TransAlta to buy PE-backed North Carolina solar facilities

Calgary-based renewable power producer TransAlta Renewables has agreed to acquire a 122-megawatt portfolio of operating solar facilities in North Carolina. The deal, expected to close in Q4 2021, reflects a purchase price of $96.65 million. The seller is a fund managed by Copenhagen Infrastructure Partners.

PRESS RELEASE

CALGARY, AB, Sept. 2, 2021 /CNW/ – TransAlta Renewables Inc. (“TransAlta Renewables” or the “Company”) (TSX: RNW) announced today that it has entered into definitive agreements for the acquisition of a 122 MW portfolio of operating solar facilities located in North Carolina (collectively, “North Carolina Solar”).

The assets will be acquired from a fund managed by Copenhagen Infrastructure Partners for US$96.65 million, subject to working capital adjustments and the assumption of existing tax equity obligations. The acquisition will be funded using existing liquidity. Income distributions to the Company will be net of cash and tax attributes provided to the tax equity investor. The acquisition is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2021. The transaction is structured so that at closing, TransAlta Renewables will acquire a 100% economic interest in North Carolina Solar from a wholly-owned subsidiary of TransAlta Corporation through a tracking share structure.

“This purchase marks an important and significant expansion of our solar footprint in the United States and is a natural fit for TransAlta Renewables given our focus on diversified, highly-contracted cash flows from strong counterparties,” said Todd Stack, President of TransAlta Renewables. “The acquisition further strengthens our expertise in solar energy and adds a new, high-quality customer in a region where we see significant opportunities for solar growth. We are excited to continue along our path of expanding our position as a market leader in clean renewable electricity.”

The North Carolina Solar portfolio consists of 20 solar photovoltaic facilities across North Carolina, with an aggregate capacity of 122 MW. The facilities are all operational and were commissioned between November 2019 and May 2021. The facilities are secured by long-term power purchase agreements (“PPAs”) with two subsidiaries of Duke Energy (“Duke”), which have an average remaining term of 12 years. Under the PPAs, Duke receives the renewable electricity, capacity, and environmental attributes from each facility. North Carolina Solar is expected to generate an average annual EBITDA of approximately US$9 million and average annual cash available for distribution (“CAFD”) of approximately US$7 million.

Investment Highlights
Expected production of approximately 195,000 MWh per year
Acquisition cost of US$96.65 million
Average annual EBITDA and CAFD of approximately US$9 million, and US$7 million, respectively
Investment Tax Credit (“ITC”) Partnership flip-based tax equity structures with target flip dates in 2026 – 2028, with assumed tax equity obligations of US$28 million at close, reducing to US$11 million by end of 2021 upon monetization of the ITC
Long term contracted cashflows with investment grade counterparties, and
Provides further geographic, technology and counterparty diversification with potential synergies for future growth

Portfolio Overview
20 operating facilities across North Carolina ranging in size from 3.2 MW to 6.7 MW
Commercial operational dates ranging from November 2019 to May 2021, and
Average remaining PPA term of 12 years with Duke

About TransAlta Renewables Inc.
TransAlta Renewables is among the largest of any publicly traded renewable independent power producers (“IPP”) in Canada. Our asset platform and economic interests are diversified in terms of geography, generation and counterparties and consist of interests in 24 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities, one solar facility, one natural gas pipeline, and one battery storage project, representing an ownership interest of 2,633 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of Pennsylvania, New Hampshire, Wyoming, Massachusetts, Michigan, Minnesota, Washington and the State of Western Australia. Our objectives are to (i) provide stable, consistent returns for investors through the ownership of, and investment in, highly contracted renewable and natural gas power generation and other infrastructure assets that provide stable cash flow primarily through long-term contracts with strong counterparties; (ii) pursue and capitalize on strategic growth opportunities in the renewable and natural gas power generation and other infrastructure sectors; (iii) maintain diversity in terms of geography, generation and counterparties; and (iv) pay out 80 to 85 per cent of cash available for distribution to the shareholders of the Company on an annual basis.