Asset manager Brookfield Corp. BN-T is working on converting its massive renewable power and infrastructure businesses from limited partnerships into traditional corporate structures, a move meant to gain more passive investors.
This week, Brookfield Renewable Partners LP BEP-UN-T, which has a $13.7-billion market capitalization, and Brookfield Infrastructure Partners LP BIP-UN-T, valued at $22.5-billion, announced their boards “have recently begun exploring whether a single combined corporate structure would be the best path forward.”
”The goal is to determine if, on a tax-free basis, we can create a single corporate security that would enhance liquidity, increase index inclusion and create value for our investors,” said both companies in separate press releases on Thursday and Friday.
In 2019, both Bermuda-based limited partnerships created dividend-paying corporations - Brookfield Renewable Corp. BEPC-T and Brookfield Infrastructure Corp. BIPC-T - as part of a move by Toronto-based parent Brookfield Corp. to attract additional investors, including stock indices and passive funds, based on these indices, that cannot hold LPs.
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The two entities - the partnerships and the corporations - have identical assets, governance and payouts. However, shares in the corporations trade at a premium to the price of the partnership units.
“With some investors viewing Brookfield as too complicated, these simplifications could be welcomed by the market longer term,” said Bank of Nova Scotia analyst Robert Hope in a report on Brookfield Renewable Partners published on Friday.
Brookfield is following a path blazed by several large North American infrastructure and power companies that acquired assets previously owned through limited partnerships to simplify their corporate structures and boost their stock price.
Companies that took these steps include pipeline operators TC Energy Corp., Enbridge Inc. and Kinder Morgan Inc.
On Friday, the spread between the price of Brookfield Renewable’s limited partnership units and corporate shares narrowed to 9.5 per cent after the company announced the board is considering creating a single entity. Mr. Hope said this is “well down from levels seen at the beginning of the week and year.”
A similar gap existed between the price of units in Brookfield Business Partners LP, the asset manager’s private equity arm, and shares in Brookfield Business Corp., which was created in 2022.
Last September, Brookfield announced plans to merge the two entities, with a goal of building their stock market following. In January, 99 per cent of investors in the limited partnership and Brookfield Business Corp. approved the marriage. The transaction closed in March.
On Friday, Brookfield declined further comment on its plans for Brookfield Renewable and Brookfield Infrastructure.
Brookfield Infrastructure Partners listed on the Toronto and New York stock exchanges in 2008, while Brookfield Renewable Partners debuted on the TSX in 2011 and the NYSE two years later.