Item 8.01 Other Events.
As previously disclosed, on March 16, 2020, TerraForm Power, Inc., a Delaware
corporation ("TerraForm Power," "TERP," or the "Company"), entered into an
Agreement and Plan of Reorganization (the "Reorganization Agreement"), by and
among Brookfield Renewable Partners L.P., an exempted limited partnership formed
under the laws of Bermuda ("BEP"), Brookfield Renewable Corporation, a
corporation incorporated under the laws of British Columbia and an indirect
subsidiary of BEP ("BEPC"), 2252876 Alberta ULC, an unlimited liability
corporation incorporated under the laws of Alberta and a wholly owned direct
subsidiary of BEP ("Acquisition Sub"), the Company and TerraForm Power NY
Holdings, Inc., a newly formed New York corporation and a wholly owned direct
subsidiary of the Company ("Holdings"). Pursuant to the terms and subject to
the conditions set forth in the Reorganization Agreement, the Company will merge
with and into Holdings (the "Reincorporation Merger"), with Holdings continuing
as the surviving corporation, and such Reincorporation Merger will be
immediately followed by (i) a binding share exchange that will result in BEPC
acquiring all of the outstanding and issued Holdings Class B common stock in
exchange for BEPC Class A exchangeable subordinated voting shares (the "BEPC
Exchange") and (ii) a binding share exchange that will result in Acquisition Sub
acquiring all of the outstanding and issued Holdings Class C common stock in
exchange for non-voting limited partnership units of BEP (the "BEP Exchange"
and, together with the BEPC Exchange and the Reincorporation Merger, the
"Transactions"). On June 29, 2020, the Company filed with the Securities and
Exchange Commission (the "SEC") a definitive proxy statement/prospectus, for the
solicitation of proxies in connection with the Annual Meeting of the Company's
stockholders, to be held on July 29, 2020, for purposes of voting on, among
other things, matters necessary to complete the Transactions (the "Proxy
Statement/Prospectus").
Supplemental Disclosures in Connection with Stockholder Litigation
In connection with the Reorganization Agreement and the Transactions, (i) one
complaint has been filed in the United States District Court for the Eastern
District of New York by a purported TerraForm Power stockholder against
TerraForm Power and members of the TerraForm Power board of directors (the
"TerraForm Power Board"), (ii) one putative class action complaint has been
filed in the United States District Court for the District of Delaware by a
purported TerraForm Power stockholder on behalf of himself and all other
similarly situated TerraForm Power stockholders (excluding defendants and
related or affiliated persons) against TerraForm Power, members of the TerraForm
Power Board, BEP, BEPC, Acquisition Sub and Holdings, and (iii) four complaints
have been filed in the United States District Court for the Southern District of
New York by purported TerraForm Power stockholders against TerraForm Power and
members of the TerraForm Power Board. The six complaints (collectively, the
"Stockholder Actions") are captioned as follows: Moriconi v. TerraForm Power,
Inc., et al., Case 1:20-cv-03136 (E.D.N.Y.) (Jul. 14, 2020), Post v. TerraForm
Power, Inc. et al., Case 1:20-cv-00927 (D. Del) (Jul. 8, 2020), McCourt v.
TerraForm Power, Inc., et al., Case 1:20-cv-05326 (S.D.N.Y.) (Jul. 10, 2020),
Raul v. TerraForm Power, Inc., et al., Case 1:20-cv-05393 (S.D.N.Y.) (Jul. 14,
2020), Schammel v. TerraForm Power, Inc., et al., Case 1:20-cv-05456 (S.D.N.Y.)
(Jul. 15, 2020), and Holmes v. TerraForm Power, Inc., et al., Case 1:20-cv-05522
(S.D.N.Y.) (Jul. 17, 2020).
In general, the Stockholder Actions allege that the defendants violated Sections
14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or aided and abetted in such alleged violations, because the
Proxy Statement/Prospectus allegedly omits or misstates certain material
information. The Stockholder Actions seek, among other things, injunctive relief
preventing the consummation of the Transactions, as well as unspecified damages
and attorneys' fees.
