TERRAFORM GLOBAL, INC. (NASDAQ:GLBL) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
Entry into a Material Definitive Agreement.
Merger Agreement and Voting and Support Agreement
On March 6, 2017, TerraForm Global, Inc., a Delaware corporation
(the Company), entered into an Agreement and Plan of
Merger (the Merger Agreement) with Orion US Holdings 1
L.P. (Parent), a Delaware limited partnership, an
affiliate of Brookfield Asset Management Inc.
(Brookfield), and BRE GLBL Holdings Inc., a Delaware
corporation and wholly owned subsidiary of Parent (Merger
Sub), providing for the merger of Merger Sub with and into
the Company (the Merger), with the Company surviving as a
wholly owned subsidiary of Parent. Concurrently with the
announcement of the Merger Agreement, Brookfield and TerraForm
Power, Inc. (TERP) announced the entry into a Merger and
Sponsorship Transaction Agreement, dated March 6, 2017 by and
among TERP, a Delaware corporation, Parent, and BRE TERP Holdings
Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (BRE TERP Holdings), to which BRE TERP Holdings
will be merged with and into TERP and TERP will survive the
merger as a subsidiary of Parent in which Parent will hold an
approximately 51% interest.
The proposed Merger was approved by the board of directors of the
Company (the Board of Directors), following the
recommendation of its Corporate Governance and Conflicts
Committee (the Conflicts Committee). Completion of the
Merger is expected to occur, subject to satisfaction of closing
conditions, in the second half of 2017.
As a result of the Merger, each share of Class A common stock of
the Company, par value $0.01 per share (the Class A
Shares), issued and outstanding immediately prior to the
effective time of the Merger (other than Class A Shares that are
(i) owned by the Company, Parent or any of their direct or
indirect wholly owned subsidiaries and not held on behalf of
third parties, (ii) owned by stockholders who have perfected and
not withdrawn a demand for appraisal rights to Section 262 of the
Delaware General Corporation Law or (iii) held by any direct or
indirect wholly owned subsidiary of the Company that is taxable
as a corporation (the foregoing clauses (i) – (iii),
collectively, the Excluded Shares)), will be converted
into the right to receive per share Merger consideration equal to
$5.10 per Class A Share in cash, without interest.
Concurrently with the execution and delivery of the Merger
Agreement, SunEdison, Inc. (SunEdison) and certain of its
affiliates executed and delivered a voting and support agreement
with Brookfield and the Company (the Voting and Support
Agreement) to which it agreed to vote or cause to be voted
any shares of common stock, par value $0.01 per share, of the
Company (each, a Share and, collectively, the
Shares) held by it or any of its controlled affiliates in
favor of the Merger and to take certain other actions to support
the consummation of the Merger and the other transactions
contemplated by the Merger Agreement. The foregoing description
of the Voting and Support Agreement does not purport to be
complete and is subject to, and qualified in its entirety by, the
full text of the Voting and Support Agreement attached hereto as
Exhibit 2.3, which is incorporated herein by reference.
The Merger Agreement includes a non-waivable condition to closing
that the Merger Agreement and the transactions contemplated by
the Merger Agreement be approved by holders of a majority of the
outstanding Class A Shares, excluding all Class A Shares held by
SunEdison or any of its affiliates (SunEdison Class A
Shares) and Parent or any of its affiliates.
Closing of the Merger also is subject to certain other
conditions, including the adoption of the Merger Agreement by
the holders of a majority of the total voting power of the
outstanding Shares entitled to vote on the Merger, receipt of
certain regulatory approvals, and the entry by the United
States Bankruptcy Court for the Southern District of New York
(the Bankruptcy Court) of orders authorizing and
approving the entry by SunEdison (and if, applicable,
SunEdisons debtor affiliates) into the Settlement Agreement,
the Voting and Support Agreement and any other agreement
entered into in connection with the Merger or the other
transactions contemplated by the Merger Agreement to which
SunEdison or any other debtor will be a party (the
Bankruptcy Court Order). In addition, Parents and Merger
Subs obligations to consummate the Merger are subject to the
requirement that certain litigation has been finally dismissed
with prejudice or the settlement thereof has been submitted for
court approval in a manner reasonably satisfactory to Parent to
agreements or stipulations containing releases reasonably
satisfactory to Parent, and all final approvals of courts or
regulatory authorities required for the settlements and
releases to become final, binding and enforceable; provided,
however, that in no event will a settlement of certain claims
made by a Renova Energia, S.A. include an aggregate payment by
the Company and its subsidiaries of greater than $3,000,000
(net of any amounts funded directly or indirectly by insurance
proceeds). In the event that this condition has not been
satisfied when all other conditions to closing are satisfied
(other than those that by their nature are satisfied or waived
at closing), Parent and the Company have agreed to negotiate in
good faith to adjust, or defer a portion of, the $5.10 in cash
per Class A Share otherwise payable to the terms of the Merger
Agreement so that this condition will be satisfied.
