Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 20-F/A

(Amendment No. 1)

 

x

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35530

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

(Exact name of Registrant as specified in its charter)

Bermuda

(Jurisdiction of incorporation or organization)

73 Front Street, 5th Floor, Hamilton HM 12, Bermuda

(Address of principal executive offices)

Jane Sheere, +1.441.295.1443

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Copies to:

Andrew J. Beck

Torys LLP

1114 Avenue of the Americas

New York, NY 10036

Telephone: 212-880-6000

Fax: 212-880-0200

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of class

 

Name of each exchange on which registered

Limited Partnership Units   New York Stock Exchange; Toronto Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ¨   No  x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.   Yes  ¨  No  ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ¨  No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ¨  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer  ¨   Accelerated filer  ¨    Non-accelerated filer  x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

           ¨ U.S. GAAP    x  International Financial Reporting Standards as issued by  the International
Accounting Standards Board
   ¨  Other            

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.   Item 17  ¨  Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No ¨


Table of Contents

TABLE OF CONTENTS

 

INTRODUCTION AND USE OF CERTAIN TERMS

     4   

FORWARD-LOOKING STATEMENTS

     10   

CAUTIONARY STATEMENT REGARDING THE USE OF NON-IFRS MEASURES

     11   

PART I

     12   
ITEM 1.       IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS      12   
  1.A    DIRECTORS AND SENIOR MANAGEMENT      12   
  1.B    ADVISERS      12   
  1.C    AUDITORS      12   
ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE      13   
ITEM 3.   KEY INFORMATION      13   
  3.A    SELECTED FINANCIAL DATA      13   
  3.B    CAPITALIZATION AND INDEBTEDNESS      15   
  3.C    REASONS FOR THE OFFER AND USE OF PROCEEDS      16   
  3.D    RISK FACTORS      16   
ITEM 4.   INFORMATION ON THE COMPANY      38   
  4.A    HISTORY AND DEVELOPMENT OF THE COMPANY      38   
  4.B    BUSINESS OVERVIEW      42   
  4.C    ORGANIZATIONAL STRUCTURE      58   
  4.D    PROPERTY, PLANT AND EQUIPMENT      62   
ITEM 4A.     UNRESOLVED STAFF COMMENTS      62   
ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS      62   
  5.A   OPERATING RESULTS      62   
  5.B   LIQUIDITY AND CAPITAL RESOURCES      106   
  5.C   RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES, ETC.      106   
  5.D   TREND INFORMATION      106   
  5.E   OFF-BALANCE SHEET ARRANGEMENTS      106   
  5.F   TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS      106   
ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES      106   
  6.A   DIRECTORS AND SENIOR MANAGEMENT      106   
  6.B   COMPENSATION      112   
  6.C   BOARD PRACTICES      121   
  6.D   EMPLOYEES      128   
  6.E   SHARE OWNERSHIP      128   
ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS      128   
  7.A   MAJOR SHAREHOLDERS      128   
  7.B   RELATED PARTY TRANSACTIONS      128   
  7.C   INTEREST OF EXPERTS AND COUNSEL      138   
 

 

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ITEM 8.   FINANCIAL INFORMATION      138   
  8.A   CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION      138   
  8.B   SIGNIFICANT CHANGES      138   
ITEM 9.   THE OFFER AND LISTING      138   
  9.A   OFFER AND LISTING DETAILS      138   
  9.B   PLAN OF DISTRIBUTION      139   
  9.C   MARKETS      139   
  9.D   SELLING SHAREHOLDERS      139   
  9.E   DILUTION      139   
  9.F   EXPENSES OF THE ISSUE      140   
ITEM 10.     ADDITIONAL INFORMATION      140   
  10.A   SHARE CAPITAL      140   
  10.B   MEMORANDUM AND ARTICLES OF ASSOCIATION      140   
  10.C   MATERIAL CONTRACTS      162   
  10.D   EXCHANGE CONTROLS      163   
  10.E   TAXATION      163   
  10.F   DIVIDENDS AND PAYING AGENTS      182   
  10.G   STATEMENT BY EXPERTS      183   
  10.H   DOCUMENTS ON DISPLAY      183   
  10.I   SUBSIDIARY INFORMATION      184   

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     184   

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     184   
PART II      184   

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     184   

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

     184   
ITEM 15. CONTROLS AND PROCEDURES      184   
ITEM 16. [RESERVED]      184   
  16A.   AUDIT COMMITTEE FINANCIAL EXPERT      184   
  16B.   CODE OF ETHICS      184   
  16C.   PRINCIPAL ACCOUNTANT FEES AND SERVICES      184   
  16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE      184   
  16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASER      184   
  16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT      184   
  16G.   CORPORATE GOVERNANCE      185   
PART III      185   
ITEM 17 FINANCIAL STATEMENTS      185   
ITEM 18. FINANCIAL STATEMENTS      185   
ITEM 19. EXHIBITS      185   
SIGNATURE      186   
INDEX TO FINANCIAL STATEMENTS   
 

 

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INTRODUCTION AND USE OF CERTAIN TERMS

Unless otherwise specified, information provided in this registration statement on Form 20-F (this “ Form 20-F ”) is as of the date of this Form 20-F. Unless the context requires otherwise, when used in this Form 20-F, the terms “Brookfield Renewable Group”, “we”, “us” and “our” refer to Brookfield Renewable, BRELP, the Holding Entities and the Operating Entities, each as defined in this Form 20-F, collectively; “Brookfield Renewable” and “BREP” refer to Brookfield Renewable Energy Partners L.P.; and “Brookfield” refers to Brookfield Asset Management Inc. and its subsidiaries (other than Brookfield Renewable). All references to “our portfolio” include 100% of the capacity and energy of the facilities even though we do not own 100% of the economic output of such facilities (see the table under Item 4.B. “Business Overview — Our Operations” for details on our portfolio).

ABCA ” means the Business Corporations Act (Alberta) , R.S.A. 2000, c. B-9, as amended, including the regulations promulgated under such Act.

Adjusted EBITDA ” means 100% of revenues less direct costs (including energy marketing costs), plus our share of cash earnings from equity-accounted investments and other income, before interest, current income taxes, depreciation, amortization and management service costs. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

an “ affiliate ” of any person is a person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person.

Amended and Restated Limited Partnership Agreement of BRELP ” means the amended and restated limited partnership agreement of Brookfield Renewable Energy L.P., dated November 20, 2011, as amended May 4, 2012.

Amended and Restated Limited Partnership Agreement of BREP ” means the amended and restated limited partnership agreement of Brookfield Renewable Energy Partners L.P., dated November 20, 2011.

ANEEL ” means National Agency for Electric Energy (Brazil).

Audit Committee ” means the audit committee of the board of directors of the Managing General Partner.

BAM’s Compensation Committee ” means Brookfield Asset Management’s compensation committee.

BC Hydro ” means British Columbia Hydro and Power Authority.

BEM LP ” means Brookfield Energy Marketing LP., an indirect wholly-owned subsidiary of Brookfield Asset Management.

Bermuda Holdco ” means BRP Bermuda Holdings I Limited.

BNDES ” means the Brazilian National Bank for Economic Development.

Bond Indenture ” means the amended and restated indenture, dated as of November 23, 2011, among Finco, The Bank of New York Mellon and BNY Trust Company of Canada, as supplemented, amended and restated from time to time, governing the Finco Bonds.

BPUSHA ” means Brookfield Power US Holding America Co.

BRELP ” means Brookfield Renewable Energy L.P.

BRELP General Partner ” means BRP Bermuda GP Limited, which serves as the general partner of BRELP GP LP.

BRELP GP LP ” means BREP Holding L.P., which serves as the general partner of BRELP.

BREP ” and “ Brookfield Renewable ” mean Brookfield Renewable Energy Partners L.P.

Brookfield ” means Brookfield Asset Management and any subsidiary of Brookfield Asset Management, other than Brookfield Renewable Group.

Brookfield Asset Management ” means Brookfield Asset Management Inc.

Brookfield Renewable ” and “ BREP ” mean Brookfield Renewable Energy Partners L.P.

Brookfield Renewable Group ” means Brookfield Renewable, BRELP, the Holding Entities and the Operating Entities, taken together.

Brookfield Renewable Power Assets ” means Brookfield’s renewable power assets (other than the assets held by the Fund) that were transferred to Brookfield Renewable pursuant to the Combination.

 

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BRP Equity ” means Brookfield Renewable Power Preferred Equity Inc.

BRPI ” means Brookfield Renewable Power Inc., a subsidiary of Brookfield Asset Management.

BRPT ” means Brookfield Renewable Power Trust, which held the assets of the Fund prior to the Combination.

BRPT Trustees ” means the trustees of BRPT.

CanHoldco ” means Brookfield BRP Holdings (Canada) Inc.

CBCA ” means the Canada Business Corporations Act , R.S.C. 1985, c. C-44, as amended, including the regulations promulgated under such Act.

CDS ” means CDS Clearing and Depository Services Inc.

CFA ” means a “controlled foreign affiliate” as defined in the Tax Act.

Class A Limited Voting Shares ” means the Class A Limited Voting Shares of Brookfield Asset Management.

Class A Preference Shares ” means the Class A Preference Shares, issuable in series (which includes the Series 1 Shares and the Series 2 Shares), of BRP Equity.

Class B Preference Shares ” means the Class B Preference Shares, issuable in series, of BRP Equity.

Code ” means the Code of Business Conduct and Ethics of Brookfield Renewable.

Combination ” means the strategic combination of all the assets of the Fund and the Brookfield Renewable Power Assets into Brookfield Renewable, effected pursuant to a plan of arrangement under Section 182 of the OBCA, effective November 28, 2011.

Combination Agreement ” means the combination agreement, dated as of September 12, 2011, among Brookfield, the Fund, BRPT and Brookfield Renewable providing for, among other things, the Combination.

Common Shares ” means the common shares of BRP Equity.

Compensation Committee ” means the compensation committee of the board of directors of the Managing General Partner.

Conflicts Policy ” has the meaning given to it under Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties — Conflicts of Interest”.

Court ” means the Ontario Superior Court of Justice.

CPI ” means the Canadian consumer price index.

CRA ” means the Canada Revenue Agency.

Development Projects Agreement ” means an agreement between CanHoldco and Brookfield for reimbursement of expenses for projects in Canada and the United States.

DRIP ” means Brookfield Renewable’s distribution reinvestment plan.

DSUs ” means deferred share units issued under the DSUP.

DSUP ” means the Deferred Share Unit Plan of Brookfield Asset Management.

DTC ” means The Depository Trust Company and Clearance Corporation.

Escrowed Shares ” means the non-voting common shares of one or more private companies under the Escrowed Stock Plan.

Escrowed Stock Plan ” means the Escrowed Stock Plan of Brookfield Asset Management.

Exchange Act ” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

FAPI ” means “foreign accrual property income” as defined in the Tax Act.

 

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FERC ” means U.S. Federal Energy Regulatory Commission.

FFO ” means Adjusted EBITDA less interest, current income taxes and management service costs, which is then adjusted for the cash-portion of non-controlling interests. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

Finco ” means BRP Finance ULC.

Finco Bonds ” means all outstanding bonds issued by Finco pursuant to the Bond Indenture.

Form 20-F ” means this registration statement filed on Form 20-F.

Fund ” means Brookfield Renewable Power Fund, a limited purpose trust established under the laws of the Province of Québec, and where appropriate, includes its subsidiaries.

Fund Entities ” means, together, the Fund and BRPT.

GLHA ” means Great Lakes Hydro America, LLC.

GLPL ” means Great Lakes Power Limited.

Governing Body ” in relation to an entity, means the board of directors or equivalent of such entity.

Government of Canada Yield ” on any date means the yield to maturity on such date (assuming semi-annual compounding) of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years as quoted as of 10:00 a.m. (Toronto time) on such date and which appears on the Bloomberg Screen GCAN5YR Page on such date; provided that, if such rate does not appear on the Bloomberg Screen GCAN5YR Page on such date, the Government of Canada Yield will mean the average of the yields determined by two registered Canadian investment dealers selected by BRP Equity, as being the yield to maturity on such date (assuming semi-annual compounding) which a Canadian dollar denominated non-callable Government of Canada bond would carry if issued in Canadian dollars at 100% of its principal amount on such date with a term to maturity of five years.

Guarantors ” means, collectively, Brookfield Renewable, BRELP, CanHoldco and Bermuda Holdco.

GW ” means gigawatt.

GWh ” means gigawatt hours.

Holdco ” has the meaning given to it under item 6.B “Compensation”.

Holder ” means an LP Unitholder who, for purposes of the Tax Act and at all relevant times, holds its LP Units as capital property and deals at arm’s length and is not affiliated (within the meaning of the Tax Act) with Brookfield Renewable, BRELP, the Managing General Partner, the BRELP General Partner, BRELP GP LP and their respective affiliates (within the meaning of the Tax Act).

Holding Entities ” means Bermuda Holdco, CanHoldco and any direct wholly-owned subsidiary of BRELP created or acquired after the date of the Amended and Restated Limited Partnership Agreement of BRELP.

HPI ” means Hydro Pontiac Inc.

HS&E ” means health, safety and the environment.

IFRS ” means the International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Income Tax Act ” or “ Tax Act ” means the Canadian Income Tax Act , R.S.C. 1985, c. 1. (5th Supp), as amended, including the regulations promulgated under such Act.

Investment Company Act ” means the United States Investment Company Act of 1940, as amended, and the rules and regulations promulgated under such Act.

IPCC ” means Intergovernmental Panel on Climate Change.

IRS ” means the U.S. Internal Revenue Service.

LIBOR ” means London Interbank Offered Rate.

LP Unitholders ” means limited partners of Brookfield Renewable, which are holders of LP Units.

 

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LP Units ” means the non-voting limited partnership units in the capital of Brookfield Renewable.

Manager ” means BRP Energy Group L.P., Brookfield Renewable Energy Group LLC and Brookfield Renewable Energy Group (Bermuda) Inc., and, unless the context otherwise requires, includes any other affiliate of such entities that provides services to Brookfield Renewable Group pursuant to our Master Services Agreement or any other service agreement or arrangement.

Managing General Partner ” means Brookfield Renewable Partners Limited, which serves as Brookfield Renewable’s general partner.

Market Price ” means the volume weighted average of the trading price for our LP Units on the NYSE (if our LP Units are listed on the NYSE) or the TSX (until our LP Units are listed for trading on the NYSE) for the five trading days immediately preceding the date the relevant distribution is paid by Brookfield Renewable.

Master Services Agreement ” means the master management and administration agreement, dated November 28, 2011, among the Service Recipients, the Manager and certain other affiliates of Brookfield Asset Management who are party thereto.

MI 61-101 ” means Canadian Multilateral Instrument 61-101 — Protection of Minority Securityholders in Special Transactions .

Minister ” means the Minister of Finance (Canada).

MPT ” means the Mississagi Power Trust.

MRE ” means the hydrological balancing pool administered by the government of Brazil.

MW ” means megawatts.

MWh ” means megawatt hours.

NEOs ” has the meaning given to it under Item 6.B “Compensation — Our Management”.

Net asset value ” means our capital at carrying value, on a pre-tax basis prepared in accordance with the procedures and assumptions utilized to prepare Brookfield Renewable’s IFRS financial statements, adjusted to reflect asset values not otherwise recognized under IFRS.

NI 58-101 ” means Canadian National Instrument 58-101 — Disclosure of Corporate Governance Practices .

Nominating and Governance Committee ” means the nominating and governance committee of the board of directors of the Managing General Partner.

Non-Resident Holder ” means a Holder who, at all relevant times, for purposes of the Tax Act, is not, and is not deemed to be, resident in Canada and who does not use or hold and is not deemed to use or hold their LP Units in connection with a business carried on in Canada.

Non-U.S. Holder ” means a beneficial owner of one or more LP Units, other than an entity classified as a partnership or other fiscally transparent entity for U.S. federal tax purposes.

NYSE ” means the New York Stock Exchange.

OBCA ” means the Business Corporations Act (Ontario) , R.S.O. 1990, c. B-16, as amended, including the regulations promulgated under such Act.

OPA ” means the Ontario Power Authority.

Operating Entities ” means the entities which, from time to time, directly or indirectly hold Brookfield Renewable Group’s operations and hold assets or operations that Brookfield Renewable Group may acquire in the future which are not held by the Service Recipients, including any assets or operations held through joint ventures, partnerships and consortium arrangements.

Original Bond Indenture ” means the trust indenture dated as of December 16, 2004, as amended, supplemented or restated, between Brookfield, Bank of New York Mellon and BNY Trust Company of Canada.

PFIC ” means a passive foreign investment company.

PPA ” means a power purchase agreement, power guarantee agreement or similar long-term agreement between a seller and buyer of electrical power generation.

 

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Preference Share Guarantees ” means the Series 1 Guarantee and the Series 2 Guarantee.

Preference Shares ” means the Class A Preference Shares and the Class B Preference Shares.

QEF election ” means an election by a U.S. Holder to treat such U.S. Holder’s share of Brookfield Renewable’s interest in a PFIC as a “qualified electing fund”.

Redeemable Partnership Unit ” means a unit of BRELP that has the rights of the Redemption-Exchange Mechanism.

Redemption-Exchange Mechanism ” means the mechanism by which Brookfield may request redemption of its limited partnership interests in BRELP in whole or in part in exchange for cash, subject to the right of Brookfield Renewable to acquire such interests (in lieu of such redemption) in exchange for LP Units.

Registration Rights Agreement ” means the registration rights agreement, dated November 28, 2011, between Brookfield and Brookfield Renewable.

Relationship Agreement ” means the relationship agreement, dated November 28, 2011, by and among Brookfield Asset Management, Brookfield Renewable, the Manager, BRELP and others.

REOP Proposals ” means tax proposals released for public comment on October 31, 2003 by the Department of Finance (Canada) regarding the deductibility of interest and other expenses for purposes of the Tax Act.

Resident Holder ” means a Holder who, for the purposes of the Tax Act and any applicable income tax treaty or convention and at all relevant times, is a resident of Canada.

RIC ” means a regulated investment company.

RPS ” means renewable portfolio standards.

RRSP ” means a trust governed by a registered retirement savings plan.

RRIF ” means a trust governed by a registered retirement income fund.

RSP ” means the Restricted Stock Plan of Brookfield Asset Management.

RSUs ” means restricted share units issued under the RSUP.

RSUP ” means the Restricted Share Unit Plan of Brookfield Asset Management.

Sarbanes-Oxley Act ” means the United States Sarbanes-Oxley Act of 2002, including the rules and regulations promulgated thereunder.

S&P ” means Standard & Poor’s Ratings Services.

SEC ” means the U.S. Securities and Exchange Commission.

Securities Act ” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

SEDAR ” means the System for Electronic Document Analysis and Retrieval administered by the Canadian Securities Administrators.

Series 1 Shares ” means the Class A Preference Shares, Series 1 of BRP Equity.

Series 2 Shares ” means the Class A Preference Shares, Series 2 of BRP Equity.

Service Recipients ” means Brookfield Renewable, BRELP, the Holding Entities and any other entity, at the option of the Holding Entities and the Operating Entities.

SHPP ” means a small hydroelectric power plant, which is a category of hydro power facilities in Brazil with 30 MW of capacity or less.

SIFT Rules ” means the rules in the Tax Act applicable to a “SIFT trust” or “SIFT partnership”, each as defined in the Tax Act, pursuant to which certain income and gains earned by a SIFT trust or SIFT partnership, will be subject to income tax at the trust or partnership level at a rate similar to a corporation and distributions or allocations of such income and gains to investors will be taxed as a dividend from a taxable Canadian corporation.

 

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Stapled Securities Proposals ” has the meaning given to it in Item 3.D “Risk Factors — Risks Relating to Taxation — Canada”.

Tax Proposals ” means all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister prior to the date hereof.

TFSA ” means a trust governed by a tax-free savings account.

TJLP ” means BNDES’s long-term interest rate.

Total Capitalization Value ” means, in any quarter, the sum of (i) the fair market value of an LP Unit multiplied by the number of LP Units issued and outstanding on the last trading day of the quarter (assuming full conversion of any limited partnership interests held by any member of Brookfield in BRELP into LP Units), plus (ii) for each class or series of security of a Service Recipient (other than LP Units) issued to third parties, the fair market value of such security multiplied by the number of securities of such class or series issued and outstanding on the last trading day of the quarter (calculated on a fully-diluted basis), plus (iii) the principal amount of all debt not captured by paragraph (ii) owed by each Service Recipient (excluding for this purpose any Operating Entity) on the last trading day of the quarter to any person that is not a member of the Brookfield Renewable Group, which debt has recourse to any Service Recipient, less any amount of cash held by all Service Recipients (excluding for this purpose any Operating Entity) on such day.

Treasury Regulations ” means the Treasury regulations promulgated under the U.S. Internal Revenue Code.

TSX ” means the Toronto Stock Exchange.

US Facilities ” means all of the U.S. facilities of Brookfield Renewable.

U.S. Holder ” has the meaning given to it under Item 10.E “Certain Material U.S. Federal Income Tax Considerations”.

U.S. Internal Revenue Code ” means the U.S. Internal Revenue Code of 1986, as amended.

Voting Agreement ” means the voting agreement, dated November 28, 2011, between Brookfield Renewable and Brookfield that provides Brookfield Renewable, through the Managing General Partner, with a number of voting rights, including the right to direct all eligible votes in the election of the directors of the BRELP General Partner.

 

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FORWARD-LOOKING STATEMENTS

This Form 20-F contains forward-looking statements concerning the business and operations of Brookfield Renewable Group. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements in this Form 20-F include statements regarding the quality of Brookfield Renewable Group’s assets and the resiliency of the cash flow they will generate, Brookfield Renewable’s anticipated financial performance, the future growth prospects and distribution profile of Brookfield Renewable and Brookfield Renewable’s access to capital. Forward-looking statements can be identified by the use of words such as “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “believes”, “potentially”, “tends”, “continue”, “attempts”, “likely”, “primarily”, “approximately”, “endeavors”, “pursues”, “strives”, “seeks” or variations of such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information in this Form 20-F are based upon reasonable assumptions and expectations, we cannot assure you that such expectations will prove to have been correct. You should not place undue reliance on forward-looking statements and information as such statements and information involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to:

 

   

our limited operating history;

 

   

the risk that the effectiveness of our internal controls over financial reporting could have a material effect on our business;

 

   

the risk that we may be deemed an “investment company” under the Investment Company Act;

 

   

the fact that we are not subject to the same disclosure requirements as a U.S. domestic issuer;

 

   

changes to hydrology at our hydroelectric stations or in wind conditions at our wind energy facilities;

 

   

the risk that counterparties to our contracts do not fulfill their obligations, and as our contracts expire, we may not be able to replace them with agreements on similar terms;

 

   

increases in water rental costs (or similar fees) or changes to the regulation of water supply;

 

   

our operations being highly regulated and exposed to increased regulation which could result in additional costs;

 

   

the risk that our concessions and licenses will not be renewed;

 

   

increases in the cost of operating our plants;

 

   

our failure to comply with conditions in, or our inability to maintain, governmental permits;

 

   

equipment failure;

 

   

dam failures and the costs of repairing such failures;

 

   

force majeure events;

 

   

exposure to uninsurable losses;

 

   

adverse changes in currency exchange rates;

 

   

our inability to access interconnection facilities and transmission systems;

 

   

occupational, health, safety and environmental risks;

 

   

disputes and litigation;

 

   

losses resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed internal processes or systems, or from external events;

 

   

general industry risks relating to the North American and Brazilian power market sectors;

 

   

advances in technology that impair or eliminate the competitive advantage of our projects;

 

   

newly developed technologies in which we invest not performing as anticipated;

 

   

labor disruptions and economically unfavorable collective bargaining agreements;

 

   

our inability to finance our operations;

 

   

the operating and financial restrictions imposed on us by our loan, debt and security agreements;

 

   

changes in our credit ratings;

 

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changes to government regulations that provide incentives for renewable energy;

 

   

our inability to identify and complete sufficient investment opportunities;

 

   

the growth of our portfolio;

 

   

our inability to develop existing sites or find new sites suitable for the development of greenfield projects;

 

   

risks associated with the development of our generating facilities and the various types of arrangements we enter into with communities and joint venture partners;

 

   

Brookfield’s election not to source acquisition opportunities for us and our lack of access to all renewable power acquisitions that Brookfield identifies;

 

   

our lack of control over all our operations;

 

   

our obligations to issue equity or debt for future acquisitions and developments;

 

   

foreign laws or regulation to which we become subject as a result of future acquisitions in new markets;

 

   

the departure of some or all of Brookfield’s key professionals; and

 

   

other factors described in this Form 20-F, including those set forth under Item 3.D “Key Information — Risk Factors”, Item 5.A “Operating and Financial Review and Prospects” and Item 4.B “Information on the Company — Business Overview”.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. The forward-looking statements represent our views as of the date of this Form 20-F and should not be relied upon as representing our views as of any date subsequent to the date of this Form 20-F. While we anticipate that subsequent events and developments may cause our views to change, we disclaim any obligation to update the forward-looking statements, other than as required by applicable law. For further information on these known and unknown risks, please see Item 3.D “Risk Factors”.

Historical Performance and Market Data

This Form 20-F contains information relating to our business as well as historical performance and market data. When considering this data, you should bear in mind that historical results and market data may not be indicative of the future results that you should expect from us.

Financial Information

The financial information contained in this Form 20-F is presented in U.S. dollars and, unless otherwise indicated, has been prepared in accordance with IFRS. All figures are unaudited unless otherwise indicated. In this Form 20-F, all references to “$” are to U.S. dollars. Canadian dollars and Brazilian Reais are identified as “C$” and “R$”, respectively.

CAUTIONARY STATEMENT REGARDING THE USE OF NON-IFRS MEASURES

This Form 20-F contains references to Adjusted EBITDA, FFO and Net Asset Value which are not generally accepted accounting measures under IFRS and therefore may differ from definitions of Adjusted EBITDA, FFO and Net Asset Value used by other entities. We believe that Adjusted EBITDA, FFO and Net Asset Value are useful supplemental measures that may assist investors in assessing the financial performance and the cash anticipated to be generated by our operating portfolio. Neither Adjusted EBITDA, FFO nor Net Asset Value should be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. As a result of the Combination, we have presented these measurements on a pro forma basis. Reconciliations of each of Adjusted EBITDA and FFO to net income on a consolidated and pro forma basis are presented in Item 5.A “Operating and Financial Review and Prospects — Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects — Reconciliation of Pro Forma Results and Balance Sheet.”

 

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PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

  1.A

DIRECTORS AND SENIOR MANAGEMENT

The following table presents the names, business addresses and functions of members of the board of directors of the Managing General Partner as of the date of this Form 20-F.

 

Name

  

Business Address

  

Position

    

Jeffrey Blidner

  

Brookfield Asset Management

Brookfield Place

181 Bay Street, Suite 300

Toronto, ON M5J 2T3

   Chair   

Eleazar de Carvalho Filho (1)

  

Rua Professor Artur Ramos

339 - Apt. 61

Jardim Paulistano, Sao Paul, SP

Brazil 01454-011

   Director   

John Van Egmond ( 1)

  

6900 N Ozona Drive

Tucson, AZ 8578

   Director   

David Mann (1)

  

50 McCurdy Drive

Chester, NS B0J 1J0

   Director   

Lou Maroun ( 1)

  

Dill Lane, Full Fathoms

Devonshire, Bermuda DV07

   Director   

Patricia Zuccotti (1)

  

4612 105th Avenue NE

Kirkland, WA 98033

   Director   
(1) Independent director under NYSE standards.         

The following table presents the names, business addresses and functions of the members of our core senior management team that are principally responsible for our operations as of the date of this Form 20-F.

 

Name and Residence

  

Business Address

  

Position

    

Harry Goldgut
Ontario, Canada

  

Brookfield Place

181 Bay Street, Suite 300

Toronto, ON M5J 2T3

   Group Chairman

Richard Legault
Quebec, Canada

  

1700 - 180 Kent Street

Ottawa, ON K1P 0B6

   President and Chief Executive
Officer

Jeff Rosenthal
Ontario, Canada

  

1700 - 180 Kent Street

Ottawa, ON K1P 0B6

   Chief Operating Officer

Sachin Shah
Ontario, Canada

  

1700 - 180 Kent Street

Ottawa, ON K1P 0B6

   Chief Financial Officer

Donald Tremblay
Quebec, Canada

  

1700 - 180 Kent Street

Ottawa, ON K1P 0B6

   Executive Vice President

See Item 6. “Directors, Senior Management and Employees” for additional information.

 

  1.B

ADVISERS

Our legal advisers are Torys LLP, located at Suite 3000, 79 Wellington St. West, Box 270, TD Centre, Toronto Ontario, Canada, M5K 1N2 and 1114 Avenue of the Americas, 23rd Floor, New York, New York 10036.7703.

 

  1.C

AUDITORS

The Managing General Partner has retained Ernst & Young LLP to act as Brookfield Renewable’s independent registered chartered accountants. The address for Ernst & Young LLP is Toronto, Ontario, Canada.

The Fund retained Deloitte & Touche LLP to act as its independent registered chartered accountants for the fiscal years ended December 31, 2009 and 2010. The address for Deloitte & Touche LLP is Ottawa, Ontario, Canada.

 

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BRPI retained Deloitte & Touche LLP to act as its independent registered chartered accountants for the fiscal years ended December 31, 2009 and 2010. The address for Deloitte & Touche LLP is Toronto, Ontario, Canada.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

 

ITEM 3. KEY INFORMATION

 

  3.A

SELECTED FINANCIAL DATA

The information in this section, excluding the Operational Information and distributions per share set forth in the tables below, is derived from and should be read in conjunction with: (i) the consolidated financial statements of Brookfield Renewable as at March 31, 2012 and for the three months ended March 31, 2012 and 2011 and related notes, (ii) the audited consolidated financial statements of Brookfield Renewable as at December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 and related notes, (iii) the unaudited pro forma condensed combined statements of income of Brookfield Renewable for the years ended December 31, 2011 and 2010 and related notes, and (iv) unaudited pro forma condensed combined statement of (loss) income of Brookfield Renewable for the three months ended March 31, 2011 and related notes; each of which is included elsewhere in this Form 20-F.

We are providing unaudited pro forma financial results that include the impact of the Combination, new contracts and contract amendments, management service agreements along with the tax impacts resulting from the Combination, as if each had occurred as of January 1, 2010. The unaudited pro forma financial results have been prepared based upon currently available information and assumptions considered appropriate by management. The unaudited pro forma financial results are provided for information purposes only and may not be indicative of the results that would have occurred had the above transactions been effected on the date indicated. The accounting for certain of the Combination transactions in the audited consolidated financial statements of Brookfield Renewable for the year ended December 31, 2011 required the determination of fair value estimates at the date of the transaction on November 28, 2011 rather than the date assumed in the determination of the pro forma results of January 1, 2010. Capacity, long-term average and actual generation include facilities acquired or commissioned during the respective period ends. Long-term average and actual generation was calculated from the acquisition date or the commercial operation date, whichever is later.

See Item 5. “Operating and Financial Review and Prospects,” Item 8. “Financial Information” and Item 18. “Financial Statements”.

Unless otherwise indicated, the financial data included in this Item 3.A are presented in millions of U.S. dollars and have been prepared in accordance with IFRS.

 

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The following table presents consolidated financial data for Brookfield Renewable as at and for the periods indicated:

 

       As at and for the
three months ended March 31
     As at and for the
year ended December 31
(1)(2)
 
(US$ millions, unless otherwise stated)    2012      2011 (2)      2011      2010      2009  

Operational Information:

              

Capacity (MW)

     4,909         4,325         4,536         4,309         4,198   

Long-term average (GWh)

     4,557         4,062         16,297         15,887         15,529   

Actual generation (GWh)

     4,817         3,924         15,877         14,480         15,833   

Selected Financial Information:

              

Revenues

     426         293         $    1,169         $    1,045         $  984   

Adjusted EBITDA (3)

     318         215         804         751         743   

FFO (3)

     175         103         318         269         324   

Net income (loss)

     31         (93)         (451)         294         (580)   

Weighted average number of LP Units outstanding–basic and diluted (millions) ( 4 )

     262.5         262.5         262.5         262.5         262.5   

Basic and diluted earnings (loss) per share

     0.11         (0.34)         (1.80)         0.98         (2.32)   

Balance sheet data:

              

Property, plant and equipment at fair value

     $  14,888            $  13,945         $  12,173      

Total assets

     16,568            15,708         13,874      

Long-term debt and credit facilities

     5,984            5,519         4,994      

Fund unit liability

     –                 –              1,355      

Participating non-controlling interests

     760            629         206      

Preferred equity

     247            241         252      

Limited partners’ equity

     6,408            6,330         3,372      

Distributions per share

     0.34                  0.73         0.50            

 

(1)

The 2011 balance sheet reflects changes in the accounting policy for construction work-in-progress. See note 2 in the audited consolidated financial statements of Brookfield Renewable as at December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009.

 

(2)

The 2011 results reflect changes arising from the Combination. See notes 2, 8, 10 and 18 in the audited consolidated financial statements of Brookfield Renewable as at December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009.

 

(3)

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Consolidated Results.”

 

(4)

On a fully-exchanged basis.

Brookfield Renewable has not included financial information for the years ended December 31, 2008 and 2007, as such information is not available on a basis consistent with the consolidated financial information for the years ended December 31, 2011, 2010 and 2009 and cannot be provided on an IFRS basis without unreasonable effort or expense.

The following table presents unaudited pro forma condensed combined financial data for Brookfield Renewable giving effect to the Combination as at and for the periods indicated as if the Combination had occurred as of January 1, 2010:

 

For the three months ended March 31

(US$ millions, unless otherwise stated)

   2011  

Operational Information:

  

Capacity (MW)

     4,325   

Long-term average (GWh)

     4,062   

Actual generation (GWh)

     3,924   

Selected Financial Information:

  

Revenues

   $ 322   

Adjusted EBITDA (1)

     239   

FFO (1)

     122   

Net income

     34   

Weighted average number of LP Units outstanding–basic and diluted (millions) (2)

     262.5   

Basic and diluted earnings per share

     0.14   

 

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As at and for the year ended December 31

(US$ millions, unless otherwise stated)

   2011      2010  

Operational Information:

     

Capacity (MW)

     4,536         4,309   

Long-term average (GWh)

     16,297         15,887   

Actual generation (GWh)

     15,877         14,480   

Selected Financial Information:

     

Revenues

   $ 1,309       $ 1,165   

Adjusted EBITDA (1)

     926         853   

FFO (1)

     419         350   

Net income

     32         86   

Weighted average number of LP Units outstanding–basic and diluted (millions) ( 2 )

     262.5         262.5   

Basic and diluted earnings per share

     0.03         0.19   

Balance sheet data:

     

Property, plant and equipment at fair value

   $   13,945       $   12,300   

Total assets

     15,708         13,828   

Long-term debt and credit facilities

     5,519         4,994   

Participating non-controlling interests

     629         206   

Preferred equity

     241         252   

Limited partners’ equity

     6,330         3,372   

Distributions per share

     0.73         0.50   
                   

 

  (1)  

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Pro Forma Results and Balance Sheet.”

 

  (2)  

On a fully-exchanged basis.

There are no differences in capacity, long-term average and actual generation since the pro forma results reflect the same portfolio of assets as are reflected in the historical table. Refer to the 5.A “Operating Results — Pro Forma Adjustments.”

 

  3.B

CAPITALIZATION AND INDEBTEDNESS

The following table presents Brookfield Renewable’s consolidated capitalization as at March 31, 2012 and as at December 31, 2011 on an actual basis derived from our consolidated financial statements prepared in accordance with IFRS.

 

(US$ millions)    March 31, 2012        December 31, 2011    

Credit facilities (1)

     $         28           $       251     

Corporate borrowings (1)

     1,497           1,071     

Subsidiary borrowings (2)

     4,459           4,197     
  

 

 

    

 

 

 
     5,984           5,519     

Deferred income tax liabilities

     2,448           2,374     

Participating non-controlling interests

     760           629     

Preferred equity

     247           241     

Limited partners’ equity

     6,408           6,330     

 

  (1)  

Issued by a subsidiary of Brookfield Renewable and guaranteed by Brookfield Renewable (and certain of its subsidiaries). The amounts are unsecured.

 

  (2)  

Issued by a subsidiary of Brookfield Renewable and secured against its own assets. The amounts are not guaranteed.

You should read this table in conjunction with our unaudited consolidated financial statements of Brookfield Renewable as at March 31, 2012 and for the three months ended March 31, 2012 and 2011 and related notes, the audited consolidated financial statements of Brookfield Renewable as at December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 and the related notes, Item 3.A “Selected Financial Data,” and Item 5. “Operating and Financial Review and Prospects” included in this Form 20-F.

 

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  3.C

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

 

  3.D

RISK FACTORS

You should carefully consider the following factors in addition to the other information set forth in this Form 20-F. If any of the following risks actually occur, our business, financial condition, results of operations and prospects could be adversely affected and the value of our LP Units would likely decline, and you could lose all or part of your investment.

Risks Related to Brookfield Renewable

Brookfield Renewable is a newly formed partnership with a limited operating history and the historical and pro forma financial information included in this Form 20-F does not reflect the financial condition or operating results we would have achieved during the periods presented, and therefore may not be a reliable indicator of our future financial performance.

Brookfield Renewable, which was formed on June 27, 2011, has a limited operating history. Our lack of operating history will make it difficult for you to assess our ability to operate profitably and make distributions to LP Unitholders. Financial information for the periods prior to November 28, 2011 is presented based on the historical combined financial information for the contributed operations as previously reported by Brookfield. For the period after completion of the Combination, the results are based on the actual results of the new entity, Brookfield Renewable, including the adjustments associated with the Combination and the execution of several new and amended agreements, including PPAs and management service agreements.

Brookfield Renewable is not, and does not intend to become, regulated as an “investment company” under the Investment Company Act (and similar legislation in other jurisdictions) and if Brookfield Renewable was deemed an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to operate as contemplated.

The Investment Company Act (and similar legislation in other jurisdictions) provides certain protections to investors and imposes certain restrictions on companies that are registered as investment companies. Among other things, such rules limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities and impose certain governance requirements. Brookfield Renewable has not been and does not intend to become regulated as an investment company and Brookfield Renewable intends to conduct its activities so it will not be deemed to be an investment company under the Investment Company Act (and similar legislation in other jurisdictions). In order to ensure that we are not deemed to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans. We will be limited in the types of acquisitions that we may make, and we may need to modify our organizational structure or dispose of assets of which we would not otherwise dispose. Moreover, if anything were to happen, which would potentially cause Brookfield Renewable to be deemed an investment company under the Investment Company Act, it would be impractical for us to operate as intended. Agreements and arrangements between and among us and Brookfield would be impaired, the type and amount of acquisitions that we would be able to make as a principal would be limited, and our business, financial condition and results of operations would be materially adversely affected. Accordingly, we would be required to take extraordinary steps to address the situation, such as the amendment or termination of our Master Services Agreement, the restructuring of Brookfield Renewable and the Holding Entities, the amendment of the Amended and Restated Limited Partnership Agreement of BREP or the termination of Brookfield Renewable, any of which could materially adversely affect the value of our LP Units. In addition, if Brookfield Renewable were deemed to be an investment company under the Investment Company Act, it would be taxable as a corporation for U.S. federal income tax purposes, and such treatment could materially adversely affect the value of our LP Units.

Brookfield Renewable is a “foreign private issuer” under U.S. securities laws and will therefore be subject to disclosure obligations different from requirements applicable to U.S. domestic registrants listed on the NYSE.

Although Brookfield Renewable will be subject to the periodic reporting requirement of the Exchange Act, the periodic disclosure required of foreign private issuers under the Exchange Act is different from periodic disclosure required of U.S. domestic registrants. Therefore, there may be less publicly available information about Brookfield Renewable than is regularly published by or about other public companies in the United States. Brookfield Renewable will be exempt from certain other sections of the Exchange Act to which U.S. domestic issuers are subject, including the requirement to provide our LP Unitholders with information statements or proxy statements that comply with the 1934 Act. In addition, insiders and large LP Unitholders of Brookfield Renewable will not be obligated to file reports under Section 16 of the Exchange Act, and certain corporate governance rules that will be imposed by the NYSE will be inapplicable to Brookfield Renewable.

 

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Our failure to maintain effective internal controls could have a material adverse effect on our business in the future and the price of our LP Units.

Pursuant to Section 404 of the Sarbanes-Oxley Act, our management will be required to deliver a report that assesses the effectiveness of our internal controls over financial reporting and our independent registered public accounting firm will be required to deliver an attestation report on our management’s assessment of, and the operating effectiveness of, our internal controls over financial reporting in conjunction with their opinion on our audited financial statements. Any failure to maintain adequate internal controls over financial reporting or to implement required, new or improved controls, or difficulties encountered in their implementation, could cause us to report material weaknesses or other deficiencies in our internal controls over financial reporting and could result in a more than remote possibility of errors or misstatements in our consolidated financial statements that would be material. If we or our independent registered public accounting firm were to conclude that our internal controls over financial reporting were not effective, investors could lose confidence in our reported financial information and the price of our LP Units could decline. Our failure to achieve and maintain effective internal controls could have a material adverse effect on our business in the future, our access to the capital markets and investors’ perception of us. In addition, material weaknesses in our internal controls could require significant expense and management time to remediate.

Risks Related to Our Operations and the Renewable Power Industry

Changes to hydrology at our hydroelectric stations or in wind conditions at our wind energy facilities could materially adversely affect the volume of electricity generated.

The revenues generated by our facilities are proportional to the amount of electricity generated which in turn is dependent upon available water flows and wind conditions. Hydrology and wind conditions have natural variations from season to season and from year to year and may also change permanently because of climate change or other factors. A natural disaster could also impact water flows within the watersheds in which we operate. Water rights are also generally owned or controlled by governments that reserve the right to control water levels or may impose water-use requirements as a condition of license renewal. Wind energy is highly dependent on weather conditions and, in particular, on wind conditions. The profitability of a wind farm depends not only on observed wind conditions at the site, which are inherently variable, but also on whether observed wind conditions are consistent with assumptions made during the project development phase. A sustained decline in water flow at our hydroelectric stations or in wind conditions at our wind energy facilities could lead to a material adverse change in the volume of electricity generated, revenues and cash flow.

In Brazil, hydroelectric power generators have access to the MRE, which, within the limitation referred to below, stabilizes hydrology by assuring that all participant plants in the MRE receive a reference amount of electricity, approximating long-term average irrespective of the actual volume of energy generated whether above or below long-term average and substantially all our assets are part of that pool. In cases of nationwide drought sustained over an entire year, when the pool as a whole is in shortfall relative to the long-term average, an asset can expect to share the nationwide shortfall pro-rata with the rest of the pool. In addition, specific rules provide the minimum percentages of the reference amount of electricity that must be actually generated each year for assuring participation in the MRE. The energy reference amount is assessed yearly according to the criteria of such regulation, and can be adjusted positively or negatively. If the MRE is terminated or changed or Brookfield Renewable’s reference amount is revised, Brookfield Renewable’s financial results would be exposed to variations in hydrology in Brazil.

Counterparties to our contracts may not fulfill their obligations and, as our contracts expire, we may not be able to replace them with agreements on similar terms.

A significant portion of the power we generate is sold under long-term PPAs with Brookfield, public utilities or industrial or commercial end-users, some of whom may not be rated by any rating agency. For example, as at December 31, 2011 approximately 55% of our projected annual sales are with Brookfield entities, which are not rated and whose obligations are not guaranteed by Brookfield Asset Management. If, for any reason, any of the purchasers of power under such PPAs, including Brookfield, are unable or unwilling to fulfill their contractual obligations under the relevant PPA or if they refuse to accept delivery of power pursuant to the relevant PPA, our assets, liabilities, business, financial condition, results of operations and cash flow could be materially and adversely affected as we may not be able to replace the agreement with an agreement on equivalent terms and conditions. External events, such as a severe economic downturn, could impair the ability of some counterparties to the PPAs or some end use customers to pay for electricity received.

Certain portions of our hydroelectric portfolio will be subject to re-contracting in the future. We cannot provide any assurance that we will be able to re-negotiate these contracts once their terms expire, and even if we are able to do so, we cannot provide any assurance that we will be able to obtain the same prices or terms we currently receive. If we are unable to renegotiate these contracts, or unable to receive prices at least equal to the current prices we receive, our business, financial condition, results of operation and prospects could be adversely affected.

 

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Conversely, a significant percentage of our sales will be made by facilities subject to indefinite term contracts with Brookfield (taking into account its rights of renewal) at fixed prices per MWh of our electricity sold. Accordingly, with respect to those facilities, our ability to realize improved revenues due to increases in market prices for renewable power may be limited.

Increases in water rental costs (or similar fees) or changes to the regulation of water supply may impose additional obligations on Brookfield Renewable.

Water rights are generally owned or controlled by governments that reserve the right to control water levels or may impose water-use requirements as a condition of license renewal that differ from those arrangements in place today. We are required to make rental payments and pay property taxes for water rights or pay similar fees for use of water once our hydroelectric projects are in commercial operation. Significant increases in water rental costs or similar fees in the future or changes in the way that governments regulate water supply could have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flow.

Supply and demand in the energy market, including the non-renewable energy market, is volatile and such volatility could have an adverse impact on electricity prices and a material adverse effect on Brookfield Renewable’s assets, liabilities, business, financial condition, results of operations and cash flow.

A portion of Brookfield Renewable’s revenues are tied, either directly or indirectly, to the wholesale market price for electricity in the markets in which Brookfield Renewable operates. Wholesale market electricity prices are impacted by a number of factors including: the price of fuel (for example, natural gas) that is used to generate other sources of electricity; the management of generation and the amount of excess generating capacity relative to load in a particular market; the cost of controlling emissions of pollution, including potentially the cost of carbon; the structure of the market; and weather conditions that impact electrical load. More generally, there is uncertainty surrounding the trend in electricity demand growth, which is greatly influenced by macroeconomic conditions, by absolute and relative energy prices, and by developments in energy conservation and demand-side management. Correspondingly, from a supply perspective, there are uncertainties associated with the timing of generating plant retirements – in part driven by environmental regulations – and with the scale, pace and structure of replacement capacity, again reflecting a complex interaction of economic and political pressures and environmental preferences. This volatility and uncertainty in the energy market, including the non-renewable energy market, could have a material adverse effect on Brookfield Renewable’s assets, liabilities, business, financial condition, results of operations and cash flow.

Our operations are highly regulated and may be exposed to increased regulation which could result in additional costs to Brookfield Renewable.

Our generation assets are subject to extensive regulation by various government agencies and regulatory bodies in different countries at the federal, regional, state, provincial and local level. As legal requirements frequently change and are subject to interpretation and discretion, we may be unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. Any new law, rule or regulation could require additional expenditure to achieve or maintain compliance or could adversely impact our ability to generate and deliver energy. Also, operations that are not currently regulated may become subject to regulation which could result in additional cost to our business. Further, changes in wholesale market structures or rules, such as generation curtailment requirements or limitations to access the power grid, could have a material adverse effect on our ability to generate revenues from our facilities.

There is a risk that our concessions and licenses will not be renewed.

We hold concessions and licenses and we have rights to operate our facilities which generally include rights to the land and water required for power generation. We expect that our rights and/or our licenses will be renewed by the applicable regulatory bodies in each country. However, if these regulatory bodies do not grant us renewal rights, or if they decide to renew our concessions and licenses, as the case may be, under conditions which would impose additional costs, or if additional restrictions such as setting a price ceiling for energy sales, our profitability and operational activity could be adversely impacted.

The cost of operating our plants could increase for reasons beyond our control.

While we currently maintain a low and competitive cost position, there is a risk that increases in our cost structure that are beyond our control could materially adversely impact our financial performance. Examples of such costs include compliance with new conditions imposed during the relicensing process, municipal property taxes, water rental fees and the cost of procuring materials and services required for our maintenance activities.

 

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We may fail to comply with the conditions in, or may not be able to maintain, our governmental permits.

Our generation assets and construction projects are required to comply with numerous federal, regional, state, provincial and local statutory and regulatory standards and to maintain numerous licenses, permits and governmental approvals required for operation. Some of the licenses, permits and governmental approvals that have been issued to our operations contain conditions and restrictions, or may have limited terms. If we fail to satisfy the conditions or comply with the restrictions imposed by our licenses, permits and governmental approvals, or the restrictions imposed by any statutory or regulatory requirements, we may become subject to regulatory enforcement action and the operation of the assets could be adversely affected or be subject to fines, penalties or additional costs or revocation of regulatory approvals, permits or licenses. In addition, we may not be able to renew, maintain or obtain all necessary licenses, permits and governmental approvals required for the continued operation or further development of our projects, as a result of which the operation or development of our assets may be limited or suspended. Our failure to renew, maintain or obtain all necessary licenses, permits or governmental approvals may have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flow.

We may experience equipment failure.

Our generation assets may not continue to perform as they have in the past and there is a risk of equipment failure due to wear and tear, latent defect, design error or operator error, early obsolescence, among other things, which could have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flow. In particular, wind generation turbines are less commercially proven than hydroelectric assets and have shorter lifespans.

The occurrence of dam failures could result in a loss of generating capacity and repairing such failures could require us to expend significant amounts of capital and other resources.

The occurrence of dam failures at any of our hydroelectric generating stations or the occurrence of dam failures at other generating stations or dams operated by third parties whether upstream or downstream of our hydroelectric generating stations could result in a loss of generating capacity and repairing such failures could require us to expend significant amounts of capital and other resources. Such failures could result in damage to the environment or damages and harm to third parties or the public, which could expose us to significant liability.

We may be exposed to force majeure events.

The occurrence of a significant event that disrupts the ability of our generation assets to produce or sell power for an extended period, including events which preclude existing customers from purchasing electricity, could have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flow. In addition, force majeure events affecting our assets could result in damage to the environment or harm to third parties or the public, which could expose us to significant liability. Our generation assets could be exposed to effects of severe weather conditions, natural disasters and potentially catastrophic events such as a major accident or incident. An assault or an action of malicious destruction, sabotage or terrorism committed on our generation assets could also disrupt our ability to generate or sell power. In certain cases, there is the potential that some events may not excuse Brookfield Renewable Group from performing its obligations pursuant to agreements with third parties. Brookfield Renewable Group may be liable for damages or suffer further losses as a result. In addition, many of our generation assets are located in remote areas which may make access for repair of damage difficult.

We may be exposed to uninsurable losses.

While we maintain insurance coverage, such insurance may not continue to be offered on an economically feasible basis and may not cover all events that could give rise to a loss or claim involving our assets or operations. If our insurance coverage is not adequate and we are forced to bear such losses or claims, our financial position could be materially and adversely affected.

We are subject to foreign currency risk which may adversely affect the performance of our operations.

A significant portion of our current operations are in countries where the U.S. dollar is not the functional currency. These operations pay distributions in currencies other than the U.S. dollar, which we must convert to U.S. dollars prior to making distributions. A significant depreciation in the value of such foreign currencies or measures which may be introduced by foreign governments to control inflation or deflation may have a material adverse effect on our business, financial condition, results of operations and cash flows.

The ability to deliver electricity to our various counterparties requires the availability of and access to interconnection facilities and transmission systems.

Our ability to sell electricity is impacted by the availability of and access to the various transmission systems to deliver power to its contractual delivery point and the arrangements and facilities for interconnecting the generation projects to the

 

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transmission systems. The absence of this availability and access, our inability to obtain reasonable terms and conditions for interconnection and transmission agreements, the operational failure of existing interconnection facilities or transmission facilities, the lack of adequate capacity on such interconnection or transmission facilities, may have a material adverse effect on our ability to deliver electricity to our various counterparties or the requirement of counterparties to accept and pay for energy delivery, which could materially and adversely affect our assets, liabilities, business, financial condition, results of operations and cash flow.

Our operations are exposed to occupational health, safety and environmental risks.

The ownership, construction and operation of our generation assets carry an inherent risk of liability related to public safety, worker health and safety and the environment, including the risk of government imposed orders to remedy unsafe conditions and/or to remediate or otherwise address environmental contamination or damage. We could also be exposed to potential penalties for contravention of health, safety and environmental laws and potential civil liability. In the ordinary course of business we incur capital and operating expenditures to comply with health, safety and environmental laws to obtain and comply with licenses, permits and other approvals and to assess and manage related risks. The costs to comply with these laws (and any future laws or amendments enacted) may increase over time and result in additional material expenditures. We may become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health, safety and environmental matters as a result of which our operations may be limited or suspended. The occurrence of any of these events or any changes, additions to or more rigorous enforcement of health, safety and environmental laws could have a material and adverse impact on operations and result in additional material expenditures. Additional environmental and workers’ health and safety issues relating to presently known or unknown matters may require unanticipated expenditures, or result in fines, penalties or other consequences (including changes to operations) that may be material and adverse to our business and results of operations.

Our renewable power business may be involved in disputes and possible litigation.

In the normal course of our operations, Brookfield Renewable may become involved in various legal actions that could expose it to significant liability for damages. The outcome with respect to outstanding, pending or future actions cannot be predicted with certainty and may be adverse to us and as a result could have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flow.

We may suffer a significant loss resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed internal processes or systems, or from external events.

We may suffer a significant loss resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed internal processes or systems, or from external events, such as the occurrence of disasters or security threats affecting our ability to operate. We operate in different markets and rely on our employees to follow our policies and processes as well as applicable laws in their activities. Risk of illegal acts or failed systems is managed through our infrastructure, controls, systems and people, complemented by central groups focusing on enterprise-wide management of specific operational risks such as fraud, trading, outsourcing, and business disruption, as well as personnel and systems risks. Specific programs, policies, standards and methodologies have been developed to support the management of these risks. These risks can result in direct or indirect financial loss, reputational impact or regulatory censure.

There are general industry risks associated with operating in the North American and Brazilian power market sectors.

We operate in the North American and Brazilian power market sectors, which are affected by competition, price, supply of and demand for power, the location of import/export transmission lines and overall political, economic and social conditions and policies. A general and extended decline in the North American or Brazilian economy or sustained conservation efforts to reduce electricity consumption could have the effect of reducing demand for electric energy over time, which did occur during the recent recession.

Advances in technology could impair or eliminate the competitive advantage of our projects.

There are other alternative technologies that can produce renewable power, such as fuel cells, microturbines and photovoltaic (solar) cells. These alternative technologies currently produce electricity at a higher average price than our generation facilities; however, research and development activities are ongoing to seek improvements in such alternative technologies and their cost of producing electricity is gradually declining. Additionally, research and developments activities are ongoing to seek improvements and reductions in carbon emissions from fossil fuel generation. It is possible that advances will further reduce the cost of alternative methods of power generation. If this were to happen, the competitive advantage of our projects may be significantly impaired or eliminated and our assets, liabilities, business, financial condition, results of operations and cash flow could be materially and adversely affected as a result.

 

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There can be no guarantee that newly developed technologies that we invest in will perform as anticipated.

We may invest in and use newly developed, less proven, technologies in our development projects or in maintaining or enhancing our existing assets. There is no guarantee that such new technologies will perform as anticipated. The failure of a new technology to perform as anticipated may materially and adversely affect the profitability of a particular development project.

Performance of our Operating Entities may be harmed by future labor disruptions and economically unfavorable collective bargaining agreements.

Certain of Brookfield Renewable’s subsidiaries are parties to collective agreements that expire periodically and those subsidiaries may not be able to renew their collective agreements without a labor disruption or without agreeing to significant increases in cost. In the event of a labor disruption such as a strike or lock-out, the ability of our generation assets to generate electricity may be impaired. Our results from operations and cash flow could be materially and adversely affected as a result.

Risks Related to Financing

Our ability to finance our operations is subject to various risks relating to the state of the capital markets.

Brookfield Renewable Group has corporate debt and limited recourse project level debt, the majority of which is non-recourse that will need to be replaced from time to time. Brookfield Renewable Group’s financings may contain conditions that limit its ability to repay indebtedness prior to maturity without incurring penalties, which may limit its capital markets flexibility. Refinancing risk includes, among other factors, dependence on continued operating performance of Brookfield Renewable Group’s assets, future electricity market prices, future capital markets conditions, the level of future interest rates and investors’ assessment of Brookfield Renewable’s credit risk at such time. In addition, certain of our financings are, and future financings may be exposed to floating interest rate risks, and if interest rates increase, an increased proportion of our cash flow may be required to service indebtedness. Future acquisitions, development and construction of new facilities and other capital expenditures will be financed out of cash generated from our operations, borrowings and possible future sales of equity. Our ability to obtain financing to finance our growth is dependent on, among other factors, the overall state of the capital markets, continued operating performance of our assets, future electricity market prices, the level of future interest rates and investors’ assessment of our credit risk at such time, and investor appetite for investments in renewable energy and infrastructure assets in general and in Brookfield Renewable Group’s securities in particular. To the extent that external sources of capital become limited or unavailable or available on onerous terms, our ability to make necessary capital investments to construct new or maintain existing facilities will be impaired, and as a result, our business, financial condition, results of operations and prospects may be materially and adversely affected.

We are subject to operating and financial restrictions through covenants in our loan, debt and security agreements.

Brookfield Renewable, BRELP and its subsidiaries are or will in the future be subject to operating and financial restrictions through covenants in our loan, debt and security agreements. These restrictions prohibit or limit our ability to, among other things, incur additional debt, provide guarantees for indebtedness, create liens, dispose of assets, liquidate, dissolve, amalgamate, consolidate or effect corporate or capital reorganizations, declare distributions, issue equity interests and create subsidiaries. A financial covenant in our bonds and in our corporate bank credit facilities limits our overall indebtedness to a percentage of total capitalization, a restriction which may limit our ability to obtain additional financing, withstand downturns in our business and take advantage of business and development opportunities. If we breach our covenants, our credit facilities may be terminated or come due and such event may cause our credit rating to deteriorate and subject Brookfield Renewable to higher interest and financing costs. We may also be required to seek additional debt financing on terms that include more restrictive covenants, require repayment on an accelerated schedule or impose other obligations that limit our ability to grow our business, acquire needed assets or take other actions that we might otherwise consider appropriate or desirable.

Changes in our credit ratings may have an adverse effect on our financial position and ability to raise capital.

We cannot assure you that any credit rating assigned to Brookfield Renewable or any of our subsidiaries’ debt securities will remain in effect for any given period of time or that any rating will not be lowered or withdrawn entirely by the relevant rating agency. A lowering or withdrawal of such ratings may have an adverse effect on our financial position and ability to raise capital.

Risks Related to Our Growth Strategy

Government regulations providing incentives for renewable energy could change at any time.

Development of renewable energy sources and the overall growth of the renewable energy industry are dependent on state or provincial, national and international policies in support of such development. In particular, Canada and the United States, two of our principal markets, and their respective provinces and states, have pursued for several years, and in many cases continue to pursue, policies of active support for renewable energy for several years. In Brazil, SHPPs benefit from a special discount for the use of the transmission and distribution system which enables them to secure higher prices in the market. Policies which incentivize the development of renewables include renewable energy purchase obligations imposed on local service entities, tax incentives, including investment tax credits, production tax credits and accelerated depreciation and direct subsidies.

 

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The cost of renewable energy to purchasers, as well as the economic return available to project sponsors, is often dependent on the level of incentives available and the availability of such incentives is uncertain. There is a risk that government regulations providing incentives for renewable energy or increasing emission standards or other environmental regulation of traditional thermal coal-fired generation could change at any time (in a manner not dissimilar from Canada’s decision to lower emission reduction targets following withdrawal from the Kyoto Protocol to the United Nations Framework Convention on Climate Change). Any such change may impact the competitiveness of renewable energy generally and the economic value and ability to develop our projects in particular. In addition, some of these incentives are subject to sunset provisions that put a burden on the renewable power industry to lobby for renewal of incentives. The budget difficulties facing many governments create greater challenges and uncertainty in getting incentives renewed. In addition, even if incentives are renewed prior to their expiration, uncertainty regarding renewal can create substantial risks and delays for developers of renewable power projects. As a result, we may face reduced ability to develop our project pipeline and realize our development growth objectives. We may also suffer material write-offs of development assets as a result.

We may be unable to identify and complete sufficient investment opportunities.

Our strategy for building LP Unitholder value is to seek to acquire or develop high-quality assets and businesses that generate sustainable and increasing cash flows, with the objective of achieving appropriate risk-adjusted returns on our invested capital over the long-term. However, there is no certainty that we will be able to find and complete sufficient investment opportunities that meet our investment criteria. Our investment criteria consider, among other things, the financial, operating, governance and strategic merits of a proposed acquisition and, as such, there is no certainty that we will be able to acquire or develop additional high-quality assets at attractive prices to continue growing our business. Competition for assets is significant and competition from other well-capitalized investors or companies may significantly increase the purchase price or prevent us from completing an acquisition.

Future growth of our portfolio may subject us to additional risks.

Our strategy is to continue to expand our business through acquisitions and developments, however, acquisitions involve risks that could materially and adversely affect our business, including: the failure of the new acquisitions or projects to achieve the expected investment results, risks related to the integration of the assets or businesses and integration or retention of personnel relating to the acquired assets or companies and the inability to achieve potential synergies. In addition, liabilities may exist that Brookfield Renewable Group does not discover in its due diligence prior to the consummation of an acquisition, or circumstances may exist with respect to the entities or assets acquired that could lead to future liabilities and, in each case, Brookfield Renewable Group may not be entitled to sufficient, or any, recourse against the vendors or contractual counterparties to an acquisition agreement. The discovery of any material liabilities subsequent to an acquisition, as well as the failure of a new acquisition to perform according to expectations, could have a material adverse effect on Brookfield Renewable Group’s assets, liabilities, business, financial condition, results of operations and cash flow.

There are several factors which may affect our ability to develop existing sites and find new sites suitable for the development of greenfield power projects.

Our ability to realize our greenfield development growth plans is dependent on our ability to develop existing sites and find new sites suitable for development into viable projects. Ability to maintain a development permit often requires specific development steps to be undertaken. Successful development of greenfield power projects, whether hydroelectric or wind, is typically dependent on a number of factors, including the ability to secure an attractive site on reasonable terms; the ability to measure resource availability at levels deemed economically attractive for continued project development; the ability to secure approvals, licenses and permits; the acceptance of local stakeholders, including in some cases, First Nations and other aboriginal peoples, of proposed developments; the ability to secure transmission interconnection access or agreements; and the ability to secure a long-term PPA or other sales contract on reasonable terms. Each of these factors can be critical in determining whether or not a particular development project might ultimately be suitable for construction. Failure to achieve any one of these elements may prevent the development and construction of a project. When this occurs we may lose all of our investment in development expenditures and may be required to write-off project development assets.

The development of our generating facilities is subject to various construction risks and risks associated with the various types of arrangements we enter into with communities and joint venture partners.

Our ability to develop an economically successful project is dependent on, among other things, our ability to construct a particular project on-time and on-budget. The construction and development of generating facilities is subject to various environmental, engineering and construction risks that could result in cost-overruns, delays and reduced performance. A number of factors that could cause such delays, cost over-runs or reduced performance include, but are not limited to, permitting delays,

 

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changing engineering and design requirements, the costs of construction, the performance and necessary experience of contractors, labor disruptions and inclement weather. In addition, we enter into various types of arrangements with communities and joint venture partners, including in some cases, First Nations and other aboriginal peoples, for the development of projects. Certain of these communities and partners may have or may develop interests or objectives which are different from or even in conflict with our objectives. Any such differences could have a negative impact on the success of our projects.

Brookfield has no obligation to source acquisition opportunities for us and we may not have access to all renewable power acquisitions that Brookfield identifies.

Our ability to grow through acquisitions depends on Brookfield’s ability to identify and present us with acquisition opportunities. Brookfield established Brookfield Renewable to hold and acquire renewable power generating operations or developments on a global basis. However, Brookfield has no obligation to source acquisition opportunities specifically for us. In addition, Brookfield has not agreed to commit to us any minimum level of dedicated resources for the pursuit of renewable power-related acquisitions. There are a number of factors which could materially and adversely impact the extent to which suitable acquisition opportunities are made available from Brookfield, for example:

 

   

it is an integral part of Brookfield’s (and our) strategy to pursue the acquisition or development of renewable power assets through consortium arrangements with institutional investors, strategic partners or financial sponsors and to form partnerships to pursue such acquisitions on a specialized or global basis. Although Brookfield has agreed with us that it will not enter any such arrangements that are suitable for us without giving us an opportunity to participate in them, there is no minimum level of participation to which we will be entitled;

 

   

the same professionals within Brookfield’s organization that are involved in acquisitions that are suitable for us are responsible for the consortiums and partnerships referred to above, as well as having other responsibilities within Brookfield’s broader asset management business. Limits on the availability of such individuals will likewise result in a limitation on the availability of acquisition opportunities for us;

 

   

Brookfield will only recommend acquisition opportunities that it believes are suitable for us. Our focus is on assets where we believe that our operations-oriented approach can be deployed to create value. Accordingly, opportunities where Brookfield cannot play an active role in influencing the underlying operating company or managing the underlying assets may not be suitable for us, even though they may be attractive from a purely financial perspective. Legal, regulatory, tax and other commercial considerations will likewise be an important consideration in determining whether an opportunity is suitable and will limit our ability to participate in these more passive investments and may limit our ability to have more than 50% of our assets concentrated in a single jurisdiction; and

 

   

in addition to structural limitations, the question of whether a particular acquisition is suitable is highly subjective and is dependent on a number of factors including an assessment by Brookfield relating to our liquidity position at the time, the risk profile of the opportunity, its fit with the balance of our then current operations and other factors. If Brookfield determines that an opportunity is not suitable for us, it may still pursue such opportunity on its own behalf, or on behalf of a Brookfield sponsored partnership or consortium.

In making these determinations, Brookfield may be influenced by factors that result in a misalignment or conflict of interest. See Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”.

We do not have control over all our operations.

We have structured some of our operations as joint ventures, partnerships and consortium arrangements. An integral part of our strategy is to participate with institutional investors in Brookfield sponsored or co-sponsored consortiums for single asset acquisitions and as a partner in or alongside Brookfield sponsored or co-sponsored partnerships that target acquisitions that suit our profile. These arrangements are driven by the magnitude of capital required to complete acquisitions of renewable assets and other industry-wide trends that we believe will continue. Such arrangements involve risks not present where a third party is not involved, including the possibility that partners or co-venturers might become bankrupt or otherwise fail to fund their share of required capital contributions. Additionally, partners or co-venturers might at any time have economic or other business interests or goals different from Brookfield Renewable and Brookfield.

Joint ventures, partnerships and consortium investments generally provide for a reduced level of control over an acquired company because governance rights are shared with others. Accordingly, decisions relating to the underlying operations, including decisions relating to the management and operation and the timing and nature of any exit, are often made by a majority vote of the investors or by separate agreements that are reached with respect to individual decisions. In addition, such operations may be subject to the risk that the company may make business, financial or management decisions with which we do not agree or the management of the company may take risks or otherwise act in a manner that does not serve our interests. Because we may not have the ability to exercise control over such operations, we may not be able to realize some or all of the benefits that we believe will be created from Brookfield’s involvement. If any of the foregoing were to occur, our financial condition and results of operations could suffer as a result.

 

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In addition, all of our current operations with less than 100% ownership are structured joint ventures, partnerships or consortium arrangements. The sale or transfer of interests in some of these operations are subject to rights of first refusal or first offer, tag along rights or drag along rights and some agreements in these operations provide for buy-sell or similar arrangements. Such rights may be triggered at a time when we may not want them to be exercised and such rights may inhibit our ability to sell our interest in an entity within the desired time frame or on any other desired basis. In addition, the operations are also all subject to pre-emptive or default rights which may lead to the joint venture or third parties compulsorily acquiring assets from the joint venture.

We may be required to issue equity or debt for future acquisitions and developments which will be dependent on the overall state of the capital markets.

Future acquisitions and developments, construction of new facilities and other capital expenditures will be financed out of cash generated from our operations, borrowings and possible future sales of equity. As such, financing our growth may depend on raising additional equity and/or debt capital. Our ability to do so is dependent on, among other factors, the overall state of the capital markets and investor appetite for investments in renewable energy assets in general and our securities in particular.

We may pursue acquisitions in new markets that are subject to foreign laws or regulation that are more onerous than the laws and regulations we are currently subject to.

We may pursue acquisitions in new markets that are subject to regulation by various foreign governments and regulatory authorities and to the application of foreign laws. Such foreign laws or regulations may not provide for the same type of legal certainty and rights, in connection with our contractual relationships in such countries, as are afforded to our projects in Canada, the United States and Brazil, which may adversely affect our ability to receive revenues or enforce our rights in connection with our foreign operations. In addition, the laws and regulations of some countries may limit our ability to hold a majority interest in some of the projects that we may develop or acquire, thus limiting our ability to control the development, construction and operation of such projects. Any existing or new operations may also be subject to significant political, economic and financial risks, which vary by country, and may include:

 

   

changes in government policies or personnel;

 

   

changes in general economic conditions;

 

   

restrictions on currency transfer or convertibility;

 

   

changes in labor relations;

 

   

political instability and civil unrest;

 

   

changes in the local electricity market; and

 

   

breach or repudiation of important contractual undertakings by governmental entities and expropriation and confiscation of assets and facilities for less than fair market value.

Risks Related to Our Relationship with Brookfield

Brookfield will exercise substantial influence over Brookfield Renewable and we are highly dependent on the Manager.

A subsidiary of Brookfield Asset Management is the sole shareholder of the Managing General Partner. As a result of its ownership of the Managing General Partner, Brookfield will be able to control the appointment and removal of the Managing General Partner’s directors and, accordingly, exercise substantial influence over Brookfield Renewable. In addition, Brookfield Renewable holds its interest in the Operating Entities indirectly and will hold any future acquisitions indirectly through BRELP, the general partner of which is indirectly owned by Brookfield. As Brookfield Renewable’s only substantial asset is the limited partnership interests that it holds in BRELP, except future rights under the Voting Agreement, Brookfield Renewable will not have a right to participate directly in the management or activities of BRELP or the Holding Entities, including with respect to the making of decisions (although it will have the right to remove and replace the BRELP GP LP).

Brookfield Renewable and BRELP depend on the management and administration services provided by or under the direction of the Manager under our Master Services Agreement. Brookfield personnel and support staff that provide services to us under our Master Services Agreement are not required to have as their primary responsibility the management and administration of Brookfield Renewable or BRELP or to act exclusively for either of us and our Master Services Agreement does not require any specific individuals to be provided by Brookfield or Brookfield Renewable. Any failure to effectively manage our current operations or to implement our strategy could have a material adverse effect on our business, financial condition and results of operations. Our Master Services Agreement continues in perpetuity, until terminated in accordance with its terms.

 

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The departure of some or all of Brookfield’s professionals could prevent us from achieving our objectives.

We will depend on the diligence, skill and business contacts of Brookfield’s professionals and the information and opportunities they generate during the normal course of their activities. Our future success will depend on the continued service of these individuals, who are not obligated to remain employed with Brookfield. Brookfield has experienced departures of key professionals in the past and may do so in the future, and we cannot predict the impact that any such departures will have on our ability to achieve our objectives. The departure of a significant number of Brookfield’s professionals for any reason, or the failure to appoint qualified or effective successors in the event of such departures, could have a material adverse effect on our ability to achieve our objectives. The Amended and Restated Limited Partnership Agreement of BREP and our Master Services Agreement do not require Brookfield to maintain the employment of any of its professionals or to cause any particular professionals to provide services to us or on our behalf.

The role and ownership of Brookfield may change.

Our arrangements with Brookfield do not require Brookfield to maintain any ownership level in Brookfield Renewable or in BRELP. Accordingly, the Managing General Partner may transfer its general partnership interest to a third party, including in a merger or consolidation or in a transfer of all or substantially all of its assets, without the consent of our LP Unitholders provided the transferee is an affiliate of the BRELP General Partner. In addition, Brookfield may sell or transfer all or part of its interests in the Manager or in the Managing General Partner, in each case, without the approval of our LP Unitholders. If a new owner were to acquire ownership of the Managing General Partner and to appoint new directors or officers of its own choosing, it would be able to exercise substantial influence over Brookfield Renewable’s policies and procedures and exercise substantial influence over our management and the types of acquisitions that we make. Such changes could result in Brookfield Renewable’s capital being used to make acquisitions in which Brookfield has no involvement or in making acquisitions that are substantially different from our targeted acquisitions. Additionally, Brookfield Renewable cannot predict with any certainty the effect that any transfer in the ownership of the Managing General Partner would have on the trading price of our LP Units or Brookfield Renewable’s ability to raise capital or make investments in the future, because such matters would depend to a large extent on the identity of the new owner and the new owner’s intentions with regard to Brookfield Renewable. As a result, the future of Brookfield Renewable would be uncertain and Brookfield Renewable’s business, financial condition and results of operations may suffer.

Brookfield is not necessarily required to act in the best interests of the Service Recipients, Brookfield Renewable or our LP Unitholders.

Our Master Services Agreement and our other arrangements with Brookfield do not impose any duty on the Manager to act in the best interest of the Service Recipients, and the Manager is not prohibited from engaging in other business activities that compete with the Service Recipients. Additionally, the Managing General Partner, the general partner of BRELP, the Managers and their affiliates will have access to material confidential information. Although some of these entities will be subject to confidentiality obligations pursuant to confidentiality agreements or pursuant to implied duties of confidence, none of the Amended and Restated Limited Partnership Agreement of BREP, the Amended and Restated Limited Partnership Agreement of BRELP nor our Master Services Agreement contains general confidentiality provisions. In addition, the Amended and Restated Limited Partnership Agreement of BREP and the Amended and Restated Limited Partnership Agreement of BRELP contain various provisions that modify the fiduciary duties that might otherwise be owed to Brookfield Renewable and our LP Unitholders, including when conflicts of interest arise. These modifications may be important to our LP Unitholders because they restrict the remedies available for actions that might otherwise constitute a breach of fiduciary duty and permit the Managing General Partner and the BRELP General Partner to take into account the interests of third parties, including Brookfield, when resolving conflicts of interest. See Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”. It is possible that conflicts of interest may be resolved in a manner that is not in the best interests of Brookfield Renewable or the best interests of our LP Unitholders.

Our organizational and ownership structure may create significant conflicts of interest that may be resolved in a manner that is not in the best interests of Brookfield Renewable or the best interests of our LP Unitholders.

Our organizational and ownership structure involves a number of relationships that may give rise to conflicts of interest between Brookfield Renewable and our LP Unitholders, on the one hand, and Brookfield, on the other hand. In certain instances, the interests of Brookfield may differ from the interests of Brookfield Renewable and our LP Unitholders, including with respect to the types of acquisitions made, the timing and amount of distributions by Brookfield Renewable, the reinvestment of returns generated by our operations, the use of leverage when making acquisitions and the appointment of outside advisors and service providers, including as a result of the reasons described under Item 7.B “Related Party Transactions”.

 

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The Managing General Partner may be unable or unwilling to terminate our Master Services Agreement.

Our Master Services Agreement provides that the Service Recipients may terminate the agreement only if: the Manager defaults in the performance or observance of any material term, condition or covenant contained in the agreement in a manner that results in material harm to the Service Recipients and the default continues unremedied for a period of 60 days after written notice of the breach is given to the Manager; the Manager engages in any act of fraud, misappropriation of funds or embezzlement against any Service Recipient that results in material harm to us; the Manager is grossly negligent in the performance of its duties under the agreement and such negligence results in material harm to the Service Recipients; or upon the happening of certain events relating to the bankruptcy or insolvency of the Manager. The Managing General Partner cannot terminate the agreement for any other reason, including if the Manager or Brookfield experiences a change of control or due solely to the poor performance or under-performance of Brookfield Renewable Group’s operations or assets, and the agreement continues in perpetuity, until terminated in accordance with its terms. In addition, because the Managing General Partner is an affiliate of Brookfield, it may be unwilling to terminate our Master Services Agreement, even in the case of a default. If the Manager’s performance does not meet the expectations of investors, and the Managing General Partner is unable or unwilling to terminate our Master Services Agreement, the market price of our LP Units could suffer. Furthermore, the termination of our Master Services Agreement would terminate Brookfield Renewable’s rights under the Relationship Agreement and the Licensing Agreement. See Item 7.B “Related Party Transactions — Relationship Agreement” and Item 7.B “Related Party Transactions — Licensing Agreement”.

The liability of the Manager is limited under our arrangements with it and we have agreed to indemnify the Manager against claims that it may face in connection with such arrangements, which may lead it to assume greater risks when making decisions relating to us than it otherwise would if acting solely for its own account.

Under our Master Services Agreement, the Manager has not assumed any responsibility other than to provide or arrange for the provision of the services described in our Master Services Agreement in good faith and will not be responsible for any action that the Managing General Partner takes in following or declining to follow its advice or recommendations. In addition, under the Amended and Restated Limited Partnership Agreement of BREP, the liability of the Managing General Partner and its affiliates, including the Manager, is limited to the fullest extent permitted by law to conduct involving bad faith, fraud or willful misconduct or, in the case of a criminal matter, action that was known to have been unlawful. The liability of the Manager under our Master Services Agreement is similarly limited, except that the Manager is also liable for liabilities arising from gross negligence. In addition, Brookfield Renewable has agreed to indemnify the Manager to the fullest extent permitted by law from and against any claims, liabilities, losses, damages, costs or expenses incurred by an indemnified person or threatened in connection with our operations, investments and activities or in respect of or arising from our Master Services Agreement or the services provided by the Manager, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the conduct in respect of which such persons have liability as described above. These protections may result in the Manager tolerating greater risks when making decisions than otherwise would be the case, including when determining whether to use leverage in connection with acquisitions. The indemnification arrangements to which the Manager is a party may also give rise to legal claims for indemnification that are adverse to Brookfield Renewable and our LP Unitholders.

Risks Related to Our LP Units

Our LP Units, which have only been trading on the TSX since November 30, 2011, are not currently included in major market indices, and an active and liquid trading market for our LP Units may not develop.

Our LP Units have only been trading on the TSX since November 30, 2011 and are not included in major market indices. We cannot predict the extent to which investor interest will lead to the development of an active and liquid trading market for our LP Units or, if such a market develops, whether it will be maintained. We cannot predict the effects on the price of our LP Units if a liquid and active trading market for our LP Units does not develop and if our LP Units continue to not be eligible for inclusion in trading indices. In addition, if such a market does not develop, relatively small sales of our LP Units may have a significant negative impact on the price of our LP Units.

We may need additional funds in the future and Brookfield Renewable may issue additional LP Units in lieu of incurring indebtedness which may dilute existing holders of our LP Units or Brookfield Renewable may issue securities that have rights and privileges that are more favorable than the rights and privileges accorded to our LP Unitholders.

Under the Amended and Restated Limited Partnership Agreement of BREP, Brookfield Renewable may issue additional partnership securities, including LP Units and options, rights, warrants and appreciation rights relating to partnership securities for any purpose and for such consideration and on such terms and conditions as the Managing General Partner may determine. The Managing General Partner’s board of directors will be able to determine the class, designations, preferences, rights, powers and duties of any additional partnership securities, including any rights to share in Brookfield Renewable’s profits, losses and distributions, any rights to receive partnership assets upon a dissolution or liquidation of Brookfield Renewable and any redemption, conversion and exchange rights. The Managing General Partner may use such authority to issue additional LP Units, which could dilute holders of our LP Units,

 

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or to issue securities with rights and privileges that are more favorable than those of our LP Units. Holders of LP Units will not have any pre-emptive right or any right to consent to or otherwise approve the issuance of any such securities or the terms on which any such securities may be issued.

Our LP Unitholders do not have a right to vote on Brookfield Renewable matters or to take part in the management of Brookfield Renewable.

Under the Amended and Restated Limited Partnership Agreement of BREP, our LP Unitholders are not entitled to vote on matters relating to Brookfield Renewable, such as acquisitions, dispositions or financing, or to participate in the management or control of Brookfield Renewable. In particular, our LP Unitholders do not have the right to remove the Managing General Partner, to cause the Managing General Partner to withdraw from Brookfield Renewable, to cause a new general partner to be admitted to Brookfield Renewable, to appoint new directors to the Managing General Partner’s board of directors, to remove existing directors from the Managing General Partner’s board of directors or to prevent a change of control of the Managing General Partner. In addition, except as prescribed by applicable laws, our LP Unitholders’ consent rights apply only with respect to certain amendments to the Amended and Restated Limited Partnership Agreement of BREP. As a result, unlike holders of common shares of a corporation, our LP Unitholders are not able to influence the direction of Brookfield Renewable, including its policies and procedures, or to cause a change in its management, even if they are unsatisfied with the performance of Brookfield Renewable. Consequently, our LP Unitholders may be deprived of an opportunity to receive a premium for their LP Units in the future through a sale of Brookfield Renewable and the trading price of our LP Units may be adversely affected by the absence or a reduction of a takeover premium in the trading price.

The market price of our LP Units may be volatile.

The market price of our LP Units may be highly volatile and could be subject to wide fluctuations. Some of the factors that could negatively affect the price of our LP Units include: general market and economic conditions, including disruptions, downgrades, credit events and perceived problems in the credit markets; actual or anticipated variations in our quarterly operating results or distributions; changes in our investments or asset composition; write-downs or perceived credit or liquidity issues affecting our assets; market perception of Brookfield Renewable, our business and our assets; our level of indebtedness and/or adverse market reaction to any indebtedness we incur in the future; our ability to raise capital on favorable terms; loss of any major funding source; the termination of our Master Services Agreement or additions or departures of our or Brookfield’s key personnel; changes in market valuations of similar renewable power companies; speculation in the press or investment community regarding us or Brookfield; and changes in U.S. tax laws that make it impractical or impossible for Brookfield Renewable to continue to be taxable as a partnership for U.S. federal income tax purposes.

Securities markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies or partnerships. Any broad market fluctuations may adversely affect the trading price of our LP Units.

Non-U.S. Holders will be subject to foreign currency risk associated with Brookfield Renewable’s distributions.

A significant number of Brookfield Renewable’s LP Unitholders will reside in countries where the U.S. dollar is not the functional currency. Our distributions are denominated in U.S. dollars but are settled in the local currency of the LP Unitholder receiving the distribution. For each Non-U.S. Holder, the value received in the local currency from the distribution will be determined based on the exchange rate between the U.S. dollar and the applicable local currency at the time of payment. As such, if the U.S. dollar depreciates significantly against the local currency of the Non-U.S. Holder, the value received by such LP Unitholder in its local currency will be adversely affected.

U.S. investors in our LP Units may find it difficult or impossible to enforce service of process and enforcement of judgments against us and directors and officers of the Managing General Partner and the Manager.

We were established under the laws of Bermuda, and most of our subsidiaries are organized in jurisdictions outside of the United States. In addition, our executive officers and the experts identified in this Form 20-F are located outside of the United States. Certain of the directors and officers of the Managing General Partner and the Manager reside outside of the United States. A substantial portion of our assets are, and the assets of the directors and officers of the Managing General Partner and the Manager and the experts identified in this Form 20-F may be, located outside of the United States. It may not be possible for investors to effect service of process within the United States upon the directors and officers of the Managing General Partner and the Manager. It may also not be possible to enforce against us, our executive officers, the experts identified in this Form 20-F or the directors and officers of the managing General Partner and the Manager judgments obtained in U.S. courts predicated upon the civil liability provisions of applicable securities law in the United States.

 

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We may not be able to continue paying comparable or growing cash distributions to LP Unitholders in the future.

The amount of cash we can distribute to LP Unitholders depends upon the amount of cash we generate from our operations. The amount of cash we generate from our operations will fluctuate from quarter to quarter and will depend upon, among other things: the weather in the jurisdictions in which we operate; the level of our operating costs; and prevailing economic conditions. In addition, the actual amount of cash we will have available for distribution will also depend on other factors, such as: the level of costs related to litigation and regulatory compliance matters; the cost of acquisitions, if any; our debt service requirements; fluctuations in our working capital needs; our ability to borrow under our credit facilities; our ability to access capital markets; restrictions on distributions contained in our debt agreements; and the amount, if any, of cash reserves established by our Managing General Partner in its discretion for the proper conduct of our business. As a result of all these factors, we cannot guarantee that we will have sufficient available cash to pay a specific level of cash distributions to our LP Unitholders. Furthermore, LP Unitholders should be aware that the amount of cash we have available for distribution depends primarily upon our cash flow, and is not solely a function of profitability, which is affected by non-cash items. As a result, we may declare and/or pay cash distributions during periods when we record net losses.

Risks Related to Taxation

General

Changes in tax law and practice may have a material adverse effect on the operations of Brookfield Renewable, the Holding Entities, and the Operating Entities and, as a consequence, the value of Brookfield Renewable’s assets and the net amount of distributions payable to LP Unitholders.

The Brookfield Renewable structure, including the structure of the Holding Entities and the Operating Entities, is based on prevailing taxation law and practice in the local jurisdictions (such as Canada, the United States, and Brazil) in which the Brookfield Renewable entities operate. Any change in tax legislation (including in relation to taxation rates) and practice in these jurisdictions could adversely affect these entities, as well as the net amount of distributions payable to LP Unitholders. Taxes and other constraints that would apply to the Brookfield Renewable entities in such jurisdictions may not apply to local institutions or other parties, and such parties may therefore have a significantly lower effective cost of capital and a corresponding competitive advantage in pursuing such acquisitions.

Brookfield Renewable’s ability to make distributions depends on it receiving sufficient cash distributions from its underlying operations, and Brookfield Renewable cannot assure LP Unitholders that it will be able to make cash distributions to them in amounts that are sufficient to fund their tax liabilities, in which case certain LP Unitholders may be required to pay income taxes on their share of Brookfield Renewable’s income even though they have not received sufficient cash distributions from Brookfield Renewable.

The Holding Entities and Operating Entities of Brookfield Renewable may be subject to local taxes in each of the relevant territories and jurisdictions in which they operate, including taxes on income, profits or gains and withholding taxes. As a result, Brookfield Renewable’s cash available for distribution is indirectly reduced by such taxes, and the post-tax return to LP Unitholders is similarly reduced by such taxes. Brookfield Renewable intends for future acquisitions to be assessed on a case-by-case basis and, where possible and commercially viable, structured so as to minimize any adverse tax consequences to LP Unitholders as a result of making such acquisitions.

In general, an LP Unitholder that is subject to income tax in Canada or the United States must include in income its allocable share of Brookfield Renewable’s items of income, gain, loss, and deduction (including, so long as it is treated as a partnership for tax purposes, Brookfield Renewable’s allocable share of those items of BRELP) for each of Brookfield Renewable’s fiscal years ending with or within such LP Unitholder’s tax year. See Item 10.E “Certain Material Canadian Federal Income Tax Considerations” and “Certain Material United States Federal Income Tax Considerations”. However, the cash distributed to a LP Unitholder may not be sufficient to pay the full amount of such LP Unitholder’s tax liability in respect of its investment in Brookfield Renewable, because each LP Unitholder’s tax liability depends on such holder’s particular tax situation. If Brookfield Renewable is unable to distribute cash in amounts that are sufficient to fund our LP Unitholders’ tax liabilities, each of our LP Unitholders will still be required to pay income taxes on its share of Brookfield Renewable’s taxable income.

As a result of holding LP Units, LP Unitholders may be subject to U.S. state, local or non-U.S. taxes and return filing obligations in jurisdictions in which they are not resident for tax purposes or otherwise not subject to tax.

LP Unitholders may be subject to U.S. state, local, and non-U.S. taxes, including unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which Brookfield Renewable entities do business or own property now or in the future, even if LP Unitholders do not reside in any of those jurisdictions. LP Unitholders may be required to file income tax returns and pay income taxes in some or all of these jurisdictions. Further, LP Unitholders may be subject to penalties for failure to comply with these requirements. Although Brookfield Renewable will attempt, to the extent reasonably

 

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practicable, to structure Brookfield Renewable operations and investments so as to minimize income tax filing obligations by LP Unitholders in such jurisdictions, there may be circumstances in which Brookfield Renewable is unable to do so. It is the responsibility of each LP Unitholder to file all U.S. federal, state, local, and non-U.S. tax returns that may be required of such LP Unitholder.

LP Unitholders may be exposed to transfer pricing risks.

To the extent that Brookfield Renewable, BRELP, the Holding Entities or the Operating Entities enter into transactions or arrangements with parties with whom they do not deal at arm’s length, including Brookfield, pursuant to the Applicable Law relating to transfer pricing, the relevant tax authorities may seek to adjust the quantum or nature of the amounts received or paid by such entities if they consider that the terms and conditions of such transactions or arrangements differ from those that would have been made between persons dealing at arm’s length and could impose penalties for failing to comply with Applicable Law relating to transfer pricing. This could result in more tax (and penalties and interest) being paid by such entities, and therefore the return to investors could be reduced.

The Managing General Partner and the BRELP General Partner believe the fees charged by or paid to non-arm’s length persons are consistent with Applicable Law relating to transfer pricing, however, no assurance can be given in this regard.

United States

If either Brookfield Renewable or BRELP were to be treated as a corporation for U.S. federal income tax purposes, the value of LP Units might be adversely affected.

The value of LP Units to LP Unitholders will depend in part on the treatment of Brookfield Renewable and BRELP as partnerships for U.S. federal income tax purposes. However, in order for Brookfield Renewable to be treated as a partnership for U.S. federal income tax purposes, under present law, 90% or more of Brookfield Renewable’s gross income for every taxable year must consist of qualifying income, as defined in Section 7704 of the U.S. Internal Revenue Code, and the partnership must not be required to register, if it were a U.S. corporation, as an investment company under the Investment Company Act and related rules. Although the Managing General Partner intends to manage Brookfield Renewable’s affairs so that Brookfield Renewable will not need to be registered as an investment company if it were a U.S. corporation and so that it will meet the 90% test described above in each taxable year, Brookfield Renewable may not meet these requirements, or current law may change so as to cause, in either event, Brookfield Renewable to be treated as a corporation for U.S. federal income tax purposes. If Brookfield Renewable were treated as a corporation for U.S. federal income tax purposes, (i) the deemed conversion to corporate status could result in recognition of gain to U.S. investors, if Brookfield Renewable were to have liabilities in excess of the tax basis of its assets; (ii) Brookfield Renewable would likely be subject to U.S. corporate income tax and potentially branch profits tax with respect to income, if any, that is effectively connected to a U.S. trade or business; (iii) distributions to U.S. Holders would be taxable as dividends to the extent of Brookfield Renewable’s earnings and profits; and (iv) Brookfield Renewable could be classified as a “passive foreign investment company” (as defined in the U.S. Internal Revenue Code), and such classification could have adverse tax consequences to U.S. Holders with respect to distributions and gain recognized on the sale of LP Units. If BRELP were to be treated as a corporation for U.S. federal income tax purposes, consequences similar to those described above would apply.

Neither Brookfield Renewable nor BRELP has requested or plans to request a ruling from the U.S. Internal Revenue Service (the “ IRS ”) regarding the tax classification of either entity for U.S. federal income tax purposes.

Brookfield Renewable may be subject to U.S. backup withholding tax if any LP Unitholder fails to comply with U.S. federal tax reporting rules, and such excess withholding tax cost will be an expense borne by Brookfield Renewable and, therefore, by all of our LP Unitholders on a pro rata basis.

Brookfield Renewable may become subject to U.S. backup withholding tax at the applicable rate (currently 28%) with respect to any LP Unitholder who fails to timely provide Brookfield Renewable, or the applicable nominee, broker, clearing agent, or other intermediary, with an IRS Form W-9 or IRS Form W-8, as applicable. See Item 10.E “Certain Material U.S. Federal Income Tax Considerations — Administrative Matters — Backup and Other Administrative Withholding”. Accordingly, it is important for each of our LP Unitholders to timely provide Brookfield Renewable or the applicable intermediary with an IRS Form W-9 or IRS Form W-8, as the case may be. To the extent that any LP Unitholder fails to timely provide the applicable form (or such form is not properly completed), Brookfield Renewable might treat such U.S. backup withholding taxes as an expense, which would be borne indirectly by all LP Unitholders on a pro rata basis. As a result, LP Unitholders that fully comply with their U.S. tax reporting obligations may bear a share of such burden created by other LP Unitholders that do not comply with the U.S. tax reporting rules.

