TransCanada to shed renewables
Canada’s pipeline giants are gradually trimming their stakes in renewable energy assets, reversing a bullish trend among midstream operators amid soaring valuations for clean energy developments.
On Thursday, TransCanada Corp. announced it would sell its Cartier wind facilities in Quebec to Innergex Renewable Energy Inc. for $630 million. With the $540-million sale of several solar facilities in October, TransCanada now has disposed of all its wind and solar portfolio.
TransCanada and rival Enbridge Inc. have been reducing their stakes in various renewable energy developments in recent months to reduce their debt load, taking advantage of private equity firms and pension funds rising interest in the sector.
Chris Cox, analyst with Raymond James in Calgary, said the sales reflect rising valuations for renewables as more investors seek out steadier returns.
“Nothing has changed except that the market for assets inherently fluctuate,” he said. “It was a less competitive market — it’s now gotten a lot more competitive.”
Enbridge, for its part, divested a 49-per-cent stake in renewable energy assets in North America and offshore wind farms in Germany for $1.75 billion in May, as part of a joint venture with the Canada Pension Plan Investment Board. Enbridge still retains interest in 2,500MW of zero-emissions power projects, and is one of Canada’s largest investors in clean energy.
One month later, energy infrastructure company AltaGas Ltd. sold its 35-percent interest in three hydro projects in B.C. to a joint venture owned by Axium Infrastructure Inc. and Manulife Financial Corp. for $922 million.
Analysts say Enbridge and TransCanada have been selling billions of dollars of assets after two blockbuster acquisitions in recent years that have swelled their debt profiles. At the same time, the entrance of new investors into the market in recent years has offered lucrative returns for the midstream firms.
“Most recently the trend has been for companies to shed non-core assets” to redeploy capital into more traditional assets such as natural gas pipelines, said Patrick Kenny, analyst at National Bank Financial.
Private equity firms such as Brookfield Energy Partners L.P., a division of Brookfield Asset Management Inc., have flocked toward renewable energy developments, capitalizing on government policies aimed at boosting renewable energy capacity. Brookfield and its partners last year bought a majority stake in TerraForm Power, a solar and wind producer in the U.S., for $656 million.
Cox said heightened interest from private equity players has also hiked competition on governmentled request for proposals (RFPs) for new renewable developments, forcing some firms onto the sidelines.