TORONTO, Oct. 26 /CNW/ - SkyPower Wind Energy Fund LP (the "Partnership")
announced today that it has entered into a non-binding letter of intent to
sell its Terrawinds wind energy facility near Rivière-du-Loup, Québec (the
"Facility") and related assets to SkyPower Corp. for $77.2 million. If the
proposed sale is completed it is currently expected that Unitholders in the
Partnership will receive approximately $10.00 per unit in value to be
comprised of cash (inclusive of indemnification for lost tax benefits) plus
certain tax benefits.
The Partnership Unit Financing
In December 2005, the Partnership raised gross proceeds of approximately
$77.2 million through the public offering and sale of approximately
7.7 million limited partnership units ("Units") of the Partnership at a price
of $10 per Unit. The net proceeds of that offering were invested in shares of
Terrawinds Resources Corp. ("Terrawinds"), which used those funds, together
with borrowed funds, to acquire wind turbines and other assets for the purpose
of developing and constructing the Facility. The purchasers of Units were
expected to be able to claim certain deductions from income for Canadian
federal and provincial income tax purposes ("Deductions"), as well as owning
an ongoing interest in the Facility through the Partnership's holding of
SkyPower Corp. is a Toronto-based wind power company engaged in the
development, acquisition, construction and ownership of wind energy projects
in Canada, the United States and India. SkyPower Corp. was the original owner
of the Facility and sold it to the Partnership in 2005 at the time of the
Partnership's offering of Units. SkyPower Corp. also entered into an agreement
with Terrawinds and the Partnership's general partner to provide a range of
administrative services to those entities, and owns a contingent equity
interest in the Partnership. Three senior officers of SkyPower Corp. also
accepted senior management positions with the Partnership's general partner
Adverse Effects of Unforeseen Delays and Revisions to the Facility
As previously announced, factors beyond the Partnership's control
resulted in unforeseen delays and the need to make extensive revisions to the
layout, engineering and construction plan for the Facility. Those delays and
changes significantly reduced the Facility's projected energy output and
significantly increased the costs of the Facility. Despite the strenuous
efforts of the Partnership's management and advisers to address the effects of
the unforeseen delays and revisions, the Partnership has not yet been able to
secure the accommodations, amendments and revisions to key agreements required
in order for the Facility to be economically viable.
As a consequence of those developments, Unitholders will not be entitled
to claim the expected Deductions and will be subject to reassessment by
Canadian federal and provincial income tax authorities. Completion of the sale
to SkyPower described below will result in Unitholders being indemnified for
the loss of their Deductions.
Furthermore, under the terms of the Partnership's credit agreement
relating to its senior secured credit facilities, the Partnership was to have
obtained certain of the accommodations, amendments and revisions by
October 31, 2007. The Partnership is in discussions with its lenders regarding
a potential extension of the October 31, 2007 date. Should such extension not
be obtained, the Partnership's failure to obtain the key contractual
accommodations, amendments and revisions before October 31, 2007 will
constitute a default under the credit agreement that will entitle the lenders
to exercise their remedies, which may include enforcement of their existing
first priority security interests, termination of continuing funding, and
acceleration of repayment of the existing debt of approximately
SkyPower Corp.'s Proposal
SkyPower Corp. has submitted a non-binding letter of intent (the
"Proposal") to the Partnership and Terrawinds under which SkyPower Corp. would
purchase all of the assets of Terrawinds for cash consideration and an
assumption of certain liabilities, including the existing debt of
approximately Cdn.$211 million (the "Proposed Sale").
The Special Liquidity Committee of the Board of Directors of the
Partnership's general partner (the "Committee") carefully considered the
Proposal and the Partnership's current circumstances and alternatives with the
advice and assistance of its financial adviser, Credit Suisse Securities
(Canada) Inc., who has been assisting the Committee since August 2007. The
Committee concluded that it would be in the best interests of the Partnership
and Unitholders to accept the Proposal. The Partnership formally accepted the
Proposal on October 25, 2007.
In connection with the Proposal, Messrs. Kerry Adler, David Bacon and
Cory Basil, all of whom are senior officers of SkyPower Corp., resigned their
positions as senior officers of the Partnership's general partner and
Terrawinds and, in the case of Mr. Adler, as a director of the general partner
The Proposal stipulates that completion of the Proposed Sale is subject
to certain conditions, including the following:
- SkyPower Corp. and the Partnership must enter into a definitive
purchase agreement setting out the terms and conditions of the
Proposed Sale acceptable to the boards of the Partnership's general
partner and SkyPower Corp. The Partnership has agreed not to pursue,
encourage or entertain any competing proposals from any other party
prior to November 5, 2007 and will endeavour to negotiate the terms
of a definitive purchase agreement with SkyPower Corp. during that
- SkyPower Corp. must obtain the agreement of the Partnership's
existing lenders with respect to the Proposed Sale.
- SkyPower Corp. must obtain approval from Hydro-Québec for an
assignment of the existing power purchase agreement for the
Terrawinds Facility to SkyPower Corp.
- SkyPower Corp. must be satisfied with its "due diligence"
investigations concerning Terrawinds.
- The Proposed Sale must be approved by at least two-thirds of the
votes cast by Unitholders at a meeting to be called to consider the
Proposed Sale and related matters. Subject to the foregoing
conditions, the Partnership currently expects that the Unitholders'
meeting will be held in December 2007.
There can be no assurance that the foregoing conditions will be satisfied
or that the Proposed Sale will ultimately be completed.
If a definitive purchase agreement is entered into by the parties,
detailed information concerning the Proposed Sale, the uses of the sale
proceeds, the income tax and other consequences of the Proposed Sale for
Unitholders, and other relevant information will be set out in an information
circular that the Partnership expects to send to Unitholders in November 2007.
About SkyPower Wind Energy Fund LP
The Partnership has invested in the common shares, including flow-through
shares, of Terrawinds Resources Corp., a Canadian corporation formed for the
purposes of constructing and operating a 166MW wind energy project near
Rivière-du-Loup, Québec which would generate electricity for sale to
Hydro-Québec pursuant to a 21-year power purchase agreement.
Certain statements included in this news release constitute
"Forward-Looking Statements" within the meaning of the Securities Act
(Ontario). Such forward-looking statements involve unknown risks,
uncertainties and other factors, including the risk that the Proposed Sale may
not be completed and the risk that Unitholders may suffer financial loss as a
result. Certain other risks and uncertainties as well as additional
information are outlined in the Partnership's 2006 Annual Report and other
continuous disclosure documents available on www.sedar.com. Those risks may
cause the actual results, performance or achievements of the Partnership to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
The forward-looking information contained in this news release represents
the expectations of the SkyPower Wind Energy Fund LP as at October 25, 2007
and, accordingly, is subject to change after that date. However, SkyPower Wind
Energy LP expressly disclaims any intention or obligation to update or revise
any forward-looking information, whether as a result of new information,
future events or otherwise, except as required by applicable law.
For further information:
For further information: W. Judson Martin, Chairman of SkyPower I GP
Inc., General Partner of SkyPower Wind Energy Fund LP, at