Capstone Infrastructure to boost capacity via Sprott buy

Jul 4, 2013 - Capstone Infrastructure Corp (TSE:CSE) will buy Sprott Power Corp (TSE:RDZ) in a CAD-70-million (USD 66.6m/EUR 51.2m) deal that would form a company with nearly 550 MW of operating and contracted power assets in Canada.

The business that will result from the tie-up will have power generation facilities across the country with about 465 MW of installed capacity, including 95 MW of operating wind farms in Nova Scotia and Ontario, plus an additional 79 MW of wind projects under construction. Furthermore, it will benefit from international investments in regulated water and district heating activities.

Under the terms, the stockholders of Sprott, now known as Renewable Energy Developers Inc (ReD), will exchange each of their shares for 0.26 of a Capstone common share plus CAD 0.001 in cash, for a total value of CAD 1.01 apiece. Once the transaction is closed, which is expected to happen in September, the existing stockholders of Capstone will hold an 80% stake in the enlarged entity, while those of ReD will own the rest.

The scheme needs to be approved by at least two-thirds of ReD’s stockholders as well as by those of the buyer at their respective meetings in August. In addition, it is subject to regulatory and court clearance.

Following completion, Capstone anticipates to assume some CAD 129 million in project-level long-term debt and around CAD 34.5 million of the target’s outstanding 6.75% convertible debentures. The purchaser also estimates it will report an adjusted EBITDA of between CAD 115 million and CAD 125 million for fiscal 2013 in the event that the transaction wraps up before end-September 2013.

(CAD 1.0 = USD 0.950/EUR 0.731)

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