Post by
CanSiamCyp on Feb 18, 2021 10:57am
BMO analyst update
Following excerpt is a good explanation of the secondary offering and the relative pricing of BEPC cf. BEP.UN (from a BMO research report of yesterday):
Key Points
US$888M secondary offering. Brookfield Asset Management (BAM-NYSE, US
$43.97; Outperform rated by Sohrab Movahedi) has sold US$888M of BEPC shares in
a secondary public offering at a price of US$51.50. The secondary offering consisted
of two tranches: 1) a US$773M public offering (15M shares); and 2) a US$116M fully
exercised over-allotment option for an additional 2.3M shares. BAM's ownership in
Brookfield Renewable remains significant at ~48% vs. ~50% previously, underpinning
continued strong alignment of interest.
BEPC premium has narrowed. The BEPC premium to BEP units has narrowed to ~7%
vs. ~35% at the beginning of the year. While the two securities are positioned as
economically equivalent given the exchangeable feature of BEPC into BEP units and
given that the dividends/distributions paid are the same, a modest premium will likely
persist (we think under 10%) given the favourable tax advantages of BEPC for certain
taxable investors. A premium that exceeds 10% as we saw earlier in the year will likely
be driven by funds flows/technicals (i.e., index addition) but we don't expect that to be
a structural driver. Our research coverage is on BEP units.
Unchanged estimates. As this was a secondary offering (i.e., BEP did not receive any
proceeds), we are maintaining our prior FFO/sh and EBITDA estimates.