Strategic Investment Agreement between Algonquin and Emera
Recently, the energy servicing companies Algonquin Power and Utilities Corporation (APUC) and Emera Inc have come to a strategic investment agreement in which both companies will join together to engage in specific investments of mutual benefit. Emera is a budding energy servicing company with assets of around $6.3 billion USD and revenue estimated at $1.6 billion USD in 2010. Algonquin Power and Utilities Corporation specialized in the generation of clean energy and the sustainable utility distribution business in North America, engaging a diversified portfolio worth $1.1 billion USD. Emera had invested a tremendous amount of capital in the generation, transmission and dispersion of electricity and it also transmits natural gas. Emera is focused on the transformation of the electricity sector to clean energy generation, and intends to maximize the amount of energy generated through clean sources.
The two companies established an effective strategic partnership agreement in April 2009. The areas of pursuit for Algonquin and Emera were clearly depicted in the agreement. For Algonquin, the primary area of pursuit includes investment opportunities related to the generation of unregulated renewable energy, natural gas distribution utilities and small electric utilities.
Areas of pursuit for Emera include investment opportunities connected with regulated renewable projects and large electric utilities within their service territories. Whenever any opportunities are encountered by Algonquin or Emera that fit within the other’s areas of pursuit, they are dedicated to work united on such projects. Emera, according to the framework established by the agreement, has agreed to a 49.999% of direct ownership in the California Pacific Electric Company (Calpeco), the remainder of which is owned by Algonquin, pending approval from the regulatory authority that oversees the California-based power company.
Emera, for its part, will receive $8.211 million USD as compensation, along with shares in two branches of the purchased enterprise. Around half of the shares will be rendered following regulatory approval of the Calpeco ownership transfer, and the remaining shares will be delivered after the completion of Calpeco’s first rate case, expected to be completed in the first half of 2012. According to the agreement, the allowed common equity interest of Emera in Algonquin would be raised from 15 to 25%.
Algonquin will attempt to get the approval of its shareholders during their upcoming annual meeting, planned to be held on June 21, 2011. Chief Executive Officer of Algonquin, Ian Robertson, commented that the agreement between Algonquin and Emera provides clarity and transparency to a business relationship that existed for the past two years, an arrangement which will maximize shareholder value for both parties by capitalizing on each company’s respective strengths.