Each of the Company, Parent and Merger Sub has made customary
representations and warranties in the Merger Agreement. The
Company has also agreed to various agreements and covenants,
including, among others, and subject to certain exceptions, to
conduct its business in the ordinary course between execution
of the Merger Agreement and closing of the Merger and not to
engage in certain specified types of transactions during such
period.
In addition, the Company is subject to a no change of
recommendation restriction limiting its ability to change its
recommendation in respect of the Merger except as permitted by
the Merger Agreement and a no shop restriction on its ability
to solicit alternative acquisition proposals from third parties
and to provide information to, and engage in discussions with,
third parties regarding alternative acquisition proposals.
The Merger Agreement contains specified termination rights,
including the right for each of the Company and Parent to
terminate the Merger Agreement if the Merger is not consummated
by December 6, 2017 (subject to a three-month extension under
certain circumstances at the discretion of either the Company
or Parent). The Merger Agreement provides for other customary
termination rights for both the Company and Parent (including,
for Parent, if the Board of Directors changes its
recommendation in respect of the Merger) as more particularly
set forth in the Merger Agreement. The Company is required to
pay Parent a termination fee equal to $30 million following
termination of the Agreement in the following circumstances:
(i) the requisite stockholder approval has not been obtained by
the termination date, and an alternative acquisition proposal
to acquire the Company has been made or announced, and within
12 months of the termination of the Merger Agreement, the
Company enters into a definitive agreement or consummates any
alternative acquisition (as defined in the Merger Agreement),
in such case, net of any expense fee paid by the Company to
Parent in connection with the Merger; (ii) if either party
terminates the Merger Agreement because the Bankruptcy Court
Order has not been entered by the Bankruptcy Court by the date
provided for such approval in the Settlement Agreement, and
within 12 months of the termination of the Merger Agreement,
the Company enters into a definitive agreement or consummates
any alternative acquisition (as defined in the Merger
Agreement), in such case, net of any expense fee paid by the
Company to Parent in connection with the Merger; (iii) if
either party terminates the Merger Agreement because the
requisite stockholder approval has not been obtained or because
the Agreement has not been consummated by the termination date,
and at the time of termination, the Board of Directors has
changed its recommendation in respect of the Merger; or (iv) if
Parent terminates the Merger Agreement because the Board of
Directors has made and not withdrawn a change of recommendation
in respect of the Merger and at the time of Parents termination
the Company has not obtained the requisite stockholder approval
of the Merger or the Bankruptcy Court Order has not been
entered by the Bankruptcy Court. In addition, if the Merger
Agreement is terminated, under certain circumstances, the
Company has agreed to pay to Parent an $8 million expense
reimbursement fee.
The representations, warranties and covenants of the Company
contained in the Merger Agreement have been made solely for
the benefit of Parent and Merger Sub. In addition, such
representations, warranties and covenants (a) have been made
only for purposes of the Merger Agreement, (b) have been
qualified by confidential disclosures made to Parent and
Merger Sub in connection with the Merger Agreement, (c) are
subject to materiality qualifications contained in the Merger
Agreement that may differ from what may be viewed as material
by investors and (d) have been included in the Merger
Agreement for the purpose of allocating risk among the
contracting parties rather than establishing matters as
facts. Accordingly, the Merger Agreement is included with
this filing only to provide investors with information
regarding the terms of the Merger Agreement, and not to
provide investors with any other factual information
regarding the Company or its business. Investors should not
rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state
of facts or condition of the Company or any of its
subsidiaries or affiliates. Moreover, information concerning
the subject matter of the representations and warranties may
change after the date of the Merger Agreement, which
subsequent information may or may not be fully reflected in
the Companys public disclosures. The Merger Agreement should
not be read alone, but should instead be read in conjunction
with the other information regarding the Company that is or
will be contained in, or incorporated by reference into, the
Forms 10-K, Forms 10-Q and other documents that the Company
files with the Securities and Exchange Commission (the
SEC).
