Brookfield Asset Management Inc., one of the biggest owners of hydropower, is about to make its first major move into solar power.
Canada’s largest alternative asset manager has about 10,700 megawatts of clean-energy plants around the world, including 217 hydropower sites — and just a half-megawatt of solar power that’s enough to power 82 U.S. homes.
Brookfield agreed this month to acquire all of TerraForm Global Inc. and a controlling stake in TerraForm Power Inc., bankrupt SunEdison Inc.’s two yieldcos that would come with almost 4 gigawatts of wind and solar. That marks a strategic shift, a sign that solar is now a cost-effective source of power, according to Sachin Shah, chief executive officer of Brookfield Renewable Partners.
“We knew at some point, the world of wind and solar would turn,” Shah said in an interview Monday at Bloomberg’s headquarters in New York. “For the first time, we saw something that lent itself to investing.”
Brookfield waited out solar power’s star turn with investors before pouncing on the TerraForms, with two deals that value the yieldcos’ combined equity at $2.49 billion, according to filings. The company is already one of the world’s largest publicly-traded pure-play renewables players, with about $25 billion of power assets.
Unlike solar and wind, hydropower produces round-the-clock power and usually requires minimal maintenance. Until recently, few of Brookfield’s rivals targeted small hydro assets.
“We didn’t care that it wasn’t very exciting,” Shah said. “Hydro provides high cash margins and good returns.”
The company has about 1.6 gigawatts of wind power, more than half in North America. It moved into wind earlier because the technology matured faster than solar. Now, solar is competitive against other power sources, and sometimes is the cheapest source of power.
Expanding Footprint
TerraForm Power owns almost 3,000 megawatts of wind and solar in OECD countries including the U.S. TerraForm Global, meanwhile, owns 919 megawatts of such assets in Brazil, India, China, South Africa, Thailand, Malaysia and Uruguay.
The deals would grow Brookfield’s clean clean-energy portfolio 37 percent, to almost 14.7 gigawatts. And they would expand its footprint beyond the Americas and western Europe to China and South Africa — and India, which had been a market that Brookfield had long studied.
“They were looking for the right entry point,” Ann Dai, a New York-based analyst at Keefe, Bruyette & Woods Inc., said in an interview Monday. “It wasn’t available for them prior to this deal.”
Solar’s struggles since SunEdison’s 2016 collapse suggest investors are now viewing the industry as a basic infrastructure play.
“These are truly infrastructure assets,” Shah said. “When have utilities ever been sexy?”