Tax-exempt organizations may face certain adverse U.S. tax consequences from owning LP Units.

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business (which income would constitute “unrelated business taxable income” (“ UBTI ”) to the extent allocated to a tax-exempt organization). Brookfield Renewable and BRELP are not prohibited from incurring indebtedness, and at times either or both may do so. If any such indebtedness were used to acquire property by Brookfield Renewable or by BRELP, such property generally would constitute “debt–financed property”, and any income from or gain from the disposition of such debt-financed property and allocated to a tax-exempt organization generally would constitute UBTI. In addition, even if such indebtedness were not used by Brookfield Renewable or BRELP to acquire property but were instead used to fund distributions to LP Unitholders, if a tax-exempt organization otherwise exempt from taxation in the United States were to use such proceeds to make an investment outside Brookfield Renewable, the IRS could assert that such investment constituted debt-financed property to such LP Unitholder with the consequences noted above. Brookfield Renewable and BRELP currently do not have any outstanding indebtedness used to acquire property, and the Managing General Partner and the BRELP General Partner do not believe that Brookfield Renewable or BRELP will generate UBTI attributable to debt-financed property in the future. However, neither Brookfield Renewable nor BRELP is prohibited from incurring indebtedness, and no assurance can be provided that neither Brookfield Renewable nor BRELP will generate UBTI attributable to debt-financed property in the future. The potential for income to be characterized as UBTI could make LP Units an unsuitable investment for a tax-exempt organization. Each tax-exempt organization should consult an independent tax adviser to determine the U.S. federal income tax consequences with respect to an investment in LP Units.

There may be limitations on the deductibility of Brookfield Renewable’s interest expense.

So long as Brookfield Renewable is treated as a partnership for U.S. federal income tax purposes, each of our LP Unitholders that is a U.S. Holder (as defined in Item 10.B “Certain Material United States Federal Income Tax Considerations”) generally will be taxed on its share of Brookfield Renewable’s net taxable income. However, U.S. federal income tax law may limit the deductibility of such LP Unitholder’s share of Brookfield Renewable’s interest expense. In addition, deductions for such LP Unitholder’s share of Brookfield Renewable’s interest expense may be limited or disallowed for U.S. state and local tax purposes. Therefore, any such LP Unitholder may be taxed on amounts in excess of such LP Unitholder’s share of the net income of Brookfield Renewable. This could adversely impact the value of LP Units if Brookfield Renewable were to incur (either directly or indirectly) a significant amount of indebtedness. See Item 10.E “Certain U.S. Federal Income Tax Considerations — Consequences to U.S. Holders — Holding of LP Units — Limitations on Interest Deductions”.

If Brookfield Renewable were engaged in a U.S. trade or business, non-U.S. persons would face certain adverse U.S. tax consequences from owning LP Units.

The Managing General Partner and the BRELP General Partner intend to use commercially reasonable efforts to structure the activities of Brookfield Renewable and BRELP, respectively, to avoid generating income treated as effectively connected with a U.S. trade or business, including effectively connected income attributable to the sale of a “United States real property interest”, as defined in the U.S. Internal Revenue Code. Accordingly, non-U.S. LP Unitholders generally will not be subject to U.S. federal income tax on interest, dividends, and gain realized by Brookfield Renewable from non-U.S. sources. It is possible, however, that the IRS could disagree with this conclusion or that the U.S. federal tax laws and Treasury Regulations could change and that Brookfield Renewable would be deemed to be engaged in a U.S. trade or business, which could have a material adverse effect on non-U.S. LP Unitholders. If, contrary to the Managing General Partner’s expectations, Brookfield Renewable is considered to be engaged in a U.S. trade or business or realizes gain from the sale or other disposition of a United States real property interest, non-U.S. LP Unitholders would be required to file U.S. federal income tax returns and would be subject to U.S. federal income tax at the regular graduated rates, which Brookfield Renewable could be required to withhold.

To meet U.S. federal income tax and other objectives, Brookfield Renewable and BRELP may invest through U.S. and non-U.S. Holding Entities that are treated as corporations for U.S. federal income tax purposes, and such Holding Entities may be subject to corporate income tax.

To meet U.S. federal income tax and other objectives, Brookfield Renewable and BRELP may invest through U.S. and non-U.S. Holding Entities that are treated as corporations for U.S. federal income tax purposes, and such Holding Entities may be subject to corporate income tax. Consequently, items of income, gain, loss, deduction, or credit realized in the first instance by the Operating Entities will not flow, for U.S. federal income tax purposes, directly to BRELP, Brookfield Renewable, or LP Unitholders, and any such income or gain may be subject to a corporate income tax, in the United States or other jurisdictions, at the level of the Holding Entity. Any such additional taxes may adversely affect Brookfield Renewable’s ability to maximize its cash flow.

 

LP Unitholders taxable in the United States may be viewed as holding an indirect interest in an entity classified as a “passive foreign investment company” for U.S. federal income tax purposes.

U.S. Holders (as defined in “Certain United States Federal Income Tax Considerations”) may face adverse U.S. tax consequences arising from the ownership of a direct or indirect interest in a “passive foreign investment company” (“ PFIC ”). Based on the organizational structure of Brookfield Renewable, as well as Brookfield Renewable’s expected income and assets, the Managing General Partner and the BRELP General Partner currently believe that a U.S. Holder is unlikely to be regarded as owning

 

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an interest in a PFIC solely by reason of owning LP Units during the taxable year ending December 31, 2012. However, there can be no assurance that an existing Brookfield Renewable entity or a future entity in which Brookfield Renewable acquires an interest will not be classified as a PFIC with respect to a U.S. Holder, because PFIC status is a factual determination that depends on the assets and income of a given entity and must be made on an annual basis. Provided a “QEF election” (as defined in “Certain United States Federal Income Tax Considerations”) is timely made and a QEF information return is filed annually by a U.S. Holder, PFIC status is not expected to have a material adverse effect on such U.S. Holder. See Item 10.E “Certain Material U.S. Federal Income Tax Considerations — Consequences to U.S. Holders — Passive Foreign Investment Companies”. In addition, recently enacted U.S. legislation requires each U.S. person who directly or indirectly owns an interest in a PFIC to file an annual report with the IRS, and the failure to file such report could result in the imposition of penalties on such U.S. person and in the extension of the statute of limitations with respect to federal income tax returns filed by such U.S. person. Each U.S. Holder should consult an independent tax adviser regarding the PFIC rules, including the potential effect of this legislation on such U.S. Holder’s filing requirements and the advisability of making a QEF election with respect to each PFIC.

Tax gain or loss from the disposition of LP Units could be more or less than expected.

If a sale of LP Units by an LP Unitholder is taxable in the United States, the LP Unitholder will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the amount realized and the LP Unitholder’s adjusted tax basis in those LP Units. Prior distributions to an LP Unitholder in excess of the total net taxable income allocated to such LP Unitholder will have decreased such holder’s tax basis in its LP Units. Therefore, such excess distributions will increase an LP Unitholder’s taxable gain or decrease such holder’s taxable loss when our LP Units are sold, and may result in a taxable gain even if the sale price is less than the original cost. A portion of the amount realized, whether or not representing gain, could be ordinary income to such LP Unitholder.

The Brookfield Renewable structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. The tax characterization of the Brookfield Renewable structure is also subject to potential legislative, judicial, or administrative change and differing interpretations, possibly on a retroactive basis.

The U.S. federal income tax treatment of LP Unitholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. LP Unitholders should be aware that the U.S. federal income tax rules, particularly those applicable to partnerships, are constantly under review (including currently) by the Congressional tax-writing committees and other persons involved in the legislative process, the IRS, the U.S. Treasury Department and the courts, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations, any of which could adversely affect the value of LP Units and be effective on a retroactive basis. For example, changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible for Brookfield Renewable to be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, affect the tax considerations of owning LP Units, change the character or treatment of portions of Brookfield Renewable’s income (including, for example, the treatment of carried interest as ordinary income rather than capital gain), and adversely affect an investment in LP Units. Such changes could also affect or cause Brookfield Renewable to change the way it conducts its activities, affect the tax considerations of an investment in Brookfield Renewable, and otherwise change the character or treatment of portions of Brookfield Renewable’s income (including changes that recharacterize certain allocations as potentially non-deductible fees).

Brookfield Renewable’s organizational documents and agreements permit the Managing General Partner to modify the limited partnership agreement of Brookfield Renewable from time to time, without the consent of our LP Unitholders, to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all LP Unitholders.

The IRS may not agree with certain assumptions and conventions that Brookfield Renewable uses in order to comply with applicable U.S. federal income tax laws or that Brookfield Renewable uses to report income, gain, loss, deduction, and credit to LP Unitholders.

Brookfield Renewable will apply certain assumptions and conventions in order to comply with applicable tax laws and to report income, gain, deduction, loss, and credit to a LP Unitholder in a manner that reflects such LP Unitholder’s beneficial ownership of partnership items, taking into account variation in ownership interests during each taxable year because of trading activity. Because Brookfield Renewable cannot match transferors and transferees of LP Units, Brookfield Renewable will adopt depreciation, amortization, and other tax accounting conventions that may not conform to all aspects of existing Treasury Regulations. In order to maintain the fungibility of our LP Units at all times, Brookfield Renewable will seek to achieve the uniformity of U.S. tax treatment for all purchasers of LP Units which are acquired at the same time and price (irrespective of the identity of the particular seller of LP Units or the time when LP Units are issued by Brookfield Renewable) through the application of certain accounting principles that Brookfield Renewable believes are reasonable. A successful IRS challenge to any of the foregoing assumptions or conventions could adversely affect the amount of tax benefits available to LP Unitholders and could require that items of income, gain, deduction, loss,

 

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or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects LP Unitholders. A successful challenge could also affect the timing of these tax benefits or the amount of gain from the sale of LP Units and could have a negative impact on the value of LP Units or result in audits of and adjustments to LP Unitholders’ tax returns.

Brookfield Renewable’s delivery of required tax information for a taxable year may be subject to delay, which could require an LP Unitholder who is a U.S. taxpayer to request an extension of the due date for such unitholder’s income tax return.

Brookfield Renewable has agreed to use commercially reasonable efforts to provide U.S. tax information (including IRS Schedule K-1 information needed to determine an LP Unitholder’s allocable share of Brookfield Renewable’s income, gain, losses and deductions) no later than 90 days after the close of each calendar year. However, providing this U.S. tax information to LP Unitholders will be subject to delay in the event of, among other reasons, the late receipt of any necessary tax information from lower-tier entities. It is therefore possible that, in any taxable year, an LP Unitholder will need to apply for an extension of time to file such LP Unitholder’s tax returns. See Item 10.E “Certain Material U.S. Federal Income Tax Considerations — Administrative Matters — Information Returns”.

The sale or exchange of 50% or more of our LP Units will result in the constructive termination of Brookfield Renewable for U.S. federal income tax purposes.

Brookfield Renewable will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of our LP Units within a 12-month period. A constructive termination of Brookfield Renewable would, among other things, result in the closing of its taxable year for U.S. federal income tax purposes for all LP Unitholders and could result in the possible acceleration of income to certain LP Unitholders and certain other consequences that could adversely affect the value of LP Units. However, the Managing General Partner does not expect a constructive termination, should it occur, to have a material impact on the computation of the future taxable income generated by Brookfield Renewable for U.S. income tax purposes. See Item 10.E “Certain Material U.S. Federal Income Tax Considerations — Administrative Matters — Constructive Termination”.

In 2010, the IRS announced a publicly traded partnership technical termination relief procedure. If a technically terminated publicly traded partnership requests relief under such procedure and the IRS grants such relief, then, among other things, the partnership need only provide one Schedule K-1 to its partners for the year, notwithstanding the two short taxable years for the partnership.

The U.S. Congress has considered legislation that could, if enacted, adversely affect Brookfield Renewable’s qualification as a partnership for U.S. federal tax purposes under the publicly traded partnership rules and subject certain income and gains to tax at increased rates. If this or similar legislation were to be enacted and to apply to Brookfield Renewable, then the after-tax income of Brookfield Renewable, as well as the market price of LP Units, could be reduced.

Over the past several years, a number of legislative proposals have been introduced in the U.S. Congress which could have had adverse tax consequences for Brookfield Renewable or BRELP, including the recharacterization of certain items of capital gain income as ordinary income for U.S. federal income tax purposes. However, such legislation was not enacted into law.

The Obama administration has indicated it supports such legislation and has proposed that the current law regarding the treatment of such items of capital gain income be changed to subject such income to ordinary income tax. For further detail on such proposed legislation, see Item 10.E. “Certain Material U.S. Federal Income Tax Considerations — Proposed Legislation”.

It remains unclear whether any legislation related to such revenue proposals or similar to the legislation described above will be proposed or enacted by the U.S. Congress and, if enacted, whether such legislation would affect an investment in Brookfield Renewable. Each LP Unitholder should consult an independent tax adviser as to the potential effect of any proposed or future legislation on an investment in Brookfield Renewable.

Under legislation recently enacted by the U.S. Congress, certain payments of U.S.-source income (as well as gross proceeds from the disposition of property that could produce such income) made to Brookfield Renewable or BRELP on or after January 1, 2014, could be subject to a 30% federal withholding tax, unless an exception applies.

Under recently enacted U.S. legislation, certain payments of U.S.-source income made on or after January 1, 2014 (as well as payments attributable to dispositions of property which produce or could produce certain U.S.-source income) to Brookfield Renewable or by Brookfield Renewable to or through non-U.S. financial institutions or non-U.S. entities, could be subject to a 30% withholding tax unless (i) the non-U.S. financial institution enters into an agreement with the IRS to provide to the IRS information concerning its direct and certain indirect U.S. account holders, or (ii) in the case of other non-U.S. entities, such entity provides to the withholding agent similar information concerning its substantial U.S. beneficial owners. Significant exceptions to these requirements apply, but the scope of these exceptions is addressed in Treasury Regulations that have yet to be made final. Each LP Unitholder should consult an independent tax adviser as to the potential effects the recently enacted legislation might have on an investment in Brookfield Renewable.

 

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Canada

The Canadian federal income tax consequences to LP Unitholders could be materially different in certain respects from those described in this Form 20-F if Brookfield Renewable is a “SIFT partnership” (as defined in the Income Tax Act (Canada) (the “Tax Act”) for any taxation year after its first taxation year or if BRELP is a “SIFT partnership”.

Under the rules in the Tax Act applicable to a “SIFT trust” (as defined in the Tax Act) or a “SIFT partnership” (the “ SIFT Rules ”), certain income and gains earned by a “SIFT partnership” are subject to income tax at the partnership level at a rate similar to a corporation, and allocations of such income and gains to its partners are taxed as a dividend from a taxable Canadian corporation. In particular, a “SIFT partnership” will be required to pay a tax on the total of its income from businesses carried on in Canada, income from “non-portfolio properties” (other than taxable dividends), and taxable capital gains from dispositions of “non-portfolio properties”. “Non-portfolio properties” include, among other things, equity interests or debt of corporations, trusts or partnerships that are resident in Canada, and of non-resident persons or partnerships the principal source of income of which is one or any combination of sources in Canada (other than an “excluded subsidiary entity” (as defined in the Tax Act)), that are held by the “SIFT partnership” and have a fair market value that is greater than 10% of the equity value of such entity, or that have, together with debt or equity that the “SIFT partnership” holds of entities affiliated (within the meaning of the Tax Act) with such entity, an aggregate fair market value that is greater than 50% of the equity value of the “SIFT partnership”. The tax rate applied to the above mentioned sources of income and gains is set at a rate equal to the “net federal corporate income tax rate”, plus the “provincial SIFT tax rate”.

A partnership will be a “SIFT partnership” throughout a taxation year if at any time in the taxation year (i) it is a “Canadian resident partnership” (as defined in the Tax Act), (ii) “investments” (as defined in the Tax Act) in the partnership are listed or traded on a stock exchange or other public market, and (iii) it holds one or more “non-portfolio properties”. For these purposes, a partnership will be a “Canadian resident partnership” at a particular time if (a) it is a “Canadian partnership” (as defined in the Tax Act) at that time, (b) it would, if it were a corporation be resident in Canada (including, for greater certainty, a partnership that has its central management and control located in Canada), or (c) it was formed under the laws of a province. A “Canadian partnership” for these purposes is a partnership all of whose members are resident in Canada or are partnerships that are “Canadian partnerships”.

Under the SIFT Rules, Brookfield Renewable was a “SIFT partnership” for its first taxation year that ended on December 31, 2011 on the basis that it was a “Canadian resident partnership” for a period of time in its first taxation year, our LP Units were listed on the TSX during that period and Brookfield Renewable held one more “non-portfolio properties” during that period. BRELP was not a “SIFT partnership” for its first taxation year that ended on December 31, 2011 on the basis that it qualified as an “excluded subsidiary entity” for its first taxation year. Brookfield Renewable could be a SIFT partnership in any subsequent taxation year in which it is a “Canadian resident partnership”. BRELP would not be a “SIFT partnership” for any taxation year for which Brookfield Renewable is a “SIFT partnership” regardless of whether BRELP is a “Canadian resident partnership” on the basis that BRELP would be an “excluded subsidiary entity”. However, BRELP could be a “SIFT partnership” for any taxation year in which Brookfield Renewable is not a “SIFT partnership” and BRELP is a “Canadian resident partnership”. On July 20, 2011, the Minister of Finance Canada (the “ Minister ”) announced Tax Proposals to amend the definition of “excluded subsidiary entity” for purposes of the SIFT Rules. Based on the limited details of these Tax Proposals provided by the Minister, these Tax Proposals should have no impact on BRELP’s qualification as an “excluded subsidiary entity”. However, no assurance can be given in this regard.

Brookfield Renewable and BRELP will be a “Canadian resident partnership” if the central management and control of these partnerships is located in Canada. This determination is a question of fact and is expected to depend on where the Managing General Partner and the BRELP General Partner are located and exercise central management and control of the respective partnerships. The Managing General Partner and the BRELP General Partner will each take appropriate steps so that the central management and control of these entities is not located in Canada such that the SIFT Rules should not apply to Brookfield Renewable for any taxation year after its first taxation year or to BRELP for any taxation year. However, no assurance can be given in this regard. If Brookfield Renewable is a “SIFT partnership” for any taxation year after its first taxation year or if BRELP is a “SIFT partnership” for any taxation year, the Canadian income tax consequences to LP Unitholders could be materially different in certain respects from those described in Item 10.E “Certain Material Canadian Federal Income Tax Considerations”. In addition, there can be no assurance that the SIFT Rules will not be revised or amended in the future such that the SIFT Rules will apply to Brookfield Renewable in subsequent taxation years or to BRELP.

If any non-Canadian resident subsidiaries (“Non-Resident Subsidiaries”) in which BRELP directly invests earn income that is “foreign accrual property income” (as defined in the Tax Act and referred to in this Form 20-F as “FAPI”) our LP Unitholders may be required to include amounts allocated from Brookfield Renewable in computing their income for Canadian federal income tax purposes even though there may be no corresponding cash distribution.

Any Non-Resident Subsidiaries in which BRELP directly invests are expected to be “controlled foreign affiliates” (as defined in the Tax Act and referred to in this Form 20-F as “ CFAs ”) of BRELP. If any of such non-Canadian subsidiaries earns income that is FAPI, in a taxation year, BRELP’s proportionate share of such FAPI must be included in computing the income of BRELP for Canadian federal income tax purposes for the fiscal period of BRELP in which the taxation year of such CFA that earned the FAPI ends, whether or not BRELP actually receives a distribution of such income. Brookfield Renewable will include its share of such FAPI of BRELP in computing its income for Canadian federal income tax purposes and LP Unitholders will be required to include

 

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their proportionate share of such FAPI allocated from Brookfield Renewable in computing their income for Canadian federal income tax purposes. As a result, LP Unitholders may be required to include amounts in their income for Canadian federal income tax purposes even though they have not and may not receive an actual cash distribution of such amount.

LP Unitholders may be required to include imputed amounts in their income for Canadian federal income tax purposes, either directly or by way of allocation of such income imputed to Brookfield Renewable or BRELP, in accordance with existing section 94.1 of the Tax Act as proposed to be amended under proposed amendments to the Tax Act announced on March 4, 2010 and contained in draft tax proposals released on August 27, 2010, if, having regard to all the circumstances, it is reasonable to conclude that one of the main reasons for the LP Unitholder acquiring or holding LP Units or of Brookfield Renewable or BRELP acquiring or holding an investment in a non-resident entity is to derive a benefit from portfolio investments in such a manner that taxes under the Tax Act on income, profits and gains for any year are significantly less than they would have been if such income, profits and gains had been earned directly.

On March 4, 2010, the Minister announced as part of the 2010 Canadian federal budget that the outstanding tax proposals regarding investments in “foreign investment entities” would be replaced with revised Tax Proposals under which the existing rules in section 94.1 of the Tax Act relating to investments in “offshore investment fund property” would remain in place subject to certain limited enhancements. On August 27, 2010, the Minister released draft legislation to implement the revised Tax Proposals. Existing section 94.1 of the Tax Act contains rules relating to investments in non-resident entities that could in certain circumstances cause income to be imputed to LP Unitholders for Canadian federal income tax purposes, either directly or by way of allocation of such income imputed to Brookfield Renewable or to BRELP. These rules would apply if it is reasonable to conclude, having regard to all the circumstances, that one of the main reasons for the LP Unitholder, Brookfield Renewable or BRELP acquiring or holding an investment in a non-resident entity is to derive a benefit from portfolio investments in such a manner that taxes under the Tax Act on income, profits and gains for any year are significantly less than they would have been if such income, profits and gains had been earned directly. In determining whether this is the case, existing section 94.1 of the Tax Act provides that consideration must be given to, among other factors, the extent to which the income, profits and gains for any fiscal period are distributed in that or the immediately following fiscal period. If, having regard to the particular circumstances, it is reasonable to conclude that one of the main reasons for the acquisition or holding of LP Units by the LP Unitholder, of units of BRELP by Brookfield Renewable, or of interests in non-resident entities (other than a CFA) by BRELP, is as stated above, for Canadian federal income tax purposes income will be imputed directly to the LP Unitholder or to Brookfield Renewable or BRELP and allocated to the LP Unitholder in accordance with the rules in existing section 94.1 of the Tax Act as proposed to be amended. No assurance can be given that existing section 94.1 of the Tax Act as proposed to be amended will not apply to an LP Unitholder, Brookfield Renewable or BRELP. The rules in existing section 94.1 of the Tax Act are complex and LP Unitholders should consult their own tax advisors regarding the application of these rules to them in their particular circumstances.

Our LP Units may not continue to be “qualified investments” under the Tax Act for registered plans.

Provided that our LP Units are listed on a “designated stock exchange” (as defined in the Tax Act), which currently includes the TSX and the NYSE, our LP Units will be “qualified investments” under the Tax Act for a trust governed by a registered retirement saving plan (“ RRSP ”), deferred profit sharing plan, registered retirement income fund (“ RRIF ”), registered education saving plan, registered disability saving plan, and a tax-free savings account (“ TFSA ”). However, there can be no assurance that tax laws relating to qualified investments will not be changed. Taxes may be imposed in respect of the acquisition or holding of non-qualified investments by such registered plans and certain other taxpayers and with respect to the acquisition or holding of “prohibited investments” by a TFSA.

Our LP Units will not be a “prohibited investment” for a trust governed by a TFSA or RRSP or RRIF, provided that the holder of the TFSA or annuitant of the RRSP or RRIF, as the case may be, deals at arm’s-length with Brookfield Renewable for purposes of the Tax Act and does not have a “significant interest” for the purposes of the prohibited investment rules in the Tax Act. LP Unitholders who hold their LP Units in a TFSA, RRSP or RRIF should consult their own tax advisers to ensure that our LP Units will not be a “prohibited investment” for a trust governed by a TFSA or RRSP or RRIF.

Proposed amendments to the Tax Act may deny the deductibility of losses arising from LP Unitholders’ LP Units in computing their income for Canadian federal income tax purposes.

On October 31, 2003, the Department of Finance (Canada) released for public comment proposed amendments to the Tax Act regarding the deductibility of interest and other expenses for purposes of the Tax Act (the “ REOP Proposals ”). Under the REOP Proposals, a taxpayer would be considered to have a loss from a source that is a business or property for a taxation year only if, in that year, it is reasonable to assume that the taxpayer will realize a cumulative profit (excluding capital gains or losses) from the business or property during the period that the business is carried on or that the property is held. In general, these proposals may deny the deduction of losses arising from LP Unitholders’ LP Units in computing their income for Canadian federal income tax purposes in a particular taxation year, if, in the year the loss is claimed, it is not reasonable to expect that an overall cumulative profit would be

 

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earned from the investment in Brookfield Renewable for the period in which our LP Unitholders held and can reasonably be expected to hold the investment. The Managing General Partner and the BRELP General Partner do not anticipate that the activities of Brookfield Renewable and BRELP will, in and of themselves, generate losses. However, investors may incur expenses in connection with an acquisition of LP Units that could result in a loss that would be affected by the REOP Proposals. As part of the 2005 Canadian federal budget, the Minister announced that an alternative proposal to reflect the REOP Proposals would be released for comment at an early opportunity. No such alternative proposal has been released to date. There can be no assurance that such alternative proposal will not adversely affect our LP Unitholders, or that any revised proposal will not differ significantly from the REOP Proposals described above and in Item 10.E “Certain Material Canadian Federal Income Tax Considerations”.

Brookfield Renewable Group may be denied a deduction for interest expense if the proposed amendments to the Tax Act concerning “stapled securities” apply to Brookfield Renewable Group.

On July 20, 2011, the Minister announced proposed amendments to the Tax Act concerning, among other things, publicly traded “stapled securities” (the “ Stapled Securities Proposals ”). The Stapled Securities Proposals would apply where two separate securities are “stapled” together such that the securities are not freely transferable independently of each other and such “stapled securities” are issued by an entity that is a trust, corporation or partnership and one or more of the “stapled securities” is listed or traded on a stock exchange or other public market and any of the following applies: (i) the “stapled securities” are both issued by the entity, (ii) one of the “stapled securities” is issued by the entity, and the other by a subsidiary of the entity, or (iii) one of the “stapled securities” is issued by a real estate investment trust (“ REIT ”) or the subsidiary of a REIT. The Stapled Securities Proposals, if they applied, would deny an interest expense in computing the income of the payer for income tax purposes for interest on the debt portion such a “stapled security”. Based on the limited details of the Stapled Securities Proposals provided by the Minister, the Stapled Securities Proposals should have no impact on Brookfield Renewable Group. However, no assurance can be given in this regard.

LP Unitholders’ foreign tax credits for Canadian federal income tax purposes will be limited if the proposed amendments to the Tax Act concerning foreign tax credit generators apply in respect of the foreign “business-income tax” or “non-business-income tax” (each as defined in the Tax Act) paid by Brookfield Renewable or BRELP to a foreign country.

On March 4, 2010, the Minister announced anti-avoidance amendments to the Tax Act which are contained in draft legislation released on August 27, 2010 to address certain foreign tax credit generator transactions (the “ Foreign Tax Credit Generator Proposals ”). Under the Foreign Tax Credit Generator Proposals, the foreign “business-income tax” or “non-business-income tax” for Canadian federal income tax purposes for any taxation year may be limited in certain circumstances, including where an LP Unitholder’s share of Brookfield Renewable’s income under the income tax laws of any country (other than Canada) under whose laws the income of Brookfield Renewable is subject to income taxation, is less than the LP Unitholder’s share of such income for purposes of the Tax Act. No assurances can be given that the Foreign Tax Credit Generator Proposals will not apply to any LP Unitholder. If the Foreign Tax Credit Generator Proposals apply, an LP Unitholder’s foreign tax credits for Canadian federal income tax purposes will be limited.

The “foreign accrual tax” (as defined in the Tax Act) applicable to a particular amount of FAPI included in BRELP’s income in respect of a particular “foreign affiliate” (as defined in the Tax Act) of BRELP will be limited if the Foreign Tax Credit Generator Proposals apply to BRELP and in such case for Canadian federal income tax purposes LP Unitholders would be allocated their pro rata share of a greater amount of FAPI that is allocated from BRELP to Brookfield Renewable.

Under the Foreign Tax Credit Generator Proposals, the “foreign accrual tax” applicable to a particular amount of FAPI included in a partnership’s income in respect of a particular “foreign affiliate” of the partnership may be limited in certain specified circumstances, including where the share of the income of any member of the partnership that is a person resident in Canada is, under the income tax laws of any country (other than Canada) under whose laws the income of the partnership is subject to income taxation, less than its share thereof for purposes of the Tax Act. No assurances can be given that the Foreign Tax Credit Generator Proposals will not apply to BRELP. If the Foreign Tax Credit Generator Proposals apply, the “foreign accrual tax” applicable to a particular amount of FAPI included in BRELP’s income in respect of a particular “foreign affiliate” of BRELP will be limited and in such case for Canadian federal income tax purposes LP Unitholders will be allocated their pro rata share of a greater amount of FAPI that is allocated from BRELP to Brookfield Renewable.

LP Unitholders who are not and are not deemed to be resident in Canada for purposes of the Tax Act and who do not use or hold and are not deemed to use or hold their LP Units in connection with a business carried on in Canada (“Non-Resident LP Unitholders”) may be subject to Canadian federal income tax with respect to any Canadian source business income earned by Brookfield Renewable or BRELP if Brookfield Renewable or BRELP were considered to carry on business in Canada.

If Brookfield Renewable or BRELP were considered to carry on a business in Canada for purposes of the Tax Act, Non-Resident LP Unitholders, would be subject to Canadian federal income tax on their proportionate share of any Canadian source business income earned or considered to be earned by Brookfield Renewable, subject to the potential application of the safe harbor rule in section 115.2 of the Tax Act, as proposed to be amended under proposed amendments to the Tax Act announced by the Minister on October 31, 2010, and any relief that may be provided by any relevant income tax treaty or convention.

 

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The Managing General Partner and the BRELP General Partner intend to manage the affairs of Brookfield Renewable and BRELP, to the extent possible, so that they do not carry on business in Canada and are not considered or deemed to carry on business in Canada for purposes of the Tax Act. Nevertheless, because the determination of whether Brookfield Renewable or BRELP is carrying on business and, if so, whether that business is carried on in Canada, is a question of fact that is dependent upon the surrounding circumstances, the CRA might contend successfully that either or both of Brookfield Renewable and BRELP carries on business in Canada for purposes of the Tax Act.

If Brookfield Renewable or BRELP is considered to carry on business in Canada or is deemed to carry on business in Canada for the purposes of the Tax Act, Non-Resident LP Unitholders that are corporations would be required to file a Canadian federal income tax return for each taxation year in which they are a Non-Resident LP Unitholder regardless of whether relief from Canadian taxation is available under an applicable income tax treaty or convention. Non-Resident LP Unitholders who are individuals would be required to file a Canadian federal income tax return for any taxation year in which they are allocated income from Brookfield Renewable from carrying on business in Canada that is not exempt from Canadian taxation under the terms of an applicable income tax treaty or convention.

Non-Resident LP Unitholders may be subject to Canadian federal income tax on capital gains realized by Brookfield Renewable or BRELP on dispositions of “taxable Canadian property”.

A Non-Resident LP Unitholder will be subject to Canadian federal income tax on its proportionate share of capital gains realized by Brookfield Renewable or BRELP on the disposition of “taxable Canadian property” (as defined in the Tax Act) other than “treaty protected property” (as defined in the Tax Act). For these purposes, “taxable Canadian property” includes, but is not limited to, property that is used or held in a business carried on in Canada, shares of corporations resident in Canada that are listed on a “designated stock exchange” if more than 50% of the fair market value of the shares is derived from certain Canadian properties during the prescribed time period, and listed shares if, during the prescribed time period, the number of shares owned exceeds prescribed amounts and more than 50% of the fair market value of the shares is derived from certain Canadian properties). Property of Brookfield Renewable and BRELP generally will be “treaty-protected property” to a Non-Resident LP Unitholder if the gain from the disposition of the property would, because of an applicable income tax treaty or convention, be exempt from tax under the Tax Act. Brookfield Renewable and BRELP are not expected to realize capital gains or losses from dispositions of “taxable Canadian property”. However, no assurance can be given in this regard. Non-Resident LP Unitholders will be required to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property” by Brookfield Renewable or BRELP unless the disposition is an “excluded disposition” for the purposes of section 150 of the Tax Act. However, Non-Resident LP Unitholders that are corporations will still be required to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property” that is an “excluded disposition” for purposes of section 150 of the Tax Act if tax would otherwise be payable under Part I of the Tax Act by such Non-Resident LP Unitholders in respect of the disposition but is not because of a tax treaty (otherwise than in respect of a disposition of “taxable Canadian property” that is “treaty-protected property” of the corporation). In general, an “excluded disposition” is a disposition of property by a taxpayer in a taxation year where (a) the taxpayer is a non-resident of Canada at the time of the disposition; (b) no tax is payable by the taxpayer under Part I of the Tax Act for the taxation year; (c) the taxpayer is not liable to pay any amounts under the Tax Act in respect of any previous taxation year (other than certain amounts for which the Canada Revenue Agency (“ CRA ”) holds adequate security); and (d) each “taxable Canadian property” disposed of by the taxpayer in the taxation year is either (i) “excluded property” (as defined in subsection 116(6) of the Tax Act) or (ii) is property in respect of the disposition of which a certificate under subsection 116(2), (4) or (5.2) has been issued by the CRA. Non-Resident LP Unitholders should consult their own tax advisors with respect to the requirements to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property” by Brookfield Renewable or BRELP.

Non-Resident LP Unitholders may be subject to Canadian federal income tax on capital gains realized on the disposition of LP Units if our LP Units are “taxable Canadian property”.

Any capital gain arising from the disposition or deemed disposition of LP Units by a Non-Resident LP Unitholder will be subject to taxation in Canada, if, at the time of the disposition or deemed disposition, our LP Units are “taxable Canadian property”, unless our LP Units are “treaty-protected property” to such Non-Resident LP Unitholder. In general, our LP Units will not be “taxable Canadian property” at the time of disposition or deemed disposition, unless (a) at any time in the 60-month period immediately preceding the disposition or deemed disposition, more than 50% of the fair market value of our LP Units was derived, directly or indirectly (under proposed amendments to the Tax Act announced by the Minister on August 27, 2010, excluding through a corporation, partnership or trust, the shares or interests in which were not themselves “taxable Canadian property”), from one or any combination of (i) real or immovable property situated in Canada, (ii) “Canadian resource property” (as defined in the Tax Act), (iii) “timber resource property” (as defined in the Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, such property, whether or not such property exists, or (b) our LP Units are otherwise deemed to be “taxable Canadian property”. Since Brookfield Renewable’s assets will consist principally of units of BRELP, our LP Units would generally be “taxable Canadian

 

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property” at a particular time, if the units of BRELP held by Brookfield Renewable derived, directly or indirectly (under proposed amendments to the Tax Act announced by the Minister on August 27, 2010, excluding through a corporation, partnership or trust, the shares or interests in which were not themselves “taxable Canadian property”), more than 50% of their fair market value from properties described in (i) to (iv) above, at any time in the 60-month period preceding the particular time. Our LP Units will be “treaty protected property” if the gain on the disposition of our LP Units is exempt from tax under the Tax Act under the terms of an applicable income tax treaty or convention. It is not expected that our LP Units will constitute “taxable Canadian property” at any time but no assurance can be given in this regard. See Item 10.E “Certain Material Canadian Federal Income Tax Considerations — Holders Not Resident in Canada”. If our LP Units constitute “taxable Canadian property”, Non-Resident LP Unitholders will be required to file a Canadian federal income tax return in respect of a disposition of our LP Units unless the disposition is an “excluded disposition” (as discussed above). If our LP Units constitute “taxable Canadian property”, Non-Resident LP Unitholders should consult their own tax advisors with respect to the requirement to file a Canadian federal income tax return in respect of a disposition of LP Units.

Non-Resident LP Unitholders may be subject to Canadian federal income tax reporting and withholding tax requirements on the disposition of “taxable Canadian property”.

Non-Resident LP Unitholders who dispose of “taxable Canadian property”, other than “excluded property” (as defined in subsection 116(6) of the Tax Act) and certain other property described in subsection 116(5.2) of the Tax Act, (or who are considered to have disposed of such property on the disposition of such property by Brookfield Renewable or BRELP), are obligated to comply with the procedures set out in section 116 of the Tax Act and obtain a certificate pursuant to the Tax Act. In order to obtain such certificate, the Non-Resident LP Unitholder is required to report certain particulars relating to the transaction to the CRA not later than 10 days after the disposition occurs. Our LP Units are not expected to be “taxable Canadian property” and neither Brookfield Renewable nor BRELP is expected to dispose of property that is “taxable Canadian property” but no assurance can be given in these regards.

Payments of dividends or interest (other than interest exempt from Canadian federal withholding tax) by residents of Canada to BRELP will be subject to Canadian federal withholding tax and the payers may be unable to apply a reduced rate taking into account the residency or entitlement to relief under an applicable income tax treaty or convention of our LP Unitholders.

Each of Brookfield Renewable and BRELP will be deemed to be a non-resident person in respect of certain amounts paid or credited to them by a person resident or deemed to be resident in Canada, including dividends or interest. Dividends or interest (other than interest exempt from Canadian federal withholding tax) paid by a person resident or deemed to be resident in Canada to BRELP will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However, the CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable to such payments to be computed by looking through the partnership and taking into account the residency of the partners (including partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-resident limited partners may be entitled to under an applicable income tax treaty or convention provided that the residency status and entitlement to treaty benefits can be established. In determining the rate of Canadian federal withholding tax applicable to amounts paid by the Holding Entities to BRELP, the Managing General Partner and the BRELP General Partner expect the Holding Entities to look-through BRELP and Brookfield Renewable to the residency of the partners of Brookfield Renewable (including partners who are residents of Canada) and to take into account any reduced rates of Canadian federal withholding tax that non-resident partners may be entitled to under an applicable income tax treaty or convention in order to determine the appropriate amount of Canadian federal withholding tax to withhold from dividends or interest paid to BRELP. However, there can be no assurance that the CRA would apply its administrative practice in this context. If the CRA’s administrative practice is not applied and the Holding Entities withhold Canadian federal withholding tax from applicable payments on a look-through basis, the Holding Entities may be liable for additional amounts of Canadian federal withholding tax plus any associated interest and penalties. Under the Canada-U.S. Income Tax Convention (1980) (the “ Treaty ”), in certain circumstances a Canadian resident payer is required to look-through fiscally transparent partnerships such as Brookfield Renewable and BRELP to the residency of the partners of such partnerships who are entitled to relief under that Treaty and take into account reduced rates of Canadian federal withholding tax that such partners may be entitled to under that Treaty. Under the Amended and Restated Limited Partnership Agreement of BREP, the amount of any taxes withheld or paid by Brookfield Renewable, BRELP or the Holding Entities in respect of LP Units may be treated either as a distribution to our LP Unitholders or as a general expense of Brookfield Renewable as determined by the Managing General Partner in its sole discretion. However, it is the current intention of the Managing General Partner to treat all such amounts as a distribution to our LP Unitholders.

While the Managing General Partner and the BRELP General Partner expect the Holding Entities to look-through Brookfield Renewable and BRELP in determining the rate of Canadian federal withholding tax applicable to amounts paid by the Holding Entities to BRELP, we may be unable to accurately or timely determine the residency of our LP Unitholders for purposes of establishing the extent to which Canadian federal withholding taxes apply or whether reduced rates of withholding tax apply to some or all of our LP Unitholders. In such a case, the Holding Entities will withhold Canadian federal withholding tax from all payments made to BRELP that are subject to Canadian federal withholding tax at the rate of 25%. Canadian resident LP Unitholders will be

 

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entitled to claim a credit for such taxes against their Canadian federal income tax liability but Non-Resident LP Unitholders will need to take certain steps to receive a refund or credit in respect of any such Canadian federal withholding taxes withheld equal to the difference between the withholding tax at a rate of 25% and the withholding tax at the reduced rate they are entitled to under an applicable income tax treaty or convention. LP Unitholders should consult their own tax advisors concerning all aspects of Canadian federal withholding taxes.

 

ITEM 4. INFORMATION ON THE COMPANY

 

  4.A

HISTORY AND DEVELOPMENT OF THE COMPANY

Overview

Brookfield Renewable owns one of the world’s largest, publicly-traded, pure-play renewable power portfolios with approximately 5,000 MW of installed capacity and long-term average generation of approximately 18,000 GWh annually. The portfolio includes 170 hydroelectric generating stations on 67 river systems and seven wind farms. We also have two hydro facilities under construction (that are scheduled to be commissioned within the next 24 months) that will grow the aggregate capacity of our portfolio by approximately 48 MW. Our portfolio is diversified across ten power markets in Canada, the United States and Brazil, providing significant geographic and operational diversification.

Our objective is to pay a distribution to our LP Unitholders that is sustainable on a long-term basis while retaining within our operations sufficient liquidity for recurring growth capital expenditures and general purposes. We currently have a target payout ratio of approximately 60-70% of FFO, which we believe will leave us with approximately $100 million of available cash per year to further invest in accretive projects or acquisitions. We expect FFO to improve further in the long-term with the reinvestment of surplus cash flows. We intend to continue with a highly stable cash flow profile sourced from predominantly long-life hydroelectric assets, the vast majority of which sell electricity under long-term, fixed price contracts with creditworthy counterparties, including Brookfield, while supporting an attractive distribution yield and growth target. We intend to pursue a long-term distribution growth rate target in the range of 3% to 5% annually.

We believe that our scale, significant capitalization and sound investment-grade ratings will continue to enhance our ability to secure and fund new transactions globally. As such, we believe we are well–positioned to be a premium vehicle for investors seeking to invest in the renewable power sector. Our LP Units are listed on the TSX under the symbol “BEP.UN” and we intend to apply to have our LP Units listed for trading on the NYSE, which is expected to enhance our trading liquidity, deepen our investor base, broaden our access to capital and improve our ability to fund growth globally.

We anticipate that the only distributions we will receive in respect of our limited partnership interests in BRELP will consist of amounts that are intended to assist us in making distributions to our LP Unitholders in accordance with our distribution policy and to allow us to pay expenses as they become due.

History and Development of Our Business

Brookfield Renewable is a Bermuda exempted limited partnership that was established on June 27, 2011 under the provisions of the Exempted Partnerships Act 1992 of Bermuda and the Limited Partnership Act 1883 of Bermuda. Our registered and head office is 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda, and the telephone number is +1.441.295.1443.

Brookfield Renewable was established to serve as the primary vehicle through which Brookfield will acquire renewable power assets on a global basis. As a result of the Combination completed on November 28, 2011, all of the renewable power assets of the Fund, a publicly traded entity in Canada, and BRPI were combined and are now indirectly held by Brookfield Renewable through BRELP and BRELP’s subsidiaries. On completion of the Combination, public unitholders of the Fund received one LP Unit in exchange for each trust unit of the Fund held and the Fund was wound up. Prior to the Combination, Brookfield owned an approximate 34% interest in the Fund on a fully-exchanged basis. On completion of the Combination, Brookfield owned 73% of Brookfield Renewable on a fully-exchanged basis. Brookfield now owns 68% of Brookfield Renewable on a fully exchanged basis and the remaining 32% is held by the public.

Three-Year History

The following is a summary of the material developments affecting our business since January 2009. Because Brookfield Renewable was established in June 2011 and commenced operations in November 2011, the developments described below include material developments relating to the Fund and material developments relating to the Brookfield Renewable Power Assets which were contributed to Brookfield Renewable as a result of the Combination.

 

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Acquisitions and Dispositions

In 2009, the Fund acquired from Brookfield substantially all of Brookfield’s Canadian hydro and wind assets, including 16 hydroelectric generating facilities, one operational wind farm and one construction-ready wind farm, in two separate transactions. In the first transaction, completed in February 2009, the Fund acquired our Prince wind farm located near Sault Ste. Marie, Ontario, and our 50% interest in the Pingston Creek Hydro Joint Venture, which operates a run-of-the-river facility in Revelstoke, British Columbia. The total consideration payable to Brookfield was C$130 million, which the Fund satisfied through the payment of C$65 million in cash and the issuance to Brookfield of shares in a subsidiary of the Fund that were exchangeable for trust units of the Fund. In the second transaction, completed in August 2009, the Fund acquired 15 hydroelectric generation plants located in Ontario and Québec, and our Gosfield wind facility for total consideration of C$945 million, which the Fund satisfied through the payment of C$365 million in cash, the issuance of a C$200 million note to Brookfield (which was subsequently repaid) and the issuance of trust units of the Fund.

In December 2010, the Fund acquired from Brookfield our 166 MW Comber wind project in southwestern Ontario, in close proximity to the Gosfield wind farm facility. The acquisition of the Comber wind project represented an investment by the Fund of C$567 million. The Comber Wind project benefits from two 20-year PPAs with the Ontario Power Authority (the “ OPA ”) pursuant to the Province of Ontario’s Feed-in Tariff program.

In early 2011, we acquired, with certain institutional investors, a 50% interest in the 30 MW Malacha hydroelectric project located in northern California, which has long-term PPAs for the majority of its power generation.

In February 2011, we acquired, with certain institutional investors, an 89.5% interest in the late stage 99 MW Granite Reliable wind project, which has long-term PPAs for the majority of its power generation.

In July 2011, we acquired, with certain institutional investors, the fully contracted 30 MW Sacre II hydroelectric facility in the southeast region of Brazil.

In November 2011, the Fund and Brookfield completed the Combination pursuant to which all assets of the Fund and the Brookfield Renewable Power Assets were combined and are now indirectly held by Brookfield Renewable through BRELP and BRELP’s subsidiaries. On completion of the Combination, public unitholders of the Fund received one LP Unit in exchange for each trust unit of the Fund held and the Fund was wound up. Prior to the Combination, Brookfield owned an approximate 34% interest in the Fund on a fully-exchanged basis. On completion of the Combination, Brookfield owned 73% of Brookfield Renewable on a fully-exchanged basis and the remaining 27% was held by the public. In connection with the Combination, Brookfield Renewable amended certain existing PPAs with Brookfield and entered into the Energy Revenue Agreement pursuant to which Brookfield agreed to support the price we receive for the energy generated by certain of our US Facilities. See Item 7.B “Related Party Transactions”.

Subsequent to year-end, in the first quarter of 2012, we also acquired, with certain institutional investors, new wind generation assets in California, including a 150 MW wind farm adjacent to our Coram wind project in the Tehachapi region. This new facility comes with a 24-year PPA with Southern California Edison. We also acquired the remaining 50% stake in our Coram wind project from our partner, along with a further 22 MW of additional operating wind generation capacity.

Portfolio Activities

Commissioning of New Facilities

In the first quarter of 2009, operations commenced at our Linha Emilia hydroelectric generating facility located in Brazil. The Linha Emilia facility is part of a larger construction project called the Carreiro complex, which also includes the Caçador and Cotiporã generating facilities. The 22.5 MW Caçador generating station commenced operations in October 2008. The 19.5 MW Cotiporã generating station commenced operations in December 2008. Total construction cost of the Carreiro complex project was R$293.8 million. In December 2008, the final tranche of funding for construction of the Carreiro complex was received from the Brazilian National Bank for Economic Development (“ BNDES ”). Each project received funding from BNDES for its respective construction costs under a separate property specific debt facility with its own terms and conditions. The Caçador project loan is R$50 million and will mature in March 2023. The Cotiporã project loan is R$63 million and will mature in June 2023. The Linha Emilia project loan is R$65 million and will mature in September 2023. Each loan bears interest at a rate of TJLP, being BNDES’s long-term interest rate, plus a margin.

During December 2009, operations commenced at our Barra do Brauna facility in Brazil. The facility is a 39 MW hydro facility that can generate 193 GWh annually, with all generation sold under a PPA expiring in February 2037. Total construction cost of the Barra do Brauna facility was R$226.3 million. During March 2010, construction of the 26.3 MW Angelina hydroelectric power plant in Brazil was completed, capable of generating 146 GWh of electricity annually. Total construction cost of the Angelina facility was R$134 million. The Angelina and Barra do Brauna generating facilities were separately financed in Brazil for a total amount of R$202 million, at an interest rate of TJLP plus a spread during the year. The loans are being amortized over ten and 16 years, respectively.

 

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In September 2010, our 51 MW Gosfield wind farm located in southwestern Ontario was commissioned. The facility is expected to generate an average of 153 GWh annually, with all energy sold under a 22-year PPA with the OPA. The project was completed ahead of schedule and below budget, with total construction costs of approximately C$142 million. A non-revolving credit facility of up to approximately C$100 million from two banks for the construction and the first three years of operation of the Gosfield wind project was secured in 2009.

In November 2011, our 166 MW Comber wind project, located near the Gosfield wind farm was commissioned. The facility is expected to generate an average of 537 GWh annually, with all energy sold under two 20-year PPAs with the OPA under the province of Ontario’s Feed-in-Tariff program. A credit facility of C$354 million from a syndicate of six banks for the construction and first two years of operations was secured in September 2010.

The 150 MW wind farm in California acquired in early 2012 reached commercial operation in the first quarter of 2012.

In December 2011, we completed construction and, in February 2012, entered into commercial operation at our 99 MW Granite Reliable wind project in New Hampshire, the largest wind project in the state. Our ownership interest in this project is held with certain institutional investors.

In May 2011, following obtaining a PPA, the notice to proceed for construction of the Coram wind project, a 102 MW facility located in California, was issued. Construction financing of $150 million for the project was obtained during the second quarter of 2011. The project reached commercial operation in March 2012.

Construction and Development of New Facilities

During the fourth quarter of 2010, construction activities commenced on two of our hydroelectric facilities in Brazil. The two facilities are anticipated to be commissioned in 2013, have a total installed capacity of 48 MW and are capable of generating a combined 242.5 GWh of generation annually. Total construction costs are expected to be R$364.5 million.

We have made progress in the development of our 45 MW hydroelectric facility in British Columbia. In addition to securing a 40-year PPA with the government of British Columbia in 2010, in the fourth quarter of 2011, we received the environment assessment certificate. We expect construction to begin in 2012, subject to the successful receipt of final permits and completion of remaining commercial agreements.

Treasury

In addition to the project financings referred to above, the following project financings were completed for our portfolio:

 

   

In July 2009, C$75 million of debt secured by our Powell River generating station was refinanced with the proceeds of C$95 million seven-year first mortgage bonds. The new bonds mature in July 2016 and bear a fixed interest rate of 6.45%, payable semi-annually.

 

   

In December 2009, financing of our Itiquira facility in Brazil was completed for a total amount of R$370 million. The debt will mature in December 2013 and bears an interest rate of CDI (Brazil’s interbank lending rate) plus a spread. The proceeds were used to repay in full indebtedness incurred to acquire the assets in 2008.

 

   

In May 2010, our Rumford Falls operations in Maine were refinanced with a non-revolving credit facility of $95 million maturing in 2017.

 

   

In July 2011, we obtained a R$120 million loan, maturing in December 2014, for our 30 MW Sacre II facility located in Brazil.

 

   

In September 2011, a $113 million 20-year construction loan was put in place for our Granite Reliable wind project, in addition to a $56 million cash grant bridge loan, a maintenance reserve loan and a letter of credit facility.

 

   

In May 2012, Brookfield Renewable refinanced indebtedness associated with its 50%-owned hydroelectric pumped storage facility in New England through a $125 million loan for a term of five years at a rate of LIBOR + 2.25%.

In January 2009, the Fund completed a public offering of 4,690,000 trust units at C$16 per unit to raise gross proceeds of approximately C$75 million and a concurrent private placement of 627,500 trust units at C$16 per unit to Brookfield to raise additional gross proceeds of approximately C$10 million. The proceeds were used to fund the cash portion of the purchase price of certain assets acquired from Brookfield.

In July 2009, the Fund sold subscription receipts exchangeable on a one-for-one basis into trust units of the Fund to finance the acquisition of substantially all of Brookfield’s remaining Canadian renewable power generation assets in August 2009. The Fund raised gross proceeds of approximately C$185 million through a public offering of 12,242,500 subscription receipts and additional gross proceeds of approximately C$195 million pursuant to a concurrent private placement of subscription receipts to certain institutional investors.

 

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In March 2010, BRP Equity, a wholly-owned subsidiary of Brookfield Renewable, issued 10,000,000 Series 1 Shares at C$25 per share for gross proceeds of C$250 million. The proceeds were used to, among other things, repay the C$200 million note issued to Brookfield as partial consideration for the purchase of Brookfield’s Canadian portfolio in August 2009.

In connection with the Combination, Finco, a wholly-owned subsidiary of Brookfield Renewable, assumed the obligations under approximately C$1.1 billion aggregate principal amount of publicly-issued Finco Bonds. The Finco Bonds are guaranteed by Brookfield Renewable and the other Guarantors.

Concurrent with the completion of the Combination, Brookfield Renewable and certain of our key holding companies entered into six separate credit agreements with six lenders, providing for an aggregate of $600 million in committed unsecured revolving credit availability. Each of these facilities, which replace the facilities that had been in place for BRPI and the Fund, expires on March 31, 2014, subject to additional one-year extensions.

On January 23, 2012, we filed a base shelf prospectus in Canada qualifying the issuance of up to US$2 billion of LP Units, Class A Preference Shares and new series of Finco Bonds.

On February 7, 2012, we completed a public offering of C$400 million aggregate principal amount of Finco Bonds, Series 8, due February 2022, which will bear interest at an annual rate of 4.79%, payable semi-annually. We used the net proceeds of the offering to refinance existing indebtedness and for general business purposes.

In March 2012, Brookfield Renewable and certain of our key holding companies entered into an additional five separate credit agreements with five banks, and at the same time reduced the aggregate availability under the existing credit facilities with the six lenders. As a result of this refinancing, Brookfield Renewable increased its committed unsecured revolving credit facility availability from an aggregate of $600 million to $900 million. Each of the new credit facilities contains similar terms and conditions as the existing facilities and expires on October 31, 2016, subject to additional one-year extensions. In May 2012, Brookfield Renewable entered into an additional credit agreement for an additional $90 million with a sixth bank on similar terms and conditions as the other credit agreements and with an expiry of October 31, 2016, subject to additional one-year extensions.

Other

On February 2, 2012, a wholly-owned subsidiary of Brookfield sold 11,430,000 LP Units of Brookfield Renewable at an offering price of $26.25 per LP Unit pursuant to a bought-deal secondary offering with a syndicate of underwriters. In connection with this offering, the underwriters were granted, and exercised in full, an over-allotment option to purchase an additional 1,714,500 LP Unit from Brookfield at the offering price.

 

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  4.B

BUSINESS OVERVIEW

Our Operations

As of the date of this Form 20-F, our portfolio is comprised of over $15 billion of predominantly hydroelectric renewable power assets with approximately 5,000 MW of installed capacity in Canada, the United States and Brazil, and long-term average generation of approximately 18,000 GWh annually. Our portfolio includes 170 hydroelectric generating stations on 67 river systems and seven wind farms. We also have two hydroelectric facilities under construction that are scheduled to be commissioned within the next 24 months, and when complete and online will grow the aggregate capacity of our portfolio by approximately 48 MW. The portfolio is diversified across ten power markets in Canada, the United States and Brazil, providing us significant geographic and operational diversification. The table below outlines the portfolio of Brookfield Renewable Group, which we believe is one of the largest listed pure-play renewable power platforms globally.

 

Markets

       Rivers          Generating
Stations
         Generating
Units
         Capacity
(MW)
         LTA (1)
(GWh)
         Storage
(GWh)
 

Operating assets

                 

Hydroelectric generation

                 

United States

     26         103         292         1,966         7,020         2,146   

Canada

     18         32         72         1,323         5,061         1,261   

Brazil (2)

     23         35         79         626         3,541         N/A   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     67         170         443         3,915         15,622         3,407   

Wind energy

                 

United States

     -         4         156         373         952         -   

Canada

     -         3         220         406         1,197         -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -         7         376         779         2,149         -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

     -         2         6         215         521         -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total from operating assets

     67         179         825         4,909 ( 3 )         18,292         3,407   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Assets under construction

                 

Hydroelectric generation

                 

Brazil ( 2)( 4 )

     -         2         4         48         229         -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     67         181         829         4,957         18,521         3,407   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  (1)  

Long-term average (“ LTA ”) is the expected average level of generation as obtained from the results of a simulation based on historical inflow data, performed over a period of usually 30 years of data.

  (2)  

Brazil hydroelectric assets benefit from a market framework which levelizes generation across producers.

  (3 )

Total net capacity including Brookfield Renewable Group’s share of equity-accounted investments’ capacity is 4,539 MW.

  ( 4 )  

All assets under construction are on the same river systems as the existing hydroelectric assets.

All figures, including capacity and LTA, include facilities acquired or commissioned to the date of this Form 20-F. For LTA, this was calculated on an annualized basis as of the beginning of the year, regardless of the acquisition or commercial operation date.

We have a comprehensive power operations and development platform located in each of our regional markets that positions us to maintain and increase the value of our asset base while competitively positioning us with strong economies of scale for continued growth. Our business has approximately 930 operations employees throughout North America and Brazil. See Item 6.D “Employees”. We also maintain a portfolio of hydroelectric, wind and pumped storage development projects in each of Canada, the United States and Brazil. See Item 7.B “Related Party Transactions — Development Projects”.

 

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Regional Operating Platforms

Canadian Platform

Our facilities in Canada are situated in Québec, Ontario and British Columbia, Canada’s three largest power markets, representing approximately three-quarters of the Canadian population. Each of these provinces has adopted policies to increase the contribution of renewables in the supply mix by offering long-term contracts with government-owned utilities or feed-in-tariffs.

 

LOGO

Most of our Canadian hydroelectric assets are larger utility-scale facilities with water storage reservoirs that can store approximately 1,300 GWh, or approximately 25% of the annual average hydroelectric generation in Canada.

We entered the Canadian wind business in 2004 and since then have completed the development, construction and operation of three wind farms in Ontario with a combined installed capacity of 406 MW. In addition to our renewable power assets, we own one combined cycle natural gas-fired facility in Ontario which sells its power to the Ontario Electricity Financial Corporation under a contract that expires in 2014.

We have several projects in various stages of development. One of our more advanced development projects is the 45 MW Kokish hydroelectric project for which we have secured a 40-year PPA with BC Hydro.

Our Canadian headquarters are located in Gatineau, Québec, along with our National System Control Center which allows remote monitoring and control of all of our assets in Canada. Our platform includes full hydroelectric and wind operating capabilities, as well as development and construction-oversight expertise. We employ approximately 243 people in our Canadian operations and approximately 34% of our employees in Canada are covered by collective agreements. We have experienced positive relations with our unionized work force in Canada.

We hold a variety of long-term waterpower licenses issued by the provinces where our operations are situated. These waterpower licenses permit us to use land, water and waterways for the generation of electricity. These licenses also contain terms that deal with water management, land use, public safety, recreation and the environment. At the end of the license period, license holders can apply to the requisite government body to have their licenses renewed.

 

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U.S. Platform

In the United States, we primarily operate in the interconnected power markets of New York, New England, Louisiana and the Mid-Atlantic, as well as in the California and Minnesota markets.

 

LOGO

The majority of our U.S. capacity is located in New York and New England. In New York State, we are one of the largest independent power producers with 75 hydroelectric facilities with an aggregate installed capacity of 711 MW. We have 844 MW of operating hydroelectric capacity in New England, including a 50% joint-venture operating interest in a 600 MW hydroelectric pumped storage facility located in Massachusetts. Pumped storage is a unique form of hydroelectric power which uses reversible turbines permitting energy to be stored by pumping water up into a reservoir, and then producing power at a later time by releasing the water during a period in which power prices are higher.

We also own four wind farms located in New Hampshire and California with a combined installed capacity of 373MW, one of which became operational at the end of the first quarter of 2012. This 102 MW wind project is located in Tehachapi, California, one of the most proven wind resource areas in the United States, attractively located near the major southern California load center of Los Angeles. We also own one combined cycle, natural gas-fired facility in New York State, which sells its power output on a merchant basis and is predominantly used to meet power needs at times of peak demand.

Our U.S. headquarters are located just outside of Boston, Massachusetts, along with our U.S. National System Control Center, which can remotely control and monitor nearly all of our facilities in the country. We employ approximately 424 people in the United States. Approximately 32% of our employees are covered by collective agreements. We have experienced positive relations with our unionized work force in the United States.

Our rights to operate our hydroelectric facilities in the United States are secured primarily through long-term licenses from the Federal Energy Regulatory Commission (the “ FERC ”), the federal agency that regulates the licensing of substantially all hydroelectric power plants in the United States. The FERC has oversight of all ongoing hydroelectric project operations, including dam safety inspections, environmental monitoring, compliance with license conditions, and the license renewal process. Our ability to sell power from certain of our generation facilities is also subject to the receipt and maintenance of certain approvals from the FERC, including market-based rate authority.

 

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Brazilian Platform

Brookfield has been an investor and operator in Brazil for over 100 years. Brookfield re-entered the Brazilian power market in 2003 and, since then, has grown its hydroelectric asset base significantly to 35 facilities on 23 river systems totaling 626 MW of installed capacity. We own facilities located in the seven developed states of Brazil located in the south, southeast and mid-west regions. Such regions represent approximately 80% of the country’s population and economic activity. As such, we believe our business in Brazil is particularly well positioned to participate in one of the world’s fastest growing electricity markets and economies.

 

LOGO

We have developed and built 12 facilities totaling 265 MW of capacity since 2003 and currently have two facilities totaling 48 MW under construction. In addition to our two hydroelectric facilities currently under construction, we have several hydro projects in various stages of development.

Our Brazilian headquarters are located in Rio de Janeiro, while our National System Control Center is located in Curitiba, Paraná from which we centrally control and monitor our Brazilian hydroelectric power stations. We employ approximately 262 people across our operations in Brazil and all of our employees are covered by annual collective agreements. We have experienced positive relations with our work force in Brazil. Our operating platform has full development, construction management and operating capability with an integrated power marketing team.

Rights to hydroelectric sites are secured in Brazil by obtaining authorizations and concessions from the Brazilian Ministry of Mines and Energy through the National Agency for Electric Energy (“ ANEEL ”). We generally focus on the SHPP segment of plants below 30 MW of capacity as these sites can be secured directly from ANEEL, whereas sites for hydroelectric plants above 50 MW can only be granted by public auction, where developers bid the lowest tariff to win the concession and a PPA with local utilities. Of our authorizations and concessions, 86% have terms exceeding 17 years. Generally, concessions and authorizations provide for an initial term of 30 years and renewal rights for an additional 20-year period.

 

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Our Competitive Strengths

We are an owner and operator of a diversified portfolio of high quality assets that produce electricity from renewable resources and have evolved into one of the world’s largest listed pure-play renewable power businesses.

Our assets generate high quality, stable cash flows derived from a virtually fully contracted portfolio. Our business model is simple: utilize our global reach to identify and acquire high quality renewable power assets at favorable valuations, finance them on a long-term, low-risk basis, and enhance the cash flows and values of these assets using our experienced operating teams to earn reliable, attractive, long-term total returns for the benefit of our LP Unitholders.

 

   

One of the largest, listed pure-play renewable platforms. We own one of the world’s largest, publicly-traded, pure-play renewable power portfolios with over $15 billion in power assets, with approximately 5,000 MW of installed capacity, and long-term average generation of approximately 18,000 GWh annually. Our portfolio includes 170 hydroelectric generating stations on 67 river systems and seven wind farms diversified across ten power markets in the United States, Canada and Brazil.

 

LOGO

 

   

Focus on attractive hydroelectric asset class. Our assets are predominantly hydroelectric and represent one of the longest life, lowest cost and most environmentally preferred forms of power generation. Our North American assets have the ability to store water in reservoirs up to approximately 28% of our annual generation. Our assets in Brazil benefit from a framework that exists in the country to levelize generation risk across producers. This ability to store water and have levelized generation in Brazil provides partial protection against short-term changes in water supply. As a result of our scale and the quality of our assets, we are competitively positioned compared to other listed renewable power platforms, providing significant scarcity value to investors.

 

   

Well positioned for global growth mandate. Over the last 10 years, we have acquired or developed over 20 hydroelectric assets totaling approximately 3,000 MW. We have strong organic growth potential with a 2,000 MW development pipeline spread across each of our operating jurisdictions. Our net asset value in renewable power has grown from approximately $900 million in 1999 to over $8.6 billion today, representing a 20% annualized growth rate. We are able to acquire and develop assets due to our established operating and project development teams, strategic relationship with Brookfield and our strong liquidity and capitalization profile.

 

   

Attractive distribution profile. We pursue a strategy which provides for highly stable, predictable cash flows sourced from predominantly long-life hydroelectric assets ensuring an attractive distribution yield. We target a distribution payout ratio in the range of approximately 60% to 70% of FFO and pursue a long-term distribution growth rate target in the range of 3% to 5% annually.

 

   

Stable, high quality cash flows with attractive long-term value for LP Unitholders. We intend to maintain a highly stable, predictable cash flow profile sourced from a diversified portfolio of low operating cost, long-life hydroelectric and wind power assets that sell electricity under long-term, fixed price contracts with creditworthy counterparties. Virtually all of our generation output is sold pursuant to PPAs, to public power authorities, load-serving utilities, and industrial users or to affiliates of Brookfield. The PPAs for our assets have a weighted-average remaining duration of 23 years, providing long-term cash flow stability.

 

   

Strong financial profile. With over $15 billion of power generating assets and a conservative leverage profile, consolidated debt-to-capitalization is approximately 40%. Our liquidity position remains strong with over $950 million cash and available bank lines. Approximately 75% of our obligations are non-recourse and our corporate debt has a weighted-average term of 10 years.

 

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Renewable Power Growth Opportunity

The renewable power generation sector is increasingly becoming a meaningful portion of new electricity supply globally. Significant new renewable generation supply continues to be built, consisting primarily of new hydro and wind capacity. Global installed renewable power now stands at over 1,300 GW worldwide, and the industry is adding in the range of 100 GW or $200 billion of new renewable power supply each year. The following chart illustrates the global growth in various renewable power generation sectors from 1996 to 2011.

 

 

LOGO

_________________

 

Sources: BP Statistical Review of World Energy, 2012 (for wind, geothermal and solar capacity (from 2000 to 2011); U.S. Energy Information Administration — International Energy Statistics (for Hydro capacity from 2000 to 2009). For 2010 and 2011 hydroelectric capacity, figures were estimated by adding to the 2009 capacity an assumed additional capacity based on the additional actual generation in 2010 and 2011 sourced from BP Statistical Review of World Energy, 2012.

  

Global Renewable Power Drivers

We believe that, over time, strong continued growth in renewable power generation will be driven by the following:

Widespread acceptance of climate change. Over the last five years, it has become generally accepted that the combustion of fossil fuels contributes to global warming. In 2007, the Intergovernmental Panel on Climate Change (“ IPCC ”) released a series of four reports to build awareness of climate change and observed that average temperatures in the world’s northern hemisphere were likely the highest in at least the past 1,300 years, and in 2005, atmospheric concentrations of carbon dioxide exceeded by far the natural range over the last 650,000 years. According to the IPCC, the ramifications of global warming for society are significant and, thus, we have observed that universal concern about global warming has become a catalyst for governments to take environmental policy action, often through legislation of renewable power procurement targets or implementation of feed-in-tariffs.

Conventional coal and nuclear generation face challenges. The continued reliance on large-scale coal and nuclear facilities is causing concern with power system regulators and the general public. Coal plants are increasingly facing legislative pressures to undertake significant environmental compliance expenditures. This in turn is accelerating the retirement of coal plants, which need to be replaced by new capacity. Following the recent Fukushima nuclear disaster in Japan, and in light of on-going cost uncertainties and concern over waste disposal, public concern over new nuclear construction and continued life extension of existing facilities has increased. This has delayed or halted most new nuclear development activities in the United States and has even caused some countries, despite relying on meaningful nuclear power, to legislate the early retirement of existing nuclear capacity.

Renewables are a cost effective way of diversifying fuel risk. The abundance of low cost natural gas in North America presents a unique opportunity to potentially replace aging coal and nuclear facilities with a domestic fuel source that is cost effective and has a lower environmental impact. As natural gas gains further acceptance, the need to diversify exposure to potentially rising fuel

 

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costs will increase the demand for renewable technologies, particularly hydroelectric and wind energy. In addition, technological developments over the last decade continue to reduce the costs of renewable technologies enhancing their position as a cost competitive complement to gas-fired generation and a means to meeting more stringent environmental standards.

Supported by government policies and incentives. There are a number of strategies that governments are using to encourage development of renewable power resources which generally include renewable portfolio standards (“ RPS ”) (requiring electricity distributors to obtain a minimum percentage of their power from renewable energy resources by specified target dates) and tax incentives or subsidies. Globally, at least 64 countries, including all 27 European Union countries, have national targets for renewable energy supply, and 37 U.S. states, the District of Columbia, Puerto Rico and nine Canadian provinces have RPS or policy goals that require load-serving utilities to offer long-term power purchase contracts for new renewable supply.

Our Core Markets

Our operating platforms in Canada, the United States and Brazil make us particularly well positioned to continue our growth in these markets. In addition, due to our relationship with Brookfield, we have access to Brookfield’s investment platforms in Europe and Australasia, giving us the capability to source transactions globally.

Canada

In Canada, renewable energy policy is predominantly implemented at the provincial level. We are currently active in Ontario, Québec and British Columbia, and all of these jurisdictions have adopted policies to increase the contribution of renewables in the supply mix. In Canada, approximately 7,000 MW of new renewable power generation is expected to be developed and come on-line in the next five years, some of which we believe will present attractive acquisition opportunities.

There is currently over 4,700 MW of renewable capacity contracted in Ontario as the province seeks to phase out or repower with alternative fuels 4,200 MW of its existing coal capacity by 2014. Furthermore, approximately half of Ontario’s nuclear capacity is aging and approaching the end of its useful life in this decade. The Ontario government has also announced a $7 billion transmission expansion plan to facilitate the integration of more renewable resources. In Québec, while most generating capacity is provincially owned, since 2003, Hydro-Québec Distribution has contracted for over 3,300 MW of renewable capacity, consisting primarily of wind-power. In British Columbia, the 2010 Clean Energy Act outlines a vision for “clean energy leadership” in the province with goals of self-sufficiency in electricity generation by 2016, while securing over 90% of total generation requirements from clean or renewable generation sources, leading to the award of power purchase contracts for approximately 2,200 MW.

United States

We believe that in the last few years the United States has offered consistent, broad-based policy momentum to transition the country’s electricity producers to cleaner generation and promote increased energy independence. The United States is now the world’s second largest wind market and is estimated to have reached 47,000 MW of installed capacity by the end of 2011, with another 10,000 MW expected online in 2012. One of the most significant drivers of renewable power growth in the United States has been the adoption of RPSs in 29 states and the District of Columbia with renewable targets often set to as high as 33% of the total supply mix by 2020. In addition, growth has been driven by various government incentive programs supporting investment in new renewables.

Concurrent with expanding policy supporting renewables, the environmental regulation of traditional thermal coal-fired generation has become significantly more stringent. In March 2011, the United States Environmental Protection Agency (the “ EPA ”) issued maximum available control technology emissions standards for hazardous air pollutants (among others, mercury, metals and acid gases) from coal — and oil-fired electric generating units. Furthermore, the EPA is expected to issue further restrictions in the future which will increase environmental compliance capital expenditures for coal-fired facilities. Since over half of this coal-fired capacity is over 30 years old, and approximately 50% of total U.S. coal capacity lacks significant emissions control technology, we believe these regulations will accelerate retirement decisions. This supply will need to be replaced by new capacity and we believe renewable and gas generation are complementary solutions to fill this gap.

In the United States, we are currently active and strategically focused on the power markets in the northeast (New York, New England and the Mid-Atlantic), as well as on the west coast in California and its adjacent markets, and Minnesota and Louisiana. Together these markets cover over 70% of the U.S. population and have among the most ambitious RPS targets. We believe these markets represent the highest value and highest barrier-to-entry markets.

Brazil

With the world’s fifth largest population and seventh largest economy, Brazil offers a rapidly growing market with sound, investment-grade, macro-economic fundamentals. Electricity demand has grown by 4.4% annually over the last 30 years, a trend we expect will continue in line with rising incomes and per capita consumption (which today is still less than one-fifth of that in the United States).

 

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As a result, we expect Brazil will require approximately 6,000 MW of new supply annually to meet its growing demand. By 2020, Brazil’s energy planning agency projects that 61,000 MW of new supply will be needed, with only approximately 34,000 MW of capacity currently under construction in the country. Much of this planned supply growth relies on large-scale hydroelectric, transmission and thermal generation infrastructure construction, some of which is facing environmental, permitting and labor challenges. As a result, we believe supply constraints will continue to increase prices and give rise to opportunities to build or acquire new capacity.

In addition to a growing SHPP segment in Brazil, other segments of the renewable power industry are growing, notably biomass cogeneration and wind power. Brazil has 5,500 MW of installed biomass capacity with another 3,500 MW to be developed until 2020, which for the most part is integrated with existing sugar or ethanol mills. Brazil is the world’s leading and most efficient producer of these commodities making this a growing segment of the renewable power industry and one which we expect to increasingly focus on.

We believe there are two aspects of the market in Brazil that make our business particularly compelling. First, substantially all of our facilities participate in a government-regulated hydrological “balancing pool” or energy reallocation mechanism (“ MRE ”) that significantly reduces the impact of hydrology variability on our cash flows. Through this pool, hydroelectric power generators are paid on the basis of “assured energy”, or long-term average generation established through government-approved hydrological studies, rather than actual production. Participating generators effectively share hydrology risk as generators experiencing below average generation conditions purchase power from generators experiencing above average conditions at prices based on a marginal production cost formula, or when producing more than normal generation, sell that power on the same basis. Secondly, SHPP facilities, other than biomass and wind power plants under 30MW, operate in a special segment of the market that benefit from certain preferred economic and regulatory rights. Customers that purchase power from these plants benefit from a special discount for the use of the distribution system which, in turn, enables us to capture a portion of this discount through higher prices with end-use customers.

Other Markets

While we do not currently operate renewable power assets outside of Canada, the United States and Brazil, Brookfield has investment platforms in South America, Europe and Australasia, regions which also offer significant renewable power growth potential.

In South America, Colombia and Peru are investment-grade rated countries that have established competitive electricity markets and each country needs over 500 MW of new power supply annually to meet strong economic and natural resource driven demand growth. These countries benefit from significant undeveloped hydroelectric potential and power prices remain relatively low on a global scale but should increase over the long-term as new supply needs to be built to meet demand growth.

Europe has long been at the forefront of renewable power policy and has over 170 GW of installed hydroelectric capacity and 86 GW of installed wind capacity. In certain countries, such as Germany, the United Kingdom, Spain and Denmark, renewable power is supplying up to 20% of total electricity needs and the reliance on renewables will continue as Europe is predominantly an importer of fossil fuels and countries such as Germany consider accelerating the phase-out of nuclear and fossil fuel generation.

Australia is a market where Brookfield has a significant real estate and infrastructure presence and in 2012 is expected to be one of the first jurisdictions globally to implement fixed carbon pricing that by 2015 is expected to evolve into a carbon cap-and-trade regime. More than 60% of Australia’s 51 GW of installed capacity is coal-fired and the country is experiencing strong growth driven by Asian demand for its resources. We expect that this will drive significant additions of new renewable power capacity throughout the next decade.

Our Growth Opportunity

We believe that the current transaction environment offers attractive acquisition opportunities to invest in renewable power acquisitions or developments that we expect will allow us to deploy capital, on an accretive basis, in the following opportunities:

 

   

Asset monetizations and divestitures. Significant renewable power generation capacity is owned by industrial companies, smaller independent power producers, private equity investors or foreign companies. These types of owners sell renewable power assets either because power generation is not their core business, their investment horizons are shorter, or a particular market ceases to be strategic.

 

   

Privatizations. We believe that in the current fiscal climate, governments will continue to engage the private sector in providing funding solutions for infrastructure requirements which could increasingly involve sales of existing assets. Our proven operating track record, global scale and ability to partner with local pension and institutional investors may better competitively position us to participate in such opportunities.

 

   

Development cycle divestitures. Renewable power assets are often developed or built by smaller developers or construction companies who, in our experience, seek to capture development-stage returns. We have been, and believe

 

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will continue to be, a logical acquirer of, or partner in, such projects. Our focus on acquisitions in this area also gives us a unique perspective on pursuing the best development-stage opportunities through acquisitions or by building projects in our own portfolio.

 

   

Brookfield Renewable Group’s development project portfolio. In addition to growing our business through acquisitions, we intend to pursue organic growth by developing our portfolio of greenfield projects. We indirectly own over 20 development projects in Brazil, Canada and the United States totaling an estimated 2,000 MW of potential capacity. See Item 7.B “Related Party Transactions — Development Projects” for further details on these development projects. Over the past five years, Brookfield has completed or commenced construction on 12 development projects totaling an aggregate of over 600 MW of capacity, giving us a successful execution track record in each of our focus markets as a developer of both hydroelectric and wind capacity. Our regional operating platforms have the development expertise and capability to advance our renewable power projects from the development stage to commercial operation. We also have the necessary expertise to oversee the regulatory, engineering, construction execution, transmission, permitting, licensing, environmental and legal activities required for successful project development.

Revenue and Cash Flow Profile

Our portfolio offers high-quality and stable cash flow derived from predominantly hydroelectric assets. Our cash flow stability is derived from the combination of long-term, fixed price contracts, a unique hydro focused portfolio with a low cost structure, and a prudent financing strategy focused on non-recourse debt with an investment grade balance sheet. Accordingly, we believe that we have a high degree of predictability in respect of revenue and costs on a per MWh basis.

We expect our current business to generate approximately $1.1 billion of Adjusted EBITDA and $550 million of FFO, annually, based on long-term average generation and assuming the completion of projects currently under construction, although we can provide no assurance that we will achieve such results in the near- or long-term. Our ability to achieve the results based on long-term average is dependent on various risks and uncertainties that our operations face, many of which are beyond our control. Some of these risks and uncertainties include hydrology or wind conditions at our facilities, and the risk that counterparties to our contracts may not fulfill their obligations. Refer to Item 3D. “Risk Factors — Risks Related to Brookfield Renewable” for the risks and uncertainties associated with achieving these results.

For the three months ended March 31, 2012, our Adjusted EBITDA and FFO, assuming generation was consistent with long-term averages, would have totaled approximately $293 million and $155 million, respectively. Our Adjusted EBITDA and FFO for the three months ended March 31, 2012 totaled $318 million and $175 million, respectively.

In 2011, our annual Adjusted EBITDA and FFO, assuming Brookfield Renewable was in place on January 1, 2011 and generation was consistent with long-term averages would have totaled approximately $986 million and $481 million, respectively. The expected increase in Adjusted EBITDA and FFO in 2012 reflects the annualized contribution of projects under development which when completed would contribute approximately $70 million to Adjusted EBITDA and $50 million to FFO. As described in Item 5.A “Operating Results — Performance Measurement”, Adjusted EBITDA and FFO do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be similar measures presented by other companies. For additional information, see Item 5.A “Operating Results — Reconciliation of Consolidated Results” and Item 5.A “Operating Results — Reconciliation of Pro Forma Results and Balance Sheet.”

Our consolidated Adjusted EBITDA and FFO in 2011 totaled $804 million and $318 million, respectively. These amounts reflect 11 months of earnings from both the Fund and privately held power assets of Brookfield, without the benefit of contracts in place in Brookfield Renewable, plus one month of Brookfield Renewable’s results after completion of the Combination on November 28, 2011.

The following table presents revenue, Adjusted EBITDA and FFO on a segmented basis for the three months ended March 31, 2012 and 2011 and fiscal years ended December 31, 2010 and 2011, by hydroelectric, wind and other facilities. Hydroelectric and wind information is further segmented by hydroelectric facilities located in the United States, Canada and Brazil.

 

 

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    Conventional Hydroelectric     Wind          Other        Total  
         United                          United              

Millions

     States     Canada        Brazil     Canada        States              

For the three months ended March 31, 2012:

             

Revenues (1)

  $ 164      $ 100      $ 91      $ 44      $ 7      $ 20      $ 426   

Adjusted EBITDA (2)

    130        83        68        39        5        (7     318   

FFO (2)

    83        66        30        29        2        (35     175   

For the three months ended March 31, 2011:

             

Revenues (1)

  $ 123      $ 54      $ 79      $ 16        -      $ 21      $ 293   

Adjusted EBITDA (2)

    95        40        61        14        -        5        215   

FFO (2)

    53        23        33        8        -        (14     103   

For the year ended December 31, 2011:

             

Revenues ( 3 )

  $ 467      $ 237      $ 335      $ 70        -      $ 60      $ 1,169   

Adjusted EBITDA (2)

    336        179        269        58        -        (38     804   

FFO (2)

    163        116        147        33        -        (141     318   

For the year ended December 31, 2010:

             

Revenues ( 3 )

  $ 459      $ 205      $ 271      $ 52        -      $ 58      $ 1,045   

Adjusted EBITDA (2)

    332        160        201        45        -        13        751   

FFO (2)

    133        96        86        28        -        (74     269   

For the year ended December 31, 2009:

             

Revenues ( 3 )

  $ 453      $ 221      $ 215      $ 40        -      $ 55      $ 984   

Adjusted EBITDA (2)

    360        188        163        35        -        (3     743   

FFO (2)

    142        129        93        20        -        (60     324   

 

(1)

Based on consolidated financial data which is derived from and should be read in conjunction with: (i) the unaudited financial statements of Brookfield Renewable as at March 31, 2012 and for the three months ended March 31, 2012 and 2011 and related notes; and (ii) the unaudited pro forma condensed combined statement of (loss) income of Brookfield Renewable for the three months ended March 31, 2011 and related notes each of which are included elsewhere in this Form 20-F.

(2)

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Consolidated Results.”

(3)

Based on audited consolidated financial data which is derived from and should be read in conjunction with: (i) the audited consolidated financial statements of Brookfield Renewable as at December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 and related notes; and (ii) the unaudited pro forma condensed combined statements of income of Brookfield Renewable for the years ended December 31, 2011 and 2010 and related notes each of which are included elsewhere in this Form 20-F.

We have a stable and predictable revenue profile driven by both long-term PPAs with a weighted average remaining duration of 23 years, combined with a well-diversified generation portfolio that reduces variability in our generation volumes. As outlined in the graph below, the majority of our long-term PPAs are with investment-grade rated or creditworthy counterparties such as government-owned utilities or power authorities, Brookfield or industrial power users. See Item 3.D “Risk Factors — Risks Related to Our Operations and the Renewable Power Industry — Counterparties to Brookfield Renewable Group’s contracts may not fulfill their obligations and, as its contracts expire, Brookfield Renewable may not be able to replace them with agreements on similar terms”.

Counterparties to Brookfield Renewable Group’s Power Contracts

 

LOGO

As at December 31, 2011, our contract profile declines from 99% contracted in 2012 to 90% contracted in 2016, largely as a result of PPA expiries in Brazil that we expect to re-contract in the normal course. The following table highlights our contract maturity profile over the next five years.

 

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        2012            2013            2014            2015            2016     

Contracted generation

              

% of total

     99         98         94         90         90   

Our portfolio benefits from significant hydrology diversification, with assets distributed on 67 rivers in three countries. Our water storage capabilities and our access to the hydrological balancing pool administered by the government of Brazil amount to approximately 38% of annual generation, allowing us to mitigate hydrological fluctuations, optimize production and minimize losses due to outages. As at March 31, 2012 the contracted generation over the next five years remained relatively unchanged from December 31, 2011.

North America. In North America, we generate revenues primarily through energy sales by way of long-term PPAs with creditworthy counterparties such as government-owned facilities or power authorities (including for example, the Ontario Power Authority, Ontario Electricity Financial Corporation, Hydro-Québec, BC Hydro and the Long Island Power Authority), load-serving utilities (such as Entergy Louisiana), Brookfield and its subsidiaries, and in some cases industrial power users. Our North American portfolio is almost fully contracted pursuant to long-term PPAs that are generally structured on a “take or pay” basis without fixed or minimum volume commitments. As a result, there is minimal risk of having to supply power from the market to customers when we are experiencing low water or wind conditions. Most of our PPAs also provide for annual escalation of the realized price, typically linked to inflation. In respect of power sold to Brookfield or its subsidiaries, Brookfield or its subsidiaries will in some cases have entered into back to back power resale agreements in respect to output purchased from Brookfield Renewable Group (see Item 4.B “Business Overview — The Manager — Energy Marketing”).

Brazil. In the Brazilian electricity market, energy is typically sold under long-term contracts either to regulated load-serving distribution companies, or “free customers”, which are customers with more than 0.5 MW of annual demand and who can choose their own electricity supplier. Both types of customers are required to demonstrate that they have contracts in place to meet all forecast demand annually. In the regulated market, Brookfield has typically entered into 20-30 year PPAs with creditworthy state-owned utilities. In the “free customer” market, Brookfield has typically entered into three-to eight-year PPAs with large industrial and commercial customers, generally engaged in producing essential services or products such as the telephone, food and pharmaceutical industries. Our PPAs in Brazil typically provide a fixed price that is fully indexed to inflation annually. Our Brazilian portfolio has a weighted average contract term of 12 years and we believe is well positioned to capture higher prices in the medium term as 23% of the portfolio is scheduled to be re-contracted in 2014 and a further 17% is scheduled to be re-contracted in 2015.

Operating Philosophy

We employ a hands-on, operations-oriented, long-term owner’s approach in the management of our portfolio, which is designed to ensure that we maintain and, where possible, enhance the value of our assets while cultivating positive relationships with local stakeholders. The operation of our generating facilities is largely decentralized through three regional operating centers covering Canada, the United States and Brazil. We supplement our regional operating platforms with a strong corporate team that provides strategic direction, commercial and business development, oversight of operations and establishes consistent policies in areas such as compliance, information technology, health and safety, human resources, stakeholder relations and procurement.

In addition, we benefit from the expertise of Brookfield, who provides strategic direction, corporate oversight, commercial and business development, and oversees decisions with regard to the funding and growth of our business. We believe this approach leads to a strong decision-making culture and long-term owner-oriented investment philosophy to build value.

The cornerstones of our operations philosophy are:

Strong regional operating platforms. In each of our core markets, we have built strong regional platforms with full construction oversight and operations development capabilities. Each of our regional platforms has a centralized, automated plant dispatch and control center allowing remote operation of most of our facilities and a central interface with regulatory and market authorities. This capability allows us to benefit from economies of scale by leveraging our operating platform when growing our business.

Disciplined management of operating costs. Our operations are focused on maintaining the cost competitive position of our portfolio through disciplined management of operating costs with the objective of offsetting the costs of inflation annually. In addition, the scalability of our platforms allow us to grow the portfolio with little incremental fixed costs ensuring a stable and predictable cost profile over the long term.

 

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Focus on asset reliability and availability. Maintaining high reliability and availability of our plants is critical as our long-term contracts provide for us to be paid for all energy delivered. To the greatest extent possible, our operating teams perform all periodic and planned maintenance activities during periods of low hydrology or wind, in order to minimize lost revenue opportunities and take advantage of excess capacity at our plants.

Long-term ownership and asset reinvestment. We seek to preserve and enhance the productivity, reliability and longevity of each of our generating facilities. The cornerstone of our asset maintenance and enhancement program is a 20-year forward-looking capital reinvestment plan. A detailed plan is prepared for each asset by our teams working together with independent engineering firms, recognized as industry leaders in hydroelectric and wind energy production and maintenance. We develop and implement our plans by taking a long-term owner’s perspective and believe the low capital expenditure maintenance requirements and long useful life of our assets are attractive attributes of hydroelectric assets. Hydroelectric power generation is a mature, efficient and relatively simple technology that has not changed dramatically over the past century.

Culture of health, safety and environmental leadership. We strive to achieve excellence in safety performance and to be recognized as an industry leader in accident prevention. Our overall objective is to incur zero high risk safety incidents and zero lost time injuries. We have adopted written health, safety and environmental (“ HS&E ”) policies that include frameworks for oversight, compliance, compliance audits and sharing best practices both within our operations and the global Brookfield group. We maintain a HS&E Steering Committee, consisting of the Chief Executive Officer, President and the Chief Operating Officers of the regional operations, and require all employees, contractors, agents and others involved in our operations to comply with our established HS&E practices.

Positive local stakeholder relationships. We seek to have transparent and well-established relationships with local stakeholder groups and the communities in which we operate, which we believe is a key element of successfully operating and developing renewable power facilities. In order to ensure the successful renewal and implementation of our water power licenses and land leases, we consult and work proactively with local stakeholders and communities potentially affected by our operations.

We maintain a performance-based culture in our operations and develop annual performance targets in each of the above areas to measure the performance of our operating teams.

Our Growth Strategy

We expect to continue focusing primarily on long-life renewable power assets that provide stable, long-term contracted cash flows, and which are well positioned to appreciate in value over time. We intend to combine our industry, operating, development and transaction expertise with our ability to commit capital to transactions in order to secure opportunities at attractive returns for securityholders. To grow Brookfield Renewable, we benefit from a pro-active and focused business development strategy in each of our markets and Brookfield’s global investment platform that may lead to originating attractive opportunities for investment. We expect that our growth will be focused on the following:

 

   

Focusing on core markets and pursuing opportunities in other high-value markets. Geographically, we expect to continue our growth in the United States, Canada and Brazil, where our existing renewable power operating platforms allow us to integrate operating or development-stage renewable power assets and capture economies of scale. Within each of these countries, our growth strategy is focused on the higher-value regional markets of these countries. For example, in the United States, we expect to continue our growth in the eastern and western power markets, where higher electricity prices and renewable portfolio standards offer more attractive returns and better long-term value. Similarly in Brazil, we operate and primarily focus on the southern portion of the country where over 80% of the population and economic activity is located. Over time, we would also pursue new markets that offer attractive opportunities to enhance the geographic diversifications of our operations, the ability to add operating platforms that we can grow over time and offer attractive risk-adjusted returns. We have access to Brookfield’s infrastructure investment platforms in Europe and Australasia, giving us the capability to secure transactions globally.

 

   

Maintaining our predominantly hydroelectric focus. We intend to maintain our predominantly hydroelectric focus as we believe hydroelectric assets are the longest-life, lowest cost, power generation assets. We believe that investing in the highest quality assets within a particular asset class offers an investment that typically can maintain a premium valuation and FFO performance throughout market cycles, and is better positioned to appreciate in value over time. We believe hydroelectric assets are the most attractive segment of the power generation infrastructure asset class as they benefit from high barriers to entry and a sustainable competitive cost advantage. In addition, wind power is a proven technology and one of the fastest growing renewable power segments globally. Also, we plan to grow our wind platform by continuing to focus on high-quality sites that benefit from a proven wind resource and are located in high-value markets where wind has significant scarcity value. Over time, we may invest in other proven renewable power technologies that share the long-life and low-cost attributes of our hydroelectric and wind assets.

 

   

Optimizing capital allocation to “build or buy” opportunities. We intend to grow our business by pursuing the acquisition of both operating and development-stage assets, or by developing and building projects from our own

 

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development project portfolio. Market conditions in some cases lead to periods where operating assets can trade at significant premiums or discounts to their replacement cost or long-term fundamental value. Similarly, renewable power policy may at certain times be particularly conducive to new developments, leading to opportunities to earn superior risk-adjusted returns by developing and building greenfield projects. For this reason, we believe a sound investment and capital allocation strategy continuously compares acquisition or “buy” investment opportunities with similar development-stage or “build” opportunities, whether sourced from our own development pipeline or through the acquisition of development-stage projects. We plan to allocate capital to the best acquisition and development opportunities sourced through our global renewable power platform and believe our ability to do so globally is one of our competitive advantages in creating value for our LP Unitholders. While we intend to pursue development projects, we expect that our development-stage capital commitments will be a relatively small portion of our cash flows and invested capital as our predominant focus will be on sites with significant competitive advantage in high-value markets that we would build once the project is ‘construction-ready’ and that benefit from sound commercial arrangements that limit construction risk and secures long-term stable cash flows.

