale wind project and has successfully developed three other wind projects totaling 325 MW, including Rockland and Goshen North.
The total cost of the acquisition will be about $88m, subject to working capital adjustments. Atlantic Power said it currently intends to fund the acquisition from the net proceeds of a planned issuance of convertible debt. This deal is subject to approval from the Federal Energy Regulatory Commission as well as other regulatory agencies. In addition to customary closing conditions, the acquisition closing is subject to Atlantic Power obtaining financing and the Meadow Creek project achieving certain commercial operating milestones. The acquisition is expected to close on or before Dec. 31, 2012.
Atlantic Power is a leading power generation and infrastructure company with a diversified portfolio of assets in the U.S. and Canada. The net generating capacity of the company’s projects is about 2,117 MW, consisting of interests in 30 operational power generation projects across 11 states and 2 provinces and also an 84-mile, 500-kV electric transmission line in California. In addition, the company has a 53-MW biomass project under construction in Georgia and an approximately 300-MW wind project under construction in Oklahoma, both expected to achieve commercial operation later this year. Atlantic Power also owns a majority interest in Rollcast Energy, a biomass power plant developer in Charlotte, N.C. Atlantic Power is incorporated in British Columbia, headquartered in Boston and has offices in Chicago, Toronto, Vancouver and San Diego.