The foregoing description of the Merger Agreement, the Merger
and the transactions contemplated by the Merger Agreement
does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Merger
Agreement attached hereto as Exhibit 2.1, which is
incorporated herein by reference.
Settlement Agreement
The Company also entered into a settlement agreement with
SunEdison and certain other parties named therein (the
Settlement Agreement) to which the Company and
SunEdison released all intercompany claims in connection with
the SunEdison bankruptcy (with certain exceptions). In
consideration for such release, SunEdison will exchange,
effective as of immediately prior to the effective time of
the Merger, all of the Class B Units (as defined in the
Merger Agreement) of TerraForm Global, LLC held by it or any
of its controlled affiliates for a number of Class A Shares
equal to 25% of the issued and outstanding Class A Shares (on
a fully diluted basis) measured as of immediately prior to
the effective time of the Merger (the Exchange). As a
result of and following completion of the Exchange, all of
the issued and outstanding shares of Class B common stock,
par value $0.01 per share, of the Company will be redeemed
and retired and all issued and outstanding IDRs (as defined
in the Merger Agreement) will be cancelled.
The foregoing description of the Settlement Agreement does
not purport to be complete and is subject to, and qualified
in its entirety by, the full text of the Settlement
Agreement attached hereto as Exhibit 2.2, which is
incorporated herein by reference.
Overview of Principal Events Leading to the Merger
Agreement with Brookfield
On March 6, 2017, following the recommendation of the
Conflicts Committee, the Board of Directors (i) determined
that the Merger is fair to, and in the best interests of,
the Company and its stockholders, (ii) approved and
declared advisable the Merger Agreement and the Merger and
the other transactions contemplated by the Merger
Agreement, and resolved to recommend that the holders of
Shares approve the Merger Agreement and the Merger and the
other transactions contemplated by the Merger Agreement,
and (iii) directed that the Merger Agreement be submitted
for adoption and approval by the Companys stockholders.The
Board of Directors recommendation marks the completion of a
strategic review process that was initiated by the Board of
Directors and the Conflicts Committee in May 2016. This
review process was initiated as part of an effort to
preserve and protect stockholder value in connection with
the disruption caused by SunEdisons voluntary filing for
bankruptcy protection to Chapter 11 of the U.S. Bankruptcy
Code on April 21, 2016 (the SunEdison bankruptcy)
and included governance, operations and business
performance initiatives deemed especially critical because
SunEdison provided all personnel and services to the
Company (other than those operational services provided by
third parties).
From May to August 2016, management of the Company
developed a business plan for the Company to operate
independently of SunEdison. The Conflicts Committee and
Board of Directors reviewed in detail the Companys business
plan under various scenarios, including the attendant
execution risks. The business planning process addressed
multiple areas, including the Companys business model,
growth prospects, dividend targets, organization design,
investment strategy, capital structure, competitive
position, project operations, corporate costs and other
factors. The Companys financial advisors evaluated the
strategic and financial implications of the Companys plan
to operate on a stand-alone basis (without a sponsor), and
its resulting competitive position in the global market for
renewable energy assets.
