Securities Law & Instruments


Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Issuer requires relief from the requirement in Part 8 of National Instrument 51-102 Continuous Disclosure Obligations to file a business acquisition report -- Acquisition is insignificant applying the asset and investment tests -- Applying the profit or loss test produces an anomalous result because the significance of the acquisition under this test is disproportionate to its significance on an objective basis in comparison to the results of the other significance tests and from a practical, commercial and financial perspective -- Issuer has provided additional measures that demonstrate the insignificance of the acquisition to the issuer and that are generally consistent with the results when applying the asset and investment tests.

Applicable Legislative Provisions

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.3, 13.1.

Applicable Decisions

In the Matter of Brookfield Renewable Partners L.P., dated December 15, 2017, (2017), 40 OSCB 10096

February 23, 2018

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 acquisition of TerraForm Global Inc. (TerraForm Global) on December 28, 2017 by the Filer and its institutional partners (the TerraForm Global Acquisition).

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

1. 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.

2. 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 Transactions

3. On October 16, 2017, the Filer and its institutional partners completed their previously announced investment in TerraForm Power Inc. (TerraForm Power), pursuant to which the Filer acquired an approximate 13.5% incremental proportionate interest in TerraForm Power (the TerraForm Power Investment). After giving effect to the TerraForm Power Investment and the Filer's existing investment in TerraForm Power, the Filer and its institutional partners collectively hold an approximate 51% interest in TerraForm Power and the Filer's proportionate interest is approximately 16%. On December 15, 2017, the Filer received relief from the Decision Maker from the requirement under Part 8 of NI 51-102 to file a BAR in connection with the TerraForm Power Investment.

4. On December 28, 2017, the Filer and its institutional partners completed the TerraForm Global Acquisition. After giving effect to the TerraForm Global Acquisition, the Filer and its institutional partners hold 100% of TerraForm Global and the Filer's proportionate interest is approximately 30.7%.

Application of the Significance Tests

5. 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.

6. Under section 8.3(12) of NI 51-102, the Filer is required to evaluate the significance of the TerraForm Global Acquisition and the TerraForm Power Investment (collectively, the TerraForm Transactions) on a combined basis, as TerraForm Global and TerraForm Power were formerly under the common control of SunEdison Inc.

7. The TerraForm Transactions are 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 and TerraForm Global as at December 31, 2016 represented only approximately 6.5% of the Filer's total assets as at December 31, 2016.

8. The TerraForm Transactions are 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 and TerraForm Global pursuant to the TerraForm Power Investment and TerraForm Global Acquisition represented only approximately 3.5% of the Filer's total assets as at December 31, 2016.

9. The TerraForm Transactions 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 and TerraForm Global for the twelve months ended December 31, 2016 represented approximately 38.9% of the consolidated specified profit or loss of the Filer for the twelve months ended December 31, 2016.

10. The application of the profit or loss test leads to an anomalous result in that the significance of the TerraForm Transactions is exaggerated out of proportion to their significance on an objective basis and in comparison to the results of the asset test and the investment test.

11. For the purposes of completing its quantitative analysis of the asset test, investment test and profit or loss test, the Filer utilized financial statements of TerraForm Power and TerraForm Global 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 Transactions from a Practical, Commercial and Financial Perspective

12. The Filer does not believe (nor did it at the time that it completed the TerraForm Transactions) that the TerraForm Transactions are significant to it from a practical, commercial and financial perspective.

13. The Filer has provided the principal regulator with additional operating measures that demonstrate the non-significance of the TerraForm Transactions to the Filer. These operating measures compared generation (in GWh), generation capacity (in MW), generation capacity (in MW in North America only) and generation capacity (in MW in Brazil only) of the Filer's incremental proportionate interest in TerraForm Power and TerraForm Global 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.

14. The Filer is of the view that the asset test, the investment test and these alternative operating metrics much more closely reflect the actual significance of the TerraForm Transactions 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"
Manager, Corporate Finance
Ontario Securities Commission