TerraForm Power, BEP, BEPC and the other named defendants believe that no
supplemental disclosures are required under applicable laws; however, solely to
avoid the risk that the Stockholder Actions delay the Transactions and to
minimize the potential expense, burden, nuisance and uncertainty of defending
the Stockholder Actions, and without admitting any liability or wrongdoing,
TerraForm Power, BEP and BEPC are making certain disclosures below that are
intended to supplement and revise those contained in the Proxy
Statement/Prospectus, which TerraForm Power, BEP and BEPC refer to as the
"Supplemental Disclosures." The Supplemental Disclosures contained below should
be read in conjunction with the Proxy Statement/Prospectus, which is available
on the Internet site maintained by the SEC at www.sec.gov, along with periodic
reports and other information TerraForm Power, BEP and BEPC filed with the SEC.
TerraForm Power, BEP, BEPC and the other named defendants have denied, and
continue to deny, that the Proxy Statement/Prospectus is deficient in any
respect or that they have committed or aided and abetted others in committing
any violations of law, and expressly maintain that, to the extent applicable,
they complied with their legal obligations and are providing the Supplemental
Disclosures below solely to try to eliminate the potential burden, nuisance,
uncertainty and expense of litigation, to put the claims that were or could have
been asserted to rest, and to avoid any possible delay to the closing of the
Transactions that might arise from litigation. Nothing in the Supplemental
Disclosures shall be deemed an admission of the legal necessity or materiality
under applicable laws of any of the Supplemental Disclosures set forth herein.
To the extent that the information set forth herein differs from or updates
information contained in the Proxy Statement/Prospectus, the information set
forth herein shall supersede or supplement the information in the Proxy
Statement/Prospectus. All page references are to pages in the Proxy
Statement/Prospectus, and terms used below, unless otherwise defined, have the
meanings set forth in the Proxy Statement/Prospectus.
--------------------------------------------------------------------------------
The TerraForm Power Board (acting on the recommendation of the Special Committee
in the case of the Merger Proposal) unanimously recommends that TerraForm Power
stockholders vote "FOR" the Merger Proposal, "FOR" each of the TERP Stockholders
Meeting Proposals and "FOR" the Adjournment Proposal.
SUPPLEMENTAL DISCLOSURES TO DEFINITIVE PROXY STATEMENT/PROSPECTUS RELATED TO
STOCKHOLDER ACTIONS
The section of the Proxy Statement/Prospectus titled "Opinions of Financial
Advisors to the Special Committee of TerraForm Power" under the heading "Opinion
of Morgan Stanley & Co. LLC-Reference Data-Equity Research Analysts' Price
Targets" is amended by:
Adding the below sentence after the first sentence of the first paragraph of
this section on page 177:
The equity research price targets for TERP common stock were as follows: BAML -
$14.00 per share; Barclays - $16.00 per share; Citi - $17.00 per share; JPM -
$17.00 per share; RBC - $17.00 per share; BMO - $18.00 per share; and
Oppenheimer - $19.00 per share, respectively, in each case as of or prior to the
unaffected date.
The section of the Proxy Statement/Prospectus titled "Opinions of Financial
Advisors to the Special Committee of TerraForm Power" under the heading "Opinion
of Morgan Stanley & Co. LLC-General" is amended by:
Replacing the fourth paragraph on page 180 with the following:
In the two years prior to the date it rendered its opinion in connection with
the TERP acquisition, in addition to the services described in this proxy
statement/prospectus, Morgan Stanley and its affiliates provided financial
advisory services to TerraForm Power and its affiliates, and received aggregate
fees of approximately $5 to $15 million in connection with such services. In
addition, in the two years prior to the date it rendered its opinion in
connection with the TERP acquisition, Morgan Stanley and its affiliates provided
financial advisory or financing services to BEP or its affiliates, including
certain portfolio companies or affiliates of BAM (an affiliate of BEP), and
received aggregate fees of approximately $65 to $90 million in connection with
such services. None of the foregoing fees were received directly from nor
related to any financial advisory or financing services provided to any of BEP,
BAM, Orion Holdings, Orion US GP LLC, Brookfield Infrastructure Fund III GP LLC,
Brookfield Asset Management Private Institutional Capital Advisor (Canada),
L.P., NA Holdco, Partners Limited, or BEPC. As of March 1, 2020, Morgan Stanley
or one of its affiliates was a lender to Brookfield Properties Retail Group,
Brookfield Property Partners L.P. and Oaktree Capital Management, acted as
administrative agent with respect to certain credit facilities of Brookfield
Property Partners L.P., and was mandated on one financing assignment for
affiliates of BAM, which in each case is unrelated to the transactions
contemplated by the transaction documents and for which Morgan Stanley would
expect to receive additional customary fees if such transactions are completed.