Following completion of a stand-alone business plan
reflecting the absence of SunEdisons sponsorship and
support, the Board of Directors, based upon the
recommendation of the Conflicts Committee, expanded the
strategic review process to include an exploration and
evaluation of all potential strategic alternatives to
maximize stockholder value, including potential
transactions to secure a new sponsor or to sell the
Company. In particular, the Company, acting on the
authority or recommendation of the Conflicts Committee,
undertook the following initiatives over this year-long
process:
Developed an emergency plan to provide continuity
in the Companys operations and cash flows
following the disruption in services provided by
SunEdison, and retained AlixPartners LLP to
provide consulting services in planning and
operational functions necessary to preserve the
Companys business;
Amended the limited liability company agreement
of its operating subsidiary to give an
independent conflicts committee the exclusive
power to manage and control business decisions
relating to or involving SunEdison (in light of
the directors serving on the Board of Directors
being subject to removal by SunEdison);
Delegated to the Conflicts Committee, given the
potentially conflicting interests of SunEdison,
oversight of the strategic review process, with a
mandate to be guided solely by consideration of
the best interests of all of the Companys
stockholders and to ensure interactions with
SunEdison were conducted on an arms-length basis;
Increased the directors on the Board of Directors
from seven to ten, seven of whom satisfy NASDAQs
independence standards and four of whom are
independent of both SunEdison and TERP;
Elected to the Conflicts Committee directors who
are independent of both SunEdison and TERP;
Required that all decisions with respect to any
strategic transaction, including the Merger, be
made following a determination that the decision
would be in the best interests of all of the
Companys stockholders and with the consent of a
majority of the independent directors;
Engaged financial and legal advisors, including
Centerview Partners LLC (Centerview), as
joint financial advisor with TERP, and Greentech
Capital Advisors (Greentech), as
independent financial advisor, as well as
Sullivan Cromwell LLP, as legal advisor, in
addition to Greenberg Traurig, LLP, the Conflicts
Committees legal advisor, and Robbins, Russell,
Englert, Orseck, Untereiner Sauber LLP, as legal
advisor to the independent directors who are not
also directors of TERP;
Developed a process and protocol for
collaborating with SunEdison in the strategic
alternatives process on an arms-length basis,
with the goal of permitting the Company to
maximize value for its public stockholders,
particularly in light of SunEdisons voting power
and the need to obtain the Bankruptcy Courts
approval for any SunEdison voting decision
regarding a strategic transaction;
Developed a business plan and forecasts assuming
the Company would continue as a stand-alone
entity (without a sponsor) and addressing
multiple areas, including growth prospects,
dividend targets, organizational design,
investment strategy, capital structure,
competitive position, project operations and
corporate costs (the Stand-Alone Plan);
Engaged in a detailed review of the Stand-Alone
Plan, including key execution risks and financial
analyses, in consultation with financial and
legal advisors, with a view towards determining
whether it was advisable to pursue such a plan or
to pursue a strategic alternatives process which
could lead to a whole Company sale or the
selection of a new sponsor to facilitate the
Companys growth;
Analyzed and filed proofs of claims against
SunEdison and negotiated the Settlement
Agreement on a timeline parallel to the pursuit
of strategic alternatives following the
determination by the Conflicts Committee that a
settlement with SunEdison on an arms-length
basis would likely increase the value that
could be obtained for all stockholders in a
potential strategic transaction; and
Conducted a strategic alternatives process in
which:
o
In the first phase, approximately 190 different
parties were contacted, of which more than 30
entered into non-disclosure agreements,
resulting in the submission of preliminary
non-binding indications of interest by ten
different parties, including five strategic
bidders and five financial bidders;
o
In the second phase, bidders were provided
access to a virtual data room, a draft merger
agreement, management presentations and
meetings, resulting in the submission of offers
from five different parties, including two
financial bidders, two strategic bidders and
Brookfield;
o
Through negotiation, Brookfield submitted a
proposal, described in further detail in the
Companys Current Report on Form 8-K filed by
the Company on January 23, 2017;
o
In weighing various strategic alternatives, the
Board evaluated the value offered to
stockholders, transaction certainty and speed
to closing in considering various bidders;
o
Brookfield was deemed to offer the highest per
share cash price at $4.15 (on a pre-settlement
basis), offered two different sponsorship
proposals, and has a history of closing
renewable energy acquisition transactions and
obtaining prompt regulatory approvals. As a
result, the Board of Directors, following the
recommendation of the Conflicts Committee,
