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.

 

August 14, 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 an approximate 14% interest in TerraForm Power Inc. (TerraForm Power) on June 11, 2018 by the Filer and its institutional partners (the 2018 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

 

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 2018 TerraForm Power Investment

 

3.             On June 11, 2018, the Filer and its institutional partners announced the completion of the 2018 TerraForm Power Investment. After giving effect to the 2018 TerraForm Power Investment, the Filer and its institutional partners hold an approximate 65% interest in TerraForm Power and the Filer holds an approximate 30% proportionate interest in TerraForm Power (which includes the Filer’s 15.7% proportionate interest held prior to the 2018 TerraForm Power Investment).

 

Application of the Significance Tests

 

4.             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.

 

5.             The 2018 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, 2017 represented only approximately 3.0% of the Filer’s total assets as at December 31, 2017.

 

6.             The 2018 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 2018 TerraForm Power Investment represented only approximately 1.4% of the Filer’s total assets as at December 31, 2017.

 

7.             The 2018 TerraForm Power Investment is, however, 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, 2017 represented approximately 256.4% of the absolute value of the Filer’s proportionate interest in its consolidated specified profit or loss for the twelve months ended December 31, 2017.

 

8.             The application of the profit or loss test leads to an anomalous result in that the significance of the 2018 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.

 

9.             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 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 2018 TerraForm Power Investment from a Practical, Commercial and Financial Perspective

 

10.          The Filer does not believe (nor did it at the time that it completed the 2018 TerraForm Power Investment) that the 2018 TerraForm Power Investment is significant to it from a practical, commercial and financial perspective.

 

11.          The Filer has provided the principal regulator with additional operating metrics that demonstrate the non-significance of the 2018 TerraForm Power Investment to the Filer. The Filer presented operating metrics that 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 metrics are generally consistent with the results of the asset test and the investment test.

 

12.          The Filer is of the view that the asset test, the investment test and these alternative financial and operating metrics much more closely reflect the actual significance of the 2018 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”

Manager, Corporate Finance