Our Distribution Policy

Our high-quality assets and PPA portfolio are expected to provide Brookfield Renewable with stable and predictable annual cash flow to fund our distributions. See Item 5.A “Operating Results — Summary of Historical Quarterly Results” for the quarterly distributions made by the Fund prior to the Combination. Distributions paid by the Fund from January 1, 2008 to completion of the Combination on November 28, 2011 were C$1.25 per trust unit in 2009, C$1.29 per trust unit in 2010, and C$0.975 per trust unit in 2011. In 2011, the Fund made distributions only in respect of the first three quarters as the Fund was wound up on November 28, 2011.

In December 2011, Brookfield Renewable declared its first cash distribution of $0.3375 ($1.35 annually) per LP Unit for the fourth quarter of 2011. The distribution was paid on January 31, 2012 to LP Unitholders of record on December 31, 2011. Brookfield Renewable announced that its regular quarterly distribution would be increased to $0.345 ($1.38 annually) per LP Unit commencing with the declaration of the first quarter distribution for fiscal 2012. This distribution was paid on April 30, 2012 to LP Unitholders of record on March 31, 2012. We intend to continue to operate as a growth-oriented entity with a focus on increasing the amount of cash available for distributions on each LP unit.

The declaration and payment of distributions are subject to the discretion of the board of directors of the Managing General Partner. Distributions will be paid quarterly on the last business day of January, April, July and October of each year, to LP Unitholders of record on the last day of December, March, June and September, respectively. The amount of any distribution payable by us is always at the discretion of the board of directors of the Managing General Partner and will be evaluated periodically, and may be revised subject to business circumstances and expected capital requirements depending on, among other things, our earnings, financial requirements for our operations, growth opportunities, the satisfaction of applicable solvency tests for the declaration and payment of distributions and other conditions existing from time to time (see Item 10.B “Memorandum and Articles of Association – Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP - Distributions”).

Our ability to continue paying or growing cash distributions are impacted by the cash we generate from our operations. The amount of cash we generate from our operations will fluctuate from quarter to quarter and will depend on various factors, several of which are outside our control, including the weather in the jurisdictions in which we operate, the level of our operating costs and prevailing economic conditions. As a result, cash distributions to the LP Unitholders are not guaranteed. Refer to Item 3.D “Key Information — Risk Factors — Risks Related to our LP Units” for a list of the primary risks, whether at previous levels or higher, that impact our ability to continue paying comparable or growing cash distributions.

We expect to have a payout ratio of approximately 60-70% of FFO, allowing us to reinvest surplus cash flow in attractive and accretive opportunities in the renewable power sector and position us to grow our distributions per LP Unit over time. Historically, FFO was not used as a key financial measure for the Fund. However, prior to the Combination the Fund’s target payout ratio was approximately 80% of distributable cash (FFO less levelized capital expenditures and debt amortization). This is substantially equivalent to a 60%-70% target payout ratio based on FFO, which would approximate 80% of distributable cash, as defined above.

We are pursuing a long-term distribution growth rate target in the range of 3% to 5% annually. The 3% to 5% annual growth rate target for distributions compares to a historical annualized growth rate of the Fund of 2.2% from inception in 1999 up to the date of the Combination. The increase from the historical growth rate of the Fund to the current target of 3% to 5% for Brookfield Renewable reflects the expected benefits of the Combination, including a broader set of growth opportunities from new and expanded geographies, significantly greater generating assets and capitalization and enhanced access to capital.

Pursuant to the terms of the Preference Share Guarantees, if the declaration or payment of dividends on the Series 1 Shares or Series 2 Shares is in arrears, Brookfield Renewable will not make distributions on our LP Units.

 

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Our Distribution Reinvestment Plan

In February 2012, Brookfield Renewable adopted a DRIP for LP Unitholders who are residents of Canada. Subject to regulatory approval and U.S. securities law registration requirements, we may in the future expand our DRIP to include LP Unitholders resident in the United States. LP Unitholders who are not residents of Canada or the United States may participate in our DRIP provided that there are not any laws or governmental regulations that prohibit them from participating in our DRIP. The following is a summary description of the principal terms of our DRIP.

Pursuant to our DRIP, Canadian holders of our LP Units are able to elect to have distributions paid on our LP Units held by them automatically reinvested in additional LP Units to be held for the account of the LP Unitholder in accordance with the terms of our DRIP.

Distributions due to DRIP participants will be paid to the plan agent, for the benefit of the DRIP participants. If a DRIP participant has elected to have his or her distributions automatically reinvested, or applied, on behalf of such DRIP participant, to the purchase of additional LP Units, such purchases will be made from Brookfield Renewable on the distribution date at the Market Price.

As soon as reasonably practicable after each distribution payment date, a statement of account will be mailed to each participant setting out the amount of the relevant cash distribution reinvested, the applicable Market Price, the number of LP Units purchased under our DRIP on the distribution payment date and the total number of LP Units, computed to four decimal places, held for the account of the participant under our DRIP (or, in the case of CDS participants, CDS will receive such statement on behalf of beneficial owners participating in our DRIP). While Brookfield Renewable will not issue fractional LP Units, a DRIP participant’s entitlement to LP Units purchased under our DRIP may include a fraction of an LP Unit and such fractional LP Units shall accumulate. A cash adjustment for any fractional LP Units will be paid by the plan agent upon the termination by a DRIP participant of his or her participation in our DRIP or upon termination of our DRIP. A registered holder may, at any time, obtain a Direct Registration System statement (a “ DRS Statement ”) for any number of whole LP Units held for the participant’s account under the DRIP by notifying the plan agent. DRS Statements for LP Units acquired under our DRIP will not be issued to participants unless specifically requested. Prior to pledging, selling or otherwise transferring LP Units held for a participant’s account (except for a sale of LP Units through the plan agent), a registered holder must request a DRS Statement be issued. The automatic reinvestment of distributions under our DRIP will not relieve participants of any income tax obligations applicable to such distributions. No brokerage commissions will be payable in connection with the purchase of our LP Units under our DRIP and all administrative costs will be borne by Brookfield Renewable.

LP Unitholders will be able to terminate their participation in our DRIP by providing, or by causing to be provided, notice to the plan agent. Such notice, if actually received by the plan agent no later than five business days prior to a record date, will have effect in respect of the distribution to be made as of such date. Thereafter, distributions to such LP Unitholders will be paid directly to the LP Unitholder. In addition, LP Unitholders may request that all or part of their LP Units held under the DRIP in cash be sold. When LP Units are sold through the plan agent, a holder will receive the proceeds less any handling charges and brokerage trading fees. Brookfield Renewable will be able to terminate our DRIP, in its sole discretion, upon notice to the DRIP participants and the plan agent, but such action will have no retroactive effect that would prejudice a participant’s interest. Brookfield Renewable will also be able to amend, modify or suspend our DRIP at any time in its sole discretion, provided that the plan agent gives written notice of that amendment, modification or suspension to our LP Unitholders, for any amendment, modification or suspension to our DRIP that in Brookfield Renewable’s opinion may materially prejudice participants.

BRELP has a corresponding distribution reinvestment plan in respect of distributions made to Brookfield Renewable and Brookfield. Brookfield Renewable does not intend to reinvest distributions it receives from BRELP in BRELP’s distribution reinvestment plan except to the extent that holders of our LP Units elect to reinvest distributions pursuant to our DRIP. Brookfield has advised Brookfield Renewable that it may from time-to-time reinvest distributions it receives from Brookfield Renewable or BRELP pursuant to our DRIP or BRELP’s distribution reinvestment plan. The limited partnership units of BRELP to be issued to Brookfield under the distribution reinvestment plan will become subject to the Redemption-Exchange Mechanism and may therefore result in Brookfield acquiring additional LP Units of Brookfield Renewable. See Item 10.B “Memorandum and Articles of Association – Description of the Amended and Restated Limited Partnership Agreement of BRELP — Redemption – Exchange Mechanism”.

BRP Equity

BRP Equity will pay dividends to the holders of its Series 1 Shares and, if applicable, Series 2 Shares, as and when declared by the board of directors of BRP Equity. BRP Equity’s Series 1 Shares and Series 2 Shares are guaranteed by Brookfield Renewable and the other Guarantors under the Preference Share Guarantees described under Item 10.B “Memorandum and Articles of Association – BRP Equity — Preference Share Guarantees”.

For the initial five-year period commencing on March 10, 2010 and ending on and including April 30, 2015, the holders of Series 1 Shares are entitled to receive fixed cumulative preferential cash dividends as and when declared by the board of directors of

 

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BRP Equity, payable quarterly on the last day of January, April, July and October in each year at an annual rate equal to C$1.3125 per share. The initial dividend of C$0.1834 per share was paid on April 30, 2010 and a total dividend of C$0.83965 per share was paid in 2010. A total dividend of C$1.3125 per share was paid in 2011.

The Manager

Brookfield Asset Management

Brookfield Asset Management is a global alternative asset manager with approximately $150 billion in assets under management. It has over a 100-year history of owning and operating assets with a focus on property, renewable power, infrastructure and private equity. It has a range of public and private investment products and services, which leverage its expertise and experience and provide it with a distinct competitive advantage in the markets where it operates. Brookfield Asset Management is co-listed on the NYSE and the TSX under the symbol “BAM” and on the NYSE Euronext under the symbol “BAMA”.

Brookfield was the manager and administrator of the Fund since its inception in 1999 and we continue to benefit from its global asset management platform and depth of experience in creating LP Unitholder value. In addition, Brookfield Renewable continues to benefit from the same management team at Brookfield who created and drove the success of the Fund. We are Brookfield’s primary vehicle through which it will acquire renewable power assets on a global basis and we benefit from its reputation and global platform to grow our business.

The Manager complements our operating platforms in three key areas:

 

   

Executive oversight of our business : The Manager provides leadership to our operating platforms and oversees the implementation of our annual and long-term operating plans, capital expenditure plans, and our power marketing plans to ensure compliance with our performance-based operating objectives and applicable laws. The Manager also oversees the implementation of our operational policies, and carries out of all of our management, accounting, regulatory reporting, legal and treasury functions.

 

   

Growing our business: We also benefit from the strategic advice, transaction origination capabilities and corporate development services of the Manager to grow our business. Brookfield Renewable benefits from the Manager’s renewable power acquisition experience focused in our target markets as well as market research capabilities that support evaluating opportunities to grow our business in our existing and new power markets.

 

   

Funding our business: The Manager recommends and oversees the implementation of funding strategies for our existing business and in connection with our acquisitions or developments. In doing so, the Manager advises upon and assists in the execution of our equity or debt financings. The Manager also arranges for the preparation of our tax planning and filing of tax returns.

Energy Marketing

Pursuant to a number of agreements, BEM LP is responsible for selling and dispatching all energy and energy related products generated by our assets in Canada and the United States. In addition, BEM LP acts as counterparty to various agreements with us pursuant to which BEM LP purchases or guarantees the price that we receive for power generation.

With approximately 100 employees and 24 hours/day, 365 days/year operations, BEM LP performs transaction execution, risk management, settlement, information technology, regulatory, legal and human resource functions. These groups provide valuable market intelligence regarding pricing dynamics, regulatory regimes and market participants, which serve to support Brookfield Renewable’s strategy. In 2011, BEM LP was responsible for the sale and dispatch of over 14,000 GWh of generation in Canada and the United States.

BEM LP and CanHoldco entered into the Energy Marketing Agreement pursuant to which BEM LP provides energy marketing services to CanHoldco. See Item 7.B “Related Party Transactions — Energy Marketing Agreement”.

Competition and Marketing

We operate in the North American and Brazilian power market sectors. The nature and extent of competition we face varies from jurisdiction to jurisdiction. Brookfield Renewable Group’s main competition in its electricity markets are coal, nuclear, oil and natural gas electricity generators as well as other renewable energy suppliers who use hydro, wind, geothermal and photovoltaic technologies. The market price of commodities, such as natural gas and coal, are important drivers of energy pricing and competition in most energy markets, especially in North America.

Our marketing efforts focus on leveraging our competitive advantages described in Item 4.B “Business Overview — Our Competitive Strengths” and our world class operating platforms described in Item 4.B “Business Overview — Operating Philosophy”.

 

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We also leverage our relationship with Brookfield, which we believe provides a unique competitive advantage considering Brookfield’s strong reputation in the energy marketing, asset management, infrastructure and global real estate industries. See Item 5.A. “Operating and Financial Review and Prospects — The Manager — Energy Marketing” and Item 7.B “Major Shareholders and Related Party Transactions — Related Party Transactions — Licensing Agreement”.

Employees

Brookfield Renewable does not currently have any senior executives who carry out management, oversight and other strategic activities. The personnel that carry out these activities are employees of Brookfield, and their services are provided to Brookfield Renewable or for our benefit under our Master Services Agreement. For a discussion of the individuals from Brookfield’s management team that are expected to be involved in our business, see Item 6.A. “Directors, Senior Management and Employees — Directors and Senior Management — Our Management” and for a discussion of our employees see Item 6.D “Employees”.

Intellectual Property

Brookfield Renewable, as licensee, entered into the Licensing Agreement with Brookfield pursuant to which Brookfield granted us a non-exclusive, royalty-free license to use the name “Brookfield” and the Brookfield logo in the United States and Canada. Other than under this limited license, we do not have a legal right to the “Brookfield” name and the Brookfield logo. Brookfield may terminate the Licensing Agreement immediately upon termination of our Master Services Agreement and it may be terminated in the circumstances described under Item 7.B “Major Shareholders and Related Party Transactions — Related Party Transactions — Licensing Agreement”.

Governmental, Legal and Arbitration Proceedings

We have not been and are not currently subject to any material governmental, legal or arbitration proceedings which may have or have had a significant impact on our financial position or profitability nor are we aware of any such proceedings that are pending or threatened.

We are occasionally named as a party in various claims and legal proceedings which arise during the normal course of our business. We review each of these claims, including the nature of the claim, the amount in dispute or claimed and the availability of insurance coverage. Although there can be no assurance as to the resolution of any particular claim, we do not believe that the outcome of any claims or potential claims of which we are currently aware will have a material adverse effect on us.

Regulation

Various activities of Brookfield Renewable Group require registrations, permits, licenses, inspections and approvals from governmental agencies and regulatory authorities and we strive to comply with all regulations applicable to our operations. Water rights are generally owned or controlled by governments that reserve the right to control water levels or may impose water-use requirements. We hold concessions, licenses and permits to operate our facilities, which generally include rights to the land and water required for power generation. Wholesale market structures or rules provide us with rights to access the power grid.

We are also subject to various laws relating to health, safety and environmental matters. These laws and regulations may change and we may become subject to more stringent laws and regulations in the future. Compliance with more stringent laws and regulations could have an adverse effect on our business, financial condition or results of operations. We have established policies and procedures for environmental management and compliance, and we have incurred and will continue to incur significant capital and operating expenditures to comply with health, safety and environmental laws and to obtain and comply with licenses, permits and other approvals and to assess and manage potential liability exposure.

Environmental Protection

We are an owner and operator of a diversified portfolio of high quality assets that produce electricity from renewable resources. Our assets are predominantly hydroelectric and represent one of the most environmentally preferred forms of power generation. We may benefit from future environmental regulations under consideration to encourage the use of clean energy technologies and regulate emissions of greenhouse gases to address climate change.

Our goal is to be responsible stewards of our resources, and good citizens in all that we do. We have adopted written environmental policies that include frameworks for oversight, compliance, compliance audits and sharing best practices both within our operations and the global Brookfield group. We require all employees, contractors, agents and others involved in our operations to comply with our established environmental practices. We seek to have transparent and well-established relationships with local stakeholder groups and the communities in which we operate, which we believe is a key element of successfully operating and developing renewable power facilities. We consult and work proactively with local stakeholders and communities potentially affected by our operations.

We are an active contributor in the communities where we conduct business. We are proud of the commitment we have made to corporate social responsibility. The initiatives we undertake and the investments we make in building our business are guided by our core set of values around sustainable development, as we create a culture and organization that can be successful today and in the future.

 

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  4.C

ORGANIZATIONAL STRUCTURE

Organizational Chart

The simplified chart below presents a summary of our ownership and organizational structure. Please note that on this chart all interests are 100% unless otherwise indicated and “GP Interest” denotes a general partnership interest and “LP Interest” denotes a limited partnership interest. Our sole material asset is a 50.1% LP Interest in BRELP. Brookfield indirectly holds the remaining 48.9% LP Interest in BRELP, a 36.2% LP Interest in Brookfield Renewable and a 0.01% and 1% GP Interest in Brookfield Renewable and BRELP, respectively, for an aggregate 68% indirect ownership interest in Brookfield Renewable (on a fully-exchanged basis). For more details on the exchange mechanism see Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP — Redemption-Exchange Mechanism”. Brookfield’s indirect 1% GP Interest in BRELP entitles it to receive incentive distributions linked to the growth of BRELP’s distributions. This simplified chart should be read in conjunction with the explanation of our ownership and organizational structure below and the information included under Item 6.A “Directors and Senior Management” and Item 7. “Major Shareholders and Related Party Transactions”.

 

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   LOGO

 

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Brookfield Renewable Energy Partners L.P.

Brookfield Renewable is a Bermuda exempted limited partnership that was established on June 27, 2011 under the provisions of the Exempted Partnerships Act 1992 of Bermuda and the Limited Partnership Act 1883 of Bermuda. Our registered and head office is 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda, and the telephone number is +1.441.295.1443. Brookfield Renewable’s sole material asset is a 50.1% limited partnership interest in BRELP. Brookfield Renewable anticipates that the only distributions that it will receive in respect of its limited partnership interests in BRELP will consist of amounts that are intended to assist it in making distributions to LP Unitholders in accordance with its distribution policy and to allow it to pay expenses as they become due. The declaration and payment of cash distributions by Brookfield Renewable is at the discretion of the Managing General Partner which is not required to make such distributions and Brookfield Renewable cannot assure you that it will make such distributions as intended. See Item 4.B “Business Overview — Our Distribution Policy”.

The Manager and Brookfield

The Service Recipients have engaged the Manager, an affiliate of Brookfield, to provide management and administration services pursuant to our Master Services Agreement. See Item 4.B “Business Overview — The Manager” and Item 6.A “Directors and Senior Management — Our Master Services Agreement” for more information on Brookfield and these arrangements.

The Managing General Partner

The Managing General Partner serves as Brookfield Renewable’s general partner and has sole authority for the management and control of Brookfield Renewable, which is exercised exclusively by its board of directors. Brookfield Renewable’s only interest in BRELP consists of limited partnership interests in BRELP, which by law do not entitle the holders thereof to participate in partnership decisions. Pursuant to the Voting Agreement, however, Brookfield Renewable, through the Managing General Partner, has a number of voting rights, including the right to direct all eligible votes in the election of the directors of the BRELP General Partner. See Item 10.B “Memorandum and Articles of Association — Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP” and Item 7.B “Related Party Transactions — Voting Agreement”.

BRELP and the Holding Entities

Brookfield Renewable indirectly holds its interests in the Operating Entities through BRELP and through CanHoldco, Bermuda Holdco and the Holding Entities. BRELP owns all of the common shares of the Holding Entities. Brookfield has provided an aggregate of $5 million of working capital to Bermuda Holdco through a subscription for shares of Bermuda Holdco. These shares are entitled to receive a cumulative preferential dividend equal to 6% of their redemption value as and when declared by the board of directors of Bermuda Holdco and will be redeemable at the option of Bermuda Holdco, subject to certain limitations, at any time after the tenth anniversary of their issuance. The shares are not entitled to vote, except as required by law.

BRELP GP LP and the BRELP General Partner

The BRELP GP LP serves as the general partner of BRELP and has sole authority for the management and control of BRELP. The general partner of BRELP GP LP is the BRELP General Partner, a corporation owned indirectly by Brookfield but controlled by Brookfield Renewable, through the Managing General Partner, pursuant to the Voting Agreement. See Item 7.B “Related Party Transactions — Voting Agreement”. BRELP GP LP is entitled to receive incentive distributions from BRELP as a result of its ownership of the general partnership interests of BRELP. See Item 7.B “Related Party Transactions — Incentive Distributions”.

See also the information contained in this Form 20-F under Item 3.D “Risk Factors — Risks Related to Brookfield Renewable” and Item 3.D “Risk Factors — Risks Related to our Relationship with Brookfield”, Item 6.A “Directors and Senior Management”, Item 7.B “Related Party Transactions” and Item 10.B “Memorandum and Articles of Association—Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP”, Item 10.B “Memorandum and Articles of Association—Description of the Amended and Restated Limited Partnership Agreement of BRELP”, and Item 7.A “Major Shareholders”.

BRP Equity

BRP Equity is an indirect wholly-owned subsidiary of Brookfield Renewable incorporated under the CBCA on February 10, 2010. Other than a loan to an indirect wholly-owned subsidiary of Brookfield Renewable, BRP Equity has no significant assets or liabilities, no subsidiaries and no operations of its own. BRP Equity has C$250 million of Class A Preference Shares, Series 1 (the “ Series 1 Shares ”) outstanding, guaranteed by Brookfield Renewable, BRELP, CanHoldco and Bermuda Holdco (collectively, the “ Guarantors ”). The Series 1 Shares are listed on the TSX under the symbol “BRF.PR.A”. See Item 10.B “Memorandum and Articles of Association — BRP Equity”.

 

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Finco

Finco is an indirect, wholly-owned subsidiary of Brookfield Renewable incorporated under the ABCA on September 14, 2011. Other than approximately C$1.5 billion aggregate principal amount of publicly-issued Finco Bonds and notes receivable from an indirect wholly-owned subsidiary of Brookfield Renewable, Finco has no significant assets or liabilities, no subsidiaries and no operations of its own. The Finco Bonds are guaranteed by Brookfield Renewable and the other Guarantors. See Item 10.B “Memorandum and Articles of Association”.

Inter-Corporate Relationships

The following table provides the name, the percentage of voting securities owned, or controlled or directed, directly or indirectly, by us, and the jurisdiction of incorporation, continuance, formation or organization of our significant subsidiaries.

 

Name of Subsidiary

   Jurisdiction of
Incorporation
  or Organization  
   Percentage of
Voting Securities
  Owned or Controlled  

Bear Swamp Power Company LLC

   Delaware    50.0%

Brookfield BRP Holdings (Canada) Inc.

   Ontario    100.0%

Brookfield Energia Renovável S.A.

   Brazil    100.0%

Brookfield Power US Holding America Co.

   Delaware    100.0%

Brookfield Power Wind Prince LP

   Ontario    100.0%

Brookfield Renewable Energy L.P.

   Bermuda    100.0%

Brookfield Renewable Power Preferred Equity Inc.

   Canada    100.0%

BRP Bermuda Holdings I Limited

   Bermuda    100.0%

BRP Finance ULC

   Alberta    100.0%

Brookfield BRP Canada Corp.

   Alberta    100.0%

Catalyst Old River Hydroelectric L.P.

   Louisiana    75.0% ( 1 )

Comber Wind Limited Partnership

   Ontario    100.00%

Coram California Development L.P.

   Delaware    50.0%

Erie Boulevard Hydropower L.P.

   New York    100.0%

Gosfield Wind Limited Partnership

   Ontario    100.0%

Granite Reliable Power LLC

   Delaware    89.5% (2)

Great Lakes Hydro America LLC

   Delaware    100.0%

Great Lakes Power Limited

   Ontario    100.0%

Hawks Nest Hydro LLC

   Delaware    100.0%

Itiquira Energetica S.A.

   Brazil    100.0%

Lake Superior Power Limited Partnership

   Ontario    100.0%

Lièvre Power LP

   Québec    100.0%

Mississagi Power Trust

   Québec    100.0%

Powell River Energy Inc.

   Canada    49.9%

Rumford Falls Hydro LLC

   Delaware    100.0%

 

  (1)  

Non-voting economic interest, held through preferred shares and secured notes.

  (2)  

Voting control held through voting agreements with certain institutional investors.

 

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  4.D

PROPERTY, PLANT AND EQUIPMENT

Brookfield Renewable’s registered and head office is 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda. Brookfield Renewable does not directly own any real property and its sole material asset is a 50.1% limited partnership interest in BRELP. See also the information contained in this Form 20-F under Item 3.D “Risk Factors—Risks Related to Our Operations and the Renewable Power Industry” and Item 5. “Operating and Financial Review and Prospects”.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

  5.A

OPERATING RESULTS

Basis of Presentation

Brookfield Renewable Group’s financial statements are prepared in accordance with International Financial Reporting Standards (“ IFRS ”) as issued by the International Accounting Standards Board (“ IASB ”), which require estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the amounts of revenue and expense during the reporting periods.

Certain comparative figures have been reclassified to conform to the current year’s presentation.

Performance Measurement

Although we monitor and analyze our financial performance using a number of indicators, our primary business objective of generating reliable and growing cash flow is monitored and analyzed using Adjusted EBITDA, FFO and Net Asset Value. See “Cautionary Statement Regarding Use of Non-IFRS Measures” regarding use of non-IFRS measures. As a result of the Combination, we have also presented these same measurements on a pro forma basis. While net income is calculated in accordance with IFRS, Adjusted EBITDA, FFO, and Net Asset Value do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. We provide additional information on how we determine Adjusted EBITDA, FFO, and Net Asset Value and we provide reconciliations to net income. See Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

Net Income

Net income is calculated in accordance with IFRS.

Summary Financial Review

In order to provide a full financial understanding of the Combination, we have prepared financial results on the following basis:

Pro Forma Basis

We are providing pro forma financial results that include the impact of the Combination, new contracts and contract amendments, management service agreements along with the tax impacts resulting from the Combination, as if each had occurred as of January 1, 2010. The unaudited pro forma financial results have been prepared based upon currently available information and assumptions deemed appropriate by management. The pro forma financial results give effect to the following transactions:

Items affecting future cash flows:

 

   

amendment and execution of PPAs; and

 

   

execution of management service agreements.

Items not affecting cash flows:

 

   

changes in the fair value of property, plant and equipment due to the change in PPAs and the resulting change in depreciation expense;

 

   

change in accounting policy for construction work-in-progress to include this asset type in the assets that are revalued when appropriate criteria are satisfied;

 

   

settlement of intercompany balances as at the date of the transaction; and

 

   

elimination of the Fund unit liability and related unrealized gain or loss on remeasurement.

For additional information on the pro forma adjustments, see Item 5.A “Operating Results — Summary of Pro Forma Adjustments” and the “Unaudited Pro Forma Condensed Combined Statements of Income.”

 

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The unaudited pro forma financial results are provided for information purposes only and may not be indicative of the results that would have occurred had the above transaction been affected on the date indicated. The accounting for certain of the Combination transactions required the determination of fair value estimates at the date of the transaction on November 28, 2011 rather than the date assumed in the determination of the pro forma results of January 1, 2010.

Consolidated Basis

The Combination did not represent a business combination under IFRS 3R Business Combinations (“IFRS 3R”) as it represented a reorganization of entities under common control of Brookfield. Accordingly, the consolidated financial statements of Brookfield Renewable Group are presented to reflect such continuing control and no adjustments were made to reflect fair values or to recognize any new assets or liabilities, as a result of the Combination. Brookfield Renewable Group’s consolidated balance sheets, statements of (loss) and income and of cash flows are presented as if these arrangements had been in place from the time that the operations were originally acquired by Brookfield. For periods prior to November 28, 2011, the financial information for Brookfield Renewable Group represents the combined financial information for the “Brookfield Renewable power division” (the “ Division ”), a division of Brookfield. Transactions entered into as part of the Combination are accounted for effective November 28, 2011.

Effective December 2011, Brookfield Renewable Group entered into voting arrangements with various affiliates of Brookfield, whereby Brookfield Renewable Group gained control of the entities that own U.S. and Brazil renewable power generating operations (the “Voting Arrangements” ). The Voting Arrangements provide Brookfield Renewable Group with all of the voting rights to elect the Boards of Directors of the relevant entities and therefore provides Brookfield Renewable Group with control. Accordingly, Brookfield Renewable Group consolidates the accounts of these entities.

The Combination and Voting Arrangements do not represent business combinations under IFRS 3R , as all combining businesses are ultimately controlled by Brookfield Asset Management both before and after the transactions were completed. Brookfield Renewable Group accounts for these reorganizations of entities under common control in a manner similar to a pooling of interest which requires the presentation of pre-Combination and Voting Arrangement financial information as if the transactions had always been in place. Refer to Note 2(o) (ii) in our consolidated financial statements for Brookfield Renewable’s policy on accounting for transactions under common control.

Overview of Performance on a Pro Forma Basis

 

                         Variance of Results  
   
For the three months ended March 31    Actual Generation      LTA Generation      Actual vs. LTA     

Actual vs.

Prior year

 
               
Generation (GWh)    2012      2011      2012      2011      2012      2011      2012  

Hydroelectric generation

                    

United States

     1,958         1,698         1,883         1,816         75         (118)         260   

Canada

     1,308         1,026         1,158         1,162         150         (136)         282   

Brazil (1)  

     867         808         875         808         (8)         -         59   
       4,133         3,532         3,916         3,786         217         (254)         601   

Wind energy

                    

Canada

     368         163         324         175         44         (12)         205   

United States

     90         -         100         -         (10)         -         90   
       458         163         424         175         34         (12)         295   

Other

     226         229         217         101         9         128         (3)   

Total generation (2)

     4,817         3,924         4,557         4,062         260         (138)         893   

% variance

                                         6%         (3)%         23%   

 

(1)

Assured generation levels.

(2)  

Actual and LTA generation includes 100% of generation from equity-accounted investments.

We compare actual generation levels against the expected LTA to highlight the impact of one of the few but important factors that affect the variability of our business results. In the short-term, we recognize that hydrology will vary from one period to the next. Over time however, we expect our facilities will continue to produce in line with their LTA, which have proven to be reliable indicators of performance. Accordingly, we present our generation and the corresponding Adjusted EBITDA and FFO results on both an actual generation and an LTA basis. Reconciliations of each of Adjusted EBITDA and FFO to net income on a consolidated and pro forma basis are presented in Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

 

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Generation levels during the three months ended March 31, 2012 increased 23% as compared to the same period during the prior year reflecting improved hydrological conditions including strong inflows from the early arrival of spring in North America. Seasonally warmer temperatures in Eastern Canada and the U.S. resulted in higher inflows and improved generation. Generation was also positively impacted by the contribution of assets that were acquired and commissioned during the last twelve months. Energy sales from our hydroelectric assets in Brazil were in line with plan and consistent with the framework that exists to levelize generation across power producers in that market. Generation from our wind portfolio during the three months ended March 31, 2012 increased by 295 GWh from the same period during the prior year, as a result of the contribution from new assets in Canada and the United States as well as improved wind conditions.

 

                         Variance of Results  
   
For the years ended December 31    Actual Generation      LTA Generation      Actual vs. LTA     

Actual vs.

Prior year

 
               
Generation (GWh)    2011      2010      2011      2010      2011      2010      2011  

Hydroelectric generation

                    

United States

     7,150         6,651         6,811         6,727         339         (76)         499   

Canada

     4,056         3,557         5,061         5,076         (1,005)         (1,519)         499   

Brazil (1)

     3,307         3,206         3,307         3,206         -         -         101   
       14,513         13,414         15,179         15,009         (666)         (1,595)         1,099   

Wind energy (3)

     662         499         712         506         (50)         (7)         163   

Other

     702         567         406         372         296         195         135   

Total generation (2)

     15,877         14,480         16,297         15,887         (420)         (1,407)         1,397   

% variance

                                         (3)%         (9)%         10%   

 

(1)  

Assured generation levels.

(2)  

Actual and LTA generation includes 100% of generation from equity-accounted investments.

(3)  

Wind energy relates to Canadian wind assets.

Generation levels in 2011 improved from the prior year, due in particular to heavy rainfall during the summer in the Northeastern United States. Hydrology conditions in Eastern Canada continued to underperform during the year; however, we did experience an improvement over the record dry conditions of 2010. Energy sales from our hydroelectric assets in Brazil were in line with the plan and consistent with the framework that exists to levelize generation across power producers in that market. Overall, generation from our hydro portfolio was 1,099 GWh above 2010 levels and 666 GWh below LTA (4% below LTA) during the year. Wind production was below LTA during the year but ahead of the prior year as we had the full year benefit of wind facilities commissioned in late 2010. Entering the first quarter of 2012, reservoir levels were 7% above LTA and with a fully contracted portfolio we are well-positioned to deliver results in line with plans for the balance of the year.

Adjusted EBITDA and FFO on a Pro Forma Basis (unless otherwise stated)

The following table presents Adjusted EBITDA and FFO for the three months ended March 31, 2012 and 2011 on a pro forma basis (unless otherwise noted) using both actual and LTA generation as described in Item 5.A “Operating Results — Basis of Presentation — Pro Forma Basis.”

 

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       Results under actual
generation
     Results under LTA
generation
 

For the three months ended March 31

(Millions, except as noted)

   2012 (1)      2011      2012      2011  

Generation (GWh)

     4,817         3,924         4,557         4,062   

Revenues

   $ 426       $ 322       $ 398       $ 341   

Other income

     5         4         5         4   

Share of cash earnings from equity-accounted investments

     4         6         4         6   

Direct operating costs

     (117)         (93)         (114)         (93)   

Adjusted EBITDA (2)

     318         239         293         258   

Interest expense - borrowings

     (110)         (97)         (110)         (97)   

Management service costs

     (7)         (5)         (7)         (5)   

Current income taxes

     (6)         (4)         (6)         (4)   

Cash portion of non-controlling interests

     (20)         (11)         (15)         (9)   

Funds from operations (FFO) (2)

   $ 175       $ 122       $ 155       $ 143   

 

(1)  

Results for the three months ended March 31, 2012 are based on a consolidated basis and not a pro forma basis.

(2)

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Consolidated Results” and Item 5.A “Operating Results — Reconciliation of Pro Forma Results and Balance Sheet.”

The discussion below provides a comparison of results on a consolidated basis for the three months ended March 31, 2012 to results on a pro forma basis for the three months ended March 31, 2011. Pro forma results reflect new contracts and contract amendments, along with the tax implications of the Combination, as if each had occurred as of January 1, 2011. See Item 5.A “Operating Results — Reconciliation of Pro Forma Results and Balance Sheet.”

Revenues totaled $426 million or $89 per MWh for the three months ended March 31, 2012, representing a year-over-year increase of $104 million. Approximately $42 million of the increase is due to improved generation levels at existing facilities. Approximately $37 million of the increase is attributable to increased generation from new hydroelectric generation facilities in Brazil and Northeast United States and from an Ontario wind facility integrated in the fourth quarter of 2011 as well as the acquisition and commissioning of nearly 375 MW in four wind facilities in California and the Northeast United States.

Adjusted EBITDA for the three months ended March 31, 2012 increased by $79 million year-over-year. Both revenues and direct operating costs were in line with expectations.

Interest expense on borrowings reflects the cost related to approximately $4,500 million of non-recourse asset-specific debt and $1,500 million of corporate debt. Our borrowings are predominantly fixed-rate and issued in local currencies providing protection to our equity capital against changes in foreign exchange and interest rates movements. Higher interest expense in the current year reflects the increased capitalization associated with our portfolio growth during the last twelve months.

Management service costs reflect a base fee of $20 million annually plus 1.25% on growth in our total capitalization.

FFO increased $53 million year-over-year to $175 million reflecting the contribution of higher generation due to greater hydrology and through the growth in our portfolio.

 

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The following table presents Adjusted EBITDA and FFO for the years ended 2011 and 2010 on a pro forma basis and under LTA as described in Item 5.A “Operating Results — Basis of Presentation — Pro Forma Basis.”

 

       Results under actual
generation
     Results under LTA
generation
 

For the years ended December 31

(Millions, except as noted)

   2011      2010      2011      2010  

Generation (GWh)

     15,877         14,480         16,297         15,887   

Revenues

   $ 1,309       $ 1,165       $ 1,369       $ 1,265   

Other income

     19         12         19         12   

Share of cash earnings from equity-accounted investments

     23         22         23         22   

Direct operating costs

     (425)         (346)         (425)         (346)   

Adjusted EBITDA (1)

     926         853         986         953   

Interest expense - borrowings

     (411)         (404)         (411)         (404)   

Management service costs

     (22)         (21)         (22)         (21)   

Current income taxes

     (22)         (32)         (22)         (32)   

Cash portion of non-controlling interests

     (52)         (46)         (50)         (46)   

Funds from operations (FFO) ( 1 )

   $ 419       $ 350       $ 481       $ 450   

 

(1)

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Pro Forma Results and Balance Sheet.”

Revenues on a pro forma basis totaled $1,309 million or $84 per MWh at the end of 2011, representing a year-over-year increase of $144 million or 12%. Approximately $21 million of the increase is attributable to the acquisition of a 30 MW hydroelectric facility in Brazil in June and the completion of a 166 MW wind facility in Eastern Canada in November. The balance is due to inflation-based escalation included in our PPAs along with an increase in overall generation levels.

Pro forma Adjusted EBITDA in 2011 increased year-over-year by $73 million or 9% to $926 million from $853 million. Adjusted EBITDA margins on our hydroelectric facilities approximate 75%. Both revenues and direct operating costs were in line with expectations ensuring stable operating margins.

Interest costs reflect the cost related to approximately $1,100 million of corporate debt and $4,200 million of non-recourse asset-specific debt. Our financings are predominantly fixed-rate and issued in local currencies providing protection to our equity capital against changes in foreign exchange and interest rate movements. In February of 2012, we issued C$400 million of additional corporate debt with a 10-year term at an annual rate of 4.79%. Proceeds from the issuance were used to repay higher yielding, shorter duration debt resulting in a lower cost of capital rate for Brookfield Renewable and an improved debt maturity profile.

Management service costs reflect a base fee of $20 million annually plus 1.25% on growth in our total capitalization.

FFO, on a pro forma basis, increased year-over-year by $69 million or 20% to $419 million from $350 million. The increase is consistent with the growth in our portfolio described above and the overall improvement in generation.

 

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Reconciliation of Pro Forma Results and Balance Sheet

The following table reconciles Adjusted EBITDA, FFO and net income on a consolidated basis to Adjusted EBITDA, FFO and net income on a pro forma basis, assuming actual generation for the periods indicated:

 

For the three months ended March 31

(Millions)

   Notes    2011  

Adjusted EBITDA on a consolidated basis

      $ 215   

Change in revenues due to revised PPA

   (i)      29   

Change in direct operating costs

   (ii)      (5)   
     

Adjusted EBITDA on a pro forma basis

        $ 239   

FFO on a consolidated basis

      $ 103   

Change in revenues due to revised PPA

   (i)      29   

Change in direct operating costs

   (ii)      (5)   

Management service costs

   (ii)      (5)   
     

FFO on a pro forma basis

        $ 122   

Net income on a consolidated basis

      $ (93)   

Change in revenues due to revised PPA

   (i)      29   

Change in direct operating costs

   (ii)      (5)   

Management service costs

   (ii)      (5)   

Elimination of loss on Fund unit liability

   (iii)      116   

Transfer of revaluation to other comprehensive income

   (iv)      (18)   

Change in depreciation expense

   (v)      1   

Intercompany settlements

   (vi)      7   

Deferred income taxes

   (vii)      2   
     

Net income on a pro forma basis

        $ 34   

 

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For the years ended December 31

(Millions)

   Notes    2011      2010  

Adjusted EBITDA on a consolidated basis

      $ 804       $ 751   

Change in revenues due to revised PPA

   (i)      140         120   

Change in direct operating costs

   (ii)      (18)         (18)   
       

Adjusted EBITDA on a pro forma basis

        $ 926       $ 853   

FFO on a consolidated basis

      $ 318       $ 269   

Change in revenues due to revised PPA

   (i)      140         120   

Change in direct operating costs

   (ii)      (18)         (18)   

Management service costs

   (ii)      (21)         (21)   
       

FFO on a pro forma basis

        $ 419       $ 350   

Net income on a consolidated basis

      $ (451)       $ 294   

Change in revenues due to revised PPA

   (i)      140         120   

Change in direct operating costs

   (ii)      (18)         (18)   

Management service costs

   (ii)      (21)         (21)   

Elimination of loss on Fund unit liability

   (iii)      376         159   

Transfer of revaluation to other comprehensive income

   (iv)      20         (606)   

Change in depreciation expense

   (v)      4         25   

Intercompany settlements

   (vi)      19         27   

Deferred income taxes

   (vii)      (37)         106   
       

Net income on a pro forma basis

        $ 32       $ 86   

For additional information see Item 5.A “Operating Results — Unaudited Pro forma Condensed Combined Statements of Income”.

The following table reconciles total assets, total liabilities and equity on a consolidated basis to total assets, total liabilities and equity on a pro forma basis.

 

As at December 31

(Millions)

   2010  

Total assets on consolidated balance sheet

   $ 13,874   

Transfer of Division

     5   

Revaluation of power assets

     126   

Intercompany settlements

     (177)   
   

Total assets on pro forma basis

   $ 13,828   

 

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       2010  

Total liabilities on consolidated balance sheet

   $ 8,689   

Transaction costs

     20   

Changes in fair value of financial instruments

     (199)   

Intercompany settlements

     (411)   
   

Total liabilities on pro forma basis

   $ 8,099   

 

       2010  

Total equity on consolidated balance sheet

   $ 5,185   

Transfer of Division

     5   

Revaluation of power assets

     325   

Intercompany settlements

     234   

Transaction costs

     (20)   

Total equity on pro forma basis

   $ 5,729   

There is no reconciliation required for 2011 since the balance sheet on a pro forma basis would be the same as the consolidated balance sheet presented.

Summary of Pro Forma Adjustments

 

(i)

Power Purchase Agreements

Pro forma income (loss) reflects an amendment to the PPA between Brookfield Asset Management and Great Lakes Power Limited (“ GLPL ”), an indirect wholly-owned subsidiary of Brookfield Renewable (the “ GLPL PPA ”). Under the amendment, Brookfield Asset Management has agreed to support the price that GLPL receives for electricity generated by facilities owned by GLPL, at C$82 per MWh. This price is to be increased annually on January 1 by an amount equal to 40% of the increase in the Canadian consumer price index during the previous calendar year.

In a separate transaction, BEM LP and Mississagi Power Trust (“ MPT ”), an indirect wholly-owned subsidiary of Brookfield Renewable, agreed to an amendment to the existing master power purchase and sale agreement (the “ Mississagi PPA ”) to adjust the price of electricity purchased to C$103 per MWh. This price is to be increased annually by an amount equal to 20% of the increase in the Canadian consumer price index during the previous calendar year.

Additionally, BEM LP and BPUSHA, agreed to an energy revenue agreement under which BEM LP agreed to support the price that BPUSHA receives for energy delivered by certain facilities in the United States at $75 per MWh. This price is to be increased annually on January 1 by an amount equal to 40% of the increase in the consumer price index during the previous calendar year, but not exceeding an increase of 3% in any calendar year. In conjunction with the energy revenue agreement, BEM LP and each of the owners of the facilities entered into power agency agreements (the “ Power Agency Agreements ”) under which BEM LP will provide certain services. BEM LP will be entitled to be reimbursed for any third-party costs incurred and, except in a few cases, receives no additional fee for its services under the Power Agency Agreements.

The impact of these contract price amendments and agreements are summarized as follows:

 

For the three months ended March 31, 2011

 

(Millions)

   Actual generation (GWh)      Incremental Revenue  

GLPL PPA

     267         $  4   

Mississagi PPA

     128         5   

Energy Revenue Agreements

     890         20   
     

Total

     1,285         $  29   

 

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       Actual generation (GWh)      Incremental Revenue  

For the years ended December 31

 

(Millions)

           2011              2010              2011              2010  

GLPL PPA

     964         997         $  13         $  13   

Mississagi PPA

     473         412         17         14   

Energy Revenue Agreements

     3,512         3,470         110         93   
         

Total

     4,949         4,879         $  140         $  120   

 

(ii)

Management Service Agreements

An exclusive agreement with Brookfield to provide operating, management and consulting services to the Brookfield Renewable Group provides for a management service fee to be paid on a quarterly basis and will continue in perpetuity. The fee has a fixed quarterly component of $5 million and a variable component calculated as a percentage of the increase in the total capitalization value of Brookfield Renewable Group, as defined. Pro forma results for management services costs reflect an expense of $5 million and $22 million for the three months ended March 31, 2011 and year ended December 31, 2011, respectively (2010: $21 million).

Brookfield Renewable Group will also pay an annual marketing service fee of $18 million to a subsidiary of Brookfield Asset Management to reflect an agreement to provide energy marketing services. The fee will be increased annually on January 1 by an amount equal to the increase in the U.S. consumer price index during the previous calendar year. Pro forma results reflect an expense of $5 million and $18 million included in direct operating costs for the three months ended March 31, 2011 and year ended December 31, 2011, respectively (2010: $18 million).

 

(iii)

Transfer of Brookfield Renewable Power Fund Units

The transfer of the 66% of the Fund units not previously owned by Brookfield was completed at fair value satisfied by the issuance of LP Units. The result of this transaction is to reflect the settlement of the Fund unit liability and the issuance of LP Units to satisfy the transfer as equity of Brookfield Renewable. As a result of this transaction, the loss on Fund unit liability already on the balance sheet as at March 31, 2011 and as at December 31, 2011 of $116 million and $376 million, respectively (2010: $159 million), related to the change in fair value of the LP Units and the distributions made on such Fund units were eliminated.

 

(iv)

Changes in Fair Value of Financial Instruments

During the three months ended March 31, 2011 and year ended December 31, 2011, certain power guarantee agreements between Brookfield Renewable Group and Brookfield were accounted for as financial instruments with unrealized gains of $18 million and $20 million, respectively (2010: $606 million).

As a result of new agreements and changes in existing agreements with Brookfield and its subsidiaries arising from the Combination, the contracts are not accounted for as financial instruments by Brookfield Renewable Group. Thus, the unrealized financial instrument gains (losses) described above has been eliminated.

 

(v)

Change in Depreciation Expense

The reduction in fair value of the power generating assets from Brookfield Renewable’s statement of income and loss results in a decrease in pro forma depreciation expense of $1 million and $4 million for the three months ended March 31, 2011 and the year ended December 31, 2011, respectively (2010: $25 million).

 

(vi)

Intercompany Settlements

Brookfield Renewable Group settled certain intercompany loans and transactions with Brookfield upon completion of the Combination. To reflect these transactions in the pro forma statement of income, interest income of $7 million and $19 million was recorded for the three months ended March 31, 2011 and the year ended December 31, 2011, respectively (2010: $27 million).

 

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(vii)

Deferred Income Tax

Net income on a pro forma basis for the three months ended March 31, 2011 reflects an increase in deferred tax recoveries of $2 million. The audited consolidated balance sheet as of December 31, 2011 reflects an increase in deferred tax assets of $30 million as a result of the contract amendment payments and a decrease in deferred tax liabilities of $30 million as a result of changes in temporary differences arising from the adjustments discussed above, primarily related to the increase in the fair value of property, plant and equipment and the elimination of the financial instrument liability and the change in applicable tax rate for certain subsidiaries as a result of the dissolution of the Fund as part of the Combination. Net income on a pro forma basis for the year ended December 31, 2011 reflects a decrease in deferred tax recoveries of $37 million (2010: $106 million increase).

 

(viii)

Earnings (Loss) Per Share

Pro forma earnings (loss) per share have been calculated based on the 262.5 million units outstanding on a fully-exchanged basis.

Contract Profile

Our portfolio is virtually fully contracted with minimal expiries over the next two years. We operate the business on a largely contracted basis to ensure a high degree of predictability in funds from operations. We do however maintain a long-term view that electricity prices and the demand for electricity from renewable sources will rise due to a growing level of acceptance around climate change and the legislated requirements in some areas to diversify away from fossil fuel based generation.

As at March 31, 2012, we had contracted virtually all of our remaining 2012 generation at an average price of $87 per MWh. The following table sets out our contracts over the next five years for generation from our existing facilities assuming LTA hydrology:

 

           

For the years ended December 31

(Millions, except as noted)

   2012  (1)      2013      2014      2015      2016  

Generation (GWh)

              

Contracted (2) :

              

Hydroelectric (3)

     11,372         15,263         14,589         13,954         13,836   

Wind

     1,578         2,104         2,104         2,104         2,104   

Other

     299         398         134         -         -   
     13,249         17,765         16,827         16,058         15,940   

Uncontracted

     140         424         1,098         1,733         1,851   

LTA (2)

     13,389         18,189         17,925         17,791         17,791   

Contracted generation – as at March 31, 2012

              

% of total generation

     99%         98%         93%         91%         90%   

Contracted revenue

   $ 1,148       $ 1,556       $ 1,462       $ 1,399       $ 1,397   

Price per MWh

   $ 87       $ 87       $ 86       $ 87       $ 87   

 

(1)

For the period from April 1, 2012 to December 31, 2012.

(2)

Assets under construction/development are included in the contract profile only if LTA and pricing details are available and the commercial operation date is imminent.

(3)

LTA for 2013 to 2016 includes generation from two facilities in Brazil that are currently under construction with estimated commercial operation dates commencing in 2013.

 

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As at December 31, 2011, we had contracted virtually all of our 2012 generation at an average price of $89 per MWh. The following table sets out our contracts over the next five years for generation from our existing facilities assuming LTA hydrology:

 

           

For the years ended December 31

(Millions, except as noted)

   2012      2013      2014      2015      2016  

Generation (GWh)

              

Contracted (1) :

              

Hydroelectric (3)

     15,096         15,263         14,589         13,954         13,836   

Wind

     1,606         1,681         1,681         1,681         1,681   

Other

     521         398         134         -         -   
     17,223         17,342         16,404         15,635         15,517   

Uncontracted

     252         424         1,053         1,689         1,806   

LTA (2)

     17,475         17,766         17,457         17,324         17,323   

Contracted generation – as at December 31, 2011

              

% of total generation

     99%         98%         94%         90%         90%   

Contracted revenue

   $ 1,536       $ 1,506       $ 1,400       $ 1,338       $ 1,331   

Price per MWh

   $ 89       $ 87       $ 85       $ 86       $ 86   

 

(1)

Assets under construction/development are included in the contract profile only if LTA and pricing details are available and commercial operation date is imminent.

(2)

Increase in generation over 2011 represents the full year contribution of completed projects.

(3)

LTA for 2013 to 2016 includes generation from two facilities in Brazil that are currently under construction with estimated commercial operation dates commencing in 2013.

We have a predictable revenue profile driven by both long-term PPAs with a weighted average remaining duration of 23 years, combined with a well-diversified generation portfolio that reduces variability in our generation volumes. The majority of our long-term PPAs as at March 31, 2012 are with investment-grade rated or creditworthy counterparties such as Brookfield and its subsidiaries (48%), government-owned utilities or power authorities (18%), industrial power users (25%) and distribution companies (9%).

As at December 31, 2011, we have on average approximately 575 GWh of energy annually which is not contracted over the next three years. As at March 31, 2012, the average that is not contacted has increased to 700 GWh All of this power can be sold into the current wholesale or bilateral market; however we intend to maintain flexibility in re-contracting to position ourselves to achieve the most optimal pricing.

Net Asset Value

The following table presents our net asset value on a consolidated basis:

 

As at March 31, 2012

(Millions, except per share amounts)

   Total     Per share  

Property, plant and equipment, at fair value

    

Hydroelectric (1)

   $ 12,615      $ 48.06   

Wind

     2,487        9.47   

Other

     86        0.33   
     15,188        57.86   

Development assets

     209        0.80   

Working capital and other, net

     221        0.84   

Long-term debt and credit facilities

     (5,984     (22.80

Participating non-controlling interests

     (760     (2.90

Preferred equity

     (247     (0.94

Net asset value (2)

   $ 8,627      $ 32.86   

 

(1)  

Includes amounts from equity-accounted investments of $329 million and $57 million of intangible assets.

(2)  

Non-IFRS measure. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

The net asset value of Brookfield Renewable totaled $8.6 billion as at March 31, 2012, which was slightly higher than the value as at December 31, 2011 primarily due to the appreciation of the Canadian dollar and Brazilian real relative to the U.S. dollar.

 

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The assets deployed in our renewable power operations are revalued on an annual basis, with the exception of foreign exchange impacts which are calculated quarterly.

The following table presents our net asset value for 2011 on a consolidated basis and 2010 on a pro forma basis as described in Item 5.A “Operating Results — Basis of Presentation — Pro Forma Basis”.

 

       Total     Per Share  

As at December 31

(Millions, except per share amounts)

   2011     2010     2011     2010  

Property, plant and equipment, at fair value

        

Hydroelectric (1)

   $ 12,463      $ 11,517      $ 47.47      $ 43.87   

Wind

     1,480        564        5.64        2.15   

Other

     86        82        0.33        0.31   
     14,029        12,163        53.44        46.33   

Development assets

     378        492        1.44        1.87   

Working capital and other, net

     380        221        1.45        0.84   

Long-term debt and credit facilities

     (5,519     (4,994     (21.02     (19.01

Participating non-controlling interests

     (629     (206     (2.40     (0.78

Preferred equity

     (241     (252     (0.92     (0.96

Net asset value (2)

   $ 8,398      $ 7,424      $ 31.99      $ 28.29   

 

(1)  

Includes amounts from equity-accounted investments for 2011: $405 million and 2010: $268 million and intangibles for 2011: $57 million and 2010: $87 million.

(2)  

Non-IFRS measure. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

The net asset value of Brookfield Renewable totaled $8.4 billion or $32 per share at December 31, 2011 compared to $7.4 billion in the prior year. Net asset values increased from 2010 by 13% due to lower discount rates and the completion of plants previously under construction, which were partially offset by lower foreign exchange rates in Canada and Brazil.

Net asset value in our property, plant and equipment increased to $14 billion. The increase over the prior year is in part due to the acquisition of a 30 MW hydroelectric asset in Brazil, the completion of two hydroelectric development assets totaling 15 MW in the United States and the completion of a 166 MW wind facility in Eastern Canada, which increased asset values by $440 million. Lower interest rates and the corresponding reduction in discount rates applied to future cash flows increased the value of our plants by $1.3 billion. In addition, approximately 275 MW of hydroelectric and wind facilities in our portfolio have been acquired with institutional partners and are consolidated into our operating results. Our net ownership of these facilities approximates 25% and, accordingly, we have recognized non-controlling interests in relation to these assets and reduced FFO by the proportionate share of cash-earnings attributable to our partners.

Development assets include two wind and two hydroelectric projects currently under construction along with early stage costs associated with a 45 MW hydroelectric facility in Western Canada, which we expect to commence construction in the second quarter of 2012. We record development assets at an estimate of fair value, where certain criteria are met, based on the value expected on completion, less the costs remaining to complete the project.

Borrowings increased during the year consistent with the growth of our asset base as overall debt to capitalization was largely unchanged. As of December 31, 2011, corporate borrowings totaled $1,322 million (2010: $1,152 million) comprised of $1,071 million of corporate debt (2010: $1,096 million) and $251 million drawn on our bank lines (2010: $56 million). We have a three-year $600 million bank facility which we typically use to fund short-term development costs and changes in working capital requirements. In our opinion, current working capital is sufficient for our present requirements.

The valuations of our property, plant and equipment reflect long-term interest rates at the corresponding valuation date. Interest rates declined in all of the markets in which we operated during 2011 due to the general weakness of the global economy and the continued flight of capital into government securities. Assumptions used to determine our weighted-average cost of capital, other than market interest rates were largely unchanged. We value our assets based on discounting cash flows over a 20-year period and key assumptions utilized in 2011 and 2010 were as follows:

 

       United States      Canada      Brazil  
       2011         2010         2011         2010         2011         2010   

Discount rate

     5.6%         7.4%         5.4%         6.4%         9.9%         10.8%   

Terminal capitalization rate

     7.2%         7.9%         6.8%         7.1%         N/A         N/A   

Exit date

     2031         2030         2031         2030         2029         2029   

 

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A 50 bps change in discount rates would have approximately $1 billion impact on our net asset value. See Item 5.A “Operating Results — Property Plant and Equipment” for a further discussion on the revaluation of our property, plant and equipment.

Growth Initiatives

Our Manager has a full-scale, globally-focused M&A capability, which has resulted in the large-scale growth of our business over the last ten years. During 2011, we acquired, with certain institutional partners, late stage wind development assets with long-term PPAs, which are currently being constructed, and we acquired and integrated a fully contracted 30 MW hydroelectric facility in the southeast region of Brazil. Including the acquired development assets, we had four hydroelectric and three wind projects totaling more than 440 MW under construction during 2011. By the end of 2011, we completed construction of two hydroelectric projects and one wind facility on time and budget and all three have been integrated into our operations. We secured a 20-year government backed financing for our New Hampshire wind facility with an annual rate of 3.75%. The remaining projects under development are on schedule and budget and are expected to be completed over the next year. We expect to start construction of a 45 MW hydroelectric facility in Western Canada in the second quarter of this year subject to finalizing construction agreements and receiving final permits, which we expect to receive in the ordinary course. The project has a 40-year PPA with the government of British Columbia and is expected to be accretive to our overall cash flows.

In addition to the projects referenced above, we have a 2,000 MW development pipeline comprised of primarily early stage hydroelectric, wind and pump storage opportunities, which we may build out over the longer term subject to project returns and relative opportunities. The development portfolio was transferred to Brookfield Renewable Group by our Manager, Brookfield, at no up-front cost. To the extent we construct or sell any project in the 2,000 MW pipeline, we are required to reimburse Brookfield for its costs incurred prior to our ownership plus 50% of any profit over our cost of capital.

With certain institutional partners, we also recently acquired new wind generation assets in California, including a 150 MW wind farm adjacent to our Coram wind project in the Tehachapi region. This new facility entered commercial operation in the first quarter and comes with a 24-year PPA with Southern California Edison. We also acquired the remaining 50% stake previously held by our partner in Coram, along with 22 MW of additional operating wind generation capacity.

Liquidity and Capital Resources

We operate with sufficient liquidity, which along with ongoing cash flow from operations enables us to fund growth initiatives, capital expenditures, distributions and to finance the business on an investment grade basis. As part of our financing strategy, we raise the majority of our debt capital in the form of asset-specific, non-recourse borrowings at our subsidiaries.

As at March 31, 2012 subsidiary and corporate borrowings increased $688 million due to additional borrowings related to the assets acquired and commissioned in our United States wind portfolio, additional corporate borrowings which were used to repay higher yielding debt, as well as the appreciation of the Canadian dollar and Brazilian real during the quarter. Our debt to capitalization ratio was 38% as at March 31, 2012, which was substantially unchanged from December 31, 2011.

As at December 31, 2011, corporate borrowings remained unchanged from the previous year; whereas our subsidiary borrowings increased due to additional borrowings for new assets in our Canadian and Brazilian portfolios. Our debt to capitalization ratio was 37% at December 31, 2011, which was substantially unchanged from December 31, 2010.

Capitalization

The following table summarizes our capitalization using book values for 2012 and 2011 and on a pro forma basis for 2010 as described under Item 5.A “Operating Results — Basis of Presentation — Pro forma Basis”.

 

       As at March 31      As at December 31  
(Millions)    2012      2011      2010  

Credit facilities

   $ 28       $ 251       $ 64   

Corporate borrowings

     1,497         1,071         1,096   

Subsidiary borrowings

     4,459         4,197         3,834   

Long-term indebtedness

     5,984         5,519         4,994   

Participating non-controlling interests

     760         629         206   

Preferred equity

     247         241         252   

Net asset value

     8,627         8,398         7,424   

Total capitalization

   $ 15,618       $ 14,787       $ 12,876   

Debt to total capitalization

     38%         37%         39%   

We have completed over $1 billion in financings since the beginning of 2011 to the date of this Form 20-F as a result of financing growth initiatives and refinancing existing debt. In February 2012, we issued C$400 million of 10-year notes, bearing interest at an annual rate of 4.79%. The funds were used to reduce shorter duration borrowings, extending term on our overall maturity profile and reducing our overall cost of capital.

 

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Available Liquidity

Total liquidity is comprised of available cash and the unutilized portion of committed bank lines. At March 31, 2012, we have over $945 million of available liquidity, which provides us with significant cushion to fund ongoing growth and capital requirements and to protect against short term fluctuations in generation. During the three months ended March 31, 2012, we expanded our revolving credit facilities from $600 million to $900 million and extended the maturity for our new facilities to October 2016.

 

       As at March 31      As at December 31  
(Millions)    2012      2011      2010  

Cash and equivalents

   $ 249       $ 267       $ 188   

Available portion of bank facility

     696         190         102   
     $ 945       $ 457       $ 290   

Corporate and Subsidiary Borrowings

The following table summarizes our debt maturities over the next three years:

 

As at March 31, 2012

(Millions)

   2012 (1)      2013      2014  

Corporate borrowings

   $ -       $ -       $ -   

Subsidiary borrowings – consolidated

     745         516         331   

Subsidiary borrowings – total (2)

     863         517         332   

 

(1)  

Represents the period from April 1, 2012 to December 31, 2012.

(2)  

Includes borrowings from equity-accounted investments.

We have no corporate borrowings maturing before 2016.

In May 2012, we refinanced indebtedness associated with our hydroelectric pumped storage facility in New England, of which we own 50%, through a $125 million loan for a term of five years at a rate of LIBOR + 2.25%.

In March 2012, we also increased the size of our revolving credit facilities from $600 million to $900 million, while extending maturities to October 2016 for the new facilities. In May 2012, Brookfield Renewable entered into an additional credit agreement for an additional $90 million with a sixth bank on similar terms and conditions as the other credit agreements and with an expiry of October 31, 2016, subject to additional one-year extensions.

As at March 31, 2012, the balance of subsidiary debt maturing over the next three years decreased as we issued C$400 million of 10-year notes, bearing interest at an annual rate of 4.79% to reduce shorter duration subsidiary borrowings. Subsidiary borrowings maturing in 2012 include $253 million on our Eastern Canadian wind assets, and $200 million attributed to our hydroelectric facilities in New York. We expect to refinance all of the upcoming maturities in the normal course.

 

As at December 31, 2011

(Millions)

   2012      2013      2014  

Corporate borrowings

     -         -         -   

Subsidiary borrowings – consolidated

   $ 650       $ 741       $ 285   

Subsidiary borrowings – total (1)

   $ 769       $ 742       $ 286   

 

(1)  

Includes borrowings from equity-accounted investments.

 

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The overall maturity profile and average interest rates associated with corporate and subsidiary borrowings are as follows:

 

As at March 31, 2012    Average term (years)      Average interest rate (%)  

Corporate borrowings

     9.5         5.3   

 

Subsidiary borrowings

  

 

 

 

10.3

 

  

  

 

 

 

6.7

 

  

 

         Average term (years)        Average interest rate (%)  

As at December 31

       2011           2010           2011           2010   

Corporate borrowings

       9.6           10.6           5.5           5.5   

 

Subsidiary borrowings

    

 

 

 

10.0

 

  

    

 

 

 

11.1

 

  

    

 

 

 

7.5

 

  

    

 

 

 

7.7

 

  

Overview of Performance on a Consolidated Basis

Generation, Adjusted EBITDA and FFO

The following table presents Adjusted EBITDA and FFO for the three months ended March 31, 2012 and 2011 on a consolidated basis as described in Item 5.A “Operating Results — Performance Measurement.”

 

For the three months ended March 31

(Millions, except as noted)

   2012      2011  

Generation (GWh) (1)  

     4,817         3,924   

Revenues

   $ 426       $ 293   

Other income

     5         4   

Share of cash earnings from equity-accounted investments

     4         6   

Direct operating costs

     (117)         (88)   

Adjusted EBITDA (2)

     318         215   

Interest expense – borrowings

     (110)         (97)   

Management service costs

     (7)         -   

Current income taxes

     (6)         (4)   

Cash portion of non-controlling interests

     (20)         (11)   

Funds from operations (FFO) (2)

   $ 175       $ 103   

 

(1)  

Variations in generation are described under Item 5.A “Operating Results — Generation. ”

(2)  

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Consolidated Results.”

Brookfield Renewable Group was created from the strategic combination of the Fund and the Division in the fourth quarter of 2011.

Brookfield Renewable Group’s consolidated statements of financial position, results of operations and cash flows are presented as if these arrangements had been in place from the time that the operations were originally acquired by Brookfield. For periods prior to November 28, 2011, the financial information for Brookfield Renewable Group represents the combined financial information for the Division. Transactions entered into as part of the Combination are accounted for effective November 28, 2011.

Revenues totaled $426 million or $89 per MWh for the three months ended March 31, 2012, representing a year-over-year increase of $133 million. Approximately $42 million of the increase is due to improved generation levels at existing facilities. Approximately $37 million of the increase is attributable to increased generation from new hydroelectric generation facilities in Brazil and Northeast United States and from an Ontario wind facility integrated in the fourth quarter of 2011 as well as the acquisition and commissioning of nearly 375 MW in four wind facilities in California and the Northeast United States. The balance of $54 million is due to inflation based escalation included in our power purchase agreements and the contribution from the amendment and execution of PPAs in connection with the Combination (“ the Amended and Executed PPAs ”).

Adjusted EBITDA for the three months ended March 31, 2012 increased by $103 million year-over-year. Both revenues and direct operating costs were in line with expectations ensuring stable operating margins.

Management service costs reflect a base fee of $20 million annually plus 1.25% on growth in our total capitalization.

 

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FFO increased $72 million year-over-year to $175 million reflecting the contribution of higher generation due to greater hydrology and through the growth in our portfolio.

The following table presents Adjusted EBITDA and FFO for the years ended 2011, 2010 and 2009 on a consolidated basis as described in Item 5.A “Operating Results — Performance Measurement.”

 

 

For the years ended December 31

(Millions, except as noted)

   2011      2010      2009  

Generation (GWh) (1)

     15,877         14,480         15,833   

Revenues

   $ 1,169       $ 1,045       $ 984   

Other income

     19         12         9   

Share of cash earnings from equity-accounted investments and long-term investments

     23         22         29   

Direct operating costs

     (407)         (328)         (279)   

Adjusted EBITDA (2)

     804         751         743   

Interest expense - borrowings

     (411)         (404)         (348)   

Management service costs

     (1)         -         -   

Current income taxes

     (22)         (32)         (23)   

Cash portion of non-controlling interests

     (52)         (46)         (48)   

Funds from operations (FFO) (2)

   $ 318       $ 269       $ 324   

 

(1)  

Variations in generation are described under Item 5.A “Operating Results — Generation.”

(2)  

Non- IFRS measures. See Item 5.A “Operating Results — Reconciliation of Consolidated Results.”

Overall, revenues were $1,169 million or 12% higher than the prior year. Adjusted EBITDA for the year ended December 31, 2011 was $804 million or an increase of 7% from $751 million in the prior year. FFO for the year ended December 31, 2011 was $318 million or an increase year-over-year by $49 million or 18%.

For the year ended December 31, 2010, revenues were $1,045 million or 6% higher than the 2009. Adjusted EBITDA for the year ended December 31, 2010 was $751 million essentially unchanged from prior year. FFO for the year ended December 31, 2010 was $269 million or a decrease year-over-year by $55 million or 17%.

A discussion of our consolidated results is provided in Item 5.A “Operating Results — Review of Operations on a Consolidated Basis.”

Reconciliation of Consolidated Results

The following tables provide a reconciliation of FFO to net income on a consolidated basis for the following periods.

 

 

For the three months ended March 31

(Millions, except as noted)

   2012      2011  

Funds from operations (FFO) – consolidated basis

   $ 175       $ 103   

Cash portion of non-controlling interests included in FFO

     20         11   

Other items:

     

Depreciation and amortization

     (126)         (110)   

Unrealized financial instrument (loss) gain

     (9)         18   

Fund unit liability revaluation

     -         (116)   

Share of non-cash loss from equity-accounted investments

     (3)         (8)   

Deferred income tax expense

     (13)         -   

Other

     (13)         9   

Net income (loss)

   $ 31       $ (93)   

Basic and diluted earnings (loss) per share

   $ 0.11       $ (0.34)   

 

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We measure our results based on Adjusted EBITDA and FFO to provide readers with an assessment of the cash flow generated by our assets and the residual cash flow retained to fund LP Unitholder distributions and growth initiatives. We recognize that net income is an important measure of profitability. However, the presentation of net income on an IFRS basis for our business often leads to the recognition of a loss even though the underlying cash flow generated by the assets is supported by high margins and stable, long-term contracts. This occurs largely for two reasons. First, under IFRS, we recognize a significantly higher level of depreciation than we are required to reinvest in the business as sustaining capital expenditures. Second, we are often required to recognize changes in the fair value of energy contracts, which are serviced by our assets and interests held by others in assets we manage through income, where the corresponding change in the asset values are recognized through equity. Therefore, when factors which are positive to the long-term prospects of our business occur, such as rising energy prices or increased asset values, the outcome is the recognition of losses related to the revaluation of fixed price contracts or our partners’ share of assets.

The net income for the three months ended March 31, 2012 was $31 million or $0.11 per share (2011: $93 million loss or $(0.34) per share) and reflects the normal course depreciation and amortization expense of $126 million (2011: $110 million). During the quarter, an analysis was performed of the useful lives of certain components of property, plant and equipment and we have determined that changes in their estimated service lives will more accurately reflect the period over which they provide economic benefits. Brookfield Renewable applied this change in accounting estimate on a prospective basis beginning January 1, 2012. Depreciation expense for the three months ended March 31, 2012 was $20 million lower as a result of this change in estimate.

2011 results also include a revaluation amount on the Fund unit liability. In accordance with IFRS, Fund units held by the public that have a feature that allows the holder to redeem the units for cash, are presented as a liability and recorded at fair value, with the change in fair value recorded in net income. In 2011, the Fund unit price appreciated significantly resulting in a revaluation amount of $116 million. As a result of the Combination, the Fund units were exchanged for partnership units and the Fund was dissolved.

 

 

For the years ended December 31

(Millions, except as noted)

   2011      2010      2009  

Funds from operations (FFO) – consolidated basis

   $ 318       $ 269       $ 324   

Non-controlling interests included in FFO

     52         46         48   

Other items:

        

Depreciation and amortization

     (468)         (446)         (321)   

Unrealized financial instrument (losses) gains

     (20)         584         (791)   

Fund unit liability revaluation

     (376)         (159)         (244)   

Share of non-cash loss in equity-accounted investments

     (13)         (7)         (13)   

Deferred income tax recovery

     50         3         335   

Other

     6         4         82   

Net (loss) income

   $ (451)       $ 294       $ (580)   

Basic and diluted earnings (loss) per share

   $ (1.80)       $ 0.98       $ (2.32)   

The net loss for the year ended December 31, 2011 was $451 million or $1.80 per unit. The net loss in 2011 largely reflects the impact of depreciation and items revalued on a mark-to-market basis as described above.

The net income for the year ended December 31, 2010 was $294 million or $0.98 per unit. The net income in 2010 largely reflects the impact of items revalued on a mark-to-market basis offset by higher depreciation expenses.

The net loss for the year ended December 31, 2009 was $580 million or $2.32 per unit. The net loss in 2009 largely reflects the impact of depreciation, items revalued on a mark-to-market basis offset by deferred income tax recovery.

Prior to the formation of Brookfield Renewable Group, we held most of our Canadian assets in the Fund where non-controlling shareholders’ interests were treated as a liability and valued at the share price. The stock market performance of the Fund during 2011, 2010 and 2009 increased year over year resulting in the recognition of a non-cash accounting loss. We view the strengthening performance of our LP Units as a benefit to all LP Unitholders, in spite of the recognition of a loss.

Prior to the formation of Brookfield Renewable Group, certain contracts for energy sales were treated as derivatives for accounting purposes. In 2010, energy prices declined resulting in a relative gain on the fixed price related to those energy contracts. Whereas in 2009, energy prices increased resulting in a relative loss on the fixed price related to those energy contracts. These contracts did provide protection against changing prices, however the gain or loss reflected in our net income reflects the value over the life of the contract and not the actual cash flow benefit realized in the year. Accordingly, we do not include revaluation gains of this nature in our FFO.

 

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                                           Variance of Results  
   
For the three months ended March 31    Actual Generation      LTA Generation      Actual vs. LTA     

Actual vs.

Prior year

 
   
Generation (GWh)    2012      2011      2012      2011      2012      2011      2012  

Hydroelectric generation

                    

United States

     1,958         1,698         1,883         1,816         75         (118)         260   

Canada

     1,308         1,026         1,158         1,162         150         (136)         282   

Brazil ( 1)

     867         808         875         808         (8)         -         59   
       4,133         3,532         3,916         3,786         217         (254)         601   
   

Wind energy

                    

Canada

     368         163         324         175         44         (12)         205   

United States

     90         -         100         -         (10)         -         90   
       458         163         424         175         34         (12)         295   
   

Other

     226         229         217         101         9         128         (3)   
               

Total generation ( 2)

     4,817         3,924         4,557         4,062         260         (138)         893   
   

% variance

                                         6%         (3)%         23%   

 

(1)

Assured generation levels.

(2)  

Actual and LTA generation includes 100% of generation from equity-accounted investments.

Actual generation and LTA generation include facilities acquired or commissioned during the respective period ends. Actual generation and LTA generation was calculated from the acquisition date or the commercial operation date, whichever is later.

We compare actual generation levels against the expected LTA to highlight the impact of one of the few but important factors that affect the variability of our business results. In the short-term, we recognize that hydrology will vary from one period to the next, over time however, we expect our facilities will continue to produce in line with their LTA, which have proven to be reliable indicators of performance. Accordingly, we present our generation and the corresponding Adjusted EBITDA and FFO results on both an actual generation and a LTA basis. Reconciliations of each of Adjusted EBITDA and FFO to net income on a consolidated and pro forma basis are presented in Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

Generation levels during the three months ended March 31, 2012 increased 23% as compared to the same period during the prior year reflecting improved hydrological conditions including strong inflows from the early arrival of spring in North America. Seasonally warmer temperatures in Eastern Canada and the U.S. resulted in higher inflows and improved generation. Generation was also positively impacted by the contribution of assets that were acquired and commissioned during the last twelve months. Energy sales from our hydroelectric assets in Brazil were in line with plan and consistent with the framework that exists to levelize generation across power producers in that market. Generation from our wind portfolio during the three months ended March 31, 2012 increased by 295 GWh from the same period during the prior year, as a result of the contribution from new assets in Canada and the United States as well as improved wind conditions.

 

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                         Variance of Results  
   
For the years ended December 31    Actual Generation      LTA Generation      Actual vs. LTA     

Actual vs.

Prior year

 
   
Generation (GWh)    2011      2010      2011      2010      2011      2010      2011  

Hydroelectric generation

                        

United States

     7,150         6,651         6,811         6,727         339         (76)         499   

Canada

     4,056         3,557         5,061         5,076         (1,005)         (1,519)         499   

Brazil (1)

     3,307         3,206         3,307         3,206         -         -         101   
       14,513         13,414         15,179         15,009         (666)         (1,595)         1,099   

Wind energy (3)

     662         499         712         506         (50)         (7)         163   

Other

     702         567         406         372         296         195         135   

Total generation (2)

     15,877         14,480         16,297         15,887         (420)         (1,407)         1,397   

% variance

                                         (3)%         (9)%         10%   

 

(1)  

Assured generation levels.

(2)  

Actual and LTA generation includes 100% of generation from equity-accounted investments.

(3)

Wind energy relates to Canadian wind assets.

Generation for the year ended December 31, 2011 was 15,877 GWh or 10% higher than in the prior year, and 3% lower than the LTA of 16,297 GWh. The improvement over the prior year reflects stronger hydrological conditions in Eastern Canada and New York. Although hydrology did return to more normalized levels, it was modestly below the LTAs due to mild conditions and below-average inflows in Ontario and Quebec.

Generation for the year ended December 31, 2010 was 14,480 GWh or 9% lower than in 2009 and 9% lower than the LTA of 15,887 GWh. The decline from 2009 reflects drier conditions in the Northeastern United States and Eastern Canada.

Generation levels in 2010 declined from 2009 due to drier conditions in the spring and summer months, particularly in the Northeastern United States and Eastern Canada. Offsetting these declines were increases in generation from our Brazilian assets acquired in early 2010, which contributed 305 GWh of generation. Overall, generation from our hydro portfolio in 2010 was 1,496 GWh lower than 2009 levels and 1,595 GWh below LTA during the year. Wind production was slightly below LTA during 2010 but ahead of the prior year by 66 GWh as we had the full year benefit of wind facilities commissioned in early 2009 and late 2010.

 

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The following tables provide additional generation and operating information by regional operating centers.

Hydroelectric Generation

The following tables present Adjusted EBITDA and FFO for the three months ended March 31, 2012 and 2011 and the years ended 2011 and 2010 on a consolidated basis as described in Item 5.A “Operating Results — Performance Measurement.”

 

For the three months ended March 31

(Millions, except as noted)

   2012  
       United
States
     Canada      Brazil      Total  

Generation (GWh) – LTA (1)

     1,883         1,158         875         3,916   

Generation (GWh) – actual (1)

     1,958         1,308         867         4,133   

Revenues

   $ 164       $ 100       $ 91       $ 355   

Other income

     1         -         4         5   

Share of cash earnings from equity-accounted investments

     3         -         1         4   

Direct operating costs

     (38)         (17)         (28)         (83)   

Adjusted EBITDA ( 2)

     130         83         68         281   

Interest expense – borrowings

     (34)         (17)         (31)         (82)   

Current income taxes

     (2)         -         (4)         (6)   

Cash portion of non-controlling interests

     (11)         -         (3)         (14)   

Funds from operations (FFO) (2)

   $ 83       $ 66       $ 30       $ 179   

 

For the three months ended March 31

(Millions, except as noted)

   2011  
      

 

United

States

  

  

     Canada         Brazil         Total   

Generation (GWh) – LTA (1)

     1,816         1,162         808         3,786   

Generation (GWh) – actual (1)

     1,698         1,026         808         3,532   

Revenues

   $ 123       $ 54       $ 79       $ 256   

Other income

     -         -         4         4   

Share of cash earnings from equity-accounted investments

     4         -         2         6   

Direct operating costs

     (32)         (14)         (24)         (70)   

Adjusted EBITDA ( 2)

     95         40         61         196   

Interest expense - borrowings

     (37)         (17)         (21)         (75)   

Current income taxes

     (1)         -         (3)         (4)   

Cash portion of non-controlling interests

     (4)         -         (4)         (8)   

Funds from operations (FFO) ( 2)

   $ 53       $ 23       $ 33       $ 109   

 

(1)  

Actual and long-term average generation includes 100% generation from equity-accounted investments.

(2)

Non-IFRS measure. See Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

 

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For the years ended December 31

(Millions, except as noted)

   2011  
       United
States
     Canada      Brazil      Total      Pro
forma
 

Generation (GWh) – LTA (1)

     6,811         5,061         3,307         15,179         15,179   

Generation (GWh) – actual (1)

     7,150         4,056         3,307         14,513         14,513   

Revenues

   $ 467       $ 237       $ 335       $ 1,039       $ 1,179   

Other income

     -         -         19         19         19   

Share of cash earnings from equity-accounted and long-term investments

     13         4         6         23         23   

Direct operating costs

     (144)         (62)         (91)         (297)         (297)   

Adjusted EBITDA (2)

     336         179         269         784         924   

Interest expense – borrowings

     (149)         (68)         (94)         (311)         (311)   

Current income taxes

     2         5         (15)         (8)         (8)   

Cash portion of non-controlling interests

     (26)         -         (13)         (39)         (39)   

Funds from operations (FFO) (2)

   $ 163       $ 116       $ 147       $ 426       $ 566   

Average revenue per MWh (3)

   $ 71       $ 70       $ 107       $ 79       $ 90   

Average direct operating costs per MWh (3)

   $ 22       $ 18       $ 29       $ 23       $ 23   
       2010   
      
 
United
States
  
  
     Canada         Brazil         Total        
 
Pro
forma
  
  

Generation (GWh) – LTA (1)

     6,727         5,076         3,206         15,009         15,009   

Generation (GWh) – actual (1)

     6,651         3,557         3,206         13,414         13,414   

Revenues

   $ 459       $ 205       $ 271       $ 935       $ 1,055   

Other income

     -         -         12         12         12   

Share of cash earnings from equity-accounted and long-term investments

     15         4         3         22         22   

Direct operating costs

     (142)         (49)         (85)         (276)         (276)   

Adjusted EBITDA (2)

     332         160         201         693         813   

Interest expense - borrowings

     (152)         (64)         (95)         (311)         (311)   

Current income taxes

     (16)         -         (16)         (32)         (32)   

Cash portion of non-controlling interests

     (31)         -         (4)         (35)         (35)   

Funds from operations (FFO) (2)

   $ 133       $ 96       $ 86       $ 315       $ 435   

Average revenue per MWh (3)

   $ 75       $ 71       $ 89       $ 77       $ 88   

Average direct operating costs per MWh (3)

   $ 23       $ 17       $ 28       $ 23       $ 23   

 

(1)  

Actual and LTA generation includes 100% generation from equity-accounted investments.

(2)  

Non-IFRS measure. See Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

(3)  

Average revenue and direct operating costs per MWh excludes generation from equity-accounted investments.

 

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For the years ended December 31

(Millions, except as noted)

   2009  
       United
States
     Canada      Brazil      Total  

Generation (GWh) – LTA (1)

     6,676         5,005         2,874         14,555   

Generation(GWh) – actual (1)

     7,313         4,723         2,874         14,910   

Revenues

   $ 453       $ 221       $ 215       $ 889   

Other income

     -         -         9         9   

Share of cash earnings from equity-accounted and long-term investments

     18         6         5         29   

Direct operating costs

     (111)         (39)         (66)         (216)   

Adjusted EBITDA (2)

     360         188         163         711   

Interest expense – borrowings

     (165)         (58)         (53)         (276)   

Current income taxes

     (10)         (1)         (12)         (23)   

Cash portion of non-controlling interests

     (43)         -         (5)         (48)   

Funds from operations (FFO) (2)

   $ 142       $ 129       $ 93       $ 364   

 

(1)  

Actual and LTA generation includes 100% generation from equity-accounted investments.

(2)  

See Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

United States

For the three months ended March 31, 2012, generation from our U.S. renewable asset portfolio was 1,958 GWh compared to LTA of 1,883 GWh and compared to prior year generation of 1,698 GWh. With an extremely wet spring and above average inflows on the Mississippi River and higher levels of precipitation in the Eastern United States, generation levels were well above LTA and prior year levels for our facilities in those regions.

Revenues for the three months ended March 31, 2012 were $164 million, representing a year-over-year increase of $41 million. Approximately $21 million was due to improved generation levels and approximately $20 million was due to the Amended and Executed PPAs. FFO was $83 million, $30 million higher than the same period in the prior year, reflecting the contribution of higher generation through improved hydrology and the Amended and Executed PPAs.

Generation from our U.S. renewable asset portfolio for the year ended December 31, 2011 was 7,150 GWh, meaningfully higher than LTA by 339 GWh or 5%. Results were also 8% ahead of the prior year. Essentially, all regions produced inflows and generation levels in 2011 that were higher than the LTA. With an extremely wet spring and record setting floods on the Mississippi River, generation levels were well above LTA in the second quarter and the third quarter for our Louisiana facility. Regions in the Northeastern United States had record levels of rainfall in the second quarter, very dry conditions in July and the wettest August in history as Hurricane Irene brought twice the level of precipitation compared to the LTA. The Northeastern region represents 60% of our U.S. renewable asset portfolio, and thus served to impact the overall results.

During 2011, we acquired and integrated into the business our first hydroelectric generating facility in California, which contributed 90 GWh of generation.

Consequently, revenues for the year ended December 31, 2011 were $467 million or 2% ahead of the prior year. Direct operating costs were in line with the prior year and FFO was $163 million, $30 million higher than the prior year due to the decreased taxes, increased revenues and decreased interest expense due to lower interest rates. Average revenues were $71 per MWh, which was slightly lower than last year.

Generation for the year ended December 31, 2010 was 6,651 GWh, slightly below LTA by 76 GWh or 1%. Results were 9% below 2009, as the Northeastern United States had record-setting dry conditions in the late spring and summer months of 2010.

Revenues for the year ended December 31, 2010 were $459 million, were 1% ahead of 2009. Direct operating costs were $142 million or $31 million higher than the prior year and FFO was $133 million or $9 million lower than 2009.

 

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Canada

For the three months ended March 31, 2012, generation from our Canadian renewable asset portfolio was 1,308 GWh or 13% above LTA of 1,158 GWh and ahead of the prior year generation of 1,026 GWh. These results reflect strong inflows from the early arrival of spring conditions throughout North America and from the Amended and Executed PPAs.

Revenues for the three months ended March 31, 2012 were $100 million, representing a year-over-year increase of $46 million. Approximately $29 million is due to the contribution from the Amended and Executed PPAs and approximately $17 million is due to improved generation levels.

For the year ended December 31, 2011, generation from our Canadian renewable asset portfolio was 4,056 GWh or 20% below LTA of 5,061 GWh and ahead of the prior year generation of 3,557 GWh. Mild weather conditions and below-average inflows persisted in Ontario throughout most of the year. At December 31, 2011, these regions experienced more seasonal levels of precipitation and with it a return to more normal hydrology conditions.

Generation levels in Quebec were slightly below plan for 2011 and our Western Canadian assets generated at above LTA levels for the year. Consequently, revenues for the year ended December 31, 2011 were $237 million, or 15% ahead of the prior year.

Average revenues were $70 per MWh and in line with the prior year.

Generation for the year ended December 31, 2010 was 3,557 GWh, 30% lower than LTA of 5,076 GWh and 25% below 2009 generation of 4,723 GWh. This was due to lower than average precipitation levels in Eastern Canada for the majority of the year.

Revenues for the year ended December 31, 2010, were $205 million or 7% lower than 2009, and reflects the decrease in generation offset by the benefit of having secured a long-term PPA for Ontario generation and the favorable exchange rates.

Brazil

For the three months ended March 31, 2012, generation from our Brazilian renewable asset portfolio for the current quarter was 867 GWh which was consistent with LTA, and 59 GWh higher than the prior comparative period. Results in the current year include the addition of a new hydroelectric facility which was acquired and integrated during the third quarter of 2011 which generated 65 GWh of electricity.

Our risk of a generation shortfall in Brazil continues to be minimized by participation in a hydrological balancing pool administered by the government of Brazil. This program mitigates hydrology risk by assuring that all participants receive, at any particular point in time, a reference amount of electricity (assured energy), irrespective of the actual volume of energy generated. The program reallocates energy, transferring surplus energy from those who generated in excess of their assured energy to those who generated less than their assured energy, up to the total generation within the pool.

Revenues for the three months ended March 31, 2012 were $91 million, an increase over the same period of the prior year by $12 million or 15%. The increase is primarily attributable to generation from a new facility integrated during the third quarter of 2011.

Generation from our Brazilian renewable asset portfolio for the year ended December 31, 2011 was 3,307 GWh, and in line with LTA. Results for 2011 include the addition of a new hydroelectric facility, which was acquired and integrated during the third quarter and generated 116 GWh of electricity.

Generation for the year ended December 31, 2010 was 3,206 GWh, but was consistent with LTA and 332 GWh higher than 2009. In early 2010, we completed the construction of a 25 MW hydroelectric power plant in Brazil, capable of generating 146 GWh of electricity annually.

Revenues for the year ended December 31, 2011 were $335 million, an increase over the prior year by $64 million primarily due to inflation-based escalation with our power sales agreements and increased generation from the new facility. FFO and results on a per MWh basis were in line with expectations.

Revenues for the year ended December 31, 2010 were $271 million, an increase over the prior year by $56 million primarily due to increased generation from the newly constructed hydroelectric facility and favorable exchange rates. Adjusted EBITDA increased from 2009 by $38 million due to the increase in revenues offset by higher operating costs but FFO was relatively flat due to interest expense associated with the new hydroelectric facilities acquired in early 2010.

 

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Net Asset Value for Hydroelectric Facilities

 

As at March 31, 2012

(Millions)

   United
States
     Canada      Brazil      Total  

Hydroelectric power assets

   $ 4,551       $ 4,969       $ 2,765       $ 12,285   

Development assets

     28         22         141         191   

Equity-accounted investments

     168         71         90         329   
     4,747         5,062         2,996         12,805   

Working capital and other, net

     187         14         142         343   

Subsidiary borrowings

     (1,848)         (950)         (389)         (3,187)   

Participating non-controlling interests

     (256)         -         (217)         (473)   

Net asset value ( 1)

   $ 2,830       $ 4,126       $ 2,532       $ 9,488   

 

(1)  

Non- IFRS measure. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

The net asset value of our hydroelectric facilities was approximately $9.5 billion as at March 31, 2012, an increase of $448 million from December 31, 2011.

 

As at December 31

(Millions)

   United
States
     Canada      Brazil      Total
2011
    

Total

2010

 

Hydroelectric power assets

   $ 4,549       $ 4,908       $ 2,681       $ 12,138       $ 11,416   

Development assets

     26         -         121         147         145   

Equity-accounted and long-term investments

     169         70         86         325         258   
     4,744         4,978         2,888         12,610         11,819   

Working capital and other, net

     169         (50)         181         300         69   

Subsidiary borrowings

     (1,838)         (928)         (645)         (3,411)         (3,472)   

Participating non-controlling interests

     (250)         -         (209)         (459)         (206)   
     2,825         4,000         2,215         9,040         8,210   

Values not recognized under IFRS

     -         -         -         -         467   

Net asset value (1)

   $ 2,825       $ 4,000       $ 2,215       $ 9,040       $ 8,677   

 

(1)  

Non-IFRS measure. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

The net asset value of our hydroelectric facilities was $9.0 billion in 2011, an increase of $363 million from $8.7 billion in 2010. This increase is due primarily to the $1,171 million increase in fair value measurement of our hydroelectric power assets, partially offset by depreciation expense of $423 million and losses on foreign exchange of $381 million. In addition, approximately 75 MW of hydroelectric facilities in our portfolio have been acquired with certain institutional partners and are consolidated into our operating results. Our net ownership of these facilities approximates 25% and, accordingly, we have recognized an increase in non-controlling interests in relation to these assets and reduced FFO by the proportionate share of cash-earnings attributable to our partners.

Development assets include two wind and two hydroelectric projects currently under construction along with early stage costs associated with a 45 MW hydroelectric facility in Western Canada on which we expect to commence construction in the second quarter of 2012. We record development assets at an estimate of fair value based on the value expected on completion, less the costs remaining to complete the project. In 2010, development assets were carried at cost with the fair value component included as a value not recognized under IFRS.

 

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The equity-accounted investments increased with the completion of two hydroelectric development assets totaling 15 MW in the United States.

Wind Energy

The following tables present Adjusted EBITDA and FFO for the three months ended March 31, 2012 and 2011 and the years ended 2011 and 2010 on a consolidated basis as described in Item 5.A “Operating Results — Performance Measurement.”

 

 

For the three months ended March 31

(Millions, except as noted)

   United
States
     Canada      2012      2011  

Generation (GWh) – LTA (1)

     100         324         424         175   

Generation (GWh) – actual (1)

     90         368         458         163   

Revenues

   $ 7       $ 44       $ 51       $ 16   

Direct operating costs

     (2)         (5)         (7)         (2)   

Adjusted EBITDA ( 2)

     5         39         44         14   

Interest expense – borrowings

     -         (10)         (10)         (6)   

Cash portion of non-controlling interests

     (3)         -         (3)         -   

Funds from operations (FFO) (2)

   $ 2       $ 29       $ 31       $ 8   

 

(1)  

Actual and LTA generation includes 100% of the generation from equity-accounted investments.

(2)  

Non-IFRS measures. See Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Pro Forma Results and Balance Sheet.”

Revenues for the three months ended March 31, 2012 were $51 million, representing a year-over-year increase of $35 million. Approximately $30 million of the increase is attributable to generation from an Ontario wind facility integrated in the fourth quarter of 2011, as well as the commissioning of nearly 375 MW in four wind facilities in California and the Northeast United States, and $5 million was due to increased generation at our existing Canadian facilities.

