CDPQ acquires 25% of UK';s First Hydro Company from Brookfield

Rhea-AI Summary

CDPQ, a global investment group, has announced an agreement with Brookfield Asset Management (NYSE: BAM) and its partners to acquire a 25% stake in First Hydro Company, a critical electricity generation and storage facility in the United Kingdom. First Hydro operates two power plants in Wales, offering a capacity of over 2,000 MW, representing 76% of the UK's total pumped hydro storage. This infrastructure is important for the country's increasing grid flexibility and stability needs.

The investment marks CDPQ's first venture into pumped hydro storage, partnering with Engie, which owns the remaining 75%. Emmanuel Jaclot, CDPQ's Executive VP and Head of Infrastructure, highlighted First Hydro's critical role in managing the UK's national electricity system and meeting net zero commitments. The financial close is expected by the end of 2024, subject to customary conditions and approvals.

Positive

• Acquisition of a 25% stake in a critical national infrastructure
• First Hydro represents 76% of UK's total pumped hydro storage capacity
• Over 2,000 MW capacity, important for grid flexibility and stability
• Partnership with Engie, a world leader in the energy sector
• Supports UK's net zero commitment through renewable electricity and storage

Negative

• None.

Insights

Financial Analyst

This acquisition by CDPQ of a 25% stake in First Hydro Company from Brookfield is a significant move in the UK's energy infrastructure sector. First Hydro's 2,000 MW capacity, representing 76% of the UK's total pumped hydro storage, positions it as a critical asset for grid stability and renewable energy integration.

For Brookfield (BAM), this deal likely represents a strategic divestment, potentially allowing them to reallocate capital to other growth opportunities or optimize their portfolio. While the financial terms aren't disclosed, such infrastructure assets typically command premium valuations due to their strategic importance and stable cash flows.

Investors should note that this transaction aligns with the global trend towards renewable energy and grid flexibility investments. It may signal Brookfield's shift in focus within the energy sector, possibly towards newer technologies or markets with higher growth potential. The impact on BAM's financials will depend on the sale price and how they utilize the proceeds, which will be important to watch in upcoming earnings reports.

Energy Infrastructure Expert

The acquisition of a 25% stake in First Hydro Company by CDPQ is a strategic move in the evolving UK energy landscape. Pumped hydro storage is becoming increasingly valuable as the grid integrates more intermittent renewable sources like wind and solar.

First Hydro's facilities in Dinorwig and Ffestiniog are not just power generators; they act as massive batteries, storing excess energy during low demand and releasing it during peak times. This capability is important for maintaining grid stability and managing the variability of renewable energy sources.

For investors, this deal highlights the growing importance of energy storage in renewable-heavy grids. It may spark increased interest in similar assets and technologies. The transaction also underscores the attractiveness of established infrastructure to institutional investors seeking long-term, stable returns in the energy transition era.

• Investment in a critical national infrastructure providing 76% of the United Kingdom's total pumped hydro storage capacity

MONTRÉAL and LONDON, Sept. 24, 2024 /PRNewswire/ - CDPQ, a global investment group, today announced it has entered into an agreement with Brookfield Asset Management (NYSE: BAM) (TSX: BAM) and its institutional partners, including its listed affiliate Brookfield Renewable (NYSE: BEP) (NYSE: BEPC) (TSX: BEP.UN) (TSX: BEPC) (together "Brookfield"), to acquire its 25% stake in First Hydro Company, a critical electricity generation and storage facility in the United Kingdom. Engie is the majority shareholder who owns the remaining 75% of the company.

Responsible for the management and operation of two power plants at Dinorwig and Ffestiniog in the Snowdonia region of Wales, First Hydro offers a capacity of more than 2,000 MW, representing 76% of the total pumped hydro storage in the United Kingdom, making it a critical infrastructure to face the country's increasing needs of grid flexibility and stability.

"First Hydro is playing a critical role in helping the United Kingdom manage its national electricity system and meet its net zero commitment by providing renewable electricity and storage capabilities," said Emmanuel Jaclot, CDPQ's Executive Vice-President and Head of Infrastructure. "This investment marks CDPQ's first foray into pumped hydro storage, and we are delighted to join forces with Engie, a longstanding partner for CDPQ and a world leader in the energy sector."

"We are pleased to have supported First Hydro throughout our ownership period including securing its long-term future through active management of the business. First Hydro will continue to provide considerable renewable power to the U.K. long into the future," said Ignacio Gomez-Acebo, Managing Director at Brookfield.

Financial close is expected by end of 2024, subject to customary closing conditions and relevant consents and approval.

ABOUT CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at June 30, 2024, CDPQ's net assets totalled CAD 452 billion. For more information, visit cdpq.com, consult our LinkedIn or Instagram pages, or follow us on X.

CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.

About Brookfield Asset Management
Brookfield Asset Management Ltd. (NYSE: BAM, TSX: BAM) is a leading global alternative asset manager with approximately $1 trillion of assets under management. We invest client capital for the long-term with a focus on real assets and essential service businesses that form the backbone of the global economy. We offer a range of alternative investment products to investors around the world — including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors.

Brookfield operates Brookfield Renewable Partners (NYSE: BEP, TSX: BEP), one of the world's largest publicly traded platforms for renewable power and sustainable solutions. Our renewable power portfolio totals over 34,000 megawatts and our development pipeline stands at approximately 200,000 megawatts. Our portfolio of sustainable solutions assets includes our investments in Westinghouse (a leading global nuclear services business) and a utility and independent power producer with operations in the Caribbean and Latin America, as well as both operating assets and a development pipeline of carbon capture and storage capacity, agricultural renewable natural gas and materials recycling. 

For more information
CONRAD HARRINGTON
Senior Director – International Media Relations
+ 1 514 847-5493
charrington@cdpq.com

JOHN HAMLIN
Manager – Communications
+44 743 605 4717
john.hamlin@brookfield.com

View original content:https://www.prnewswire.com/news-releases/cdpq-acquires-25-of-uks-first-hydro-company-from-brookfield-302256332.html

SOURCE CDPQ

FAQ

What percentage of First Hydro Company did CDPQ acquire from Brookfield (BAM)?

CDPQ acquired a 25% stake in First Hydro Company from Brookfield Asset Management (BAM) and its partners.

What is the significance of First Hydro Company in the UK energy market?

First Hydro Company represents 76% of the total pumped hydro storage capacity in the United Kingdom, making it a critical infrastructure for grid flexibility and stability.

When is the financial close of CDPQ's acquisition of First Hydro Company expected?

The financial close of the acquisition is expected by the end of 2024, subject to customary closing conditions and relevant consents and approvals.

How does First Hydro Company contribute to the UK's net zero commitment?

First Hydro Company helps the UK meet its net zero commitment by providing renewable electricity and storage capabilities, important for managing the national electricity system.