Atlantic Power Corporation (TSX: ATP) (NYSE: AT) ("Atlantic
Power" or the "Company") and Capital Power Income L.P. (TSX:
CPA.UN) ("CPILP" or the “Partnership”) jointly announced today that
they have entered into an arrangement agreement (the "Agreement")
pursuant to which Atlantic Power will acquire, directly and
indirectly, all of the outstanding limited partnership units of
CPILP for Cdn$19.40 per limited partnership unit, payable in cash
or shares of Atlantic Power (the “Transaction”).
The agreed price of Cdn$19.40 represents a 4.1% premium to the
CPILP closing price of Cdn$18.63 on June 17, 2011 and a 6.8%
premium to the Partnership's volume-weighted average trading price
for the 30 days leading up to October 5, 2010, the day on which
CPILP announced it was undertaking a strategic review process.
In connection with Atlantic Power’s acquisition of CPILP, CPILP
will sell its Roxboro and Southport facilities located in North
Carolina (the “North Carolina Assets”) to an affiliate of Capital
Power Corporation (TSX: CPX) (“Capital Power”). The Transaction
values the North Carolina Assets at approximately Cdn$121 million.
This Transaction will have the effect of reducing the number of
CPILP units outstanding by approximately 6.2 million units.
Additionally, in connection with the Transaction, the management
agreement between Capital Power and CPILP will be terminated (or
assigned to Atlantic Power) in consideration of a payment of Cdn$10
million. Atlantic Power will assume the management of CPILP and
enter into a transitional services agreement with Capital Power for
a term of up to 12 months following closing, that will facilitate
the integration of CPILP into Atlantic Power.
Highlights of the Transaction
- Atlantic Power will become a leading
publicly-traded power generation and infrastructure company, with a
larger and more diversified portfolio of contracted power
generation assets in the United States and Canada
- Atlantic Power’s market capitalization
and enterprise value should nearly double, which is expected to add
liquidity and enhance access to capital to fuel the long term
growth of the Company’s asset base throughout North America
- Both company’s equity holders are
expected to enjoy strengthened dividend sustainability for the
foreseeable future with immediate accretion to cash available for
distribution
- CPILP unitholders will benefit from the
opportunity to participate in Atlantic Power’s growth
- CPILP unitholders can elect to receive
Cdn$19.40 in cash or 1.30 shares of ATP for each CPILP unit,
subject to allocation limits; share election will qualify CPILP
unitholders to obtain a tax free rollover to the extent
permitted
- Upon closing, the Company intends to
increase dividends by 5%, from Cdn$1.094 to Cdn$1.15 per share on
an annual basis
- Atlantic Power’s headquarters will
remain in Boston, with additional offices in Chicago, Toronto, and
Richmond, B.C. resulting from the integration of the two
companies
- Combines Atlantic Power’s proven
management team with CPILP’s highly qualified operations,
maintenance, commercial management, accounting, human resources,
legal and other personnel
- Expected to be completed in the fourth
quarter of 2011, subject to customary approvals including
unitholder and shareholder approvals
"This is a transformative transaction for Atlantic Power," said
Barry Welch, President and Chief Executive Officer of Atlantic
Power. "CPILP has an attractive high-quality portfolio of
contracted power generation assets located in Canada and the United
States that are a unique, strategic fit with Atlantic Power. Our
combined generating capacity and geographic footprint leaves us
extremely well positioned to continue providing a stable dividend
to our shareholders. Moreover, we are extremely pleased by the
calibre of the employees that we have met at CPILP, and are excited
to be welcoming them to the Atlantic Power team. We believe that,
together, we can continue to grow the Company and achieve
operational excellence across the board. In the coming weeks, we
look forward to introducing Atlantic Power to CPILP's unitholders
and employees and sharing our thoughts on the transaction as well
as on the future growth of Atlantic Power."
The Transaction is a result of the strategic review process
undertaken by the Partnership that was publicly announced on
October 5, 2010. The strategic review process was undertaken by a
special committee of independent directors of CPI Income Services
Ltd., the general partner of CPILP, in co-operation with Capital
Power and included an evaluation of a broad range of alternatives
for CPILP.