Generation was 458 GWh and above LTA by 8% or 34 GWh due to strong wind conditions in the three months ended March 31, 2012.

 

 

For the years ended December 31

(Millions, except for per MWh)

   2011  ( 4 )      2010  ( 4 )      2009  

Generation (GWh) – LTA (1)

     712         506         506   

Generation (GWh) – actual (1)

     662         499         433   

Revenues

   $ 70       $ 52       $ 40   

Direct operating costs

     (12)         (7)         (5)   

Adjusted EBITDA (2)

     58         45         35   

Interest expense - borrowings

     (25)         (17)         (15)   

Funds from operations (FFO) (2)

     33         28         20   

Average revenue per MWh ( 3 )

   $         106       $         104       $           92   

Average direct operating costs per MWh ( 3 )

   $ 18       $ 14       $ 12   

 

(1)  

Actual and LTA generation includes 100% of generation from equity-accounted investments.

(2)  

Non-IFRS measure. See Item 5.A “Operating and Financial Review and Prospects —Reconciliation of Consolidated Results” and Item 5.A “Operating and Financial Review and Prospects Reconciliation of Pro Forma Results and Balance Sheet.”

(3)  

Average revenue and direct operating costs per MWh excludes generation from equity-accounted investments.

(4)  

There is no difference for Wind between consolidated and pro forma results.

Generation from our renewable wind portfolio in Canada was 662 GWh, or lower than LTA by 7% or 50 GWh, due to below average wind conditions for the year. Generation was ahead of the prior year by 33% due to a full year of generation from an Ontario wind facility, which was commissioned in September 2010. The successful commercial operation and integration of another Ontario wind facility in the fourth quarter of 2011 also contributed to the increase in generation.

 

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Revenues for the year ended December 31, 2011 were $70 million or 35% higher than the previous year primarily due to the increased generation from new asset commercialization.

Revenues for the year ended December 31, 2010 were $52 million or 30% higher than 2009 primarily due to a full year generation from a wind facility located in Eastern Canada that was acquired in the first quarter of 2009 and the increased generation from the new facility commissioned in late 2010.

Net Asset Value for Wind Facilities

 

As at March 31, 2012

(Millions)

   United
States
     Canada      Total  

Wind power assets

   $ 1,051       $ 1,437       $ 2,488   

Development assets

     -         18         18   
     1,051         1,455         2,506   

Working capital and other, net

     (36)         16         (20)   

Subsidiary borrowings

     (614)         (659)         (1,273)   

Participating non-controlling interests

     (280)         (7)         (287)   

Net asset value ( 1)

   $ 121       $ 805       $ 926   

 

(1)  

Non-IFRS measure. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

The net asset value of our wind facilities was $926 million as at March 31, 2012 as compared to $730 million as at December 31, 2011. This increase is primarily due to the acquisition of new wind facilities in California and the commercialization of a wind facility in the Northeast United States.

Consequently, subsidiary borrowings also increased by $488 million as compared to December 31, 2011 as a result of $436 million of debt assumed in the acquisition of the California wind generation assets. Non-controlling interests also increased in aggregate due to the acquisition of wind development assets with certain institutional investors.

 

As at December 31

(Millions)

   2011      2010  

Wind power assets

   $   1,400       $     564   

Development assets

     231         53   

Equity – accounted investments

     80         11   
     1,711         628   

Working capital and other, net

     (26)         (16)   

Subsidiary borrowings

     (785)         (362)   

Participating non-controlling interests

     (170)         -   
     730         250   

Values not recognized under IFRS

     -         133   

Net asset value (1)

   $ 730       $ 383   

 

(1)  

Non-IFRS measure. Refer to “Cautionary Statement Regarding the Use of Non-IFRS Measures.”

The net asset value of our wind facilities was $730 million in 2011 and $383 million in 2010, an increase of $347 million. This increase is due primarily to the completion of a 166 MW wind facility in Eastern Canada, which increased values by approximately $400 million. This increase was offset by depreciation expense and foreign exchange losses. In addition, approximately 200 MW of wind assets in our portfolio have been acquired with certain institutional partners and are consolidated into our operating results. Our net ownership of these facilities approximates 25% and, accordingly, we have recognized non-controlling interests in relation to these assets and reduced FFO by the proportionate share of cash-earnings attributable to our partners.

 

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Consequently, subsidiary borrowings were increased to finance these new facilities. Non-controlling interests increased in aggregate due to the acquisition of wind development assets in partnership with investors in the Brookfield Americas Infrastructure Fund.

At December 31, 2011, development assets were revalued to fair value based on the value expected on completion, less the costs remaining to complete the project. In the prior year, development assets were carried at cost with the fair value component included as values not recognized under IFRS.

Corporate Capitalization

The long-life nature of our assets allows us to finance the majority of our facilities on an asset-specific, non-recourse basis. In addition, we utilize a modest amount of corporate debt to provide additional leverage to LP Unitholders while maintaining strong access to the capital markets.

 

       As at March 31      As at December 31  
(Millions)    2012      2011      2010 (1)  

Credit facilities

   $ 28       $ 251       $ 64   

Corporate borrowings

     1,497         1,071         1,096   

Subsidiary borrowings

     4,459         4,197         3,834   

Long-term indebtedness

     5,984         5,519         4,994   

Participating non-controlling interests

     760         629         206   

Preferred equity

     247         241         252   

Net asset value

     8,627         8,398         7,424   

Total capitalization

   $         15,618       $         14,787       $         12,876   

Debt to total capitalization

     38%         37%         39%   

 

(1)  

Information for 2010 was prepared on a pro forma basis.

Total capitalization as at March 31, 2012 increased $800 million to $15.6 billion. During the three months ended March 31, 2012 subsidiary and corporate borrowings increased due to additional borrowings related to the assets acquired and commissioned in our United States wind portfolio, additional corporate borrowings which were used to repay higher yielding debt and the outstanding credit facilities, as well as the appreciation of the Canadian dollar and Brazilian real during the quarter. The participating non-controlling interests and net asset value both increased due to the acquisition of wind development assets with certain institutional investors. Our debt to capitalization ratio was 38% as at March 31, 2012, which was substantially unchanged from December 31, 2011.

We issued C$400 million of 10-year corporate notes, bearing interest at an annual rate of 4.79%. The proceeds were used to reduce borrowings, extend the term on our overall maturity profile and reduce cost of capital.

Total capitalization as at December 31, 2011 was $14.8 billion, representing an increase of $1.9 billion since December 31, 2010. The increase in net asset value is largely a result of an increase in the value of our property, plant, and equipment as discussed under “Property, Plant and Equipment”. The increase in total capitalization was also positively impacted by an increase in subsidiary borrowings as a result of growth in our asset base.

On a consolidated basis, Adjusted EBITDA to interest totaled 2.0 times and 1.9 times in 2011 and 2010, respectively. On a pro forma basis, Adjusted EBITDA to interest was 2.3 times in 2011 (2010: 2.1 times) reflecting the increased cash flows associated with the amended PPAs, which occurred as part of the Combination.

 

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Corporate and Subsidiary Borrowings

The following table summarizes our corporate and subsidiary borrowings.

 

                Maturity           

 

As at December 31, 2011

(Millions)

   Average
Term
     2012      2013      2014      2015      2016      Thereafter      Total  

Corporate borrowings

                       

Credit facilities

     2.3       $ -       $ -       $ 251       $ -       $ -         $        -       $ 251   

Corporate borrowings

     9.6         -         -         -         -         294         783         1,077   
                -         -         251         -         294         783         1,328   

Subsidiary borrowings

                       

United States

     12.6         328         53         207         46         71         1,316         2,021   

Canada

     8.3         261         390         13         14         11         883         1,572   

Brazil

     6.2         61         298         65         65         28         136         653   
       10.0         650         741         285         125         110         2,335         4,246   

Consolidated borrowings

            $ 650       $ 741       $ 536       $ 125       $ 404         $  3,118       $ 5,574   

Borrowings – Equity accounted investments

              119         1         1         35         94         170         420   

Total (1)

            $     769       $     742       $     537       $     160       $     498         $  3,288       $ 5,994   

 

(1)  

Represents consolidated borrowings and borrowings of subsidiaries accounted for on an equity basis

As at March 31, 2012, subsidiary and corporate borrowings increased to $4,459 million and $1,497 million, respectively, due to additional borrowings related to the assets acquired and commissioned in our United States wind portfolio, additional corporate borrowings which were used to repay higher yielding debt, as well as the appreciation of the Canadian dollar and Brazilian real during the quarter. Total subsidiary borrowings have an average of 10 years with an average interest rate of 6.7%. The corporate borrowings have an average life of 10 years with an average interest rate of 5.3%.

Subsidiary borrowings maturing in the next twelve months as at March 31, 2012 include $253 million on our Eastern Canadian wind assets and $200 million attributed to our hydroelectric facilities in New York. We expect to refinance all of the upcoming maturities in the normal course. In May 2012, we refinanced indebtedness associated with our hydroelectric pumped storage facility in New England, of which we own 50%, through a $125 million loan for a term of five years at a rate of LIBOR + 2.25%.

Partnership Capital

Brookfield Renewable’s capital structure is comprised of two classes of Partnership units: general partnership units and LP Units. Income and distributions of Brookfield Renewable are allocated to the partners of record based on their respective interests in Brookfield Renewable. Distributions may be made to the Managing General Partner with the exception of instances where there is insufficient cash available, where payment renders Brookfield Renewable unable to pay its debts as and when they fall due, or when payment of which might leave Brookfield Renewable unable to meet any future or contingent obligations.

BRELP, a subsidiary of Brookfield Renewable, has issued redeemable partnership units held 100% by Brookfield, which may, at the request of the holder, require BRELP to redeem the LP Units for cash consideration after a mandatory two-year holding period from the date of issuance. The right is subject to Brookfield Renewable’s right of first refusal, which entitle, it, at its sole discretion, to elect to acquire all of the LP Units so presented to BRELP that are tendered for redemption in exchange for LP Units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with LP Units, the BRELP redeemable partnership units are classified as LP Units.

As of the date of this Form 20-F, the total amount of LP Units outstanding was comprised of 262,531,519 LP Units, assuming the exchange of all redeemable LP Units discussed above, and one general partnership unit. Based on the number of LP Units outstanding as of the date of this Form 20-F, Brookfield’s aggregate LP interest in Brookfield Renewable Group would be approximately 68% if it exercised its redemption right in full and Brookfield Renewable exercised its right of first refusal.

As at March 31, 2012, there were no changes to the total amount of LP Unit outstanding.

 

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Analysis of Consolidated Financial Statements

Summary Consolidated Statements of Income

 

 

 

For the three months ended March 31

(Millions, except as noted)

   2012     2011  

 

 

Generation (GWh) – LTA (1)

     4,557        4,062   

Generation (GWh) – actual (1)

     4,817        3,924   

 

 

Funds from operations (FFO) – consolidated basis

   $ 175      $ 103   

Cash portion of non-controlling interests included in FFO

     20        11   

Other items:

    

Depreciation and amortization

     (126     (110

Unrealized financial instrument (loss) gain

     (9     18   

Fund unit liability revaluation

     -        (116

Share of non-cash loss from equity-accounted investments

     (3     (8

Deferred income tax expense

     (13     -   

Other

     (13     9   

 

 

Net income (loss)

   $ 31      $ (93

 

 

Basic and diluted earnings (loss) per share

   $ 0.11      $ (0.34

 

 

 

(1)  

Actual and LTA generation includes 100% generation from equity-accounted investments.

We measure our results based on Adjusted EBITDA and FFO to provide readers with an assessment of the cash flow generated by our assets and the residual cash flow retained to fund LP Unitholder distributions and growth initiatives. We recognize that net income is an important measure of profitability. However, the presentation of net income on an IFRS basis for our business often leads to the recognition of a loss even though the underlying cash flow generated by the assets is supported by high margins and stable, long-term contracts. This occurs largely for two reasons. First, under IFRS, we recognize a significantly higher level of depreciation than we are required to reinvest in the business as sustaining capital expenditures. Second, we are often required to recognize changes in the fair value of energy contracts, which are serviced by our assets and interests held by others in assets we manage through income, where the corresponding change in the asset values are recognized through equity. Therefore, when factors which are positive to the long-term prospects of our business occur, such as rising energy prices or increased asset values, the outcome is the recognition of losses related to the revaluation of fixed price contracts or our partners’ share of assets.

The net income for the three months ended March 31, 2012 was $31 million or $0.11 per share (2011: $93 million loss or $(0.34) per share) and reflects the normal course depreciation and amortization expense of $126 million (2011: $110 million). During the quarter, an analysis was performed of the useful lives of certain components of property, plant and equipment and we have determined that changes in their estimated service lives will more accurately reflect the period over which they provide economic benefits. Brookfield Renewable applied this change in accounting estimate on a prospective basis beginning January 1, 2012. Depreciation expense for the three months ended March 31, 2012 was $20 million lower as a result of this change in estimate.

2011 results also include a revaluation amount on the Fund unit liability. In accordance with IFRS, Fund units held by the public that have a feature that allows the holder to redeem the units for cash, are presented as a liability and recorded at fair value, with the change in fair value recorded in net income. In 2011, the Fund unit price appreciated significantly resulting in a revaluation amount of $116 million. As a result of the Combination, the Fund units were exchanged for partnership units and the Fund was dissolved.

 

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For the years ended December 31

(Millions, except per share amounts and as noted)

   2011     2010     2009  

 

 

Generation (GWh) – LTA (1)

     16,297        15,887        15,529   

Generation (GWh) – actual (1)

     15,877        14,480        15,833   

 

 

Funds from operations (FFO)

   $ 318      $ 269      $ 324   

Cash portion of non-controlling interests included in FFO

     52        46        48   

Other items:

      

Depreciation and amortization

     (468     (446     (321

Unrealized financial instrument (losses) gains

     (20     584        (791

Fund unit liability revaluation

     (376     (159     (244

Share of non-cash losses from equity-accounted investments

     (13     (7     (13

Deferred income tax recovery

     50        3        335   

Other

     6        4        82   

 

 

Net (loss) income

   $ (451   $ 294      $ (580

 

 

Basic and diluted (loss) earnings per share

   $ (1.80   $ 0.98      $ (2.32

 

 

 

(1)  

Actual and LTA generation includes 100% generation from equity-accounted investments.

Net loss for the year ended December 31, 2011 was $451 million and reflects normal course depreciation and amortization expense of $468 million (2010: $446 million). It also includes a revaluation amount on the Fund unit liability. Under IFRS, Fund units held by the public that have a feature that allows the holder to redeem the units for cash, are presented as a liability and recorded at fair value, with the change in fair value recorded in net income. In 2011, the Fund unit price appreciated significantly resulting in a revaluation amount of $376 million (2010: $159 million). As a result of the Combination, the Fund units were exchanged for LP Units and the Fund was dissolved.

Net income for the year ended December 31, 2010 was $294 million compared to a loss of $580 million in 2009 and reflects normal course depreciation and amortization expense of $446 million (2009: $321 million). It also includes an unrealized financial instrument gain of $584 million (2009: $791 million loss) and a revaluation amount on the Fund unit liability of $159 million (2009: $244 million). On April 1, 2011, Brookfield Renewable Group designated its two significant long-term energy contracts with related parties as cash-flow hedges. As a result of new agreements and changes in existing agreements with Brookfield and its subsidiaries arising from the Combination, these contracts are no longer accounted for as derivatives by Brookfield Renewable Group effective November 28, 2011. For the period from April 1, 2011 to November 28, 2011, Brookfield Renewable Group recorded accounting losses of $708 million related to these contracts that were recorded in Other Comprehensive Income (“ OCI ”). On formation of Brookfield Renewable Group, $704 million of unrealized accounting losses were reversed.

Amendments were made to certain energy derivative contracts and other agreements with the related parties which resulted in the energy derivative contracts no longer meeting the derivatives definition under the IFRS. Since these amendments arose from the common control reorganization with Brookfield the amounts were adjusted directly into limited partnership equity.

 

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Summary Consolidated Balance Sheets

 

      

 

As at March 31

     As at December 31  
(Millions)    2012      2011      2010  

Property, plant and equipment

   $ 14,888       $ 13,945       $ 12,173   

Equity-accounted and long-term investments

     329         405         269   

Total assets

     16,568         15,708         13,874   

Long-term debt and credit facilities

     5,984         5,519         4,994   

Deferred income tax liabilities

     2,448         2,374         2,429   

Total liabilities

     9,153         8,508         8,689   

Fund unit liability

     -         -         1,355   

Participating non-controlling interests

     760         629         206   

Preferred equity

     247         241         252   

Limited partners’ equity

     6,408         6,330         3,372   

Total liabilities and partners’ equity

   $ 16,568       $ 15,708       $ 13,874   

The net asset value of Brookfield Renewable totaled $8.6 billion as at March 31, 2012, which was slightly higher than the value as at December 31, 2011. Values increased during the quarter primarily as a result of the appreciation of the Canadian dollar and Brazilian real relative to the U.S. dollar.

The carrying value of our assets increased during 2011, primarily due to the increase in fair value measurement of our renewable power generation facilities, acquisition of assets, new projects that began commercial operations in 2011 and ongoing sustaining capital expenditures

The assets deployed in our renewable power operations are revalued on an annual basis, with the exception of foreign exchange

 

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Equity-Accounted and Long-Term Investments

The following are Brookfield Renewable’s equity-accounted and long-term investments:

 

      

Ownership

Percentage Interest

     Carrying value  

As at December 31

(Millions)

   2011      2010      2011      2010  
     %      %                

Bear Swamp Power Co. LLC

     50         50       $ 130       $ 95   

Brookfield Americas Infrastructure Fund investees (1)

     50         50         119         5   

Powell River Energy Inc.

     50         50         21         40   

Pingston Power Inc.

     50         50         49         43   

Galera Centrais Elétricas S.A.

     50         50         86         80   

Other long-term investments

                       -         6   
                       $ 405       $ 269   

 

(1)  

Consists of 50% ownership interests in Coram California Development L.P and Malacha Hydro Limited Partnership.

The ownership percentage interest as at March 31, 2012 remained unchanged from December 31, 2011.

The carrying value of equity-accounted investments decreased to $329 million as at March 31, 2012. The decrease is primarily attributable to Brookfield Asset Infrastructure Fund’s acquisition of the remaining 50% interest in wind generation facility bringing Brookfield Renewable’s total investment to 100%.

Participating Non-Controlling Interests

 

       Ownership Percentage
Interest
     Carrying value  

As at December 31

(Millions)

   2011      2010      2011      2010  
     %         %         

Brookfield Americas Infrastructure Fund

     50-100         50-100       $ 380       $ -   

The Catalyst Group

     75         75         167         143   

Brascan Energetica

     50         50         74         63   

Other

     50         50         8         -   
                       $ 629       $ 206   

In December 2011, Brookfield Renewable Group entered into voting agreements with subsidiaries of Brookfield whereby these subsidiaries, as managing members of entities related to Brookfield Americas Infrastructure Fund (the “ BAIF Entities ”) in which Brookfield Renewable Group holds investments with certain institutional investors, agreed to assign to Brookfield Renewable Group their voting rights to appoint the directors of subsidiaries of the BAIF Entities. Brookfield Renewable Group’s economic interests in the BAIF Entities in the United States and Brazil are 22% and 25%, respectively.

The percentage of ownership interest relating to participating non-controlling interests as at March 31, 2012 remained unchanged from December 31, 2011.

 

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The carrying value in participating non-controlling interest increased $131 million during the three months ended March 31, 2012 to $760 million. The increase is primarily attributable to Brookfield Asset Infrastructure Fund’s acquisition of the remaining 50% interest in wind generation facility bringing Brookfield Renewable’s total investment to 100%.

Segmented Net Asset Value

The following table provides a breakdown of our consolidated net asset value by region.

 

       Hydroelectric                                               

As at December 31

(Millions)

   United
States
     Canada      Brazil      Wind      Other
assets
     Corporate
and other
     2011      2010  
 

Total power assets

   $ 4,549       $ 4,908       $ 2,681       $ 1,400       $ 86       $ -       $ 13,624       $ 12,062   
 

Development assets

     26         -         121         231         -         -         378         198   
 

Equity-accounted and long-term investments

     169         70         86         80         -         -         405         269   
 
     4,744         4,978         2,888         1,711         86         -         14,407         12,529   
 

Working capital and other, net

     169         (50)         181         (26)         (11)         117         380         (197)   
 

Long-term debt and credit facilities

     (1,838)         (928)         (645)         (785)         -         (1,323)         (5,519)         (4,994)   
 

Participating non-controlling interests

     (250)         -         (209)         (170)         -         -         (629)         (206)   
 

Preferred equity

     -         -         -         -         -         (241)         (241)         (252)   
 
     2,825         4,000         2,215         730         75         (1,447)         8,398         6,880   
 

Values not recognized under IFRS (1)

     -         -         -         -         -         -         -         600   
 

Net asset value

   $ 2,825       $ 4,000       $ 2,215       $ 730       $ 75       $ (1,447)       $ 8,398       $ 7,480   
 

Net asset value - per share

   $ 10.76       $ 15.24       $ 8.44       $ 2.78       $ 0.28       $ (5.51)       $ 31.99       $ 28.50   

 

(1)

In 2010, the unrecognized value related to ongoing project development activities that would be recognized under IFRS upon final commissioning of the projects. Effective December 31, 2011, there was a change in accounting policy for construction work-in-progress to include this asset type in the assets that are revalued when appropriate criteria are satisfied.

Net asset value in our property, plant and equipment increased to $14 billion. The increase over the prior year was in part due to the acquisition of a 30 MW hydroelectric asset in Brazil, the completion of two hydroelectric development assets totaling 15 MW in the United States and the completion of a 166 MW wind facility in Eastern Canada, which increased asset values by $440 million. Lower interest rates and the corresponding reduction in discount rates applied to future cash flows increased the value of our plants by $1.3 billion, net of non-controlling interests. In addition, approximately 275 MW of hydroelectric and wind facilities in our portfolio have been acquired with certain institutional partners and are consolidated into our operating results. Our net ownership of these facilities approximates 25%. Offsetting these increases for the year ended December 31, 2011 was depreciation expense of $456 million and the net unfavorable impact of foreign exchange on Canadian and Brazilian assets of approximately $116 million and $277 million, respectively.

The net asset value of Brookfield Renewable totaled $8.6 billion as at March 31, 2012, which was slightly higher than the value as at December 31, 2011. Values increased during the quarter primarily as a result of the appreciation of the Canadian dollar and Brazilian real relative to the U.S. dollar.

Development assets include two wind and two hydroelectric projects currently under construction along with early stage costs associated with a 45 MW hydroelectric facility in Western Canada which we expect to commence construction in the second quarter of 2012.

 

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Property, Plant and Equipment

Revaluation of Property, Plant and Equipment

In accordance with IFRS, Brookfield Renewable Group has elected to revalue its property, plant and equipment at a minimum on an annual basis, as at December 31 st of each year. As a result, certain of Brookfield Renewable Group’s property, plant and equipment, are carried at revalued amounts as opposed to historical cost. The property, plant and equipment assets that are revalued use a discounted cash flow valuation model over a 20-year period and incorporate Brookfield Renewable Group’s expectations regarding several inputs, including future inflation rates and discount rates, as well as estimates regarding future electricity prices, anticipated LTA generation, operating and capital expenditures, including future major maintenance expenditures all over a 20-year period. Brookfield Renewable Group valued the property, plant and equipment using inputs, which vary according to the type and geographic location of the asset. Brookfield Renewable Group’s equity can vary with changing discount and terminal capitalization rates. For example, a 50 bps change in discount rates would have an approximate $1 billion impact on our net asset value.

 

       United States        Canada        Brazil  
       2011        2010        2011        2010        2011        2010  

Discount rate

     5.6%           7.4%           5.4%           6.4%           9.9%           10.8%   

Terminal capitalization rate

     7.2%           7.9%           6.8%           7.1%           N/A           N/A   

Exit date

     2031           2030           2031           2030           2029           2029   

Brookfield Renewable Group elected to change its accounting policy for the revaluation of property plant and equipment to include development assets effective December 31, 2011. We record development assets at an estimate of fair value based on the value expected on completion, less the costs remaining to complete the project. In the prior year, development assets were carried at cost with the fair value component included as a value not recognized under IFRS.

Contractual Obligations

The following table summarizes our significant contractual obligations.

 

As at December 31, 2011
(Millions)
   2012      2013      2014      2015      2016      Thereafter      Total  

Principal repayments:

                    

Subsidiary borrowings

   $ 650       $ 741       $ 285       $ 125       $ 110       $ 2,335       $ 4,246   

Corporate borrowings

     -         -         -         -         294         783         1,077   

Equity-accounted and long-term investments

     119         1         1         35         94         170         420   
       769         742         286         160         498         3,288         5,743   

Capital projects

     46         -         -         -         -         -         46   
       815         742         286         160         498         3,288         5,789   

Interest payable (1)

                    

Subsidiary borrowings

     239         204         146         125         116         799         1,629   

Corporate borrowings

     59         59         59         59         59         283         578   

Equity-accounted and long-term investments

     20         19         19         18         17         121         214   
       318         282         224         202         192         1,203         2,421   

Total

   $  1,133       $  1,024       $  510       $  362       $  690       $  4,491       $  8,210   

 

(1)  

Represents aggregate interest payable expected to be paid over the entire term of the obligations, if held to maturity. Variable rate interest payments have been calculated based on current rates.

In addition, as a result of the Combination, two management service agreements with Brookfield were executed. See Item 5.A “Operating Results — Summary of Pro Forma Adjustments—Management Service Agreements” and “Unaudited Pro forma Condensed Combined Statements of Income” for more information.

Contractual obligations as at March 31, 2012 increased by $436 million as a result of the investment in wind development and generation assets in California.

Guarantees

In the normal course of operations, we execute agreements that provide for indemnification and guarantees to third parties in transactions such as business dispositions and acquisitions, construction projects, capital projects, and sales and purchases of assets and services. We have also agreed to indemnify our directors and certain of our officers and employees. The nature of substantially all of the indemnification undertakings prevents us from making a reasonable estimate of the maximum potential amount that we could be required to pay third parties, as many of the agreements do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, we have made no significant payments under such indemnification agreements.

 

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Off-Balance Sheet Arrangements

Brookfield Renewable Group has no off-balance sheet financing arrangements.

Related Party Transactions

Brookfield Renewable Group’s related party transactions are in the normal course of business and are recorded at the exchange amount, except for related party acquisitions. Brookfield Renewable Groups’ related party transactions are primarily with subsidiaries of Brookfield.

As discussed in Note 2b to our audited consolidated financial statements included elsewhere in this Form 20-F, effective November 28, 2011, Brookfield and Brookfield Renewable completed the Combination Agreement. This resulted in the strategic combination of the Fund and the renewable power assets of certain Brookfield subsidiaries to create Brookfield Renewable Group. Consequently at the date of the Combination, Brookfield Asset Management, Brookfield Renewable Group’s ultimate parent, held, directly or indirectly, approximately a 73% limited partnership interest (68% as at the date of this Form 20-F) on a fully-exchanged basis and all general partnership units totaling a 0.01% general partnership interest in Brookfield Renewable Group. Details of amended and new agreements entered into by Brookfield Renewable Group as a result of the Combination are included under Item 5.A “Operating Results — Summary of Pro Forma Adjustments — PPAs”.

Brookfield Renewable Group sells electricity to Brookfield through long-term PPAs to provide stable cash flow and reduce Brookfield Renewable Group’s exposure to electricity prices in deregulated power markets. Brookfield Renewable Group also benefits from a wind levelization agreement with a subsidiary of Brookfield, which reduces the exposure to the fluctuation of wind generation at certain facilities and thus improves the stability of its cash flow.

In addition to these agreements, Brookfield Renewable Group and Brookfield have executed other agreements related to the provision of operations, maintenance, administration, insurance services and the securing of natural gas prices with respect to a gas plant in Eastern Canada. These are fully described in Note 8 to our annual audited consolidated financial statements included elsewhere in this Form 20-F.

In December 2011, Brookfield Renewable Group entered into voting agreements with subsidiaries of Brookfield whereby these subsidiaries, as managing members of entities related to Brookfield Americas Infrastructure Fund, in which Brookfield Renewable Group holds investments with certain institutional partners, agreed to assign to Brookfield Renewable Group their voting rights to appoint the directors of such entities.

The following table reflects the related party agreements and transactions on the consolidated statements of income (loss):

 

For the three months ended March 31

(Millions)

   2012      2011  

Revenues

     

Purchase and revenue support agreements

   $ 139       $ 63   

Wind levelization agreement

     (2)         1   
     $ 137       $ 64   

Direct operating costs

     

Energy purchases

   $ 17       $ 11   

Operations, maintenance and administration services

     5         3   

Insurance services

     4         4   
     $ 26       $ 18   

Interest expense

   $ -       $ 7   

Management service costs

   $ 7       $ -   

 

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For the year ended December 31
(Millions)
   Related Party    2011      2010      2009  

Revenues

           

Purchase and revenue support agreements

   Brookfield    $ 254       $  205       $  190   

Wind levelization agreement

   Brookfield      7         5         5   
          $ 261       $ 210       $ 195   

Direct operating costs

           

Energy purchases

   Brookfield    $ 41       $ 42       $ 26   

Operations, maintenance and administration services

   Brookfield      11         17         9   

Insurance services

   Brookfield      18         15         11   
          $ 70       $ 74       $ 46   

Interest expense

   Brookfield    $ 19       $ 40       $ 52   

Management service costs

   Brookfield    $ 1       $ -       $ -   

The following table reflects the impact of the related party agreements and transactions on the consolidated balance sheets:

 

 

  

As at December 31
(Millions)
   Related Party             2011      2010  

Due from related parties

           

Amounts due from

   Brookfield       $ 227       $ 377   

Note receivable

   Coram California Development               26         23   
         $ 253       $ 400   

Amounts due from

   Brookfield, Brascan Energetica       $ 13       $ -   

Note receivable

   Powell River Energy Inc.         19         19   
                   $ 32       $ 19   

Due to related parties

           

Amounts due to and current portion of note payable

   Brookfield       $ 74       $ 567   

Accrued Unitholders distributions payable

   Brookfield               65         -   
         $ 139       $ 567   

Note payable

   Brookfield       $ 8       $ 101   

Credit facilities

   Brookfield             $ -       $ 8   

Amounts due from and the note receivable are not considered impaired based on the credit worthiness of the counterparties. Accordingly, as at December 31, 2011, 2010 and 2009 an allowance for doubtful accounts was not deemed necessary. See Item 7.B “Related Party Transactions”.

Consolidated Statements of Cash Flows

 

For the three months ended March 31 (Millions)    2012      2011  

Cash flow provided by (used in):

     

Operating activities

     $  203       $     88   

Financing activities

     (66)         168   

Investing activities

     (47)         (182)   

Impact of foreign exchange on cash

     7         2   

Increase in cash and cash equivalents

     $    97       $     76   

Cash and cash equivalents as at March 31, 2012 totaled $364 million, representing an increase of $97 million since December 31, 2011. This increase includes $55 million of restricted cash that was reclassified from other long-term assets to cash and cash equivalents during the three months ended March 31, 2012. Cash and cash equivalents includes $130 million of restricted cash (December 31, 2011: $42 million).

 

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Operating Activities

We generated $203 million from operating activities for the three months ended March 31, 2012, an increase year-over-year of $115 million. $72 million of the increase is attributable to an increase in FFO, as well as $45 million in net changes in working capital balance

Financing Activities

Cash flows used in financing activities totaled $66 million for the three months ended March 31, 2012. Borrowings of $574 million relate primarily to the C$400 million issuance of 10-year corporate notes as well as drawings on our revolving corporate credit facilities. Repayments of $664 million relate to $293 million of repayments on subsidiary borrowings, as well as $371 million of repayments on our revolving corporate credit facilities. Approximately $117 million of capital provided by non-controlling interests relates to the acquisitions of wind facilities acquired in California.

Distributions

For the three months ended March 31, 2012, cash distributions to LP Unitholders and preferred shareholders were $90 million and $3 million, respectively (2011: $35 million and $3 million, respectively). With the completion of the Combination in November 2011, the number of outstanding units increased from 104,718,976 to 262,485,747, on a fully-exchanged basis.

During the quarter we announced an increase in LP Unitholder distributions to $1.38 per share, on an annualized basis, and took effect with the first quarter distribution paid in April 2012.

Investing Activities

Cash flows used in investing activities totaled $47 million for the three months ended March 31, 2012. Approximately $131 million represents the net cash consideration associated with the acquisitions of wind facilities in California. A further $75 million relates to the continued investment in sustaining capital expenditures, and development and construction of renewable power generating assets.

 

For the years ended December 31 (Millions)    2011      2010      2009  

Cash flow provided by (used in):

        

Operating activities

     $  349       $ 218         $  418   

Financing activities

     809         189         765   

Investing activities

     (1,090)         (397)         (1,213)   

Impact of foreign exchange on cash

     11         5         31   

Net cash inflow

     $    79       $ 15         $      1   

Cash and cash equivalents at the end of the 2011 year totaled $267 million, representing an increase of $79 million since December 31, 2010. Cash at the end of 2010 totaled $188 million, representing an increase of $15 million since December 31, 2009.

Operating Activities

We generated $349 million from operating activities for the year ended December 31, 2011, an increase of $131 million from the same period last year primarily due to FFO of $318 million. This is compared to operating activities of $218 million, which was primarily due to FFO of $269 million in 2010.

We generated $418 million from operating activities for the year ended December 31, 2009, primarily due to FFO of $336 million.

Net Change in Non-Cash Working Capital

The net change in working capital shown in the consolidated statements of cash flow is comprised of the following:

 

For the years ended December 31 (Millions)    2011      2010      2009  

Trade receivables and other current assets

     $    (12)       $ (9)         $  (85)   

Accounts payable, accrued liabilities, and other

     -         (20)         108   
       $    (12)       $   (29)         $    23   

 

 

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Financing Activities

Cash flows provided by financing activities totaled $809 million for the year ended December 31, 2011, resulting from borrowings of $880 million offset by $215 million of repayments, and distributions to partners and non-controlling interests of $39 million and $109 million, respectively. This is compared to 2010 cash flows provided by financing activities of $189 million, resulting from $747 million in debt borrowings, $239 million of capital provided by non-controlling interests and the sale of Fund units for $164 million offset by $951 million of debt repayments, $110 million of distributions to unitholders of the Fund and distributions to non-controlling interests.

This can also be compared to 2009 cash flows provided by financing activities of $765 million, resulting from $1,203 million in debt borrowings, $375 from the issuance of new Fund units, offset by $811 million of debt repayments, and $64 million of distributions to unitholders of the Fund and distributions to non-controlling interests.

Investing Activities

During 2011, we invested $1,090 million in a number acquisitions and growth oriented initiatives compared to $397 million in the prior year. Construction of two wind projects in Ontario and California required $698 million. The acquisition of a Brazil hydroelectric facility and a wind project in Northeastern United States were $212 million.

During 2010, we invested $247 million in the development and construction of renewable power generation and $53 million in sustaining capital expenditures.

During 2009, we reduced the amount owing to Brookfield Asset Management by $1,100 million, invested $124 million in the development and construction of renewable power generation, invested $37 million in sustaining capital expenditures, and increased restricted cash by $82 million.

Risk Management

Brookfield Renewable Group faces market risk from foreign currency assets and liabilities, the impact of changes in interest rates, and floating rate liabilities. Market risk is managed by funding assets with financial liabilities in the same currency and with similar interest rate characteristics and holding financial contracts, such as interest rate swaps and foreign exchange contracts, to minimize residual exposures. Financial instruments held by Brookfield Renewable Group that are subject to market risk include borrowings and financial instruments, such as interest rate, currency and commodity contracts. The categories of financial instruments that can give rise to significant variability are described below:

Commodity Risk

Our commodity risk is to the price of electricity. Brookfield Renewable Group sells electricity under long-term contracts to secure stable prices and mitigate its exposure to wholesale markets. As at December 31, 2011, virtually all (99%) of the Brookfield Renewable Group’s generation was sold pursuant to PPAs, either to third parties or through entities of Brookfield. During 2011, certain of the long-term contracts were considered financial instruments, and were recorded at fair value in the consolidated financial statements.

The table below summarizes the impact of changes in the market price of electricity as at December 31. The impact is expressed in terms of the effect on net income and OCI. The sensitivities are based on the assumption that the market price changes by five percent with all other variables held constant.

Impact of a 5% change in the market price of electricity

 

       Effect on net income      Effect on OCI  
(MILLIONS)    2011      2010      2009      2011      2010      2009  

5% increase

   $ (2)       $ (125)         (138)       $ -       $ -       $ -   

5% decrease

   $         2       $ 139         138       $   -       $   -       $   -   

Interest Rate Risk

Brookfield Renewable Group’s assets largely consist of long duration physical assets. Brookfield Renewable Group’s financial liabilities consist primarily of long-term fixed rate debt or floating-rate debt that has been swapped to fixed rates with interest rate financial instruments. All non-derivative financial liabilities are recorded at their amortized cost. Brookfield Renewable Group also holds interest rate contracts to lock-in fixed rates on anticipated future debt issuances.

 

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Interest rate risk exists principally due to our subsidiaries’ and associates’ indebtedness with variable rates. Our subsidiaries have long-term debt principal value of $4,246 million (on a proportionate basis) as of December 31, 2011 of which approximately $1,382 million or 33% has been issued as floating rate debt. Of this amount, $730 million has been hedged through the use of interest rate swaps. Brookfield Renewable Group has corporate long-term debt with a principal value of $1,077 million as of December 31, 2011, all of which is fixed-rate debt.

The table below summarizes the impact of changes in the interest rate as at December 31. The impact is expressed in terms of the effect on income and OCI. The sensitivities are based on the assumption that the interest rate changes by one percent at the beginning of the financial year and is held constant throughout the reporting period, with all other variables held constant.

Impact of a 1% change in interest rates

 

       Effect on net income      Effect on OCI  
(MILLIONS)    2011      2010      2009      2011      2010      2009  

1% increase

   $ (7)       $ (7)       $ (7)       $     48       $     1       $     10   

1% decrease

   $     7       $ 7       $ 7       $ (48)       $ (1)       $ (10)   

Foreign Currency Risk

Brookfield Renewable Group’s principal foreign exchange risks involve changes in the value of the Canadian dollar and the Brazilian real versus the U.S. dollar. To mitigate these risks, Brookfield Renewable Group designates certain monetary liabilities as hedges against its net investment in the Canadian subsidiaries. In addition, management monitors the risk associated with foreign currency rate fluctuations and, from time to time, may enter into forward foreign exchange contracts or employ other hedging strategies.

Brookfield Renewable Group is also exposed to foreign currency risk arising on the translation of foreign monetary assets and liabilities recorded in its U.S. functional subsidiaries but as the monetary value of these is small the impact is minimal.

Credit Risk

Brookfield Renewable Group minimizes credit risk with counterparties to financial instruments and physical electricity and gas transactions through the selection, monitoring and diversification of counterparties, and the use of standard trading contracts, and other credit risk mitigation techniques. In addition, Brookfield Renewable Group’s PPAs are reviewed regularly and are almost exclusively with customers having long standing credit histories or investment grade ratings, which limit the risk of non-collection.

Liquidity Risk

Liquidity risk is the risk that Brookfield Renewable Group cannot meet a demand for cash or fund an obligation when due. Liquidity risk is mitigated by Brookfield Renewable Group’s cash and cash equivalent balances and its access to undrawn credit and hydrology reserve facilities. We also ensure that we have access to public debt markets by maintaining a strong credit rating.

Brookfield Renewable Group is also subject to the risk associated with debt financing. This risk is mitigated by the long-term duration of debt instruments and the diversification in maturity dates over an extended period of time.

The sensitivity analysis discussed above reflects only the risks associated with instruments that we consider are market sensitive and the potential loss resulting from one or more selected hypothetical changes. Therefore, the discussion above is not intended to reflect fully the market risk exposure that the Brookfield Renewable has.

Critical Accounting Estimates and Judgments

The preparation of financial statements in conformity with IFRS requires management to select appropriate accounting policies to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. In particular, critical accounting policies and estimates utilized in the normal course of preparing Brookfield Renewable Group’s consolidated financial statements require the determination of the fair value of property, plant and equipment, the estimation of useful lives of assets of property, plant and equipment, depreciation and amortization; value of intangible assets; ability to utilize tax losses; effectiveness of financial hedges for accounting purposes; and fair values for recognition, measurement and disclosure purposes.

In making estimates, management relies on external information and observable conditions where possible, supplemented by internal analysis, as required. These estimates have been applied in a manner consistent with that in the prior year and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology or assumptions utilized in this Form 20-F. These estimates are impacted by, among other things, future power prices, movements in interest rates, foreign exchange

 

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and other factors, some of which are highly uncertain, as described in the analysis of business and environmental risks section of this Form 20-F. The interrelated nature of these factors prevents us from quantifying the overall impact of these movements on Brookfield Renewable Group’s financial statements in a meaningful way. These sources of estimation uncertainty relate in varying degrees to virtually all asset and liability account balances.

Critical Estimates

Brookfield Renewable Group makes estimates and assumptions that affect the carrying value of assets and liabilities, disclosure of contingent assets and liabilities and the reported amount of earnings for the year. Actual results could differ from estimates. The estimates and assumptions that are critical to the determination of the amounts reported in the consolidated financial statements relate to the following:

 

(i)

Property, plant and equipment

The fair value of Brookfield Renewable Group’s property, plant and equipment is calculated using estimates and assumptions about future electricity prices, anticipated LTA generation, estimated operating and capital expenditures, future inflation rates and discount rates, as described in Note 9 to our annual audited consolidated financial statements included elsewhere in this Form 20F. Judgment is involved in determining the appropriate estimates and assumptions in the valuation of Brookfield Renewable Group’s property, plant and equipment. See “— Critical Judgments In Applying Accounting Policies” below for further details.

Estimates of useful lives and residual values are used in determining depreciation and amortization. To ensure the accuracy of useful lives and residual values, these estimates are reviewed on an annual basis.

 

(ii)

Financial instruments

Brookfield Renewable Group makes estimates and assumptions that affect the carrying value of its financial instruments, including estimates and assumptions about future electricity prices, LTA generation, capacity prices, discount rates and the timing of energy delivery. Non-financial instruments are valued using estimates of future electricity prices, which are estimated by considering broker quotes for the years in which there is a liquid market and for the subsequent years its best estimate of electricity prices that would allow new entrants into the market.

 

(iii)

Deferred income tax

The consolidated financial statements include estimates and assumptions for determining the future tax rates applicable to subsidiaries and identifying the temporary differences that relate to each subsidiary. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted at the balance sheet date. Operating plans and forecasts are used to estimate when temporary difference will reverse.

Critical Judgments in Applying Accounting Policies

The following are the critical judgments that have been made in applying the accounting policies used in the consolidated financial statements and that have the most significant effect on the amounts in the consolidated financial statements:

 

(i)

Preparation of consolidated financial statements

These consolidated financial statements present the financial position, results of operations and cash flows of Brookfield Renewable Group. Judgment is required in determining what assets, liabilities and transactions are recognized in the consolidated financial statements as pertaining to Brookfield Renewable Group’s operations.

 

(ii)

Common control transactions

IFRS 3R does not include specific measurement guidance for transfers of businesses or subsidiaries between entities under common control. Accordingly, Brookfield Renewable Group has developed a policy to account for such transactions taking into consideration other guidance in the IFRS framework and pronouncement of other standard-setting bodies. Brookfield Renewable Group’s policy is to record assets and liabilities recognized as a result of transactions between entities under common control at the carrying value on the transferor’s financial statements, and to have the financial statements reflect the results of combining entities for all periods presented for which the entities were under the transferor’s common control, irrespective of when the combination takes place.

 

(iii)

Property, plant and equipment

The accounting policy relating to the Brookfield Renewable Group’s property, plant and equipment is described in Note 2 (e) to our December 31, 2011 annual audited consolidated financial statements included elsewhere in this Form 20-F. In applying this policy,

 

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judgment is used in determining whether certain costs are additions to the carrying amount of the property, plant and equipment as opposed to repairs and maintenance. If an asset has been developed, judgment is required to identify the point at which the asset is capable of being used as intended and to identify the directly attributable costs to be included in the carrying value of the development asset. The useful lives of property, plant and equipment are determined by independent engineers periodically with an annual review by management.

Annually, Brookfield Renewable Group determines the fair value of its property, plant and equipment using a methodology that it has judged to be reasonable. The methodology is a 20-year discounted cash flow model. Twenty years is the period considered reasonable as Brookfield Renewable Group has 20-year capital plans and it believes a reasonable third party would be indifferent between extending the cash flows further in the model versus using a discounted terminal value.

In developing a view on electricity prices, Brookfield Renewable Group has concluded that independent market quotes for the first four years are appropriate to utilize for this timeframe as it represents a liquid market. Long-term electricity prices have been developed to reflect the renewable nature of the portfolio, and are within a range of what a new build renewable asset would achieve and the price that a new thermal facility would require in order to earn a reasonable return.

Discount rates are determined each year by considering the current interest rates, average market cost of capital as well as the price risk and the geographical location of the operational facilities as judged by management. Inflation rates are also determined by considering the current inflation rates by geographical location and the expectations of future rates by economists. Operating costs are based on long-term budgets escalated thereafter for inflation rate specific to the country under review. Each operational facility has a 20-year capital plan that it follows to ensure the maximum life of its assets is achieved. Foreign exchange rates are forecasted by using the spot rates and the available forward rates, extrapolated beyond the period available. The inputs described above to the discounted cash flow model require management to consider facts, trends and plans in making its judgments as to what derives a reasonable fair value of its property, plant and equipment.

 

(iv)

Consolidation of the Brookfield Renewable Power Fund

Included within the consolidated financial statements prior to the Combination was the 34% investment in the Fund, on a fully-exchanged basis. As a result of the reduction in ownership share of the Fund during 2010, Brookfield reassessed whether it continued to control the Fund. In making this assessment, the definition of control and guidance as set out in IAS 27 - Consolidated and Separate Financial Statements (“ IAS 27 ”) was considered. Prior to the Combination, Brookfield concluded that control did exist as it had the power to govern the financial and operating policies of the Fund under specific agreements. As a result, the Fund was controlled by Brookfield, and the financial position, results of operations and cash flows of the Fund were consolidated within the consolidated financial statements.

 

(v)

Financial instruments

In applying the policy on Financial Instruments, judgments are made in applying the criteria set out in IAS 39, Financial Instruments: Recognition and Measurement (“ IAS 39 ”), to record financial instruments at fair value through profit and loss, and the assessments of the effectiveness of hedging relationships.

 

(vi)

Deferred income tax

In applying this policy, judgments are made in determining the probability of whether deductions, tax credits and tax losses can be utilized.

Recently Adopted Accounting Policies

 

(i)

Related party disclosures – revised definition of related parties

On January 1, 2011, Brookfield Renewable Group adopted the revised version of IAS 24, Related Party Disclosures (“ IAS 24 ”). IAS 24 is required to be applied retrospectively for annual periods beginning on or after January 1, 2011, and requires entities to disclose in their financial statements information about transactions with related parties. Generally, two parties are related to each other if one party controls, or significantly influences, the other party. IAS 24 has simplified the definition of a related party. Implementation of IAS 24 did not have a material impact on Brookfield Renewable Group’s consolidated financial statements.

 

(ii)

Defined benefit assets and minimum funding requirements

On January 1, 2011, the Brookfield Renewable Group adopted Prepayments of a Minimum Funding Requirement (Amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, IAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (“ IFRIC 14 ”). Without the amendments, in some circumstances entities were not permitted to recognize as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem. Implementation of IFRIC 14 did not have a material impact on the Brookfield Renewable Group’s consolidated financial statements.

 

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(iii)

Improvements to IFRS

On January 1, 2011, Brookfield Renewable Group adopted Improvements to IFRS – as part of the IASB’s program of annual improvements to its standards. Implementation of Improvements to IFRS did not have a material impact on Brookfield Renewable Group’s consolidated financial statements.

 

(iv)

Extinguishing financial liabilities with equity instruments

On January 1, 2011, Brookfield Renewable Group adopted Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments (“ IFRIC 19 ”). This interpretation provides guidance on how to account for the extinguishment of a financial liability by the issue of equity instruments. IFRIC 19 clarifies that the entity’s equity instruments issued to a creditor, which are part of the consideration paid to extinguish the financial liability are measured at their fair value. If their fair value cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. Differences between the carrying amount of the financial liability extinguished and the initial measurement amount of the equity instruments issued is included in the entity’s profit or loss for the period. Implementation of IFRIC 19 did not have a material impact on Brookfield Renewable’s audited consolidated financial statements.

Future Changes in Accounting Policies

 

(i)

Financial instruments

IFRS 9, Financial Instruments (“ IFRS 9 ”) was issued by the IASB on October 28, 2010, and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Two measurement categories continue to exist to account for financial liabilities in IFRS 9, fair value through profit or loss (“ FVTPL ”) and amortized cost. Financial liabilities held for trading are measured at FVTPL, and all other financial liabilities are measured at amortized cost unless the fair value option is applied. The treatment of embedded derivatives under the new standard is consistent with IAS 39 and is applied to financial liabilities and non-derivative hosts not within the scope of the standard. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. Management is currently evaluating the impact of IFRS 9 on the consolidated financial statements.

 

(ii)

Consolidation

IFRS 10, Consolidation (“ IFRS 10 ”) was issued by the IASB on May 12, 2011, and replaces SIC-12, Consolidation – Special Purpose Entities and parts of IAS 27. IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under IAS 27, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 10 on the consolidated financial statements.

 

(iii)

Joint arrangements

IFRS 11, Joint Arrangements (“ IFRS 11 ”) was issued by the IASB on May 12, 2011, and replaces IAS 31, Interests in Joint Ventures (“ IAS 31 ”), and SIC-13, Jointly Controlled Entities—Non-monetary Contributions by Venturers. IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under IAS 31, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 11 on the consolidated financial statements.

 

(iv)

Disclosure of interests in other entities

IFRS 12, Disclosure of Interests in Other Entities (“ IFRS 12 ”) was issued by the IASB on May 12, 2011. IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off-balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 12 on the consolidated financial statements.

 

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(v)

Fair value measurement

IFRS 13, Fair Value Measurement (“ IFRS 13 ”), a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards, was issued by the IASB on May 12, 2011. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It supersedes the fair value guidance that currently exists in IAS 16 concerning the use of the revaluation method. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. IFRS 13 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 13 on the consolidated financial statements.

 

(vi)

Accounting for employee benefits and minimum funding requirements

In June 2011, the IASB issued significant amendments to IAS 19, Employee Benefits (“ IAS 19 ”). These changes affect the recognition of actuarial gains and losses by removing the option to use the corridor approach and requiring immediate recognition in OCI. These OCI amounts cannot be recycled to the income statement. There are also changes to the recognition, measurement and presentation of past service costs, cost of benefits and finance expense or income relating to employee benefits. Further, termination benefits are recognized as a liability only when the entity can no longer withdraw the offer of the termination benefit or recognizes any related restructuring costs. There are additional disclosure requirements. The amendment is effective for periods beginning on or after January 1, 2013. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

(vii)  

Presentation of items of other comprehensive income

In June 2011, IASB issued amendments to IAS 1, Presentation of Financial Statements. These amendments include a requirement for entities to group items presented in OCI on the basis of whether they are potentially re-classifiable to profit or loss subsequently (reclassification adjustments), and emphasize the importance of presenting profit or loss and OCI together and with equal prominence. The amendment is effective for annual periods starting on or after July 1, 2012. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

(viii)  

Income taxes

In December 2010, IASB issued amendments to IAS 12, Income Taxes. Under these amendments, an entity is required to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment is effective for annual periods starting on or after January 1, 2012. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

(ix)

Consolidation and separate financial statements

In May 2011, IASB amended and reissued IAS 27. The amended standard is to be applied in accounting for investments in subsidiaries, jointly ventures, and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements. The amendment is effective for annual periods starting on or after January 1, 2013. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

(x)

Investment in associates

In May 2011, IASB amended and reissued IAS 28, Investment in Associates and Joint Ventures. The amended standard prescribes the accounting treatment for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The amendment is effective for annual periods starting on or after January 1, 2013. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

Fourth Quarter Results for 2011

Generation for the three months ended December 31, 2011 was 3,848 GWh compared to 4,002 GWh in the same period last year and LTA of 4,076 GWh. This is a decrease of 154 GWh or 4% in the quarter compared to last year and a 228 GWh or 6% decrease from LTA.

Hydroelectric generation for the three months ended December 31, 2011 was 3,391 GWh compared to 3,586 GWh in the same period last year and LTA of 3,723 GWh. This is a decrease of 195 GWh or 5% in the quarter compared to last year and 332 GWh or 9% decrease than LTA.

 

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Wind generation for the three months ended December 31, 2011 was 255 GWh compared to 186 GWh in the same period last year and LTA of 249 GWh. This is an increase of 69 GWh or 37% in the quarter compared to last year and an increase of 6 GWh or 2% increase from LTA.

 

               
                                                             Variance of Results  

For the three months ended December 31

(GWh)

   Actual Generation      LTA Generation      Actual vs.
Prior year
     Actual vs.
LTA
 
       2011         2010         2009         2011         2010         2009         2011         2011   

Hydroelectric generation

                       

United States

     1,756         1,711         1,838         1,655         1,621         1,601         45         101   

Canada

     756         1,054         958         1,189         1,193         1,200         (298)         (433)   

Brazil (1)

     879         821         745         879         821         745         58         -   
     3,391         3,586         3,541         3,723         3,635         3,546         (195)         (332)   

Wind energy

     255         186         129         249         154         134         69         6   

Other

     202         230         156         104         104         104         (28)         98   

Total generation (2)

     3,848         4,002         3,826         4,076         3,893         3,784         (154)         (228)   

% variance

                                                           (4)%         (6)%   

 

(1)  

Assured generation levels

(2)  

Actual and LTA generation includes 100% of generation from equity-accounted investments.

Summary of Historical Quarterly Results

FFO can vary with the amount of electricity generated in any given quarter and the realized prices of selling that electricity. The volume of electricity generated depends on available water inflows that rely upon precipitation and the management of storage capabilities. Realized prices are influenced by PPAs, and changes in foreign exchange rates. The following is a summary of unaudited quarterly financial information for the last eight consecutive quarters:

 

       
       2012      2011      2010  
   

For the periods ended,

(Millions, except as noted)

   Q1      Q4      Q3      Q2      Q1      Q4      Q3      Q2  

Generation (GWh) (1)

     4,817         3,848         3,614         4,491         3,924         4,002         2,890         3,407   

Revenues

   $ 426       $ 267       $ 280       $ 329       $ 293       $ 281       $ 222       $ 244   

Adjusted EBITDA

     318         135         205         249         215         201         166         174   

FFO

     175         21         87         121         103         68         39         73   

Net income (loss)

     29         (72)         (232)         (81)         (90)         414         (55)         (55)   

Net income (loss) per share

   $ 0.11         (0.27)         (0.89)         (0.30)         (0.34)         1.57         (0.21)         (0.21)   

Distributions

   $ 90       $ 89       $ 34       $ 34       $ 35       $ 34       $ 33       $ 33   

 

(1)  

Actual generation includes 100% of generation from equity-accounted investments.

Subsequent Events

Growth Developments

With certain institutional partners, Brookfield Renewable Group recently acquired new wind generation assets in California, including a 150 MW wind farm adjacent to the Coram wind project in the Tehachapi region. This new facility entered commercial operation in the first quarter of 2012 and comes with a 24-year PPA with Southern California Edison. Brookfield Renewable Group also acquired the remaining 50% stake previously held by its partner in Coram, along with a further 22 MW of additional operating wind generation capacity.

In March 2012, our 102 MW Coram wind facility in California achieved commercial operation.

 

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Unitholder Distribution Increase

In January 2012, Brookfield Renewable Group announced an increase in LP Unitholder distributions to $1.38 per unit on an annualized basis, an increase of three cents per LP Unit per year, to take effect during the first quarter distribution payable in April 2012.

Secondary Offering and Over-Allotment Option Exercised

In the first quarter of 2012, a bought-deal secondary offering that was completed, through which a wholly-owned subsidiary of Brookfield sold 13,144,500 LP Units (11,430,000 LP Units plus 1,714,500 LP Units pursuant to an over-allotment option that was exercised in full) at an offering price of C $26.25 per LP Unit. Brookfield had previously owned approximately 73% of Brookfield Renewable on a fully-exchanged basis. Upon the completion of the secondary offering, and giving effect to the over-allotment option, Brookfield now owns, directly and indirectly, 177,750,609 LP Units, representing approximately 68% of Brookfield Renewable Group on a fully-exchanged basis.

Medium-Term Note Offering

In February 2012, Brookfield Renewable Group successfully completed a C$400 million offering of medium-term notes bearing interest at a rate of 4.79% per year that are due February 2022. Proceeds of the offering were used to refinance existing indebtedness and for general business purposes.

Distribution Reinvestment Plan

In the first quarter of 2012, the Board of Directors for Brookfield Renewable approved the adoption and implementation of a distribution reinvestment plan. The plan has been implemented in the current quarter and allows registered or beneficial holders of LP Units who are residents in Canada to acquire additional LP Units by reinvesting all or a portion of their cash distributions without paying commissions.

Credit Facilities

In March 2012, Brookfield Renewable Group expanded its revolving credit facilities from $600 million to $900 million, with maturity dates out to October 2016. In May 2012, Brookfield Renewable entered into an additional credit agreement for an additional $90 million with a sixth bank on similar terms and conditions as the other credit agreements and with an expiry of October 31, 2016, subject to additional one-year extensions.

 

  5.B

LIQUIDITY AND CAPITAL RESOURCES

See Item 5.A “Operating and Financial Review and Prospects — Liquidity and Capital Resources”.

 

  5.C

RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES, ETC.

Not applicable.

 

  5.D

TREND INFORMATION

See Item 5.A “Operating and Financial Review and Prospects — Operating Results,” “— Contract Profile” and “— Liquidity and Capital Resources”.

 

  5.E

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

  5.F

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

See Item 5.A “Operating and Financial Review and Prospects — Liquidity and Capital Resources — Contractual Obligations”.

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

  6.A

DIRECTORS AND SENIOR MANAGEMENT

Board of Directors of the Managing General Partner

As required by Bermuda law, the Amended and Restated Limited Partnership Agreement of BREP provides for the management and control of Brookfield Renewable by a general partner rather than a board of directors and officers. The Managing General Partner, which is a wholly-owned subsidiary of Brookfield Asset Management, serves as Brookfield Renewable’s general partner and has a board of directors. The Managing General Partner has no executive officers. The Managing General Partner has sole responsibility and authority for the central management and control of Brookfield Renewable, which is exercised through its board of directors. The directors of the Managing General Partner each serve as a director until a successor is appointed to replace them.

 

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The board of directors of the Managing General Partner is comprised of six directors, five of whom are independent pursuant to the NYSE Listed Company Manual and within the meaning of Canadian National Instrument 58-101 - Disclosure of Corporate Governance Practices ( “NI 58-101 ”). The following table presents certain information concerning the current board of directors of the Managing General Partner as of the date of this Form 20-F. We intend to appoint a seventh director to the board of directors of the Managing General Partner.

 

Name and Residence

  

Position

  

Election Date

  

Principal Occupation

Jeffrey Blidner

Ontario, Canada

   Chair    August 2, 2011    Senior Managing Partner of Brookfield Asset Management

Eleazar de Carvalho Filho (1)(3)

Sao Paulo, Brazil

   Director    November 28, 2011    Corporate Director

John Van Egmond (2)(3)

Arizona, United States

   Director    November 28, 2011    Financial Consultant, Ozona Corporation

David Mann (1)(2)

Nova Scotia, Canada

   Director    November 28, 2011    Counsel, Cox & Palmer

Lou Maroun (2)(3)

Devonshire, Bermuda

   Director    August 2, 2011    Executive Chairman of Sigma Real Estate Advisors/Sigma Capital Corporation

Patricia Zuccotti (1)

Washington, United States

   Director    November 28, 2011    Corporate Director

 

(1) Member of the Audit Committee.

(2) Member of the Nominating and Governance Committee.

(3) Member of the Compensation Committee.

Biographical information for each of the directors is included below.

Jeffrey Blidner . Jeffrey is the Chair of the board of directors of the Managing General Partner. Jeffrey is a Senior Managing Partner of Brookfield Asset Management and is responsible for strategic planning as well as transaction execution. Prior to joining Brookfield in 2000, Jeffrey was a senior partner at a Toronto-based law firm. His practice focused on merchant banking transactions, public offerings, mergers and acquisitions, management buy-outs, restructurings and private equity transactions. Jeffrey was called to the Bar in Ontario as a Gold Medalist in 1974. Jeffrey was a director of AT&T Canada Inc. from August 2002 to January 2003. On October 15, 2002, AT&T Canada Inc. filed under the Companies’ Creditors Arrangement Act (Canada) in connection with a capital restructuring process. The order was in effect until February 28, 2003.

Eleazar de Carvalho Filho . Eleazar is a Director of the Managing General Partner. Eleazar was formerly the President and Managing Director of the Brazilian National Development Bank and has served as the Chief Executive Officer for Unibanco Investment Bank. He is a founding partner of Iposeira Capital, established in 2003 as an independent advisory and asset management company, as well as Virtus BR Partners. From 2006 to 2011, Eleazar served as the non-executive Chairman of BHP Billiton Brazil. He also served on the board of directors of Petrobras, Eletrobrás and Vale, among others. Eleazar is currently a director of FMC Technologies, Inc. and of Companhia Brasileira de Distribuição Grupo Pão de Açúcar (GPA), President of the Board of Trustees of the Brazilian Symphony Orchestra and is also a member of the Chairman’s International Advisory Council of the Americas Society. Born in Sao Paulo, Eleazar holds a Master of Arts in International Relations from The Johns Hopkins University in Washington, D.C. and a Bachelor of Arts with a major in Economics from New York University. Eleazar was a Director of Varig S.A. — Vição Aérea Rio-Grandense from May 7, 2005 to November 18, 2005. On June 17, 2005 Varig S.A. — Vição Aérea Rio-Grandense applied for a grant of judicial recovery with a view to restructuring payments to its creditors. On August 20, 2010, Varig S.A. — Vição Aérea Rio-Grandense was declared bankrupt. The bankruptcy proceedings are still underway.

John Van Egmond . John is a Director of the Managing General Partner. John is presently a financial consultant with Ozona Corporation (a general consulting company) in Tucson, Arizona. Prior to this role, he was the acting President and Chief Executive Officer and Director of Wilshire Technologies, Inc. (located in Carlsbad, California) where he was responsible for all financial, operational, sales and marketing and human resource functions. John is the past President of Century Power Corporation, an independent power producer based in Tucson, Arizona. John is a Certified Public Accountant and received a Bachelor of Science in accounting in 1972 from Montana State University.

David Mann . David is a Director of the Managing General Partner. David formerly served as President and Chief Executive Officer of Nova Scotia Power Inc. (1996-2004) and Vice Chairman (2004-2005) and President and Chief Executive Officer (1995-

 

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2004) of Emera Inc., TSX-listed energy and services companies that invest in electrical generation, transmission and distribution. David currently serves as Counsel at Cox & Palmer (a law firm) and has over 30 years of experience in the practice of corporate and commercial law, with a particular emphasis on corporate finance and public utility regulation. He also serves as Chairman of Logistec Corporation and is the Audit Committee Chairman of Logistec Corporation and also New Growth Corporation, Acadian Timber Corp., and Allbanc Split Corp II. David holds a Bachelor of Commerce and a Bachelor of Laws from Dalhousie University and a Master of Laws from the University of London, England.

Lou Maroun . Lou is a Director of the Managing General Partner. Lou is also a Director of Brookfield Infrastructure Partners L.P. and is the Founder and Executive Chairman of Sigma Real Estate Advisors/Sigma Capital Corporation, which specializes in international real estate advisory. Prior to this role, Lou was the Executive Chairman of ING Real Estate Canada, and held executive positions in a number of real estate companies where he was responsible for overseeing operations, real estate transactions, asset and property management, as well as many other related functions. Lou also is on the board of directors of Acadian Timber Corp. and Partners REIT. Lou graduated from the University of New Brunswick in 1972 with a Bachelor’s degree followed by a series of post graduate studies, majoring in psychology. In January of 2007, after a long and successful career in investment real estate, Lou was elected to the position of Fellow of the Royal Institute of Chartered Surveyors.

Patricia Zuccotti . Patricia is a Director of the Managing General Partner. Patricia served as Senior Vice President, Chief Accounting Officer and Controller of Expedia, Inc. from October 2005 to November 2011. Prior to joining Expedia, Patricia was the Director, Enterprise Risk Services of Deloitte & Touche LLP from June 2003 until October 2005. Patricia is a Certified Public Accountant and received her Masters of Business Administration, majoring in accounting and finance, from the University of Washington and a Bachelor of Arts, majoring in political science, from Trinity College.

Our Management

The Managing General Partner does not have any employees. Instead, members of Brookfield’s senior management and other individuals from Brookfield’s global affiliates are drawn upon to fulfill the Manager’s obligations to provide us with management services under our Master Services Agreement. The following table presents certain information concerning our core senior management team that is principally responsible for our operations and their positions with the Manager as of the date of this Form 20-F.

 

Name

  

Years of
experience
in relevant
industry
or role

  

Years at
Brookfield

  

Current Position with the Manager  

Harry Goldgut

   27    15    Group Chairman

Richard Legault

   27    23    President and Chief Executive Officer

Sachin Shah

   13    10    Chief Financial Officer

Jeff Rosenthal

   27    5    Chief Operating Officer

Donald Tremblay

   25    19    Executive Vice President

Each of the members of our core senior management team has substantial operational and transaction origination and execution expertise. Members of this team have also been integral in building and developing Brookfield’s renewable power operations and, although certain members of the senior management team are also managing partners of Brookfield or have some responsibilities in other Brookfield businesses, these members devote substantially all of their time to the management and development of the renewable power business. Biographical information for each of the members of this team is included below.

Harry Goldgut. Harry is the Group Chairman of the Manager. Harry is also a Senior Managing Partner of Brookfield Asset Management and the Chairman of Brookfield’s Power & Utilities Group comprising Brookfield’s renewable power generation and electric utilities businesses. He has been involved in the electric power industry since 1985. Harry joined Brookfield in 1997 as Vice President, Power Generation and since then has held various senior positions in BRPI, becoming its Co-Chairman and Chief Executive Officer in 2000, adding Chairman in 2005. He has been actively involved in developing and expanding Brookfield’s power operations and has had primary responsibility for its acquisitions and its senior regulatory relationships. He has played an active role in the restructuring of the electricity industry in Ontario as both a member of the Market Design Committee appointed by the Ontario Government in 1998 and as a member of the Minister of Energy’s Advisory Committee. Harry received an LL.B. in 1980 from Osgoode Hall Law School, and was called to the Ontario Bar in 1982.

 

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Richard Legault. Richard is the President and Chief Executive Officer of the Manager. Richard is also a Senior Managing Partner of Brookfield Asset Management, Chief Executive Officer of BRPI and was the Chief Executive Officer of the Fund. Richard oversees Brookfield’s Power & Utilities Group, comprising Brookfield’s renewable power generation and electric utilities businesses. He has led the growth of Brookfield’s renewable power operations in North and South America, helping to make Brookfield Renewable one of the largest pure play renewable power portfolios. Richard was Chief Financial Officer of Brookfield from 2000 to 2001, prior to which he held several senior positions in operations, finance, and corporate development with the Brookfield’s forest products operations. Richard received a Bachelor of Accounting from the Université du Québec in Hull.

Sachin Shah. Sachin is the Chief Financial Officer of the Manager. Sachin joined Brookfield Asset Management in 2002 as part of the corporate finance team and most recently served as its Managing Partner, Finance. In that capacity, working with Brookfield Asset Management’s Chief Financial Officer, Sachin focused on financial reporting, treasury, risk management and investor relations. In February 2011, he joined BRPI as Chief Financial Officer. Sachin received a Bachelor of Commerce degree from the University of Toronto in 1999.

Jeff Rosenthal. Jeff joined Brookfield in 2007 to oversee Brookfield’s management of transmission and distribution assets in North America. In 2010, he was appointed Chief Operating Officer of Brookfield’s Canadian renewable power portfolio and transmission assets. In 2012, Mr. Rosenthal took over the role of Chief Operating Officer for the whole Brookfield Renewable Power Group, including North and South American Operations. He is responsible for ensuring all operations and development activities are conducted with the utmost importance placed on Health, Safety and the Environment. He leads the strategic initiatives that foster development activities, in addition to supporting mergers and acquisition opportunities for both generation and transmission. Previously, Jeff was President and Chief Executive Officer of Oshawa Power and Utilities and has held other senior positions in the utility industry. Jeff is a Professional Engineer and has a Masters of Business Administration from the Schulich School of Business at York University.

Donald Tremblay. Donald is the Executive Vice President of the Manager. Donald has 19 years of experience working at Brookfield and started his career holding financial management positions of increasing responsibility with Brookfield. Donald was instrumental in the initial public offering of the Fund. Donald served as Executive Vice President and Chief Financial Officer of BRPI from 2003 to February 2011. In this role, he has led teams responsible for financings of a total value exceeding C$2.5 billion and has been actively involved in the due diligence process in many of the acquisitions that have significantly expanded the portfolio of assets of BRPI. Donald received a Bachelor of Accounting from the Université du Québec in Hull in 1987.

See also information contained under Item 3.D “Risk Factors — Risks Related to Our Relationship with Brookfield” and Item 7.B “Related Party Transactions”.

Our Master Services Agreement

Brookfield Renewable, BRELP and the Holding Entities entered into our Master Services Agreement pursuant to which the Manager has agreed to provide oversight of our business and provide the services of senior management to Brookfield Renewable. In addition, the Manager has agreed to provide services relating to acquisitions or dispositions, financings, business planning and strategy and oversight and supervision of various day to day management and administrative activities. The Operating Entities are not a party to our Master Services Agreement.

Under our Master Services Agreement, the Service Recipients have appointed the Manager, as the service provider, to provide or arrange for the provision by an appropriate service provider of the following services:

 

   

causing or supervising the carrying out of all day to day management, secretarial, accounting, banking, treasury, administrative, liaison, representative, regulatory and reporting functions and obligations;

 

   

providing overall strategic advice to the Holding Entities including advising with respect to the expansion of their business into new markets;

 

   

establishing and maintaining or supervising the establishment and maintenance of books and records;

 

   

identifying, evaluating and recommending to the Holding Entities acquisitions or dispositions from time to time and, where requested to do so, assisting in negotiating the terms of such acquisitions or dispositions;

 

   

recommending and, where requested to do so, assisting in the raising of funds whether by way of debt, equity or otherwise, including the preparation, review or distribution of any prospectus or offering memorandum in respect thereof and assisting with communications support in connection therewith;

 

   

causing or supervising the preparation and implementation of any operating plan, capital expenditure plan or marketing plan;

 

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recommending to the Holding Entities suitable candidates to serve on the Governing Bodies of the Operating Entities;

 

   

making recommendations with respect to the exercise of any voting rights to which the Holding Entities are entitled in respect of the Operating Entities;

 

   

making recommendations with respect to the payment of dividends by the Holding Entities or any other distributions by the Service Recipients, including distributions by us to our LP Unitholders;

 

   

monitoring and/or oversight of the applicable Service Recipient’s accountants, legal counsel and other accounting, financial or legal advisors and technical, commercial, marketing and other independent experts and managing litigation in which a Service Recipient is sued or commencing litigation after consulting with, and subject to the approval of, the relevant Governing Body;

 

   

attending to all matters necessary for any reorganization, bankruptcy proceedings, dissolution or winding up of a Service Recipient, subject to approval by the Governing Body of the relevant Service Recipient;

 

   

supervising the timely calculation and payment of taxes payable, and the filing of all tax returns due, by each Service Recipient;

 

   

causing or supervising the preparation of the Service Recipients’ annual consolidated financial statements, quarterly interim financial statements and other public disclosure;

 

   

making recommendations in relation to and effecting the entry into insurance of each Service Recipient’s assets, together with other insurances against other risks including directors and officers insurance, as the relevant Service Provider and the relevant Governing Body may from time to time agree;

 

   

arranging for individuals to carry out the functions of the principal executive, accounting and financial officers for Brookfield Renewable only for purposes of applicable securities laws;

 

   

providing individuals to act as senior officers of Holding Entities as agreed from time to time, subject to the approval of the relevant Governing Body;

 

   

advising the Service Recipients regarding the maintenance of compliance with applicable laws and other obligations; and

 

   

providing all such other services as may from time to time be agreed with the Service Recipients that are reasonably related to the Service Recipient’s day to day operations.

The Manager’s activities are subject to the supervision of the board of directors of the Managing General Partner and the Governing Bodies of each of the other Service Recipients, as applicable. The Manager has agreed to exercise the power and discharge the duties conferred under our Master Services Agreement honestly and in good faith, and will exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, subject to, and after taking into account, the terms and conditions of the Relationship Agreement.

Management Fee

Pursuant to our Master Services Agreement, we pay an annual base management fee, referred to as the “ Base Management Fee ”, to the Manager equal to $20 million (which amount shall be adjusted for inflation annually beginning on January 1, 2013, at an inflation factor based on year over year United States consumer price index) plus 1.25% of the amount by which the Total Capitalization Value (which is generally determined with reference to the aggregate of the value of all outstanding LP Units, assuming full conversion of Brookfield’s limited partnership interests in BRELP into LP units, and securities of the other Service Recipients that are not held by Brookfield Renewable Group, plus all outstanding third party debt with recourse to Brookfield Renewable, BRELP or a Holding Entity, less all cash held by such entities) of Brookfield Renewable exceeds an initial reference value determined based on its market capitalization immediately following the Combination. In the event that the measured Total Capitalization Value of Brookfield Renewable in a given period is less than the initial reference value, the Manager will receive a Base Management Fee of $20 million annually (subject to an annual escalation by a specified inflation factor beginning on January 1, 2013). The Base Management Fee will be calculated and paid on a quarterly basis.

Total Capitalization Value as of the latest balance sheet date (March 31, 2012) is $8,599,742,627, which against the initial reference value of $8,093,033,167 and factoring in the quarterly amount of the $20 million payable annually, resulted in a Base Management Fee payment for the first quarter of 2012 in the amount of approximately $6.6 million. The Base Management Fee payment for the period between the Combination and December 31, 2011, was approximately $2.2 million.

 

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To the extent that under any other arrangement we are obligated to pay a base management fee (directly or indirectly through an equivalent arrangement) to the Manager (or any affiliate) on a portion of our capital that is comparable to the Base Management Fee, the Base Management Fee payable for each quarter in respect thereof will be reduced on a dollar for dollar basis by our proportionate share of the comparable base management fee (or equivalent amount) under such other arrangement for that quarter. The Base Management Fee will not be reduced by the amount of any incentive distribution payable by any Service Recipient or Operating Entity to the Manager (or any other affiliate) (for which there is a separate credit mechanism under the Amended and Restated Limited Partnership Agreement of BRELP), or any other fees that are payable by any Operating Entity to Brookfield for financial advisory, operations and maintenance, development, operations management and other services. See Item 7.B “Related Party Transactions — Other Services” and “— Incentive Distributions”.

Reimbursement of Expenses and Certain Taxes

The relevant Service Recipient will reimburse the Manager for all out-of-pocket fees, costs and expenses incurred in connection with the provision of the services including those of any third party. Such out-of-pocket fees, costs and expenses include, among other things, (i) fees, costs and expenses relating to any debt or equity financing; (ii) fees, costs and expenses incurred in connection with the general administration of any Service Recipient; (iii) taxes, licenses and other statutory fees or penalties levied against or in respect of a Service Recipient; (iv) amounts owed under indemnification, contribution or similar arrangements; (v) fees, costs and expenses relating to our financial reporting, regulatory filings and investor relations and the fees, costs and expenses of agents, advisors and other persons who provide services to or on behalf of a Service Recipient; and (vi) any other fees, costs and expenses incurred by the Manager that are reasonably necessary for the performance by the Manager of its duties and functions under our Master Services Agreement. However, the Service Recipients will not be required to reimburse the Manager for the salaries and other remuneration of its management, personnel or support staff who carry out any services or functions for such Service Recipients or overhead for such persons.

In addition, the Service Recipients will be required to pay all fees, expenses and costs incurred in connection with the investigation, acquisition, holding or disposal of any acquisition that is made or that is proposed to be made by us. Where the acquisition or proposed acquisition involves a joint acquisition that is made alongside one or more other persons, the Manager will be required to allocate such fees, costs and expenses in proportion to the notional amount of the acquisition made (or that would have been made in the case of an unconsummated acquisition) among all joint investors. Such additional fees, expenses and costs represent out-of-pocket costs associated with investment activities that will be undertaken pursuant to our Master Services Agreement.

The Service Recipients will also be required to pay or reimburse the Manager for all sales, use, value added, goods and services, harmonized sales, withholding or other taxes or customs duties or other governmental charges levied or imposed by reason of our Master Services Agreement or any agreement it contemplates, other than income taxes, corporation taxes, capital taxes or other similar taxes payable by the Manager, which are personal to the Manager.

Termination

Our Master Services Agreement continues in perpetuity, until terminated in accordance with its terms. However, the Service Recipients may terminate our Master Services Agreement effective upon written notice of termination to the Manager if any of the following occurs:

 

   

the Manager defaults in the performance or observance of any material term, condition or covenant contained in the agreement in a manner that results in material harm to the Service Recipients and the default continues unremedied for a period of 60 days after written notice of the breach is given to the Manager;

 

   

the Manager engages in any act of fraud, misappropriation of funds or embezzlement against any Service Recipient that results in material harm to the Service Recipients;

 

   

the Manager is grossly negligent in the performance of its duties under the agreement and such gross negligence results in material harm to the Service Recipients; or

 

   

certain events relating to the bankruptcy or insolvency of the Manager.

The Service Recipients have no right to terminate for any other reason, including if the Manager or Brookfield experiences a change of control. The Managing General Partner may only terminate our Master Services Agreement on behalf of Brookfield Renewable with the prior unanimous approval of the Managing General Partner’s independent directors.

Our Master Services Agreement expressly provides that the agreement may not be terminated by the Service Recipients due solely to the poor performance or the underperformance of any of our operations.

 

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The Manager may terminate our Master Services Agreement effective upon written notice of termination to the Service Recipients if any Service Recipient defaults in the performance or observance of any material term, condition or covenant contained in the agreement in a manner that results in material harm to the Manager and the default continues unremedied for a period of 60 days after written notice of the breach is given to the Service Recipients. The Manager may also terminate our Master Services Agreement upon the occurrence of certain events relating to the bankruptcy or insolvency of any Service Recipient.

If our Master Services Agreement is terminated, the Licensing Agreement, the Relationship Agreement and any of Brookfield’s obligations under the Relationship Agreement would also terminate. See Item 7.B “Related Party Transactions — Relationship Agreement” and Item 3.D “Risk Factors — Risks Related to Our Relationship with Brookfield”.

Indemnification and Limitations on Liability

Under our Master Services Agreement, the Manager has not assumed and will not assume any responsibility other than to provide or arrange for the provision of the services called for under such agreement in good faith and will not be responsible for any action that the Service Recipients take in following or declining to follow the advice or recommendations of the Manager. The Managers have agreed to indemnify each of the Service Recipients and their affiliates, and their directors, officers, agents, members, partners, shareholders, employees and other representatives to the fullest extent permitted by law from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) resulting from the Manager’s bad faith, fraud, willful misconduct, gross negligence and, in the case of a criminal matter, conduct undertaken with the knowledge that the conduct was unlawful. The maximum amount of the aggregate liability of the Manager and its affiliates, the directors, officers, employees, contractors, agents, advisors and other representatives of the Manager and its affiliates, will be equal to the amounts previously paid in respect of services pursuant to our Master Services Agreement or any other agreement or arrangement contemplated by our Master Services Agreement in the two most recent calendar years by the Service Recipients. The Service Recipients have also agreed to indemnify each of the Manager, Brookfield and their directors, officers, agents, subcontractors, delegates, members, partners, shareholders and employees to the fullest extent permitted by law from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) incurred by an indemnified person or threatened in connection with our respective businesses, investments and activities or in respect of or arising from our Master Services Agreement or the services provided by the Manager, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the indemnified person’s bad faith, fraud, willful misconduct, gross negligence or in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under our Master Services Agreement, the indemnified persons will not be liable to the Service Recipients to the fullest extent permitted by law, except for conduct that involved bad faith, fraud, willful misconduct, gross negligence, or in the case of a criminal matter, conduct that the indemnified person knew to have been unlawful.

Outside Activities

Our Master Services Agreement does not prohibit the Manager or its affiliates from pursuing other business activities or providing services to third parties that compete directly or indirectly with us. For a description of related aspects of the relationship between Brookfield and the Service Recipients, see Item 7.B “Related Party Transactions — Relationship Agreement”.

See also information contained in this Form 20-F under Item 6.C “Board Practices,” Item 3.D “Risk Factors — Risks Related to our Relationship with Brookfield” and Item 6.A “Directors and Senior Management”.

 

  6.B

COMPENSATION

Our Management

The Managing General Partner does not have any employees. We have entered into our Master Services Agreement with the Manager pursuant to which the Manager and certain other affiliates of Brookfield provide or arrange for other service providers to provide management services to Brookfield Renewable, BRELP and the Holding Entities. The fees payable under the Master Service Agreement are set forth under Item 6.A “Directors and Senior Management—Our Master Services Agreement—Management Fee”. In addition, Brookfield is entitled to receive incentive distributions from BRELP described under Item 7.B “Related Party Transactions—Incentive Distributions”.

Pursuant to our Master Services Agreement, members of Brookfield’s senior management and other individuals from Brookfield’s global affiliates are drawn upon to fulfill obligations under our Master Services Agreement. However, these individuals, including the Brookfield employees identified in the table below under Item 6.A “Directors and Senior Management—Our Management”, are not compensated by Brookfield Renewable or the Managing General Partner. Instead, they continue to be compensated by Brookfield. These individuals are not directors or officers of Brookfield Renewable or the Managing General Partner.

The following individuals performed functions similar to a chief executive officer and chief financial officer for Brookfield Renewable (only for the purpose of compliance with applicable securities laws) and the other three most highly paid members of our core senior management team for the year ended December 31, 2011 (collectively, our “ Named Executive Officers ” or “ NEOs ”):

Richard Legault, Chief Executive Officer of the Manager;

 

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Sachin Shah, Chief Financial Officer of the Manager;

Harry Goldgut, Group Chairman of the Manager;

*Ben Vaughan, President and Chief Operating Officer of the Manager; and

Donald Tremblay, Executive Vice President of the Manager

*Effective May 2012, Ben Vaughan has ceased to act as President and Chief Operating Officer of the Manager and is transitioning to a new position with Brookfield outside of Brookfield Renewable and the Manager.

Under Canadian securities laws, we are required to disclose the following executive compensation information relating to the Named Executive Officers. The compensation philosophy of Brookfield, which determines the compensation of our senior management, and the compensation elements paid to them outlined below, are provided for full disclosure.

Compensation Philosophy of Brookfield

Brookfield determines the compensation of its employees and the executives and senior managers of its subsidiaries, which includes the NEOs. Brookfield has adopted an approach to compensation that is intended to foster an entrepreneurial environment that encourages management to make decisions and take actions that will create long-term sustainable cash flow growth and will result in improvement in long-term shareholder value.

Compensation Elements Paid by Brookfield

The primary elements of total compensation paid by Brookfield to the NEOs are: base salary, management incentive plan awards (“ Cash Bonus ”) and participation in long-term incentive plans.

Total annual compensation awarded to senior executives, including the Named Executive Officers, generally does not change significantly from year to year. This practice recognizes that rewarding short-term performance would not necessarily be consistent with Brookfield’s focus of long-term value creation. A significant amount of annual compensation for these executives is represented by awards pursuant to long-term share ownership plans which vest over time, in order for the executives to increase their ownership interest in Class A Limited Voting Shares of Brookfield Asset Management (“ Class A Limited Voting Shares ”).

Total compensation for executives who are at earlier stages in their careers also includes awards pursuant to long-term share ownership plans but tends to include a larger percentage of their total compensation in the form of base salary and cash bonus awards in recognition of their personal needs and to be competitive within the financial services industry. Furthermore, changes in total compensation from year to year may vary more for these executives as they take on increasing responsibility.

As executives progress within Brookfield, they have the opportunity to reinvest their Cash Bonus into deferred share units under the DSUP or restricted shares under the Restricted Stock Plan of Brookfield, thereby enabling them to increase their ownership interests. In addition, notwithstanding the fact that regular total compensation for individuals may not change significantly year over year, management may request that Brookfield Asset Management’s compensation committee (“ BAM’s Compensation Committee ”) grant special compensation awards to executives who have demonstrated a clear ability to take on additional responsibilities and have consistently performed at an exceptional level. These special awards are granted in the form of options to acquire Class A Limited Voting Shares, restricted shares of Class A Limited Voting Shares or escrowed shares as described below.

Brookfield Renewable has no control over the form or amount of the compensation paid by Brookfield to the NEOs and participation in long-term incentive plans is not allocated to or payable by Brookfield Renewable.

Base Salaries

Base salaries of the NEOs are determined and approved by Brookfield. Base salaries tend to remain fairly constant from one year to another unless the scope and responsibility of the position has changed.

Cash Bonus and Long-Term Incentive Plans

Brookfield believes that, for the NEOs, given their focus on long-term decision making, the impact of which is difficult to assess in the short term, a formula calculation based on annual operational targets may not appropriately reflect their long-term objectives. Accordingly, for the NEOs, the Cash Bonus and compensation under long-term incentive plans are determined primarily through an evaluation by Brookfield of the progress in executing Brookfield Renewable’s strategy and business plan as a whole; no specific weight is given to the achievement of any individual objective

The Cash Bonuses and compensation under long-term incentive plans granted to the NEOs by Brookfield are directly related to the performance and achievements of the NEOs, the performance and success of Brookfield Renewable Group, as well as significant contributions to the business strategy of Brookfield as a whole. The level of Cash Bonus and long-term incentive

 

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compensation granted to each NEO is discretionary, based on his achievement of specific objectives that are set at the beginning of the year with Brookfield’s Chief Executive Officer and pertain, in part to the performance of Brookfield Renewable Group with respect to its FFO, capital improvement programs, operational expenditures, environment, health and safety programs, growth of the portfolio of assets, financing activities, as well as sound management governance practices.

The objectives relating to Brookfield Renewable are driven by Brookfield Renewable Group’s business plan and are meant to be aggressive and indicative of the entrepreneurial and opportunistic culture of the organization. They support the long-term strategy of Brookfield Renewable Group by translating into concrete and specific terms various transactions and initiatives that Brookfield’s and our Manager’s management believe will create shareholder value over the long-term.

Brookfield’s long-term incentive plans are intended to enable participants to create wealth through increases in the value of Class A Limited Voting Shares. The purpose of these arrangements is to achieve an alignment of interest between Brookfield’s shareholders and management and to motivate executives to improve Brookfield’s long-term financial success, measured in terms of enhanced shareholder wealth over the long term.

Brookfield has three long-term incentive plans in which NEOs of Brookfield Renewable participate. They are described below in more detail.

Management Share Option Plans . The management share option plans govern the granting to executives of options to purchase Class A Limited Voting Shares at a fixed price. The options typically vest as to 20% at the end of each year on a cumulative basis and are exercisable over a ten-year period. The management share option plans are administered by BAM’s Compensation Committee. Options are granted to the NEOs in late February or early March of each year as part of the annual compensation review. Management may request that BAM’s Compensation Committee grant special compensation awards to the NEOs. BAM’s Compensation Committee has a specific written mandate to review and approve executive compensation. BAM’s Compensation Committee makes recommendations to the board of directors of Brookfield Asset Management with respect to the proposed allocation of options to the NEOs based in part upon the recommendations of the Chief Executive Officer of the Manager and the board of directors of Brookfield Asset Management gives final approval on these compensation matters.

The number of options granted to NEOs is determined based on the scope of their roles, level of responsibilities and performance against objectives set out for the Brookfield Renewable Group. In doing so, consideration is given to the number and value of previous grants of options. Since the annual option awards are generally made during a blackout period, the effective grant date for such options is set six business days after the end of the blackout period. The exercise price for such options is the volume-weighted average trading price for Class A Limited Voting Shares on the NYSE for the five business days preceding the effective grant date.

Deferred Share Unit Plan . The DSUP provides for the issuance of deferred share units (“ DSUs ”) of Brookfield, the value of which are equal to the value of a Class A Limited Voting Share. The DSUP is administered by BAM’s Compensation Committee. DSUs vest over periods of up to five years, with the exception of DSUs awarded in lieu of a Cash Bonus which vest immediately. DSUs can only be redeemed for cash upon cessation of employment through retirement, resignation, termination or death.

DSUs are issued based on the value of Class A Limited Voting Shares at the time of the award (the “ DSU Allotment Price ”). In the case of DSUs acquired through the reinvestment of Cash Bonus awards, the DSU Allotment Price is equal to the exercise price for options granted at the same time as described above. Holders of DSUs will be allotted additional DSUs as dividends are paid on Class A Limited Voting Shares on the same basis as if the dividends were reinvested pursuant to Brookfield Asset Management’s dividend reinvestment plan. These additional DSUs allotted as dividends are subject to vesting provisions (except in the case of dividends on DSUs acquired through the reinvestment of Cash Bonus awards). The redemption value of DSUs will be equivalent to the market value of an equivalent number of Class A Limited Voting Shares on the date employment with Brookfield or Brookfield Renewable Group ceases.

Restricted Share Unit Plan. The Restricted Share Unit Plan (the “ RSUP ”) provides for the issuance of restricted share units (“ RSUs ”), the value of which are equal to the increase in market value of a Class A Limited Voting Share over the market value as at the date of issuance (the “ RSU Allotment Price ”). The RSUP is administered by the BAM Compensation Committee. RSUs vest over periods of up to five years.

RSUs can only be redeemed for cash upon cessation of employment through retirement, resignation, termination or death.

RSUs are not adjusted for regular dividends paid on Brookfield Asset Management’s Class A Limited Voting Shares. The redemption value of RSUs is equal to the difference between the market value of an equivalent number of Brookfield Asset Management’s Class A Limited Voting Shares on the date employment with Brookfield Asset Management ceases and the original RSU Allotment Price for such RSUs.

In limited circumstances, senior executives are awarded RSUs as additional compensation subject to limits approved by Brookfield Asset Management’s board of directors. No RSUs have been awarded since February 2004.

Restricted Stock Plans. Brookfield Asset Management has two restricted stock plans: the Restricted Stock Plan and the Escrowed Stock Plan. These plans were established on February 17, 2011 to provide Brookfield and its executives with alternatives to Brookfield Asset Management’s existing plans which allow executives to increase their share ownership. Restricted shares have the advantage of allowing executives to become Brookfield Asset Management shareholders, receive dividends, and to have full ownership of the shares after the restriction period ends.

 

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Restricted Stock Plan. The Restricted Stock Plan (the “ RSP ”) governs the award to executives of Class A Limited Voting Shares purchased on the open market. BAM’s Compensation Committee administers the RSP. Restricted shares vest over periods of up to five years, except that restricted shares awarded in lieu of a cash bonus vest immediately. Vested and unvested restricted stock must be held until the fifth anniversary of the award date. Holders of restricted shares are entitled to vote their shares and to receive dividends that are paid on the Class A Limited Voting Shares. Prior to the fifth anniversary of the award date, these dividends are distributed in the form of additional restricted shares, equivalent in value to the cash dividends paid on the restricted shares net of required withholding taxes and subject to the same vesting and hold provisions as the original restricted shares.

