Canada’s Boralex signs USD $216M deal for controlling interests in seven solar plants located in the U.S

Quebec — Boralex Inc. is announced that Boralex US Solar CIA LLC, a wholly-owned subsidiary of the Corporation, has entered into binding agreements with Centaurus Renewable Energy LLC (“CRE”) and certain other investors to acquire their controlling interests in seven solar plants, located in the United States, for a purchase price of $CA283 million (US$216.5 million).

CRE and other investors will retain certain non-controlling interests in the assets resulting in total net installed capacity to Boralex of 118 MWac.

The operating solar plants totalling 209 MWac of gross installed capacity, located in the City of Five Points, the City of Huron, Kettleman City, the City of Lancaster and the City of Newman, California; Chambers County, Alabama; and Indianapolis, Indiana, were commissioned between 2014 and 2017. The assets benefit from long-term Power Purchase Agreements (“PPAs”) with the Regents of the University of California, Alabama Power Company, PG&E, Southern California Edison, City of Palo Alto, and Indianapolis Power & Light, expiring between 2029 and 2046 with a remaining weighted average of more than 21.5 years on the PPAs.

Closing of the transaction is currently anticipated to occur on or before December 31, 2020, subject to the satisfaction of usual closing conditions, including receipt of FERC approval for the Lafayette and Five Points assets. The PPA of the Lafayette asset contains a right of first refusal in favor of Alabama Power, pursuant to which the CRE interest in Lafayette can be acquired by Alabama Power within sixty days of being notified of a third-party binding offer by matching the proposed purchase price. Boralex does not know whether Alabama Power intends to exercise such right or not. The acquisition of the interest in this specific asset is therefore subject to the waiver or expiry of this right.

“The acquisition of Centaurus’ interest in seven solar plants will mark Boralex’s entry into the California, Alabama, and Indiana markets. The acquisition of interests in these high-quality assets secured by long term contracts is perfectly aligned with the growth and diversification orientations of our 2023 strategic plan. We are extremely pleased with the stable stream of cash flow and strong growth potential this transaction is bringing to Boralex. This transaction will be accretive to discretionary cash flow (AFFO) per share in the first year and will be a springboard to further development in these new regional energy markets for Boralex, especially California” said Patrick Lemaire, President and Chief Executive Officer of Boralex.

Highlights
Acquisition price: CA$283M (US$216.5M)
Debt financing covering about 75% of the acquisition price to be put in place
Adds 118 MWac net power to Boralex’s installed capacity
Long term contracts with a remaining weighted average duration of more than 21.5 years
Expected combined EBITDA (US GAAP) contribution: around CA$20M (US$15M)
Accretive to discretionary cash flow (AFFO) per share in the first year with expected AFFO of about CA$4M (US$3M) or $0.03 per share, a 3 % increase over the consolidated amount generated by Boralex in 2019

“We are excited to announce these agreements to acquire interests in this portfolio of solar plants, which offers a good seasonal complement to our wind and hydro assets as well as predictable cash flows. Upon closing, Boralex will become the new managing member of the sites and, over time, we will implement various strategies expected to increase the results for Boralex ” added Patrick Decostre, Vice President and Chief Operating Officer of the corporation.

Expected Synergies
Assets optimization through improved operating and maintenance work
Accretive retrofits and repowering potential given high PPA prices, PPA flexibility and long remaining PPA terms
Springboard to our participation in the growth of these new regional energy markets, with a focus on California where Boralex sees additional potential development which could be done, among others, with the resources to be deployed for the assets to be acquired
Potential addition of storage in California
Operational experience improving the competitiveness of greenfield development

Description of the Assets

The assets are comprised of the following:

Lafayette solar plant (79 MWac) (“Lafayette”) is located in Chambers County, AL and the sponsor equity is currently owned by CRE (59%) affiliates of Global Atlantic Financial Group (40%) and a minor investor (1%). Lafayette was commissioned in December 2017 and has a PPA in place with Alabama Power Company, expiring in December 2045, and has third-party tax equity;

Five Points solar plant (60 MWac) (“Five Points”) is located in Five Points, CA and the sponsor equity is currently owned by CRE (50%) and affiliates of Global Atlantic Financial Group (50%). Five Points was commissioned in October 2016 and has a PPA in place with the Regents of University of California, expiring in October 2041, and has third-party tax equity;

Kettleman solar plant (20 MWac) (“Kettleman”) is located in Kettleman City, CA and is currently owned by CRE (50%) and affiliates of Global Atlantic Financial Group (50%). Kettleman was commissioned in August 2015 and has a PPA in place with the City of Palo Alto, expiring in August 2040, and no longer has any third-party tax equity;

Frontier solar plant (20 MWac) (“Frontier”) is located in Newman, CA and the sponsor equity is currently owned by CRE (50%) and affiliates of Global Atlantic Financial Group (50%). Frontier was commissioned in July 2016 and has a PPA in place with the City of Palo Alto, expiring in July 2046 and has third-party tax equity;

Westlands solar plant (18 MWac) (“Westland”) is located in Huron, CA and is currently owned by CRE (65.5%) and affiliates of Global Atlantic Financial Group (32.5%) and a minority investor (2%). Boralex will acquire 50% of the Total Class B interests leaving CRE with 15.5%. Westland was commissioned in January 2014 and has a PPA in place with PG&E, expiring in February 2034, and does not have any third-party tax equity;

Lancaster solar plant (3 MWac) (“Lancaster”) is located in Lancaster, CA and is currently owned by CRE (100%). Lancaster was commissioned in December 2014 and has two PPAs in place with Southern California Edison, expiring in December 2034 and does not have any third-party tax equity; and

IMS solar plant (9 MWac) (“IMS”) is located in Indianapolis, IN and is currently owned by CRE (100%). IMS was commissioned in July 2014 and has a PPA in place with Indianapolis Power & Light, expiring in July 2029, and no longer has any third-party tax equity.