Francois L. Poirier, Chairman of the special committee of
independent directors of CPI Income Services Ltd., said "the
special committee has unanimously recommended that unitholders vote
in favour of the transaction, as we believe it is in the best
interests of CPILP and is the best option available following our
strategic review process."
Stuart Lee, President of the general partner of CPILP, said, "we
are delighted to be entering into this transaction with Atlantic
Power and believe that the transaction provides fair value and the
ability to receive Atlantic Power’s shares provides future upside
through ownership of the combined company. Cooperation under the
transitional services agreement should facilitate the smooth and
orderly integration of CPILP's assets and employees into Atlantic
Power."
Effect of the Acquisition on Atlantic Power's Asset
Base
As a result of the Transaction, Atlantic Power will emerge as a
leading publicly traded, power generation and infrastructure
company with a well diversified portfolio of assets in the United
States and Canada. The Transaction will increase the net generating
capacity of the Company’s projects by 143% from 871 MW to
approximately 2,116 MW. The combined portfolio of assets will
consist of interests in 30 operational power generation projects
across 11 states and 2 provinces, one 53 MW biomass project under
construction in Georgia, and an 84-mile, 500 kilovolt electric
transmission line located in California. Atlantic Power will remain
headquartered in Boston and will add offices in Chicago, Toronto,
and Richmond, B.C. Atlantic Power will be adding personnel from
Capital Power who have a strong track record of managing, operating
and maintaining CPILP's assets, allowing the Company to have direct
control across the vast majority of its portfolio by taking
advantage of the valuable expertise of its new personnel.
Atlantic Power Dividend Increase Following Close of
Transaction
The Transaction is expected to be immediately accretive to cash
available for distribution following the closing of the
Transaction. As a result, Atlantic Power intends to increase its
dividend by 5% from Cdn$1.094 per share to Cdn$1.15 per share on an
annual basis following the closing of the Transaction. Atlantic
Power’s dividend will continue to be paid monthly.
CPILP Unitholders Entitled to Continued Distribution through
Closing
The Partnership is entitled under the Agreement and intends to
continue to pay its monthly distributions, equal to Cdn$1.76 per
limited partnership unit on an annual basis, through the month
preceding the month of closing.
Transaction Details
The Transaction will be effected by way of a court approved
statutory plan of arrangement pursuant to the Canada Business
Corporations Act (the “Arrangement”). Under the terms of the
Arrangement, Partnership unitholders will be permitted to exchange
each of their limited partnership units for, at their election,
Cdn$19.40 in cash or 1.30 Atlantic Power common shares (the "Merger
Consideration"). All cash elections will be subject to proration if
total cash elections exceed Cdn$506.5 million and all share
elections will be subject to proration if total share elections
exceed approximately 31.4 million Atlantic Power common shares. As
part of the Arrangement, Atlantic Power will acquire all of the
outstanding shares of CPI Investments Inc. (an entity indirectly
owned by EPCOR Utilities Inc. and Capital Power), the direct and
indirect holder of 16,513,504 units of CPILP, on effectively the
same basis as the acquisition of units of CPILP under the
Arrangement.
Capital Power will be subject to a customary 90 day lock-up
agreement with respect to any Atlantic Power shares it receives as
part of the Transaction. The Agreement includes a customary mutual
non-solicit clause.
Partnership unitholders that are not exempt from Canadian income
tax and that receive Atlantic Power shares under the arrangement
may make a joint election with Atlantic Power to enable them to
exchange their limited partnership units on a tax-deferred basis to
the extent permitted.
Non-residents of Canada, and any partnership that is not a
"Canadian partnership" (each within the meaning of the Income Tax
Act (Canada)), are not eligible to own limited partnership units of
CPILP.
Atlantic Power has obtained committed debt financing sufficient
to enable it to pay the cash portion of the merger consideration,
but plans to conduct public and/or private offerings of
approximately Cdn$423 million of debt and approximately Cdn$200
million of equity prior to closing to fund the cash portion of the
purchase price and to refinance certain existing short-term debt of
CPILP.
Following the completion of the Transaction, Atlantic Power will
maintain its listings on the New York Stock Exchange and Toronto
Stock Exchange under the symbols AT and ATP, respectively, and the
preferred shares of CPI Preferred Equity Ltd. will remain
outstanding and listed on the Toronto Stock Exchange.
