FT : Brookfield swoops for UK wind farms in $1bn deal

Brookfield swoops for UK wind farms in $1bn deal
Canadian investment firm is buying Banks Renewables, one of the UK’s largest renewable developers

Canadian investment firm Brookfield is buying one of the UK’s largest renewable developers, in a boost for the country’s onshore wind industry after recent setbacks.

Brookfield will acquire Durham-based Banks Renewables in a deal worth almost $1bn, according to people with knowledge of the details. 

Banks Renewables, part of the family-owned Banks Group, owns operational onshore wind farms in northern England and Scotland, and also has a large portfolio of onshore wind, solar and battery assets in development. 

The transaction comes as other developers have warned of a challenging environment for wind power because of rising costs, with developers Vattenfall and Community Windpower recently halting an offshore and an onshore project respectively in the UK.

Sebastian Perl, the Brookfield vice-president who led the transaction, said he thought there was “generally a very positive outlook” for renewables in the UK and that cost pressures for onshore wind were short-term. 

“We have a long-term view as a long-term investor,” he said. “There might be some challenges along the road but you have that with every market, every business. It hasn’t changed our view on the market or the investment environment in the UK.”

He added that he did not see the UK government’s windfall tax on low-carbon electricity generators, singled out by Community Windpower as one reason for halting its development, as a “showstopper”. 

The deal is being done by Brookfield’s second Global Transition Fund, which started raising money this year to invest in projects advancing the shift away from fossil fuels. 

Its first Global Transition Fund raised $15bn last year and its investments include buying nuclear fuel and reactor developer Westinghouse in partnership with Cameco, and leading a takeover of Australian energy group Origin Energy.

Brookfield is already present in the UK’s onshore wind market, having kept hold of some farms in development after selling a handful of operating wind farms in 2021 to Danish company Ørsted.

It is also currently developing a 60MW wind farm in Scotland and has agreed that the electricity will be sold to real estate developer Canary Wharf Group.

Banks Renewables’ total portfolio comprises just over 4GW: about 300MW of operational wind farms, 300MW of onshore wind farms, solar and battery projects that have received planning permission, and another 3.5GW in the pipeline.

Most of its onshore wind pipeline is in Scotland, reducing its exposure to more restrictive planning rules in England. The UK government last month eased rules that in effect banned new onshore wind farms in England, but industry experts have warned that the changes may not go far enough to bring forward new developments. 

The Banks Group, which was founded in 1976, also develops property in the north of England and Scotland and it mined coal for more than 40 years until 2020. Harry Banks, chair and founder, said Brookfield’s “greater resources” would help develop the renewables portfolio. 

“It will be good for Brookfield because they are acquiring a renewables business with a proven record and a capability to take the business forward,” he added. The deal is due to be completed by the end of November.

>>> After Hours Summary: ODD +13.2% up on guidance; SCU +5.5% higher after Boaz

After Hours Summary: ODD +13.2% up on guidance; SCU +5.5% higher after Boaz Weinstein raises bid; TAK -5.9% down after providing EXKIVITY updates

After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ODD +13.2% (guidance)
Companies trading higher in after hours in reaction to news: SCU +5.5% (Boaz Weinstein raises bid for the company, according to Bloomberg), TNYA +4.8% (publishes preclinical data), ATAI +3.2% (completes Phase 1 study of VLS-01), ADEA +2.4% (files lawsuit against Shaw; Samsung enters into long-term agreement), CIFR +2% (September operational update), MORF +1.9% (Point72 Asset Management discloses 5.2% stake), AOUT +1.3% (approves $10 mln for share repurchases), MDB +0.6% (names new CTO), SYM +0.5% (CFO retiring), BF.A +0.1% (approves $400 mln for repurchases)

After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: None
Companies trading lower in after hours in reaction to news: TAK -5.9% (updates EXKIVITY), BHVN -4.5% (files mixed shelf; files $200 mln public offering), RLGT -1% (acquires Daleray Corp operations), TPB -1% (files $500 mln mixed shelf), JBL -0.6% (reducing headcount), V -0.4% (announces $100 mln Gen AI initiative), WE -0.2% (withholding interest payments), SAFE -0.1% (credit ratings upgraded)

>>> US Close Dow -0,22% S&P +0,01% Nasdaq +0,67% Russell -1,58%

Closing Stock Market Summary
Today was the first trading day of the new month and second calendar day of the fourth quarter. Stocks followed a familiar pattern, though, and struggled alongside rising market rates. The final standing for the S&P 500 was a bit misleading, as it belied broad weakness below the surface.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1% and nine of the 11 S&P 500 sectors saw a decline. The rate-sensitive utilities sector was noticeably weak, plunging 4.7%. The energy sector (-2.1%) was another laggard, sliding with oil prices ($89.71/bbl, -1.10, -1.2%), which was partially a reaction to a stronger dollar and a Reuters report that OPEC's oil output rose in September.
Relative strength in the mega cap space proved to the be the difference for the market-cap weighted S&P 500 and Nasdaq Composite. The Dow Jones Industrial Average and the Russell 2000, meanwhile, registered losses of 0.2% and 1.6%, respectively.