The section of the Proxy Statement/Prospectus titled "Opinions of Financial
Advisors to the Special Committee of TerraForm Power" under the heading "Opinion
of Greentech Capital Advisors Securities, LLC-Corporate Discounted Cash Flow
Analysis-TerraForm Power" is amended by:
Replacing the first sentence in the last paragraph of this section on page 185
with the following:
Greentech derived the terminal value for TerraForm Power by applying perpetual
growth rates of 0.75% to 1.25% to TerraForm Power's terminal year levered free
cash flow and taking the midpoint. The perpetual growth rates reflected an
assumption that management would be able to continue to raise debt and equity to
fund continual investment in the replacement of the finite-lived assets
comprising TERP's portfolio into perpetuity at a rate in line with estimates in
management's 5-year plan of approximately $283 million invested per year
(excluding project financing). Greentech also observed that because TERP did
not have an internal development pipeline, nor any internal M&A capability, it
would continue to be dependent on BAM to secure the pipeline of new asset
investment opportunities in perpetuity. Greentech also considered the implied
exit CAFD Yield (a form of exit multiple) of the terminal value, and determined
that the perpetual growth rates of 0.75% to 1.25% implied an exit CAFD yield of
5.8% to 7.1%. Greentech observed that this range reflected a premium to TERP's
pre-announcement unaffected 2020 CAFD yield of 7.5%. If Greentech had assumed a
perpetual growth rate that did not imply a premium to TERP's unaffected 2020
CAFD yield, it would have resulted in a lower equity value for TERP and a lower
exchange ratio.
--------------------------------------------------------------------------------
The section of the Proxy Statement/Prospectus titled "Opinions of Financial
Advisors to the Special Committee of TerraForm Power" under the heading "Opinion
of Greentech Capital Advisors Securities, LLC-Corporate Discounted Cash Flow
Analysis-BEP" is amended by:
Replacing the first sentence in the third paragraph of this section on page 185
with the following:
Greentech derived the terminal value for BEP by applying perpetual growth rates
of 1.25% to 1.75% to BEP's terminal year levered free cash flow and taking the
midpoint. The perpetual growth rates reflect an assumption that BEP will be
able to continue to raise debt and equity to fund the continual replacement of
finite lived assets comprising BEP's portfolio into perpetuity at a rate in line
with BEP's recently demonstrated rate of capital raising and investment and
future plans. Greentech also observed that BEP controlled a significant internal
development pipeline of assets and internal M&A capabilities, and as such was
not dependent on third parties (other than BAM) to source these investment
opportunities. Greentech also observed the significant portion of
indefinite-lived hydro power assets in BEP's portfolio did not require
replacement over time. Greentech also considered the implied exit AFFO Yield (a
form of exit multiple) of the terminal value, and determined that the perpetual
growth rates of 1.25% to 1.75% implied an exit AFFO yield of 6.6% to 8.2%.
Greentech observed that this range reflected a discount to BEP's
pre-announcement unaffected 2020 AFFO Yield of 5.4%. If Greentech had assumed a
perpetuity growth rate for BEP that implied a premium to BEP's pre-announcement
unaffected 2020 AFFO Yield of 5.4%, consistent with the premium implied for
TERP, it would have resulted in a higher equity value for BEP and a lower
exchange ratio.
The section of the Proxy Statement/Prospectus titled "Opinions of Financial
Advisors to the Special Committee of TerraForm Power" under the heading "Opinion
of Greentech Capital Advisors Securities, LLC-Sum-of-the-Parts Analysis-Run-off
Case" is amended by:
Replacing the first sentence in the third paragraph of this section on page 190
with the following:
The Project Life IRRs Methodology discounted the cash flows from each project
within the TerraForm Power forecasts by Project-level Discount Rates, derived
from Grant Thornton's 2019 Renewable Energy Discount Rate Survey results, and
adjusted based on Greentech's professional judgement. The Grant Thornton 2019
Renewable Energy Discount Rate Survey applied an 8.50% discount rate to Spanish
Wind, an 8.25% discount rate to North American Wind, an 8.00% discount rate to
North American Solar PV and DG, a 7.75% discount rate to Spanish CSP Solar, and
a 7.25% discount rate to UK Solar PV. Portugal project returns were assumed to
be in line with Spanish project returns, and Uruguayan and Chilean returns were
assumed to be in line with U.S. returns plus their respective country risk
premiums as outlined by Damodaran's Country Risk: Determinants, Measures, and
Implications 2019 edition. Greentech, in its professional judgement, further
adjusted the discount rates to be 0.5% lower, consistent with its observations
of private market sale transactions for comparable contracted renewable assets.