Board Approvals and Fairness Opinions
The Agreement has been unanimously approved by the boards of
directors of each of Atlantic Power and the general partner of
CPILP. The board of directors of CPILP has received opinions from
each of CIBC World Markets Inc. (“CIBC”) and Greenhill & Co.
Ltd. (“Greenhill”) stating that, as of the date thereof, and
subject to the assumptions, limitations and qualifications set
forth therein, the consideration to be received by limited
partnership unitholders of CPILP pursuant to the arrangement
agreement is fair from a financial point of view to unitholders
(other than Capital Power). CIBC has also provided an opinion to
the board of directors of the general partner of CPILP that the
consideration to be received by CPILP for the North Carolina Assets
is fair, from a financial point of view, to the Partnership.
TD Securities Inc. and Morgan Stanley & Co. LLC are acting
as financial advisors and Goodmans LLP is acting as lead legal
counsel to Atlantic Power along with Goodwin Procter LLP and
Leonard, Street and Deinard.
CIBC and Greenhill are acting as financial advisors to CPILP.
Fraser Milner Casgrain LLP and K&L Gates LLP are acting as
legal counsel to the Manager of CPILP and Norton Rose OR LLP and
Richard Shaw Professional Corporation are acting as counsel to
CPILP.
Regulatory Matters and Other Closing Conditions
Completion of the Transaction is subject to customary closing
conditions, including, among others: Canadian court approvals; a
favourable vote by CPILP unitholders; a favourable vote by the
Atlantic Power shareholders; and the receipt of all necessary
regulatory approvals.
Each of CPILP and Atlantic Power will call a meeting to approve
the Transaction (in the case of CPILP) and the share issuance
portion of the merger consideration (in the case of Atlantic
Power). In connection with such meetings, each of CPILP and
Atlantic Power will mail proxy statements/information circulars
providing further details of the Transaction. The Agreement
includes a customary non-solicit clause.
Investor Conference Call and Webcast
A telephone conference call hosted by Atlantic Power's and
CPILP’s management teams will be held on Monday, June 20, 2011 at
10:00 AM ET. The telephone numbers for the conference call are:
Local/International: (416) 849-2698, North American Toll Free:
(866) 400-2270. The conference call will also be broadcast over
Atlantic Power's and CPILP’s websites at www.atlanticpower.com and
www.capitalpowerincome.ca. Please call or log in 10 minutes prior
to the call. The telephone numbers to listen to the conference call
after it is completed (Instant Replay) are Local/International:
(416) 915-1035, North American Toll Free (866) 245-6755. Please
enter the passcode 474023# when instructed. The conference call
will also be archived on both company’s web sites.
About Atlantic Power
Atlantic Power owns and operates a diverse fleet of power
generation and infrastructure assets in the United States. Atlantic
Power’s generation projects sell electricity to utilities and other
large commercial customers under long-term power purchase
agreements, which seek to minimize exposure to changes in commodity
prices. Atlantic Power’s power generation projects in operation
have an aggregate gross electric generation capacity of
approximately 1,948 MW in which its ownership interest is
approximately 871 MW. Atlantic Power’s corporate strategy is to
generate stable cash flows from its existing assets and to make
accretive acquisitions to sustain its dividend payout to
shareholders, which is currently paid monthly at an annual rate of
Cdn$1.094 per share. Atlantic Power’s current portfolio consists of
interests in 12 operational power generation projects across nine
states, one 53 MW biomass project under construction in Georgia,
and an 84-mile, 500 kilovolt electric transmission line located in
California. Atlantic Power also owns a majority interest in
Rollcast Energy, a biomass power plant developer with several
projects under development.
Atlantic Power trades on the New York Stock Exchange under the
symbol AT, on the Toronto Stock Exchange under the symbol ATP and
has a market capitalization of approximately $1.0 billion. For more
information, please visit the Company's website at
www.atlanticpower.com.
About CPILP
Established in 1997, CPILP's portfolio includes 19 wholly-owned
power generation assets located in Canada and the United States and
a 50.15 per cent interest in a power generation asset in Washington
State. CPILP's assets have a total net generating capacity of 1,400
MW and more than four million pounds per hour of thermal energy.
For more information, please visit CPILP's website at
www.capitalpowerincome.ca.