Following a big move in September, the 10-yr note yield jumped another 11 basis points to 4.68% after hitting 4.70% earlier. The 2-yr note yield settled seven basis points higher at 5.11%. Those moves occurred in the midst of a better-than-expected ISM Manufacturing Index for September and some pleasing construction spending data for August, although yields were rising in front of those 10:00 a.m. ET releases.
The S&P 500 tested the 4,300 level at its high this morning, but failed to break above it. That failure, along with the 10-yr note yield hitting 4.70% at its high of the day, invited additional selling activity.
Mega cap stocks took on a safe-haven visage that mitigated broad market losses. They were not immune to selling activity, but saw an uptick in buying in the late afternoon that enabled the three major indices to close off their lows. NVIDIA (NVDA 447.82, +12.83, +3.0%), Apple (AAPL 173.75, +2.54, +1.5%), and Microsoft (MSFT 321.80, +1.38, +1.9%), which were relative strength leaders throughout the session, were standouts in that regard. The Vanguard Mega Cap Growth ETF (MGK) closed up 1.0%.

The communication services (+1.5%), information technology (+1.3%), and consumer discretionary (+0.3%) sectors, all of which house mega-cap components, were alone in positive territory at the close.
  • Nasdaq Composite: +27.2% YTD
  • S&P 500: +11.7% YTD
  • S&P Midcap 400: +1.6% YTD
  • Dow Jones Industrial Average: +0.9% YTD
  • Russell 2000: -0.3% YTD
Reviewing today's economic data:
  • The September ISM Manufacturing PMI checked in at 49.0% (consensus 47.8%), up from 47.6% in August. The dividing line between expansion and contraction is 50.0%, so the September reading denotes an ongoing contraction in the manufacturing sector, but at a slower pace than the prior month. September marked the 11th straight month the PMI reading has been below 50.0%.
    • The key takeaway from the report is the understanding that the pace of contraction in the manufacturing sector slowed in September, which is something that will be construed as an economy tracking more for a soft landing at this juncture than a hard landing.
  • Total construction spending increased 0.5% month-over-month in August ( consensus 0.5%) after increasing an upwardly revised 0.9% (from 0.7%) in July. Total private construction was up 0.5% month-over-month while total public construction increased 0.6% month-over-month. On a year-over-year basis, total construction spending was up 7.4%.
    • The key takeaway from the report is that there was balanced strength in August between private and public construction spending that gave a boost to total construction spending, which was up nicely year-over-year, leaving it well out of any hard-landing zone.
Tuesday's economic data is limited to the August JOLTS - Job Openings report at 10:00 a.m. ET.

>>> Fed Vice Chair for Supervision Barr: See higher probability than before for

Fed Vice Chair for Supervision Barr: See higher probability than before for a soft landing; There has been a lot of progress on inflation
- Economic activity has been considerably more resilient than expected
- Baseline projection is for below potential growth over the next year and further softening in the labor market; Labor market is tight but supply and demand are coming into better balance
- The full effects of past tightening are yet to come in the months ahead
- Bank supervisors expect banks to be ready and willing to use the discount window
- Monetary policy is best served by focusing on macroeconomic objectives
- The most important question at this point is not whether an additional rate increase is needed this year, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals
- We are at a point where we can 'proceed carefully' on monetary policy (echoing Chair Powell)
- I expect some further softening in the US labor market
- I'm highly attuned to risks to both of the Fed's mandates
- Monetary policy cannot be indifferent to financial risks
- Most banks are managing interest rate risk well
- Not anywhere close to lower bond level for bank reserves

- Q&A: Affirms confidence that we can get to the 2% inflation target
- Likely we are at or near sufficiently restrictive level of rates; Likely we will have to keep rates up for some time
- The amount of credit tightening we are seeing is less than what I feared in March
- It seems like we are seeing the right kind of slowing in the housing market; Goods and housing services inflation is on the right path downward

>>> Biden Administration said to tell China to expect updated rules curbing ship

Biden Administration said to tell China to expect updated rules curbing shipments of AI chips as soon as this month - press
- US official says the PRC has been notified to expect updated rules on AI chips around the one year anniversary of the original rules issued on Oct 7th, 2022. The 'heads up' to Chinese officials is seen by the US as an effort to stabilize relations with the Chinese govt.
- The timing of the new rules has been weighed on by the Biden administration's efforts to ensure that China President Xi will attend the APEC summit in San Francisco in November (14-16th)