This analysis resulted in an average discount rate of 7.8% across TERP's
utility-scale wind portfolio, 7.5 % across TERP's North American utility-scale
solar portfolio, 8.2% across South American utility scale solar, 7.5% across the
distributed solar assets, and 7.7% across the Saeta portfolio. If Greentech had
not adjusted the Grant Thornton discount rates to be 0.5% lower, it would have
resulted in a lower equity value for TERP and a lower exchange ratio.
--------------------------------------------------------------------------------
The section of the Proxy Statement/Prospectus titled "Opinions of Financial
Advisors to the Special Committee of TerraForm Power" under the heading "Opinion
of Greentech Capital Advisors Securities, LLC-Other Analyses" is amended by:
Replacing the second bullet in the first paragraph of this section on page 192
with the following:
• (i) the following publicly available research analysts' price targets for
TerraForm Power: BMO - $18.00, BAML - $14.00, Barclays - $16.00, Oppenheimer -
$19.00, JP Morgan - $17.00, Citi - $17.00, and RBC - $17.00, which indicated
high and low price targets for TerraForm Power of $14.00 to $19.00 per share;
and (ii) the following publicly available research analysts' price targets for
BEP: Barclays $48.00, Wells Fargo - $46.00, TD Securities - $45.00, CIBC -
$43.00, RBC - $45.00, Credit Suisse - $40.85, Scotiabank - $41.00, Raymond
James - $40.00, and BMO - $39.00, which indicated high and low price targets
for BEP of $39.00 to $48.00 per unit. The reference range indicated by this
analysis was 0.29x to 0.49x.
The section of the Proxy Statement/Prospectus titled "Certain TerraForm Power
Forecasts" is amended by:
Adding the following as the last three sentences of the first full paragraph on
page 208:
The TerraForm Power and BEP forecasts did not include or take into
account information regarding potential strategic, financial and operational
benefits that TerraForm Power and BEP management, respectively, estimated would
occur as a result of the TERP acquisition, including, for example, (i) changes
in the amount of BEP's and TerraForm Power's respective credit facilities, (ii)
the elimination of TerraForm Power's credit agreement with BAM, (iii) the
refinancing of certain of TerraForm Power's debt, and (iv) the elimination and
reduction of certain public company, audit and regulatory compliance and labor
costs. These estimated benefits were used and relied upon by Morgan Stanley to
calculate aggregate savings of approximately $6.1 million, $8.1 million, $8.8
million, $12.4 million and $12.4 million for the years ending 2020, 2021, 2022,
2023 and 2024, respectively, and which we refer to in this paragraph as the
"synergies". At the direction and with the consent of the Special Committee,
Morgan Stanley used and relied upon the synergies for purposes of performing its
financial analysis and rendering its opinion.