agreed to negotiate exclusively with Brookfield
with respect to a business combination until
11:59 p.m. New York City time on March 6, 2017;
o
During the exclusivity period, the Company
developed a sponsorship business plan and
forecasts in collaboration with Brookfield,
including a potential asset acquisition
pipeline, cash flow projections and capital
structure details, as well as assumptions
regarding costs and fees. The Company reviewed
the business plan under Brookfields
sponsorship, including key execution risks and
financial analyses, in consultation with
financial and legal advisors, with a view
towards determining whether a sponsorship plan
would yield greater value for the Companys
stockholders than the Stand-Alone Plan or a
sale of the Company for cash;
o
Following completion of the sponsorship model
described above, Brookfield withdrew its
sponsorship proposal, noting among other things
that the sponsorship model was unlikely to be
successfully received in the marketplace;
o
Several weeks into the exclusivity period
with Brookfield, the Company also received an
unsolicited offer from Party A for $4.52 per
Class A Share, subject to satisfactory
completion of due diligence and other
conditions;
o
During exclusivity with Brookfield, the Board
of Directors, following the recommendation of
the Conflicts Committee, negotiated with
Brookfield and improved its offer to $4.45
per Class A Share (without giving effect to
the reduced number of outstanding shares that
would result from the Exchange) and which
Brookfield confirmed was its best and final
offer;
o
The $4.45 per Class A Share (pre-settlement
price) offered by Brookfield provided
existing Class A stockholders with $5.10 in
cash after giving effect to the SunEdison
settlement, which provides current Class A
stockholders with 75% of the total
consideration offered to all stockholders;
o
SunEdison stated that it would not support
the Settlement Agreement if the Company
entered into a transaction with Party A;
o
The Board of Directors and the Conflicts
Committee each expressed serious concerns as
to whether Party A would finalize a
transaction at the value it had indicated in
its letter and about the certainty and timing
of closing;
o
The Board of Directors evaluated the
certainty of signing and closing with
Brookfield, which had completed extensive due
diligence, its likely ability to gain
regulatory and other approvals, and the fully
financed nature of its proposal, as well as
the economic value offered to stockholders;
and
o
The terms of the Merger Agreement, the
Settlement Agreement and the Voting and
Support Agreement were robustly negotiated by
the Company, were approved by the Board of
Directors following the recommendation of the
Conflicts Committee, and were executed
substantially concurrently on March 6, 2017.
The Conflicts Committees and Board of Directors
Reasons for the Merger
In evaluating the Merger Agreement and the Merger,
the Conflicts Committee and the Board of Directors
compared a variety of alternatives and considered
numerous factors, including the following
non-exhaustive list of material factors and benefits
of the Merger, each of which the Conflicts Committee
and the Board of Directors believed supported their
respective determinations that a sale for cash at
$5.10 per share was superior to other strategic
alternatives or the Stand-Alone Plan:
the fact that the price offers an attractive
valuation for the Company;
the fact that while the Stand-Alone Plan
could provide the Companys stockholders the
opportunity to participate in potential
future increases in the trading value of the
Companys stock and, in the longer term,
payment of dividends, it was subject to
significant risks:
o
In the Stand-Alone Plan the combination of
the structural challenges described below, a
small market capitalization and an emerging
market geographic business focus made it
unlikely that the equity trading value of
Class A Shares would exceed the cash per
share Merger consideration;
o
In the Stand-Alone Plan the Company would
be subject to risks and costs arising out
of:
the lack of an asset acquisition pipeline
or visible growth trajectory, including the
need to identify suitable renewable energy
projects for investment;
an uncertain capability to compete for
stabilized, equity yield generating
infrastructure as a stand-alone entity
relative to competitors, given the Companys
potentially high cost of capital,
operational challenges and failure to close
certain transactions;
project operating risks, including
irradiance/wind resource, curtailment,
availability, operation and maintenance
costs and merchant pricing;
a limited ability to attract and retain
personnel, including to develop new
projects and to operate and optimize
existing fleet operations;
a business model that focuses exclusively
on emerging markets (as compared to a
traditional yieldco focus on developed
markets) with exposure to emerging market
macroeconomic and political risks as well
as the risks associated with interest rate
increases and fluctuations in currency
exchange rates (including potentially
negative effects on CAFD (as defined below)
by reducing the Companys ability to
repatriate cash) and the challenges of
re-investing free cash flow of a specific
currency in attractive development projects
of the same currency;
the uncertainty of investors appetite for