Escrowed Stock Plan. The Escrowed Stock Plan (the “ Escrowed Stock Plan ”) governs the award of non-voting common shares (“ escrowed shares ”) of one or more private companies (each, a “ Holdco ”) to designated executives or other individuals designated by BAM’s Compensation Committee. Each Holdco is capitalized with common shares and preferred shares issued to Brookfield for cash proceeds. Each Holdco uses its cash resources to purchase Class A Limited Voting Shares of Brookfield Asset Management on the open market. Dividends paid to each Holdco on the Class A Limited Voting Shares acquired by the Holdco will be used to pay dividends on the preferred shares which are held by Brookfield. The Class A Limited Voting Shares acquired by a Holdco will not be voted.

Escrowed shares typically vest 20% each year commencing on the date of the first anniversary of the date of the award and must be held until the fifth anniversary of the award date. Each holder may exchange escrowed shares for Class A Limited Voting Shares issued from treasury of Brookfield Asset Management at a date at least five years from and no more than 10 years from the award date.

Brookfield believes that, for the NEOs, given their focus on long term decision making, the impact of which is difficult to assess in the short term, a formula calculation based on annual operational targets or individual performance targets may not appropriately reflect the long term strategy. Accordingly, as a whole, no specific weight is given to the achievement of any individual objective.

For 2011, the Cash Bonuses and compensation under long-term incentive plans paid to the NEOs by Brookfield were based on the overall performance of Brookfield Renewable Group and significant contributions to the business strategy of Brookfield as a whole. Listed below are several of the key accomplishments which drove Brookfield Renewable Group’s strategy and business plan and which influenced the level of Cash Bonus and long-term incentives received by each of the NEOs.

 

   

We successfully completed the Combination to establish Brookfield Renewable, thus forming one of the world’s largest publicly-listed pure-play renewable power businesses.

 

   

We obtained credit facilities of a total value of C$950 million to support our growth activities, including the acquisition of wind development projects and a hydroelectric facility in Brazil.

 

   

We successfully implemented low cost funding strategies through completion and closing of a total of C$622 million of financings for seven of our assets.

 

   

We significantly increased our presence on the West Coast of the United States from both an operational and commercial perspective. We completed the acquisition of two wind projects in California totaling 172 MW and the remaining 50% interest in our existing 102MW California wind project, which will allow us to significantly expand our portfolio of wind assets.

 

   

We commissioned our 166 MW Comber wind farm in Canada, whose construction was completed on schedule and below budget by C$40 million, as well as completed the construction and commissioning of the 99 MW Granite Reliable wind farm located in the U.S.

 

   

We acquired Sacre II, a fully contracted 30 MW hydroelectric facility in the southeast region of Brazil, and successfully integrated the employees to our Brazil operations.

 

   

We completed the construction and commissioning of two hydroelectric plants, namely Lower St. Anthony Falls and Glen Ferris, therefore adding another 16 MW of capacity to our U.S. portfolio of assets.

 

   

We made strong progress on furthering the development of a 45 MW hydroelectric project in British Columbia that has a 40-year power purchase agreement by receiving a key environmental assessment certificate.

 

   

Further details on many of our 2011 accomplishments are described under Item 4.A “History and Development of our Business”.

 

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Performance Graph

LOGO

 

Jan 1, 2007 Jan 1, 2007 Jan 1, 2007 Jan 1, 2007 Jan 1, 2007 Jan 1, 2007
       Jan 1, 2007      2007      2008      2009      2010      2011  

 

Brookfield Renewable Power Fund / Brookfield

                   

Renewable Energy Partners L.P.

     100.0         113.7         94.8         122.9         140.7         195.6   

S&P / TSX Composite Index Total Return

     100.0         109.8         73.6         99.1         116.9         106.7   

The graph above shows the performance of our LP Units (and, prior to the Combination, the Fund’s trust units) as compared to the S&P/TSX Composite Index for the past five years. The performance of the LP Units is one of the considerations but not a direct factor in the determination of compensation for NEOs.

 

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Summary Compensation Table

The NEOs are all employed by Brookfield and their services are provided to us pursuant to our Master Services Agreement. We are not responsible for paying their compensation. For the purpose of full disclosure, the following table presents the compensation for the NEOs for the period from January 1, 2011 to December 31, 2011 and for the previous two years (which includes payments to the NEOs by Brookfield prior to the Combination).

 

              Salary      Share-based Awards  

 Options-based  

 Awards  

 

Non-equity  

incentive plan  
compensation  

  Pension 
Value 
  All Other 
Compensation 
  Total Annual
Compensation

Name and Principal  

Position

 

Year 

 

   

(1) 

($) 

    Escrowed 
Shares 
(2)  
($)  
 

Restricted

Shares  (3), (7)   
($)   

  DSUs  
(1), (7) 
($)  
 

(1), (4), (5), (6)  

($)  

 

(1), (7)  

 

($)  

  ($)    

(1), (8) 

($) 

 

(1)  

($)

Harry Goldgut  ( i )

    2011         454,913       981,000    454,913       0     0       29,127    1,919,953

Group Chairman of the  

    2010         404,367       1,180,500    0     404,367    0     0       25,603    2,014,837

Manager

    2009         379,094         0     303,275    1,458,000     0       24,444    2,164,813

Richard Legault   

    2011         505,459       1,308,000    0       0     505,459       42,104    2,361,022

Chief Executive Officer of  

    2010         505,459       1,180,500    0     126,365    0     379,094       34,008    2,225,426

the Manager

    2009         404,367         0     202,184    1,701,000     202,184       34,307    2,544,041

Benjamin Vaughan

 

   

 

2011 

 

  

 

   

 

404,367 

 

  

 

 

 

  1,113,930  

 

 

 

  981,000  

 

  40,437  

 

 

 

  35,770 

 

  2,575,504

 

President and Chief

    2010         353,821         0     161,747    826,350     40,437       34,627    1,416,982

Operating Officer of the

                                   

Manager

    2009         303,275         0     53,073    972,000     53,073       27,813    1,409,234

Sachin Shah

    2011         303,275         363,728       457,800     113,728       31,237    1,269,768

Chief Financial Officer of  

    2010         267,893         0     101,092    275,450     101,092       18,577    764,104

the Manager

    2009         242,620         0     60,655    607,500     60,655       18,600    990,030

Donald Tremblay

    2011         328,548         0       196,200     227,457       45,923    798,128

Executive Vice President  

    2010         303,275         0       181,010     121,310       43,862    649,457

of the Manager

    2009         252,729         0       364,500     101,092       45,544    763,865

(1) Compensation is normally paid to the NEOs in Canadian dollars. The US dollar equivalent shown has been calculated for purposes of this summary compensation table using the average exchange rate of C$1.00 = US$1.010918, which was the average rate for 2011 as reported by the Bank of Canada.

(2) The value awarded under the Escrowed Stock Plan is determined by the board of directors of Brookfield Asset Management and considers the stock market price of the Class A Limited Voting Share at the time of the award and the potential increase in value assuming a hold of 7.5 years, a volatility of 32.6%, a risk free rate of 1.8% and a dividend growth rate of 4%. This value has been discounted by 25% to reflect the delayed vesting until the fifth anniversary of the award.

(3) Includes restricted share grants and elected deferrals from Cash Bonus. Restricted shares granted to the executive vest 20% per year over 5 years. Restricted shares received as a result of bonus deferral vest immediately. The restricted shares in this column for 2011 were awarded on February 29, 2012 at a price of US$31.32, the volume weighted average price of the Class A Limited Voting Shares on the NYSE for the 5 days preceding the award date less the value of the required withholding taxes. Mr. Vaughan was awarded a total of 21,499 restricted shares, Mr. Shah was awarded a total of 7,020 restricted shares and Mr. Goldgut was awarded a total of 8,726 restricted shares.

 

(4) The 2011 option awards are based on the value of the options issued on February 29, 2012 of $6.54 per option calculated using the Black-Scholes option pricing model, discounted by 25% to reflect the five-year vesting and one-year holding provisions of Brookfield’s management share option plans. The options granted at this date are exercisable at the price of $31.32.

(5) The 2010 option awards are based on the value of the options issued on March 1, 2011 of $7.87 per option calculated using the Black-Scholes option pricing model, discounted by 25% to reflect the five-year vesting and one-year holding provisions of Brookfield’s management share option plans. The options granted at this date are exercisable at a price of $32.61.

(6) The 2009 option awards are based on the value of the options issued on March 2, 2010 of $4.86 per option (converted from C$5.03 using the Bloomberg’s mid-market exchange rate of US$1 = C$1.0356 on March 2, 2010.) calculated using the Black-Scholes option pricing model, discounted by 25% to reflect the five-year vesting and one-year holding provisions of Brookfield’s management share option plans. The options granted at this date are exercisable at a price of $23.18.

(7) Some of the NEOs have elected to reinvest a portion of their Cash Bonus in Brookfield and receive it in share-based awards (DSUs or Restricted Shares). The bonus paid out in the form of DSUs or Restricted Shares is included in the share-based awards columns.

(8) These amounts include annual retirement savings contributions, participation in an executive group benefits program and vehicle benefits.

(9) The values in this row do not include $27,005 of in-the-money value from 1,375 options which Mr. Goldgut exercised in 2011.

 

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Incentive Plan Awards - Outstanding Share-Based Awards and Option Based Awards

The following table shows the options, restricted share awards and unvested DSUs outstanding at December 31, 2011.

Option Awards and Share-Based Awards at December 31, 2011

 

      Option Awards (1) (2)    Restricted Share Appreciation    Share-Based Awards  
      Vested and Unvested    Units (RSU) Awards (2)(3)
Vested and Unvested
   Escrowed Shares (1)    Deferred Share Units (DSUs) (1)  
      Number of
Securities
Underlying
Unexercised
Options
   Market
Value of
Unexercised
Options
   Number of
Securities
Underlying
Outstanding
RSUs
   Market
Value

of
Outstanding
RSUs
   Number of
Unvested
ESs
   Market
Value of
Unvested
ESs (d)
   Number of
Unvested
DSUs
   Market
Value of
Unvested
DSUs
   Market
Value  of
Vested
DSUs (e)
 
      (#)    ($)    (#)    ($)    (#)    ($)    (#)    ($)    ($)  

 

  

 

  

 

  

 

 

Harry Goldgut

  1,098,000    9,642,290    253,125    4,758,888    150,000    -            4,328,051   

Richard Legault

  1,534,375    9,843,837    253,125    4,758,888    150,000    -            2,826,945   

Benjamin Vaughan

  867,563    5,679,727    -    -    -    -            800,007   

Sachin Shah

  565,250    3,743,460    -    -    -    -            473,974   

Donald Tremblay

  294,625    1,635,133    -    -    -    -                384,504   

(1) These values do not include awards made to the NEOs on February 29, 2012.

(2) The market value is the amount by which the value of the Class A Limited Voting Shares at the date shown exceeded the exercise price of the options or the RSU awards. The closing price of Class A Limited Voting Shares on the TSX on December 31, 2011 was $27.44 (C$28.04 converted into U.S. dollars at the Bank of Canada exchange rate on that day of US$1.00 = C$1.0218) and on the NYSE on December 30, 2011 of $27.48 as applicable.

(3) Restricted shares are not redeemable until cessation of employment and have no expiration date.

(4) The value of the escrowed shares is equal to the value of the Class A Limited Voting Shares held by Holdco less the net liabilities and preferred share obligations of the Holdco. There are no vested escrowed shares.

(5) The market value is calculated as the number of vested DSUs multiplied by the closing price of the Class A Limited Voting Share on December 31, 2011. The closing price of Class A Limited Voting Shares on the TSX on December 31, 2011 was $27.44 (C$28.04 converted into U.S. dollars at the Bank of Canada exchange rate on that day of US$1.00 = C$1.0218) and on the NYSE on December 30, 2011 of $27.48 as applicable.

 

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Incentive Plan Awards - Outstanding Option Awards and Restricted Shares at December 31, 2011

The following table shows the details of each option and restricted share outstanding at December 31, 2011.

 

      Option-based Awards        
 
Restricted Share Units
(RSUs)
  
  

Name and

principal position

 

Number of
securities
underlying
unexercised
options

(#)

    Options
exercise
price (C$)
   

Options
exercise
price

($) (1)

   

  Options  

  expiration date  

 

Market

value of
unexercised
options at
Dec 31,

2011

($) (2)

   

Number of
RSUs

(#)

   

Issuance
price

($) (1)(3)

   

Market value

of RSUs

December 31,
2011

($) (2)

 
             

Harry Goldgut

Group Chairman of the Manager

    83,000      $ 8.51      $ 8.33      February 13, 2012    $ 1,586,436        253,125      $ 8.64      $ 4,758,888   
    118,125      $ 8.83      $ 8.64      February 12, 2013   $ 2,220,811        -            -            -       
    84,375      $ 13.37      $ 13.08      February 11, 2014   $ 1,211,710        -            -            -       
    168,750      $ 20.42      $ 19.98      February 11, 2015   $ 1,258,808        -            -            -       
    56,250      $ 27.30      $ 26.72      February 14, 2016   $ 40,859        -            -            -       
    37,500      $ 39.03      $ 38.20      February 13, 2017   $ -        -            -            -       
    50,000      $ 31.62      $ 30.95      February 20, 2018   $ -        -            -            -       
    200,000      $ 17.65      $ 17.27      February 25, 2019   $ 2,033,666        -            -            -       
    300,000        $ 23.18      March 2, 2020   $ 1,290,000        -            -            -       
      1,098,000                          $ 9,642,290        253,125              $ 4,758,888   
             
Richard Legault     84,375      $ 13.37      $ 13.08      February 11, 2014   $ 1,211,710        253,125      $ 8.64      $ 4,758,888   

Chief Executive Officer of

the Manager

    393,750      $ 20.42      $ 19.98      February 11, 2015   $ 2,937,218        -            -            -       
    168,750      $ 27.30      $ 26.72      February 14, 2016   $ 122,578        -            -            -       
      37,500      $ 39.03      $ 38.20      February 13, 2017   $ -        -            -            -       
      100,000      $ 31.62      $ 30.95      February 20, 2018   $ -        -            -            -       
      400,000      $ 17.65      $ 17.27      February 25, 2019   $ 4,067,332        -            -            -       
      350,000        $ 23.18      March 2, 2020   $ 1,505,000        -            -            -       
      1,534,375                          $ 9,843,838        253,125              $ 4,758,888   
             
Ben Vaughan     15,688      $ 8.83      $ 8.64      February 12, 2013   $ 294,943        -            -            -       

 

President and Chief Operating Officer of the Manager

    33,750      $ 13.37      $ 13.08      February 11, 2014   $ 484,684        -            -            -       
    129,375      $ 20.42      $ 19.98      February 11, 2015   $ 965,086        -            -            -       
    33,750      $ 27.30      $ 26.72      February 14, 2016   $ 24,516        -            -            -       
    30,000      $ 39.03      $ 38.20      February 13, 2017   $ -        -            -            -       
    20,000      $ 31.62      $ 30.95      February 20, 2018   $ -        -            -            -       
    300,000      $ 17.65      $ 17.27      February 25, 2019   $ 3,050,499        -            -            -       
    200,000        $ 23.18      March 2, 2020   $ 860,000        -            -            -       
    105,000        $ 32.61      March 1, 2021   $ -        -            -            -       
      867,563                          $ 5,679,728        -                  $ -        
             
Sachin Shah     6,750      $ 13.37      $ 13.08      February 12, 2014   $ 96,937        -            -            -       

Chief Financial Officer of

the Manager

    6,750      $ 20.42      $ 19.98      February 11, 2015   $ 50,352        -            -            -       
    11,250      $ 27.30      $ 26.72      February 14, 2016   $ 8,172        -            -            -       
      38,250      $ 39.03      $ 38.20      February 13, 2017   $ -        -            -            -       
      42,250      $ 31.62      $ 30.95      February 20, 2018   $ -        -            -            -       
      300,000      $ 17.65      $ 17.27      February 25, 2019   $ 3,050,499        -            -            -       
      125,000        $ 23.18      March 2, 2020   $ 537,500        -            -            -       
      35,000        $ 32.61      March 1, 2021   $ -        -            -            -       
      565,250                          $ 3,743,460        -                  $ -       
             
Donald Tremblay     14,625      $ 13.37      $ 13.08      February 11, 2014   $ 210,030        -            -            -       
      22,500      $ 20.42      $ 19.98      February 11, 2015   $ 167,841        -            -            -       

Executive Vice President

of the Manager

    27,000      $ 27.30      $ 26.72      February 14, 2016   $ 19,612        -            -            -       
    22,500      $ 39.03      $ 38.20      February 13, 2017   $ -        -            -            -       
      20,000      $ 31.62      $ 30.95      February 20, 2018   $ -        -            -            -       
      90,000      $ 17.65      $ 17.27      February 25, 2019   $ 915,150        -            -            -       
      75,000        $ 23.18      March 2, 2020   $ 322,500        -            -            -       
      23,000        $ 32.61      March 1, 2021   $ -               
      294,625                          $ 1,635,133        -                  $ -       

(1) The 2011 options exercise price was converted into US dollars at the Bank of Canada exchange rate on December 31, 2011 US $1.00 = C$1.0218.

(2) The market value of the Class A Limited Voting Shares under option and RSUs is the amount by which the closing price of Class A Limited Voting Shares on December 31, 2011 exceeded the exercise price of the options and/or the issuance price of the RSUs. All values are calculated using the closing price of Class A Voting Shares on December 31, 2011 on the TSX for options issued prior to March 2, 2010 and on the NYSE for options issued thereafter. The closing price of the Class A Limited Voting Shares on the TSX on December 31, 2011 was $27.44 (C$28.04 converted into U.S. dollars at the Bank of Canada exchange rate on that day of C$1.00 = US$1.0218.) The closing value of the Class A Limited Voting Shares on December 31, 2011 on the NYSE was $27.48.

(3) RSUs are not redeemable until cessation of employment and have no expiration date.

 

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Incentive Plan Awards - Value Vested or Earned During the Year

The following table shows the value of all option and share-based awards which vested during 2011.

Option and Share-Based Awards Vested During 2011

 

           

Non-equity    
incentive plan    
compensation –

Value earned    
during the year

      Value Vested During 2011  (1)       
     

Options

 

 

DSUs

 

 
Name Executive Officer   ($)   ($)  

Harry Goldgut

  1,235,497   451,005   0    
     

Richard Legault

  2,044,619   161,171   505,459    
     

Benjamin Vaughan

  1,315,716   172,009   40,437    
     

Sachin Shah

  1,150,891   208,756   113,728    
     

Donald Tremblay

  441,698   5,998   227,457    

(1) The value on vesting date has been converted to US$ at an exchange rate of CDN $1.00 = US$1.010918, which was the average Bank of Canada Exchange rate for 2011.

Pension Plan

Brookfield Renewable sponsors a defined benefit pension plan and a defined contribution pension plan. The defined benefit pension plan provides its employees, upon their normal retirement age of 65 years or upon early retirement at the time when age plus service is equal to or greater than 85 years, with a pension payable for the retiree’s life and 60% of that pension continuing to the retiree’s spouse upon the employee’s death. If the employee does not have a spouse at retirement, the lifetime pension is payable for the retiree’s life with a ten-year guarantee. If the employee retires prior to the age of 65, a temporary bridge benefit is also payable. The annual pension under the defined benefit plan at an employee’s normal retirement date is calculated as the product of (i) 2.0% of the employee’s highest five-year average annual eligible earnings less 0.5% of the five-year average of Year’s Maximum Pensionable Earnings under the Canada/Québec Pension Plan, and (ii) the employee’s years of credited service.

Mr. Legault and Mr. Tremblay participated in the defined benefit pension plan until December 31, 2005. Since January 1, 2006, they have not accrued additional pension credits in any pension plan sponsored by Brookfield Renewable or its subsidiaries. The annual pension payable to Mr. Legault under the defined benefit pension plan when he reaches age 65 or when his age plus service is equal to 85 years amounts to $68,600. Mr. Tremblay elected in 2007 to transfer the lump sum value of his entitlements out of the pension plan.

The following table sets out certain information with respect to Mr. Legault’s accrued benefits in the defined benefit pension plan in which he participated until December 31, 2005.

Pension Plan Benefit Table

 

     

Number of 

years of 

credited service 

 

Annual benefits payable 

($) 

 

Accrued 

obligation at 

start of year ($) 

 

Compensatory 

change 

($) 

 

Accrued 

obligation at 

year end 

($) 

Name     At year end    At age 65       

Richard Legault

                       
             

Chief Executive

Officer of the

Manager

  16.31    68,600    68,600    598,000      759,000 

Note: Amounts reported in Canadian dollars.

 

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Termination and Change of Control Benefits

There are no employment contracts between the NEOs and Brookfield Renewable. None of the NEOs have any termination, change of control arrangement or other compensatory plan, contract or arrangement with Brookfield Renewable.

While the NEOs participate in Brookfield’s long-term incentive plans, Brookfield Renewable does not reimburse the Manager for such participation and has no obligations under these plans to the NEOs in the event of a change of control or a termination of their employment.

Board of Directors of the Managing General Partner

The Managing General Partner pays each of its directors $60,000 per year for serving on its board of directors and various board committees. The Managing General Partner pays the chairperson/lead director of the board of directors an additional $35,000 per year and each chairperson of the committees of the board of directors an additional $10,000 ($20,000 for the chairperson of the Audit Committee). Only those directors who are not employed by Brookfield or its affiliates are entitled to receive compensation for acting as a director of the Managing General Partner.

We believe that directors of the Managing General Partner can better represent LP Unitholders if they are LP Unitholders themselves. Accordingly, within five years of joining the board of directors, directors of the Managing General Partner are required to hold sufficient LP Units such that either the acquisition cost or current market value is equal to at least two times their annual retainer, as established by the board. This minimum ownership requirement is currently $120,000. We consider this minimum ownership requirement to be consistent with best practices.

The Compensation Committee is responsible for reviewing and making recommendations to the board of directors of the Managing General Partner concerning the remuneration of directors and committee members. See Item 6.C “Board Practices — Compensation Committee”.

Indebtedness of Directors and Executive Officers

As at the date of this Form 20-F, and at all times since January 1, 2011, none of the directors, officers, employees and former directors, officers and employees of the Managing General Partner, the Manager or any of their respective subsidiaries (or of the Fund or Brookfield or their respective subsidiaries prior to the Combination), nor any of their associates, has or had any indebtedness owing to Brookfield Renewable or any of its subsidiaries (or to the Fund or Brookfield or their respective subsidiaries prior to the Combination).

 

  6.C

BOARD PRACTICES

Board Structure, Practices and Committees

The structure, practices and committees of the Managing General Partner’s board of directors, including matters relating to the size, independence and composition of the board of directors, the election and removal of directors, requirements relating to board action and the powers delegated to board committees, are governed by the Managing General Partner’s bye-laws. The Managing General Partner’s board of directors is responsible for exercising the management, control, power and authority of the Managing General Partner except as required by applicable law or the bye-laws of the Managing General Partner. The following is a summary of certain provisions of those bye-laws that affect Brookfield Renewable’s governance.

Size, Independence and Composition of the Board of Directors

The Managing General Partner’s board of directors is currently set at six directors, and we intend to appoint a seventh director. The board may consist of between three and 11 directors or such other number of directors as may be determined from time-to-time by a resolution of the Managing General Partner’s shareholders and subject to its bye-laws. At least three directors and at least a majority of the directors holding office must be independent of the Managing General Partner and Brookfield, as determined by the full board of directors using the standards for independence established under applicable securities laws.

If the death, resignation or removal of an independent director results in the board of directors consisting of less than a majority of independent directors, the vacancy must be filled promptly. Pending the filling of such vacancy, the board of directors may temporarily consist of less than a majority of independent directors and those directors who do not meet the standards for independence may continue to hold office. In addition, the Managing General Partner’s bye-laws provide that not more than 50% of the directors (as a group) or the independent directors (as a group) may be residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the board of directors from time to time).

 

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Election and Removal of Directors

The Managing General Partner’s board of directors was appointed by its sole shareholder and each of its current directors will serve until the close of the next annual meeting of shareholders of the Managing General Partner or his or her death, resignation or removal from office, whichever occurs first. Vacancies on the board of directors may be filled and additional directors may be added by a resolution of the Managing General Partner’s shareholders or a vote of the directors then in office. A director may be removed from office by a resolution duly passed by the Managing General Partner’s shareholders or, if the director has been absent without leave from three consecutive meetings of the board of directors, by a written resolution requesting resignation signed by all other directors then holding office. A director will be automatically removed from the board of directors if he or she becomes bankrupt, insolvent or suspends payments to his or her creditors or becomes prohibited by law from acting as a director.

Action by the Board of Directors

The Managing General Partner’s board of directors may take action in a duly convened meeting at which a quorum is present or by a written resolution signed by all directors then holding office. When action is to be taken at a meeting of the board of directors, the affirmative vote of a majority of the votes cast is required for any action to be taken.

Transactions Requiring Approval by Independent Directors

The Managing General Partner’s independent directors approved the Conflicts Policy which addresses the approval and other requirements for transactions in which there is potential for a conflict of interest to arise. These transactions include, but are not limited to:

 

   

the dissolution of BRELP;

 

   

any material amendment to our Master Services Agreement, the Amended and Restated Limited Partnership Agreement of BRELP or the Amended and Restated Limited Partnership Agreement of BREP;

 

   

any material service agreement or other arrangement pursuant to which Brookfield will be paid a fee, or other consideration other than any agreement or arrangement contemplated by our Master Services Agreement;

 

   

subject to certain exceptions, acquisitions by us from, and dispositions by us to, Brookfield;

 

   

subject to certain exceptions, any other material transaction involving us and Brookfield; and

 

   

termination of, or any determinations regarding indemnification under, our Master Services Agreement.

The Conflicts Policy requires the transactions described above to be approved by a majority of the Managing General Partner’s independent directors. Pursuant to the Conflicts Policy, independent directors may grant approvals for any of the transactions described above in the form of general guidelines, policies or procedures in which case no further special approval will be required in connection with a particular transaction or matter permitted thereby. The Conflicts Policy can be amended at the discretion of the Managing General Partner. See Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”.

Transactions in Which a Director Has an Interest

A director who directly or indirectly has an interest in a contract, transaction or arrangement with the Managing General Partner, Brookfield Renewable or certain of our affiliates is required to disclose the nature of his or her interest to the full board of directors. Such disclosure may generally take the form of a general notice given to the board of directors to the effect that the director has an interest in a specified company or firm and is to be regarded as interested in any contract, transaction or arrangement made with that company or firm or its affiliates after the date of the notice. A director may participate in any meeting called to discuss or any vote called to approve the transaction in which the director has an interest and any transaction approved by the board of directors will not be void or voidable solely because the director was present at or participated in the meeting in which the approval was given provided that the board of directors or a board committee authorizes the transaction in good faith after the director’s interest has been disclosed or the transaction is fair to the Managing General Partner and Brookfield Renewable at the time it is approved.

Service Contracts

There are no service contracts with directors that provide benefit upon termination of office or services.

 

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Indemnification and Limitations on Liability

The Amended and Restated Limited Partnership Agreement of BREP

The laws of Bermuda permit the partnership agreement of a limited partnership, such as Brookfield Renewable, to provide for the indemnification of a partner, the officers and directors of a partner and any other person against any and all claims and demands whatsoever, except to the extent that the indemnification may be held by the courts of Bermuda to be contrary to public policy or to the extent that the laws of Bermuda prohibit indemnification against personal liability that may be imposed under specific provisions of the laws of Bermuda. The laws of Bermuda also permit a partnership to pay or reimburse an indemnified person’s expenses in advance of a final disposition of a proceeding for which indemnification is sought. See Item 10.B “Memorandum and Articles of Association — Description of Our LP Units and The Amended and Restated Limited Partnership Agreement of BREP — Indemnification; Limitations on Liability” for a description of the indemnification arrangements in place under the Amended and Restated Limited Partnership Agreement of BREP.

The Managing General Partner’s Bye-laws

The laws of Bermuda permit the bye-laws of an exempted company, such as our Managing General Partner, to provide for the indemnification of its officers, directors and shareholders and any other person designated by the company against any and all claims and demands whatsoever, except to the extent that the indemnification may be held by the courts of Bermuda to be contrary to public policy or to the extent that the laws of Bermuda prohibit indemnification against personal liability that may be imposed under specific provisions of the laws of Bermuda. Bermuda company law also permits an exempted company to pay or reimburse an indemnified person’s expenses in advance of a final disposition of a proceeding for which indemnification is sought.

Under the Managing General Partner’s bye-laws, the Managing General Partner is required to indemnify, to the fullest extent permitted by law, its affiliates, directors, officers, resident representative, shareholders and employees, any person who serves on a Governing Body of BRELP or any of its subsidiaries and certain others against any and all losses, claims, damages, liabilities, costs or expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, incurred by an indemnified person in connection with Brookfield Renewable’s investments and activities or in respect of or arising from their holding such positions, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the indemnified person’s bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew or ought reasonably to have known was unlawful. In addition, under the Managing General Partner’s bye-laws, (i) the liability of such persons has been limited to the fullest extent permitted by law and except to the extent that their conduct involves bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew or ought reasonably to have known was unlawful; and (ii) any matter that is approved by the independent directors will not constitute a breach of any duties stated or implied by law or equity, including fiduciary duties. The Managing General Partner’s bye-laws require it to advance funds to pay the expenses of an indemnified person in connection with a matter in which indemnification may be sought until it is determined that the indemnified person is not entitled to indemnification.

Insurance

Brookfield Renewable has obtained insurance coverage under which the directors of the Managing General Partner are insured, subject to the limits of the policy, against certain losses arising from claims made against such directors by reason of any acts or omissions covered under the policy in their respective capacities as directors of the Managing General Partner, including certain liabilities under securities laws.

Corporate Governance Disclosure

The Managing General Partner’s board of directors encourages sound corporate governance practices designed to promote the well-being and ongoing development of Brookfield Renewable, including advancing the best interests of Brookfield Renewable.

The Managing General Partner’s board of directors is of the view that its corporate governance policies and practices, outlined below, are comprehensive and consistent with the guidelines for corporate governance adopted by Canadian securities administrators. The board is also of the view that these policies and practices are consistent with the requirements of the New York Stock Exchange and the applicable provisions under the Sarbanes-Oxley Act.

Board of Directors of the Managing General Partner

Mandate of the Board

The Managing General Partner’s board of directors oversees the management of Brookfield Renewable’s affairs directly and through three existing standing committees. The responsibilities of the board and each committee are set out in written charters , which are reviewed and approved annually. These charters are also posted on Brookfield Renewable’s website, www.brookfieldrenewable.com under “About - Governance”. See also Item 6.C “Board Practices”.

 

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In fulfilling its mandate, the board is, among other things, responsible for the following:

 

   

assessing the principal risks of Brookfield Renewable’s business and reviewing, approving and monitoring the systems in place to manage these risks;

 

   

reviewing and approving the reports issued to LP Unitholders, including annual and interim financial statements; and

 

   

promoting the effective operation of the board.

Meetings of the Board

The Managing General Partner’s board of directors meets at least four times each year, with additional meetings held to consider specific items of business or as deemed necessary. Meeting frequency and agenda items may change depending on the opportunities or risks faced by Brookfield Renewable. The board is responsible for its agenda. Prior to each board meeting, the Chair of the board discusses agenda items for the meeting with the Manager.

There has been one regularly scheduled meeting, in 2012, and one special meeting of the Managing General Partner’s board of directors since the Combination. All of the directors were present at the quarterly meeting. Four regular meetings are scheduled for 2012.

Size and Composition of the Board

The Managing General Partner’s board of directors is currently set at six directors, and we intend to appoint a seventh director. See Item 6.C “Board Practices — Size, Independence and Composition of the Board of Directors”.

Independent Directors

At least three directors and at least a majority of the directors holding office must be independent of the Managing General Partner and Brookfield, as determined by the full board of directors using the standards for independence established under applicable securities laws. See Item 6.C “Board Practices — Size, Independence and Composition of the Board of Directors”.

The following table describes the independence status of the directors of the Managing General Partner.

 

Director

  

Independence Status

  

Reason for Related Status

Jeffrey Blidner

   Related   

Mr. Blidner is a Senior Managing Partner of

Brookfield Asset Management.

Eleazar de Carvalho Filho

   Independent   

John Van Egmond

   Independent   

David Mann

   Independent   

Lou Maroun

   Independent   

Patricia Zuccotti

   Independent   

The Chair of the Managing General Partner’s board of directors is Jeffrey Blidner, who is not an independent director. However, each of the committees of the board is fully comprised of independent directors. In addition, special committees of independent directors may be formed from time to time to review particular matter or transactions. The board encourages regular open dialogue between the independent directors and the Chair to discuss matters raised by independent directors.

At all quarterly meetings held since the Combination, the independent directors held meetings without the presence of management and the directors that are not independent. The board has also adopted the Conflicts Policy to govern its practices in circumstances in which conflicts of interest with Brookfield may arise. See Item 6.C “Board Practices — Transactions Requiring Approval by Independent Directors” and “— Transactions in Which a Director Has an Interest” and Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”.

 

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Other Directorships

The following directors of the Managing General Partner are also directors of other reporting issuers (or the equivalent in foreign jurisdictions).

 

   

Maroun: Brookfield Infrastructure Partners L.P.; Acadian Timber Corp.; Partners REIT

 

   

de Carvalho Filho: FMC Technologies, Inc. and Companhia Brasileira de Distribuição Grupo Pão de Açúcar (GPA)

 

   

Mann: Acadian Timber Corp.; New Growth Corp; Split Corp. III; Logistec Corp.

 

   

Blidner: Brookfield Infrastructure Partners Limited; Rouse Properties, Inc.

Director Orientation and Education

New directors of the Managing General Partner are provided with comprehensive information about Brookfield Renewable and its affiliates. Arrangements are made for specific briefing sessions from appropriate senior personnel to help new directors better understand Brookfield Renewable’s strategies and operations. They also participate in the continuing education measures discussed below.

The Managing General Partner’s board of directors receives annual operating plans for each of Brookfield Renewable’s strategic business units and more detailed presentations on particular strategies. Existing directors are invited to join the orientation sessions for new directors as a refresher. The directors are also invited to participate in guided tours of Brookfield Renewable’s various operational facilities. They have the opportunity to meet and participate in work sessions with management to obtain insight into the operations of Brookfield Renewable and its affiliates. Directors are regularly briefed to help better understand industry related issues such as accounting rule changes, transaction activity, capital markets initiatives, significant regulatory developments, as well as trends in corporate governance.

Director Expectations

The Managing General Partner’s board of directors has adopted a Charter of Expectations for Directors, which sets out the expectations in regard to personal and professional competencies, share ownership, meeting attendance, conflicts of interest, changes of circumstance and resignation events. Directors are expected to identify in advance any potential conflict of interest regarding a matter coming before the board or its committees, bring these to the attention of the board or committee chairman and refrain from voting on such matters. Directors are also expected to submit their resignations to the Chair of the board if they become unable to attend at least 75% of the board’s regularly scheduled meetings or if they become involved in a legal dispute, regulatory or similar proceedings, take on new responsibilities or experience other changes in personal or professional circumstances that could adversely impact Brookfield Renewable or their ability to serve as director. The Charter of Expectations for Directors is reviewed annually and a copy is posted on Brookfield Renewable’s website, www.brookfieldrenewable.com under “About - Governance”. Further information on director share ownership requirements is set out under “Board Practices”.

Committees of the Board

The Managing General Partner’s board of directors believes that its committees assist in the effective functioning of the board and help ensure that the views of independent directors are effectively represented.

The board has three committees:

 

   

the Audit Committee;

 

   

the Nominating and Governance Committee; and

 

   

the Compensation Committee.

The responsibilities of these Committees are set out in written charters, which are reviewed and approved annually by the board of directors. The charters of these committees can be found on our website, www.brookfieldrenewable.com under “About - Governance”. All members of these committees must be independent directors, as described above. Special committees may be formed from time to time as required to review particular matters or transactions. While the board retains overall responsibility for corporate governance matters, the Audit Committee, the Nominating and Governance Committee and the Compensation Committee each have specific responsibilities for certain aspects of corporate governance, in addition to their other responsibilities as described below.  

 

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Audit Committee

The Managing General Partner’s board of directors has established an audit committee (the “ Audit Committee ”) that operates pursuant to a written charter. The Audit Committee consists solely of independent directors, each member is financially literate and there will be at least one member at all times designated as an audit committee financial expert. Audit Committee members may not serve on more than two other public company audit committees, except with the prior approval of the Managing General Partner’s board of directors. Not more than 50% of the Audit Committee members may be directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the board of directors from time to time).

The Audit Committee is responsible for assisting and advising the Managing General Partner’s board of directors with matters relating to:

 

   

our accounting and financial reporting processes;

 

   

the integrity and audits of our financial statements;

 

   

our compliance with legal and regulatory requirements; and

 

   

the qualifications, performance and independence of our independent accountants.

The Audit Committee is also responsible for engaging our independent auditors, reviewing the plans and results of each audit engagement with our independent auditors, approving professional services provided by our independent auditors, considering the range of audit and non-audit fees charged by our independent auditors and reviewing the adequacy of our internal accounting controls.

As of the date of this Form 20-F, the Audit Committee was comprised of the following three directors: Patricia Zuccotti (Chair), David Mann and Eleazar de Carvalho Filho, all of whom are independent directors.

Nominating and Governance Committee

The Managing General Partner’s board of directors has established a nominating and governance committee (the “ Nominating and Governance Committee ”) that operates pursuant to a written charter. The Nominating and Governance Committee consists entirely of independent directors and not more than 50% of the Nominating and Governance Committee members may be directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the board of directors from time to time).

The Nominating and Governance Committee is responsible for approving the appointment by the sitting directors of a person to the office of director and for recommending a slate of nominees for election as directors by the Managing General Partner’s shareholders. The Nominating and Governance Committee is also responsible for assisting and advising the Managing General Partner’s board of directors with respect to matters relating to the general operation of the board of directors, Brookfield Renewable’s governance, the governance of the Managing General Partner.

It is the responsibility of the Nominating and Governance Committee to assess the size and composition of the Managing General Partner’s board of directors and its committees; to review the effectiveness of the board’s operations and its relations with the Manager; to assess the performance of the board, individual directors and the Manager; and to review Brookfield Renewable’s corporate governance practices.  The Nominating and Governance Committee has met twice since the Combination, in 2012.

The Nominating and Governance Committee annually reviews the performance of the board and its committees and the individual contribution of directors through a self-survey.

The Nominating and Governance Committee is also responsible for evaluating candidates put forward by Brookfield as candidates for nomination to the board. As Brookfield Asset Management is entitled to elect all of the directors of the Managing General Partner, the directors of the Managing General Partner consult with Brookfield to identify and assess the credentials of appropriate individuals with the skills, knowledge, experience and talents needed to act as an independent member of the board of directors of the Managing General Partner. Brookfield maintains an “evergreen” list of potential independent board members to ensure that outstanding candidates with the needed skills can be quickly identified to fill planned or unplanned vacancies. Candidates from that list and any other candidates familiar to Brookfield or Brookfield Renewable are assessed to ensure the Managing General Partner’s board of directors has the appropriate mix of talent, quality, skills and other requirements necessary to promote sound governance and board effectiveness. Individuals who meet those requirements are recommended by Brookfield to the Nominating and Governance Committee for its review as potential candidates for nomination to the board.

As of the date of this Form 20-F, the Nominating and Governance Committee was comprised of the following three directors, David Mann (Chair), Lou Maroun and John Van Egmond, all of whom are independent directors.

 

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Compensation Committee

The Managing General Partner’s board of directors has established a compensation committee (the “ Compensation Committee ”) that operates pursuant to a written charter. The Compensation Committee consists solely of independent directors. Not more than 50% of the Compensation Committee members may be directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the board of directors from time to time).

It is the responsibility of the Compensation Committee to review and make recommendations to the board of directors of the Managing General Partner concerning the remuneration of directors and committee members and supervise any changes in the fees to be paid pursuant to our Master Services Agreement.  The Compensation Committee has met once since the Combination, in 2012.

On recommendation of the Compensation Committee, the Managing General Partner’s board of directors sets compensation of the directors by seeking to ensure that the compensation reflects the responsibilities and risks involved in being a director and aligns the interests of the directors with the best interests of Brookfield Renewable and our LP Unitholders. Compensation of the directors is periodically assessed by the Compensation Committee and the board to ensure that it is competitive in the marketplace and fair in relation to the scope of the duties and responsibilities of the directors.

The Managing General Partner does not have any executive officers. As the Manager manages Brookfield Renewable pursuant to our Master Services Agreement, the compensation of our core senior management team is determined by Brookfield. Our Compensation Committee is responsible for supervising any changes in the fees to be paid pursuant to our Master Services Agreement. See Item 6.A “Directors and Senior Management — Our Management” and Item 6.B “Compensation — Our Management”.

As of the date of this Form 20-F, the Compensation Committee was comprised of the following three directors, John Van Egmond (Chair), Eleazar de Carvalho Filho and Lou Maroun, all of whom are independent directors.

Board, Committees and Director Evaluation

The Managing General Partner’s board of directors believes that a regular and formal process of evaluation improves the performance of the board as a whole, its committees and individual directors. Each year, a survey is sent to directors regarding the effectiveness of the board and its committees, inviting comments and suggestions on areas for improvement. The results of this survey are reviewed by the Nominating and Governance Committee, which makes recommendations to the board as required. Each director also receives a list of questions for completing a self-assessment. The Chair of the board holds private interviews with each director annually to discuss the operations of the board and its committees and to provide any feedback on the individual director’s contributions.

Board and Management Responsibilities

The Managing General Partner’s board of directors has not developed written position descriptions for the Chair of the board or the chair of any of the committees of the board. However, each chair takes responsibility for ensuring the board or committee, as applicable, addresses the matters within its written charter.

The Managing General Partner’s board of directors has not developed a written position description for any members of our core senior management team. The services of our core senior management team are provided by the Manager pursuant to our Master Services Agreement. See Item 6.A “Directors and Senior Management — Our Master Services Agreement”.

Code of Business Conduct and Ethics

Brookfield Renewable has adopted a Code of Business Conduct and Ethics (the “ Code ”), a copy of which can be found on Brookfield Renewable’s web site at www.brookfieldrenewable.com or on Brookfield Renewable’s SEDAR profile at www.sedar.com. The Code provides guidelines to ensure that all employees, including directors of the Managing General Partner, respect Brookfield Renewable’s commitment to conducting business relationships with respect, openness and integrity. Management provides regular instructions and updates to the Code to our employees. Employees may report activities which they feel are not consistent with the spirit and intent of the Code through a hotline set up specifically to monitor compliance with the Code. Monitoring of calls is managed by an independent third party called The Network. The Audit Committee is to be notified of significant calls made to this hotline reporting activities that are not consistent with the Code by Brookfield’s internal auditor. If the Audit Committee considers it appropriate, it will notify the Nominating and Governance Committee and/or the board of directors of significant calls. The board has not granted any waivers of the Code to date.

The Managing General Partner’s board of directors promotes the highest ethical business conduct. The board has taken measures to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or our core senior management team has a material interest. Any director with a material interest in a transaction declares his/her

 

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interest and refrains from voting on such matter. Significant related party transactions, if any, are reviewed and approved by an independent committee made up of independent directors who may be advised by independent counsel and independent advisors. See Item 6.C “Board Practices — Transactions Requiring Approval by Independent Directors” and “— Transactions in Which a Director Has an Interest” and Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”.

 

  6.D

EMPLOYEES

We do not employ the individuals who provide management services to us under our Master Services Agreement, including the individuals who serve as the Managing General Partner’s Chief Executive Officer and Chief Financial Officers. The personnel that carry out these activities are employees of Brookfield, and their services are provided to Brookfield Renewable or for our benefit under our Master Services Agreement. For a discussion of the individuals from Brookfield’s management team that are involved in our renewable power business, see “Directors and Senior Management — Our Management”. However, through our subsidiaries, we have approximately 1,063 employees involved in the day-to-day operations of our facilities and the development of our business, of which approximately 243 operations and 134 corporate employees are located in Canada, 424 are located in the United States and approximately 262 are located in Brazil. Approximately 481, or 44% of these employees, are covered by collective agreements expiring between 2012 and 2015 (with preparations for negotiations on those expiring in 2012 currently under way). We believe that we have stable and positive relations with our unionized work forces in Canada, the United States and Brazil.

 

  6.E

SHARE OWNERSHIP

Except as described below under Item 7.A “Major Shareholders and Related Party Transactions — Major Shareholders”, as of the date of this Form 20-F, the directors and officers of the Managing General Partner and the employees of the Manager who perform executive functions for Brookfield Renewable, and their respective associates, as a group, beneficially owned, directly or indirectly, or exercised control or direction over, less than 1% of the outstanding LP Units.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

  7.A

MAJOR SHAREHOLDERS

As of the date of this Form 20-F, there are 132,872,896 LP Units outstanding. To our knowledge, as at the date of this Form 20-F, no person or company, other than Brookfield, beneficially owns or controls or directs, directly or indirectly, more than 5% of our LP Units. Brookfield beneficially owns 48,091,986 LP Units and 129,658,623 Redeemable Partnership Units, or a 68% interest in Brookfield Renewable (on a fully-exchanged basis) including its indirect general partnership interest in the Managing General Partner and the BRELP GP LP. All LP Units, including those held by BRPI, are non-voting. See also the information contained in this Form 20-F under Item 10.B “Memorandum and Articles of Association — Description of our LP Units and the Amended and Restated Limited Partnership Agreement of BREP”.

As of April 26, 2012, none of our outstanding LP Units were held by holders of record in the United States, not including LP Units held of record by DTC. As of April 26, 2012, DTC was the holder of record of 1,834,299 LP Units.

The following tables set forth information, as of date of this Form 20-F, regarding the beneficial ownership of LP Units by:

 

   

each person that is a beneficial owner of more than 5% of our LP Units; and

 

   

all directors and executive officers as a group.

 

Principal Beneficial Owners

  

LP Units

  

Percentage of LP

Units

Brookfield Renewable Power Inc.

   177,750,609 (1)    68% (2)

 

 

  (1)

Includes 129,658,623 Redeemable Partnership Units held by Brookfield which are redeemable for cash or exchangeable for LP Units in accordance with the Redemption Exchange Mechanism. All Redeemable Partnership Units and all limited partnership units of BRELP held by BREP are non-voting. For additional information, see Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP — Units”.

 

 

  (2)

Assuming the exchange of all Redeemable Partnership Units held by Brookfield and including Brookfield’s indirect general partnership interests.

 

See also the information contained in this Form 20-F under Item 3.D “Risk Factors—Risks Related to our Relationship with Brookfield”, Item 6.A “Directors and Senior Management”, Item 6.C “Board Practices” and Item 7.B “Related Party Transactions”.

 

  7.B

RELATED PARTY TRANSACTIONS

We are an affiliate of Brookfield. We have entered into a number of agreements and arrangements with Brookfield in order to enable us to be established as a separate entity and to pursue our vision of being a leading owner and operator of high-quality renewable power assets. While we believe that this ongoing relationship with Brookfield provides us with a strong competitive advantage as well as access to opportunities that would otherwise not be available to us, we operate as an independent, stand-alone entity. We describe below these relationships as well as potential conflicts of interest (and the methods for resolving them) and other material considerations arising from our relationship with Brookfield.

 

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See also the information contained in this Form 20-F under Item 3.D “Risk Factors — Risks Related to Our Relationship with Brookfield”, Item 5.A “Operating Results — Related Party Transactions”, Item 6.A “Directors and Senior Management”, Item 6.C “Board Practices” and Item 7.A “Major Shareholders” and Notes 8 and 5 to our audited annual financial statements for the year ended December 31, 2011 and our unaudited quarterly financial statements for the three months ended March 31, 2012, respectively.

Relationship Agreement

Brookfield Asset Management and certain of its subsidiaries entered into an agreement with Brookfield Renewable, referred to as the Relationship Agreement that governs aspects of the relationship among them. Pursuant to the Relationship Agreement, Brookfield Asset Management has agreed that Brookfield Renewable will serve as its primary vehicle through which it will acquire renewable power assets on a global basis. See Item 4.B “Business Overview — The Manager” for further details on Brookfield Asset Management.

Each of Brookfield Renewable, BRELP and the Holding Entities acknowledge and agree that Brookfield Asset Management is not required under the Relationship Agreement to allocate any minimum level of dedicated resources for the pursuit of acquisitions of power generation operations or developments and that Brookfield has established or advised, and may continue to establish or advise, other entities that rely on the diligence, skill and business contacts of Brookfield’s professionals and the information and acquisition opportunities they generate during the normal course of their activities (including in the power generation sector). Brookfield Asset Management also agrees that it will not sponsor transactions that are suitable for us in the renewable power sector unless we are given an opportunity to participate. Further, Brookfield may, but is not required to, offer Brookfield Renewable Group the opportunity to acquire an integrated utility even if a significant component of such utility’s operations consist of renewable power generation, a non-renewable power generation operation or development, such as a power generation operation that uses coal or natural gas, a portfolio of power operations, if a significant component of such portfolio’s operations consist of non-renewable power generation, or renewable power generation operations or developments that comprise part of a broader enterprise, unless the primary purpose of such acquisition, as determined by Brookfield, acting in good faith, is to acquire the underlying operation or development.

Brookfield Renewable, BRELP and the Holdings Entities also acknowledge and agree that members of Brookfield carry on a diverse range of businesses worldwide, including the development, ownership and/or management of power, transmission and other infrastructure assets, and investing and advising on investing in any of the foregoing or loans, debt instruments and other securities with underlying infrastructure collateral or exposure including renewable power generation operations or developments, both as principal and through other public companies that are affiliates of Brookfield or through private investment vehicles and accounts established or managed by affiliates of Brookfield and that except as explicitly provided in the Relationship Agreement, the Relationship Agreement will not in any way limit or restrict members of Brookfield from carrying on their respective business.

If we intend to pursue an acquisition opportunity presented by Brookfield, one or more members of Brookfield may participate in the acquisition opportunity if we do not have the financial capacity (as determined by Brookfield) to acquire all of the opportunity or if Brookfield allocates participation in the opportunity between Brookfield Renewable and one or more members of Brookfield, after taking into consideration the purpose of the investment opportunity, the risk/return profile, the source of the investment opportunity and other factors that Brookfield considers relevant. In the event that we decline an acquisition opportunity presented by Brookfield, Brookfield may pursue such acquisition opportunity for its own account, without restriction. Due to the foregoing, we expect to compete from time-to-time with Brookfield or other third parties for access to the benefits that we expect to realize from Brookfield Asset Management’s involvement in our business. See Item 3.D “Risk Factors — Risks Related to Our Relationship with Brookfield — Brookfield is not necessarily required to act in the best interests of Service Recipients, Brookfield Renewable, or our LP Unitholders”.

An integral part of our strategy is to participate with institutional investors in Brookfield sponsored or co-sponsored consortiums or funds for acquisitions that fit our strategy. Brookfield has a strong track record of leading such consortiums and funds and actively manages underlying assets to improve performance. Currently, Brookfield manages the Brookfield Americas Infrastructure Fund, a $2.7 billion infrastructure fund focused on North and South America. Brookfield is the fund manager and typically invests approximately 25% of the capital required for a transaction alongside its institutional investors. It is currently intended that future renewable power acquisitions identified by Brookfield may be funded with commitments pursuant to these funds and we would fund Brookfield’s participation where renewable power investments are made by Brookfield’s sponsored institutional funds.

In the event of the termination of our Master Services Agreement, the Relationship Agreement would also terminate, including Brookfield’s commitments to provide us with acquisition opportunities, as described above.

 

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Master Services Agreement

Brookfield Renewable, BRELP and the Holding Entities entered into our Master Services Agreement pursuant to which the Manager has agreed to provide oversight of the business and provide the services of senior officers to Brookfield Renewable Group. In addition, the Manager has agreed to provide services relating to acquisitions or dispositions, financings, business planning and strategy and oversight and supervision of various day to day management and administration activities. In exchange for providing these services, the Manager is entitled to a Base Management Fee equal to $20 million which amount shall be adjusted for inflation annually beginning on January 1, 2013, at an inflation factor based on year over year United States consumer price index) plus 1.25% of the amount by which the Total Capitalization Value (which is generally determined with reference to the aggregate of the value of all outstanding LP Units and securities of the other Service Recipients that are not held by Brookfield Renewable Group, plus all outstanding third party debt with recourse to Brookfield Renewable, BRELP or a Holding Entity, less all cash held by such entities) of Brookfield Renewable exceeds an initial reference value determined based on its market capitalization immediately following the Combination. In the event that the measured Total Capitalization Value of Brookfield Renewable in a given period is less than the initial reference value, the Manager will receive a Base Management Fee of $20 million annually (subject to an annual escalation by a specified inflation factor beginning on January 1, 2013). The Base Management Fee will be calculated and paid on a quarterly basis. For a detailed description of our Master Services Agreement, see Item 6.A “Directors and Senior Management — Our Master Services Agreement”.

Total Capitalization Value as of the latest balance sheet date (March 31, 2012) is $8,599,742,627, which against the initial reference value of $8,093,033,167 and factoring in the quarterly amount of the $20 million payable annually, resulted in a Base Management Fee payment for the first quarter of 2012 in the amount of approximately $6.6 million. The Base Management Fee payment for the period between the Combination and December 31, 2011 was approximately $2.2 million.

Combination Agreement

BRPI, the Fund, BRPT and BREP entered into a Combination Agreement resulting in Brookfield Renewable being established to serve as the primary vehicle through which Brookfield will acquire renewable power assets on a global basis. As a result of the Combination completed on November 28, 2011, all of the renewable power assets of the Fund, at the time a publicly traded entity in Canada, and Brookfield were combined and are now indirectly held by Brookfield Renewable through BRELP and BRELP’s subsidiaries. On completion of the Combination, public unitholders of the Fund received one LP Unit in exchange for each trust unit of the Fund held and the Fund was wound up. Prior to the Combination, Brookfield owned an approximate 34% interest in the Fund on a fully-exchanged basis. On completion of the Combination, Brookfield owned 73% of Brookfield Renewable on a fully-exchanged basis. Brookfield now owns 68% of Brookfield Renewable on a fully-exchanged basis and the remaining 32% is held by the public.

Incentive Distributions

BRELP GP LP is entitled to receive incentive distributions from BRELP as a result of its ownership of the general partnership interest in BRELP. The incentive distributions are to be calculated in increments based on the amount by which quarterly distributions on the limited partnership units of BRELP exceed specified target levels as set forth in the Amended and Restated Limited Partnership Agreement of BRELP. See Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP — Distributions”.

BRELP GP LP may, at its sole discretion, elect to reinvest incentive distributions in exchange for Redeemable Partnership Units.

To the extent that any of the Holding Entities or any operating entity pays to Brookfield any comparable performance or incentive distribution, the amount of any future incentive distributions will be reduced in an equitable manner to avoid duplication of distributions.

General Partner Distributions

Pursuant to the Amended and Restated Limited Partnership Agreement of BREP, the Managing General Partner is entitled to receive a general partner distribution equal to 0.01% of the total distributions of Brookfield Renewable. See Item 10.B “Memorandum and Articles of Association — Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP —Distributions”.

Pursuant to the Amended and Restated Limited Partnership Agreement of BRELP, BRELP GP LP is entitled to receive a general partner distribution from BRELP equal to a share of the total distributions of BRELP in proportion to BRELP GP LP’s percentage interest in BRELP which is equal to 1% of the total distributions of BRELP. In addition, it is entitled to receive the incentive distributions described above under “— Incentive Distributions”. See Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP — Distributions”.

 

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Energy Revenue Agreement

On November 23, 2011, BEM LP, a subsidiary of Brookfield, and BPUSHA, a subsidiary of BRELP that indirectly owns most of our U.S. facilities entered into an energy revenue agreement (the “ Energy Revenue Agreement ”) pursuant to which BEM LP agreed to support the price that BPUSHA receives for the energy generated from certain of those facilities. BEM LP has agreed to pay BPUSHA each month an amount equal to the difference between the Fixed Amount and the total revenues received by BPUSHA from certain of those facilities. The “ Fixed Amount ” is calculated as the energy generated by those facilities multiplied by a price of $75/MWh (subject to an annual adjustment, beginning January 1, 2012, equal to 40% of the increase in the U.S. Consumer Price Index during the previous year, but capped at a 3% increase in the fixed price per year). Should the total revenues received by these facilities from sales of electricity and all ancillary services, capacity and green credits for any month be more than the calculated Fixed Amount at the end of any month, BEM LP will receive from BPUSHA an amount equal to such excess.

In the Energy Revenue Agreement, BEM LP has agreed that at all times it does not have a minimum net worth of $500 million, it will provide a guarantee or other acceptable security of a person with a minimum net worth of $500 million. Initially this guarantee is being provided by Brookfield for a period of not less than three years.

The Energy Revenue Agreement has an initial term of 20 years, with automatic renewals for successive 20-year periods unless 180 days before the end of the applicable term (i) both parties agree in writing not to renew the agreement or (ii) BEM LP provides written notice that the agreement shall terminate with respect to one or more facilities five years after the end of the applicable term. The Energy Revenue Agreement is subject to customary termination provisions in the event of a failure to pay or an insolvency event of BPUSHA or BEM LP.

Other Power Agreements

In addition to the Energy Revenue Agreement, Brookfield Renewable is a party to a number of commercial agreements with Brookfield, including (i) PPAs for the sale of power generated from certain of Brookfield Renewable Group’s North American facilities to subsidiaries of Brookfield; and (ii) revenue support agreements under which Brookfield supports Brookfield Renewable’s revenue from the sale of power generated by certain of Brookfield Renewable Group’s North American facilities. Including the Energy Revenue Agreement, Brookfield purchases or provides revenue support for approximately 55% of Brookfield Renewable Group’s portfolio as of December 31, 2011.

Details of the related party power purchase and revenue support agreements are as follows:

Under a PPA with Great Lakes Power Limited (“ GLPL ”), a subsidiary of Brookfield Asset Management supports the price that GLPL receives for energy generated by all of GLPL’s facilities in Canada at a price of C$82 per MWh subject to an annual adjustment equal to 40% of the increase in the consumer price index (“ CPI ”) in the previous year. The GLPL PPA has an initial term ending on December 1, 2029 and automatically renews for successive 20-year periods, subject to certain termination provisions. If the GLPL PPA is not terminated prior to 2029, the price under the GLPL PPA reverts to C$68 per MWh subject to an annual adjustment equal to 40% of the increase in the CPI for each year.

Under a PPA with Mississagi Power Trust (“ MPT ”), a subsidiary of Brookfield Asset Management purchases the energy generated by certain of MPT’s facilities in Ontario at a price of C$103 per MWh subject to an annual adjustment equal to 20% of the increase in the CPI in the previous year. The MPT PPA terminates on December 1, 2029, subject to MPT’s option to terminate the agreement, on 120 days written notice, at certain times between 2017 and 2024.

Pursuant to PPAs with Great Lakes Hydro America (“ GLHA ”), a subsidiary of Brookfield Asset Management purchases the energy generated by several of GLHA’s power facilities in Maine and New Hampshire at a price of $37 per MWh, subject to an annual adjustment equal to 20% of the increase in the CPI during the previous year. The GLHA PPA has a 20-year term ending in 2022 and 2023.

Pursuant to a PPA with Lievre Power, a subsidiary of Brookfield Asset Management purchases the energy generated by Lievre Power’s facilities in Quebec (excluding the Rapides des Cedres facility) at a price of C$68 per MWh, subject to an annual adjustment equal to the lesser of 40% of the increase in the CPI during the previous calendar year or 3%. The Lievre Power PPA has a 20-year term ending in 2019.

Pursuant to a PPA with Hydro Pontiac Inc. (“ HPI ”), a subsidiary of Brookfield Asset Management has agreed to purchase the energy generated by HPI’s two facilities in Quebec at a price of C$68 per MWh, subject to an annual adjustment beginning in 2010 equal to 40% of the increase in the CPI during the previous calendar year. This power guarantee agreement is scheduled to commence in 2019 for one facility and in 2020 for the other, upon the expiration of existing PPAs. The HPI PPAs with Brookfield will have an initial term ending in 2029, and automatically renew for successive 20-year periods.

Pursuant to a 10-year wind levelization agreement expiring in 2019, a subsidiary of Brookfield Asset Management mitigates any potential wind variation from the expected annual generation of 506 GWh for our Prince Wind assets in Ontario. Any excess generation compared to the expected generation results in a payment from Brookfield Renewable to the subsidiary of Brookfield Asset Management, while a shortfall would result in a payment from a subsidiary of Brookfield Asset Management to Brookfield Renewable.

 

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Pursuant to a 20-year PPA guarantee, expiring in 2021, Brookfield guarantees to Powell River the payment obligations of an industrial power purchaser for an annual fee of $0.5 million.

Energy Marketing Agreement

BEM LP and CanHoldco entered into an energy marketing agreement on November 28, 2011 pursuant to which BEM LP has agreed to provide energy marketing services to CanHoldco (the “ Energy Marketing Agreement ”). Under the Energy Marketing Agreement, CanHoldco has appointed BEM LP to provide the following energy marketing services to CanHoldco for our North American power generating facilities:

 

   

preparing and assisting with compliance with an annual marketing plan which seeks to maximize annual generation, taking into account (among other things) (i) the hydrologic or wind resource available to each power generating facility in a prudent manner having regard to obligations under applicable regulatory authorizations, and (ii) the obligation of the Operating Entities to operate and maintain the power generating facilities in accordance with prudent industry practice and to protect against harm to human life or property of any person;

 

   

preparing and assisting with compliance with a risk management policy; and

 

   

assisting with compliance with the terms of any energy marketing agreement between BEM LP and any subsidiary of CanHoldco holding the power generating facilities.

Pursuant to the Energy Marketing Agreement, CanHoldco pays an annual marketing fee, referred to as the “ Base Marketing Fee ”, to BEM LP equal to $18 million (subject to increase by a specified inflation factor beginning on January 1, 2013), paid in equal monthly installments. To the extent that any amounts are paid to BEM LP (or one of its affiliates) under certain other existing energy marketing agreements or PPAs between certain of the Operating Entities and BEM LP (or one of its affiliates) that BEM LP determines are comparable to the Base Marketing Fee, the Base Marketing Fee will be reduced on a dollar for dollar basis by the comparable amounts.

The Energy Marketing Agreement has a term of 20 years. Provided that no event of default relating to BEM LP has occurred and is continuing, the Energy Marketing Agreement will be automatically renewed for successive periods of 20 years unless BEM LP provides CanHoldco with written notice to the contrary at least 180 days prior to the expiry of the applicable term.

The Energy Marketing Agreement is subject to customary termination provisions in the event of a failure to pay or an insolvency event of the applicable Operating Entity or BEM LP.

The maximum amount of the aggregate liability of BEM LP pursuant to the Energy Marketing Agreement is equal to the fees previously paid pursuant to the Energy Marketing Agreement in the two most recent calendar years by CanHoldco.

The Energy Marketing Agreement does not prohibit BEM LP or its affiliates from pursuing other business activities that compete directly or indirectly with us. For a description of related aspects of the relationship between Brookfield and CanHoldco, see Item 7.B “Related Party Transactions— Relationship Agreement”.

Power Agency Agreements

BEM LP and the owners of many of our North American facilities have entered into power agency agreements (the “ Power Agency Agreements ”). Under each Power Agency Agreement, BEM LP is appointed as the exclusive agent of the owner in respect of the sales of electricity, the procurement of transmission and other additional services. BEM LP also schedules, dispatches and arranges for transmission of the power produced and the power supplied to third parties in accordance with prudent industry practice. Pursuant to each Power Agency Agreement, BEM LP is entitled to be reimbursed for any third party costs incurred, and except in a few cases, no additional fee for its services. To the extent that any fee is payable to BEM LP (or one of its affiliates) under certain existing Power Agency Agreements, the Base Marketing Fee under the Energy Marketing Agreement will be reduced on a dollar for dollar basis.

The Power Agency Agreements that relate to the Energy Revenue Agreement have initial terms of 20 years, with automatic renewals for successive 20-year periods unless 180 days before the end of the applicable term (i) both parties agree in writing not to renew the agreement or (ii) BEM LP has provided the owner with the written notice to terminate the Energy Revenue Agreement as it relates to the particular facility five years after the end of the applicable term. Other Power Agency Agreements have varying terms, renewal and termination rights but are generally long-term arrangements. The Power Agency Agreements are subject to customary termination provisions in the event of a failure to pay or an insolvency event of the applicable Operating Entity or BEM LP.

 

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Development Projects

We indirectly acquired a number of early stage development projects in Brazil, Canada and the United States from Brookfield on completion of the Combination. To further align interests and incentivize continued development success with respect to these specific projects, Brookfield received no upfront proceeds on closing for the transfer of these projects, but is entitled to receive on commercial operation or sale of the projects, in each case if developed or sold in the 25 years following closing, up to 100% of the development costs that it contributed to each project and 50% of the fair market value of the projects in excess of a priority return on each party’s invested capital. These amounts will only be payable on projects upon substantial completion or sale of the project. Fair market value means our pro rata percentage of the fair market value of a development project, as determined by the Manager and the independent directors of CanHoldco, on the date on which substantial completion of the development project has been achieved, or, if earlier, the date that the project is sold. With respect to the projects located in Canada and the United States, we entered into the Development Projects Agreement which provides for the reimbursement of expenses to Brookfield for such projects and each project entity and Brookfield have entered into a separate royalty agreement providing for royalties on each project. With respect to our projects located in Brazil, Brookfield subscribed for special shares which contain a redemption feature that provides for the reimbursement of expenses as well as the sharing of the fair market value of a project on projects located in Brazil. These financial arrangements with Brookfield will not apply to any future projects. Projects in late stage development or construction were transferred for consideration as part of the Combination and are not part of this mechanism.

Voting Agreement

Brookfield and Brookfield Renewable determined that it is advisable for Brookfield Renewable to have control over the BRELP General Partner, BRELP GP LP and BRELP. Accordingly, Brookfield Renewable and Brookfield entered into the Voting Agreement that provides Brookfield Renewable, through the Managing General Partner, a number of rights.

Pursuant to the Voting Agreement, Brookfield has agreed that any voting rights with respect to the BRELP General Partner, the BRELP GP LP and BRELP will be voted in favor of the election of directors approved by Brookfield Renewable. For these purposes, Brookfield Renewable may maintain, from time-to-time, an approved slate of nominees or provide direction with respect to the approval or rejection of any matter in the form of general guidelines, policies or procedures in which case no further approval or direction will be required. Any such general guidelines, policies or procedures may be modified by Brookfield Renewable in its discretion.

In addition, pursuant to the Voting Agreement, Brookfield has also agreed that any voting rights with respect to the BRELP General Partner, the BRELP GP LP and BRELP will be voted in accordance with the direction of Brookfield Renewable with respect to the approval or rejection of the following matters relating to any such entity, as applicable: (i) any sale of all or substantially all of its assets, (ii) any merger, amalgamation, consolidation, business combination or other material corporate transaction, except in connection with any internal reorganization that does not result in a change of control, (iii) any plan or proposal for a complete or partial liquidation or dissolution, or any reorganization or any case, proceeding or action seeking relief under any existing laws or future laws relating to bankruptcy or insolvency, (iv) any amendment to the limited partnership agreement of BRELP GP LP or to the Amended and Restated Limited Partnership Agreement of BRELP, or (v) any commitment or agreement to do any of the foregoing.

In addition, pursuant to the Voting Agreement, Brookfield has agreed that it will not exercise its right under the limited partnership agreement of BRELP GP LP to remove the BRELP General Partner as the general partner of BRELP GP LP except with the prior consent of Brookfield Renewable.

The Voting Agreement terminates (i) at such time that Brookfield ceases to own any interest in BRELP, (ii) at such time that the Managing General Partner (or its successors or permitted assigns) involuntarily ceases to be the general partner of Brookfield Renewable, (iii) at such time that the BRELP GP LP (or its successors or permitted assigns) involuntarily ceases to be the general partner of BRELP, or (iv) at such time that the BRELP General Partner (or its successors or permitted assigns) involuntarily ceases to be the general partner of BRELP GP LP. In addition, we are permitted to terminate the Voting Agreement upon 30 days’ notice.

The Voting Agreement also contains restrictions on transfers of the shares of the BRELP General Partner, except that Brookfield may transfer shares of the BRELP General Partner to any of its affiliates.

Other Voting Agreements

In December 2011, Brookfield Renewable entered into voting agreements with subsidiaries of Brookfield Asset Management whereby these subsidiaries, as managing members of entities related to Brookfield Americas Infrastructure Fund (collectively, the “ BAIF Entities ”) in which Brookfield Renewable holds investments with institutional investors, agreed to assign to Brookfield Renewable their voting rights to appoint the directors subsidiaries of the BAIF Entities. In March 2012, Brookfield Renewable entered into an amendment to one of those voting agreements to account for the recent acquisition (with its institutional investors) of certain California wind assets in the first quarter of 2012. Brookfield Renewable’s economic interests in the BAIF Entities in the United States and Brazil are 22% and 25%, respectively.

 

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Registration Rights Agreement

On November 28, 2011, Brookfield and Brookfield Renewable entered into a registration rights agreement (the “ Registration Rights Agreement ”) pursuant to which Brookfield Renewable has agreed that, upon the request of Brookfield, Brookfield Renewable will file one or more registration statements to register for sale under the Securities Act, or one or more prospectuses to qualify the distribution in Canada of, any LP Units held by Brookfield (including LP Units acquired pursuant to the Redemption Exchange Mechanism). Under the Registration Rights Agreement, Brookfield Renewable is not required to file a registration statement or a prospectus unless Brookfield requests that LP Units having a value of at least $50,000,000 be registered or qualified. In the Registration Rights Agreement, Brookfield Renewable has agreed to pay expenses in connection with such registration and sales, except for any underwriting discounts or commissions which will be borne by Brookfield, and will indemnify Brookfield for material misstatements or omissions in the registration statement and/or prospectus.

Licensing Agreement

Pursuant to a licensing agreement, Brookfield has granted to us a non-exclusive, royalty-free license to use the name “Brookfield” and the Brookfield logo (the “ Licensing Agreement ”). Other than under this limited license, we do not have a legal right to the “Brookfield” name and the Brookfield logo in the United States and Canada.

We will be permitted to terminate the Licensing Agreement upon 30 days’ prior written notice if Brookfield defaults in the performance of any material term, condition or agreement contained in the Licensing Agreement and the default continues for a period of 30 days after written notice of termination of the breach is given to Brookfield. Brookfield may terminate the Licensing Agreement effective immediately upon termination of our Master Services Agreement or with respect to any licensee upon 30 days’ prior written notice of termination if any of the following occurs:

 

   

the licensee defaults in the performance of any material term, condition or agreement contained in the Licensing Agreement and the default continues for a period of 30 days after written notice of termination of the breach is given to the licensee;

 

   

the licensee assigns, sublicenses, pledges, mortgages or otherwise encumbers the intellectual property rights granted to it pursuant to the Licensing Agreement;

 

   

certain events relating to a bankruptcy or insolvency of the licensee; or

 

   

the licensee ceases to be an affiliate of Brookfield.

Termination of the Licensing Agreement with respect to one or more licensees will not affect the validity or enforceability of the Licensing Agreement with respect to any other licensees.

Preferred Shares

Brookfield has provided an aggregate of $5 million of working capital to Bermuda Holdco through a subscription for preferred shares of Bermuda Holdco. The preferred shares are entitled to receive a cumulative preferential dividend equal to 6% of their redemption value as and when declared by the board of directors of Bermuda Holdco and are redeemable at the option of Bermuda Holdco, subject to certain limitations, at any time after the tenth anniversary of their issuance. The preferred shares are not entitled to vote, except as required by law.

Redemption-Exchange Mechanism

One or more wholly-owned subsidiaries of Brookfield that hold Redeemable Partnership Units have the right to require BRELP to redeem all or a portion of the Redeemable Partnership Units, subject to Brookfield Renewable’s right of first refusal, for cash in an amount equal to the market value of one of our LP Units multiplied by the number of LP Units to be redeemed (subject to certain adjustments). See Item 10.B “Memorandum and Articles of Association – Description of the Amended and Restated Limited Partnership Agreement of BRELP — Redemption-Exchange Mechanism”. The redemption right can only be exercised after November 28, 2013. Taken together, the effect of the redemption right and the right of first refusal is that one or more wholly-owned subsidiaries of Brookfield will receive our LP Units, or the value of such LP Units, at the election of Brookfield Renewable. Should Brookfield Renewable determine not to exercise its right of first refusal, cash required to fund a redemption of limited partnership interests of BRELP held by wholly-owned subsidiaries of Brookfield will likely be financed by a public offering of our LP Units.

Indemnification Arrangements

Subject to certain limitations, Brookfield and its directors, officers, agents, members, partners, shareholders and employees generally benefit from indemnification provisions and limitations on liability that are included in the Amended and Restated Limited

 

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Partnership Agreement of BREP, Managing General Partner’s bye-laws, the Amended and Restated Limited Partnership Agreement of BRELP, our Master Services Agreement and other arrangements with Brookfield. See Item 6.A “Directors and Senior Management — Our Master Services Agreement”, Item 10.B “Memorandum and Articles of Association — Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP — Indemnification; Limitations on Liability” and “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP — Indemnification; Limitations on Liability”.

Other Services

Brookfield may provide to the Operating Entities services which are outside the scope of our Master Services Agreement under arrangements that are on market terms and conditions and pursuant to which Brookfield will receive fees. The services provided under these arrangements will include financial advisory, operations management and other services. Pursuant to our conflict of interest guidelines, those arrangements may require prior approval by a majority of the independent directors, which may be granted in the form of general guidelines, policies or procedures. See Item 7.B “Related Party Transactions— Conflicts of Interest and Fiduciary Duties”.

Conflicts of Interest and Fiduciary Duties

Fiduciary Duties

Each of the Managing General Partner and the BRELP GP LP are required to exercise its powers and carry out its functions as general partner of Brookfield Renewable and BRELP, respectively, honestly and in good faith, and exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, in each case, subject to and after taking into account, the terms and conditions of the Relationship Agreement, our Master Services Agreement and the Conflicts Policy. However, the Amended and Restated Limited Partnership Agreement of BREP and the Amended and Restated Limited Partnership Agreement of BRELP contain various provisions that modify the fiduciary duties that might otherwise be owed to us and our LP Unitholders. These duties include the duties of care and loyalty. The duty of loyalty, in the absence of provisions in the Amended and Restated Limited Partnership Agreement of BREP and the Amended and Restated Limited Partnership Agreement of BRELP to the contrary, would generally prohibit the Managing General Partner and BRELP General Partner from taking any action or engaging in any transaction as to which it has a conflict of interest. The Amended and Restated Limited Partnership Agreement of BREP and the Amended and Restated Limited Partnership Agreement of BRELP each prohibit the limited partners (or LP Unitholders) from advancing claims that otherwise might raise issues as to compliance with fiduciary duties or applicable law. For example, the agreements provide that the Managing General Partner, BRELP General Partner and their affiliates will not have any obligation under the Amended and Restated Limited Partnership Agreement of BREP and the Amended and Restated Limited Partnership Agreement of BRELP, or as a result of any duties stated or implied by law or equity, including fiduciary duties, to present business or investment opportunities to Brookfield Renewable, BRELP, any Holding Entity or any other holding vehicle established by Brookfield Renewable. They also allow affiliates of the Managing General Partner and BRELP General Partner to engage in activities that may compete with us or our activities. In addition, the agreements permit the Managing General Partner and BRELP General Partner to take into account the interests of third parties, including Brookfield, when resolving conflicts of interest.

These modifications to the fiduciary duties may be detrimental to our LP Unitholders because they restrict the remedies available for actions that might otherwise constitute a breach of fiduciary duty and permit conflicts of interest to be resolved in a manner that is not always in the best interests of Brookfield Renewable or the best interests of our LP Unitholders. We believe it is necessary to modify the fiduciary duties that might otherwise be owed to us and our LP Unitholders, as described above, due to our organizational and ownership structure and the potential conflicts of interest created thereby. Without modifying those duties, the ability of the Managing General Partner and BRELP General Partner to attract and retain experienced and capable directors and to take actions that we believe will be necessary for the carrying out of our business would be unduly limited due to their concern about potential liability.

Conflicts of Interest

We maintain a conflicts protocol and guidelines (the “ Conflicts Policy ”) for addressing conflicts and potential conflicts and for providing guidelines for the completion of certain transactions. The Conflicts Policy states that conflicts be resolved based on the principles of transparency and that transactions that are carried out, be carried out at an arm’s length basis, with validation of terms as arm’s length being based upon actual participation of arm’s length third party participants such as co-investors whenever possible, or otherwise through objective, independent professional advice or other satisfactory evidence of market terms. The Conflicts Policy also states that in circumstances of actual conflict, independent director, or where required, LP Unitholder approval be obtained.

The Conflicts Policy recognizes the benefit to us of our relationship with Brookfield and our intent to pursue a strategy that seeks to maximize the benefits from this relationship. The Conflicts Policy also recognizes that the principal areas of potential application of the Conflicts Policy on an ongoing basis will be in connection with our acquisitions and our participation in Brookfield

 

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led consortia and partnership arrangements, together with any management or service arrangements entered into in connection therewith or the ongoing operations of the underlying Operating Entities. The Conflicts Policy may be amended from time to time at the discretion of the Managing General Partner.

In general, the Conflicts Policy provides that acquisitions that are carried out jointly by us and Brookfield, or in the context of a Brookfield led or co-led consortium or partnership, be carried out on the basis that the consideration paid by us be no more, on a per share or proportionate basis, than the consideration paid by Brookfield or other participants, as applicable. The Conflicts Policy also provides that any fees or carried interest payable in respect of our proportionate investment, or in respect of an acquisition made solely by us, must be credited in the manner contemplated by our Master Services Agreement and the Amended and Restated Limited Partnership Agreement of BRELP, where applicable, or that such fees or carried interest must either have been negotiated with another arm’s-length participant or otherwise demonstrated to be on market terms. The Conflicts Policy further provides that if the acquisition involves the purchase by us of an asset from Brookfield, or the participation in a transaction involving the purchase by us and Brookfield of different assets, that a fairness opinion or, in some circumstances, a valuation or appraisal by a qualified expert be obtained, confirming that the consideration paid by us is fair from a financial point of view. These requirements provided for in the Conflicts Policy are in addition to any disclosure, approval and valuation requirements that may arise under applicable law.

With respect to transactions in which there is greater potential for a conflict of interest to arise, the Managing General Partner may be required to seek the prior approval of the independent directors pursuant to the Conflicts Policy guidelines that have been approved by the independent directors from time to time. These transactions include (i) the dissolution of Brookfield Renewable; (ii) any material amendment to our Master Services Agreement, the Amended and Restated Limited Partnership Agreement of BREP or the Amended and Restated Limited Partnership Agreement of BRELP; (iii) acquisitions by us from, and dispositions by us to, Brookfield; (iv) any other material transaction involving us and Brookfield; and (v) termination of, or any determinations regarding indemnification under, our Master Services Agreement or any determinations regarding indemnification under the Amended and Restated Limited Partnership Agreement of BREP or the Amended and Restated Limited Partnership Agreement of BRELP. Pursuant to the Conflicts Policy, independent directors may grant prior approvals for any of these transactions in the form of general guidelines, policies or procedures in which case no further special approval will be required in connection with a particular transaction or matter permitted thereby. In certain circumstances, these transactions may be related party transactions for the purposes of, and subject to certain requirements of, Canadian Multilateral Instrument 61-101— Protection of Minority Security Holders in Special Transactions (“ MI 61-101 ”). MI 61-101 provides a number of circumstances in which a transaction between an issuer and a related party may be subject to valuation and minority approval requirements. An exemption from such requirements is available when the fair market value of the transaction is not more than 25% of the market capitalization of the issuer. Brookfield Renewable has been granted exemptive relief from the requirements of MI 61-101 that, subject to certain conditions, permits it to be exempt from the minority approval and valuation requirements for transactions that would have a value of less than 25% of Brookfield Renewable’s market capitalization, if the indirect equity interest in Brookfield Renewable, which is held in the form of Redeemable Partnership Units, is included in the calculation of Brookfield Renewable’s market capitalization. As a result, the 25% threshold, above which the minority approval and valuation requirements apply, is increased to include the approximately 48.9% indirect interest in Brookfield Renewable held by Brookfield in the form of Redeemable Partnership Units.

Our organizational and ownership structure and strategy involve a number of relationships that may give rise to conflicts of interest between Brookfield Renewable and our LP Unitholders, on the one hand, and Brookfield, on the other hand. In particular, conflicts of interest could arise, among other reasons, because:

 

   

in originating and recommending acquisition opportunities, Brookfield has significant discretion to determine the suitability of opportunities for us and to allocate such opportunities to us or to itself or third parties;

 

   

because of the scale of typical renewable power acquisitions and because our strategy includes completing acquisitions through consortium or partnership arrangements with pension funds and other financial sponsors, we will likely make co-investments with Brookfield and Brookfield sponsored funds or Brookfield sponsored or co-sponsored consortiums and partnerships, which typically will require that Brookfield owe fiduciary duties to the other partners or consortium members that it does not owe to us;

 

   

there may be circumstances where Brookfield will determine that an acquisition opportunity is not suitable for us because of the fit with our acquisition strategy and/or limits arising due to regulatory or tax considerations and/or limits on our financial capacity or because of the immaturity of the target assets and Brookfield is entitled to pursue the acquisition on its own behalf rather than offering us the opportunity to make the acquisition;

 

   

where Brookfield has made an acquisition, it may transfer it to us at a later date after the assets have been developed or we have obtained sufficient financing;

 

   

our relationship with Brookfield involves a number of arrangements pursuant to which Brookfield provides various services, access to financing arrangements and originates acquisition opportunities, and circumstances may arise in which these arrangements will need to be amended or new arrangements will need to be entered into;

 

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under the Amended and Restated Limited Partnership Agreement of BRELP and the agreements governing the Operating Entities, Brookfield is generally entitled to share in the returns generated by our operations, which could create an incentive for it to assume greater risks when making decisions than it otherwise would in the absence of such arrangements;

 

   

Brookfield is permitted to pursue other business activities and provide services to third parties that compete directly with our business and activities without providing us with an opportunity to participate, which could result in the allocation of Brookfield’s resources, personnel and acquisition opportunities to others who compete with us;

 

   

Brookfield does not owe Brookfield Renewable or our LP Unitholders any fiduciary duties, which may limit our recourse against it;

 

   

the liability of Brookfield is limited under our arrangements with them, and we have agreed to indemnify Brookfield against claims, liabilities, losses, damages, costs or expenses which they may face in connection with those arrangements, which may lead them to assume greater risks when making decisions than they otherwise would if such decisions were being made solely for their own account, or may give rise to legal claims for indemnification that are adverse to the interests of our LP Unitholders;

 

   

Brookfield or a Brookfield sponsored consortium may want to acquire or dispose of the same asset as us;

 

   

we may be, directly or indirectly, purchasing an asset from, or selling an asset to, Brookfield;

 

   

there may be circumstances where we are acquiring different assets as part of the same transaction with Brookfield; and

 

   

other conflicting transactions involving us and Brookfield.

Other Related Party Transactions

On February 4, 2009, the Fund indirectly acquired from Brookfield, its majority unitholder at the time, each of the Prince wind farm and a 50% joint venture interest in the Pingston Creek hydroelectric facility. The aggregate consideration for the transaction was C$130 million, of which C$65 million was paid in cash and the remaining C$65 million was paid through the issuance of shares of a subsidiary of the Fund exchangeable for trust units of the Fund. At the time of the transaction, certain BPRT Trustees and all executive officers of the Fund were also directors and executive officers of BRPI. In order to ensure that the transaction was fair, reasonable and in the best interests of the Fund and its unitholders, the BRPT Trustees established an independent committee made up exclusively of independent BRPT Trustees to review and consider the transaction. The independent committee was advised by independent legal counsel and engaged an independent valuator to render a fairness opinion. Based on the fairness opinion and a review of the transaction, the independent committee determined that the transaction was fair and reasonable and in the best interests of the Fund and its unitholders, and recommended the transaction for approval by the BRPT Trustees.

On August 31, 2009, the Fund indirectly acquired from Brookfield, its majority unitholder at the time, substantially all of the remaining Canadian renewable power generation assets owned by Brookfield, including fifteen hydroelectric generation plants located in Ontario and Québec and the Gosfield wind farm. The aggregate consideration for the acquisition was C$945 million, of which C$365 million was paid in cash, C$200 million was satisfied by a senior unsecured note payable to Brookfield and the issuance to Brookfield of C$380 million in trust units of the Fund (representing 25,562,500 trust units). At the time of the transaction, certain BRPT Trustees and all executive officers of the Fund were also directors and executive officers of BRPI. In order to ensure that the transaction was fair, reasonable and in the best interests of the Fund and its unitholders, the BRPT Trustees established an independent committee made up exclusively of independent BRPT Trustees to review and consider the transaction. The independent committee was advised by independent legal counsel and engaged an independent valuator to render a formal valuation and fairness opinion. Based on the formal valuation and fairness opinion and a review of the transaction, the independent committee determined that the transaction was fair and reasonable and in the best interests of the Fund and its unitholders, and recommended the transaction for approval by the BRPT Trustees. The transaction was approved by a majority of the minority unitholders of the Fund at a special meeting of unitholders held on August 19, 2009.

On November 28, 2011, as a result of the Combination, all of the assets of the Fund and the Brookfield Renewable Power Assets were combined and are now held by Brookfield Renewable. Immediately prior to the Combination, Brookfield owned approximately 34% of the outstanding trust units of the Fund, on a fully-exchanged basis. On completion of the Combination, public unitholders of the Fund received one LP Unit in exchange for each trust-unit of the Fund held and the Fund was wound up. On completion of the Combination, Brookfield owned 73% of Brookfield Renewable on a fully-exchanged basis and the remaining 27% was held by the public. In addition, in connection with the Combination, subsidiaries of Brookfield were appointed as Manager under our Master Services Agreement and provide services under the Energy Marketing Agreement. See also Item 7.B “Related Party Transactions”. At the time of the transaction, certain BRPT Trustees and all executive officers of the Fund were also directors and executive officers of BRPI. In order to ensure that the transaction was fair, reasonable and in the best interests of the Fund and its unitholders, the BRPT Trustees established an independent committee made up exclusively of independent BRPT Trustees to review

 

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and consider the transaction. The independent committee was advised by independent legal counsel and engaged an independent valuator to render a formal valuation and fairness opinion. Based on the formal valuation and fairness opinion and a review of the transaction, the independent committee determined that the transaction was fair and reasonable and in the best interests of the Fund and its unitholders, and recommended the transaction for approval by the BRPT Trustees. The transaction was approved by a majority of the minority unitholders of the Fund at a special meeting of unitholders held on November 10, 2011.

 

  7.C

INTEREST OF EXPERTS AND COUNSEL

Not applicable.

 

ITEM 8. FINANCIAL INFORMATION

 

  8.A

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

See Item 18. “Financial Statements”, which contains our audited consolidated financial statements prepared in accordance with IFRS.

Legal Proceedings

To our knowledge, there are no legal proceedings material to Brookfield Renewable or its subsidiaries to which any of Brookfield Renewable or its subsidiaries is or was a party to or of which any of their respective properties are the subject matter, nor are there any such proceedings known to us to be contemplated.

To our knowledge, there were no (i) penalties or sanctions imposed against Brookfield Renewable or its subsidiaries by a court relating to securities legislation or by a securities regulatory authority during Brookfield Renewable’s last financial year; (ii) penalties or sanctions imposed by a court or regulatory body against Brookfield Renewable or its subsidiaries that would likely be considered important to a reasonable investor in making an investment decision; or (iii) settlement agreements Brookfield Renewable or its subsidiaries entered into with a court relating to securities legislation or with a securities regulatory authority during the last financial year.

 

  8.B

SIGNIFICANT CHANGES

A discussion of the significant changes in our business can be found under Item 4. “Information on the Company”, Item 4.A “History and Development of the Company” and Item 5. “Operating and Financial Review and Prospects—Subsequent Events”.

 

ITEM 9. THE OFFER AND LISTING

 

  9.A

OFFER AND LISTING DETAILS

Our LP Units are listed on the TSX under the symbol “BEP.UN”. We intend to apply to list our LP Units on the NYSE. Listing on the NYSE will be subject to us fulfilling all of the listing requirements of the NYSE.

Our LP Units began trading on the TSX on November 30, 2011 following the Combination. The following table sets forth the reported high and low prices and the trading volumes of our LP Units on the TSX for the periods indicated:

 

     High    Low    Volume

2012

        

June 1, 2012 to June 26, 2012

   C$28.39    C$26.41    1,707,150

May

   C$28.37    C$26.50    1,936,705

April

   C$27.67    C$25.70    1,572,901

March

   C$27.97    C$25.65    2,157,069

February

   C$27.75    C$26.23    3,993,660

January

   C$27.86    C$26,16    3,784,546

April 1, 2012 to June 26, 2012

   C$28.39   

C$26.41

  

5,216,756

January 1, 2012 to March 31, 2012

   C$27.97    C$25.65   

9,935,275

2011

        

December

   C$27.39    C$25.30    4,780,868

November 30 (1)

   C$25.90    C$25.30    888,493

November 30, 2011 to December 31, 2011

   C$27.39    C$25.30   

 

 

  (1)

    Date LP Units commenced trading on the TSX.

 

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Prior to the Combination the Fund’s trust units, which were exchanged for our LP Units on a one-for-one basis pursuant to the Combination, were listed on the TSX under the symbol “BRC.UN”. The following table sets forth the reported high and low prices and the trading volumes of the Fund’s trust units on the TSX for the periods indicated:

 

     High    Low    Volume

 

2011

        

 

November (to November 29)

   C$27.84    C$24.63    7,400,721

 

October

   C$28.10    C$24.42    3,665,714

 

September

   C$26.75    C$22.85    5,661,592

 

August

   C$24.08    C$20.58    2,812,413

 

July

   C$23.70    C$22.51    1,120,832

 

June

   C$23.31    C$21.41    3,093,011

 

May

   C$23.95    C$22.29    2,775,376

 

April

   C$23.50    C$22.01    3,677,132

 

March

   C$23.69    C$21.05    4,048,332

 

February

   C$22.10    C$21.01    3,694,246

 

January

   C$21.49    C$20.63    3,798,991

 

October 1, 2011 to November 29, 2011

   C$28.10    C$24.42   

 

July 1, 2011 to September 30, 2011

   C$26.75    C$20.58   

 

April 1, 2011 to June 30, 2011

   C$23.95    C$21.41   

 

January 1, 2011 to March 31, 2011

   C$23.69    C$20.63   

 

October 1, 2010 to December 31, 2010

   C$22.41    C$20.40   

 

July 1, 2010 to September 30, 2010

   C$21.54    C$19.65   

 

April 1, 2010 to June 30, 2010

   C$21.67    C$18.76   

 

January 1, 2010 to March 31, 2010

   C$21.73    C$19.10   

 

20 11

   C$28.10    C$20.58   

 

2010

   C$22.41    C$18.76   

 

2009

   C$20.00    C$14.70   

 

2008

   C$20.71    C$15.25   

 

2007

   C$21.52    C$17.91   

The LP Units do not have a par value. See Item 5.A “Operating and Financial Review and Prospects—Operating Results”, Item 7.B “Related Party Transactions” and Item 10. “Additional Information”.

 

  9.B

PLAN OF DISTRIBUTION

Not applicable.

 

  9.C

MARKETS

See Item 9.A. “The Offer and Listing—Offer and Listing Details”.

 

  9.D

SELLING SHAREHOLDERS

Not applicable.

 

  9.E

DILUTION

Not applicable.

 

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  9.F

EXPENSES OF THE ISSUE

Not applicable.

 

ITEM 10. ADDITIONAL INFORMATION

 

  10.A

SHARE CAPITAL

See Item 3.B “Capitalization and Indebtedness”, Item 4. “Information on the Company”, Item 5.A “Operating and Financial Review and Prospects—Operating Results—Partnership Capital”, Item 6.B “Compensation”, Item 9.A “The Offer and Listing—Offer and Listing Details” and Item 10.B “Memorandum and Articles of Association”.

