Algonquin Power and Emera Sign New Strategic Co-Operation Agreement

Algonquin Power and Utilities Corp. (APUC) (TSX: AQN) and Emera Inc. (TSX: EMA) have signed a new strategic investment and co-operation agreement pursuant to which the two companies will pursue projects in each specific areas or in tandem in projects of mutual benefits.

The agreement specifies “areas of pursuit” for each of Algonquin and Emera. For Algonquin, these include investment opportunities relating to unregulated renewable generation, small electric utilities and gas distribution utilities. For Emera, these include investment opportunities related to regulated renewable projects within its service territories and large electric utilities. In respect of opportunities encountered by either Algonquin or Emera that fit within the other’s business development “areas of pursuit”, they are committed to working together on such opportunities.

Algonquin and Emera commenced their joint-venture and strategic investment partnership in April 2009 when the two companies jointly established California Pacific Utilities Ventures, LLC (CPUV) . Iin January 2011 CPUV completed the acquisition of the California-based electricity distribution and related generation assets of NV Energy, Inc. for total consideration of US $131.8 million. Currently CPUV owns and operates through California Pacific Electric Company, LLC (CalPeco). The amount paid by Emera for its 49.999% equity investment in the common shares of CPUV was US $30.9 million. In connection with the acquisition, Emera agreed to a conditional treasury subscription for approximately 8.5 million shares of APUC at a price of $3.25 per share.

In December 2010, Algonquin, through Liberty Energy Utilities Co., entered into agreements to acquire Granite State Electric Company, a regulated electric utility, and EnergyNorth Natural Gas Inc. a regulated natural gas utility from National Grid USA for total consideration of US $285 million. In connection with the acquisitions, Emera has agreed to a treasury subscription of subscription receipts convertible into 12.0 million APUC common shares upon closing of the transactions at a purchase price of $5.00 per share

As first act pursuant to the new agreement, Algonquin will acquire Emera’s 49.999% ownership in CalPeco to own 100% of CalPeco. Algonquin will issue 8.211 million Algonquin shares in two tranches to Emara. As part of the agreement, Emera’s allowed common equity interest in Algonquin will be increased from 15% to 25%. Algonquin will seek shareholder approval at its upcoming annual and special general meeting scheduled for June 21, 2011.

As second act under the agreement, Algonquin and Emera, through Northeast Wind, a joint venture of the two companies, have acquired a 49% minority interest in First Wind Holdings, LLC’s wind energy projects in the Northeast U.S.

First Wind will transfer its Northeast wind energy projects to a new operating company of which First Wind will own 51%. Northeast Wind will own 49%. Northeast Wind will invest a total of $333 million to acquire the 49% ownership of the operating company. This includes a $150 million loan to the operating company. The loan will be repaid within 5 years, or convert to equity in future projects.

Emera will initially own 75% of Northeast Wind and Algonquin will own the balance.