the Companys equity securities in light of
the significant erosion in stockholder
value since the Companys initial public
offering;
the requirement that the Company would need
to cure defaults and comply with high yield
covenants in its existing debt, making it
difficult to pay dividends or reinvest
cash;
existing noteholders willingness to accept
a tender at a lower premium than the
make-whole amount; and
the need for the Company to refinance its
corporate debt and obtain new project debt
on existing assets on favorable terms;
the Companys financial condition and
reputation in the power industry, its high
cost of capital and the uncertainty of its
ability to access capital markets, combined
with the Conflicts Committees and the Board
of Directors assessment of macroeconomic
factors and uncertainty around forecasted
economic conditions, both in the near and
the long term, and within the renewable
power industry in emerging markets
countries in particular;
the opinions of Centerview and Greentech,
each dated March 6, 2017, to the effect
that, as of that date and based upon and
subject to the various assumptions made,
procedures followed, matters considered and
limitations on the review undertaken set
forth in each respective opinion, that the
Merger consideration of $5.10 per Class A
Share in cash to be received by the holders
of the Class A Shares in the Merger is fair
from a financial point of view, as of the
date of such opinion, to such holders
(other than Parent and its subsidiaries),
as will be disclosed in the proxy statement
that the Company intends to file with the
SEC as described below under Additional
Information and Where to Find It;
the financial condition and reputation of
Brookfield and its and Parents ability to
pay the Merger consideration of $5.10 per
Class A Share in cash out of cash on hand
sources without a financing condition to
the Merger;
the belief that Brookfield, as a seasoned
and well-known operator in the renewable
energy industry, may be able to obtain
certain regulatory approvals necessary to
close the Merger quicker than other
potential bidders;
the fact that the terms of the Merger
Agreement require the adoption of the
Merger Agreement by the holders of a
majority of the outstanding Shares as
well as the approval of the Merger
Agreement and the transactions
contemplated by the Merger Agreement by
the holders of a majority of the
outstanding Class A Shares excluding
SunEdison and its affiliates and
Brookfield and its affiliates (which is a
non-waivable condition to closing); and
the fact that several weeks into
exclusivity, Brookfield withdrew its
sponsorship offer, such that the
Conflicts Committee and the Board of
Directors were choosing only between the
Stand-Alone Plan and a whole-company
sale.
In view of the variety of factors considered in
connection with their respective evaluation of
the Merger Agreement and the Merger and the other
transactions contemplated by the Merger
Agreement, neither the Conflicts Committee nor
the Board of Directors found it practicable to,
and neither the Conflicts Committee nor the Board
of Directors did, quantify or otherwise assign
relative weights to the specific factors
considered in reaching their respective
determination and their respective
recommendation. In addition, individual directors
may have given different weights to different
factors. Neither the Conflicts Committee nor the
Board of Directors undertook to make any specific
determination as to whether any factor, or any
particular aspect of any factor, supported or did
not support their respective ultimate
determination. Each of the Conflicts Committee
and the Board of Directors based its respective
recommendation on the totality of the information
presented.
Certain Company Projections
The Company does not, as a matter of course,
publicly disclose detailed financial forecasts as
to future performance, earnings or other results
due to the difficulty of predicting economic and
market conditions and accurately forecasting the
Companys performance, particularly for extended
periods, other than limited financial metrics
from time to time as part of the Companys ongoing
efforts to communicate with investors regarding
the Companys business continuity and progress
toward operational independence from SunEdison.
Management of the Company prepared an unaudited
forecast contemplating a scenario in which the
Company would transition to an emerging markets
independent power producer business model through
continued development of in-house growth and
project operations capabilities, reduction of
dividend payout ratio targets to sustainable
levels and growth through third party
acquisitions. We refer to this forecast as the
Management Stand-Alone Plan. In the Management
Stand-Alone Plan, management of the Company
employed assumptions based on the performance of
its current project portfolio, the Companys
ability to manage its current liabilities, and
the Companys ability to raise and deploy capital
in its target markets in the future.
The internal financial forecasts summarized
below (the Forecasts) were prepared by
or at the direction of and approved by
management for internal use in connection with
the Companys exploration and evaluation of
strategic alternatives to maximize stockholder
value, including transactions to secure a new
sponsor or a sale of the Company.
