Green vs Black - The Canadian Hydro vs TransAlta Face-Off
There is an interesting battle playing out in the Canadian energy marketplace and it doesn't involving the oil patch. This time, it's big coal TransAlta seeking to buy Canadian renewable energy pioneer Canadian Hydro Developers for $4.55 per share.
Canadian Hydro, founded by renewable energy pioneers, John and Ross Keating is a true leader in its field, operating wind, hydroelectric and biomass projects in BC, Alberta and Quebec. In June, it added the 198MW Wolfe Island wind farm to bring its operating total to 694 megawatts with another 252 megawatts in late-stage development. Canadian Hydro Developers truly is a great Canadian renewable energy success story.
TransAlta is a giant power generator, which operates over 50 power plants (over 8000 MW) mainly from coal but with some wind energy (248MW).
TransAlta's hostile takeover notice came in last Monday. By Thursday, Canadian Hydro's CEO, Kent Brown and the board of directors asked that shareholders reject TransAlta's hostile bid, calling it "inadequate" and TransAlta's timing "purely opportunistic." On Friday, Mr. Brown appeared on the Business News Network and made a compelling case for shareholders to reject TransAlta offer. Here is the 8 minute video link.
On August 6, 2009, Canadian Hydro's board of directors issued a directors circular to all shareholders regarding TransAlta's offer. Here is the August 6 press release.
Those in the renewable energy industry are watching this story very closely. Could this the first move by coal and oil & gas in an attempt to take over the renewable energy sector and control the growth of clean and green energy in Canada? I see this hostile bid as TransAlta's way to green itself, to buy clean energy assets in order to offset CO2 emissions ultimately acting as a hedge against upcoming cap-and-trade laws. An interesting plan for sure. Perhaps it is thought to be cheaper to buy the green assets now, rather than purchasing the carbon offsets later? If that is true, then it is possible that Canadian Hydro is undervalued today.
There are so many questions, that only time will be able to answer. At least for now, the decision rests in the hands of the Canadian Hydro shareholders to do nothing or tender their shares.