 

  10.B

MEMORANDUM AND ARTICLES OF ASSOCIATION

Description of our LP Units and the Amended and Restated Limited Partnership Agreement of BREP

The following is a description of the material terms of our LP Units and the Amended and Restated Limited Partnership Agreement of BREP. Because this description is only a summary of the terms of our LP Units and the Amended and Restated Limited Partnership Agreement of BREP, it does not contain all of the information that you may find useful and is qualified in its entirety by reference to all of the provisions of the Amended and Restated Limited Partnership Agreement of BREP. For more complete information, you should read the Amended and Restated Limited Partnership Agreement of BREP which is available electronically on the website of the SEC at www.sec.gov and on our profile on The System for Electronic Document Analysis and Retrieval (“ SEDAR ”) at www.sedar.com and will be made available to LP Unitholders as described under Item 10.C “Material Contracts” and Item 10.H “Documents on Display”.

See also the information contained in this Form 20-F under Item 3.D “Risk Factors—Risks Related to Our Relationship with Brookfield”, Item 6.A “Directors and Senior Management”, Item 6.C “Board Practices” and Item 7.B “Related Party Transactions”.

Formation and Duration

Brookfield Renewable is a Bermuda exempted limited partnership registered under the Limited Partnership Act 1883 and the Exempted Partnerships Act 1992 . Brookfield Renewable has a perpetual existence and will continue as a limited liability partnership unless it is terminated or dissolved in accordance with the Amended and Restated Limited Partnership Agreement of BREP. Brookfield Renewable’s interests consist of our LP Units, which represent limited partnership interests in Brookfield Renewable, and any additional partnership interests representing limited partnership interests that we may issue in the future as described below under “— Issuance of Additional Partnership Interests”.

Nature and Purpose

Under section 2.2 of the Amended and Restated Limited Partnership Agreement of BREP, the purpose of Brookfield Renewable is to: acquire and hold interests in BRELP and, subject to the approval of the Managing General Partner, any other subsidiary of Brookfield Renewable; engage in any activity related to the capitalization and financing of Brookfield Renewable’s interests in such entities; and engage in any other activity that is incidental to or in furtherance of the foregoing and that is approved by the Managing General Partner and that lawfully may be conducted by a limited partnership organized under the Limited Partnership Act 1883 , the Exempted Partnerships Act 1992 and the Amended and Restated Limited Partnership Agreement of BREP.

Management

As required by law, the Amended and Restated Limited Partnership Agreement of BREP provides for the management and control of Brookfield Renewable by a general partner, the Managing General Partner. The Managing General Partner will exercise its powers and carry out its functions honestly and in good faith and the Managing General Partner will exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, in each case, subject to, and after taking into account, the terms and conditions of the Relationship Agreement, our Master Services Agreement and the Conflicts Policy. Except as set out in the Amended and Restated Limited Partnership Agreement of BREP, the Managing General Partner has no additional duty to propose or approve any conduct of Brookfield Renewable, and may decline to propose or approve such conduct free of any additional duty (including fiduciary duty). The Managing General Partner shall not be in breach of any duty to Brookfield Renewable if it takes actions permitted by the Amended and Restated Limited Partnership Agreement of BREP, the Relationship Agreement, our Master Services Agreement or the Conflicts Policy.

Our LP Units

Our LP Units are limited partnership interests in Brookfield Renewable. Holders of our LP Units are not entitled to the withdrawal or return of capital contributions in respect of our LP Units, except to the extent, if any, that distributions are made to such holders pursuant to the Amended and Restated Limited Partnership Agreement of BREP or upon the liquidation of Brookfield Renewable as described below under “— Liquidation and Distribution of Proceeds” or as otherwise required by applicable law.

 

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Except to the extent expressly provided in the Amended and Restated Limited Partnership Agreement of BREP, a holder of our LP Units does not have priority over any other LP Unitholder, either as to the return of capital contributions or as to profits, losses or distributions. Unless otherwise determined by the Managing General Partner, in its sole discretion, LP Unitholders will not be granted any pre-emptive or other similar right to acquire additional interests in Brookfield Renewable. In addition, LP Unitholders do not have any right to have their LP Units redeemed by Brookfield Renewable.

Issuance of Additional Partnership Interests

Subject to any approval required by applicable law and the approval of any applicable securities exchange, the Managing General Partner has broad rights to cause Brookfield Renewable to issue additional partnership interests and may cause Brookfield Renewable to issue additional partnership interests (including new classes of partnership interests and options, rights, warrants and appreciation rights relating to such interests) for any partnership purpose, at any time and on such terms and conditions as it may determine without the approval of any limited partners. Any additional partnership interests may be issued in one or more classes, or one or more series of classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of partnership interests) as may be determined by the Managing General Partner in its sole discretion, all without approval of our limited partners.

Transfers of LP Units

We are not required to recognize any transfer of our LP Units until certificates, if any, evidencing such LP Units are surrendered for registration of transfer. Each person to whom an LP Unit is transferred or issued (including any nominee holder or an agent or representative acquiring such LP Unit for the account of another person) shall be admitted to Brookfield Renewable as a partner with respect to the unit so transferred or issued when any such transfer or issuance is reflected in the books and records of Brookfield Renewable subject to and in accordance with the terms of the Amended and Restated Limited Partnership Agreement of BREP. Any transfer of an LP Unit shall not entitle the transferee to share in the profits and losses of Brookfield Renewable, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled until the transferee becomes a partner and a party to the Amended and Restated Limited Partnership Agreement of BREP.

By accepting a unit for transfer in accordance with the Amended and Restated Limited Partnership Agreement of BREP, each transferee will be deemed to have:

 

   

executed the Amended and Restated Limited Partnership Agreement of BREP and become bound by the terms thereof;

 

   

granted an irrevocable power of attorney to the Managing General Partner or the liquidator of Brookfield Renewable and any officer thereof to act as such partner’s agent and attorney-in-fact to execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (i) all agreements, certificates, documents and other instruments relating to the existence or qualification of Brookfield Renewable as an exempted limited partnership (or a partnership in which the limited partners have limited liability) in Bermuda and in all jurisdictions in which Brookfield Renewable may conduct activities and affairs or own property; any amendment, change, modification or restatement of the Amended and Restated Limited Partnership Agreement of BREP, subject to the requirements of the Amended and Restated Limited Partnership Agreement of BREP; the dissolution and liquidation of Brookfield Renewable; the admission, withdrawal of any partner of Brookfield Renewable or any capital contribution of any partner of Brookfield Renewable; the determination of the rights, preferences and privileges of any class or series of units or other partnership interests of Brookfield Renewable; and any tax election with any limited partner or general partner on our behalf or on behalf of any limited partner or the general partner, and (ii) subject to the requirements of the Amended and Restated Limited Partnership Agreement of BREP, all ballots, consents, approvals, waivers, certificates, documents and other instruments necessary or appropriate, in the sole discretion of the Managing General Partner or the liquidator of Brookfield Renewable, to make, evidence, give, confirm or ratify any voting consent, approval, agreement or other action that is made or given by Brookfield Renewable’s partners or is consistent with the terms of the Amended and Restated Limited Partnership Agreement of BREP or to effectuate the terms or intent of the Amended and Restated Limited Partnership Agreement of BREP;

 

   

made the consents and waivers contained in the Amended and Restated Limited Partnership Agreement of BREP; and

 

   

ratified and confirmed all contracts, agreements, assignments and instruments entered into on behalf of Brookfield Renewable in accordance with the Amended and Restated Limited Partnership Agreement of BREP, including the granting of any charge or security interest over the assets of Brookfield Renewable and the assumption of any indebtedness in connection with the affairs of Brookfield Renewable.

The transfer of any unit and/or the admission of any new partner to Brookfield Renewable will not constitute an amendment to the Amended and Restated Limited Partnership Agreement of BREP.

 

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Book-Based System

LP Units may be represented in the form of one or more fully registered unit certificates held by, or on behalf of, CDS or DTC, as applicable, as custodian of such certificates for the participants of CDS or DTC, registered in the name of CDS or DTC or their respective nominee, and registration of ownership and transfers of LP Units may be effected through the book-based system administered by CDS or DTC, as applicable.

Investments in BRELP

If and to the extent that Brookfield Renewable raises funds by way of the issuance of equity or debt securities, or otherwise, pursuant to a public offering, private placement or otherwise, an amount equal to the proceeds will be invested in BRELP.

Capital Contributions

Brookfield contributed $1 and the Managing General Partner contributed $100 to the capital of Brookfield Renewable in order to form Brookfield Renewable. Thereafter, Brookfield contributed to Brookfield Renewable its interest in various renewable power businesses in exchange for Redeemable Partnership Units and our LP Units. No partner will have the right to withdraw any or all of its capital contribution.

Distributions

Distributions to partners of Brookfield Renewable will be made only as determined by the Managing General Partner in its sole discretion. However, the Managing General Partner will not be permitted to cause Brookfield Renewable to make a distribution if it does not have sufficient cash on hand to make the distribution, the distribution would render it insolvent or if, in the opinion of the Managing General Partner, the distribution would leave it with insufficient funds to meet any future contingent obligations, or the distribution would contravene the Limited Partnership Act 1883 .

The amount of taxes withheld or paid by Brookfield Renewable or by any member of Brookfield Renewable Group in respect of LP Units held by LP Unitholders or the Managing General Partner shall be treated either as a distribution to such partner or as a general expense of Brookfield Renewable as determined by the Managing General Partner in its sole discretion.

Any distributions from Brookfield Renewable will be made to the limited partners as to 99.99% and to the Managing General Partner as to 0.01%. Each limited partner will receive a pro rata share of distributions made to all limited partners in accordance with the proportion of all outstanding LP Units held by that limited partner. Except for receiving 0.01% of distributions from Brookfield Renewable, the Managing General Partner shall not be compensated for its services as Managing General Partner but it shall be reimbursed for certain expenses.

Allocations of Income and Losses

Limited partners will share in the net profits and net losses of Brookfield Renewable generally in accordance with their respective percentage interest in Brookfield Renewable.

Net income and net losses for U.S. federal income tax purposes will be allocated for each taxable year or other relevant period among our partners using a monthly, quarterly or other permissible convention pro rata on a per unit basis, except to the extent otherwise required by law or pursuant to tax elections made by Brookfield Renewable. Each item of income, gain, loss and deduction so allocated to a partner of Brookfield Renewable generally will have the same source and character as though such partner had realized the item directly.

The income for Canadian federal income tax purposes of Brookfield Renewable for a given fiscal year of Brookfield Renewable will be allocated to each partner in an amount calculated by multiplying such income by a fraction, the numerator of which is the sum of the distributions received by such partner with respect to such fiscal year and the denominator of which is the aggregate amount of the distributions made by Brookfield Renewable to partners with respect to such fiscal year. Generally, the source and character of items of income so allocated to a partner with respect to a fiscal year of Brookfield Renewable will be the same source and character as the distributions received by such partner with respect to such fiscal year.

If, with respect to a given fiscal year, no distribution is made by Brookfield Renewable or Brookfield Renewable has a loss for Canadian federal income tax purposes, one quarter of the income, or loss, as the case may be, for Canadian federal income tax purposes of Brookfield Renewable for such fiscal year, will be allocated to the partners of record at the end of each calendar quarter ending in such fiscal year pro rata to their respective percentage interests in Brookfield Renewable, which in the case of the Managing General Partner shall mean 0.01%, and in the case of all limited partners of Brookfield Renewable shall mean in the aggregate 99.99%, which aggregate percentage interest shall be allocated among the limited partners in the proportion that the number of LP Units held at each such date by a limited partner is of the total number of LP Units issued and outstanding at each such date. To

 

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such end, any person who was a partner at any time during such fiscal year but who has transferred all of such person’s LP Units before the least day of that fiscal year may be deemed to be a partner on the last day of such fiscal year for the purposes of subsection 96(1) of the Income Tax Act. Generally, the source and character of such income or losses so allocated to a partner at the end of each calendar quarter will be the same source and character as the income or loss earned or incurred by Brookfield Renewable in such calendar quarter.

However, any gain for Canadian tax purposes allocated by BRELP to Brookfield Renewable in respect of the disposition of the common shares of CanHoldco by BRELP, will be allocated for Canadian tax purposes firstly, in respect of any LP Units held by Brookfield or any affiliates of Brookfield (other than any member of Brookfield Renewable Group) by BRELP that were acquired on the exchange of Redeemable Partnership Units, such portion of the gain, if any, that would otherwise have been allocated for Canadian tax purposes to Brookfield or any affiliates of Brookfield (other than any member of Brookfield Renewable Group) in respect of the Redeemable Partnership Units on the assumption that such units had not been exchanged for LP Units and remained Redeemable Partnership Units, shall be allocated pro rata to Brookfield or any affiliates of Brookfield (other than any member of Brookfield Renewable Group) in respect of our LP Units acquired on the exchange of Redeemable Partnership Units, and secondly, the remaining portion of the gain, if any, shall be allocated to LP Unitholders on a per LP Unit basis excluding LP Units owned by Brookfield or any member of the Brookfield Group (other than Brookfield Renewable Group) immediately after the completion of the Combination and LP Units acquired by Brookfield or any affiliates of Brookfield (other than any member of Brookfield Renewable Group) pursuant to the Redemption-Exchange Mechanism. The foregoing summary, to the extent it states matters of Canadian or U.S. tax law or legal conclusions, is qualified in its entirety by the sections in this Form 20-F under Item 10.E entitled “Certain Material Canadian Federal Income Tax Considerations” and “Certain Material U.S. Federal Income Tax Considerations”.

Limited Liability

Assuming that a limited partner does not participate in the control or management of Brookfield Renewable or conduct the affairs of, sign or execute documents for or otherwise bind Brookfield Renewable within the meaning of the Limited Partnership Act 1883 and otherwise acts in conformity with the provisions of the Amended and Restated Limited Partnership Agreement of BREP, such partner’s liability under the Limited Partnership Act 1883 and the Amended and Restated Limited Partnership Agreement of BREP will be limited to the amount of capital such partner is obligated to contribute to Brookfield Renewable for its limited partner interest plus its share of any undistributed profits and assets, except as described below.

If it were determined, however, that a limited partner was participating in the control or management of Brookfield Renewable or conducting the affairs of, signing or executing documents for or otherwise binding Brookfield Renewable (or purporting to do any of the foregoing) within the meaning of the Limited Partnership Act 1883 or the Exempted Partnerships Act 1992 , such limited partner would be liable as if it were a general partner of Brookfield Renewable in respect of all debts of Brookfield Renewable incurred while that limited partner was so acting or purporting to act. Neither the Amended and Restated Limited Partnership Agreement of BREP nor the Limited Partnership Act 1883 specifically provides for legal recourse against the Managing General Partner if a limited partner were to lose limited liability through any fault of the Managing General Partner. While this does not mean that a limited partner could not seek legal recourse, we are not aware of any precedent for such a claim in Bermuda case law.

No Management or Control

Brookfield Renewable’s limited partners, in their capacities as such, may not take part in the management or control of the activities and affairs of Brookfield Renewable and do not have any right or authority to act for or to bind Brookfield Renewable or to take part or interfere in the conduct or management of Brookfield Renewable. Limited partners are not entitled to vote on matters relating to Brookfield Renewable, although LP Unitholders are entitled to consent to certain matters as described under “— Amendments to the Amended and Restated Limited Partnership Agreement of BREP”, “— Opinion of Counsel and Limited Partner Approval”, “— Sale or Other Disposition of Assets”, and “— Withdrawal of the Managing General Partner” which may be effected only with the consent of the holders of the percentages of our outstanding LP Units specified below. Each LP Unit shall entitle the LP Unitholder to one vote for the purposes of any approvals of LP Unitholders.

Meetings

The Managing General Partner may call special meetings of partners at a time and place outside of Canada determined by the Managing General Partner on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. The limited partners do not have the ability to call a special meeting. Only holders of record on the date set by the Managing General Partner (which may not be less than 10 days nor more than 60 days, before the meeting) are entitled to notice of any meeting.

Written consents may be solicited only by or on behalf of the Managing General Partner. Any such consent solicitation may specify that any written consents must be returned to Brookfield Renewable within the time period, which may not be less than 20 days, specified by the Managing General Partner.

 

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For purposes of determining holders of partnership interests entitled to provide consents to any action described above, the Managing General Partner may set a record date, which may be not less than 10 nor more than 60 days before the date by which record holders are requested in writing by the Managing General Partner to provide such consents. Only those holders of partnership interests on the record date established by the Managing General Partner will be entitled to provide consents with respect to matters as to which a consent right applies.

Amendments to the Amended and Restated Limited Partnership Agreement of BREP

Amendments to the Amended and Restated Limited Partnership Agreement of BREP may only be proposed by or with the consent of the Managing General Partner. To adopt a proposed amendment, other than the amendments that do not require limited partner approval discussed below, the Managing General Partner must seek approval of at least 66 2 / 3 % of the voting power of our outstanding LP Units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment.

Prohibited Amendments

No amendment may be made that would:

 

  (i)

enlarge the obligations of any limited partner without its consent, except that any amendment that would have a material adverse effect on the rights or preferences of any class of partnership interests in relation to other classes of partnership interests may be approved by at least a majority of the type or class of partnership interests so affected; or

 

  (ii)

enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by Brookfield Renewable to the Managing General Partner or any of its affiliates without the consent of the Managing General Partner, which may be given or withheld in its sole discretion.

The provision of the Amended and Restated Limited Partnership Agreement of BREP preventing the amendments having the effects described directly above can be amended upon the approval of the holders of at least 90% of the outstanding LP Units, and in the case of (ii) above, with the consent of the Managing General Partner, which may be given or withheld in its sole discretion.

No Limited Partner Approval

Subject to applicable law, the Managing General Partner may generally make amendments to the Amended and Restated Limited Partnership Agreement of BREP without the approval of any limited partner to reflect:

 

   

a change in the name of Brookfield Renewable, the location of Brookfield Renewable’s registered office, or Brookfield Renewable’s registered agent;

 

   

the admission, substitution or withdrawal of partners in accordance with the Amended and Restated Limited Partnership Agreement of BREP;

 

   

a change that the Managing General Partner determines is reasonable and necessary or appropriate for Brookfield Renewable to qualify or to continue Brookfield Renewable’s qualification as an exempted limited partnership under the laws of Bermuda or a partnership in which the limited partners have limited liability under the laws of any jurisdiction or is necessary or advisable in the opinion of the Managing General Partner to ensure that Brookfield Renewable will not be treated as an association taxable as a corporation or otherwise taxed as an entity for tax purposes;

 

   

an amendment that the Managing General Partner determines to be necessary or appropriate to address certain changes in tax regulations, legislation or interpretation;

 

   

an amendment that is necessary, in the opinion of our counsel, to prevent Brookfield Renewable or the Managing General Partner or its directors or officers from in any manner being subjected to the provisions of the Investment Company Act or similar legislation in other jurisdictions;

 

   

an amendment that the Managing General Partner determines in its sole discretion to be necessary or appropriate for the creation, authorization or issuance of any class or series of partnership interests or options, rights, warrants or appreciation rights relating to partnership securities;

 

   

any amendment expressly permitted in the Amended and Restated Limited Partnership Agreement of BREP to be made by the Managing General Partner acting alone;

 

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any amendment that, in the sole discretion of the Managing General Partner, is necessary or appropriate to reflect and account for the formation by Brookfield Renewable of, or its investment in, any partnership, association, body corporate or other entity, as otherwise permitted by the Amended and Restated Limited Partnership Agreement of BREP;

 

   

a change in Brookfield Renewable’s fiscal year and related changes; or

 

   

any other amendments substantially similar to any of the matters described directly above.

In addition, the Managing General Partner may make amendments to the Amended and Restated Limited Partnership Agreement of BREP without the approval of any limited partner if those amendments, in the discretion of the Managing General Partner:

 

   

do not adversely affect Brookfield Renewable’s limited partners considered as a whole (including any particular class of partnership interests as compared to other classes of partnership interests) in any material respect;

 

   

are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion or binding directive, order, ruling or regulation of any governmental agency or judicial authority;

 

   

are necessary or appropriate to facilitate the trading of our LP Units or to comply with any rule, regulation, guideline or requirement of any securities exchange on which our LP Units are or will be listed for trading;

 

   

are necessary or appropriate for any action taken by the Managing General Partner relating to splits or combinations of LP Units made in accordance with the provisions of the Amended and Restated Limited Partnership Agreement of BREP; or

 

   

are required to effect the intent the provisions of the Amended and Restated Limited Partnership Agreement of BREP or are otherwise contemplated by the Amended and Restated Limited Partnership Agreement of BREP.

Opinion of Counsel and Limited Partner Approval

The Managing General Partner will not be required to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners if one of the amendments described above under “— No Limited Partner Approval” should occur. No other amendments to the Amended and Restated Limited Partnership Agreement of BREP will become effective without the approval of holders of at least 90% of our LP Units, unless Brookfield Renewable obtains an opinion of counsel to the effect that the amendment will not cause Brookfield Renewable to be treated as an association taxable as a corporation or otherwise taxable as an entity for tax purposes (provided that for U.S. tax purposes the Managing General Partner has not made the election described below under “— Election to be Treated as a Corporation”) or affect the limited liability under the Limited Partnership Act 1883 of any of Brookfield Renewable’s limited partners.

In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests in relation to other classes of partnership interests will also require the approval of the holders of at least a majority of the outstanding partnership interests of the class so affected.

In addition, any amendment that reduces the voting percentage required to take any action must be approved by the written consent or affirmative vote of limited partners whose aggregate outstanding voting units constitute not less than the voting requirement sought to be reduced.

Sale or Other Disposition of Assets

The Amended and Restated Limited Partnership Agreement of BREP generally prohibits the Managing General Partner, without the prior approval of the holders of at least 66 2 / 3 % of the voting power of our LP Units, from causing Brookfield Renewable to, among other things, sell, exchange or otherwise dispose of all or substantially all of Brookfield Renewable’s assets in a single transaction or a series of related transactions, including by approving on Brookfield Renewable’s behalf the sale, exchange or other disposition of all or substantially all of the assets of Brookfield Renewable’s subsidiaries. However, the Managing General Partner, in its sole discretion, may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of Brookfield Renewable’s assets (including for the benefit of persons who are not Brookfield Renewable or Brookfield Renewable’s subsidiaries) without that approval. The Managing General Partner may also sell all or substantially all of Brookfield Renewable’s assets under any forced sale of any or all of Brookfield Renewable’s assets pursuant to the foreclosure or other realization upon those encumbrances without that approval.

 

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Take-Over Bids

If, within 120 days after the date of a take-over bid, as defined in the Securities Act (Ontario) , the take-over bid is accepted by holders of not less than 90% of our outstanding LP Units, other than our LP Units held at the date of the take-over bid by the offeror or any affiliate or associate of the offeror, and the offeror acquires all of such LP Units deposited or tendered under the take-over bid, the offeror will be entitled to acquire our LP Units not deposited under the take-over bid on the same terms as our LP Units acquired under the take-over bid.

Election to be Treated as a Corporation

If the Managing General Partner determines in its sole discretion that it is no longer in Brookfield Renewable’s best interests to continue as a partnership for U.S. federal income tax purposes, the Managing General Partner may elect to treat Brookfield Renewable as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.

Termination and Dissolution

Brookfield Renewable will terminate upon the earlier to occur of (i) the date on which all of Brookfield Renewable’s assets have been disposed of or otherwise realized by Brookfield Renewable and the proceeds of such disposals or realizations have been distributed to partners, (ii) the service of notice by the Managing General Partner, with the special approval of a majority of its independent directors, that in its opinion the coming into force of any law, regulation or binding authority has or will render illegal or impracticable the continuation of Brookfield Renewable, and (iii) at the election of the Managing General Partner, with the special approval of its independent directors, if Brookfield Renewable, as determined by the Managing General Partner, based on an opinion of counsel, is required to register as an “investment company” under the Investment Company Act or similar legislation in other jurisdictions.

Brookfield Renewable will be dissolved upon the withdrawal of the Managing General Partner as the general partner of Brookfield Renewable (unless a successor entity becomes the general partner as described in the following sentence or the withdrawal is effected in compliance with the provisions of the Amended and Restated Limited Partnership Agreement of BREP that are described below under “— Withdrawal of the Managing General Partner”) or the entry by a court of competent jurisdiction of a decree of judicial dissolution of Brookfield Renewable or an order to wind-up or liquidate the Managing General Partner without the appointment of a successor in compliance with the provisions of the Amended and Restated Limited Partnership Agreement of BREP that are described below under “— Withdrawal of the Managing General Partner”. Brookfield Renewable will be reconstituted and continue without dissolution if within 30 days of the date of dissolution (and so long as a notice of dissolution has not been filed with the Bermuda Monetary Authority), a successor general partner executes a transfer deed pursuant to which it becomes the general partner and assumes the rights and undertakes the obligations of the general partner and Brookfield Renewable receives an opinion of counsel that the admission of the new general partner will not result in the loss of the limited liability of any limited partner.

Liquidation and Distribution of Proceeds

Upon our dissolution, unless Brookfield Renewable is continued as a new limited partnership, the liquidator authorized to wind-up Brookfield Renewable’s affairs will, acting with all of the powers of the Managing General Partner that the liquidator deems necessary or appropriate in its judgment, liquidate Brookfield Renewable’s assets and apply the proceeds of the liquidation first, to discharge Brookfield Renewable’s liabilities as provided in the Amended and Restated Limited Partnership Agreement of BREP and by law and thereafter to the partners pro rata according to the percentages of their respective partnership interests as of a record date selected by the liquidator. The liquidator may defer liquidation of Brookfield Renewable’s assets for a reasonable period of time or distribute assets to partners in kind if it determines that an immediate sale or distribution of all or some of Brookfield Renewable’s assets would be impractical or would cause undue loss to the partners.

Withdrawal of the Managing General Partner

The Managing General Partner may withdraw as Managing General Partner without first obtaining approval of our Unitholders by giving 180 days’ advance written notice to the other partners, and that withdrawal will not constitute a violation of the Amended and Restated Limited Partnership Agreement of BREP.

Upon the withdrawal of the Managing General Partner, the holders of at least 66 2 / 3 % of the voting power of our outstanding LP Units may select a successor to that withdrawing Managing General Partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability, tax matters and the Investment Company Act (and similar legislation in other jurisdictions) cannot be obtained, Brookfield Renewable will be dissolved, wound up and liquidated. See “— Termination and Dissolution” above.

 

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In the event of withdrawal of a general partner where that withdrawal violates the Amended and Restated Limited Partnership Agreement of BREP, a successor general partner will have the option to purchase the general partnership interest of the departing general partner for a cash payment equal to its fair market value. Under all other circumstances where a general partner withdraws, the departing general partner will have the option to require the successor general partner to purchase the general partnership interest of the departing general partner for a cash payment equal to its fair market value. In each case, this fair market value will be determined by agreement between the departing general partner and the successor general partner. If no agreement is reached within 30 days of the general partner’s departure, an independent investment banking firm or other independent expert selected by the departing general partner and the successor general partner will determine the fair market value. If the departing general partner and the successor general partner cannot agree upon an expert within 45 days of the general partner’s departure, then an expert chosen by agreement of the experts selected by each of them will determine the fair market value.

If the option described above is not exercised by either the departing general partner or the successor general partner, the departing general partner’s general partnership interests will automatically convert into LP Units pursuant to a valuation of those interests as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.

Transfer of the General Partnership Interest

The Managing General Partner may transfer all or any part of its general partnership interest without first obtaining approval of any LP Unitholder. As a condition of this transfer, the transferee must (i) be an affiliate of the general partner of BRELP (or the transfer must be made concurrently with a transfer of the general partnership units of BRELP to an affiliate of the transferee), (ii) agree to assume the rights and duties of the Managing General Partner to whose interest that transferee has succeeded, (iii) agree to be bound by the provisions of the Amended and Restated Limited Partnership Agreement of BREP and (iv) furnish an opinion of counsel regarding limited liability and tax matters. Any transfer of the general partnership interest is subject to prior notice to and approval of the relevant Bermuda regulatory authorities. At any time, the shareholder of the Managing General Partner may sell or transfer all or part of its shares in the Managing General Partner without the approval of the unitholders.

Partnership Name

If the Managing General Partner ceases to be the general partner of Brookfield Renewable and our new general partner is not an affiliate of Brookfield, Brookfield Renewable will be required by the Amended and Restated Limited Partnership Agreement of BREP to change the name of Brookfield Renewable to a name that does not include “Brookfield” and which could not be capable of confusion in any way with such name. The Amended and Restated Limited Partnership Agreement of BREP explicitly provides that this obligation shall be enforceable and waivable by the Managing General Partner notwithstanding that it may have ceased to be the general partner of Brookfield Renewable.

Transactions with Interested Parties

The Managing General Partner, the Manager and their respective partners, members, shareholders, directors, officers, employees and shareholders, which we refer to as “interested parties”, may become limited partners or beneficially interested in limited partners and may hold, dispose of or otherwise deal with our LP Units with the same rights they would have if the Managing General Partner was not a party to the Amended and Restated Limited Partnership Agreement of BREP. An interested party will not be liable to account either to other interested parties or to Brookfield Renewable, Brookfield Renewable’s partners or any other persons for any profits or benefits made or derived by or in connection with any such transaction.

The Amended and Restated Limited Partnership Agreement of BREP permits an interested party to sell investments to, purchase assets from, vest assets in and enter into any contract, arrangement or transaction with Brookfield Renewable, BRELP, any of the Holding Entities, any operating entity or any other holding vehicle established by Brookfield Renewable and may be interested in any such contract, transaction or arrangement and shall not be liable to account either to Brookfield Renewable, BRELP, any of the Holding Entities, any operating entity or any other holding vehicle established by Brookfield Renewable or any other person in respect of any such contract, transaction or arrangement, or any benefits or profits made or derived therefrom, by virtue only of the relationship between the parties concerned, subject to any approval requirements that are contained in the Conflicts Policy. See Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”.

Outside Activities of the Managing General Partner; Conflicts of Interest

Under the Amended and Restated Limited Partnership Agreement of BREP, the Managing General Partner is required to maintain as its sole activity the role of general partner of Brookfield Renewable. The Managing General Partner is not permitted to engage in any business or activity or incur or guarantee any debts or liabilities except in connection with or incidental to its performance as general partner or incurring, guaranteeing, acquiring, owning or disposing of debt or equity securities of BRELP, a Holding Entity or any other holding vehicle established by Brookfield Renewable.

 

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The Amended and Restated Limited Partnership Agreement of BREP provides that each person who is entitled to be indemnified by Brookfield Renewable (other than the Managing General Partner), as described below under “— Indemnification; Limitations on Liability”, shall have the right to engage in businesses of every type and description and other activities for profit, and to engage in and possess interests in business ventures of any and every type or description, irrespective of whether (i) such activities are similar to our affairs or activities or (ii) such affairs and activities directly compete with, or disfavor or exclude, the Managing General Partner, Brookfield Renewable, BRELP, any Holding Entity, any operating entity or any other holding vehicle established by Brookfield Renewable. Such business interests, activities and engagements will be deemed not to constitute a breach of the Amended and Restated Limited Partnership Agreement of BREP or any duties stated or implied by law or equity, including fiduciary duties, owed to any of the Managing General Partner, Brookfield Renewable, BRELP, any Holding Entity, any operating entity and any other holding vehicle established by Brookfield Renewable (or any of their respective investors), and shall be deemed not to be a breach of the Managing General Partner’s fiduciary duties or any other obligation of any type whatsoever of the Managing General Partner. None of the Managing General Partner, Brookfield Renewable, BRELP, any Holding Entity, any operating entity, any other holding vehicle established by Brookfield Renewable or any other person shall have any rights by virtue of the Amended and Restated Limited Partnership Agreement of BREP or the partnership relationship established thereby or otherwise in any business ventures of any person who is entitled to be indemnified by Brookfield Renewable as described below under “— Indemnification; Limitations on Liability”.

The Managing General Partner and the other indemnified persons described in the preceding paragraph do not have any obligation under the Amended and Restated Limited Partnership Agreement of BREP to present business or investment opportunities to Brookfield Renewable, BRELP, any Holding Entity, any operating entity or any other holding vehicle established by Brookfield Renewable. These provisions will not affect any obligation of an indemnified person to present business or investment opportunities to Brookfield Renewable, BRELP, any Holding Entity, any operating entity or any other holding vehicle established by Brookfield Renewable pursuant to the Relationship Agreement or any other separate written agreement between such persons.

Any conflicts of interest and potential conflicts of interest that are approved by a majority of the Managing General Partner’s independent directors from time-to-time will be deemed approved by all partners. Pursuant to the Conflicts Policy, independent directors may grant approvals for any matters that may give rise to a conflict of interest or potential conflict of interest in the form of general guidelines, policies or procedures that are adopted by the Managing General Partner’s independent directors, and amended from time-to-time with the approval of a majority of the independent directors of the Managing General Partner, in which case no further special approval will be required in connection with a particular transaction or matter permitted thereby other than any approvals required by law. See Item 7.B “Related Party Transactions — Conflicts of Interest and Fiduciary Duties”.

Indemnification; Limitations on Liability

Under the Amended and Restated Limited Partnership Agreement of BREP, Brookfield Renewable is required to indemnify on an after-tax basis out of the assets of Brookfield Renewable to the fullest extent permitted by law the Managing General Partner, the Manager and any of their respective affiliates (and their respective officers, directors, agents, shareholders, partners, members and employees), any person who serves on a Governing Body of BRELP, a Holding Entity, operating entity or any other holding vehicle established by Brookfield Renewable and any other person designated by the Managing General Partner as an indemnified person, in each case, against all losses, claims, damages, liabilities, costs or expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, incurred by an indemnified person in connection with our investments and activities or by reason of their holding such positions, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the indemnified person’s gross negligence, bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under the Amended and Restated Limited Partnership Agreement of BREP, (i) the liability of such persons has been limited to the fullest extent permitted by law, except to the extent that their conduct involves gross negligence, bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful and (ii) any matter that is approved by the independent directors of the Managing General Partner will not constitute a breach of the Amended and Restated Limited Partnership Agreement of BREP or any duties stated or implied by law or equity, including fiduciary duties. The Amended and Restated Limited Partnership Agreement of BREP requires us to advance funds to pay the expenses of an indemnified person in connection with a matter in which indemnification may be sought until it is determined that the indemnified person is not entitled to indemnification.

Accounts, Reports and Other Information

Under the Amended and Restated Limited Partnership Agreement of BREP, the Managing General Partner is required to prepare financial statements in accordance with IFRS as determined by the International Accounting Standards Board. Brookfield Renewable’s financial statements must be made publicly available together with a statement of the accounting policies used in their preparation, such information as may be required by applicable laws and regulations and such information as the Managing General Partner deems appropriate. Brookfield Renewable’s annual financial statements must be audited by an independent accounting firm of international standing and made publicly available within such period of time as is required to comply with applicable laws and

 

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regulations, including any rules of any applicable securities exchange. Brookfield Renewable’s quarterly financial statements may be unaudited and are made available publicly as and within the time period required by applicable laws and regulations, including any rules of any applicable securities exchange. The Managing General Partner is also required to prepare all other press releases, proxy circulars and other disclosure documentation as by be required by applicable laws, including any rules of any applicable securities exchange.

The Managing General Partner is also required to use commercially reasonable efforts to prepare and send to the limited partners of Brookfield Renewable on an annual basis, additional information regarding Brookfield Renewable, including Schedule K-1 (or equivalent) and information related to the passive foreign investment company status of certain non-U.S. corporations that we control. The Managing General Partner will, where reasonably possible, prepare and send information required by the non-U.S. limited partners of Brookfield Renewable for U.S. federal income tax reporting purposes. The Managing General Partner will also, where reasonably possible and applicable, prepare and send information required by limited partners of Brookfield Renewable for Canadian federal income tax purposes.

Governing Law; Submission to Jurisdiction

The Amended and Restated Limited Partnership Agreement of BREP is governed by and will be construed in accordance with the laws of Bermuda. Under the Amended and Restated Limited Partnership Agreement of BREP, each of Brookfield Renewable’s partners (other than governmental entities prohibited from submitting to the jurisdiction of a particular jurisdiction) will submit to the non-exclusive jurisdiction of any court in Bermuda in any dispute, suit, action or proceeding arising out of or relating to the Amended and Restated Limited Partnership Agreement of BREP. Each partner waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process of any such court and further waives, to the fullest extent permitted by law, any claim of inconvenient forum, improper venue or that any such court does not have jurisdiction over the partner. Any final judgment against a partner in any proceedings brought in a court in Bermuda will be conclusive and binding upon the partner and may be enforced in the courts of any other jurisdiction of which the partner is or may be subject, by suit upon such judgment. The foregoing submission to jurisdiction and waivers will survive the dissolution, liquidation, winding up and termination of Brookfield Renewable.

Description of the Amended and Restated Limited Partnership Agreement of BRELP

The following is a description of the material terms of the Amended and Restated Limited Partnership Agreement of BRELP. Holders of LP Units in Brookfield Renewable are not limited partners of BRELP and do not have any rights under the Amended and Restated Limited Partnership Agreement of BRELP. Pursuant to the Voting Agreement, however, Brookfield Renewable, through the Managing General Partner, has the right to direct all eligible votes in the election of the directors of the BRELP General Partner, through which Brookfield Renewable participates in the management and activities of BRELP and the Holding Entities. See Item 7.B “Related Party Transactions—Voting Agreements”.

Because this description is only a summary of the terms of the agreement, it does not necessarily contain all of the information that you may find useful. For more complete information, you should read the Amended and Restated Limited Partnership Agreement of BRELP which is available electronically on the website of the Securities and Exchange Commission at www.sec.gov and on our SEDAR profile at www.sedar.com and will be made available to LP Unitholders as described under Item 10.C “Material Contracts” and Item 10.H “Documents on Display”.

Formation and Duration

BRELP is a Bermuda exempted limited partnership registered under the Limited Partnership Act 1883 and the Exempted Partnerships Act 1992 . BRELP has a perpetual existence and will continue as a limited liability partnership unless Brookfield Renewable is terminated or dissolved in accordance with the Amended and Restated Limited Partnership Agreement of BRELP.

Nature and Purpose

Under the Amended and Restated Limited Partnership Agreement of BRELP, the purpose of BRELP is to: acquire and hold interests in the Holding Entities and, subject to the approval of the BRELP GP LP, any other subsidiary of BRELP; engage in any activity related to the capitalization and financing of BRELP’s interests in such entities; and engage in any other activity that is incidental to or in furtherance of the foregoing and that is approved by the BRELP GP LP and that lawfully may be conducted by a limited partnership organized under the Limited Partnership Act 1883 , the Exempted Partnerships Act 1992 and the Amended and Restated Limited Partnership Agreement of BRELP.

 

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Management

As required by law, the Amended and Restated Limited Partnership Agreement of BRELP provides for the management and control of BRELP by a general partner, the BRELP GP LP. The BRELP GP LP will exercise its powers and carry out its functions honestly and in good faith and the BRELP GP LP will exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, in each case, subject to, and after taking into account, the terms and conditions of the Relationship Agreement, our Master Services Agreement and the Conflicts Policy. Except as set out in the Amended and Restated Limited Partnership Agreement of BRELP, the BRELP GP LP has no additional duty to propose or approve any conduct of BRELP, and may decline to propose or approve such conduct free of any additional duty (including fiduciary duty). The BRELP GP LP shall not be in breach of any duty to BRELP if it takes actions permitted by the Amended and Restated Limited Partnership Agreement of BRELP, the Relationship Agreement, our Master Services Agreement or the Conflicts Policy.

Units

BRELP’s units are limited partnership interests in BRELP. Holders of units of BRELP are not entitled to the withdrawal or return of capital contributions in respect of their units, except to the extent, if any, that distributions are made to such holders pursuant to the Amended and Restated Limited Partnership Agreement of BRELP or upon the dissolution of BRELP or as otherwise required by applicable law. Except to the extent expressly provided in the Amended and Restated Limited Partnership Agreement of BRELP, a holder of units of BRELP does not have priority over any other holder of units, either as to the return of capital contributions or as to profits, losses or distributions.

In connection with the Combination, BRELP issued two classes of units. The first class of units was issued to Brookfield and subsequently transferred to Brookfield Renewable and the second class of units, referred to as the Redeemable Partnership Units, were issued to wholly-owned subsidiaries of Brookfield. Redeemable Partnership Units are identical to the limited partnership units held by Brookfield Renewable, except as described below under “— Distributions” and “— Withdrawal of the General Partner” and except that they have the right of redemption described below under the heading “— Redemption-Exchange Mechanism”.

Issuance of Additional Partnership Interests

Subject to any approval required by applicable law, BRELP may issue additional partnership interests (including new classes of partnership interests and options, rights, warrants and appreciation rights relating to such interests) for any partnership purpose, at any time and from time to time and on such terms and conditions as its general partner may determine. Any additional partnership interests authorized to be issued by Amended and Restated Limited Partnership Agreement of BRELP may be issued in one or more classes, or one or more series of classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of partnership interests) as its general partner may determine in its sole discretion.

Redemption-Exchange Mechanism

At any time after November 28, 2013, one or more wholly owned subsidiaries of Brookfield that hold Redeemable Partnership Units will have the right to require BRELP to redeem for cash all or a portion of the Redeemable Partnership Units held by such subsidiary, subject to Brookfield Renewable’s right to acquire such Redeemable Partnership Units, as described below, provided that exercise of the right of redemption or the payment of the redemption amount would not otherwise cause BRELP to be in breach or violation of any agreement material to BRELP or Brookfield Renewable Group or applicable law. Any such redeeming subsidiary may exercise its right of redemption by delivering a notice of redemption to BRELP and Brookfield Renewable. After presentation for redemption, such redeeming subsidiary will receive, subject to Brookfield Renewable’s right to acquire Redeemable Partnership Units, as described below, for each unit that is presented, cash in an amount equal to the market value of one of our units multiplied by the number of units to be redeemed (as determined by reference to the five day volume weighted average of the trading price of our units and subject to certain customary adjustments). Upon its receipt of the redemption notice, Brookfield Renewable will have a right to acquire Redeemable Partnership Units entitling it, at its sole discretion, to elect to acquire all (but not less than all) units described in such notice and presented to BRELP for redemption in exchange for LP Units on a one for one basis (subject to certain customary adjustments). Upon a redemption for cash, the holder’s right to receive distributions with respect to BRELP’s Redeemable Partnership Units so redeemed will cease.

Brookfield’s aggregate interest in Brookfield Renewable, including its interest in the Managing General Partner and the BRELP GP LP, would be approximately 68% if it exercised its redemption right in full and Brookfield Renewable exercised its right of first refusal on BRELP’s Redeemable Partnership Units redeemed. Brookfield’s total percentage interest in Brookfield Renewable would be increased if it participates in BRELP’s distribution reinvestment plan.

 

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Distributions

Distributions by BRELP will be made in the sole discretion of its general partner, the BRELP GP LP. However, the BRELP GP LP will not be permitted to cause BRELP to make a distribution if BRELP does not have sufficient cash on hand to make the distribution, the distribution would render BRELP insolvent or if, in the opinion of the BRELP GP LP, the distribution would or might leave BRELP with insufficient funds to meet any future contingent obligations or the distribution would contravene the Limited Partnership Act 1883 .

Except as set forth below, prior to the dissolution of BRELP, distributions of available cash (if any) in any given quarter will be made by BRELP as follows, referred to as the “ Regular Distribution Waterfall ”:

 

   

first, 100% of any available cash to Brookfield Renewable until BRELP has distributed an amount equal to Brookfield Renewable’s expenses and outlays for the quarter properly incurred;

 

   

second, 100% of any available cash then remaining to the owners of BRELP’s partnership interests, pro rata to their percentage interests, until an amount equal to $0.375 has been distributed in respect of each limited partnership unit of BRELP during such quarter, referred to as the First Distribution Threshold;

 

   

third, 85% of any available cash then remaining to the owners of BRELP’s partnership interests, pro rata to their percentage interests, and 15% to its general partner, until an amount equal to $0.4225 has been distributed in respect of each limited partnership unit of BRELP during such quarter, referred to as the Second Distribution Threshold; and

 

   

thereafter, 75% of any available cash then remaining to the owners of BRELP’s partnership interests, pro rata to their percentage interests, and 25% to its general partner.

If, prior to the dissolution of BRELP, available cash is deemed by its general partner, in its sole discretion, to be (i) attributable to sales or other dispositions of BRELP’s assets and (ii) representative of unrecovered capital, then such available cash shall be distributed to the partners of BRELP in proportion to the unrecovered capital attributable to BRELP’s partnership interests held by the partners until such time as the unrecovered capital attributable to each such partnership interest is equal to zero. Thereafter, distributions of available cash made by BRELP (to the extent made prior to dissolution) will be made in accordance with the Regular Distribution Waterfall.

Upon the occurrence of an event resulting in the dissolution of BRELP, all cash and property of BRELP in excess of that required to discharge BRELP’s liabilities will be distributed as follows: (i) to the extent such cash and/or property is attributable to a realization event occurring prior to the event of dissolution, such cash and/or property will be distributed in accordance with the Regular Distribution Waterfall and/or the distribution waterfall applicable to unrecovered capital; and (ii) all other cash and/or property will be distributed in the manner set forth below:

 

   

first, 100% to Brookfield Renewable until Brookfield Renewable has received an amount equal to the excess of (i) the amount of Brookfield Renewable’s outlays and expenses incurred during the term of BRELP, over (ii) the aggregate amount of distributions received by Brookfield Renewable pursuant to the first tier of the Regular Distribution Waterfall during the term of BRELP;

 

   

second, 100% to the partners of BRELP, in proportion to their respective amounts of unrecovered capital in BRELP;

 

   

third, 100% to the owners of BRELP’s partnership interests, pro rata to their percentage interests, until an amount has been distributed in respect of each limited partnership unit of BRELP equal to the excess of (i) the First Distribution Threshold for each quarter during the term of BRELP (subject to adjustment upon the subsequent issuance of additional partnership interests in BRELP), over (ii) the aggregate amount of distributions made in respect of a BRELP’s limited partnership unit pursuant to the second tier of the Regular Distribution Waterfall during the term of BRELP (subject to adjustment upon the subsequent issuance of additional partnership interests in BRELP);

 

   

fourth, 85% to the owners of BRELP’s partnership interests, pro rata to their percentage interests, and 15% to its general partner, until an amount has been distributed in respect of each limited partnership unit of BRELP equal to the excess of (i) the Second Distribution Threshold less the First Distribution Threshold for each quarter during the term of BRELP (subject to adjustment upon the subsequent issuance of additional partnership interests in BRELP), over (ii) the aggregate amount of distributions made in respect of a limited partnership unit of BRELP pursuant to the third tier of the Regular Distribution Waterfall during the term of BRELP (subject to adjustment upon the subsequent issuance of additional partnership interests in BRELP); and

 

   

thereafter, 75% to the owners of BRELP’s partnership interests, pro rata to their percentage interests, and 25% to its general partner.

 

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Each partner’s percentage interest is determined by the relative portion of all outstanding partnership interests held by that partner from time to time and is adjusted upon and reflects the issuance of additional partnership interests of BRELP. In addition, the unreturned capital attributable to each of the partnership interests, as well as certain of the distribution thresholds set forth above, may be adjusted pursuant to the terms of the Amended and Restated Limited Partnership Agreement of BRELP so as to ensure the uniformity of the economic rights and entitlements of (i) the previously outstanding partnership interests of BRELP, and (ii) the subsequently-issued partnership interests of BRELP.

The Amended and Restated Limited Partnership Agreement of BRELP provides that, to the extent that any Holding Entity or any operating entity pays to Brookfield any comparable performance or incentive distribution, the amount of any incentive distributions paid to the BRELP GP LP in accordance with the distribution entitlements described above will be reduced in an equitable manner to avoid duplication of distributions.

BRELP GP LP may elect, at its sole discretion, to reinvest incentive distributions in Redeemable Partnership Units.

Sale or Other Disposition of Assets

The Amended and Restated Limited Partnership Agreement of BRELP generally prohibits the general partner of BRELP, without the prior approval of the holders of at least 50% of the voting power of the units of BRELP, from causing BRELP to, among other things, sell, exchange or otherwise dispose of all or substantially all of BRELP or Brookfield Renewable Group’s assets in a single transaction or a series of related transactions.

No Management or Control

BRELP’s limited partners, in their capacities as such, may not take part in the management or control of the activities and affairs of BRELP and do not have any right or authority to act for or to bind BRELP or to take part or interfere in the conduct or management of BRELP.

Limited partners are not entitled to vote on matters relating to BRELP, although holders of units are entitled to consent to certain matters as described under “— Amendment of the Amended and Restated Limited Partnership Agreement of BRELP”, “— Opinion of Counsel and Limited Partner Approval” and “— Withdrawal of the General Partner” which may be effected only with the consent of the holders of the percentages of outstanding units specified below. Each unit shall entitle the holder thereof to one vote for the purposes of any approvals of holders of units.

In addition, pursuant to the Voting Agreement, Brookfield Renewable, through the Managing General Partner, has a number of voting rights, including the right to direct all eligible votes in the election of the directors of the BRELP General Partner. See Item 7.B “Related Party Transactions — Voting Agreement”.

Meetings

Special meetings of the limited partners of BRELP may be called by its general partner at a time and place outside of Canada determined by it on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Special meetings of the limited partners may also be called by limited partners holding 50% or more of the voting power of the outstanding partnership interests of the class or classes for which a meeting is proposed. For this purpose, the partnership interests outstanding do not include partnership interests owned by its general partner or any of its affiliates other than any member of Brookfield Renewable Group. Only holders of partnership interests of BRELP of record on the date set by its general partner (which may not be less than 10 days nor more than 60 days, before the meeting) are entitled to notice of any meeting.

Amendment of the Amended and Restated Limited Partnership Agreement of BRELP

Amendments to the Amended and Restated Limited Partnership Agreement of BRELP may only be proposed by or with the consent of its general partner. To adopt a proposed amendment, other than the amendments that do not require limited partner approval discussed below, the general partner must seek approval of at least 66 2 / 3 % of the voting power of BRELP’s outstanding units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment.

Prohibited Amendments

No amendment may be made that would:

 

   

enlarge the obligations of any limited partner without its consent, except that any amendment that would have a material adverse effect on the rights or preferences of any class of partnership interests in relation to other classes of partnership interests may be approved by at least a majority of the type or class of partnership interests so affected; or

 

   

enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by BRELP to the BRELP GP LP or any of its affiliates without the consent of the BRELP GP LP which may be given or withheld in its sole discretion.

 

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The provision of the Amended and Restated Limited Partnership Agreement of BRELP preventing the amendments having the effects described directly above can be amended upon the approval of the holders of not less than 90% of the outstanding units.

No Limited Partner Approval

Subject to applicable law, the BRELP GP LP may generally make amendments to the Amended and Restated Limited Partnership Agreement of BRELP without the approval of any limited partner to reflect:

 

   

a change in the name of Brookfield Renewable, the location of Brookfield Renewable’s registered office or Brookfield Renewable’s registered agent;

 

   

the admission, substitution or withdrawal or removal of partners in accordance with the Amended and Restated Limited Partnership Agreement of BRELP;

 

   

a change that its general partner determines is reasonable and necessary or appropriate for Brookfield Renewable to qualify or to continue its qualification as an exempted limited partnership under the laws of Bermuda or a partnership in which the limited partners have limited liability under the laws of any jurisdiction or is necessary or advisable in the opinion of its general partner to ensure that BRELP will not be treated as an association taxable as a corporation or otherwise taxed as an entity for tax purposes;

 

   

an amendment that the BRELP GP LP determines to be necessary or appropriate to address certain changes in tax regulations, legislation or interpretation;

 

   

an amendment that is necessary, in the opinion of counsel, to prevent BRELP or its general partner or its directors, officers, agents or trustees, from having a material risk of being in any manner subjected to the provisions of the Investment Company Act or similar legislation in other jurisdictions;

 

   

an amendment that its general partner determines in its sole discretion to be necessary or appropriate for the creation, authorization or issuance of any class or series of partnership interests or options, rights, warrants or appreciation rights relating to partnership securities;

 

   

any amendment expressly permitted in the Amended and Restated Limited Partnership Agreement of BRELP to be made by its general partner acting alone;

 

   

any amendment that in the sole discretion of the BRELP GP LP is necessary or appropriate to reflect and account for the formation by Brookfield Renewable of, or its investment in, any person, as otherwise permitted by the Amended and Restated Limited Partnership Agreement of BRELP;

 

   

a change in its fiscal year and related changes;

 

   

any amendment concerning the computation or allocation of specific items of income, gain, expense or loss among the partners that, in the sole discretion of its general partner, is necessary or appropriate to (i) comply with the requirements of applicable law, (ii) reflect the partners’ interests in BRELP, or (iii) consistently reflect the distributions made by BRELP to the partners pursuant to the terms of the Amended and Restated Limited Partnership Agreement of BRELP;

 

   

any amendment that in the sole discretion of the BRELP GP LP is necessary or appropriate to address any statute, rule, regulation, notice, or announcement that affects or could affect the U.S. federal income tax treatment of any allocation or distribution related to any interest of the BRELP GP LP in the profits of BRELP; and

 

   

any other amendments substantially similar to any of the matters described directly above.

In addition, amendments to the Amended and Restated Limited Partnership Agreement of BRELP may be made by the BRELP GP LP without the approval of any limited partner if those amendments, in the discretion of the BRELP GP LP:

 

   

do not adversely affect BRELP’s limited partners considered as a whole (including any particular class of partnership interests as compared to other classes of partnership interests) in any material respect;

 

   

are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion or binding directive, order, ruling or regulation of any governmental agency or judicial authority;

 

   

are necessary or appropriate to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;

 

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are necessary or appropriate for any action taken by its general partner relating to splits or combinations of units made in accordance with the provisions of the Amended and Restated Limited Partnership Agreement of BRELP; or

 

   

are required to effect the intent of the provisions of the Amended and Restated Limited Partnership Agreement of BRELP or are otherwise contemplated by the Amended and Restated Limited Partnership Agreement of BRELP.

Opinion of Counsel and Limited Partner Approval

The BRELP GP LP will not be required to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners if one of the amendments described above under “— No Limited Partner Approval” should occur. No other amendments to the Amended and Restated Limited Partnership Agreement of BRELP will become effective without the approval of holders of at least 90% of the voting power of BRELP’s units, unless it obtains an opinion of counsel to the effect that the amendment will not (i) cause BRELP to be treated as an association taxable as a corporation or otherwise taxable as an entity for tax purposes (provided that for U.S. tax purposes its general partner has not made the election described below under “— Election to be Treated as a Corporation”) or (ii) affect the limited liability under the Limited Partnership Act 1883 of any of BRELP’s limited partners.

In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests in relation to other classes of partnership interests will also require the approval of the holders of at least a majority of the outstanding partnership interests of the class so affected.

In addition, any amendment that reduces the voting percentage required to take any action must be approved by the affirmative vote of limited partners whose aggregate outstanding voting units constitute not less than the voting requirement sought to be reduced.

Election to be Treated as a Corporation

If, in the determination of its general partner, it is no longer in BRELP’s best interests to continue as a partnership for U.S. federal income tax purposes, the BRELP GP LP may elect to treat BRELP as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.

Dissolution

BRELP shall dissolve and its affairs shall be wound up, upon the earlier of (i) the service of notice by its general partner, with the approval of a majority of the members of the independent directors of the Managing General Partner, that, in the opinion of the general partner, the coming into force of any law, regulation or binding authority renders illegal or impracticable the continuation of BRELP; (ii) the election of its general partner, with the approval of its independent directors, if BRELP, as determined by its general partner, based on an opinion of counsel, is required to register as an “investment company” under the Investment Company Act or similar legislation in other jurisdictions; (iii) the date that its general partner withdraws from the partnership (unless a successor entity becomes the general partner of BRELP as described below under “— Withdrawal of the General Partner”); (iv) the date on which any court of competent jurisdiction enters a decree of judicial dissolution of BRELP or an order to wind-up or liquidate its general partner without the appointment of a successor in compliance with the provisions of the Amended and Restated Limited Partnership Agreement of BRELP that are described below under “— Withdrawal of the General Partner”; and (v) the date on which its general partner decides to dispose of, or otherwise realize proceeds in respect of, all or substantially all of BRELP’s assets in a single transaction or series of transactions.

BRELP will be reconstituted and continue without dissolution if, within 30 days of the date of dissolution (and provided that a notice of dissolution with respect to BRELP has not been filed with the Bermuda Monetary Authority), a successor general partner executes a transfer deed pursuant to which the new general partner assumes the rights and undertakes the obligations of the original general partner, but only if BRELP receives an opinion of counsel that the admission of the new general partner will not result in the loss of limited liability of any limited partner of BRELP.

Withdrawal of the General Partner

The BRELP GP LP may withdraw as general partner without first obtaining approval of BRELP’s limited partners by giving 180 days advance notice, and that withdrawal will not constitute a violation of the Amended and Restated Limited Partnership Agreement of BRELP.

Upon the withdrawal of the BRELP GP LP, the holders of at least a majority of the voting power of the outstanding class of units that are not Redeemable Partnership Units may elect a successor to the BRELP GP LP. If a successor is not selected, or is elected but an opinion of counsel regarding limited liability, tax matters and the Investment Company Act (and similar legislation in other jurisdictions) cannot be obtained, BRELP will be dissolved, wound up and liquidated. See “— Dissolution” above.

 

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The BRELP GP LP may not be removed unless that removal is approved by the vote of the holders of at least 66 2 / 3 % of the outstanding class of units that are not Redeemable Partnership Units and it receives a withdrawal opinion of counsel regarding limited liability, tax matters and the Investment Company Act (and similar legislation in other jurisdictions). Any removal of the BRELP GP LP is also subject to the approval of a successor general partner by the vote of the holders of a majority of the voting power of its outstanding units that are not Redeemable Partnership Units.

In the event of the removal of the BRELP GP LP under circumstances where cause exists or withdrawal of the BRELP GP LP where that withdrawal violates the Amended and Restated Limited Partnership Agreement of BRELP, a successor general partner will have the option to purchase the general partnership interest of the BRELP GP LP for a cash payment equal to its fair market value. Under all other circumstances where the BRELP GP LP withdraws or is removed by the limited partners, BRELP GP LP will have the option to require the successor general partner to purchase the general partnership interest of BRELP GP LP for a cash payment equal to its fair market value. In each case, this fair market value will be determined by agreement between BRELP GP LP and the successor general partner. If no agreement is reached within 30 days of BRELP GP LP’s departure, an independent investment banking firm or other independent expert selected by BRELP GP LP and the successor general partner will determine the fair market value. If BRELP GP LP and the successor general partner cannot agree upon an expert within 45 days of BRELP GP LP’s departure, then an expert chosen by agreement of the experts selected by each of them will determine the fair market value.

If the option described above is not exercised by either the departing general partner or the successor general partner, the departing general partner’s general partnership interests will automatically convert into units pursuant to a valuation of those interests as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.

Transfer of the General Partnership Interest

BRELP GP LP may transfer all or any part of its general partnership interest without first obtaining approval of any holders of BRELP limited partnership units. As a condition of this transfer, the transferee must (i) be an affiliate of the general partner of Brookfield Renewable (or the transfer must be made concurrently with a transfer of the general partnership units of Brookfield Renewable to an affiliate of the transferee), (ii) agree to assume the rights and duties of the general partner to whose interest that transferee has succeeded, (iii) agree to be bound by the provisions of the Amended and Restated Limited Partnership Agreement of BRELP and (iv) furnish an opinion of counsel regarding limited liability and tax matters. Any transfer of the general partnership interest is subject to prior notice to and approval of the relevant Bermuda regulatory authority. At any time, the members of the BRELP GP LP may sell or transfer all or part of their units in the BRELP GP LP without the approval of the holders of BRELP limited partnership units.

Transactions with Interested Parties

The general partner of BRELP, its affiliates and its respective partners, members, shareholders, directors, officers, employees and shareholders, which we refer to as “interested parties”, may become limited partners or beneficially interested in limited partners and may hold, dispose of or otherwise deal with units of BRELP with the same rights they would have if the general partner of BRELP were not a party to the Amended and Restated Limited Partnership Agreement of BRELP. An interested party will not be liable to account either to other interested parties or to BRELP, its partners or any other persons for any profits or benefits made or derived by or in connection with any such transaction.

The Amended and Restated Limited Partnership Agreement of BRELP permits an interested party to sell investments to, purchase assets from, vest assets in and enter into any contract, arrangement or transaction with BRELP, any of the Holding Entities, any operating entity or any other holding vehicle established by BRELP and may be interested in any such contract, transaction or arrangement and shall not be liable to account either to BRELP, any of the Holding Entities, any operating entity or any other holding vehicle established by BRELP or any other person in respect of any such contract, transaction or arrangement, or any benefits or profits made or derived therefrom, by virtue only of the relationship between the parties concerned, subject to the Conflicts Policy.

Outside Activities of the General Partner

Under the Amended and Restated Limited Partnership Agreement of BRELP, the general partner will be required to maintain as its sole activity the role of the general partner of BRELP. The general partner will not be permitted to engage in any activity or incur or guarantee any debts or liabilities except in connection with or incidental to its performance as general partner or incurring, guaranteeing, acquiring, owning or disposing of debt or equity securities of a subsidiary of an Holding Entity or any other holding vehicle established by BRELP.

The Amended and Restated Limited Partnership Agreement of BRELP provides that each person who is entitled to be indemnified by BRELP, as described below under “— Indemnification; Limitations on Liability” (other than the general partner) will have the right to engage in businesses of every type and description and other activities for profit, and to engage in and possess interests in business ventures of any and every type or description, irrespective of whether (i) such businesses and activities are similar

 

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to our activities, or (ii) such businesses and activities directly compete with, or disfavor or exclude, BRELP, its general partner, any Holding Entity, operating entity, or any other holding vehicle established by BRELP. Such business interests, activities and engagements will be deemed not to constitute a breach of the Amended and Restated Limited Partnership Agreement of BRELP or any duties stated or implied by law or equity, including fiduciary duties, owed to any of BRELP, its general partner, any Holding Entity, operating entity, and any other holding vehicle established by BRELP (or any of their respective investors), and shall be deemed not to be a breach of its general partner’s fiduciary duties or any other obligation of any type whatsoever of the general partner. None of BRELP, its general partner, any Holding Entity, operating entity, any other holding vehicle established by BRELP or any other person shall have any rights by virtue of the Amended and Restated Limited Partnership Agreement of BRELP or the partnership relationship established thereby or otherwise in any business ventures of any person who is entitled to be indemnified by BRELP as described below under “— Indemnification; Limitations on Liability”.

The BRELP GP LP and the other indemnified persons described in the preceding paragraph will not have any obligation under the Amended and Restated Limited Partnership Agreement of BRELP to present business or investment opportunities to BRELP, any Holding Entity, operating entity, or any other holding vehicle established by BRELP. These provisions will not affect any obligation of such indemnified person to present business or investment opportunities to BRELP, any Holding Entity, operating entity or any other holding vehicle established by BRELP pursuant to the Relationship Agreement or any other separate written agreement between such persons.

Indemnification; Limitations on Liability

Under the Amended and Restated Limited Partnership Agreement of BRELP, BRELP is required to indemnify on an after-tax basis out of the assets and to the fullest extent permitted by law its general partner, the Manager and any of their respective affiliates (and their respective officers, directors, agents, shareholders, partners, members and employees), any person who serves on a Governing Body of BRELP, a Holding Entity, operating entity or any other holding vehicle established by Brookfield Renewable and any other person designated by its general partner as an indemnified person, in each case, against all losses, claims, damages, liabilities, costs or expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, incurred by an indemnified person in connection with its business, investments and activities or by reason of their holding such positions, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the indemnified person’s gross negligence, bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under the Amended and Restated Limited Partnership Agreement of BRELP, (i) the liability of such persons has been limited to the fullest extent permitted by law, except to the extent that their conduct involves gross negligence, bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful and (ii) any matter that is approved by the independent directors will not constitute a breach of any duties stated or implied by law or equity, including fiduciary duties. The Amended and Restated Limited Partnership Agreement of BRELP requires it to advance funds to pay the expenses of an indemnified person in connection with a matter in which indemnification may be sought until it is determined that the indemnified person is not entitled to indemnification. In addition, under the Amended and Restated Limited Partnership Agreement of BRELP, the general partner of BRELP, on behalf of Brookfield, is required under certain circumstances to indemnify BRELP and Brookfield Renewable for U.S. federal income taxes imposed under Sections 897, 1445, or 1461 of the U.S. Internal Revenue Code of 1986, as amended, on BRELP or Brookfield Renewable as a result of the exercise of the redemption right or the exchange right by Brookfield or Brookfield Renewable, as the case may be, pursuant to the Amended and Restated Limited Partnership Agreement of BRELP.

Governing Law

The Amended and Restated Limited Partnership Agreement of BRELP is governed by and will be construed in accordance with the laws of Bermuda.

BRP Equity

BRP Equity is an indirect wholly owned subsidiary of Brookfield Renewable incorporated under the CBCA on February 10, 2010. Other than a loan to an affiliate, BRP Equity has no significant assets or liabilities, no subsidiaries and no ongoing business operations of its own. BRP Equity’s Series 1 Shares and Series 2 Shares are guaranteed by Brookfield Renewable and the other Guarantors under the Preference Share Guarantees described under Item 10.B “Memorandum and Articles of Association — BRP Equity — Preference Share Guarantees”.

Pursuant to BRP Equity’s articles of incorporation, BRP Equity is authorized to issue an unlimited number of common shares (the “ Common Shares ”), an unlimited number of Class A Preference Shares (the “ Class A Preference Shares ”), issuable in series (which includes the Series 1 Shares and Series 2 Shares), and an unlimited number of Class B preference shares (the “ Class B Preference Shares ”), issuable in series. As of the date of this Form 20-F, one Common Share held indirectly by Brookfield Renewable was issued and outstanding, and 10 million Series 1 Shares were issued and trading on the TSX. No series of Class B Preference Shares have been created to date. The following is a summary of rights, privileges, restrictions and conditions attached to the Common Shares, Class A Preference Shares, Series 1 Shares and Series 2 Shares, and the Class B Preference Shares.

 

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Common Shares

Holders of Common Shares are entitled to one vote for each such share held on all votes taken at meetings of the shareholders of BRP Equity, except meetings at which only the holders of a specified class or series of shares of BRP Equity are entitled to vote. Subject to the rights of holders of Class A Preference Shares or any series thereof, Class B Preference Shares or any series thereof, and other shares of BRP Equity ranking prior to the Common Shares, the holders of Common Shares are entitled to dividends as may be declared from time to time by the board of directors of BRP Equity. Holders of Common Shares may make use of various shareholder remedies available pursuant to the CBCA.

Class A Preference Shares

Issuance in Series

The board of directors of BRP Equity may from time to time issue Class A Preference Shares in one or more series, each series to consist of such number of shares as will before issuance thereof be fixed by the directors who will at the same time determine the designation, rights, privileges, restrictions and conditions attaching to that series of Class A Preference Shares.

Priority

The Class A Preference Shares rank senior to the Class B Preference Shares, the Common Shares and all other shares ranking junior to the Class A Preference Shares with respect to priority in payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of BRP Equity. Pursuant to the CBCA, each series of Class A Preference Shares participates rateably with every other series of Class A Preference Shares in respect of accumulated dividends and return of capital.

Voting

Subject to applicable corporate law or unless provision is made in the articles relating to any series of Class A Preference Shares, the holders of the Class A Preference Shares or of a series thereof are not entitled as holders of that class or series to receive notice of, to attend or to vote at any meeting of the shareholders of BRP Equity.

Approval

The approval of the holders of the Class A Preference Shares of any matters to be approved by a separate vote of the holders of the Class A Preference Shares may be given by special resolution in accordance with the share conditions for the Class A Preference Shares. Each holder of Class A Preference Shares entitled to vote at a class meeting of holders of Class A Preference Shares, or at a joint meeting of the holders of two or more series of Class A Preference Shares, has one vote in respect of each C$25.00 of the issue price of each Class A Preference Share held by such holder.

Specific Provisions of the Class A Preference Shares, Series 1

Dividends

The holders of Series 1 Shares are entitled to receive fixed cumulative preferential cash dividends, as and when declared by the board of directors of BRP Equity, payable quarterly on the last day of January, April, July and October in each year, at an annual rate equal to C$1.3125 per share until April 30, 2015. The annual fixed dividend rate (the “ Annual Fixed Dividend Rate ”) for each subsequent 5-year fixed rate period will be payable quarterly on the last day of January, April, July and October in an amount equal to the sum of the Government of Canada Yield on the 30th day prior to the first day of such subsequent fixed rate period plus 2.62%. The annual fixed dividend for each such period will be equal to the applicable Annual Fixed Dividend Rate multiplied by C$25.00.

Series 1 Guarantee

The Series 1 Shares are fully and unconditionally guaranteed by the Guarantors pursuant to guarantee indentures among each of the Guarantors, BRP Equity and Computershare Trust Company of Canada (the “ Series 1 Guarantee ”). See the description of the Preference Share Guarantees under “— Preference Share Guarantees”.

Redemption

The Series 1 Shares will not be redeemable by BRP Equity prior to April 30, 2015. On April 30, 2015 and on April 30 every five years thereafter, and subject to certain other restrictions set out under “— Restrictions on Dividends and Retirement and Issue of Shares”, BRP Equity may, at its option, redeem all or from time to time any part of the outstanding Series 1 Shares by payment in cash of a per share sum equal to C$25.00, in each case together with all accrued and unpaid dividends up to but excluding the date fixed for redemption (less any tax required to be deducted and withheld by BRP Equity).

 

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For so long as the Series 1 Guarantee remains in full force and effect, if, in contravention of the Series 1 Guarantee, there is a liquidation, dissolution or winding-up of Brookfield Renewable (whether voluntary or involuntary) or any other distribution of assets of Brookfield Renewable to our securityholders for the purpose of winding-up Brookfield Renewable’s affairs, the Series 1 Shares shall be redeemed by BRP Equity by payment in cash of a per share sum equal to C$25.00, together with all accrued and unpaid dividends up to but excluding the date of payment or distribution (less any tax required to be deducted and withheld by BRP Equity).

Conversion of Series 1 Shares into Series 2 Shares

Subject to applicable law and the provisions of the Series 1 Shares, holders of the Series 1 Shares will have the right, at their option, on April 30, 2015 and on April 30 every five years thereafter, to convert all or any of their Series 1 Shares into Series 2 Shares on the basis of one Series 2 Share for each Series 1 Share. Under certain circumstances, the Series 1 Shares automatically convert into Series 2 Shares on the basis of one Series 2 Share for each Series 1 Share.

Purchase for Cancellation

Subject to applicable law and to the provisions described under “— Restrictions on Dividends and Retirement and Issue of Shares”, BRP Equity may at any time purchase for cancellation the whole or any part of the Series 1 Shares at the lowest price or prices at which in the opinion of the board of directors of BRP Equity such shares are obtainable.

Rights on Liquidation

In the event of the liquidation, dissolution or winding-up of BRP Equity or any other distribution of assets of BRP Equity among its shareholders for the purpose of winding-up its affairs, the holders of the Series 1 Shares will be entitled to receive C$25.00 per share, together with all accrued and unpaid dividends up to but excluding the date of payment or distribution (less any tax required to be deducted and withheld by BRP Equity), before any amount is paid or any assets of BRP Equity are distributed to the holders of any shares ranking junior as to capital to the Series 1 Shares. The holders of the Series 1 Shares will not be entitled to share in any further distribution of the assets of BRP Equity. The payment of the amount to be paid to the holders of the Series 1 Shares upon liquidation, dissolution and winding-up of BRP Equity is fully and unconditionally guaranteed by the Guarantors.

Priority

The Series 1 Shares rank senior to the Class B Preference Shares and the Common Shares of BRP Equity with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of BRP Equity or in the event of any other distribution of assets of BRP Equity among its shareholders for the purpose of winding-up its affairs. The Series 1 Shares rank on a parity with every other series of Class A Preference Shares with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of BRP Equity or in the event of any other distribution of assets of BRP Equity among its shareholders for the purpose of winding-up its affairs.

Restrictions on Dividends and Retirement and Issue of Shares

So long as any of the Series 1 Shares are outstanding, BRP Equity will not, without the approval of the holders of the Series 1 Shares:

 

  a.

declare, pay or set apart for payment any dividends (other than stock dividends payable in shares of BRP Equity ranking as to capital and dividends junior to the Series 1 Shares) on shares of BRP Equity ranking as to dividends junior to the Series 1 Shares;

 

  b.

except out of the net cash proceeds of a substantially concurrent issue of shares of BRP Equity ranking as to return of capital and dividends junior to the Series 1 Shares, redeem or call for redemption, purchase or otherwise pay off, retire or make any return of capital in respect of any shares of BRP Equity ranking as to capital junior to the Series 1 Shares;

 

  c.

redeem or call for redemption, purchase or otherwise pay off or retire for value or make any return of capital in respect of less than all of the Series 1 Shares then outstanding; or

 

  d.

except pursuant to any purchase obligation, sinking fund, retraction privilege or mandatory redemption provisions attaching thereto, redeem or call for redemption, purchase or otherwise pay off, retire or make any return of capital in respect of any Class A Preference Shares, ranking as to the payment of dividends or return of capital on a parity with the Series 1 Shares;

unless, in each case under a. to d. above, all accrued and unpaid dividends up to and including the dividend payable for the last completed period for which dividends were payable on the Series 1 Shares and on all other shares of BRP Equity ranking prior to or on a parity with the Series 1 Shares with respect to the payment of dividends have been declared and paid or set apart for payment.

 

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Shareholder Approvals

In addition to any other approvals required by law, the approval of all amendments to the rights, privileges, restrictions and conditions attaching to the Series 1 Shares as a series and any other approval to be given by the holders of the Series 1 Shares may be given by a resolution carried by an affirmative vote of at least 66 2 / 3 % of the votes cast at a meeting at which the holders of a majority of the outstanding Series 1 Shares are present or represented by proxy or, if no quorum is present at such meeting, at an adjourned meeting at which the holders of Series 1 Shares then present would form the necessary quorum. At any meeting of holders of Series 1 Shares as a series, each such holder shall be entitled to one vote in respect of each C$25.00 of issue price of the Series 1 Shares held by such holder.

Voting Rights

The holders of the Series 1 Shares will not (except as otherwise provided by law and except for meetings of the holders of Class A Preference Shares as a class and meetings of all holders of Series 1 Shares as a series) be entitled to receive notice of, attend, or vote at, any meeting of shareholders of BRP Equity unless and until BRP Equity shall have failed to pay eight quarterly dividends on the Series 1 Shares, whether or not consecutive. In the event of such non-payment, and for only so long as any such dividends remain in arrears, the holders of the Series 1 Shares will be entitled to receive notice of and to attend each meeting of BRP Equity’s shareholders, other than meetings at which only holders of another specified class or series are entitled to vote, and to one vote in respect of each C$25.00 of issue price of the Series 1 Shares held by such holder.

Specific Provisions of the Class A Preference Shares, Series 2

Dividends

The holders of Series 2 Shares will be entitled to receive floating rate cumulative preferential cash dividends, as and when declared by the board of directors of BRP Equity, payable quarterly on the last day of January, April, July and October, in the amount per share determined by multiplying the applicable floating quarterly dividend rate by C$25.00. The floating quarterly dividend rate for each applicable quarterly period will be calculated on the 30th day prior to the first day of the period and will be equal to the sum of the average yield expressed as a percentage per year on three-month Government of Canada Treasury Bills, as reported by the Bank of Canada, for the most recent treasury bills auction preceding the applicable calculation date, plus 2.62% calculated on the basis of the actual number of days elapsed in the period divided by 365.

Series 2 Guarantee

The Series 2 Shares are fully and unconditionally guaranteed by the Guarantors pursuant to guarantee indentures among each of the Guarantors, BRP Equity and Computershare Trust Company of Canada (the “ Series 2 Guarantee ” and together with the Series 1 Guarantee, the “ Preference Share Guarantees ”). See the description of the Preference Share Guarantees under “— Preference Share Guarantees”.

Redemption

The Series 2 Shares will not be redeemable by BRP Equity prior to April 30, 2015. Subject to certain other restrictions set out under “— Restrictions on Dividends and Retirement and Issue of Shares”, BRP Equity may, at its option, redeem all or from time to time any part of the outstanding Series 2 Shares by payment in cash of a per share sum equal to (i) C$25.00 in the case of redemptions on April 30, 2020 and on April 30 every five years thereafter (each, a “ Conversion Date ”), or (ii) C$25.50 in the case of redemptions on any date which is not a Conversion Date on or after April 30, 2015, in each case together with all accrued and unpaid dividends up to but excluding the date fixed for redemption (less any tax required to be deducted and withheld by BRP Equity).

For so long as the Series 2 Guarantee remains in full force and effect, if, in contravention of the Series 2 Guarantee, there is a liquidation, dissolution or winding-up of Brookfield Renewable (whether voluntary or involuntary) or any other distribution of assets of Brookfield Renewable to our securityholders for the purpose of winding-up Brookfield Renewable’s affairs, the Series 2 Shares shall be redeemed by BRP Equity by payment in cash of a per share sum equal to C$25.00, together with all accrued and unpaid dividends up to but excluding the date of payment or distribution (less any tax required to be deducted and withheld by BRP Equity).

Conversion of Series 2 Shares into Series 1 Shares

Subject to applicable law and the provisions of the Series 2 Shares, holders of the Series 2 Shares will have the right, at their option, on each Conversion Date, to convert all or any of their Series 2 Shares into Series 1 Shares on the basis of one Series 1 Share for each Series 2 Share. Under certain circumstances, the Series 2 Shares automatically convert into Series 1 Shares on the basis of one Series 1 Share for each Series 2 Share.

 

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Purchase for Cancellation

Subject to applicable law and to the provisions described under “— Restrictions on Dividends and Retirement and Issue of Shares”, BRP Equity may at any time purchase for cancellation the whole or any part of the Series 2 Shares at the lowest price or prices at which in the opinion of the board of directors of BRP Equity such shares are obtainable.

Rights on Liquidation

In the event of the liquidation, dissolution or winding-up of BRP Equity or any other distribution of assets of BRP Equity among its shareholders for the purpose of winding-up its affairs, the holders of the Series 2 Shares will be entitled to receive C$25.00 per share, together with all accrued and unpaid dividends up to but excluding the date of payment or distribution (less any tax required to be deducted and withheld by BRP Equity), before any amount is paid or any assets of BRP Equity are distributed to the holders of any shares ranking junior as to capital to the Series 2 Shares. The holders of the Series 2 Shares will not be entitled to share in any further distribution of the assets of BRP Equity. The payment of the amount to be paid to the holders of the Series 2 Shares upon liquidation, dissolution and winding-up of BRP Equity is fully and unconditionally guaranteed by the Guarantors.

Priority

The Series 2 Shares rank senior to the Class B Preference Shares and the Common Shares of BRP Equity with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of BRP Equity or in the event of any other distribution of assets of BRP Equity among its shareholders for the purpose of winding-up its affairs. The Series 2 Shares rank on a parity with every other series of Class A Preference Shares with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of BRP Equity or in the event of any other distribution of assets of BRP Equity among its shareholders for the purpose of winding-up its affairs.

Restrictions on Dividends and Retirement and Issue of Shares

So long as any of the Series 2 Shares are outstanding, BRP Equity will not, without the approval of the holders of the Series 2 Shares:

 

  a.

declare, pay or set apart for payment any dividends (other than stock dividends payable in shares of BRP Equity ranking as to capital and dividends junior to the Series 2 Shares) on shares of BRP Equity ranking as to dividends junior to the Series 2 Shares;

 

  b.

except out of the net cash proceeds of a substantially concurrent issue of shares of BRP Equity ranking as to return of capital and dividends junior to the Series 2 Shares, redeem or call for redemption, purchase or otherwise pay off, retire or make any return of capital in respect of any shares of BRP Equity ranking as to capital junior to the Series 2 Shares;

 

  c.

redeem or call for redemption, purchase or otherwise pay off or retire for value or make any return of capital in respect of less than all of the Series 2 Shares then outstanding; or

 

  d.

except pursuant to any purchase obligation, sinking fund, retraction privilege or mandatory redemption provisions attaching thereto, redeem or call for redemption, purchase or otherwise pay off, retire or make any return of capital in respect of any Class A Preference Shares, ranking as to the payment of dividends or return of capital on a parity with the Series 2 Shares;

unless, in each case under a. to d. above, all accrued and unpaid dividends up to and including the dividend payable for the last completed period for which dividends were payable on the Series 2 Shares and on all other shares of BRP Equity ranking prior to or on a parity with the Series 2 Shares with respect to the payment of dividends have been declared and paid or set apart for payment.

Shareholder Approvals

In addition to any other approvals required by law, the approval of all amendments to the rights, privileges, restrictions and conditions attaching to the Series 2 Shares as a series and any other approval to be given by the holders of the Series 2 Shares may be given by a resolution carried by an affirmative vote of at least 66 2 / 3 % of the votes cast at a meeting at which the holders of a majority of the outstanding Series 2 Shares are present or represented by proxy or, if no quorum is present at such meeting, at an adjourned meeting at which the holders of Series 2 Shares then present would form the necessary quorum. At any meeting of holders of Series 2 Shares as a series, each such holder shall be entitled to one vote in respect of each C$25.00 of issue price of the Series 2 Shares held by such holder.

 

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Voting Rights

The holders of the Series 2 Shares will not (except as otherwise provided by law and except for meetings of the holders of Class A Preference Shares as a class and meetings of all holders of Series 2 Shares as a series) be entitled to receive notice of, attend, or vote at, any meeting of shareholders of BRP Equity unless and until BRP Equity shall have failed to pay eight quarterly dividends on the Series 2 Shares, whether or not consecutive. In the event of such non-payment, and for only so long as any such dividends remain in arrears, the holders of the Series 2 Shares will be entitled to receive notice of and to attend each meeting of BRP Equity’s shareholders, other than meetings at which only holders of another specified class or series are entitled to vote, and to one vote in respect of each C$25.00 of issue price of the Series 2 Shares held by such holder.

Class B Preference Shares

Issuance in Series

The board of directors of BRP Equity may from time to time issue Class B Preference Shares in one or more series, each series to consist of such number of shares as will before issuance thereof be fixed by the directors who will at the same time determine the designation, rights, privileges, restrictions and conditions attaching to that series of Class B Preference Shares.

Priority

The Class B Preference Shares rank junior to the Class A Preference Shares and senior to the Common Shares and all other shares ranking junior to the Class B Preference Shares with respect to priority in payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of BRP Equity. Pursuant to the CBCA, each series of Class B Preference Shares participates rateably with every other series of Class B Preference Shares in respect of accumulated dividends and return of capital.

Voting

Subject to applicable corporate law or unless provision is made in the articles relating to any series of Class B Preference Shares, the holders of the Class B Preference Shares or of a series thereof are not entitled as holders of that class or series to receive notice of, to attend or to vote at any meeting of the shareholders of BRP Equity.

Approval

The approval of the holders of the Class B Preference Shares of any matters to be approved by a separate vote of the holders of the Class B Preference Shares may be given by special resolution in accordance with the share conditions for the Class B Preference Shares. Each holder of Class B Preference Shares entitled to vote at a class meeting of holders of Class B Preference Shares, or at a joint meeting of the holders of two or more series of Class B Preference Shares, has one vote in respect of each C$25.00 of the issue price of each Class B Preference Share held by such holder.

Preference Share Guarantees

The Preference Share Guarantees provide that the Series 1 Shares and Series 2 Shares will be fully and unconditionally guaranteed by Brookfield Renewable and the other Guarantors as to (i) payment of dividends, as and when declared, (ii) payment of amounts due on redemption of the Series 1 Shares and Series 2 Shares, and (iii) payment of amounts due on the liquidation, dissolution or winding up of BRP Equity. As long as the declaration or payments of dividends on the Series 1 Shares or Series 2 Shares are in arrears, Brookfield Renewable will not make any distributions on our LP Units nor will any other Guarantor make any distributions or pay any dividends on equity securities of such Guarantor. The Preference Share Guarantees by the Guarantors will be subordinated to all of their respective senior and subordinated debt and will rank senior to the LP Units. The Preference Share Guarantees will rank on a pro rata and pari passu basis with each other. The rights, obligations and liabilities of a Guarantor pursuant to the Preference Share Guarantees will terminate upon the conveyance, distribution, transfer or lease of all or substantially all of its properties, securities and assets to another Guarantor. A Guarantor may not otherwise convey, distribute, transfer or lease all or substantially all of its properties, securities and assets to another person, unless the person which acquires the properties, securities and assets of such Guarantor assumes such Guarantor’s obligations under the Preference Share Guarantees.

Finco

Finco is an indirect wholly-owned subsidiary of Brookfield Renewable incorporated under the ABCA on September 14, 2011. Other than approximately C$1.9 billion aggregate principal amount of publicly-issued Finco Bonds, Finco has no significant assets or liabilities, no subsidiaries and no operations of its own.

 

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Pursuant to Finco’s articles of incorporation, Finco is authorized to issue an unlimited number of common shares. As of the date of this Form 20-F, one common share held indirectly by Brookfield Renewable was issued and outstanding. Holders of common shares are entitled to one vote for each such share held on all votes taken at meetings of the shareholders of Finco, except meetings at which only the holders of a specified class or series of shares of Finco are entitled to vote. Subject to the rights of holders of any shares of Finco ranking prior to the common shares, the holders of common shares are entitled to dividends as may be declared from time to time by the board of directors of Finco. Holders of common shares may make use of various shareholder remedies available pursuant to the ABCA.

The Finco Bonds are governed under the Bond Indenture and guaranteed by Brookfield Renewable and the other Guarantors as described under “— Bond Indenture and Guarantees”. The Finco Bonds consist of the following fixed rate medium term notes:

 

Medium-term notes

             Maturity                       Interest Rate            Principal Amount as 
 at December 31, 2011 
 (in millions) 

Series 3 (C$200 million)

   2018    5.25%   C$200 million

Series 4 (C$150 million)

   2036    5.84%   C$150 million

Series 6 (C$300 million)

   2016    6.13%   C$300 million

Series 7 (C$450 million)

   2020    5.14%   C$450 million

In the first quarter of 2012, Series 8 (C$400 million) medium-term notes were issued with a maturity date of 2022 and an interest rate of 4.79%

Bond Indenture and Guarantees

The Bond Indenture provides for the issuance of one or more series of unsecured debentures or notes of Finco, a wholly-owned subsidiary of Brookfield Renewable, by way of supplemental indenture. The Bond Indenture amends and restates the trust indenture dated as of December 16, 2004, as amended, supplemented or restated, between Brookfield, Bank of New York Mellon and BNY Trust Company of Canada (the “ Original Bond Indenture ”), and gives effect to the assumption of the Finco Bonds by Finco from Brookfield in connection with the Combination. In connection with the Combination, Finco assumed the Series 3, Series 4, Series 6 and Series 7 notes issued under supplemental indentures to the Original Bond Indenture. The Amended and Restated Second Supplemental Indenture to the Original Bond Indenture, dated October 27, 2006, provides for the issue of C$200 million aggregate principal amount of Series 3 medium term notes and C$150 million aggregate principal amount of Series 4 medium term notes. The Amended and Restated Fourth Supplemental Indenture to the Original Bond Indenture, dated November 27, 2009, provides for the issue of C$300 million aggregate principal amount of Series 6 notes. The Fifth Supplemental Indenture to the Original Bond Indenture, dated November 27, 2009, provides for the issue of C$450 million aggregate principal amount of Series 7 notes. The Seventh Supplemental Indenture dated February 7, 2012, provides for the issue of C$400 million aggregate principal amount of the Series 8 Notes. The Finco Bonds are unconditionally guaranteed by Brookfield Renewable and the other Guarantors as to payment of the principal of, premium, if any, and interest on all debentures issued by Finco under the Bond Indenture from time to time and all other obligations and liabilities owing by Finco to the trustee under the Bond Indenture. Pursuant to the guarantees, each of the Guarantors has agreed to not enter into any transaction whereby all or substantially all of the undertaking, property and assets of the Guarantor would become the property of any other person unless the other person assumed the obligations of the Guarantor under the guarantee and certain other conditions are met or unless the transaction is between or among any one or more of Finco, the Guarantor, another Guarantor and/or any subsidiary of any of them. The rights, obligations and liabilities of a Guarantor will terminate in the event that it transfers all or substantially all of its assets to another Guarantor.

 

  10.C

MATERIAL CONTRACTS

The following are the only material contracts, other than contracts entered into in the ordinary course of business, to which we have been a party within the past two years:

 

   

the Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy Partners L.P., dated November 20, 2011 (see Item 10.B “Memorandum and Articles of Association — Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP”);

 

   

the Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy L.P., dated November 20, 2011 (see Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP”);

 

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First Amendment to Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy L.P., dated May 4, 2012 (see Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP”);

 

   

our Master Services Agreement, dated November 28, 2011, by and among Brookfield Asset Management Inc., Brookfield Renewable Energy Partners L.P. and Brookfield Renewable Energy L.P., and others (see Item 6.A “Directors and Senior Management – Our Master Services Agreement”);

 

   

the Registration Rights Agreement, dated November 28, 2011, between Brookfield Renewable Energy Partners L.P. and Brookfield Asset Management Inc. (see Item 7.B “Related Party Transactions – Registration Rights Agreement”);

 

   

the Relationship Agreement, dated November 28, 2011, by and among Brookfield Renewable Energy Partners L.P., Brookfield Renewable Energy L.P., the Manager, and Brookfield Asset Management Inc., and others (see Item 7.B “Related Party Transactions – Relationship Agreement”);

 

   

the Combination Agreement, dated September 12, 2011, by and among Brookfield Renewable Power Inc., Brookfield Renewable Power Fund, Brookfield Renewable Power Trust and Brookfield Renewable Energy Partners L.P. (see Item 7.B “Related Party Transactions – Relationship Agreement”);

 

   

the Amended and Restated Indenture, dated as of November 23, 2011, among BRP Finance ULC, BNY Trust Company of Canada and The Bank of New York Mellon (see Item 10.B “Memorandum and Articles of Association – Finco - Bond Indenture and Guarantees”);

 

   

the Amended and Restated Guarantee Indenture, dated November 25, 2011, by and among Brookfield Renewable Energy Partners L.P., Brookfield Renewable Energy L.P., Brookfield BRP Holdings (Canada) Inc., BRP Bermuda Holdings I Limited (collectively, the “Guarantors” ), Brookfield Renewable Power Preferred Equity Inc., and Computershare Trust Company of Canada (Class A Preference Shares, Series 1) (see Item 10.B “Memorandum and Articles of Association – BRP Equity - Preference Share Guarantees”);

 

   

the Amended and Restated Guarantee Indenture, dated November 25, 2011, by and among Brookfield Renewable Energy Partners L.P., Brookfield Renewable Energy L.P., Brookfield BRP Holdings (Canada) Inc., BRP Bermuda Holdings I Limited (collectively, the “Guarantors” ), Brookfield Renewable Power Preferred Equity Inc., and Computershare Trust Company of Canada (Class A Preference Shares, Series 2) (see Item 10.B “Memorandum and Articles of Association – BRP Equity - Preference Share Guarantees”);

 

   

the Guarantee, dated November 23, 2011, by Brookfield Renewable Energy L.P and BNY Trust Company of Canada (see Item 10.B “Memorandum and Articles of Association – Finco - Bond Indenture and Guarantees”);

 

   

the Guarantee, dated November 23, 2011, by Brookfield Renewable Energy Partners L.P and BNY Trust Company of Canada (see Item 10.B “Memorandum and Articles of Association – Finco - Bond Indenture and Guarantees”);

 

   

the Guarantee, dated November 23, 2011, by BRP Bermuda Holdings I Limited and BNY Trust Company of Canada (see Item 10.B “Memorandum and Articles of Association – Finco - Bond Indenture and Guarantees”) and

 

   

the Guarantee, dated November 23, 2011, by Brookfield BRP Holdings (Canada) Inc. and BNY Trust Company of Canada (see Item 10.B “Memorandum and Articles of Association – Finco - Bond Indenture and Guarantees”).

