Calgary’s Fort Chicago Energy Partners LP (TSX:FCE.UN) is making its third acquisition of energy assets in B.C. within two months with a proposed $314-million deal to acquire Vancouver’s Pristine Power Inc. (TSX:PPX).
In the share-swap deal, Fort Chicago will assume $195 million in debt from Pristine, which has energy projects in B.C. and Ontario.
Based on the $11.30 closing price of Fort Chicago’s Class A units on September 21, Pristine shareholders will receive $3.05 per Pristine share, a 17% premium over Pristine’s $2.60 closing price on September 21.
Pristine’s B.C. assets include a 75% interest in two five-megawatt (MW) waste-heat recovery plants located at the Savona and 150 Mile House compressor stations, which form part of Spectra Energy’s B.C. pipeline system.
Pristine announced September 7 it is paying $17 million, including the assumption of $12 million in debt, to acquire an additional 50% interest in those two facilities from Enmax Green Power Inc.
In conjunction with that deal, Fort Chicago acquired 33 MW worth of energy assets in B.C. from Enmax Corp. for $114.9 million, including the assumption of $12 million of project debt. Those assets include a 99% interest in the 11 MW Furry Creek hydroelectric facility; a 100% interest in the two 11 MW Clowhom hydroelectric facilities; and a 50% interest in the 15 MW Culliton Creek hydroelectric project.
A Fort Chicago subsidiary acquired Vancouver’s Swift Power Corp. for $0.35 per share in July, representing a 40% premium over Swift’s closing price.
Swift has a long-term electricity purchase agreement with BC Hydro for the 20-megawatt Dasque Cluster hydroelectric project near Terrace. The plant is expected to be operational in late 2012.
Fort Chicago’s recent deals in B.C. reflect its efforts to diversify beyond its main pipeline operations. It is particularly interested in both operational and development-stage run-of-river power.
Jeffry Myers, Pristine’s president and CEO, told BIV the deal gives Pristine’s projects better access to lower-cost capital through the larger Fort Chicago.
“The biggest driver of this transaction is probably the change in capital markets,” said Myers. “We’ve gone from being a sector that was growth oriented to a sector that's more yield and size oriented now and more based on cash flow."
David Holm, Fort Chicago’s executive vice-president of corporate and business development, said that, as an infrastructure-focused company, Fort Chicago is interested in long-term energy assets that have long-term energy purchase contracts. He said that in B.C. such assets are typically run-of-river facilities. He did not rule out additional acquistions in B.C., but said Fort Chicago is focused on closing its existing deals.