Brookfield Management Poised for Power Play

Toronto-based Brookfield Management Inc. (BAM) has picked up C$565-million in liquidity after selling part of its renewable power business, setting up the global asset manager for significant further acquisitions.

The company announced it will use the capital to look for investment opportunities in the renewable power sector.

Michael Goldberg, Desjardins analyst, said in a note Tuesday:

While the timing and nature of those opportunities is unclear, what is clear is that by monetizing this business ... [Brookfield can] pursue other opportunities that can provide a return superior to the return being earned by the [current] business.

The assets sold to Great Lakes Hydro Income Fund (GLHIF.PK) earn a healthy 10.5%, suggesting that Brookfield has its eye on something even better.

He said:

We see this transaction as one more indication that Brookfield is laying the groundwork for other significant transactions in the prevailing distressed environment, which could potentially provide a much higher return on its investment.

The sale itself, announced after the markets closed on Monday, includes 15 hydroelectric facilities and one wind power project, and nets Brookfield C$365-million in cash and a C$200-million senior unsecured note issued by purchaser Great Lakes Hydro, along with another C$380-million worth of new GLH units.

Brookfield owns 50% of Great Lakes Hydro.