Copies of the agreements noted above will be made available, free of charge, by the Managing General Partner and are available electronically on the website of the SEC at www.sec.gov and on our SEDAR profile at www.sedar.com. Written requests for such documents should be directed to our Corporate Secretary at 73 Front Street, 5 th Floor, Hamilton, HM 12, Bermuda, +1.441.295.1443.

 

  10.D

EXCHANGE CONTROLS

There are currently no governmental laws, decrees, regulations or other legislation of Bermuda or the United States which restrict the import or export of capital, including the availability of cash and cash equivalents for use by Brookfield Renewable and its subsidiaries, or the remittance of distributions, interest or other payments to non-residents of Bermuda or the United States holding our LP Units.

 

  10.E

TAXATION

The following summary discusses certain material United States, Canadian and Bermudian tax considerations related to the holding and disposition of our LP Units as of the date of this Form 20-F. Holders of our LP Units are advised to consult their own tax advisors concerning the consequences under the tax laws of the country of which they are resident or in which they are otherwise subject to tax of making an investment in our LP Units.

 

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Certain Material U.S. Federal Income Tax Considerations

This summary discusses certain material United States federal income tax considerations to LP Unitholders relating to the holding and disposition of LP Units as of the date hereof. This summary is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the “ U.S. Internal Revenue Code ”), on the regulations promulgated under the U.S. Internal Revenue Code, and on published administrative rulings, judicial decisions, and other applicable authorities, all as in effect on the date hereof and all of which are subject to change at any time, possibly with retroactive effect. This summary is necessarily general and may not apply to all categories of investors, some of which may be subject to special rules, including, without limitation, persons that own (directly or indirectly, applying certain attribution rules) more than 5% of our LP Units, dealers in securities or currencies, financial institutions or financial services entities, life insurance companies, persons that hold LP Units as part of a straddle, hedge, constructive sale or conversion transaction with other investments, persons whose functional currency is not the U.S. dollar, persons who have elected mark-to-market accounting, persons who hold LP Units through a partnership or other entity treated as a pass-through entity for U.S. federal income tax purposes, persons for whom LP Units are not a capital asset, persons who are liable for the alternative minimum tax, and certain U.S. expatriates or former long-term residents of the United States. Tax-exempt organizations are addressed separately below. The actual tax consequences of the ownership and disposition of LP Units will vary depending on an LP Unitholder’s individual circumstances.

For purposes of this discussion, a “ U.S. Holder ” is a beneficial owner of LP Units who is for U.S. federal tax purposes: (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust (a) the primary supervision of which is subject to a court within the United States and all substantial decisions of which one or more U.S. persons have the authority to control or (b) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

A “ Non-U.S. Holder ” is a beneficial owner of LP Units, other than a U.S. Holder or an entity classified as a partnership or other fiscally transparent entity for U.S. federal tax purposes.

If a partnership holds LP Units, the tax treatment of a partner of such partnership generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships that hold LP Units should consult an independent tax adviser.

This discussion does not constitute tax advice and is not intended to be a substitute for tax planning. Each LP Unitholder should consult an independent tax adviser concerning the U.S. federal, state and local income tax consequences particular to its ownership and disposition of LP Units, as well as any consequences under the laws of any other taxing jurisdiction.

Partnership Status of Brookfield Renewable and BRELP

Each of Brookfield Renewable and BRELP has made a protective election to be classified as a partnership for U.S. federal tax purposes. An entity that is treated as a partnership for U.S. federal tax purposes incurs no U.S. federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss, deduction, or credit of the partnership in computing its U.S. federal income tax liability, regardless of whether cash distributions are made. Distributions of cash by a partnership to a partner generally are not taxable unless the amount of cash distributed to a partner is in excess of the partner’s adjusted basis in its partnership interest.

An entity that would otherwise be classified as a partnership for U.S. federal income tax purposes may nonetheless be taxable as a corporation if it is a “publicly traded partnership”, unless an exception applies. Brookfield Renewable will be publicly traded. However, an exception, referred to as the “ Qualifying Income Exception ”, exists with respect to a publicly traded partnership if (i) at least 90% of such partnership’s gross income for every taxable year consists of “qualifying income” and (ii) the partnership would not be required to register under the Investment Company Act if it were a U.S. corporation. Qualifying income includes certain interest income, dividends, real property rents, gains from the sale or other disposition of real property, and any gain from the sale or disposition of a capital asset or other property held for the production of income that otherwise constitutes qualifying income.

The Managing General Partner and the BRELP General Partner intend to manage the affairs of Brookfield Renewable and BRELP, respectively, so that Brookfield Renewable will meet the Qualifying Income Exception in each taxable year. Accordingly, the Managing General Partner believes that Brookfield Renewable will be treated as a partnership and not as a corporation for U.S. federal income tax purposes.

If Brookfield Renewable fails to meet the Qualifying Income Exception, other than a failure which is determined by the IRS to be inadvertent and which is cured within a reasonable time after discovery, or if Brookfield Renewable is required to register under the Investment Company Act, Brookfield Renewable will be treated as if it had transferred all of its assets, subject to liabilities, to a

 

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newly formed corporation, on the first day of the year in which Brookfield Renewable fails to meet the Qualifying Income Exception, in return for stock in such corporation, and then distributed the stock to our LP Unitholders in liquidation. This deemed contribution and liquidation generally would be tax-free to a U.S. Holder, unless Brookfield Renewable were to have liabilities in excess of the tax basis of its assets at such time. Thereafter, Brookfield Renewable would be treated as a corporation for U.S. federal income tax purposes.

If Brookfield Renewable were treated as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception, an election by the Managing General Partner or otherwise, Brookfield Renewable’s items of income, gain, loss, deduction, or credit would be reflected only on Brookfield Renewable’s tax return rather than being passed through to LP Unitholders, and Brookfield Renewable would be subject to U.S. corporate income tax and potentially branch profits tax with respect to its income, if any, effectively connected with a U.S. trade or business. Moreover, under certain circumstances, Brookfield Renewable might be classified as a passive foreign investment company (“ PFIC ”) for U.S. federal income tax purposes, and a U.S. Holder would be subject to the rules applicable to PFICs discussed below. See “— Consequences to U.S. Holders — Passive Foreign Investment Companies”. Subject to the PFIC rules, distributions made to U.S. Holders would be treated as taxable dividend income to the extent of Brookfield Renewable’s current or accumulated earnings and profits. Any distribution in excess of current and accumulated earnings and profits would first be treated as a tax-free return of capital to the extent of a U.S. Holder’s adjusted tax basis in its LP Units. Thereafter, to the extent such distribution were to exceed a U.S. Holder’s adjusted tax basis in its LP Units, the distribution would be treated as gain from the sale or exchange of such LP Units. The amount of a distribution made before January 1, 2013 and treated as a dividend could be eligible for reduced rates of taxation, provided certain conditions are met, including that Brookfield Renewable is not a PFIC for the taxable year of such distribution or for the preceding year. Based on the foregoing consequences, treatment of Brookfield Renewable as a corporation could materially reduce a holder’s after-tax return and therefore could result in a substantial reduction of the value of LP Units. If BRELP were to be treated as a corporation for U.S. federal income tax purposes, consequences similar to those described above would apply to Brookfield Renewable’s interests in BRELP.

The remainder of this summary assumes that Brookfield Renewable and BRELP will be treated as partnerships for U.S. federal tax purposes. Brookfield Renewable expects that a substantial portion of the items of income, gain, deduction, loss, or credit realized by Brookfield Renewable will be realized in the first instance by BRELP and allocated to Brookfield Renewable for reallocation to LP Unitholders. Unless otherwise specified, references in this section to realization of Brookfield Renewable’s items of income, gain, loss, deduction, or credit include a realization of such items by BRELP and the allocation of such items to Brookfield Renewable.

Proposed Legislation

Over the past several years, a number of legislative and administrative proposals relating to partnership taxation have been introduced and, in certain cases, have been passed by the U.S. House of Representatives. On May 28, 2010, the U.S. House of Representatives passed legislation which, if it had been finally enacted into law and applied to Brookfield Renewable or to BRELP, could have had adverse consequences, including (i) the recharacterization of capital gain income as “ordinary income”, (ii) the potential reclassification of qualified dividend income as “ordinary income” subject to a higher rate of U.S. income tax, and (iii) potential limitations on the ability of our partnership to meet the “qualifying income” exception for taxation as a partnership for U.S. federal income tax purposes. This legislation was not passed by the U.S. Senate and therefore was not enacted into law. However, substantially similar legislation was reintroduced in the U.S. House of Representatives in February 2012.

The Obama administration has indicated it supports the adoption of legislation that similarly changes the treatment of carried interest for U.S. federal income tax purposes. In its published revenue proposals for 2013 the Obama administration proposes that the current law governing the treatment of carried interest be changed for taxable years ending after December 31, 2012 to subject such income to ordinary income tax. The Obama administration’s published revenue proposals for previous years contained similar proposals.

It remains unclear whether any legislation related to such revenue proposals or similar to the legislation described above will be proposed or enacted by the U.S. Congress and, if enacted, whether such legislation would affect an investment in Brookfield Renewable. Each LP Unitholder should consult an independent tax adviser as to the potential effect of any proposed or future legislation on an investment in Brookfield Renewable. The remainder of this discussion is based on current law without regard to the proposed legislation or administrative proposals discussed above.

Consequences to U.S. Holders

Holding of LP Units

Income and loss. Each U.S. Holder must take into account, as described below, its allocable share of Brookfield Renewable’s items of income, gain, loss, deduction, and credit for each of Brookfield Renewable’s taxable years ending with or within such U.S. Holder’s taxable year. Each item generally will have the same character and source as though such holder had

 

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realized the item directly. Each U.S. Holder must report such items without regard to whether any distribution has been or will be received from Brookfield Renewable. Although not required by the Amended and Restated Limited Partnership Agreement of BREP, Brookfield Renewable intends to make cash distributions to all LP Unitholders on a quarterly basis in amounts generally expected to be sufficient to permit U.S. Holders to fund their estimated U.S. tax obligations (including U.S. federal, state, and local income taxes) with respect to their allocable shares of Brookfield Renewable’s net income or gain. However, based upon a U.S. Holder’s particular tax situation and simplifying assumptions that Brookfield Renewable will make in determining the amount of such distributions, and depending upon whether a U.S. Holder elects to reinvest such distributions pursuant to the distribution reinvestment plan, if available, a U.S. Holder’s tax liability might exceed cash distributions made by Brookfield Renewable, in which case any tax liabilities arising from the ownership of LP Units would need to be satisfied from such U.S. Holder’s own funds.

With respect to U.S. Holders who are individuals, certain dividends paid by a corporation (including certain qualified foreign corporations) to Brookfield Renewable and that are allocable to such U.S. Holders prior to January 1, 2013, may qualify for reduced rates of taxation. A qualified foreign corporation includes a foreign corporation that is eligible for the benefits of specified income tax treaties with the United States. In addition, a foreign corporation is treated as a qualified corporation with respect to its shares that are readily tradable on an established securities market in the United States. Among other exceptions, U.S. Holders who are individuals will not be eligible for reduced rates of taxation on any dividends if the payer is a PFIC for the taxable year in which such dividends are paid or for the preceding taxable year. U.S. Holders that are corporations generally will not be entitled to a “dividends received deduction” in respect of dividends paid by non-U.S. corporations in which Brookfield Renewable (through BRELP) owns stock. Each U.S. Holder should consult an independent tax adviser regarding the application of the foregoing rules in light of its particular circumstances.

For U.S. federal income tax purposes, a U.S. Holder’s allocable share of Brookfield Renewable’s items of income, gain, loss, deduction, or credit will be governed by the Brookfield Renewable limited partnership agreement if such allocations have “substantial economic effect” or are determined to be in accordance with such U.S. Holder’s interest in Brookfield Renewable. Similarly, Brookfield Renewable’s allocable share of items of income, gain, loss, deduction, or credit of BRELP will be governed by the BRELP limited partnership agreement if such allocations have “substantial economic effect” or are determined to be in accordance with Brookfield Renewable’s interest in BRELP. The Managing General Partner and the BRELP General Partner believe that, for U.S. federal income tax purposes, such allocations should be given effect, and the Managing General Partner and the BRELP General Partner intend to prepare tax returns based on such allocations for 2012 and future fiscal periods of Brookfield Renewable. If the IRS were to successfully challenge the allocations made pursuant to either the Brookfield Renewable limited partnership agreement or the BRELP limited partnership agreement, the resulting allocations for U.S. federal income tax purposes might be less favorable than the allocations set forth in such agreements.

Basis. Each U.S. Holder will have an initial tax basis in its LP Units equal to the amount of cash paid for such LP Units (or, in the case of LP Units received in exchange for trust units of the fund pursuant to the Combination, such holder’s tax basis in such trust units), increased by such holder’s share of Brookfield Renewable liabilities, if any. That basis will be increased by such U.S. Holder’s share of Brookfield Renewable’s income and by increases in such U.S. Holder’s share of Brookfield Renewable’s liabilities, if any. That basis will be decreased, but not below zero, by distributions a U.S. Holder receives from Brookfield Renewable, by such U.S. Holder’s share of Brookfield Renewable’s losses, and by any decrease in such U.S. Holder’s share of Brookfield Renewable’s liabilities. The IRS has ruled that a partner in a partnership, unlike a stockholder of a corporation, has a single, or “unitary”, tax basis in his or her partnership interest. As a result, any amount a U.S. Holder pays to acquire additional LP Units in Brookfield Renewable (including through the distribution reinvestment plan, if available) will be averaged with the adjusted tax basis of LP Units owned by such holder prior to the acquisition of such additional LP Units. The Managing General Partner and the BRELP General Partner express no opinion regarding the appropriate methodology to be used in making this determination.

For purposes of the foregoing rules, the rules discussed immediately below, and the rules applicable to a sale or exchange of LP Units, Brookfield Renewable’s liabilities generally will include Brookfield Renewable’s share of any liabilities of BRELP.

Limits on deductions for losses and expenses. A U.S. Holder’s deduction of its allocable share of Brookfield Renewable’s losses will be limited to such U.S. Holder’s tax basis in LP Units and, if the holder is an individual or a corporate holder that is subject to the “at risk” rules, to the amount for which the holder is considered to be “at risk” with respect to Brookfield Renewable’s activities, if that is less than such U.S. Holder’s tax basis. In general, a U.S. Holder will be at risk to the extent of such holder’s tax basis in LP Units, reduced by (i) the portion of that basis attributable to such U.S. Holder’s share of Brookfield Renewable’s liabilities for which the holder will not be personally liable (excluding certain qualified non-recourse financing) and (ii) any amount of money the U.S. Holder borrows to acquire or hold LP Units, if the lender of those borrowed funds owns an interest in Brookfield Renewable, is related to the U.S. Holder, or can look only to LP Units for repayment. A U.S. Holder’s at-risk amount generally will increase by such U.S. Holder’s allocable share of Brookfield Renewable’s income and gain and decrease by distributions received from Brookfield Renewable and such U.S. Holder’s allocable share of losses and deductions. A U.S. Holder must recapture losses deducted in previous years to the extent that distributions cause such U.S. Holder’s at-risk amount to be less than zero at the end of any taxable

 

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year. Losses disallowed or recaptured as a result of these limitations will carry forward and will be allowable to the extent that such U.S. Holder’s tax basis or at-risk amount, whichever is the limiting factor, subsequently increases. Upon the taxable disposition of LP Units, any gain recognized by a U.S. Holder can be offset by losses that were previously suspended by the at-risk limitation, but may not be offset by losses suspended by the basis limitation. Any excess loss above the gain previously suspended by the at-risk or basis limitations may no longer be used. Each U.S. Holder should consult an independent tax adviser as to the effects of the at-risk rules.

The Managing General Partner and the BRELP General Partner do not expect to generate income or losses from “passive activities” for purposes of Section 469 of the U.S. Internal Revenue Code. Accordingly, income allocated to a U.S. Holder may not be offset by such holder’s Section 469 passive losses, and losses allocated to a U.S. Holder may not be used to offset such holder’s Section 469 passive income. In addition, other provisions of the U.S. Internal Revenue Code may limit or disallow any deduction for losses by a U.S. Holder or deductions associated with certain assets of Brookfield Renewable or BRELP in certain cases. Each U.S. Holder should consult an independent tax adviser regarding the limitations on the deductibility of losses that such holder may be subject to under applicable sections of the U.S. Internal Revenue Code.

Limitations on deductibility of organizational expenses and syndication fees. In general, neither Brookfield Renewable nor any U.S. Holder may deduct organizational or syndication expenses. Similar rules apply to organizational or syndication expenses incurred by BRELP. Syndication fees (which would include any sales or placement fees or commissions) must be capitalized and cannot be amortized or otherwise deducted.

Limitations on interest deductions. A U.S. Holder’s share of Brookfield Renewable’s interest expense is likely to be treated as “investment interest” expense. For a non-corporate U.S. Holder, the deductibility of “investment interest” expense is generally limited to the amount of such holder’s “net investment income”. A U.S. Holder’s share of Brookfield Renewable’s dividend and interest income will be treated as investment income, although “qualified dividend income” subject to reduced rates of tax in the hands of an individual will only be treated as investment income if such individual elects to treat such dividend as ordinary income not subject to reduced rates of tax. In addition, state and local tax laws may disallow deductions for a U.S. Holder’s share of Brookfield Renewable’s interest expense.

Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment.

Deductibility of partnership investment expenditures by individual partners and by trusts and estates. Subject to certain exceptions, all miscellaneous itemized deductions of an individual taxpayer, and certain of such deductions of an estate or trust, are deductible only to the extent that such deductions exceed 2% of the taxpayer’s adjusted gross income. Moreover, absent U.S. Congressional action, in taxable years beginning on or after January 1, 2013, the otherwise allowable itemized deductions of individuals whose gross income exceeds an applicable threshold amount are subject to reduction by an amount equal to the lesser of (i) 3% of the excess of the individual’s adjusted gross income over the threshold amount, or (ii) 80% of the amount of the individual’s itemized deductions. The operating expenses of Brookfield Renewable, including Brookfield Renewable’s allocable share of the Base Management Fee or any other management fees, may be treated as miscellaneous itemized deductions subject to the foregoing rule. Accordingly, a non-corporate U.S. Holder should consult an independent tax adviser regarding the application of these limitations.

Treatment of Distributions

Distributions of cash by Brookfield Renewable generally will not be taxable to a U.S. Holder to the extent of such holder’s adjusted tax basis (described above) in LP Units. Any cash distributions in excess of a U.S. Holder’s adjusted tax basis generally will be considered to be gain from the sale or exchange of LP Units (described below). Under current law, such gain generally would be treated as capital gain and would be long-term capital gain if a U.S. Holder’s holding period for LP Units were to exceed one year. A reduction in a U.S. Holder’s allocable share of Brookfield Renewable liabilities, and certain distributions of marketable securities by Brookfield Renewable, would be treated similar to cash distributions for U.S. federal income tax purposes.

Sale or Exchange of LP Units

A U.S. Holder will recognize gain or loss on the sale or taxable exchange of LP Units equal to the difference, if any, between the amount realized and such U.S. Holder’s tax basis in LP Units sold or exchanged. A U.S. Holder’s amount realized will be measured by the sum of the cash or the fair market value of other property received plus such U.S. Holder’s share of Brookfield Renewable’s liabilities, if any.

Gain or loss recognized by a U.S. Holder upon the sale or exchange of LP Units generally will be taxable as capital gain or loss and will be long-term capital gain or loss if the U.S. Holder held our LP Units for more than one year on the date of such sale or exchange. Assuming a U.S. Holder has not elected to treat its share of Brookfield Renewable’s investment in any PFIC as a “qualified electing fund”, gain attributable to such investment in a PFIC would be taxable in the manner described below in “— Passive Foreign

 

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Investment Companies”. In addition, certain gain attributable to “unrealized receivables” or “inventory items” could be characterized as ordinary income rather than capital gain. For example, if Brookfield Renewable were to hold debt acquired at a market discount, accrued market discount on such debt would be treated as “unrealized receivables”. The deductibility of capital losses is subject to limitations.

Each U.S. Holder who acquires LP Units at different times and intends to sell all or a portion of our LP Units within a year of the most recent purchase is urged to consult an independent tax adviser regarding the application of certain “split holding period” rules to such sale and the treatment of any gain or loss as long-term or short-term capital gain or loss.

Foreign Tax Credit Limitations

Each U.S. Holder generally will be entitled to a foreign tax credit with respect to such U.S. Holder’s allocable share of creditable foreign taxes paid on Brookfield Renewable’s income and gains. Complex rules may, depending on such U.S. Holder’s particular circumstances, limit the availability or use of foreign tax credits. Gain from the sale of Brookfield Renewable’s investments may be treated as U.S.-source gain. Consequently, a U.S. Holder may not be able to use the foreign tax credit arising from any foreign taxes imposed on such gains unless the credit can be applied (subject to applicable limitations) against U.S. tax due on other income treated as derived from foreign sources. Certain losses that Brookfield Renewable incurs may be treated as foreign-source losses, which could reduce the amount of foreign tax credits otherwise available.

Section 754 Election

Brookfield Renewable and BRELP have each made the election permitted by Section 754 of the U.S. Internal Revenue Code, or the Section 754 Election. The Section 754 Election is irrevocable without the consent of the IRS. The Section 754 Election generally requires Brookfield Renewable to adjust the tax basis in its assets, or inside basis, attributable to a transferee of LP Units under Section 743(b) of the U.S. Internal Revenue Code to reflect the purchase price paid by the transferee for LP Units. This election does not apply to a person who purchases LP Units directly from Brookfield Renewable. For purposes of this discussion, a transferee’s inside basis in Brookfield Renewable’s assets will be considered to have two components: (i) the transferee’s share of Brookfield Renewable’s tax basis in Brookfield Renewable’s assets, or common basis, and (ii) the adjustment under Section 743(b) of the U.S. Internal Revenue Code to that basis. The foregoing rules would also apply to BRELP.

Generally, a Section 754 Election would be advantageous to a transferee U.S. Holder if such U.S. Holder’s tax basis in its LP Units were higher than such LP Units’ share of the aggregate tax basis of Brookfield Renewable’s assets immediately prior to the transfer. In that case, as a result of the Section 754 Election, the transferee U.S. Holder would have a higher tax basis in its share of Brookfield Renewable’s assets for purposes of calculating, among other items, such holder’s share of any gain or loss on a sale of Brookfield Renewable’s assets. Conversely, a Section 754 Election would be disadvantageous to a transferee U.S. Holder if such U.S. Holder’s tax basis in its LP Units were lower than such LP Units’ share of the aggregate tax basis of Brookfield Renewable’s assets immediately prior to the transfer. Thus, the fair market value of LP Units may be affected either favorably or adversely by the election.

Without regard to whether the Section 754 Election is made, if LP Units are transferred at a time when Brookfield Renewable has a “substantial built-in loss” in its assets, Brookfield Renewable will be obligated to reduce the tax basis in the portion of such assets attributable to such LP Units.

The calculations involved in the Section 754 Election are complex, and the Managing General Partner and the BRELP General Partner advise that they will make them on the basis of assumptions as to the value of Brookfield Renewable assets and other matters. Each U.S. Holder should consult an independent tax adviser as to the effects of the Section 754 Election.

Uniformity of LP Units

Because Brookfield Renewable cannot match transferors and transferees of LP Units, Brookfield Renewable must maintain uniformity of the economic and tax characteristics of LP Units to a purchaser of LP Units. In the absence of uniformity, Brookfield Renewable may be unable to comply fully with a number of U.S. federal income tax requirements. A lack of uniformity can result from a literal application of certain Treasury Regulations to Brookfield Renewable’s Section 743(b) adjustments, the determination that Brookfield Renewable’s Section 704(c) allocations are unreasonable, or other reasons. Section 704(c) allocations would be intended to reduce or eliminate the disparity between tax basis and the value of Brookfield Renewable’s assets in certain circumstances, including on the issuance of additional LP Units. In order to maintain the fungibility of all LP Units at all times, Brookfield Renewable will seek to achieve the uniformity of U.S. tax treatment for all purchasers of LP Units which are acquired at the same time and price (irrespective of the identity of the particular seller of LP Units or the time when LP Units are issued by Brookfield Renewable), through the application of certain tax accounting principles that the Managing General Partner believes are reasonable for Brookfield Renewable. However, the IRS may disagree with Brookfield Renewable and may successfully challenge its application of such tax accounting principles. Any non-uniformity could have a negative impact on the value of LP Units.

 

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Foreign Currency Gain or Loss

Brookfield Renewable’s functional currency is the U.S. dollar, and Brookfield Renewable’s income or loss is calculated in U.S. dollars. It is likely that Brookfield Renewable will recognize “foreign currency” gain or loss with respect to transactions involving non-U.S. dollar currencies. In general, foreign currency gain or loss is treated as ordinary income or loss. Each U.S. Holder should consult an independent tax adviser regarding the tax treatment of foreign currency gain or loss.

Passive Foreign Investment Companies

U.S. Holders may be subject to special rules applicable to indirect investments in foreign corporations, including an investment through Brookfield Renewable in a PFIC. A PFIC is defined as any foreign corporation with respect to which (after applying certain look-through rules) either (i) 75% or more of its gross income for a taxable year is “passive income” or (ii) 50% or more of its assets in any taxable year (generally based on the quarterly average of the value of its assets) produce or are held for the production of “passive income”. There are no minimum stock ownership requirements for PFICs. If a U.S. Holder holds an interest in a foreign corporation for any taxable year during which the corporation is classified as a PFIC with respect to such holder, then the corporation will continue to be classified as a PFIC with respect to that U.S. Holder for any subsequent taxable year during which the U.S. Holder continues to hold an interest in the corporation, even if the corporation’s income or assets would not cause it to be a PFIC in such subsequent taxable year, unless an exception applies.

Subject to certain exceptions described below, any gain on the disposition of stock of a PFIC owned by a U.S. Holder indirectly through Brookfield Renewable, as well as income realized on certain “excess distributions” by such PFIC, would be treated as though realized ratably over the shorter of such U.S. Holder’s holding period of LP Units or Brookfield Renewable’s holding period for the PFIC. Such gain or income generally would be taxable as ordinary income, and dividends paid by the PFIC would not be eligible for the preferential tax rate for dividends paid to non-corporate U.S. Holders. In addition, an interest charge would apply, based on the tax deferred from prior years.

If a U.S. Holder were to make an election to treat such U.S. Holder’s share of Brookfield Renewable’s interest in a PFIC as a “qualified electing fund”, such election a “ QEF election ”, for the first year such holder were treated as holding such interest, then in lieu of the foregoing treatment, the U.S. Holder would be required to include in income each year a portion of the ordinary earnings and net capital gains of the PFIC, even if not distributed to Brookfield Renewable or to the holder. A QEF election must be made by a U.S. Holder on an entity-by-entity basis. To make a QEF election, a U.S. Holder must, among other things, (i) obtain a PFIC annual information statement (through an intermediary statement supplied by Brookfield Renewable) and (ii) prepare and submit IRS Form 8621 with such U.S. Holder’s annual income tax return.

Once a U.S. Holder has made a QEF election for an entity, such election applies to any additional shares of interest in such entity acquired directly or indirectly, including through additional LP Units acquired after the QEF election is made (such as LP Units acquired under the distribution reinvestment plan, if available). If a U.S. Holder were to make a QEF election after the first year that the holder were treated as holding in interest in a PFIC, the adverse tax consequences relating to PFIC stock would continue to apply with respect to the pre-QEF election period, unless the holder were to make a “purging election”. The purging election would create a deemed sale of such U.S. Holder’s previously held share of Brookfield Renewable’s interests in a PFIC. The gain recognized by the purging election would be subject to the special tax and interest charge rules, which treat the gain as an excess distribution, as described above. As a result of the purging election, a U.S. Holder would have a new basis and holding period in such U.S. Holder’s share of Brookfield Renewable’s interests in the PFIC. U.S. Holders should consult an independent tax adviser as to the manner in which such direct inclusions could affect their allocable share of Brookfield Renewable’s income and their tax basis in their LP Units and the advisability of making a QEF election or a purging election.

Alternatively, in the case of a PFIC that is a publicly traded foreign company, an election may be made to “mark to market” the stock of such foreign company on an annual basis. Pursuant to such an election, a U.S. Holder would include in each year as ordinary income the excess, if any, of the fair market value of such stock over its adjusted basis at the end of the taxable year. However, none of the existing Brookfield Renewable entities are expected to be publicly traded, although Brookfield Renewable may in the future acquire interests in PFICs which are publicly traded foreign companies. Thus the mark-to-market election is not expected to be available to any U.S. Holder in respect of its indirect ownership interest in any foreign corporation owned by Brookfield Renewable.

Based on the organizational structure of Brookfield Renewable, as well as Brookfield Renewable’s expected income and assets, the Managing General Partner and the BRELP General Partner currently believe that a U.S. Holder is unlikely to be regarded as owning an interest in a PFIC solely by reason of owning LP Units during the taxable year ending December 31, 2012. However, there can be no assurance that an existing Brookfield Renewable entity or a future entity in which Brookfield Renewable acquires an interest will not be classified as a PFIC with respect to a U.S. Holder, because PFIC status is a factual determination that depends on the assets and income of a given entity and must be made on an annual basis. Moreover, in order to ensure that it satisfies the Qualifying Income Exception, Brookfield Renewable may determine to hold an existing or future operating entity through a Holding Entity that would be classified as a PFIC. See “— Investment Structure” below.

 

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To the extent reasonably practicable, Brookfield Renewable intends to timely provide U.S. Holders with the information necessary to make a QEF election with respect to any Brookfield Renewable entity that the Managing General Partner and the BRELP General Partner believe is a PFIC with respect to a U.S. Holder. Accordingly, each U.S. Holder is urged to consider timely filing a QEF election with respect to each such entity for which Brookfield Renewable provides the necessary information. Any such election should be made for the first year Brookfield Renewable holds an interest in such entity or for the first year in which a U.S. Holder holds LP Units, if later.

Recently enacted U.S. legislation requires each U.S. person who directly or indirectly owns an interest in a PFIC to file an annual report with the IRS, and failure to file such report could result in the imposition of penalties on such U.S. person and in the extension of the statute of limitations with respect to federal income tax returns filed by such U.S. person. However, this reporting requirement has been temporarily suspended. Each U.S. Holder should consult an independent tax adviser regarding the PFIC rules, including the potential effect of this legislation on such U.S. Holder’s filing requirements and the advisability of making a QEF election or, if applicable, a mark-to-market election, with respect to each PFIC.

Investment Structure

To ensure that it meets the Qualifying Income Exception for publicly traded partnerships (discussed above) and complies with certain requirements in its limited partnership agreement, Brookfield Renewable may structure certain investments through an entity classified as a corporation for U.S. federal income tax purposes. Such investment structures will be entered into as determined in the sole discretion of the Managing General Partner and the BRELP General Partner in order to create a tax structure that generally is efficient for LP Unitholders. However, because LP Unitholders will be located in numerous taxing jurisdictions, no assurance can be given that any such investment structure will benefit all LP Unitholders to the same extent, and such an investment structure might even result in additional tax burdens on some LP Unitholders. As discussed above, if any such entity were a non-U.S. corporation, it might be considered a PFIC. If any such entity were a U.S. corporation, it would be subject to U.S. federal income tax on its operating income, including any gain recognized on the disposition of its investments. In addition, if the investment were to involve U.S. real property, gain recognized on the disposition of the investment by a corporation generally would be subject to corporate-level tax, whether the corporation were a U.S. or a non-U.S. corporation.

Taxes in Other Jurisdictions

In addition to U.S. federal income tax consequences, an investment in Brookfield Renewable could subject a U.S. Holder to U.S. state and local taxes in the U.S. state or locality in which such holder is a resident for tax purposes. A U.S. Holder could also be subject to tax return filing obligations and income, franchise, or other taxes, including withholding taxes, in non-U.S. jurisdictions in which Brookfield Renewable invests. Brookfield Renewable will attempt, to the extent reasonably practicable, to structure its operations and investments so as to avoid income tax filing obligations by U.S. Holders in non-U.S. jurisdictions. However, there may be circumstances in which Brookfield Renewable is unable to do so. Income or gain from investments held by Brookfield Renewable may be subject to withholding or other taxes in jurisdictions outside the U.S., except to the extent an income tax treaty applies. A U.S. Holder who wishes to claim the benefit of an applicable income tax treaty might be required to submit information to tax authorities in such jurisdictions. Each U.S. Holder should consult an independent tax adviser regarding the U.S. state, local, and non-U.S. tax consequences of an investment in Brookfield Renewable.

Transferor/Transferee Allocations

Brookfield Renewable may allocate items of income, gain, loss, and deduction using a monthly or other convention, whereby any such items recognized in a given month by Brookfield Renewable are allocated to our LP Unitholders as of a specified date of such month. As a result, a U.S. Holder who transfers LP Units might be allocated income, gain, loss, and deduction realized by Brookfield Renewable after the date of the transfer. Similarly, if a U.S. Holder acquires additional LP Units, such holder may be allocated income, gain, loss, and deduction realized by Brookfield Renewable prior to such U.S. Holder’s ownership of such LP Units.

Although Section 706 of the U.S. Internal Revenue Code generally governs allocations of items of partnership income and deductions between transferors and transferees of partnership interests, it is not clear that Brookfield Renewable’s allocation method complies with the requirements. If Brookfield Renewable’s convention were not permitted, the IRS might contend that Brookfield Renewable’s taxable income or losses must be reallocated among LP Unitholders. If such a contention were sustained, a U.S. Holder’s tax liabilities might be adjusted to such holder’s detriment. The Managing General Partner is authorized to revise Brookfield Renewable’s method of allocation between transferors and transferees (as well as among investors whose interests otherwise vary during a taxable period).

U.S. Federal Estate Tax Consequences

If LP Units are included in the gross estate of a U.S. citizen or resident for U.S. federal estate tax purposes, then a U.S. federal estate tax might be payable in connection with the death of such person. Individual U.S. Holders should consult an independent tax adviser concerning the potential U.S. federal estate tax consequences with respect to LP Units.

 

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Certain Reporting Requirements

A U.S. Holder who invests more than $100,000 in Brookfield Renewable will be required to file IRS Form 8865 reporting the investment with such U.S. Holder’s U.S. federal income tax return for the year that includes the date of the investment. A U.S. Holder may be subject to substantial penalties if it fails to comply with this and other information reporting requirements with respect to an investment in LP Units. Each U.S. Holder should consult an independent tax adviser regarding such reporting requirements.

U.S. Taxation of Tax-Exempt U.S. Holders of LP Units

Income recognized by a U.S. tax-exempt organization is exempt from U.S. federal income tax except to the extent of the organization’s UBTI. UBTI is defined generally as any gross income derived by a tax-exempt organization from an unrelated trade or business that it regularly carries on, less the deductions directly connected with that trade or business. In addition, income arising from a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) that holds operating assets or is otherwise engaged in a trade or business generally will constitute UBTI. Notwithstanding the foregoing, UBTI generally does not include any dividend income, interest income, certain other categories of passive income, or capital gains realized by a tax-exempt organization, so long as such income is not “debt financed”, as discussed below. The Managing General Partner believes that Brookfield Renewable should not be regarded as engaged in a trade or business, and anticipates that any operating assets held by Brookfield Renewable will be held through entities that are treated as corporations for U.S. federal income tax purposes.

The exclusion from UBTI does not apply to income from “debt financed property”, which is treated as UBTI to the extent of the percentage of such income that the average acquisition indebtedness with respect to the property bears to the average tax basis of the property for the taxable year. If an entity treated as a partnership for U.S. federal income tax purposes incurs acquisition indebtedness, a tax-exempt partner in such partnership will be deemed to have acquisition indebtedness equal to its allocable portion of such acquisition indebtedness. If any such indebtedness were used by Brookfield Renewable or by BRELP to acquire property, such property generally would constitute debt-financed property, and any income or gain realized on such debt-financed property and allocated to a tax-exempt organization generally would constitute UBTI to such tax-exempt organization. In addition, even if such indebtedness were not used either by Brookfield Renewable or by BRELP to acquire property but were instead used to fund distributions to LP Unitholders, if a tax-exempt organization subject to taxation in the United States used such proceeds to make an investment outside Brookfield Renewable, the IRS might assert that such investment constitutes debt-financed property to such LP Unitholder with the consequences noted above. Brookfield Renewable and BRELP currently do not have any outstanding indebtedness used to acquire property, and the Managing General Partner and the BRELP General Partner do not believe that Brookfield Renewable or BRELP will generate UBTI attributable to debt-financed property in the future. However, neither Brookfield Renewable nor BRELP is prohibited from incurring indebtedness, and no assurance can be provided that neither Brookfield Renewable nor BRELP will generate UBTI attributable to debt-financed property in the future. Tax-exempt U.S. Holders should consult an independent tax adviser regarding the tax consequences of an investment in LP Units.

Investments by U.S. Mutual Funds

U.S. mutual funds that are treated as regulated investment companies (“ RICs ”), for U.S. federal income tax purposes are required, among other things, to meet an annual 90% gross income and a quarterly 50% asset value test under Section 851(b) of the U.S. Internal Revenue Code to maintain their favorable U.S. federal income tax status. The treatment of an investment by a regulated investment company in LP Units for purposes of these tests will depend on whether Brookfield Renewable is treated as a “qualified publicly traded partnership”. If Brookfield Renewable is so treated, then LP Units themselves are the relevant assets for purposes of the 50% asset value test, and the net income from LP Units is the relevant gross income for purposes of the 90% gross income test. If, however, Brookfield Renewable is not so treated, then the relevant assets are the RIC’s allocable share of the underlying assets held by BREP, and the relevant gross income is the RIC’s allocable share of the underlying gross income earned by Brookfield Renewable. Whether Brookfield Renewable will qualify as a qualified publicly traded partnership depends on the exact nature of its future investments, but the Managing General Partner believes it is likely that Brookfield Renewable will not be treated as a qualified publicly traded partnership. RICs should consult an independent tax adviser regarding the U.S. tax consequences of an investment in LP Units.

Consequences to Non-U.S. Holders

Holding of LP Units and Other Considerations

The Managing General Partner and the BRELP General Partner intend to use commercially reasonable efforts to structure the activities of Brookfield Renewable and BRELP, respectively, to avoid generating income treated as effectively connected with a U.S. trade or business, including effectively connected income attributable to the sale of a “United States real property interest”, as defined in the U.S. Internal Revenue Code. Specifically, Brookfield Renewable intends not to invest directly, or through an entity which would be treated as a partnership for U.S. federal income tax purposes, if the Managing General Partner believes at the time of such investment that such investment would generate income treated as effectively connected with a U.S. trade or business. If, as

 

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anticipated, Brookfield Renewable is not treated as engaged in a U.S. trade or business or as deriving income which is treated as effectively connected with a U.S. trade or business, and provided that a Non-U.S. Holder is not itself engaged in a U.S. trade or business, then such Non-U.S. Holder generally will not be subject to U.S. tax return filing requirements solely as a result of owning LP Units and generally will not be subject to U.S. federal income tax on its allocable share of Brookfield Renewable’s interest and dividends from non-U.S. sources or gain from the sale or other disposition of securities or real property located outside of the United States.

However, there can be no assurance that the law will not change or that the IRS will not challenge the Managing General Partner’s position that Brookfield Renewable is not engaged in a U.S. trade or business. If, contrary to the Managing General Partner’s expectations, Brookfield Renewable is treated as engaged in a U.S. trade or business, then a Non-U.S. Holder generally would be required to file a U.S. federal income tax return, even if no effectively connected income were allocable to it. If Brookfield Renewable were to have income treated as effectively connected with a U.S. trade or business, then a Non-U.S. Holder would be required to report that income and would be subject to U.S. federal income tax at the regular graduated rates. In addition, Brookfield Renewable generally would be required to withhold U.S. federal income tax on such Non-U.S. Holder’s distributive share of such income. A corporate Non-U.S. Holder might also be subject to branch profits tax at a rate of 30%, or at a lower treaty rate, if applicable.

In general, even if Brookfield Renewable is not engaged in a U.S. trade or business, a Non-U.S. Holder will be subject to a federal withholding tax equal to 30% of the gross amount of its allocable share of certain U.S.-source income (such as dividends and interest) which is not effectively connected with a U.S. trade or business. However, the Managing General Partner does not expect Brookfield Renewable to earn any such U.S.-source income. Accordingly, the 30% withholding tax is not expected to apply. If, contrary to expectation, Brookfield Renewable were to earn such income, then a Non-U.S. Holder’s allocable share of distributions of such income generally would be subject to U.S. withholding tax at a rate of 30%, or at a lower treaty rate, if applicable. A Non-U.S. Holder might be required to take additional steps to receive a credit or refund of any excess withholding tax paid on such holder’s account, which could include the filing of a non-resident U.S. income tax return with the IRS, unless such holder were not subject to U.S. tax based on its tax status or were otherwise eligible for a reduced rate of U.S. withholding under an applicable income tax treaty. Each Non-U.S. Holder should consult an independent tax adviser regarding the potential for the 30% withholding tax to apply to its allocable share of income of Brookfield Renewable.

Special rules may apply in the case of a Non-U.S. Holder (i) that has an office or fixed place of business in the United States; (ii) that is present in the United States for 183 days or more in a taxable year; or (iii) that is (a) a former citizen or long-term resident of the United States, (b) a foreign insurance company that is treated as holding a partnership interest in Brookfield Renewable in connection with its U.S. business, (c) a PFIC, or (d) a corporation that accumulates earnings to avoid U.S. federal income tax. Each Non-U.S. Holder should consult an independent tax adviser regarding the application of these special rules.

Administrative Matters

Tax Matters Partner

The Managing General Partner will act as Brookfield Renewable’s “tax matters partner”. As the tax matters partner, the Managing General Partner will have the authority, subject to certain restrictions, to act on behalf of Brookfield Renewable in connection with any administrative or judicial review of Brookfield Renewable’s items of income, gain, loss, deduction, or credit.

Information Returns

Brookfield Renewable will provide U.S. tax information on its website (including IRS Schedule K-1 information needed to determine an LP Unitholder’s allocable share of Brookfield Renewable’s income, gain, losses, and deductions) no later than 90 days after the end of Brookfield Renewable’s taxable year. In addition, Brookfield Renewable will provide an IRS Schedule K-1 to any LP Unitholder that furnishes Brookfield Renewable or its agents with certain basic information regarding such holder’s LP Units. To assist each LP Unitholder in this regard, Brookfield Renewable maintains a website, in respect of 2012 and subsequent taxation years. However, providing this U.S. tax information to LP Unitholders will be subject to delay in the event of, among other reasons, the late receipt of any necessary tax information from lower-tier entities. It is therefore possible that, in any taxable year, an LP Unitholder will need to apply for an extension of time to file such LP Unitholder’s tax returns.

In preparing this U.S. tax information, Brookfield Renewable will use various accounting and reporting conventions, some of which have been mentioned in the previous discussion, to determine an LP Unitholder’s share of income, gain, loss, and deduction. The IRS may successfully contend that certain of these reporting conventions are impermissible, which could result in an adjustment to an LP Unitholder’s income or loss.

Brookfield Renewable may be audited by the IRS. Adjustments resulting from an IRS audit could require an LP Unitholder to adjust a prior year’s tax liability and result in an audit of such holder’s own tax return. Any audit of an LP Unitholder’s tax return could result in adjustments not related to Brookfield Renewable’s tax returns, as well as those related to Brookfield Renewable’s tax returns.

 

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Tax Shelter Regulations and Related Reporting Requirements

If Brookfield Renewable were to engage in a “reportable transaction”, Brookfield Renewable (and possibly LP Unitholders) would be required to make a detailed disclosure of the transaction to the IRS in accordance with regulations governing tax shelters and other potentially tax-motivated transactions. A transaction may be a reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a “listed transaction” or “transaction of interest”, or that it produces certain kinds of losses equal to or exceeding $2 million (or, in the case of certain foreign currency transactions, losses equal to or exceeding $50,000). An investment in Brookfield Renewable may be considered a “reportable transaction” if, for example, Brookfield Renewable were to recognize certain significant losses in the future. In certain circumstances, an LP Unitholder who disposes of an interest in a transaction resulting in the recognition by such holder of significant losses in excess of certain threshold amounts may be obligated to disclose its participation in such transaction. Certain of these rules are unclear, and the scope of reportable transactions can change retroactively. Therefore, it is possible that the rules may apply to transactions other than significant loss transactions.

Moreover, if Brookfield Renewable were to participate in a reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, an LP Unitholder might be subject to (i) significant accuracy-related penalties with a broad scope, (ii) for those persons otherwise entitled to deduct interest on federal tax deficiencies, non-deductibility of interest on any resulting tax liability, and (iii) in the case of a listed transaction, an extended statute of limitations. Brookfield Renewable does not intend to participate in any reportable transaction with a significant purpose to avoid or evade tax, nor does Brookfield Renewable intend to participate in any listed transactions. However, no assurance can be provided that the IRS will not assert that Brookfield Renewable has participated in such a transaction.

Each LP Unitholder should consult an independent tax adviser concerning any possible disclosure obligation under the regulations governing tax shelters with respect to the disposition of LP Units.

Taxable Year

Brookfield Renewable currently intends to use the calendar year as its taxable year for U.S. federal income tax purposes. Under certain circumstances which Brookfield Renewable currently believes are unlikely to apply, a taxable year other than the calendar year may be required for such purposes.

Constructive Termination

Subject to the electing large partnership rules described below, Brookfield Renewable will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of our LP Units within a 12-month period.

A constructive termination of Brookfield Renewable would result in the close of its taxable year for all LP Unitholders. If an LP Unitholder reports on a taxable year other than a fiscal year ending on Brookfield Renewable’s year-end, and the LP Unitholder is otherwise subject to U.S. federal income tax, the closing of Brookfield Renewable’s taxable year may result in more than 12 months of Brookfield Renewable’s taxable income or loss being includable in such LP Unitholder’s taxable income for the year of the termination. Brookfield Renewable would be required to make new tax elections after a termination, including a new Section 754 Election. A constructive termination could also result in penalties and other adverse tax consequences if Brookfield Renewable were unable to determine that the termination had occurred. Moreover, a constructive termination might either accelerate the application of, or subject Brookfield Renewable to, any tax legislation enacted before the termination.

In 2010, the IRS announced a publicly traded partnership technical termination relief procedure. If a technically terminated publicly traded partnership requests relief under such procedure and the IRS grants such relief, then, among other things, the partnership need only provide one Schedule K-1 to its partners for the year, notwithstanding the two short taxable years for the partnership.

Elective Procedures for Large Partnerships

The U.S. Internal Revenue Code allows large partnerships to elect streamlined procedures for income tax reporting. This election would reduce the number of items that must be separately stated on the Schedules K-1 that are issued to our LP Unitholders, and such Schedules K-1 would have to be provided to holders on or before the first March 15 following the close of each taxable year. In addition, this election would prevent Brookfield Renewable from suffering a “technical termination” (which would close Brookfield Renewable’s taxable year and require that Brookfield Renewable make a new Section 754 Election) if, within a 12-month period, there were a sale or exchange of 50% or more of Brookfield Renewable’s total LP Units. Despite the foregoing benefits, there are also costs and administrative burdens associated with such an election. Consequently, as of this time, Brookfield Renewable has not elected to be subject to the reporting procedures applicable to large partnerships.

 

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Backup and Other Administrative Withholding

For each calendar year, Brookfield Renewable will report to each LP Unitholder and to the IRS the amount of distributions that Brookfield Renewable pays, and the amount of tax (if any) that Brookfield Renewable withholds on these distributions. Under the backup withholding rules, an LP Unitholder may be subject to backup withholding tax (at the applicable rate, currently 28%) with respect to distributions paid unless: (i) such holder is an exempt recipient and demonstrates this fact when required; or (ii) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding tax, and otherwise complies with the applicable requirements of the backup withholding tax rules. A U.S. Holder that is exempt should certify such status on a properly completed IRS Form W-9. A Non-U.S. Holder may qualify as an exempt recipient by submitting a properly completed IRS Form W-8. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to an LP Unitholder will be allowed as a credit against such LP Unitholder’s U.S. federal income tax liability and may entitle such LP Unitholder to a refund from the IRS, provided the LP Unitholder supplies the required information to the IRS in a timely manner.

If an LP Unitholder does not timely provide Brookfield Renewable, or the applicable nominee, broker, clearing agent, or other intermediary, with IRS Form W-9 or IRS Form W-8, as applicable, or such form is not properly completed, then Brookfield Renewable may become subject to U.S. backup withholding taxes in excess of what would have been imposed had Brookfield Renewable or the applicable intermediary received properly completed forms from all LP Unitholders. For administrative reasons, and in order to maintain the fungibility of our LP Units, such excess U.S. backup withholding taxes, and if necessary similar items, may be treated by Brookfield Renewable as an expense that will be borne indirectly by all LP Unitholders on a pro rata basis (e.g., since it may be impractical for Brookfield Renewable to allocate any such excess withholding tax cost to our LP Unitholders that failed to timely provide the proper U.S. tax forms).

Additional Withholding Requirements

Under recently enacted U.S. legislation, certain payments of U.S.-source income made on or after January 1, 2014 (as well as payments attributable to dispositions of property which produce or could produce certain U.S.-source income) to Brookfield Renewable or by Brookfield Renewable to or through non-U.S. financial institutions or non-U.S. entities, could be subject to a 30% withholding tax unless (i) the non-U.S. financial institution enters into an agreement with the IRS to provide to the IRS information concerning its direct and certain indirect U.S. account holders, or (ii) in the case of other non-U.S. entities, such entity provides to the withholding agent similar information concerning its substantial U.S. beneficial owners. Significant exceptions to these requirements apply, but the scope of these exceptions is addressed in Treasury Regulations that have yet to be made final. Each LP Unitholder should consult an independent tax adviser regarding the treatment of U.S. withholding taxes in general and the application of the recently enacted legislation in light of such holder’s particular circumstances.

Information Reporting with Respect to Foreign Financial Assets

Under recently promulgated Treasury Regulations, U.S. individuals that own “specified foreign financial assets” with an aggregate fair market value exceeding either $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year generally are required to file an information report with respect to such assets with their tax returns. Significant penalties may apply to persons who fail to comply with these new rules. Specified foreign financial assets include not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person, and any interest in a foreign entity. The U.S. Treasury Department and the IRS anticipate that, for taxable years beginning on or after January 1, 2012, these information reporting requirements will apply to certain U.S. entities that own specified foreign financial assets. The failure to report information required under these regulations could result in substantial penalties and in the extension of the statute of limitations with respect to federal income tax returns filed by an LP Unitholder. Each LP Unitholder should consult an independent tax adviser regarding the possible implications of these new rules for an investment in LP Units.

Certain Effects of a Transfer of LP Units

Brookfield Renewable may allocate items of income, gain, loss, deduction, and credit using a monthly or other convention, whereby any such items recognized in a given month by Brookfield Renewable are allocated to LP Unitholders as of a specified date of such month. BRELP may invest in debt obligations or other securities for which the accrual of interest or income thereon is not matched by a contemporaneous receipt of cash. Any such accrued interest or other income would be allocated pursuant to such monthly or other convention. Consequently, LP Unitholders may recognize income in excess of cash distributions received from Brookfield Renewable, and any income so included by a LP Unitholder would increase the basis such LP Unitholder has in LP Units and would offset any gain (or increase the amount of loss) realized by such LP Unitholder on a subsequent disposition of its LP Units.

BRELP has invested and will continue to invest in certain Holding Entities and Operating Entities organized in non-U.S. jurisdictions, and income and gain from such investments may be subject to withholding and other taxes in such jurisdictions. If any such non-U.S. taxes were imposed on income allocable to an LP Unitholder, and such LP Unitholder were thereafter to dispose of

 

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its LP Units prior to the date distributions were made in respect of such income, under applicable provisions of the U.S. Internal Revenue Code and Treasury Regulations, the LP Unitholder to whom such income was allocated (and not the LP Unitholder to whom distributions were ultimately made) would, subject to other applicable limitations, be the party permitted to claim a credit for such non-U.S. taxes for U.S. federal income tax purposes. Thus an LP Unitholder may be affected either favorably or adversely by the foregoing rules. Complex rules may, depending on an LP Unitholder’s particular circumstances, limit the availability or use of foreign tax credits, and investors are urged to consult an independent tax adviser regarding all aspects of foreign tax credits.

Nominee Reporting

Persons who hold an interest in Brookfield Renewable as a nominee for another person are required to furnish to Brookfield Renewable:

 

  (i)

the name, address and taxpayer identification number of the beneficial owner and the nominee;

 

  (ii)

whether the beneficial owner is (a) a person that is not a U.S. person, (b) a foreign government, an international organization, or any wholly-owned agency or instrumentality of either of the foregoing, or (c) a tax-exempt entity;

 

  (iii)

the amount and description of LP Units held, acquired, or transferred for the beneficial owner; and

 

  (iv)

specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales.

Brokers and financial institutions are required to furnish additional information, including whether they are U.S. persons and specific information on LP Units they acquire, hold, or transfer for their own account. A penalty of $100 per failure, up to a maximum of $1,500,000 per calendar year, generally is imposed by the U.S. Internal Revenue Code for the failure to report such information to Brookfield Renewable. The nominee is required to supply the beneficial owner of LP Units with the information furnished to Brookfield Renewable.

New Legislation or Administrative or Judicial Action

The U.S. federal income tax treatment of LP Unitholders depends, in some instances, on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. LP Unitholders should be aware that the U.S. federal income tax rules, particularly those applicable to partnerships, are constantly under review (including currently) by the Congressional tax-writing committees and other persons involved in the legislative process, the IRS, the U.S. Treasury Department and the courts, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations, any of which could adversely affect the value of LP Units and be effective on a retroactive basis. For example, changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible for Brookfield Renewable to be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, affect the tax considerations of owning LP Units, change the character or treatment of portions of Brookfield Renewable’s income (including, for example, the treatment of carried interest as ordinary income rather than capital gain), and adversely affect an investment in LP Units. Such changes could also affect or cause Brookfield Renewable to change the way it conducts its activities, affect the tax considerations of an investment in Brookfield Renewable, and otherwise change the character or treatment of portions of Brookfield Renewable’s income (including changes that recharacterize certain allocations as potentially non-deductible fees).

Brookfield Renewable’s organizational documents and agreements permit the Managing General Partner to modify the limited partnership agreement of Brookfield Renewable from time to time, without the consent of our LP Unitholders, to elect to treat Brookfield Renewable as a corporation for U.S. federal tax purposes, or to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all LP Unitholders.

THE FOREGOING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. THE TAX MATTERS RELATING TO BROOKFIELD RENEWABLE AND LP UNITHOLDERS ARE COMPLEX AND ARE SUBJECT TO VARYING INTERPRETATIONS. MOREOVER, THE EFFECT OF EXISTING INCOME TAX LAWS, THE MEANING AND IMPACT OF WHICH IS UNCERTAIN, AND OF PROPOSED CHANGES IN INCOME TAX LAWS WILL VARY WITH THE PARTICULAR CIRCUMSTANCES OF EACH LP UNITHOLDER, AND IN REVIEWING THIS FORM 20-F THESE MATTERS SHOULD BE CONSIDERED. EACH LP UNITHOLDER SHOULD CONSULT AN INDEPENDENT TAX ADVISER WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES OF ANY INVESTMENT IN LP UNITS.

 

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Certain Material Canadian Federal Income Tax Considerations

The following is a fair summary of the principal Canadian federal income tax consequences under the Tax Act of the holding and disposition of our LP Units generally applicable to an LP Unitholder who, for the purposes of the Tax Act and at all relevant times, holds its LP Units as capital property and deals at arm’s length and is not affiliated (within the meaning of the Tax Act) with Brookfield Renewable, BRELP, the Managing General Partner, the BRELP General Partner, the BRELP GP LP and their respective affiliates (within the meaning of the Tax Act) (a “ Holder ”). Generally, our LP Units will be considered capital property to a Holder, provided that the Holder does not use or hold its LP Units in the course of carrying on a business, and did not acquire its LP Units in one or more transactions considered to be an adventure or concern in the nature of trade.

This summary is not applicable to (i) a Holder that is a “financial institution” for the purposes of the “mark-to-market property” rules under the Tax Act, (ii) a Holder that is a “specified financial institution” (as defined in the Tax Act), (iii) a Holder an interest in which would be a “tax shelter investment” (as defined in the Tax Act) or a Holder who acquires an LP Unit as a “tax shelter investment” (and this summary assumes that no such persons hold LP Units), (iv) a Holder who has elected to have the “functional currency” reporting rules under the Tax Act apply to it, (v) a Holder that has or will have, directly or indirectly, a “significant interest” (as defined in subsection 34.2(1) of the Tax Act) in Brookfield Renewable, or (vi) a Holder for whom any affiliate (within the meaning of the Tax Act) of BRELP is a “foreign affiliate” for purposes of the Tax Act.

This summary is based upon the provisions of the Tax Act in force prior to the date hereof, all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister prior to the date hereof (the “ Tax Proposals ”) and the current administrative policies and assessing practices of the CRA published in writing prior to the date hereof. This summary assumes that the Tax Proposals will be enacted as proposed but no assurance can be given that the Tax Proposals will be enacted as proposed or at all.

This summary is not exhaustive of all possible Canadian federal income tax consequences and, except for the Tax Proposals, does not take into account, or anticipate any changes in law, whether by legislative, regulatory, or judicial action or decision. This summary does not take into account any provincial, territorial, or foreign income tax considerations. The provincial, territorial, or foreign income tax consequences may differ significantly from those identified in the following discussion. A Holder should consult their own tax advisors in respect of the provincial, territorial, or foreign income tax consequences to them of holding and disposing of LP Units.

This summary assumes that neither Brookfield Renewable nor BRELP will be considered to carry on business in Canada. The Managing General Partner and the BRELP General Partner intend to conduct the affairs of each of these entities, to the extent possible, so that neither of these entities should be considered to carry on business in Canada for purposes of the Tax Act. However, no assurance can be given in this regard. This summary also assumes that other than corporations that are organized in and resident in Canada, no subsidiary of Brookfield Renewable or BRELP is expected to invest in any property in Canada or receive dividends, rents, interest or royalties from any Canadian resident person. If Brookfield Renewable or BRELP directly carry on business in Canada, the tax implications to Brookfield Renewable or BRELP and to LP Unitholders may be materially different than as set out in this Form 20-F.

This summary also assumes that neither Brookfield Renewable nor BRELP is a “tax shelter” (as defined in the Tax Act) or “tax shelter investment”. However, no assurance can be given in this regard.

This summary also assumes that Brookfield Renewable will not be a “SIFT partnership” as defined in subsection 197(1) of the Tax Act for purposes of the SIFT Rules at any relevant time after the end of its first taxation year that ended on December 31, 2011 and that BRELP will not be a “SIFT partnership” at any relevant time. This is based on the assumption that Brookfield Renewable will not be a “Canadian resident partnership” as defined in subsection 248(1) of the Tax Act at any relevant time after the end of its first taxation year and that BRELP either (1) at all relevant times qualifies as an “excluded subsidiary entity” (as defined in the Tax Act) or (2) is not a “Canadian resident partnership” at any relevant time after the end of its first taxation year that ended on December 31, 2011. On July 20, 2011, the Minister announced Tax Proposals to amend the definition of “excluded subsidiary entity”. Based on the limited details of these Tax Proposal provided by the Minister, these Tax Proposals should have no impact on BRELP’s qualification as an “excluded subsidiary entity”. However, there can be no assurance that the SIFT Rules will not be revised or amended such that the SIFT Rules will apply to Brookfield Renewable and/or BRELP.

This summary is of a general nature only and should not be construed, nor is it intended to be, legal or tax advice or representations to any particular Holder. Accordingly, Holders should consult with their own tax advisors for advice with respect to the income tax consequences to them in their particular circumstances. See also Item 3.D “Risk Factors — Risks Relating to Taxation — Canada”.

For purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of LP Units must be expressed in Canadian dollars including any distributions, adjusted cost base and proceeds of disposition. For purposes of the Tax Act, amounts denominated in a currency other than the Canadian dollar generally must be converted into Canadian dollars using the rate of exchange quoted by the Bank of Canada at noon on the date such amounts arose, or such other rate of exchange as is acceptable to the CRA.

 

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Holders Resident in Canada

The following portion of the summary is generally applicable to a Holder who, for the purposes of the Tax Act and any applicable income tax treaty or convention and at all relevant times, is a resident of Canada (a “ Resident Holder ”).

Computation of Income or Loss

Each Resident Holder is required to include (or, subject to the “at-risk rules” discussed below, entitled to deduct) in computing his or her income for a particular taxation year, the Resident Holder’s pro rata share of Brookfield Renewable’s income (or loss) for its fiscal year ending in, or coincidentally with, the Resident Holder’s taxation year end, whether or not any of that income is distributed to the Resident Holder in the taxation year and regardless of whether LP Units were held throughout such year.

Brookfield Renewable will not itself be a taxable entity and is not expected to be required to file an income tax return in Canada for any taxation year after its first taxation year. However, Brookfield Renewable’s income (or loss) for a fiscal period for purposes of the Tax Act will be computed as if Brookfield Renewable were a separate person resident in Canada and its partners will be allocated a share of that income (or loss) in accordance with the Amended and Restated Limited Partnership Agreement of BREP. Brookfield Renewable’s income (or loss) will include its share of the income (or loss) of BRELP for a fiscal year determined in accordance with the Amended and Restated Limited Partnership Agreement of BRELP. For this purpose, Brookfield Renewable’s fiscal year end and that of BRELP will be December 31.

Brookfield Renewable’s income for tax purposes for a given fiscal year will be allocated to its LP Unitholders in an amount calculated by multiplying such income that is allocable to LP Unitholders by a fraction, the numerator of which is the sum of the distributions received by such LP Unitholders with respect to such fiscal year and the denominator of which is the aggregate amount of the distributions made by Brookfield Renewable to its LP Unitholders with respect to such fiscal year. Generally, the source and character of items of income allocated to an LP Unitholder with respect to a particular fiscal year will be the same source and character as the cash distributions received by such LP Unitholder with respect to such fiscal year.

If, with respect to a given fiscal year, no distribution is made by Brookfield Renewable to LP Unitholders or Brookfield Renewable has a loss for tax purposes, one quarter of its income, or loss, as the case may be, for tax purposes for such fiscal year that is allocable to our LP Unitholders, will be allocated to our LP Unitholders who are LP Unitholders of record at the end of each calendar quarter ending in such fiscal year in the proportion that the number of LP Units held at each such date by an LP Unitholder is of the total number of LP Units that are issued and outstanding at each such date. Generally, the source and character of such income or loss allocated to an LP Unitholder at the end of each calendar quarter will be the same source and character as the income or loss earned or incurred by Brookfield Renewable in such calendar quarter.

Brookfield Renewable’s income as determined for purposes of the Tax Act may differ from its income as determined for accounting purposes and may not be matched by cash distributions. The above allocations of income for Canadian tax purposes are subject to a special allocation of income for Canadian tax purposes, that would allocate to Brookfield or certain of its affiliates for Canadian income tax purposes only, a portion of certain gains recognized in respect of a disposition of shares of CanHoldco which will reduce, to the extent provided in the relevant partnership agreement, the income for Canadian tax purposes, if any, allocated to LP Unitholders associated with such gains, if any. In addition, for purposes of the Tax Act, all income of Brookfield Renewable and BRELP must be calculated in Canadian currency. Where Brookfield Renewable (or BRELP) hold investments denominated in U.S. dollars or other foreign currencies, gains and losses may be realized by Brookfield Renewable (or BRELP) as a consequence of fluctuations in the relative values of the Canadian and foreign currencies.

In computing Brookfield Renewable’s income (or loss), deductions may be claimed in respect of reasonable administrative costs, interest and other expenses incurred by Brookfield Renewable for the purpose of earning income, subject to the relevant provisions of the Tax Act. Brookfield Renewable may also deduct from its income for the year a portion of the reasonable expenses, if any, incurred by Brookfield Renewable to issue units. The portion of such issue expenses deductible by Brookfield Renewable in a taxation year is 20% of such issue expenses, pro-rated where Brookfield Renewable’s taxation year is less than 365 days. Brookfield Renewable and BRELP may be required to withhold and remit Canadian federal withholding tax on any management or administration fees or charges paid or credited to a person who is a non-resident of Canada, to the extent that such management or administration fees or charges are deductible in computing Brookfield Renewable’s or BRELP’s income from a source in Canada.

In general, a Resident Holder’s share of Brookfield Renewable’s income (or loss) from a particular source will be treated as if it were income (or loss) of the Resident Holder from that source, and any provisions of the Tax Act applicable to that type of income (or loss) will apply to the Resident Holder. Brookfield Renewable will invest in units of BRELP. In computing Brookfield Renewable’s income (or loss) under the Tax Act, BRELP will itself be deemed to be a separate person resident in Canada which computes its income (or loss) and allocates to its partners their respective share of such income (or loss) in accordance with the Tax Act. Accordingly, the source and character of amounts included in (or deducted from) the income of Resident Holders on account of income (or loss) earned by BRELP generally will be determined by reference to the source and character of such amounts when earned by BRELP.

The characterization by CRA of gains realized by Brookfield Renewable or BRELP on the disposition of investments as either capital gains or income gains will depend largely on factual considerations, and no conclusions are expressed in this Form 20-F.

 

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A Resident Holder’s share of taxable dividends received or considered to be received by BRELP in a fiscal year from a corporation resident in Canada and allocated to Brookfield Renewable will be treated as a dividend received by the Resident Holder and will be subject to the normal rules in the Tax Act applicable to such dividends, including the enhanced dividend gross-up and tax credit for “eligible dividends” when the dividend received by BRELP has been designated as an “eligible dividend”.

Foreign taxes paid by Brookfield Renewable or BRELP and taxes withheld at source (other than for the account of a particular Resident Holder) will be allocated pursuant to the governing partnership agreement. Each Resident Holder’s share of the “business income tax” and “non-business income tax” (each as defined in the Tax Act) paid in a foreign country for a year will be creditable against its Canadian federal income tax liability to the extent permitted by the detailed rules contained in the Tax Act. Although the foreign tax credit provisions are designed to avoid double taxation, the maximum credit is limited. Because of this, and because of timing differences in recognition of expenses and income and other factors, there is a risk of double taxation. The Minister announced the Foreign Tax Credit Generator Proposals on March 4, 2010 which are contained in draft legislation released on August 27, 2010 as anti-avoidance rules to address certain foreign tax credit generator transactions. Under the Foreign Tax Credit Generator Proposals, the foreign “business income tax” or “non-business income tax” for any taxation year may be limited in certain circumstances, including where a Resident Holder’s share of the income of Brookfield Renewable under the income tax laws of any country (other than Canada) under whose laws the income of Brookfield Renewable is subject to income taxation, is less than the Resident Holder’s share of such income for purposes of the Tax Act. No assurance can be given that the Foreign Tax Credit Generator Proposals will not apply to any Resident Holder. If the Foreign Tax Credit Generator Proposals apply, a Resident Holder’s foreign tax credits will be limited.

Each of Brookfield Renewable and BRELP will be deemed to be a non-resident person in respect of certain amounts paid or credited to them by a person resident or deemed to be resident in Canada, including dividends or interest. Dividends or interest (other than interest exempt from Canadian federal withholding tax) paid by a person resident or deemed to be resident in Canada to BRELP will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However, the CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable to such payments to be computed by looking through the partnership and taking into account the residency of the partners (including partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-resident partners may be entitled to under an applicable income treaty or convention, provided that the residency status and entitlement to the treaty benefits can be established. In determining the rate of Canadian federal withholding tax applicable to amounts paid by the Holding Entities to BRELP, the Managing General Partner and the BRELP General Partner expect the Holding Entities to look-through BRELP and Brookfield Renewable to the residency of Brookfield Renewable’s partners (including partners who are residents of Canada) and to take into account any reduced rates of Canadian federal withholding tax that non-resident partners may be entitled to under an applicable income tax treaty or convention in order to determine the appropriate amount of Canadian federal withholding tax to withhold from dividends or interest paid to BRELP. However, there can be no assurance that CRA would apply its administrative practice in this context. Under the Canada-U.S. Income Tax Convention (1980) (the “ Treaty ”), in certain circumstances a Canadian resident payer is required to look-through fiscally transparent partnerships such as Brookfield Renewable and BRELP to the residency of the partners of such partnerships who are entitled to relief under that Treaty and take into account any reduced rates of Canadian federal withholding tax that such partners may be entitled to under that Treaty. Under the Amended and Restated Limited Partnership Agreement of BREP, the amount of any taxes withheld or paid by Brookfield Renewable, BRELP or the Holding Entities in respect of LP Units may be treated either as a distribution to our LP Unitholders or as a general expense of Brookfield Renewable, as determined by the Managing General Partner in its sole discretion. However, the Managing General Partner’s current intention is to treat all such amounts as a distribution to our LP Unitholders.

If Brookfield Renewable incurs losses for tax purposes, each Resident Holder will, subject to the REOP Proposals (discussed below), be entitled to deduct in the computation of income for the purposes of the Tax Act the Resident Holder’s pro rata share of any net losses for tax purposes of Brookfield Renewable for its fiscal year to the extent that the Resident Holder’s investment is “at-risk” within the meaning of the Tax Act. The Tax Act contains “at-risk rules” which may, in certain circumstances, restrict the deduction of a limited partner’s share of any losses of a limited partnership. The Managing General Partner and the BRELP General Partner do not anticipate that Brookfield Renewable or BRELP will incur losses but no assurance can be given in this regard. Accordingly, Resident Holders should consult their own tax advisors for specific advice with respect to the potential application of the “at-risk rules”.

On March 4, 2010, the Minister announced as part of the 2010 Canadian federal budget that the outstanding Tax Proposals regarding investments in “foreign investment entities” would be replaced with revised Tax Proposals under which the existing rules in section 94.1 of the Tax Act relating to investments in “offshore investment fund property” would remain in place subject to certain limited enhancements. The Minister released draft legislation to implement these revised Tax Proposals on August 27, 2010. Existing section 94.1 of the Tax Act contains rules relating to investments in non-resident entities that could, in certain circumstances, cause income to be imputed to Resident Holders, either directly or by way of allocation of such income imputed to Brookfield Renewable or BRELP. These rules would apply if it is reasonable to conclude, having regard to all the circumstances, that one of the main reasons for the Resident Holder, Brookfield Renewable or BRELP acquiring or holding an investment in a non-resident entity is to derive a benefit from portfolio investments in such a manner that taxes under the Tax Act on income, profits and gains for any year are significantly less than they would have been if such income, profits and gains had been earned directly. In determining whether this is

 

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the case, existing section 94.1 of the Tax Act provides that consideration must be given to, among other factors, the extent to which the income, profits and gains for any fiscal period are distributed in that or the immediately following fiscal period. No assurance can be given that existing section 94.1 of the Tax Act as proposed to be amended will not apply to a Resident Holder, Brookfield Renewable or BRELP. If, having regard to the particular circumstances, it is reasonable to conclude that one of the main reasons for the acquisition or holding of LP Units by the Resident Holder, of units of BRELP by Brookfield Renewable, or of interests in non-resident entities (other than a CFA) by BRELP, is as stated above, income will be imputed directly to the Resident Holder or to Brookfield Renewable or BRELP and allocated to the Resident Holder in accordance with the rules in existing section 94.1 of the Tax Act as proposed to be amended. The rules in existing section 94.1 of the Tax Act are complex and Resident Holders should consult their own tax advisors regarding the application of these rules to them in their particular circumstances.

Dividends paid to BRELP by a CFA of BRELP will be included in computing the income of BRELP. To the extent that any CFA of BRELP or any direct or indirect subsidiary thereof earns income that is characterized as FAPI in a particular taxation year of the CFA, the FAPI allocable to BRELP must be included in computing the income of BRELP for Canadian federal income tax purposes for the fiscal period of BRELP in which the taxation year of the CFA ends, whether or not BRELP actually receives a distribution of that FAPI. If an amount of FAPI is included in computing the income of BRELP for Canadian federal income tax purposes, an amount may be deductible in respect of the “foreign accrual tax” (as defined in the Tax Act) applicable to the FAPI. Any amount of FAPI included in income net of the amount of any deduction in respect of “foreign accrual tax” will increase the adjusted cost base to BRELP of its shares of the CFA in respect of which the FAPI was included. At such time as BRELP receives a dividend of this type of income that was previously treated as FAPI, that dividend will effectively not be taxable to BRELP and there will be a corresponding reduction in the adjusted cost base to BRELP of the CFA shares. Under the Foreign Tax Credit Generator Proposals, the “foreign accrual tax” applicable to a particular amount of FAPI included in a partnership’s income in respect of a particular “foreign affiliate” of the partnership may be limited in certain specified circumstances, including where the share of the income of any member of the partnership that is a person resident in Canada is, under the income tax laws of any country (other than Canada) under whose laws the income of the partnership is subject to income taxation, less than its share thereof for purposes of the Tax Act. No assurance can be given that the Foreign Tax Credit Generator Proposals will not apply to BRELP. If the Foreign Tax Credit Generator Proposals apply, the “foreign accrual tax” applicable to a particular amount of FAPI included in BRELP’s income in respect of a particular “foreign affiliate” of BRELP will be limited and in such case Resident Holders will be allocated their pro rata share of a greater amount of FAPI that is allocated from BRELP to Brookfield Renewable.

Other Tax Proposals

On October 31, 2003, the Department of Finance (Canada) released the REOP Proposals for public comment. Under the REOP Proposals, a taxpayer would be considered to have a loss from a source that is a business or property for a taxation year only if, in that year, it is reasonable to assume that the taxpayer will realize a cumulative profit (excluding capital gains or losses) from the business or property during the period that the business is carried on or that the property is held. In general, these proposals may deny the realization of losses by Resident Holders from their investment in Brookfield Renewable in a particular taxation year, if, in the year the loss is claimed, it is not reasonable to expect that an overall cumulative profit would be earned from the investment in Brookfield Renewable for the period in which the Resident Holder has held and can reasonably be expected to hold the investment. The Managing General Partner and the BRELP General Partner have advised Counsel that they do not anticipate that the activities of Brookfield Renewable or BRELP will, in and of themselves, generate losses, but no assurance can be given in this regard. However, Resident Holders may incur expenses in connection with an acquisition of LP Units that could result in a loss that could be affected by the REOP Proposals. As part of the 2005 Canadian federal budget, the Minister announced that an alternative proposal to reflect the REOP Proposals would be released for comment at an early opportunity. No such alternative proposal has been released to date. There can be no assurance that such alternative proposal will not adversely affect Resident Holders, or that any revised proposal will not differ significantly from the REOP Proposals described in this Form 20-F.

On July 20, 2011, the Minister announced the Stapled Securities Proposals. The Stapled Securities Proposals would apply where two separate securities are “stapled” together such that the securities are not freely transferable independently of each other and such “stapled securities” are issued by an entity that is a trust, corporation or partnership and one or more of the “stapled securities” is listed or traded on a stock exchange or other public market and any of the following applies: (i) the “stapled securities” are both issued by the entity, (ii) one of the “stapled securities” is issued by the entity, and the other by a subsidiary of the entity, or (iii) one of the “stapled securities” is issued by a REIT or the subsidiary of a REIT. The Stapled Securities Proposals, if they applied, would deny an interest expense in computing the income of the payer for income tax purposes for interest on the debt portion of such a “stapled security”. Based on the limited details of the Stapled Securities Proposals provided by the Minister, the Stapled Securities Proposals should have no impact on Brookfield Renewable Group. However, no assurance can be given in this regard.

Resident Holders that are individuals or trusts may be subject to the alternative minimum tax rules. Such Resident Holders should consult their own tax advisors.

Disposing of LP Units

The disposition by a Resident Holder of an LP Unit will result in the realization of a capital gain (or capital loss) by such Resident Holder. The amount of such capital gain (or capital loss) will generally be the amount, if any, by which the proceeds of

 

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disposition of the LP Unit, less any reasonable costs of disposition, exceed (or are exceeded by) the adjusted cost base of such LP Unit. In general, the adjusted cost base of a Resident Holder’s LP Units will be equal to: (i) the actual cost of our LP Units (excluding any portion thereof financed with limited recourse indebtedness); plus (ii) the pro rata share of Brookfield Renewable’s income allocated to the Resident Holder for Brookfield Renewable’s fiscal years ending before the relevant time; less (iii) the aggregate of the pro rata share of Brookfield Renewable’s losses allocated to the Resident Holder (other than losses which cannot be deducted because they exceed the Resident Holder’s “at-risk” amount) for Brookfield Renewable’s fiscal years ending before the relevant time; and less (iv) the Resident Holder’s distributions received from Brookfield Renewable before the relevant time. The adjusted cost base of each LP Unit will be subject to the averaging provisions contained in the Tax Act.

Where a Resident Holder disposes of all of its LP Units, such person will no longer be a partner of Brookfield Renewable. If, however, a Resident Holder is entitled to receive a distribution from Brookfield Renewable after the disposition of all such LP Units, then the Resident Holder will be deemed to dispose of our LP Units at the later of: (i) the end of Brookfield Renewable’s fiscal year during which the disposition occurred; and (ii) the date of the last distribution made by Brookfield Renewable to which the Resident Holder was entitled. Pursuant to Tax Proposals, the pro rata share of Brookfield Renewable’s income (or loss) for tax purposes for a particular fiscal year that is allocated to a Resident Holder who has ceased to be a partner will generally be added (or deducted) in the computation of the adjusted cost base of the Resident Holder’s LP Units immediately before the disposition. These rules are complex and Resident Holders should consult their own tax advisors for advice with respect to the specific tax consequences to them of disposing of LP Units.

A Resident Holder will realize a deemed capital gain if, and to the extent that, the adjusted cost base of the Resident Holder’s LP Units is negative at the end of any fiscal year of Brookfield Renewable. In such a case, the adjusted cost base of the Resident Holder’s LP Units will be nil at the beginning of Brookfield Renewable’s next fiscal year.

The taxation of capital gains and capital losses is discussed below under “— Taxation of Capital Gains and Capital Losses”.

Taxation of Capital Gains and Capital Losses

In general, one-half of a capital gain realized by a Resident Holder must be included in computing such Resident Holder’s income as a taxable capital gain. One-half of a capital loss is deducted as an allowable capital loss against taxable capital gains realized in the year and any remainder may be deducted against taxable capital gains in any of the three years preceding the year or any year following the year to the extent and under the circumstances described in the Tax Act.

Where a Resident Holder disposes of LP Units to a tax-exempt person, more than one-half of such capital gain may be treated as a taxable capital gain if any portion of the gain is attributable to an increase in value of depreciable property held by BRELP. Resident Holders contemplating such dispositions should consult their own tax advisors. The BRELP General Partner does not expect that BRELP will hold any depreciable property and, therefore the Managing General Partner and the BRELP General Partner expect that only one-half of any capital gains arising from a disposition of LP Units should be treated as a taxable capital gain in the event of a disposition of LP Units to a tax-exempt person.

A Resident Holder that is throughout the relevant taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay an additional refundable tax of 6 2 /3 % on its “aggregate investment income” (as defined in the Tax Act) for the year, which is defined to include taxable capital gains.

Capital gains realized by an individual (including certain trusts) may give rise to a liability for alternative minimum tax under the Tax Act.

Eligibility for Investment

Provided that our LP Units are listed on a “designated stock exchange” which currently includes the TSX and the NYSE, our LP Units will be “qualified investments” under the Tax Act for a trust governed by an RRSP, deferred profit sharing plan, RRIF, registered education saving plan, registered disability saving plan, and a TFSA. Taxes may be imposed in respect of the acquisition or holding of non-qualified investments by such registered plans and certain other taxpayers and with respect to the acquisition or holding of “prohibited investments” (as defined in the Tax Act) by a TFSA or RRSP or RRIF.

LP Units will not be a “prohibited investment” for a trust governed by a TFSA or RRSP or RRIF, provided that the holder of the TFSA or the annuitant of the RRSP or RRIF, as the case may be, deals at arm’s length with Brookfield Renewable for purposes of the Tax Act and does not have a “significant interest” for the purposes of the prohibited investment rules in the Tax Act. Resident Holders should consult their own tax advisors to ensure that our LP Units will not be a “prohibited investment” for a trust governed by a TFSA or RRSP or RRIF.

Holders Not Resident in Canada

The following portion of the summary is generally applicable to a Holder who, at all relevant times, for purposes of the Tax Act, is not, and is not deemed to be, resident in Canada and who does not use or hold and is not deemed to use or hold their LP Units in connection with a business carried on in Canada (a “ Non-Resident Holder ”).

 

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The following portion of the summary assumes that (i) our LP Units will not, at any relevant time, constitute “taxable Canadian property” (as defined in the Tax Act) of any LP Unitholder and (ii) Brookfield Renewable and BRELP will not dispose of properties that are “taxable Canadian property” (which includes, but is not limited to, property that is used or held in a business carried on in Canada, shares of corporations resident in Canada that are not listed on a “designated stock exchange” if more than 50% of the fair market value of the shares is derived from certain Canadian properties during the prescribed time period and listed shares if, during the prescribed time period, the number of shares owned exceeds prescribed amounts and more than 50% of the fair market value of the shares is derived from certain Canadian properties). In general, our LP Units will not constitute “taxable Canadian property” of any Non-Resident Holder at the time of disposition, unless (a) at any time during the 60-month period immediately preceding the disposition, more than 50% of the fair market value of our LP Units was derived, directly or indirectly (under Tax Proposals released on August 27, 2010, excluding through a corporation, partnership of trust, the shares or interests in which were not themselves “taxable Canadian property”), from one or any combination of (i) real or immovable property situated in Canada, (ii) “Canadian resource property” (as defined in the Tax Act), (iii) “timber resource property” (as defined in the Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, such property, whether or not such property exists, or (b) our LP Units are otherwise deemed to be “taxable Canadian property”. Since Brookfield Renewable’s assets will consist principally of units of BRELP, our LP Units would generally be “taxable Canadian property” at a particular time if the units of BRELP held by Brookfield Renewable derived, directly or indirectly (under Tax Proposals released on August 27, 2010, excluding through a corporation, partnership of trust, the shares or interests in which were not themselves “taxable Canadian property”), more than 50% of their fair market value from properties described in (i) to (iv) above, at any time in the 60-month period preceding the particular time. The Managing General Partner and the BRELP General Partner do not expect their LP Units to be “taxable Canadian property” and they do not expect Brookfield Renewable and BRELP to dispose of “taxable Canadian property”. However, no assurance can be given in this regard. See Item 3.D “Risk Factors — Risks Relating to Taxation — Canada”.

Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that is an insurer carrying on business in Canada and elsewhere.

Taxation of Income or Loss

A Non-Resident Holder will not be subject to Canadian federal income tax under Part I of the Tax Act on its share of income from a business carried on by Brookfield Renewable (or BRELP) outside Canada or the non-business income earned by Brookfield Renewable (or BRELP) from sources in Canada. However, a Non-Resident Holder may be subject to Canadian federal withholding tax under Part XIII of the Tax Act, as described below. The Managing General Partner and the BRELP General Partner intend to organize and conduct the affairs of Brookfield Renewable and BRELP such that Non-Resident Holders should not be considered to be carrying on business in Canada solely by virtue of holding LP Units. However, no assurance can be given in this regard.

Each of Brookfield Renewable and BRELP will be deemed to be a non-resident person in respect of certain amounts paid or credited to them by a person resident or deemed to be resident in Canada, including dividends or interest. Dividends or interest (other than interest exempt from Canadian federal withholding tax) paid by a person resident or deemed to be resident in Canada to BRELP will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However, the CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable to such payments to be computed by looking through the partnership and taking into account the residency of the partners (including partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-resident partners may be entitled to under an applicable income tax treaty or convention, provided that the residency status and entitlement to the treaty benefits can be established. In determining the rate of Canadian federal withholding tax applicable to amounts paid by the Holding Entities to BRELP, the Managing General Partner and the BRELP General Partner expect the Holding Entities to look-through BRELP and Brookfield Renewable to the residency of Brookfield Renewable’s partners (including partners who are residents of Canada) and to take into account any reduced rates of Canadian federal withholding tax that non-resident partners may be entitled to under an applicable income tax treaty or convention in order to determine the appropriate amount of Canadian federal withholding tax to withhold from dividends or interest paid to BRELP. However, there can be no assurance that the CRA would apply its administrative practice in this context. Under the Treaty, in certain circumstances a Canadian resident payer is required to look through fiscally transparent partnerships such as Brookfield Renewable and BRELP to the residency of the partners of such partnerships who are entitled to relief under that Treaty and take into account reduced rates of Canadian federal withholding tax that such partners may be entitled to under that Treaty. Under the Amended and Restated Limited Partnership Agreement of Brookfield Renewable, the amount of any taxes withheld or paid by Brookfield Renewable, BRELP or the Holding Entities in respect of LP Units may be treated either as a distribution to our LP Unitholders or as a general expense of Brookfield Renewable, as determined by the Managing General Partner in its sole discretion. However, the Managing General Partner’s current intention is to treat all such amounts as a distribution to our LP Unitholders.

Bermuda Tax Considerations

As a Bermuda exempted limited partnership and under current Bermuda law, neither Brookfield Renewable nor BRELP is subject to tax on profits, income or dividends, nor is there any capital gains tax, estate duty or death duty in Bermuda.

Furthermore, each of Brookfield Renewable and BRELP has received an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 (as amended), that in the event that Bermuda enacts any legislation

 

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imposing tax computed on profits, income, any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, each of Brookfield Renewable and BRELP and none of its operations or its shares, debentures or other obligations shall be exempt from the imposition of such tax until 31 March 2035, provided that such exemption shall not prevent the application of any tax payable in accordance with the provisions of the Land Tax Act, 1967 or otherwise payable in relation to land in Bermuda leased to Brookfield Renewable or BRELP.

 

  10.F

DIVIDENDS AND PAYING AGENTS

Distribution Policy

Our high-quality assets and PPA portfolio are expected to provide Brookfield Renewable with stable and predictable annual cash flow to fund our distributions, which we expect will be at an annual level of $1.38 per LP Unit, commencing with Brookfield Renewable’s quarterly distribution payable on April 30, 2012. The declaration and payment of distributions are subject to the discretion of the board of directors of the Managing General Partner. Distributions will be paid quarterly on the last business day of January, April, July and October of each year, to LP Unitholders of record on the last day of December, March, June and September, respectively. The amount of any distribution payable by us is always at the discretion of the board of directors of the Managing General Partner and will be evaluated periodically, and may be revised subject to business circumstances and expected capital requirements depending on, among other things, our earnings, financial requirements for our operations, growth opportunities, the satisfaction of applicable solvency tests for the declaration and payment of distributions and other conditions existing from time to time (see Item 10.B “Memorandum and Articles of Association — Description of Our LP Units and the Amended and Restated Limited Partnership Agreement of BREP - Distributions”). We expect to have a payout ratio of approximately 60-70% of FFO, allowing us to reinvest surplus cash flow in attractive and accretive opportunities in the renewable power sector and position us to grow our distributions per LP Unit over time. We are pursuing a long-term distribution growth rate target in the range of 3% to 5% annually.

Pursuant to the terms of the Preference Share Guarantees, if the declaration or payment of dividends on the Series 1 Shares or Series 2 Shares is in arrears, Brookfield Renewable will not make distributions on our LP Units.

In December 2011, Brookfield Renewable declared its first cash distribution of $0.3375 per LP Unit for the fourth quarter of 2011. The distribution was paid on January 31, 2012 to LP Unitholders of record on December 31, 2011.

Distributions paid by the Fund from January 1, 2008 to completion of the Combination on November 28, 2011 were C$1.25 per trust unit in 2009, C$1.29 per trust unit in 2010, and C$0.975 per trust unit in 2011. In 2011, the Fund made distributions only in respect of the first three quarters as the Fund was wound up on November 28, 2011.

Distribution Reinvestment Plan

In February 2012, Brookfield Renewable adopted a DRIP for LP Unitholders who are residents of Canada. Subject to regulatory approval and U.S. securities law registration requirements, we may in the future expand our DRIP to include LP Unitholders resident in the United States. LP Unitholders who are not residents of Canada or the United States may participate in our DRIP provided that there are not any laws or governmental regulations that prohibit them from participating in our DRIP. The following is a summary description of the principal terms of our DRIP.

Pursuant to our DRIP, Canadian holders of our LP Units are able to elect to have distributions paid on our LP Units held by them automatically reinvested in additional LP Units to be held for the account of the LP Unitholder in accordance with the terms of our DRIP.

Distributions due to DRIP participants will be paid to the plan agent, for the benefit of the DRIP participants. If a DRIP participant has elected to have his or her distributions automatically reinvested, or applied, on behalf of such DRIP participant, to the purchase of additional LP Units, such purchases will be made from Brookfield Renewable on the distribution date at the Market Price.

As soon as reasonably practicable after each distribution payment date, a statement of account will be mailed to each participant setting out the amount of the relevant cash distribution reinvested, the applicable Market Price, the number of LP Units purchased under our DRIP on the distribution payment date and the total number of LP Units, computed to four decimal places, held for the account of the participant under our DRIP (or, in the case of CDS participants, CDS will receive such statement on behalf of beneficial owners participating in our DRIP). While Brookfield Renewable will not issue fractional LP Units, a DRIP participant’s entitlement to LP Units purchased under our DRIP may include a fraction of an LP Unit and such fractional LP Units shall accumulate. A cash adjustment for any fractional LP Units will be paid by the plan agent upon the termination by a DRIP participant of his or her participation in our DRIP or upon termination of our DRIP. A registered holder may, at any time, obtain a DRS Statement for any number of whole LP Units held for the participant’s account under the DRIP by notifying the plan agent. DRS Statements for LP Units acquired under our DRIP will not be issued to participants unless specifically requested. Prior to pledging, selling or otherwise transferring LP Units held for a participant’s account (except for a sale of LP Units through the plan agent), a registered holder must request a DRS Statement be issued. The automatic reinvestment of distributions under our DRIP will not relieve participants of any income tax obligations applicable to such distributions. No brokerage commissions will be payable in connection with the purchase of our LP Units under our DRIP and all administrative costs will be borne by Brookfield Renewable.

 

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LP Unitholders will be able to terminate their participation in our DRIP by providing, or by causing to be provided, notice to the plan agent. Such notice, if actually received by the plan agent no later than five business days prior to a record date, will have effect in respect of the distribution to be made as of such date. Thereafter, distributions to such LP Unitholders will be paid directly to the LP Unitholder. In addition, LP Unitholders may request that all or part of their LP Units held under the DRIP in cash be sold. When LP Units are sold through the plan agent, a holder will receive the proceeds less any handling charges and brokerage trading fees. Brookfield Renewable will be able to terminate our DRIP, in its sole discretion, upon notice to the DRIP participants and the plan agent, but such action will have no retroactive effect that would prejudice a participant’s interest. Brookfield Renewable will also be able to amend, modify or suspend our DRIP at any time in its sole discretion, provided that the plan agent gives written notice of that amendment, modification or suspension to our LP Unitholders, for any amendment, modification or suspension to our DRIP that in Brookfield Renewable’s opinion may materially prejudice participants.

BRELP has a corresponding distribution reinvestment plan in respect of distributions made to Brookfield Renewable and Brookfield. Brookfield Renewable does not intend to reinvest distributions it receives from BRELP in BRELP’s distribution reinvestment plan except to the extent that holders of our LP Units elect to reinvest distributions pursuant to our DRIP. Brookfield has advised Brookfield Renewable that it may from time-to-time reinvest distributions it receives from Brookfield Renewable or BRELP pursuant to our DRIP or BRELP’s distribution reinvestment plan. The limited partnership units of BRELP to be issued to Brookfield under the distribution reinvestment plan will become subject to the Redemption-Exchange Mechanism and may therefore result in Brookfield acquiring additional LP Units of Brookfield Renewable. See Item 10.B “Memorandum and Articles of Association — Description of the Amended and Restated Limited Partnership Agreement of BRELP — Redemption — Exchange Mechanism”.

