Pattern Energy Group Inc (NASDAQ:PEGI) reported that the company has finalized a deal under which Canada Pension Plan Investment Board will buy it. It is an all-cash agreement valued at around $6.1 billion, including debt. Pattern Energy management team will lead the new firm.
Yieldco making comeback
Pattern Energy is the latest yieldco to finalize a buyout offer. In 2018, Capital Dynamics acquired the 8Point3 Energy Partners LP in a deal valued at $977 million. Back in 2017, Brookfield purchased TerraForm Global Inc. for $750 million. Yieldcos emerged over six years ago and since then has turned into prime growth engines for the renewable power segment in the U.S.
They permitted developers to offer solar farms to publicly-listed yieldcos they had and reinvest the funds to build more. Later, SunEdison collapsed after depending on two yieldcos to support a dizzying acquiring binge. Questions came about its governance, and shareholders became uncertain whether the yieldcos could pay rising dividends.
Pattern Energy has 28 solar and wind projects in the U.S., Japan and Canada, and development projects in Mexico. Separately, CPPIB has said that it will acquire Pattern’s development arm at an unrevealed price. Pattern Energy looks attractive because it offers scale for CPPIB and an extensive portfolio that fits CPPIB’s requirements.
Pattern CEO Michael Garland, who managed the firm for over a decade, will head the combined entity that includes both Pattern Energy Group Holdings 2 LP and Pattern Energy. The transaction is anticipated to close by the second quarter. The company will continue disbursing quarterly dividends until the agreement closes.
This deal will be financed with $2.6 billion of equity and includes committed debt financing of $1 billion. Pattern reviewed several bids as part of an extensive process that involved numerous parties.
Once the deal with CPPIB closes, it will be pooled with Pattern Development, a firm backed by private equity company Riverstone Holdings LLC, to establish an integrated renewable energy firm that both builds and runs power assets.