While the Forecasts were prepared in good faith
by management, no assurance can be made
regarding future events and the disclosure of
these Forecasts should not be regarded as an
indication that the Company, the Board of
Directors, the Conflicts Committee, their
respective advisors or any other person
considered, or now considers, the Forecasts to
be a reliable prediction of future results, and
the Forecasts should not be relied upon as
such. The Forecasts cover multiple years and
prospective financial information by its nature
becomes subject to greater uncertainty with
each successive year. In addition, the
Forecasts were prepared at a prior period in
time and reflect estimates, assumptions and
business decisions as of the time of
preparation, all of which are subject to
change. The estimates, assumptions and business
decisions made by management upon which the
Forecasts are based involve judgments with
respect to, among other matters, future
industry performance, general business,
economic, regulatory, market and financial
conditions, many of which are difficult or
impossible to predict accurately, are subject
to significant operational, economic,
competitive or other third party risks and
uncertainties, and are beyond the Companys
control. Management of the Company has limited
visibility into the likelihood of the
occurrence and potential magnitude of the
material risks to the Companys performance in
the unpredictable operating environment
surrounding the Company, and as a result faces
challenges in being able to accurately forecast
the Companys performance and predict the
effectiveness of initiatives designed to enable
the Company to operate as an independent
Company (with or without a sponsor) and to
improve the performance of the business and
revenue. There can be no assurance that the
estimates and assumptions made in preparing the
Forecasts will prove accurate, that the
projected results will be realized or that
actual results will not be significantly higher
or lower than projected results. The Forecasts
also reflect estimates, assumptions and
business decisions that do not reflect the
effects of the Merger (or any failure of the
Merger to occur), or any other changes that may
in the future affect the Company or its assets,
business, operations, properties, policies,
corporate structure, capitalization and
management.
Important factors that may affect actual
results and cause the Forecasts to not be
achieved include risks and uncertainties
described below under the section titled
Cautionary Statement Regarding Forward-Looking
Statements and in the Companys filings with the
SEC. None of the Company, Brookfield or any of
their respective affiliates, advisors,
officers, directors or representatives has made
or makes any representation to any Company
stockholder or any other person regarding the
information included in the Forecasts or the
ultimate performance of the Company compared to
the information included in the Forecasts or
that the Forecasts will ultimately be achieved.
In light of the foregoing factors and the
uncertainties inherent in the Forecasts, the
Companys stockholders are cautioned not to
place undue, if any, reliance on the Forecasts.
The Company does not intend to update or
otherwise revise the Forecasts for any reason
or purpose, even in the event that any or all
of the assumptions on which the Forecasts were
based are no longer appropriate.
The Forecasts include certain financial
measures that do not conform to U.S.
Generally Accepted Accounting Principles,
which we refer to as GAAP, including adjusted
earnings before interest, taxes, depreciation
and amortization (Adjusted EBITDA) and
cash available for distribution (CAFD)
(each as further described below). This
information is included because management
believes these non-GAAP financial measures
could be useful in evaluating the business,
potential operating performance and cash flow
of the Company. Non-GAAP financial measures
should not be considered in isolation from,
or as a substitute for, financial information
presented in compliance with GAAP, and
non-GAAP financial measures as presented in
the Forecasts may not be comparable to
similarly titled amounts used by other
companies in the industry.
The Forecasts were not prepared with a view
toward public disclosure, soliciting proxies
or complying with GAAP, the published
guidelines of the SEC regarding financial
projections and forecasts or the guidelines
established by the American Institute of
Certified Public Accountants for preparation
and presentation of financial projections and
forecasts. Neither the Companys independent
registered public accounting firm nor any
other independent registered public
accounting firm has examined, compiled or
otherwise performed any procedures with
respect to the prospective financial
information contained in these forecasts and,
accordingly, neither the Companys independent
registered public accounting firm nor any
other independent registered public
accounting firm has expressed any opinion or
given any other form of assurance on such
information or its achievability, and assumes
no responsibility for, and disclaims any
association with, the prospective financial
information.
The following tables present in summary form
certain of the financial measures projected
in the Forecasts:
Management Stand-Alone Plan – ($mm,
except Dividends Per Share)
Revenue
$245
$276
$298
$300
$311
$323
$329
$333
$347
$362
() Cost of Operations
($50)
($54)
($58)
($59)
($61)
($64)
($66)
($69)
($72)
($74)
() Corporate General
Administrative
($36)
($21)
($21)
($20)
($21)
($21)
($22)
($22)
($23)
($23)
() Depreciation Amortization
($52)
($61)
($68)
($69)
($73)
($76)
($80)
($84)
($88)
($92)
() Stock-based Compensation
($4)
($4)
($4)
($4)
($4)
($4)
($4)
($4)
($4)
($4)