--------------------------------------------------------------------------------
Forward-Looking Statements
This Current Report on 8-K contains "forward-looking statements" within the
meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the
"Securities Act"), Section 21E of the Exchange Act and "safe harbor" provisions
of the United States Private Securities Litigation Reform Act of 1995. The words
"will", "intend", "should", "could", "target", "growth", "expect", "believe",
"plan", derivatives thereof and other expressions which are predictions of or
indicate future events, trends or prospects and which do not relate to
historical matters identify the above mentioned and other forward-looking
statements. Forward-looking statements in this Current Report on 8-K include
statements regarding the Transactions, the prospects and benefits of the
combined company and any other statements regarding the parties' future
expectations, beliefs, plans, objectives, financial conditions, assumptions or
future events or performance. Although TerraForm Power, BEP and BEPC believe
that these forward-looking statements and information are based upon reasonable
assumptions and expectations, you should not place undue reliance on them, or
any other forward-looking statements or information in this press release. The
future performance and prospects of BEP and TerraForm Power are subject to a
number of known and unknown risks and uncertainties. Factors that could cause
actual results of BEP and TerraForm Power to differ materially from those
contemplated or implied by the statements in this Current Report on Form 8-K
include uncertainties as to whether TerraForm Power's Special Committee will
continue to recommend any transaction with BEP to the TerraForm Power
stockholders; uncertainties as to whether TerraForm Power stockholders not
affiliated with BEP will approve any transaction; uncertainties as to whether
the other conditions to the Transactions will be satisfied or satisfied on the
anticipated schedule? the timing of the Transactions and whether the
Transactions will be completed, including as a result of potential litigation in
connection with the Transactions; failure to realize contemplated benefits from
the Transactions, including the possibility that the expected synergies and
value creation from the Transactions will not be realized; the inability to
retain key personnel? and incurrence of significant costs in connection with the
Transactions. For further information on these known and unknown risks, please
see "Risk Factors" included in TerraForm Power's definitive proxy statement
regarding the Transactions, and its most recent Annual Report on Form 10-K and
subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed
with the SEC and in BEP's Form 20-F and other risks and factors that are
described therein and that are described in BEP's and BEPC's F-1/F-4 described
below and the preliminary prospectus filed with the SEC and the securities
regulators in Canada qualifying the special distribution of BEPC exchangeable
shares.
The foregoing list of important factors that may affect future results is not
exhaustive. The forward-looking statements represent our views as of the date of
this press release and should not be relied upon as representing our views as of
any subsequent date. While we anticipate that subsequent events and developments
may cause our views to change, we disclaim any obligation to update the
forward-looking statements, other than as required by applicable law.
Additional Information and Where to Find It
This Current Report on Form 8-K is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be made with the
SEC. Any solicitation will only be made through materials filed with the SEC.
TerraForm Power mailed or otherwise provided to its stockholders its definitive
proxy statement regarding the Transactions on or about June 29, 2020.
Nonetheless, this Current Report on Form 8-K may be deemed to be solicitation
material in respect of the Transactions. BEP and BEPC have filed relevant
materials with the SEC, including a registration statement on Form F-1/F-4
(Registration Nos. 333-234614 and 234614-01) (the "F-1/F-4"), as filed with the
SEC as an amendment to Form F-1, that includes a proxy statement of TerraForm
Power that also constitutes a prospectus of BEP and BEPC. On June 29, 2020, the
SEC declared the F-1/F-4 effective. This Current Report on Form 8-K is not a
substitute for the registration statement, proxy statement/prospectus or any
other documents that BEP, BEPC or TerraForm Power may file with the SEC or send
to stockholders in connection with the Transactions. STOCKHOLDERS OF TERRAFORM
POWER ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE
DEFINITIVE PROXY STATEMENT/PROSPECTUS, WHICH WAS ALSO FILED WITH THE SEC,
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTIONS.
Investors and security holders may obtain copies of the F-1/F-4, including the
proxy statement/prospectus, and other documents filed with the SEC free of
charge at the SEC's website, www.sec.gov. Copies of documents filed with the SEC
by TerraForm Power are available free of charge on TerraForm Power's website at
www.terraformpower.com. Copies of documents filed with the SEC by BEP and BEPC
are available free of charge on BEP's website at bep.brookfield.com.
Participants in the Solicitation
TerraForm Power and its directors and executive officers, BEPC and its directors
and executive officers, and BEP and its directors and executive officers may be
deemed to be participants in the solicitation of proxies from the holders of the
Company Common Stock in respect of the Transactions. Information about the
directors and executive officers of the Company is set forth on its website at
www.terraformpower.com/. Information about the directors and executive officers
of BEP is set forth on its website at http://bep.brookfield.com/. Information
about the directors and executive officers of BEPC is set forth in the Proxy
Statement/Prospectus. Investors may obtain additional information regarding the
interests of such participants by reading the Proxy Statement/Prospectus
regarding the Transaction. You may obtain free copies of these documents as
described in the preceding paragraph.
--------------------------------------------------------------------------------
Non-solicitation
No securities regulatory authority has either approved or disapproved of the
contents of this Current Report on Form 8-K. This Current Report on Form 8-K
shall not constitute an offer to sell or the solicitation of an offer to sell or
the solicitation of an offer to buy any securities, nor shall there be any sale
of securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the Securities
Act.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses