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KKR buys Emera’s $1.2B stake in Nfld. clean energy transmission line

Labrador Island Link sale allows Emera to reduce debt, use proceeds for regulated utility investments

KKR to take Emera's $1.2B stake in Atlantic clean energy lineNew York investment firm KKR & Co. Inc. will acquire the $1.19-billion minority indirect stake in the Labrador Island Link clean energy transmission line held by Halifax-based energy company Emera Inc.

The transaction is made up of $957 million in cash and $235 million from KKR assuming Emera’s obligation to fund a remaining investment. It is expected to close on or near June 4.

The move was made to reduce Emera’s corporate debt and support other investments in its regulated utility businesses, according to a release.

The Labrador Island Link is a 1,100-kilometre high-voltage transmission line that connects the 824-megawatt Muskrat Falls hydroelectric facility on the mainland of Labrador to Soldiers Pond on the island of Newfoundland near St. John’s. Commissioning started in 2023.

Emera was an investor in the Labrador Island Link alongside Newfoundland and Labrador Hydro (formerly Nalcor Energy), the owner and operator of the infrastructure project.

“This agreement is an important step in strengthening our company and positioning us to continue to capitalize on the growth opportunities in front of us," Scott Balfour, Emera’s CEO, said in the release. “With this transaction, we look forward to a new relationship with KKR while remaining committed to our partnership with NL Hydro.”

The Labrador Island Link line

The transmission line was in the planning stages since 2009, proposed by then-Nalcor Energy, a Crown corporation of Newfoundland and Labrador.

Newfoundland and Labrador Hydro handled the design, engineering, construction, operation and maintenance of the Labrador–Island Transmission Link.

Delays and budget overruns plagued the project. Construction was originally expected to finish in 2016, but commissioning was not complete until 2023. The cost almost doubled from the original estimate of $7.4 billion, rising to $13.37 billion as of 2022.

Emera committed to contributing 20 per cent of construction costs for the project, providing transmission to Newfoundland and Labrador Hydro through Nova Scotia, and investing an amount that would not exceed 49 per cent in the overall transmission assets, according to a Newfoundland and Labrador government release.

The Labrador Island Link is to provide up to 900 megawatts of clean energy to the region from the second-largest hydroelectric facility in Newfoundland and Labrador: the Muskrat Falls project. It also connects to other provincial hydroelectric sites including Bay D’Espoir and Cat Arm.

Over 90 per cent of Newfoundland and Labrador’s electricity is generated by renewables.

Andritz, a company that provided the equipment for the Muskrat Falls facility, said it will remove three million to four million tons of carbon dioxide emissions per year, equal to removing one million cars from the road.

Revamping the deal

Selling its stake in the project will provide Emera with a one-time payment and immediate cash. KKR will receive quarterly distribution payments over the remaining life of the 50-year contract for the Labrador Island Link line

But Emera will remain engaged in the partnership for the project by providing capital to support ongoing operations, it adds.

Emera’s regulated utilities include Nova Scotia Power, Emera Newfoundland & Labrador, Emera New Brunswick and Tampa Electric in Florida. The company did not specify what investments it plans into its regulated utilities.

KKR held $250.8 billion in private equity and $83.6 billion in infrastructure assets as of March 31. The infrastructure assets include oil and gas producers and renewable energy companies.

It held three solar energy assets that were sold in 2015 to Canadian Solar Inc. for $270 million.

In March KKR acquired German renewable energy company Encavis AG for over $3 billion. Earlier this month, KKR said it would put up $800 million for additional renewable energy deals.

“KKR has a long history of investing in stable, reliable and essential transmission assets like the Labrador Island Link, and we look forward to beginning this long-term strategic partnership with Emera and NL Hydro to deliver clean energy across the region,” Brandon Freiman, a KKR partner and head of North American Infrastructure, said in the release.

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