Cautionary Note Regarding Forward-looking Statements
To the extent any statements made in this news release contain
information that is not historical, these statements are
forward-looking statements within the meaning of Section 27A of the
U.S. Securities Act of 1933, as amended, and Section 21E of the
U.S. Securities Exchange Act of 1934, as amended and under Canadian
securities law (collectively, "forward-looking statements").
These forward-looking statements relate to, among other things,
the expected benefits of the proposed transaction between Atlantic
Power and CPILP, such as accretion, the ability to pay dividends,
enhanced cash flow, growth potential, liquidity and access to
capital, market profile and financial strength; the position of the
combined company; and the expected timing of the completion of the
Transaction.
Forward-looking statements can generally be identified by the
use of words such as “should”, “intend, , “may”, “expect”,
"believe", "anticipate", "estimate", "continue", "plan", "project",
"will", "could", "would", "target", "potential" and other similar
expressions. In addition, any statements that refer to
expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. Although
Atlantic Power and CPILP believe that the expectations reflected in
such forward-looking statements are reasonable, such statements
involve risks and uncertainties, and undue reliance should not be
placed on such statements. Certain material factors or assumptions
are applied in making forward-looking statements, including, but
not limited to, factors and assumptions regarding the items
outlined above. Actual results may differ materially from those
expressed or implied in such statements. Important factors that
could cause actual results to differ materially from these
expectations include, among other things:
- the failure to receive, on a timely
basis or otherwise, the required approvals by Atlantic Power
shareholders, CPILP unitholders and government or regulatory
agencies (including the terms of such approvals);
- the risk that a condition to closing of
the Transaction may not be satisfied;
- the possibility that the anticipated
benefits and synergies from the proposed transaction cannot be
fully realized or may take longer to realize than expected;
- the possibility that costs or
difficulties related to the integration of Atlantic Power and CPILP
operations will be greater than expected;
- the ability of the combined company to
retain and hire key personnel and maintain relationships with
customers, suppliers or other business partners;
- the impact of legislative, regulatory,
competitive and technological changes; the risk that the credit
ratings of the combined company may be different from what the
companies expect;
and other risk factors relating to the power industry, as
detailed from time to time in Atlantic Power's filings with the
United States Securities and Exchange Commission ("SEC") and the
Canadian Securities Administrators ("CSA"), and CPILP's filings
with the CSA. There can be no assurance that the proposed
transaction will in fact be consummated. Neither Atlantic Power nor
CPILP undertakes any obligation to update or revise any
forward-looking statement, except as may be required by law.
Additional Information
In connection with the proposed transaction, Atlantic Power
Corporation ("Atlantic Power") plans to file with a registration
statement on Form S-4 with the United States Securities and
Exchange Commission (“SEC”) that will include a joint proxy
statement/management circular of Atlantic Power and Capital Power
Income L.P. (“CPILP”) that will also constitute a prospectus of
Atlantic Power. Atlantic Power and CPILP will mail the joint proxy
statement/prospectus to their respective stock and unitholders.
INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS
AND ALL OTHER RELEVANT MATERIALS THAT MAY BE FILED WITH THE SEC
WHEN THEY BECOMES AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. You will be able to obtain the joint proxy
statement/prospectus, as well as other filings containing
information about Atlantic Power and CPILP, free of charge, at the
website maintained by the SEC at www.sec.gov, at the website
maintained by the Canadian Securities Administrators ("CSA") at
www.sedar.com or at Atlantic Power's website, www.atlanticpower.com
or by writing Atlantic Power at the
following: Atlantic Power Corporation, 200 Clarendon Street, Floor
25, Boston, Massachusetts 02116, or telephoning Atlantic Power at
(617) 977-2400.
The respective directors and executive officers of Atlantic
Power and CPILP, and other persons, may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information regarding Atlantic Powers'
directors and executive officers is available in its definitive
proxy statement filed with the SEC on May 2, 2011, and information
regarding CPILP's directors and executive officers is available in
its Annual Information Form filed on March 11, 2011 at
www.sedar.com. These documents can be obtained free of charge from
the sources indicated above. Other information regarding the
interests of the participants in the proxy solicitation will be
included in the joint proxy statement/prospectus and other relevant
materials to be filed with the SEC and CSA when they become
available.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
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