N.H. hydro plants added to buyer’s giant portfolio

What is Brascan and why is it buying up all of these utility assets?

You may remember that in addition to owning a 43 percent share in Nexfor, and thus the pulp and paper mills in northern New Hampshire, Brascan was the company that last September acquired three hydroelectric power plants, two of them in New Hampshire, from Hafslund, a Norwegian-based power company, for approximately $30 million, including working capital.

This transaction included the Pontook and Errol plants, located 20 miles apart on the Androscoggin River in New Hampshire, and Brassua, located on the Moose River in Maine, with a total generating capacity of 16.5 megawatts. At the time, Brascan said its growth strategy in the power business was focused on the acquisition of high-quality assets that generate long-term sustainable cash flows.

Brascan said that the facilities provided “strategic advantages and operating synergies when combined with its existing operations in New England,” particularly the six power-generating facilities it already owned on the Androscoggin River just downstream of the Pontook and Errol facilities, according to Harry Goldgut, cochairman and chief executive officer of Brascan Power.

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Goldgut was quoted as saying: “The completion of this transaction brings to 42 the total number of Brascan’s generating facilities across New Hampshire, Maine, Ontario, Quebec, British Columbia and Louisiana, and total generating capacity to 1,700 megawatts.”

Then a month or so ago, Vermont said it was joining two Canadian companies — Toronto-based Brascan Corp. and Halifax-based Emera Inc. — in seeking to acquire a group of hydroelectric stations on the Connecticut and Deerfield rivers in Vermont. The partnership has been described in news reports as being heavily shrouded in the secrecy demanded by confidentiality agreements, according to members of the state panel created by the Vermont Legislature to look into whether the state should purchase the facilities from USGenNE, a subsidiary of PG&E.

Even more recently, Brascan announced that it has entered into an agreement to acquire 71 hydroelectric power generating plants, totaling 674 megawatts of capacity, and one 95 megawatt co-generation facility, in upstate New York, from Reliant Energy Inc. for $900 million.

“The acquisition of this portfolio of highquality hydroelectric assets, located on six river systems in New York State, furthers our growth strategy and, with nearly 40 existing plants in New England, Ontario and Quebec, significantly enhances our operating flexibility, marketing and sales of electricity in these interconnected markets,” according to Goldgut.

The plants generate approximately 3,000 gigawatts of energy output annually. The power will initially be sold in the wholesale electricity market, but will be contracted to customers on a long-term basis over time as the facilities are integrated with Brascan’s existing operations in the Northeast.

Brascan intends to finance a portion of the acquisition with asset-specific financing, similar to the company’s other power-generating assets, with the balance funded out of Brascan’s available financial resources.

Roots in Brazil

In Maine, Brascan’s acquisitions earned it the Maine International Trade Center’s 2004 Foreign Investor of the Year Award. Its recent transactions in Maine include a January 2002 acquisition of six hydroelectric generating facilities from Great Northern Paper Company for $160 million.

In April 2003, Brascan purchased Great Northern Paper Company and its woodlands for approximately $100 million, and Brascan recently conducted a $14 million overhaul of its 18-megawatt Weldon Generating Facility, on the Penobscot River, south of Millinocket. In terms of its power-generation function, Brascan says it has developed and successfully operated hydroelectric power facilities for over 100 years. It describes itself as “one of the lowest-cost producers of hydroelectric power in North America and the largest independent producer and distributor of power in Ontario and Quebec.”

Brascan (formerly EdperBrascan) also has three hydroelectric power-generation facilities in operation in Brazil, where the company was founded. In addition it has key interconnection and transmission facilities in Northeast North America and says that 85 percent of the power it generates is under long-term contracts.

The company is supporting the development of wind power in Canada through investment in Superior Wind Energy, a joint venture with Harmony Wind Energy.

Superior Wind Energy is a Canadianowned and operated company with plans to develop wind energy resources to supply the Ontario market with renewable energy.

As a result of the acquisition in New York, Brascan’s portfolio has increased to 120 plants with approximately 2,600 megawatts of generating capacity on 20 river systems, predominantly in the Northeast United States and Canada.

Real estate development

Brascan is a self-described real estate, power generation and asset management company whose objective is to earn a superior return on equity by operating businesses which produce consistent and sustainable cash flows. The company says it has direct investments of $17 billion and a further $7 billion in assets.

Listed on the New York and Toronto stock exchanges under the symbol BNN, Brascan claims a total of $1 billion in residential assets. It builds homes for sale and develops commercial lands and income properties for investment and sale. Its master- planned residential community business is conducted under established trade names (Brascan, Brookfield Homes and Carma) with operations in six North American markets — California, Virginia, Denver, Calgary, Edmonton and Toronto — and two markets in South America, Rio de Janeiro and Sao Paulo.

The company also has created a platform of alternative asset funds within the real estate sector. These funds are launched with capital invested by Brascan and managed by Brascan with co-investment by institutional investors seeking alternatives to traditional equity investments.

Earlier this year Brascan said that virtually all of its diversified holdings contributed strongly to a first-quarter profit of $147 million, compared with $56 million a year earlier. Brascan said its earnings nearly tripled because of strong results from its resource holdings and the impact of acquisitions. NHBR

Doug Patch, former chairman of the New Hampshire Public Utilities Commission, is with the Concord law firm of Orr and Reno.

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