Canadian pension fund PSP to buy largest stake in Pattern Energy by Karl-Erik Stromsta , Recharge News, 19 June 2017
Sector Pension Investment Board will acquire nearly 10% of the shares of
Pattern Energy, becoming the wind-focused US yieldco’s largest shareholder, in
a deal Pattern says underscores growing investor confidence in the renewables
Investments, among Canada’s largest pension investment managers, will acquire
8.7 million shares of Pattern Energy from its privately held sponsor company,
worth $206m at their closing price of $23.69 on Friday.
will also co-invest $500m in projects being acquired by Pattern Energy,
including stakes in the recently completed Meikle wind farm in British Columbia
and the Mont Sainte-Marguerite project in Quebec due for completion later this
PSP is part of
a growing body of Canadian investment funds and energy companies moving
aggressively into renewables. San Francisco-based Pattern, whose shares are
listed in both the US and Canada, is a sizeable player in the wind markets of
was the 11 th largest owner of US
wind capacity at the end of 2016, with 1.8GW, according to data compiled by the
American Wind Energy Association. The yieldco owns 2.6GW of renewables capacity
overall, and has targeted 5GW by 2020.
relationship grants us access to a portfolio of projects and a source of new
assets in renewables, and we believe it will provide good and stable returns
for our contributors and beneficiaries,” says Patrick Samson, PSP Investment’s
managing director for infrastructure investments, noting that renewables are
“the fastest growing market of power generation”.
Pattern Energy rose 3.4% in early trading Monday on the news, to $24.50, their
highest point since mid-2015.
For much of the
past two years, Pattern's shares have traded below their 2013 initial public
offering price of $22, amid persistent investor concerns about renewables
yieldcos in the wake of SunEdison's bankruptcy.
But the tides
have been turning for yieldcos this year, with Pattern’s shares up more than
28% in 2017.
invests in Pattern Development 2.0
investment comes as part of a flurry of deals and reshuffling within the
Pattern family of companies, which includes the publicly listed yieldco Pattern
Energy and two privately held developers – Pattern Development 1.0 and Pattern
Development 2.0, which are owned by US private-equity firm Riverstone Holdings.
Late last year
a single development company – Pattern Development, known as Pattern
Energy's "sponsor" – was split into two companies: Pattern
Development 1.0 and Pattern Development 2.0.
Development 2.0 owns the bulk of the early- and mid-stage renewables projects
in the development portfolio, while Pattern Development 1.0 has held the controlling
stake in Pattern Energy and most of the late-stage projects expected to be sold
– or “dropped down” – to the yieldco.
behind separating Pattern Development 2.0 into its own early-stage development
company was that it would be easier to raise capital for new projects and
expand the development pipeline.
creation of the separate development companies, Pattern Energy has signaled the
likelihood that it would invest directly in Pattern Development 2.0.
Pattern Energy confirmed it will make an “initial” $60m investment into Pattern
Development 2.0 – giving it a 20% stake – with an option to invest up to $300m
and acquire the entire company. In doing so, Pattern would tie together the
early-stage development and project operations activities into a single
As a result of
the transaction, PSP will indirectly become an owner of Pattern Development 2.0
through its stake in Pattern Energy.
Pattern Development 1.0 will "gradually wind up its business",
selling its remaining projects to Pattern Energy over time, the company says.
Energy’s investment in the development business allows us to improve our
margins and secure access to a tremendous pipeline of new projects,” says chief
executive Mike Garland, chief executive of both Pattern Energy and the
Energy’s direct investment in Pattern Development 2.0 comes alongside a $724m
package of long-term capital commitments announced for the developer from an
entity managed by Riverstone, which includes money from pension, sovereign
wealth, endowments, family office, and investment funds.
Development 2.0 says it has expanded its project pipeline to 10GW, encompassing
wind, solar, transmission and storage projects in the US, Canada and Mexico.