December 15, 2017
In the Matter of
the Securities Legislation of Ontario
(the Jurisdiction)
and
In the Matter of
the Process for Exemptive Relief Applications in Multiple Jurisdictions
and
In the Matter of
Brookfield Renewable Partners L.P.
(the Filer)
DECISION
Background
The securities regulatory authority or regulator in the Jurisdiction (the Decision Maker) has received an application (the Application) from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction (the Legislation) for relief from the requirement under Part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) to file a business acquisition report (a BAR) in connection with the Filer’s investment in TerraForm Power Inc. (TerraForm Power) on October 16, 2017, which together with the Filer’s existing investment in TerraForm Power, represents a 51% interest in TerraForm Power (the TerraForm Power Investment).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator (the Principal Regulator) for the Application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
The Filer is an exempted limited partnership existing under the laws of Bermuda. The Filer was established on June 27, 2011 under the provisions of the Exempted Partnerships Act 1992 of Bermuda and the Limited Partnership Act 1883 of Bermuda. The Filer’s head and registered office is located at 73 Front Street, 5th Floor, Hamilton, HM 12, Bermuda.
The Filer is a reporting issuer (or the equivalent thereof) under the securities legislation of each of the provinces and territories of Canada. The Filer is not in default of securities legislation in any jurisdiction of Canada.
The TerraForm Power Investment
The Filer is an investor in Brookfield Infrastructure Fund III (BIF III), a private infrastructure fund sponsored by BAM, which prior to the TerraForm Power Investment held an approximate 11.5% interest in TerraForm Power. The Filer indirectly held an approximate 3.3% proportionate interest in TerraForm Power on account of its investment in BIF III.
On October 16, 2017, the Filer completed the TerraForm Power Investment. After giving effect to the TerraForm Power Investment, the Filer and its institutional partners held a 51% interest in TerraForm Power and the Filer held a 16% proportionate interest in TerraForm Power (which includes the Filer’s 3.3% proportionate interest held prior to the TerraForm Power Investment).
Application of the Significance Tests
Under Part 8 of NI 51-102, the Filer is required to file a BAR for any completed business acquisition that is determined to be significant based on the acquisition satisfying any of the three significance tests set out in section 8.3(2) of NI 51-102.
The TerraForm Power Investment is not a significant acquisition under the asset test in section 8.3(2)(a) of NI 51-102 as the Filer’s incremental proportionate share of the consolidated assets of TerraForm Power as at December 31, 2016 represented only approximately 3.8% of the Filer’s total assets as at December 31, 2016.
The TerraForm Power Investment is not a significant acquisition under the investment test in section 8.3(2)(b) of NI 51-102 as the Filer’s completed investments in and advances to TerraForm Power pursuant to the TerraForm Power Investment represented only approximately 0.7% of the Filer’s total assets as at December 31, 2016.
The TerraForm Power Investment would, however, be a significant acquisition under the profit or loss test in section 8.3(2)(c) of NI 51-102 as the Filer’s incremental proportionate share of the consolidated specified profit or loss of TerraForm Power for the twelve months ended December 31, 2016 represented approximately 20.9% of the consolidated specified profit or loss of the Filer for the twelve months ended December 31, 2016.
The application of the profit or loss test leads to an anomalous result in that the significance of the TerraForm Power Investment is exaggerated out of proportion to its significance on an objective basis and in comparison to the results of the asset test and the investment test.
For the purposes of completing its quantitative analysis of the asset test, investment test and profit or loss test, the Filer utilized TerraForm Power’s financial statements which were prepared in accordance with U.S. generally accepted accounting principles and the Filer’s financial statements which were prepared in accordance with International Financial Reporting Standards (IFRS). The differences between U.S. generally accepted accounting principles and IFRS would not be significant to the quantitative analysis presented in the Application.
The Significance of the TerraForm Power Investment from a Practical, Commercial and Financial Perspective
The Filer does not believe (nor did it at the time that it completed the TerraForm Power Investment) that the TerraForm Power Investment is significant to it from a practical, commercial and financial perspective.
The Filer has provided the principal regulator with additional operational measures that demonstrate the non-significance of the TerraForm Power Investment to the Filer. These operational measures compared generation (in GWh), generation capacity (in MW) and generation capacity (in MW in North America only) of the Filer’s incremental proportionate interest in TerraForm Power to that of the Filer, and the results of those measures are generally consistent with the results of the asset test and the investment test.
The Filer is of the view that the asset test, the investment test and these alternative operational metrics much more closely reflect the actual significance of the TerraForm Power Investment to the Filer from a practical, commercial and financial perspective.
Decision
The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted.
“Michael Balter”
Michael Balter, Manager, Corporate Finance
Ontario Securities Commission