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Brookfield was already a hydro giant, now It’s going after solar

[NEW YORK] In 2017, Brookfield Asset Management Inc had just a half-megawatt of solar power. By the end of this year, the total owned outright by the company could be about 2,000 megawatts.

Its unit, Brookfield Renewable Partners LP, said Monday it's bidding to buy the shares of TerraForm Power Inc that it doesn't already own in a deal that values TerraForm at around US$3.9 billion. The unsolicited bid comes more than two years after Brookfield initially rescued TerraForm from SunEdison Inc., a collapsed clean-energy company, by buying a 61.5 per cent controlling stake.

The unsolicited bid by Brookfield is part of a years-long effort to diversify its portfolio and recycle capital by selling mature assets and acquiring new ones. The company has long been a hydropower player, with a capacity of around 7,900 megawatts. It's recent M&A activity has boosted its wind and solar exposure.

In the third quarter of last year, Brookfield agreed to acquire a 200-megawatt wind farm in China for US$100 million with its partners. In July, it agreed to acquire a 50 per cent interest in X-Elio, a global solar developer. Meanwhile, its shares surged about 80 per cent last year, making it one of the best performers among North American renewables companies.

Market voices on:

"It's really a function of ‘do we feel like we can run a bigger, stronger company by simplifying the structure?' Yes, absolutely," said Sachin Shah, Brookfield Renewable's chief executive officer, in an interview Monday.

Colin Rusch, an analyst at Oppenheimer & Co, said in a note Monday that he sees a "high likelihood" that the deal happens. TerraForm's shares rose 10 per cent to US$17.16 in New York trading Monday while Brookfield fell 4.2 per cent to US$46.05.

Brookfield Renewable is "a best-in-class developer of long-dated renewable power and a savvy purchaser of distressed assets," said Andrew Kuske, an analyst with Credit Suisse Group AG, in a research note.