Brookfield Asset Management Inc. is close to purchasing Renova Energia SA’s stake in TerraForm Global Inc., bringing it nearer its goal of buying the renewable energy yieldco and opening a path to take majority control of Renova, according to people familiar with the transaction.
The $107 million transaction will also resolve a legal dispute between Renova and TerraForm Global, after Renova accused it of fraud, according to the people, who asked not to be identified because the matter is not public. Spokesmen for Brookfield, Renova and TerraForm Global declined to comment.
Brookfield is expanding its energy operations by pushing into solar power and pursuing assets in emerging markets including China and India. It’s buying TerraForm Global, along with control of TerraForm Power Inc., in a move that would expand its clean-energy portfolio 37 percent. The two sister yieldcos were formed by the renewables giant SunEdison Inc., and the sale is part of the complicated unwinding of last year’s biggest U.S. bankruptcy. Renova also was dragged down by SunEdison’s failure, and is in the process of restructuring its operations and selling assets.
Once the second-largest renewable company in Brazil, Renova owns 20 million shares, an 18 percent stake, in TerraForm Global. The deal should close in the next few days, according to the people.
When that’s complete, Brookfield expects to move forward with another transaction. Canada’s largest alternative-asset manager plans to acquire a 15.7 percent stake in Renova from the Brazilian utility Light SA, and to inject 800 million reais ($254 million) of fresh capital into the developer. Those moves would give Brookfield control of 51 percent of Renova, according to one of the people.
Renova acquired the TerraForm stake as part of a sweeping 2015 deal with SunEdison, which was then the world’s biggest clean-energy developer. TerraForm Global was formed by SunEdison to purchase wind and solar farms and help support its parent’s global expansion efforts, and agreed to buy projects from Renova. The parent agreed to buy 16 percent of Renova.
Instead, SunEdison overreached and by late 2015 the company was heavily in debt and stumbling. The deal with Renova was never completed and eventually fell apart, leaving the Brazilian company short of capital. Renova has alleged, among other things, that TerraForm Global fraudulently induced it to enter into deals based on misleading and false representations about its, and SunEdison’s, finances.
Renova has since struggled to complete projects and its debt grew to 2.8 billion reais at the end of last year. The company is restructuring its operations, including a deal announced in January to sell its 386.1 megawatt Alto Sertao II wind complex to U.S.-based AES Corp. for 650 million reais. Renova plans to use proceeds from the TerraForm Global sale to trim debt and speed completion of the 437-megawatt Alto Sertao III wind project, set to go into operation this year.
Brookfield announced in March an agreement to acquire all of TerraForm Global and majority control of TerraForm Power. The transactions are expected to close in the second half of this year.