BRP Equity

BRP Equity will pay dividends to the holders of its Series 1 Shares and, if applicable, Series 2 Shares, as and when declared by the board of directors of BRP Equity. BRP Equity’s Series 1 Shares and Series 2 Shares are guaranteed by Brookfield Renewable and the other Guarantors under the Preference Share Guarantees described under Item 10.B “Memorandum and Articles of Association — BRP Equity - Preference Share Guarantees”.

For the initial five-year period commencing on March 10, 2010 and ending on and including April 30, 2015, the holders of Series 1 Shares are entitled to receive fixed cumulative preferential cash dividends as and when declared by the board of directors of BRP Equity, payable quarterly on the last day of January, April, July and October in each year at an annual rate equal to C$1.3125 per share. The initial dividend of C$0.1834 per share was paid on April 30, 2010 and a total dividend of C$0.83965 per share was paid in 2010. A total dividend of C$1.3125 per share was paid in 2011.

Paying Agent

Computershare Limited has been appointed to act as paying agent for distributions by Brookfield Renewable in 2012.

 

  10.G

STATEMENT BY EXPERTS

The audited consolidated financial statements of Brookfield Renewable at December 31, 2011, and for the year then ended, appearing in this Form 20-F have been audited by Ernst & Young LLP, independent registered public accounting firm, and as at December 31, and for the years ended December 31, 2010 and 2009 by Deloitte & Touche LLP, independent registered chartered accountants, as set forth in their respective reports thereon appearing elsewhere in this Form 20-F, and are included in reliance upon such reports given on the authority of such firms as experts in accounting and auditing.

 

  10.H

DOCUMENTS ON DISPLAY

Any statement in this Form 20-F about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Form 20-F the contract or document is deemed to modify the description contained in this Form 20-F. You must review the exhibits themselves for a complete description of the contract or document.

Brookfield Asset Management is subject to the information filing requirements of the Exchange Act, and accordingly is required to file periodic reports and other information with the SEC. As a foreign private issuer under the SEC’s regulations, we will file annual reports on a Form 20-F and other reports on Form 6-K. The information disclosed in our reports may be less extensive than that required to be disclosed in annual and quarterly reports on Forms 10-K and 10-Q required to be filed with the SEC by U.S. issuers. Moreover, as a foreign private issuer, we will not be subject to the proxy requirements under Section 14 of the Exchange Act, and our directors and principal shareholders are not subject to the insider short swing profit reporting and recovery rules under Section 16 of the Exchange Act.

The contracts and other documents referred to in this Form 20-F, and our and Brookfield Asset Management’s SEC filings are and will be available at the SEC’s website at www.sec.gov, respectively. You may also read and copy any document Brookfield Renewable or Brookfield Asset Management files with the SEC at the public reference facilities maintained by the SEC at SEC Headquarters, Public Reference Section, 100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330.

In addition, Brookfield Renewable and Brookfield Asset Management are required to file documents required by Canadian securities laws electronically with Canadian securities regulatory authorities and these filings are available on Brookfield Renewable’s or Brookfield Asset Management’s SEDAR profile at www.sedar.com. Written requests for such documents should be directed to our Corporate Secretary at 73 Front Street, 5 th Floor, Hamilton, HM 12, Bermuda.

 

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  10.I

SUBSIDIARY INFORMATION

Not applicable.

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the information contained in this Form 20-F under Item 5.A “Operating Results — Risk Management”.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

 

ITEM 15. CONTROLS AND PROCEDURES

Not applicable.

 

ITEM 16. [RESERVED]

 

  16A.

AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable.

 

  16B.

CODE OF ETHICS

Not applicable.

 

  16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable.

 

  16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

Not applicable.

 

  16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASER

Brookfield Renewable may from time-to-time, subject to applicable law, purchase our LP Units for cancellation in the open market, provided that any necessary approval has been obtained. Brookfield has also advised our partnership that it may from time-to-time, subject to applicable law, purchase our LP Units in the market without making an offer to all LP Unitholders.

 

  16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Each of BRPI and the Fund appointed Ernst & Young LLP to replace Deloitte & Touche LLP as its independent registered public accounting firm for the fiscal year ended December 31, 2011. On March 29, 2011, BRPI’s Audit Committee and Board of Directors and the Fund’s Audit Committee and Board of Trustees considered and approved the decision not to propose Deloitte & Touche LLP for re-appointment and to appoint Ernst & Young LLP as the successor auditor.

Deloitte & Touche LLP’s audit reports regarding the financial statements of Brookfield Renewable, BRPI, “Brookfield’s renewable power division” and the Fund for the fiscal years ended December 31, 2010 and 2009 did not contain any adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope or accounting principles. For the fiscal years ended December 31, 2010 and 2009, none of Brookfield Renewable, BRPI, “Brookfield’s renewable power division” or the Fund had any disagreement(s) with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s), if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused them to make reference to the subject matter of the disagreement(s) in connection with their audit reports.

Ernst & Young LLP has acted as the independent auditor of Brookfield Renewable since its inception. During the fiscal years ended December 31, 2010 and 2009 and the subsequent interim period prior to March 29, 2011, none of “Brookfield’s renewable power division” the Fund, or anyone on their behalf, consulted with Ernst & Young LLP with respect to either a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of Brookfield Renewable, “Brookfield’s renewable power division” or the Fund , and neither a written report nor oral advice was provided to Brookfield Renewable, “Brookfield’s renewable power division” or the Fund that Ernst & Young LLP concluded was an important factor considered by Brookfield Renewable, “Brookfield’s renewable power division” or the Fund in reaching a decision as to any accounting, auditing or financial reporting issue or b) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).

 

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Brookfield Renewable provided Deloitte & Touche LLP with a copy of the foregoing disclosures and requested Deloitte & Touche LLP to furnish to Brookfield Renewable a letter addressed to the SEC stating whether Deloitte & Touche LLP agrees with such disclosures. A copy of such letter is attached as Exhibit 15.3 to this Form 20-F.

 

  16G.

CORPORATE GOVERNANCE

Not applicable.

PART III

 

ITEM 17 FINANCIAL STATEMENTS

Not applicable.

 

ITEM 18. FINANCIAL STATEMENTS

See the list of financial statements on page F-1, which are filed as part of this Form 20-F.

 

ITEM 19. EXHIBITS

 

Number   Description
1.1  

Certificate of Registration of Brookfield Renewable Energy Partners L.P., registered as of June 27, 2011.

1.2  

Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy Partners L.P., dated November 20, 2011.

1.3  

Articles of Incorporation of Brookfield Renewable Partners Limited.

1.4  

Bye-laws of Brookfield Renewable Partners Limited.

4.1  

Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy L.P., dated November 20, 2011.

4.2  

Master Services Agreement, dated November 28, 2011, by and among Brookfield Asset Management Inc., Brookfield Renewable Energy Partners L.P. and Brookfield Renewable Energy L.P., and others.

4.3  

Relationship Agreement, dated November 28, 2011, by and among Brookfield Renewable Energy Partners L.P., Brookfield Renewable Energy L.P., the Manager, and Brookfield Asset Management Inc., and others.

4.4  

Registration Rights Agreement, dated November 28, 2011, between Brookfield Renewable Energy Partners L.P. and Brookfield Asset Management Inc.

4.5  

Combination Agreement, dated September 12, 2011, by and among Brookfield Renewable Power Inc., Brookfield Renewable Power Fund, Brookfield Renewable Power Trust and Brookfield Renewable Energy Partners L.P.

4.6  

Amended and Restated Indenture, dated as of November 23, 2011, among BRP Finance ULC, BNY Trust Company of Canada and The Bank of New York Mellon.

4.7  

Amended and Restated Guarantee Indenture, dated November 25, 2011, by and among Brookfield Renewable Energy Partners L.P., Brookfield Renewable Energy L.P., Brookfield BRP Holdings (Canada) Inc., BRP Bermuda Holdings I Limited, Brookfield Renewable Power Preferred Equity Inc., and Computershare Trust Company of Canada (Class A Preference Shares, Series 1).

4.8  

Amended and Restated Guarantee Indenture, dated November 25, 2011, by and among Brookfield Renewable Energy Partners L.P., Brookfield Renewable Energy L.P., Brookfield BRP Holdings (Canada) Inc., BRP Bermuda Holdings I Limited, Brookfield Renewable Power Preferred Equity Inc., and Computershare Trust Company of Canada (Class A Preference Shares, Series 2).

4.9  

Guarantee, dated November 23, 2011, by Brookfield Renewable Energy L.P. and BNY Trust Company of Canada.

4.10  

Guarantee, dated November 23, 2011, by Brookfield Renewable Energy Partners L.P. and BNY Trust Company of Canada.

4.11  

Guarantee, dated November 23, 2011, by BRP Bermuda Holdings I Limited and BNY Trust Company of Canada.

4.12  

Guarantee, dated November 23, 2011, by Brookfield BRP Holdings (Canada) Inc. and BNY Trust Company of Canada.

4.13  

First Amendment to Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy L.P., dated May 4, 2012.

8.1  

List of all significant subsidiaries (as defined in §210-1.02(w) of Regulation S-X) of Brookfield Renewable Energy Partners L.P. (incorporated by reference to Item 4.C “Organizational Structure”).

15.1  

Consent of Deloitte & Touche LLP.

15.2

 

 

Consent of Ernst & Young LLP.

 

16.1  

Letter dated June 28, 2012 of Deloitte & Touche LLP as required by Item 16F of Form 20-F.

 

 

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SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing Amendment No. 1 to Form 20-F and that it has duly caused and authorized the undersigned to sign this Form 20-F on its behalf.

 

Dated: June 28, 2012

  BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. by its general partner, Brookfield Renewable Partners Limited
 

By:

 

/s/ Sachin Shah

   

 Name:

 

  Sachin Shah

   

 Title:

 

  Chief Financial Officer of its manager,

  BRP Energy Group L.P.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

INDEX TO FINANCIAL STATEMENTS

 

   

Page

 

Audited consolidated financial statements of Brookfield Renewable as at December  31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

    F-5   

Unaudited consolidated financial statements of Brookfield Renewable as at March  31, 2012 and for the three months ended March 31, 2012 and 2011

    F-59   

Unaudited pro forma condensed combined statements of (loss) income for the years ended December  31, 2011 and 2010

    F-75   

Unaudited pro forma condensed combined statement of (loss) income for the three months ended March  31, 2011

    F-83   

 

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MANAGEMENT’S RESPONSIBILITY

Management’s Responsibility for Financial Statements

The accompanying consolidated financial statements have been prepared by and are the responsibility of the Board of Directors and Management.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and reflect Management’s best estimates and judgments based on currently available information. Brookfield Renewable Group has developed and maintains a system of internal controls in order to ensure, on a reasonable and cost effective basis, the reliability of its financial information.

The consolidated financial statements have been audited by Ernst & Young LLP and Deloitte & Touche LLP. Their reports outline the scope of their examination and opinion on the consolidated financial statements.

 

LOGO

  

LOGO

Richard Legault

Chief Executive Officer

  

Sachin Shah

Chief Financial Officer

April 27, 2012

 

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INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Brookfield Renewable Energy Partners L.P.

We have audited the accompanying consolidated financial statements of Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”), which comprise the consolidated balance sheet as at December 31, 2011 and the consolidated statements of (loss) income, comprehensive income (loss), changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We were not engaged to perform an audit of Brookfield Renewable’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Brookfield Renewable’s internal control over financial reporting. Accordingly, we express no such opinion.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Brookfield Renewable Energy Partners L.P. as at December 31, 2011, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of matter

As discussed in Note 2 to the consolidated financial statements, Brookfield Renewable has elected to prospectively change its method of accounting for construction work-in-process to apply the revaluation method effective December 31, 2011.

 

    /s/ Ernst & Young LLP

Toronto, Canada

    Chartered Accountants

April 27, 2012

    Licensed Public Accountants

 

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Report of Independent Registered Chartered Accountants

To the Partners of Brookfield Renewable Energy Partners L.P.

We have audited the accompanying consolidated financial statements of Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”), which comprise the consolidated balance sheet as at December 31, 2010, and the consolidated statements of (loss) income, statements of comprehensive income (loss), statements of changes in equity and statements of cash flows for the years ended December 31, 2010 and December 31, 2009, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We were not engaged to perform an audit of Brookfield Renewable’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Brookfield Renewable’s internal control over financial reporting. Accordingly, we express no such opinion.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Brookfield Renewable Energy Partners L.P. as at December 31, 2010, and its financial performance and its cash flows for the years ended December 31, 2010 and December 31, 2009 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ Deloitte & Touche LLP

Independent Registered Chartered Accountants

Licensed Public Accountants

April 27, 2012

Toronto, Canada

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED BALANCE SHEETS

 

AS AT DECEMBER 31

(U.S. $ MILLIONS)

   Notes      2011      2010  

Assets

        

Current assets

        

Cash and cash equivalents

     5       $ 267       $ 188   

Trade receivables and other current assets

     6         158         146   

Due from related parties

     8         253         400   
        678         734   

Due from related parties

     8         32         19   

Equity-accounted and long-term investments

     9         405         269   

Property, plant and equipment, at fair value

     10         13,945         12,173   

Intangible assets

     11         57         87   

Deferred income tax assets

     15         306         276   

Other long-term assets

     12         285         316   
              $   15,708       $   13,874   

Liabilities and Partners’ equity

        

Current liabilities

        

Accounts payable and accrued liabilities

     13       $ 190       $ 190   

Financial instrument liabilities

     7         99         25   

Due to related parties

     8         139         567   

Current portion of long-term debt and credit facilities

     14         650         135   
        1,078         917   

Financial instrument liabilities

     7         15         221   

Due to related parties

     8         8         101   

Long-term debt and credit facilities

     14         4,869         4,859   

Deferred income tax liabilities

     15         2,374         2,429   

Other long-term liabilities

     16         164         162   
                8,508         8,689   

Fund unit liability

     18         -         1,355   

Non-controlling interests

        

Participating non-controlling interests

     22         629         206   

Preferred equity

     23         241         252   

Limited partners’ equity

     18         6,330         3,372   
                7,200         5,185   
       $   15,708       $   13,874   

The accompanying notes are an integral part of these consolidated financial statements.

Approved on behalf of Brookfield Renewable Energy Partners L.P.:

 

LOGO     LOGO
Patricia Zuccotti     David Mann
Director     Director

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

 

FOR THE YEARS ENDED DECEMBER 31

(U.S. $ MILLIONS)

   Notes      2011      2010      2009  

Revenues

     8,25       $ 1,169       $ 1,045       $ 984   

Other income

        19         12         9   

Share of cash earnings in equity-accounted investments

     9         23         22         29   

Direct operating costs

     8,20         (407)         (328)         (279)   

Interest expense – borrowings

     25         (411)         (404)         (348)   

Management service costs

     8         (1)         -         -   

Current income taxes

     15         (22)         (32)         (23)   

Funds from operations prior to non-controlling interests

              370         315         372   

Other items

           

Depreciation and amortization

     10,11         (468)         (446)         (321)   

Unrealized financial instrument (losses) gains

     7         (20)         584         (791)   

Loss on Fund unit liability

     18         (376)         (159)         (244)   

Share of non-cash loss in equity-accounted investments

     9         (13)         (7)         (13)   

Deferred income tax recovery

     15         50         3         335   

Other

        6         4         82   

Net (loss) income

            $ (451)       $ 294       $ (580)   

Net (loss) income attributable to:

           

Non-controlling interests

           

Participating non-controlling interests

     22         11         25         28   

Preferred equity

     23         13         10         -   

Limited partners

              (475)         259         (608)   
              $ (451)       $ 294         (580)   

Basic and diluted earnings (loss) per share

     18       $ (1.80)       $ 0.98       $ (2.32)   

The accompanying notes are an integral part of these consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

FOR THE YEARS ENDED DECEMBER 31

(U.S. $ MILLIONS)

   Notes      2011      2010      2009  

Net (loss) income

            $ (451)       $ 294       $ (580)   

Other comprehensive income (loss)

           

Revaluations of property, plant and equipment

     9,10         1,774         (959)         103   

Financial instruments designated as cash-flow hedges

     7         (774)         -         19   

Foreign currency translation

        (169)         168         278   

Deferred income taxes on above items, net

     15         239         444         (47)   
                1,070         (347)         353   

Comprehensive income (loss)

      $ 619       $ (53)       $ (227)   

Comprehensive income (loss) attributable to:

           

Non-controlling interests

     22,23       $ 218       $ 51       $ 6   

Limited partners’ equity

              401         (104)         (233)   
              $ 619       $ (53)       $ (227)   

The accompanying notes are an integral part of the consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

FOR THE YEARS ENDED DECEMBER 31

(U.S. $ MILLIONS)

   Notes      2011     2010     2009  

Participating non-controlling interests

     22          

Balance, beginning of year

      $ 206      $ 197      $ 207   

Net income

        11        25        28   

Other comprehensive income

        200        10        (22

Acquisitions

        223        -        -   

Distributions

        (25     (23     (18

Other

              14        (3     2   

Balance, end of year

            $  629      $ 206      $  197   

Preferred equity

     23          

Balance, beginning of year

      $  252      $  -      $   -   

Net income

        13        10        -   

Other comprehensive (loss) income

        (6     8        -   

Shares issued

        -        244        -   

Distributions

        (13     (10     -   

Other

              (5     -        -   

Balance, end of year

            $ 241      $ 252      $   -   

Limited partners’ equity

     18          

Balance, beginning of year

      $ (1,569   $ (1,196   $     683   

Net (loss) income

        (475     259        (608

Distributions

        (98     (632     (1,271

Adjustments related to the Combination

         

Settlement of the Fund unit liability

        1,568        -        -   

Derivative balances

        163        -        -   

Settlement of related party balances

        350        -        -   

Transfer of assets

              47        -        -   

Balance, end of year

        $(14)      $ (1,569   $ (1,196

Accumulated other comprehensive income

     24         6,344        4,941        5,304   
      $  6,330      $  3,372      $   4,108   

Fund unit liability

     18         -        1,355        899   
              $  7,200      $  5,185      $     5,204   

The accompanying notes are an integral part of these consolidated financial statements

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE YEARS ENDED DECEMBER 31

(U.S. $ MILLIONS)

   Notes      2011      2010      2009  

Operating activities

           

Net (loss) income

      $ (451)       $ 294       $ (580)   

Adjustments for the following non-cash items:

           

Depreciation and amortization

     10,11         468         446         321   

Unrealized financial instrument losses (gains)

     7         20         (584)         791   

Loss on Fund unit liability

     18         376         159         244   

Share of earnings in equity-accounted investments

     9         (10)         (15)         (16)   

Deferred income tax recovery

     15         (50)         (3)         (335)   

Other

        -         (87)         (48)   

Dividends received from equity-accounted investments

              8         37         18   
        361         247         395   

Net change in working capital balances

     21         (12)         (29)         23   
                349         218         418   

Financing activities

           

Long-term debt – borrowings

     14         880         747         1,203   

Long-term debt – repayments

     14         (215)         (951)         (811)   

Capital provided by participating non-controlling interests and preferred equity

        186         239         4   

Issuance of new Fund units

        -         -         375   

Sale of Fund units held by Brookfield Renewable

        -         164         -   

Contributions from common parent

     14         106         100         58   

Distributions:

           

To participating non-controlling interests and preferred equity

     22,23         (39)         (33)         (18)   

To unitholders of the Fund

     18         (109)         (77)         (46)   
                809         189         765   

Investing activities

           

Due to (from) related parties

        (120)         (115)         (970)   

Acquisitions

     4         (212)         -         -   

Investment in:

           

Sustaining capital expenditures

        (66)         (53)         (37)   

Development and construction of renewable power generating assets

        (698)         (247)         (124)   

Change in restricted cash and other

        6         18         (82)   
                (1,090)         (397)         (1,213)   

Foreign exchange gain on cash held in foreign currencies

              11         5         31   

Cash and cash equivalents

           

Increase

        79         15         1   

Balance, beginning of year

        188         173         172   

Balance, end of year

            $ 267       $ 188       $ 173   

Supplemental cash flow information:

           

Interest paid

      $ 318       $ 299       $ 207   

Interest received

      $ 27       $ 15       $ 14   

Income taxes paid

            $ 48       $ 39       $ 32   

The accompanying notes are an integral part of these consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

1.    ORGANIZATION AND DESCRIPTION OF THE BUSINESS

The business activities of Brookfield Renewable Energy Partners L.P. and its subsidiaries (collectively, “Brookfield Renewable Group”) consist of owning a portfolio of renewable power generating facilities in Canada, the United States and Brazil, which have historically been held as part of the power generating operations of Brookfield Renewable Power Inc. (“BRPI”) and Brookfield Renewable Power Fund ( the “Fund”).

Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) is a publicly traded limited partnership established under the laws of Bermuda pursuant to an amended and restated limited partnership agreement dated November 20, 2011.

The registered office of Brookfield Renewable is Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

2.    SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The accounting policies used in the consolidated financial statements are based on the IFRS applicable as at December 31, 2011, and encompasses individual IFRS, International Accounting Standards (“IAS”), and interpretations made by the International Financial Reporting Interpretations Committee (“IFRIC”) and the Standing Interpretations Committee (“SIC”). The policies set out below are consistently applied to all periods presented.

These consolidated financial statements have been authorized for issuance by the Board of Directors of its general partner, Brookfield Renewable Partners Limited, on April 27, 2012.

Certain comparative figures have been reclassified to conform to the current year’s presentation.

All figures are presented in millions of United States (“U.S.”) dollars unless otherwise noted.

(b) Basis of presentation

The consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of property, plant and equipment and certain assets and liabilities which have been measured at fair value. Cost is recorded based on the fair value of the consideration given in exchange for assets.

(i)    Consolidation

These consolidated financial statements include the accounts of Brookfield Renewable and its subsidiaries, which are the entities over which Brookfield Renewable has control. Control exists when Brookfield Renewable has the power, directly or indirectly, to govern the financial and operating policies of an entity, so as to obtain benefits from its activities. Non-controlling interests in the equity of Brookfield Renewable Group’s subsidiaries are shown separately in partners’ equity in the consolidated balance sheets.

(ii)    Strategic combination of the renewable power generating operations

On November 28, 2011, Brookfield Renewable announced the completion of the strategic combination (the “Combination”) of the renewable power assets of BRPI and the Fund to launch Brookfield Renewable. Also, on that date, the public unitholders of the Fund received one non-voting limited partnership unit (“LP Unit”) of Brookfield Renewable in exchange for each trust unit of the Fund held, and the Fund was wound up. In addition, all required approvals were obtained from the holders of preferred shares of Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”) and BRPI’s unsecured noteholders as well as the required regulatory, governmental, corporate and contractual consents, assignments and approvals.

Brookfield Renewable also created a new subsidiary BRP Finance ULC (“BRP Finance”) to assume BRPI’s term notes with maturities ranging from 2016 to 2036.

Also as part of the Combination, Brookfield Renewable entered into a voting agreement with Brookfield Asset Management Inc. (“Brookfield Asset Management”) and certain of its subsidiaries, which provides Brookfield Renewable with control of the general partner of Brookfield Renewable Energy L.P. (“BRELP”). Accordingly, Brookfield Renewable consolidates the accounts of BRELP and its subsidiaries. In addition, BRELP issued redeemable partnership units (the “Redeemable

 

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Partnership Units”), to a subsidiary of Brookfield Asset Management, pursuant to which the holder may at its request require BRELP to redeem the Redeemable Partnership Units for cash consideration after a mandatory two-year holding period from the date of issuance. This right is subject to Brookfield Renewable’s right of first refusal which entitles it, at its sole discretion, to elect to acquire all of the Redeemable Partnership Units so presented to BRELP that are tendered for redemption in exchange for Brookfield Renewable LP Units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with LP Units, the Redeemable Partnership Units are classified as limited partnership units of Brookfield Renewable.

At the date of the Combination, Brookfield Asset Management, Brookfield Renewable’s ultimate parent company, held directly or indirectly, approximately a 73% limited partnership interest on a fully-exchanged basis and all general partnership units including a 0.01% general partnership interest in Brookfield Renewable. Brookfield Asset Management and its subsidiaries, other than Brookfield Renewable, are collectively referred to as Brookfield in these financial statements. Subsequent to year-end, Brookfield sold LP Units in Brookfield Renewable and Brookfield Asset Management currently holds, directly or indirectly, approximately a 68% limited partnership interest on a fully-exchanged basis.

Effective November 30, 2011, Brookfield Renewable’s LP Units traded under the symbol “BEP.UN” on the TSX.

Effective December 2011, Brookfield Renewable Group entered into voting arrangements with various affiliates of Brookfield, whereby Brookfield Renewable Group gained control of the entities that own U.S. and Brazil renewable power generating operations (the “Voting Arrangements”). The Voting Arrangements provide Brookfield Renewable Group with all of the voting rights to elect the Boards of Directors of the relevant entities and therefore provides Brookfield Renewable Group with control. Accordingly, Brookfield Renewable consolidates the accounts of these entities.

The Combination and Voting Arrangements do not represent business combinations under IFRS 3, Business Combinations (“ IFRS 3R” ), as all combining businesses are ultimately controlled by Brookfield Asset Management both before and after the transactions were completed. Brookfield Renewable accounts for these reorganizations of entities under common control in a manner similar to a pooling of interest which requires the presentation of pre-Combination and Voting Arrangement financial information as if the transactions had always been in place. Refer to Note 2(o) (ii) for Brookfield Renewable’s policy on accounting for transactions under common control.

Financial information for the periods prior to November 28, 2011 is presented based on the historical combined financial information for the contributed operations as previously reported by Brookfield. For the period after completion of the Combination, the results are based on the actual results of the new entity, Brookfield Renewable, including the adjustments associated with the Combination and the execution of several new and amended agreements, including Power Purchase Agreements (“PPA”) and management service agreements. Refer to Note 8 - Related party transactions for further information.

(iii)    Equity-accounted investments and joint ventures

Equity-accounted investments are entities over which Brookfield Renewable Group has significant influence or which it jointly controls. Significant influence is the ability to participate in the financial and operating policy decisions of the investee, but it has no control or joint control over those investees. Such investments are accounted for using the equity method. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

Brookfield Renewable Group accounts for its interests in jointly controlled entities using the equity method. Under the equity method, the carrying value of an interest in an investee is initially recognized at cost and adjusted for Brookfield Renewable Group’s share of net income, other comprehensive income (“OCI”), distributions by the equity-accounted investment and other adjustments to Brookfield Renewable Group’s proportionate interest in the investee.

(c) Foreign currency translation

All figures reported in the consolidated financial statements and tabular disclosures to the consolidated financial statements are reflected in millions of U.S. dollars, which is the functional currency of Brookfield Renewable. Each of the foreign operations included in these consolidated financial statements determines its own functional currency, and items included in the financial statements of each subsidiary are measured using that functional currency.

Assets and liabilities of foreign operations having a functional currency other than the U.S. dollar are translated at the rate of exchange prevailing at the reporting date and revenues and expenses at the rate of exchange prevailing at the dates of the transactions during the period. Gains or losses on translation of foreign subsidiaries are included in OCI. Gains or losses on foreign currency denominated balances and transactions that are designated as hedges of net investments in these operations are reported in the same manner.

 

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In preparing the consolidated financial statements of Brookfield Renewable, foreign currency denominated monetary assets and liabilities are translated into the functional currency using the closing rate at the applicable consolidated balance sheet dates. Non-monetary assets and liabilities, denominated in a foreign currency and measured at fair value, are translated at the rate of exchange prevailing at the date when the fair value was determined and non-monetary assets measured at historical cost are translated at the historical rate. Revenues and expenses are measured in the functional currency at the rates of exchange prevailing at the dates of the transactions with gains or losses included in income.

(d) Cash and cash equivalents

Cash and cash equivalents include cash, term deposits and money market instruments with original maturities of less than 90 days. Restricted cash expected to be used within the next twelve months has been classified as cash and cash equivalents.

(e) Property, plant and equipment and revaluation method

Power generating assets are classified as property, plant and equipment and are accounted for using the revaluation method. Property, plant and equipment are initially measured at cost and subsequently carried at their revalued amount, being the fair value at the date of the revaluation, less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are made on an annual basis as at December 31, 2011 to ensure that the carrying amount does not differ significantly from fair value. Third party appraisers are retained to review the fair value values of selected Brookfield Renewable Group’s power generating assets on a rotating basis every three to five years. The last third party appraisals for certain facilities were completed effective January 1, 2009.

Where the carrying amount of an asset increased as a result of a revaluation, the increase is recognized in income to the extent the increase reverses a previously recognized decrease recorded through income, with the remainder of the increase recognized in OCI and accumulated in equity under revaluation surplus. Where the carrying amount of an asset decreased, the decrease is recognized in OCI to the extent that a balance exists in revaluation surplus with respect to the asset, with the remainder of the decrease recognized in income as a revaluation decrease under IAS 16, Property, Plant and Equipment (“IAS 16”).

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

Gains and losses on disposal of an item of property, plant and equipment are recognized in ‘Other’ in the consolidated statements of (loss) income. The revaluation surplus is not transferred from the total reserve when the assets are disposed.

Brookfield Renewable Group determines the fair value of its property, plant and equipment by using a 20-year discounted cash flow model. This model includes estimates of future electricity prices, anticipated long-term average (“LTA”) generation, estimated operating and capital expenditures, and assumptions about future inflation rates by geographical location and discount rates. Discount rates are calculated, giving consideration to the price risk and geographical location of Brookfield Renewable Group’s facilities.

Depreciation on power generating assets is calculated on a straight-line basis over the estimated service lives of the assets, which are as follows:

 

Estimated service lives

Dams

   Up to 115 years

Penstocks

   Up to 60 years

Powerhouses

   Up to 115 years

Hydroelectric generating units

   Up to 115 years

Wind generating units

   Up to 22 years

Gas-fired co-generating units

   Up to 40 years

Other assets

   Up to 60 years

Costs are allocated to significant components of property, plant and equipment. When items of property, plant and equipment have different useful lives, they are accounted for as separate items (significant components) and depreciated separately. To ensure the accuracy of useful lives and residual values, a review is conducted annually. Depreciation is

 

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calculated based on the cost of the asset less its residual value. Depreciation commences when the asset is in the location and conditions necessary for it to be capable of operating in the manner intended by management. It ceases at the earlier of the date the asset is classified as held-for-sale and the date the asset is de-recognized. An item of property, plant and equipment and any significant component is de-recognized upon disposal or when no future economic benefits are expected from its use. Other assets include equipment, buildings, gas-fired co-generating units and leasehold improvements. Buildings, furniture and fixtures, leasehold improvements and office equipment are recorded at historical cost, less accumulated depreciation. Land and construction work-in-progress (“CWIP”) are not subject to depreciation.

The depreciation of property, plant and equipment in Brazil is based on the duration of the concession or authorization. The average remaining concession or authorization duration at December 31, 2011, is 18 years (2010: 21 years). Since land rights are part of the concession or authorization, this cost is also subject to depreciation.

Brookfield Renewable elected to change its accounting policy for the revaluation of property, plant and equipment to include eligible CWIP effective December 31, 2011. Brookfield Renewable historically accounted for CWIP at cost until the asset was available for use to produce power for sale. Brookfield Renewable has elected to change its policy to provide more accurate and reliable information of the fair value of its property, plant and equipment. Brookfield Renewable will revalue CWIP when sufficient information exists to determine fair value using the discounted cash flow method. The impact of this change in accounting policy was to record an increase in property, plant and equipment and equity-accounted investments of $89 million and $65 million, respectively. Accordingly, there was also an increase in OCI of $58 million net of non-controlling interests and deferred income taxes.

(f) Asset impairment

At each balance sheet date, management assesses whether there is any indication that assets are impaired. For non-financial tangible and intangible assets (including equity-accounted investments), an impairment is recognized, if the recoverable amount, determined as the greater of the estimated fair value, less costs to sell, and the discounted future cash flows generated from use and eventual disposal of an asset or cash generating unit, is less than its carrying value. The projections of future cash flows take into account the relevant operating plans and management’s best estimate of the most probable set of conditions anticipated to prevail. Should an impairment loss subsequently reverse, the carrying amount of the asset is increased to the lesser of the revised estimate of the recoverable amount, and the carrying amount that would have been recorded had no impairment loss been recognized previously.

(g) Trade receivable and other current assets

Trade receivables and other current assets are recognized initially at fair value, and subsequently measured at amortized cost using the effective interest rate method, less any allowance for uncollectability.

(h) Intangible assets

Intangible assets with finite lives are carried at cost, less any accumulated amortization and any accumulated impairment losses, and are amortized on a straight-line basis over their estimated useful lives of 4 to 25 years. Amortization commences when the asset is in the condition necessary for it to be capable of operating in the manner intended by management and ceases at the earlier of the date the asset is classified as held-for-sale and the date the asset is derecognized.

A service concession arrangement is an arrangement whereby a private sector entity (an operator) constructs or upgrades the infrastructure for public service, and operates and maintains that infrastructure for a specified period of time. The operator is paid for its services over the period of the arrangement. The grantor controls or regulates what services the operator using the assets must provide, to whom, and at what price, and also controls any significant residual interest in the assets at the end of the term of the arrangement. In Brazil, the power industry is regulated by the government and overseen by the National Agency of Electric Energy (“ANEEL”).

At December 31, 2011, the consolidated financial statements include service concession arrangements in place relating to one of the Brazilian subsidiaries. The price of power sold under these concessions is set by ANEEL at the beginning of the concession period and is based on the recovery of Brookfield Renewable Group’s costs incurred each year. Prices are regulated periodically throughout the term of the concession at the discretion of ANEEL. Brookfield Renewable Group is responsible for operating the hydroelectric facilities and to provide energy at ANEEL’s regulatory and industry standards. At the end of the concession arrangement, Brookfield Renewable Group is obliged to return the hydroelectric facilities and land to ANEEL. Additional investments or expansions made to the facilities operated under these concession arrangements by Brookfield Renewable Group must be authorized by ANEEL and Brookfield Renewable Group has the right to be reimbursed for any authorized additions made to the facility at the end of the concession term. No additions were made to the facilities throughout 2011 and no such obligation exists at December 31, 2011. Current service concession arrangements expire within a range of 4 to 25 years, at which time management expects to request renewal from ANEEL.

 

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Revenues earned from the service concession arrangements are recognized in accordance with the revenue recognition policies used in these consolidated financial statements. The service concession arrangements are recognized as intangible assets as Brookfield Renewable Group has a contractual right to charge users of the public service, through its PPAs. The service concession agreement is initially recognized at fair value and subsequently recorded using amortized cost. Amortization commences upon approval of the arrangement by the grantor, ANEEL, and is amortized on a straight-line basis over the term of the concession.

(i) Financial instruments

All financial instruments are classified into one of the following categories: assets and liabilities at fair value through profit or loss (“FVTPL”) cash, loans and receivables, financial instruments used for hedging, and other financial liabilities. All financial instruments are recorded at fair value at recognition. Subsequent to initial recognition, financial assets classified as loans and receivables, and other financial liabilities are measured at amortized cost using the effective interest method. Financial assets and liabilities classified as financial instruments used for cash-flow hedging continue to be recognized at fair value through OCI. Other financial assets and liabilities and non-hedging financial instruments are recorded at fair value through profit and loss.

Brookfield Renewable Group presents the liability and equity components separately upon recognition of such financial instruments. The amount of accretion relating to the liability component is recognized in profit or loss; and the amount of consideration relating to the equity component is recognized in equity.

Brookfield Renewable Group selectively utilizes derivative financial instruments to manage financial risks, including interest rate, commodity and foreign exchange risks. A derivative is a financial instrument, which requires no initial investment, settles at a future date, and has a value that changes in response to the change in a specified variable such as an interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index. Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure, and it is highly probable that it will continue to be effective as a hedge based on an expectation of offsetting cash flows or fair value. Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative that was previously recorded in equity by the application of hedge accounting is recognized in income over the remaining term of the original hedging relationship, unless the originally forecasted transaction is no longer expected to occur, at which point it is released to income. The fair values of derivative financial instruments are included in financial instrument assets or financial instrument liabilities, respectively.

(i) Items qualifying as hedges

Cash flow hedge

The effective portion of unrealized gains and losses on interest rate forward and swap contracts designated as hedges of future interest rate payments are included in equity as cash flow hedges when the interest rate risk relates to an anticipated interest payment. The periodic exchanges of payments on interest rate swap contracts designated as hedges of debt are recorded on an accrual basis as an adjustment to interest expense. The periodic exchanges of payments on interest rate contracts designated as hedges of future interest payments are recorded in income over the term of the corresponding interest payments.

Net investment hedge

Realized and unrealized gains and losses on foreign exchange forward contracts designated as hedges of currency risks are included in equity when the currency risk relates to a net investment in a subsidiary with a functional currency other than the U.S. dollar and are included in income in the period in which the subsidiary is disposed.

(ii) Items not qualifying as hedges

Upon initial recognition of a derivative financial instrument that is not designated as a hedge, a derivative asset or liability is recorded with an offsetting deferred liability or asset, respectively. Gains or losses arising from changes in fair value of the derivative asset or liability are recognized in income through fair value gains or losses in the period the changes occur. The deferred liability or asset is amortized through income, on a straight-line basis, over the life of the derivative financial instrument.

 

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(j) Revenue and expense recognition

Revenue from the sale of electricity is recorded when the power is delivered. The revenue must be considered collectible and the costs incurred to provide the electricity to be measurable before recognizing the related revenue. Costs related to the purchases of power or fuel is recorded upon delivery. All other costs are recorded as incurred.

(k) Income taxes

Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries, based on the tax rates and laws enacted or substantively enacted at the balance sheet date. Current income tax assets and liabilities are included in trade receivables and other current assets and accounts payable and accrued liabilities, respectively.

Deferred tax is recognized on taxable temporary differences between the tax bases and the carrying amounts of assets and liabilities. Deferred tax is not recognized if the temporary difference arises from goodwill or from initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting profit. Deferred income tax assets are recognized for all deductible temporary differences, carry forwards of unused tax credits and unused tax losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent it is no longer probable that the income tax assets will be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted at the balance sheet dates.

Current and deferred income taxes relating to items recognized directly in OCI are also recognized directly in OCI.

Current and deferred income taxes are recorded based on the accounting records of the individual entities that are included within Brookfield Renewable Group. No additional allocation was considered necessary, prior to the Combination.

(l) Business combinations

The acquisition of a business is accounted for using the acquisition method. The consideration for an acquisition is measured at the aggregate of the fair values, at the date of exchange, of the assets transferred, the liabilities incurred to former owners of the acquired business, and equity instruments issued by the acquirer in exchange for control of the acquired business. The acquired business’ identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3R are recognized at their fair values at the acquisition date, except for non-current assets that are classified as held-for-sale in accordance with IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations. These are recognized and measured at fair value, less costs to sell, income taxes which are measured in accordance with IAS 12, Income Taxes and share-based payments which are measured in accordance with IFRS 2, Share-based Payment. The non-controlling interest in the acquiree is initially measured at the non-controlling interest’s proportion of the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.

To the extent that the aggregate of the fair value of consideration paid, the amount of any non-controlling interest and the fair value of any previously held interest in the acquiree exceeds the fair value of the net identifiable tangible and intangible assets, goodwill is recognized. To the extent that this excess is negative, the excess is recognized as a gain in income.

When a business combination is achieved in stages, previously held interests in the acquired entity are re-measured to fair value at the acquisition date, which is the date control is obtained, and the resulting gain or loss, if any, is recognized in income. Amounts arising from interests in the acquired business prior to the acquisition date that have previously been recognized in OCI are reclassified to income. Upon disposal or loss of control of a subsidiary, the carrying amount of the net assets of the subsidiary (including any OCI relating to the subsidiary) are derecognized with the difference between any proceeds received and the carrying amount of the net assets recognized as a gain or loss in income.

(m) Other items

(i)  Capitalized costs

Capitalized costs related to CWIP include all eligible expenditures incurred in connection with the development and construction of the power generating asset. The expenditures consist of cost of materials, direct labor and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Interest and borrowings costs are capitalized when activities that are necessary to prepare the asset for its intended use or sale are in progress, expenditures for the asset have been incurred and funds have been used or borrowed to fund the construction or development. Capitalization of interest and borrowing costs ceases when the asset is ready for its intended use.

 

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(ii)   Pension and employee future benefits

Pension and employee future benefits are recognized in the consolidated financial statements in respect of employees of the operating entities within Brookfield Renewable Group. The costs of retirement benefits for defined benefit plans and post-employment benefits are recognized as the benefits are earned by employees. The consolidated financial statements use the accrued benefit pro-rated method, using the length of service and management’s best estimate assumptions to value its pension and other retirement benefits. Assets are valued at fair value for purposes of calculating the expected return on plan assets. For defined contribution plans, amounts are expensed based on employee entitlement. The consolidated financial statements use the ‘corridor’ method of recognizing actuarial gains and losses. The ‘corridor’ method is based on recognizing actuarial gains and losses that fall outside the plus or minus 10% ‘corridor.’

(iii)   Decommissioning, restoration and environmental liabilities

Legal and constructive obligations associated with the retirement of property, plant and equipment are recorded as liabilities when those obligations are incurred and are measured at the present value of the expected costs to settle the liability, discounted at a current credit-adjusted pre-tax rate specific to the liability. The liability is accreted up to the date the liability will be incurred with a corresponding charge to operating expenses. The carrying amount of decommissioning, restoration and environmental liabilities is reviewed annually with changes in the estimates of timing or amount of cash flows added to or deducted from the cost of the related asset.

(iv)   Interest and borrowing costs

Interest and borrowing costs are capitalized when such costs are directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that takes a substantial period of time to prepare for its intended use.

(v)   Provisions

A provision is a liability of uncertain timing or amount. A provision is recognized if Brookfield Renewable Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses. The provision is measured at the present value of the best estimate of the expenditures expected to be required to settle the obligation using a discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. Provisions are re-measured at each balance sheet date using the current discount rate. The increase in the provision due to the passage of time is recognized as interest expense.

(vi)   Interest income

Interest income is earned with the passage of time and is recorded on an accrual basis.

(n) Critical estimates

Brookfield Renewable Group makes estimates and assumptions that affect the carrying value of assets and liabilities, disclosure of contingent assets and liabilities and the reported amount of income for the year. Actual results could differ from those estimates. The estimates and assumptions that are critical to the determination of the amounts reported in the consolidated financial statements relate to the following:

i)  Property, plant and equipment

The fair value of Brookfield Renewable Group’s property, plant and equipment is calculated using estimates and assumptions about future electricity prices, anticipated LTA generation, estimated operating and capital expenditures, future inflation rates and discount rates, as described in “—Note 10 - Property, Plant and Equipment”. Judgment is involved in determining the appropriate estimates and assumptions in the valuation of Brookfield Renewable Group’s property, plant and equipment. See “— Note 2(o) - Critical judgments in applying accounting policies” for further details.

 

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Estimates of useful lives and residual values are used in determining depreciation and amortization. To ensure the accuracy of useful lives and residual values, these estimates are reviewed on an annual basis.

ii)  Financial instruments

Brookfield Renewable Group makes estimates and assumptions that affect the carrying value of its financial instruments, including estimates and assumptions about future electricity prices, LTA generation, capacity prices, discount rates and the timing of energy delivery. Non-financial instruments are valued using estimates of future electricity prices which are estimated by considering broker quotes for the years in which there is a liquid market and for the subsequent years Brookfield Renewable Group’s best estimate of electricity prices that would allow new entrants into the market. See “— Note 7 - Risk Management and Financial Instruments” for more details.

iii)  Deferred income taxes

The consolidated financial statements include estimates and assumptions for determining the future tax rates applicable to subsidiaries and identifying the temporary differences that relate to each subsidiary. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply during the year when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted at the consolidated balance sheet dates. Operating plans and forecasts are used to estimate when the temporary difference will reverse.

(o) Critical judgments in applying accounting policies

The following are the critical judgments that have been made in applying the accounting policies used in the consolidated financial statements and that have the most significant effect on the amounts in the consolidated financial statements:

i)  Preparation of consolidated financial statements

These consolidated financial statements present the financial position, results of operations and cash flows of Brookfield Renewable Group. Judgment is required in determining what assets, liabilities and transactions are recognized in the consolidated financial statements as pertaining to Brookfield Renewable Group’s operations prior to the Combination.

ii)  Common control transactions

Common control business combinations specifically fall outside of scope of IFRS 3R and as such management has used its judgment to determine an appropriate policy to account for these transactions, considering other relevant accounting guidance that is within the framework of principles in IFRS and that reflects the economic reality of the transactions, in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. As a result, the consolidated financial statements account for assets and liabilities acquired at the previous carrying value on the predecessor’s financial statements. Differences between the consideration given and the assets and liabilities received are recorded directly to equity.

iii)  Property, plant and equipment

The accounting policy relating to Brookfield Renewable Group’s property, plant and equipment is described in Note 2(e). In applying this policy, judgment is used in determining whether certain costs are additions to the carrying amount of the property, plant and equipment as opposed to repairs and maintenance. If an asset has been developed, judgment is required to identify the point at which the asset is capable of being used as intended and to identify the directly attributable costs to be included in the carrying value of the development asset. The useful lives of property, plant and equipment are determined by independent engineers periodically with an annual review by management.

Annually, Brookfield Renewable Group determines the fair value of its property, plant and equipment using a methodology that it has judged to be reasonable. The methodology is a 20-year discounted cash flow model. Twenty years is the period considered reasonable as Brookfield Renewable Group has 20-year capital plans and it believes a reasonable third party would be indifferent between extending the cash flows further in the model versus using a discounted terminal value. The cash flow model uses estimates of future electricity prices, considering broker quotes for the years in which there is a liquid market and for the subsequent years, its best estimate of electricity prices that would allow new entrants into the market. Discount rates are determined each year by considering the current interest rates, average market cost of capital as well as the price risk and the geographical location of the operational facilities as judged by management. Inflation rates are also determined by considering the current inflation rates and the expectations of future rates by economists. Operating costs are based on long-term budgets escalated thereafter for inflation. Each operational facility has a 20-year capital plan that it

 

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follows to ensure the maximum life of its assets is achieved. Foreign exchange rates are forecasted by using the spot rates and the available forward rates, extrapolated beyond the period available. The inputs described above to the discounted cash flow model require management to consider facts, trends and plans in making its judgments as to what derives a reasonable fair value of its property, plant and equipment.

iv)  Consolidation of Brookfield Renewable Power Fund

Brookfield Renewable held a 34% investment in the Fund, on a fully-exchanged basis. As a result, Brookfield Renewable assessed whether it continued to control the Fund, given its reduced ownership level. In making this assessment, Brookfield Renewable considered the definition of control and guidance as set out in IAS 27, Consolidated and Separate Financial Statements (“IAS 27”). Brookfield Renewable concluded that control did exist as it had the power to govern the financial and operating policies of the Fund under specific agreements. Effective November 28, 2011, public unitholders of the Fund received one LP Unit of Brookfield Renewable in exchange for each trust unit of the Fund held, and the Fund was wound up.

v)  Financial instruments

The accounting policy relating to Brookfield Renewable Group’s financial instruments is described in Note 2(i). In applying this policy, judgments are made in applying the criteria set out in IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”), to record financial instruments at fair value through profit and loss, and the assessments of the effectiveness of hedging relationships.

vi)  Deferred income taxes

The accounting policy relating to Brookfield Renewable Group’s income taxes is described in Note 2(k). In applying this policy, judgments are made in determining the probability of whether deductions, tax credits and tax losses can be utilized.

(p) Recently adopted accounting policies

(i)  Related party disclosures – revised definition of related parties

On January 1, 2011, Brookfield Renewable adopted the revised version of IAS 24, Related Party Disclosures (“IAS 24”). IAS 24 is required to be applied retrospectively for annual periods beginning on or after January 1, 2011, and requires entities to disclose in their financial statements information about transactions with related parties. Generally, two parties are related to each other if one party controls, or significantly influences, the other party. IAS 24 has simplified the definition of a related party. Implementation of IAS 24 did not have a material impact on Brookfield Renewable’s consolidated financial statements.

(ii)  Defined benefit assets and minimum funding requirements

On January 1, 2011, Brookfield Renewable adopted Prepayments of a Minimum Funding Requirement (Amendments to IFRIC 14). The amendments corrected an unintended consequence of IFRIC 14, IAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (“IFRIC 14”). Without the amendments, in some circumstances entities were not permitted to recognize as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem. Implementation of IFRIC 14 did not have a material impact on Brookfield Renewable’s consolidated financial statements.

(iii)  Improvements to IFRS

On January 1, 2011, Brookfield Renewable adopted Improvements to IFRS – as part of the IASB’s program of annual improvements to its standards. Implementation of Improvements to IFRS did not have a material impact on Brookfield Renewable’s consolidated financial statements.

(iv)  Extinguishing Financial Liabilities with Equity Instruments

On January 1, 2011, Brookfield Renewable adopted Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments (“IFRIC 19”). This interpretation provides guidance on how to account for the extinguishment of a financial liability by the issue of equity instruments. IFRIC 19 clarifies that the entity’s equity instruments issued to a creditor, which are part of the consideration paid to extinguish the financial liability are measured at their fair value. If their fair value cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. Differences between the carrying amount of the financial liability extinguished and the initial measurement amount of the equity instruments issued is included in the entity’s profit or loss for the period. Implementation of IFRIC 19 did not have a material impact on Brookfield Renewable’s consolidated financial statements.

(q) Future changes in accounting policies

(i)  Financial Instruments

IFRS 9, Financial Instruments (“IFRS 9”) was issued by the International Accounting Standards Board (“IASB”) on October 28, 2010, and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is

 

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measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Two measurement categories continue to exist to account for financial liabilities in IFRS 9, FVTPL and amortized cost. Financial liabilities held for trading are measured at FVTPL, and all other financial liabilities are measured at amortized cost unless the fair value option is applied. The treatment of embedded derivatives under the new standard is consistent with IAS 39 and is applied to financial liabilities and non-derivative hosts not within the scope of the standard. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. Management is currently evaluating the impact of IFRS 9 on the consolidated financial statements.

 

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(ii)  Consolidation

IFRS 10, Consolidation (“IFRS 10”) was issued by the IASB on May 12, 2011, and replaces SIC-12, Consolidation – Special Purpose Entities and parts of IAS 27. IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under IAS 27, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 10 on the consolidated financial statements.

(iii)  Joint arrangements

IFRS 11, Joint Arrangements (“IFRS 11”) was issued by the IASB on May 12, 2011, and replaces IAS 31, Interests in Joint Ventures (“IAS 31”), and SIC-13, Jointly Controlled Entities—Non-monetary Contributions by Venturers. IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, and revenue and expenses of the joint operation. Under IAS 31, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 11 on the consolidated financial statements.

(iv)  Disclosure of interests in other entities

IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”) was issued by the IASB on May 12, 2011. IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off-balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 12 on the consolidated financial statements.

(v)  Fair value measurement

IFRS 13, Fair Value Measurement (“IFRS 13”), a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards, was issued by the IASB on May 12, 2011. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It supersedes the fair value guidance that currently exists in IAS 16 concerning the use of the revaluation method. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. IFRS 13 is effective for annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 13 on the consolidated financial statements.

(vi)  Accounting for employee benefits and minimum funding requirements

In June 2011, the IASB issued significant amendments to IAS 19, Employee Benefits (“IAS 19”). These changes affect the recognition of actuarial gains and losses by removing the option to use the corridor approach and requiring immediate recognition in OCI. These OCI amounts cannot be recycled to the income statement. There are also changes to the recognition, measurement and presentation of past service costs, cost of benefits and finance expense or income relating to employee benefits. Further, termination benefits are recognized as a liability only when the entity can no longer withdraw the offer of the termination benefit or recognizes any related restructuring costs. There are additional disclosure requirements. The amendment is effective for periods beginning on or after January 1, 2013. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

(vii)  Presentation of items of OCI

In June 2011, IASB issued amendments to IAS 1, Presentation of Financial Statements. These amendments include a requirement for entities to group items presented in OCI on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments), and emphasize the importance of presenting profit or loss and OCI together and with equal prominence. The amendment is effective for annual periods starting on or after July 1, 2012. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

(viii)  Income Taxes

In December 2010, IASB issued amendments to IAS 12, Income Taxes. Under these amendments, an entity is required to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment is effective for annual periods starting on or after January 1, 2012. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

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(ix)  Consolidation and Separate Financial Statements

In May 2011, IASB amended and reissued IAS 27. The amended standard is to be applied in accounting for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements. The amendment is effective for annual periods starting on or after January 1, 2013. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

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(x)  Investment in Associates

In May 2011, IASB amended and reissued IAS 28, Investment in Associates and Joint Ventures. The amended standard prescribes the accounting treatment for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The amendment is effective for annual periods starting on or after January 1, 2013. Management is currently evaluating the impact of these amendments on the consolidated financial statements.

 

3.

PRINCIPAL SUBSIDIARIES

The following table lists the subsidiaries of Brookfield Renewable which, in the opinion of management, significantly affects its financial position and results of operations:

 

      Country of
incorporation,
registration or
operations
    Proportion of ownership
interest held by
Brookfield Renewable
    Proportion of the voting
power held by
Brookfield Renewable
 
AS AT DECEMBER 31          

      2011

%

    

        2010

%

   

    2011

%

    

        2010

%

 

Brookfield Renewable Energy L.P. (1)

        Bermuda        50         -        100         -   

Brookfield Renewable Power Fund (2)

    Canada        -         34        -         34   

Brookfield Renewable Power Preferred Equity Inc.

    Canada        100         100        100         100   

BRP Finance ULC

    Canada        100         -        100         -   

Great Lakes Power Limited

    Canada        100         100        100         100   

Mississagi Power Trust

    Canada        100         100        100         100   

Lievre Power L.P.

    Canada        100         100        100         100   

Catalyst Old River Hydroelectric L.P.

    U.S.        75         75        75         75   

Erie Boulevard Hydropower L.P.

    U.S.        100         100        100         100   

Brookfield Energia Renovavel S.A.

    Brazil        100         100        100         100   

Itiquira Energetica S.A.

    Brazil        100         100        100         100   

 

(1)

Since the Redeemable Partnership Units of BRELP are classified as LP Units of Brookfield Renewable (Note 18), Brookfield Renewable effectively has a 99% economic interest in BRELP.

(2)

The proportion of voting power of the Fund is on a fully-exchanged basis. On November 28, 2011, upon completion of the Combination, the Fund was wound up.

 

4.

ACQUISITIONS

Brookfield Americas Infrastructure Fund

Effective December 2011, Brookfield Renewable Group entered into Voting Arrangements with various affiliates of Brookfield, whereby Brookfield Renewable Group gained control of certain entities that own U.S. and Brazil renewable power generating operations. The Voting Arrangements do not represent business combinations under IFRS 3R, as all combining businesses are ultimately controlled by Brookfield Asset Management both before and after the transactions were completed. Brookfield Renewable accounts for these reorganizations of entities under common control in a manner similar to a pooling of interest which requires the presentation of pre-Voting Arrangement financial information as if the transactions had always been in place. The entities that own the U.S. and Brazil renewable power generating operations completed the following acquisitions in 2011:

In February 2011, a 75% controlling interest in a 99 MW wind development project located in Northeastern United States was acquired, with a further 15% acquired in July 2011. Cash consideration paid in the first quarter of 2011 was $25 million, with a further $5 million paid in the third quarter, for a total cash consideration of $30 million.

In July 2011, a 100% interest in a 30 MW hydroelectric facility located in Brazil was acquired for consideration of $190 million. The acquisition cost was partially funded from the issuance of debt in the amount of $77 million.

 

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Other

In January 2011, a 50.25% controlling interest in an early stage wind development project located in Western Canada was acquired. Cash consideration paid in the first quarter of 2011 was $7 million.

Purchase price allocations, at fair values, with respect to the above acquisitions were as follows:

 

(MILLIONS)    United
States
     Canada      Brazil      Total  

Cash and cash equivalents

   $ 4       $ -       $ -       $ 4   

Trade receivables and other current assets

     -         -         5         5   

Property, plant and equipment

     30         14         190         234   
         

Total assets

     34         14         195         243   

Accounts payable and accrued liabilities

     (1)         -         (5)         (6)   

Non-controlling interests

     (3)         (7)         -         (10)   
         

Total liabilities

     (4)         (7)         (5)         (16)   

Net assets acquired

   $ 30       $ 7       $ 190       $   227   

 

5.

CASH AND CASH EQUIVALENTS

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Cash

   $ 106       $ 87   

Short-term deposits

     119         77   

Restricted cash

     42         24   
     $     267       $     188   

 

6.

TRADE RECEIVABLES AND OTHER CURRENT ASSETS

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Trade receivables

   $ 84       $ 111   

Prepaids and other

     74         35   
     $     158       $     146   

As at December 31, 2011, 100% (2010: 97%) of trade receivables were current. Trade receivables are generally on 30-day terms and credit limits are assigned and monitored for all counterparties. In determining the recoverability of trade receivables, management performs a risk analysis considering the type and age of the outstanding receivables and the credit worthiness of the counterparties. Management also reviews trade receivable balances on an ongoing basis. Bad debt expense related to trade receivables is recognized at the time an account is deemed uncollectible. Accordingly, as at December 31, 2011 and 2010 an allowance for doubtful accounts was not deemed necessary.

 

7.

RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

RISK MANAGEMENT

Brookfield Renewable Group’s activities expose it to a variety of financial risks, including market risk (i.e., commodity price risk, interest rate risk, and foreign currency risk), credit risk and liquidity risk. Brookfield Renewable Group uses financial instruments primarily to manage these risks.

 

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(a)

Market risk

Market risk is defined for these purposes as the risk that the fair value or future cash flows of a financial instrument held by Brookfield Renewable Group will fluctuate because of changes in market prices.

Brookfield Renewable Group faces market risk from foreign currency assets and liabilities, the impact of changes in interest rates, and floating rate liabilities. Market risk is managed by funding assets with financial liabilities in the same currency and with similar interest rate characteristics and holding financial contracts, such as interest rate swaps and foreign exchange contracts, to minimize residual exposures. Financial instruments held by Brookfield Renewable Group that are subject to market risk include borrowings and financial instruments, such as interest rate, currency and commodity contracts. The categories of financial instruments that can give rise to significant variability are described below:

 

(i)

Commodity price risk

Commodity price risk is defined for these purposes as the risk that the fair value or future cash flows of a financial instrument held by Brookfield Renewable Group will fluctuate because of changes in commodity prices. Commodity price risk arises from the sale of Brookfield Renewable Group’s uncontracted generation, as well as impacts on the carrying values of Brookfield Renewable Group’s non-financial derivative contracts.

Brookfield Renewable Group sells electricity under long-term contracts to secure stable prices and mitigate its exposure to wholesale markets. As at December 31, 2011, virtually all (99%) of Brookfield Renewable Group’s generation was sold pursuant to PPAs, either to third parties or through entities of Brookfield. During 2011, certain of the long-term contracts were considered financial instruments, and were recorded at fair value in the consolidated financial statements. The change in fair value of long-term contracts was recorded in either income as “unrealized financial instrument (losses) gains” or OCI, as applicable.

The table below summarizes the impact of changes in the market price of electricity as at December 31. The impact is expressed in terms of the effect on net income and OCI. The sensitivities are based on the assumption that the market price changes by five percent with all other variables held constant.

Impact of a 5% change in the market price of electricity

 

       Effect on net income      Effect on OCI  
(MILLIONS)    2011      2010      2009      2011      2010      2009  

5% increase

   $ (2)       $ (125)         (138)       $ -       $ -       $ -   

5% decrease

   $         2       $     139         138       $ -       $ -       $ -   

 

(ii)

Interest rate risk

Interest rate risk is defined for these purposes as the risk that the fair value or future cash flows of a financial instrument held by Brookfield Renewable Group will fluctuate, because of changes in interest rates.

Brookfield Renewable Group’s assets largely consist of long duration physical assets. Brookfield Renewable Group’s financial liabilities consist primarily of long-term fixed rate debt or floating-rate debt that has been swapped to fixed rates with interest rate financial instruments. All non-derivative financial liabilities are recorded at their amortized cost. Brookfield Renewable Group also holds interest rate contracts to lock-in fixed rates on anticipated future debt issuances.

Fluctuations in interest rates could impact Brookfield Renewable Group’s cash flows, primarily with respect to the interest payable against Brookfield Renewable Group’s variable rate debt, which is limited to certain subsidiary borrowings with a total principal value of $1,382 million (2010: $1,140 million). Of this amount, $730 million (2010: $463 million) has been hedged through the use of interest rate swaps. Brookfield Renewable’s subsidiaries will enter into agreements designed to minimize the exposure to interest rate fluctuations on these debts. The fair values of the recognized liability for these agreements were calculated using a valuation model with observable interest rates.

The table below summarizes the impact of changes in the interest rate as at December 31. The impact is expressed in terms of the effect on income and OCI. The sensitivities are based on the assumption that the interest rate changes by one percent with all other variables held constant.

Impact of a 1% change in interest rates

 

       Effect on net income      Effect on OCI  
(MILLIONS)    2011          2010      2009      2011      2010      2009  

1% increase

   $ (7)       $ (7)       $ (7)       $     48       $     1       $     10   

1% decrease

   $       7       $     7       $     7       $ (48)       $ (1)       $ (10)   

 

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(b)

Credit risk

Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual obligations. Brookfield Renewable Group’s exposure to credit risk in respect of financial instruments relates primarily to counterparty obligations regarding energy contracts, interest rate swaps, forward foreign exchange contracts and physical electricity and gas transactions.

Brookfield Renewable Group minimizes credit risk with counterparties through the selection, monitoring and diversification of counterparties, and the use of standard trading contracts, and other credit risk mitigation techniques. In addition, Brookfield Renewable Group’s PPAs are reviewed regularly and are almost exclusively with customers having long standing credit histories or investment grade ratings, which limit the risk of non-collection. As at December 31, 2011, 100% (2010: 97%) of Brookfield Renewable Group’s trade receivables of $84 million were current. See “— Note 6 - Trade receivables and other current assets” for additional details regarding Brookfield Renewable Group’s trade receivables balance.

The maximum credit exposure at December 31 was as follows:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Cash and cash equivalents

   $ 267       $ 188   

Trade receivables and other current assets

     158         146   

Due from related parties

     285         419   
     $       710       $       753   

 

(c)

Liquidity risk

Liquidity risk is the risk that Brookfield Renewable Group cannot meet a demand for cash or fund an obligation when due. Liquidity risk is mitigated by Brookfield Renewable Group’s cash and cash equivalent balances and its access to undrawn credit and hydrology reserve facilities. Details of the undrawn credit facilities are included in Note 14 - Debt obligations. Brookfield Renewable Group also ensures that it has access to public debt markets by maintaining a strong credit rating of BBB.

Brookfield Renewable Group is also subject to the risk associated with debt financing. This risk is mitigated by the long-term duration of debt instruments and the diversification in maturity dates over an extended period of time.

The table below classifies the cash obligations related to Brookfield Renewable Group’s liabilities into relevant maturity groupings based on the remaining period from the balance sheet dates to the contractual maturity date. As the amounts are the contractual undiscounted cash flows, they may not agree with the amounts disclosed in the consolidated balance sheets.

 

AS AT DECEMBER 31, 2011

(MILLIONS)

   < 1 year      2-5 years      >5 years      Total  

Accounts payable and accrued liabilities

   $ 190       $ -       $ -       $ 190   

Financial instrument liabilities (1)

     99         15         -         114   

Due to related parties

     139         8         -         147   

Other long-term liabilities - concession payments

     4         24         120         148   

Long-term debt and credit facilities

     650         1,806         3,118         5,574   

Interest payable - borrowings (2)

     298         827         1,082         2,207   

Total

   $         1,380       $         2,680       $         4,320       $       8,380   

 

AS AT DECEMBER 31, 2010

(MILLIONS)

   < 1 year      2-5 years      >5 years      Total  

Accounts payable and accrued liabilities

   $ 190       $ -       $ -       $ 190   

Financial instrument liabilities (1)

     15         11         -         26   

Due to related parties

     567         101         -         668   

Other long-term liabilities - concession payments

     -         21         260         281   

Long-term debt and credit facilities

     201         1,429         3,414         5,044   

Interest payable - borrowings (2)

     291         905         1,220         2,416   

Total

   $         1,264       $         2,467       $         4,894       $       8,625   

 

(1)  

Financial instruments liabilities exclude amounts determined to be non-financial derivatives.

(2)  

Represents aggregate interest payable expected to be paid over the entire term of the obligations, if held to maturity. Variable-rate interest payments have been calculated based on current rates.

 

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FINANCIAL INSTRUMENT DISCLOSURES

Brookfield Renewable Group classifies its assets and liabilities as outlined below:

 

 

Financial assets and liabilities

 

 

AS AT DECEMBER 31, 2011

(MILLIONS)

   Cash, loans
and
receivables
     Assets (1)
(liabilities)
     Derivatives
used for
hedging
     Other
financial
liabilities
     Non-financial
assets and
liabilities
     Total  

Cash and cash equivalents

   $ 267       $ -       $ -       $ -       $ -       $ 267   

Trade receivables and other current assets (2)

     122         -         -         -         36         158   

Due from related parties (2)

     285         -         -         -         -         285   

Equity-accounted and long-term investments

     -         -         -         -         405         405   

Property, plant and equipment

     -         -         -         -         13,945         13,945   

Intangible assets

     -         -         -         -         57         57   

Deferred income tax assets

     -         -         -         -         306         306   

Other long-term assets

     156         -         -         -         129         285   

Total assets

   $ 830       $ -       $ -       $ -       $ 14,878       $ 15,708   

Accounts payable and accrued liabilities (2)

   $ -       $ -       $ -       $ (190)       $ -       $ (190)   

Financial instrument liabilities

     -         (26)         (88)         -         -         (114)   

Due to related parties (2)

     -         -         -         (147)         -         (147)   

Long-term debt and credit facilities (2)

     -         -         -         (5,519)         -         (5,519)   

Deferred income tax liabilities

     -         -         -         -         (2,374)         (2,374)   

Other long-term liabilities

     -         -         -         -         (164)         (164)   

Total liabilities

   $ -       $ (26)       $ (88)       $ (5,856)       $ (2,538)       $ (8,508)   

 

(1)

Measured at fair value with all gains and losses recorded in the consolidated statement of (loss) income.

(2)

Measured at fair value at inception and subsequently recorded at amortized cost using the effective interest rate method.

 

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Financial assets and liabilities

 

 

 

AS AT DECEMBER 31, 2010

(MILLIONS)

   Cash, loans
and
receivables
     Assets (1)
(liabilities)
     Derivatives
used for
hedging
     Other
financial
liabilities
     Non-financial
assets and
liabilities
     Total  

Cash and cash equivalents

   $ 188       $ -       $ -       $ -       $ -       $ 188   

Trade receivables and other current assets (2)

     111         -         -         -         35         146   

Due from related parties (2)

     419         -         -         -         -         419   

Equity-accounted and long-term investments

     -         -         -         6         263         269   

Property, plant and equipment

     -         -         -         -         12,173         12,173   

Intangible assets

     -         -         -         -         87         87   

Deferred income tax assets

     -         -         -         -         276         276   

Other long-term assets

     156         -         -         -         160         316   

Total assets

   $ 874       $ -       $ -       $ 6       $ 12,994       $ 13,874   

Accounts payable and accrued liabilities (2)

   $ -       $ -       $ -       $ (190)       $ -       $ (190)   

Financial instrument liabilities

     -         (220)         (26)         -         -         (246)   

Due to related parties (2)

     -         -         -         (668)         -         (668)   

Long-term debt and credit facilities (2)

     -         -         -         (4,994)         -         (4,994)   

Deferred income tax liabilities

     -         -         -         -         (2,429)         (2,429)   

Other long-term liabilities

     -         -         -         (162)         -         (162)   

Fund unit liability

     -         (1,355)         -         -         -         (1,355)   

Total liabilities

   $ -       $ (1,575)       $ (26)       $ (6,014)       $ (2,429)       $ (10,044)   

 

(1)

Measured at fair value with all gains and losses recorded in the consolidated statement of (loss) income.

(2)

Measured at fair value at inception and subsequently recorded at amortized cost using the effective interest rate method.

The fair value of financial instruments is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act.

Fair values determined using valuation models require the use of assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those assumptions, management looks primarily to external readily observable market inputs such as interest rate yield curves, currency rates, and price, as applicable. The fair value of interest rate swap contracts, which form part of financing arrangements, is calculated by way of discounted cash flows, using market interest rates and applicable credit spreads.

Financial instruments measured at fair value are categorized into one of three hierarchy levels, described below. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities.

Level 1 – inputs are based on unadjusted quoted prices in active markets for identical assets and liabilities;

Level 2 – inputs, other than quoted prices in Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3 – inputs for the asset or liability that are not based on observable market data.

 

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The following table presents Brookfield Renewable Group’s financial assets and financial liabilities measured at fair value classified by the fair value hierarchy:

 

AS AT DECEMBER 31

(MILLIONS)

   Level 1      Level 2      Level 3      2011      2010  

Cash and cash equivalents

   $ 267       $ -       $ -       $ 267       $ 188   
 

Fund unit liability

     -         -         -         -         (1,355)   
 

Financial instrument liabilities, net

                
 

Energy derivative contracts

     (2)         (24)         -         (26)         (220)   
 

Interest rate swaps

     -         (88)         -         (88)         (23)   
 

Foreign exchange contracts

     -         -         -         -         (3)   
 

Total

   $ 265       $ (112)       $ -       $ 153       $ (1,413)   

There were no transfers between levels during the year.

The following table presents the changes in fair value measurements for Brookfield Renewable Group’s net financial instrument position included in Level 3 of the fair value hierarchy as set out above:

 

FOR THE YEAR ENDED, DECEMBER 31, 2011

(MILLIONS)

   Level 3  

Balance, December 31, 2010

   $ (199)   

Settled

     199   

Balance, December 31, 2011

   $ -   

The aggregate amount of Brookfield Renewable Group’s net financial instrument positions are as follows:

 

AS AT DECEMBER 31

(MILLIONS)

   Notes     2011     2010  

Energy derivative contracts

     (a   $ (26   $ (220

Interest rate swaps

     (b     (88     (23

Foreign exchange contracts

     (c     -        (3
             $ (114   $ (246

 

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The following table presents the change in Brookfield Renewable Group’s total net financial instrument position during the year:

 

(MILLIONS)

   Note      2011      2010      2009  

Balance, beginning of year

      $ (246)       $ (808)       $ (23)   

(Decreases) increases in the net financial position:

           

Unrealized (loss) gain through income on energy derivative contracts

     (a)         (19)         584         (791)   

Unrealized accounting loss through OCI on energy derivative contracts

     (a)         (708)         -         -   

Unrealized gain (loss) through income on interest rate swaps

     (b)         (1)         -         9   

Unrealized gain (loss) through OCI on interest rate swaps

     (b)         (66)         1         -   

Unrealized loss through OCI on foreign exchange contracts

        -         (1)         (2)   

Reversal of energy derivative contracts designated as cash-flow hedges through accumulated OCI

        704         -         -   

Foreign exchange and other

        -         (22)         (1)   

Reversal of energy derivative contracts designated as cash-flow hedges through retained earnings

              222         -         -   

Balance, end of year

            $ (114)       $ (246)       $ (808)   

 

 

 

AS AT DECEMBER 31

(MILLIONS)

   Note     2011     2010  

Derivative liabilities not designated as hedging instruments:

      

Energy derivative contracts

     (a   $ (26   $ (220

Net position

           $ (26   $ (220

Derivate liabilities designated as hedging instruments:

      

Interest rate swaps

     (b   $ (88   $ (23

Foreign exchange contracts

     (c     -        (3

Net position

           $ (88   $ (26

(a) Energy derivative contracts

Brookfield Renewable Group has entered into long-term energy derivative contracts primarily to eliminate the price risk on the sale of future power generation. Certain energy contracts are recorded in Brookfield Renewable’s consolidated financial statements at an amount equal to fair value, using quoted market prices or, in their absence, a valuation model using both internal and third-party evidence and forecasts.

As at December 31, 2011, Brookfield Renewable Group had total net financial instrument liabilities of $26 million relating to energy derivative contracts (2010: $220 million).

On April 1, 2011, Brookfield Renewable Group designated its two significant long-term energy contracts with related parties as cash-flow hedges. As a result of new agreements and changes in existing agreements with Brookfield arising from the Combination, these contracts are no longer accounted for as derivatives by Brookfield Renewable Group effective November 28, 2011. For the period from April 1, 2011 to November 28, 2011, Brookfield Renewable Group recorded accounting losses of $708 million related to these contracts that were recorded in OCI. On formation of Brookfield Renewable, $704 million of unrealized accounting losses were reversed.

 

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Amendments made to certain energy derivative contracts and other agreements with the related parties, effective November 28, 2011, resulted in the energy derivative contracts no longer meeting the derivatives definition under the IFRS. Since these amendments arose from the common control reorganization with Brookfield Asset Management the amounts were adjusted directly into limited partnership equity.

In the next 12 months, it is expected that a $24 million loss (2010: $4 million loss) will be settled or reclassified into income.

(b) Interest rate swaps

Brookfield Renewable Group has entered into interest rate swap contracts primarily to minimize exposure to interest rate fluctuations on its variable rate debt or to lock in interest rates on future debt refinancing. All interest rate swap contracts are recorded in the consolidated financial statements in OCI at an amount equal to fair value.

At December 31, 2011, agreements with a total notional value of $1,226 million were outstanding (2010: $900 million). The fixed interest rates resulting from these agreements range from 2.03% to 4.50% (2010: 2.03% to 4.50%).

(c) Foreign exchange contracts

Brookfield Renewable Group has entered into foreign exchange contracts primarily to minimize exposure to fluctuations in foreign currencies in which it and its subsidiaries operate. All foreign exchange contracts are recorded in Brookfield Renewable’s consolidated financial statements in OCI at an amount equal to fair value.

The notional amount at December 31, 2011 of the foreign exchange contracts was $nil (2010: $180 million).

8. RELATED PARTY TRANSACTIONS

Brookfield Renewable Group’s related party transactions are recorded at the exchange amount. Brookfield Renewable Group’s related party transactions are primarily with Brookfield.

The immediate parent of Brookfield Renewable is its general partner. The ultimate parent of Brookfield Renewable is Brookfield Asset Management.

As discussed in the Significant Accounting Policies Note 2(b) - Basis of Presentation, effective November 28, 2011, Brookfield Asset Management and Brookfield Renewable completed the Combination agreement. This resulted in the strategic combination of all the renewable power assets of the Fund and certain Brookfield subsidiaries to create Brookfield Renewable.

Consequently at the date of the Combination, Brookfield Asset Management held directly or indirectly, approximately a 73% limited partnership interest on a fully-exchanged basis and all general partnership units equal to 0.01% general partnership interest in Brookfield Renewable. Effective, November 30, 2011, Brookfield Renewable’s LP Units have traded under the symbol “BEP.UN” on the TSX.

Agreements relating to the Combination

In connection with the completion of the Combination, Brookfield Renewable Group entered into a number of agreements with Brookfield, including the following agreements:

Principal Agreements

Combination Agreement

The Combination was effected pursuant to a Combination Agreement which contains covenants, representations and warranties of and from each of BRPI, the Fund, Brookfield Renewable Power Trust (“BRPT”) and Brookfield Renewable pursuant to which Brookfield Renewable agreed to acquire all of the assets of the Fund and all of the other renewable power assets of BRPI pursuant to a court-approved Plan of Arrangement under Ontario corporate law.

Limited Partnership Agreements

Each of the amended and restated limited partnership agreements of Brookfield Renewable and BRELP outline the key terms of the partnerships, including provisions relating to management, protections for limited partners, capital contributions, distributions and allocation of income and losses. Pursuant to BRELP’s amended and restated limited partnership agreement, BRELP’s general partner is entitled to receive incentive distributions from BRELP as a result of its ownership of the general partnership interest in BRELP. The incentive distributions are to be calculated in increments based on the amount by which quarterly distributions on the limited partnership units of BRELP exceed specified target levels as set forth in the amended and restated partnership agreement.

 

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Relationship Agreement

Brookfield entered into an agreement with Brookfield Renewable Group pursuant to which Brookfield agreed that Brookfield Renewable Group will serve as its primary vehicle through which it will acquire renewable power assets on a global basis.

 

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Master Services Agreement

Brookfield Renewable Group entered into an exclusive agreement with Brookfield pursuant to which Brookfield has agreed to provide oversight of the business and provide the services of senior officers to Brookfield Renewable Group for a management service fee. The fee is paid on a quarterly basis and has a fixed quarterly component of $5 million and a variable component calculated as a percentage of the increase in the total capitalization value of Brookfield Renewable Group over an initial reference value (subject to an annual escalation by a specified inflation factor beginning on January 1, 2013). The Master Services Agreement continues in perpetuity, until terminated in accordance with its terms.

BRELP Voting Agreement

Pursuant to a voting agreement dated November 28, 2011 (the “Voting Agreement”), between Brookfield Renewable and Brookfield, Brookfield Renewable, through the Managing General Partner, has a number of voting rights, including the right to direct all eligible votes in the election of the directors of BRELP’s general partner.

Revenue Agreements

Contract Amendments

Two long-term PPAs on generating assets in Ontario were amended to increase the price from C$68 per MWh to an average of C$88 per MWh on a portfolio basis. The agreements described below are with respect to generating assets held by the Mississagi Power Trust (“MPT”), and Great Lakes Power Limited (“GLPL”). In addition, the term of the Mississagi PPA has been extended to December 1, 2029 and MPT has been granted the unilateral option to terminate the agreement, on 120 days written notice, at certain times between 2017 and 2024.

As amended, the GLPL PPA requires Brookfield to support the price that GLPL receives for energy generated by certain facilities in Canada at a price of C$82 per MWh subject to an annual adjustment equal to 40% of the Consumer Price Index (“CPI”) in the previous year. The GLPL agreement has an initial term to 2029, and the contract automatically renews for successive 20-year periods with certain termination provisions. If the contract is not terminated prior to 2029, the price under this agreement reverts back to the original C$68 per MWh subject to an annual adjustment equal to 40% of the CPI for each year.

As amended, the MPT PPA requires Brookfield to purchase the energy generated at a price of C$103 per MWh subject to an annual adjustment equal to 20% of the CPI in the previous year. The MPT contract terminates on December 1, 2029, subject to the early termination options described above.

Energy Revenue Agreement

The Energy Revenue Agreement was entered into between Brookfield and Brookfield Power U.S. Holding America Co. (“BPUSHA”) that indirectly owns substantially all of the U.S. facilities of Brookfield Renewable Group. Brookfield will support the price that BPUSHA receives for energy generated by certain facilities in the United States at a price $75 per MWh. This price is to be increased annually on January 1 by an amount equal to 40% of the increase in the CPI during the previous calendar year, but not exceeding an increase of 3% in any calendar year. The Energy Revenue Agreement will have an initial term of 20 years, with automatic renewals for successive 20-year periods with certain termination provisions.

Power Services Agreements

Power Agency Agreements

In conjunction with the Energy Revenue agreement, certain Brookfield Renewable Group subsidiaries entered into Power Agency Agreements appointing Brookfield as the exclusive agent of the owner in respect of the sales of electricity, including the procurement of transmission and other additional services. In addition, this subsidiary will schedule, dispatch and arrange for transmission of the power produced and the power supplied to third-parties in accordance with prudent industry practice. Pursuant to each Agreement, the subsidiary will be entitled to be reimbursed for any third-party costs incurred, and, except in a few cases, receives no additional fee for its services in connection with the sale of power and for providing the other services.

Energy Marketing Agreement

Brookfield has agreed to provide energy marketing services to Brookfield Renewable Group’s North American businesses. Under this Agreement, Brookfield Renewable Group pays an annual energy marketing fee of $18 million per year.

Development Projects Agreement

As part of the Combination, Brookfield Renewable Group indirectly acquired a number of development projects in the United States, Canada and Brazil from Brookfield. Brookfield received no upfront proceeds on closing for the transfer of

 

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these projects, but is entitled to receive on commercial operation or sale of the projects, in each case if developed or sold in the 25 years following closing, up to 100% of the development costs that it contributed to each project and 50% of the fair market value of the projects in excess of a priority return on each party’s invested capital. These amounts will only be payable on projects upon substantial completion or sale of the project. With respect to the projects located in the United States and Canada, the Development Projects Agreement provides for the reimbursement of expenses to Brookfield for such projects, and a separate royalty agreement exists to provide royalties on each project. With respect to projects located in Brazil, Brookfield subscribed for special shares which contain a redemption feature that provides for the reimbursement of expenses as well as the sharing of the fair market value on projects.

Other Agreements

In addition, the following related party agreements were in place with either the Fund or BRPI and continue to be in effect, and were thus transferred to Brookfield Renewable Group on the effective date of the Combination.

Revenue Agreements

Pursuant to a 20-year PPA, a subsidiary of Brookfield purchases all energy from several power facilities in Maine and New Hampshire held by Great Lakes Holding America (“GLHA”) at $37 per MWh. The energy rates are subject to an annual adjustment equal to 20% of the increase in the CPI during the previous year.

Pursuant to a 20-year PPA, a subsidiary of Brookfield purchases all energy from Lievre Power in Quebec at C$68 per MWh. The energy rates are subject to an annual adjustment equal to the lesser of 40% of the increase in the CPI during the previous calendar year or 3%.

Pursuant to a power guarantee agreement, a subsidiary of Brookfield will purchase all energy from the two facilities of Hydro Pontiac Inc. at a price of C$68 per MWh, to be increased annually each calendar year beginning in 2010 by an amount equal to 40% of the increase in the CPI during the previous calendar year. This power guarantee agreement is scheduled to commence in 2019 for one facility and in 2020 for the other, upon the expiration of existing power agreements. This agreement has an initial term to 2029 and automatically renews for successive 20-year period with certain termination provisions.

Pursuant to a 10-year Wind Levelization agreement expiring in 2019, a subsidiary of Brookfield mitigates any potential wind variation from the expected annual generation of 506 GWh with regards to the Prince Wind assets in Ontario. Any excess generation compared to the expected generation results in a payment from Brookfield Renewable Group to Brookfield, while a shortfall would result in a payment from Brookfield to Brookfield Renewable Group.

Contract amendment payments

In August 2009, Brookfield Renewable Group and Brookfield amended the PPAs for MPT and Lièvre to increase the respective contract prices to C$68 per MWh. The price escalation provisions continue in the amended contracts. An amount of $349 million was paid for the contract amendments which was recorded, net of applicable deferred income tax, as a distribution recorded in limited partners’ equity since the transactions were between entities under the common control of Brookfield Asset Management. Refer to the note 2(o)(ii) for Brookfield Renewable’s policy on accounting for transactions under common control.

Payment obligations relating to PPAs

Pursuant to a 20-year PPA guarantee, expiring in 2021, Brookfield guarantees to Powell River Energy the payment of obligations of an industrial power purchaser for an annual fee of C$.5 million.

Purchase of natural gas

Brookfield acting as an agent on behalf of Brookfield Renewable Group secures the price of natural gas with respect to a gas plant in Ontario until the end of 2013 for a weighted average price of $6 per MMbtu.

Insurance services

In the normal course of operations, an insurance broker affiliated with Brookfield, entered into transactions with Brookfield Renewable Group to provide insurance services. These transactions are measured at fair value. In 2011, $nil (2010: $10 million) was included in “Other” on the consolidated statements of (loss) income for insurance claims.

 

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The following table reflects the related party agreements and transactions on the consolidated statements of (loss) income:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

     Related Party                                        

2011

    

2010

    

2009

 

Revenues

             

Purchase and revenue support agreements

    

Brookfield

   $ 254       $ 205       $ 190   

Wind Levelization agreement

    

Brookfield

     7         5         5   
            $ 261       $ 210       $ 195   

Direct operating costs

             

Energy purchases

    

Brookfield

   $ 41       $ 42       $ 26   

Operations, maintenance and administration services

    

Brookfield

     11         17         9   

Insurance services

    

Brookfield

     18         15         11   
            $ 70       $ 74       $ 46   

Interest expense

    

Brookfield

   $ 19       $ 40       $ 52   

Management service costs

    

Brookfield

   $ 1       $ -       $ -   

Amounts due to/from related parties

Current assets and note receivable outstanding

Current assets due from Brookfield are non-interest bearing, unsecured and due on demand. The note receivable from an equity-accounted investment is non-interest bearing, unsecured and due on demand.

Amounts due and note receivable outstanding

Amounts due from Brookfield are non-interest bearing, unsecured and due on demand. The note receivable from an equity-accounted investment is unsecured, due on demand and interest bearing with the annual interest rate between 10% and 18%. The rate for 2011 was 13% (2010: 10%). The note is due December 2020.

Amounts and note payable outstanding

Amounts due to Brookfield are unsecured, due on demand and interest bearing with the annual interest rate ranging between 5.8% and 14%. The rate for 2011 was 10% (2010: 5.8%).

Amounts and the note receivable are not considered impaired based on the credit worthiness of the related- party counterparties. Accordingly, as at December 31, 2011 and 2010, an allowance for doubtful accounts was not deemed necessary.

Current portion of long-term debt and credit facilities

Brookfield has provided a hydrology reserve facility to Brookfield Renewable to be used to maintain cash distributions due to changes in hydrology from year to year. This is discussed further in Note 14 - Debt Obligations .

The following table reflects the impact of the related party agreements and transactions on the consolidated balance sheets:

 

AS AT DECEMBER 31

(MILLIONS)

  

Related Party

  

2011

    

2010

 

Due from related parties

        

Amounts due from

  

Brookfield

   $ 227       $ 377   

Note receivable

  

Coram California Development

     26         23   
      $ 253       $ 400   

Amounts due from

  

Brookfield, Brascan Energetica

   $ 13       $ -   

Note receivable

  

Powell River Energy Inc.

     19         19   
      $ 32       $ 19   

Due to related parties

                  

Amounts due to and current portion of note payable

  

Brookfield

   $ 74       $ 567   

Accrued unitholders distributions payable (Note 18)

  

Brookfield

   $ 65       $ -   
      $ 139       $ 567   

Note payable

  

Brookfield

   $ 8       $ 101   

Credit facilities

  

Brookfield

   $ -       $ 8   

 

 

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Voting Agreements

In December 2011, Brookfield Renewable entered into voting agreements with Brookfield whereby these subsidiaries, as managing members of entities related to Brookfield Americas Infrastructure Fund (the “BAIF Entities”) in which Brookfield Renewable Group holds investments with institutional investors, agreed to assign to Brookfield Renewable Group their voting rights to appoint the directors subsidiaries of the BAIF Entities. Brookfield Renewable Group’s economic interests in the BAIF Entities in the United States and Brazil are 22% and 25%, respectively.

 

9.

EQUITY-ACCOUNTED AND LONG-TERM INVESTMENTS

The following are Brookfield Renewable Group’s equity-accounted and long-term investments:

 

       Ownership
percentage interest
     Carrying Value  
AS AT DECEMBER 31
(MILLIONS)
   2011      2010      2011      2010  
       %         %                     

Bear Swamp Power Co. L.L.C.

     50         50         $  130         $    95   

Brookfield Americas Infrastructure Fund investees (1)

     50         50         119         5   

Powell River Energy Inc.

     50         50         21         40   

Pingston Power Inc.

     50         50         49         43   

Galera Centrais Elétricas S.A.

     50         50         86         80   
           $  405         $  263   

Other long-term investments

                       -         6   
                         $  405         $  269   

 

(1)  

Consists of 50% ownership interests in Coram California Development L.P and Malacha Hydro Limited Partnership.

The following table presents the changes in Brookfield Renewable Group’s equity-accounted and long-term investments:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010      2009  

Balance, beginning of year

   $ 269       $ 283       $ 277   

Share of net income

     10         15         16   

Share of OCI

     (7)         -         -   

Revaluation recognized through OCI

     136         -         (33)   

Other

     (3)         (29)         23   

Balance, end of year

   $   405       $   269       $   283   

The following tables summarize certain financial information of equity-accounted investments:

 

AS AT DECEMBER 31

(MILLIONS)

   Current
assets
     Long-
term
assets
     Current
liabilities
     Long-
term
liabilities
     Current
assets
     Long-
term
assets
     Current
liabilities
     Long-
term
liabilities
 
       2011      2010  

Bear Swamp Power Co.
L.L.C.

   $ 40       $ 572       $ (150)       $ (201)       $ 31       $ 467       $ (21)       $ (301)   

Brookfield Americas
Infrastructure Fund

     17         412         (25)         (165)         11         17         (23)         -   

Powell River Energy Inc.

     9         212         (5)         (173)         5         230         (4)         (150)   

Pingston Power Inc.

     3         165         (1)         (68)         3         155         (2)         (68)   

Galera Centrais Elétricas
S.A

     7         171         (2)         (3)         7         138         (1)         (3)   
     $ 76       $ 1,532       $ (183)       $ (610)       $ 57       $   1,007       $ (51)       $ (522)   

 

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FOR THE YEARS ENDED

DECEMBER 31

(MILLIONS)

   Revenue      Net income
(loss)
     Share of
net income
(loss)
     Revenue      Net income
(loss)
     Share of
net income
(loss)
 
       2011      2010  

Bear Swamp Power Co.
L.L.C.

   $ 58       $ 16       $ 8       $ 69       $ 29       $ 14   

Brookfield Americas
Infrastructure Fund

     10         -         -         -         -         -   

Powell River Energy Inc.

     24         (2)         (1)         20         (5)         (2)   

Pingston Power Inc.

     8         1         1         9         3         1   

Galera Centrais Elétricas
S.A

     17         4         2         13         3         2   
     $ 117       $ 19       $ 10       $ 111       $ 30       $ 15   

 

FOR THE YEAR ENDED

DECEMBER 31

(MILLIONS)

   Revenue      Net
income
     Share of
net
income
 
       2009   

Bear Swamp Power Co.
L.L.C.

   $ 81       $ 22       $ 11   

Powell River Energy Inc.

     17         2         1   

Pingston Power Inc.

     8         1         -   

Galera Centrais Elétricas
S.A

     23         8         4   
     $   129       $   33       $   16   

 

10.

PROPERTY, PLANT AND EQUIPMENT

The composition of the net book value of Brookfield Renewable Group’s property, plant and equipment, is presented in the following table:

 

(MILLIONS)    Hydroelectric     Wind     Other  (1)     Total  

As at January 1, 2009

   $ 10,910      $ 302      $ 639      $ 11,851   

Foreign exchange

     1,090        48        64        1,202   

Additions/transfers

     68        -        (10     58   

Revaluation recognized through OCI

     74        30        32        136   

Disposals

     (1     -        (50     (51

Revaluation through income

     (3     -        (4     (7

Depreciation (2)

     (256     (20     (37     (313

As at January 1, 2010

   $ 11,882      $ 360      $ 634      $ 12,876   

Foreign exchange

     244        19        31        294   

Additions/transfers

     126        185        37        348   

Revaluation recognized through OCI

     (974     13        2        (959

Disposals

     (3     -        (2     (5

Revaluation through income

     60        -        (3     57   

Depreciation (2)

     (378     (22     (38     (438

As at December 31, 2010

   $ 10,957      $ 555      $ 661      $ 12,173   

Foreign exchange

     (293     (12     (89     (394

Additions/transfers

     514        396        119        1,029   

Revaluation recognized through OCI

     1,094        489        55        1,638   

Disposals

     (2     -        (29     (31

Revaluation recognized through income

     (13     -        -        (13

Depreciation (2)

     (381     (33     (43     (457

As at December 31, 2011

   $ 11,876      $     1,395      $         674      $   13,945   

 

(1)

Included within the “Other” category are land, roads, decommissioning assets, leasehold improvements, gas-fired generating units and CWIP.

(2)

Assets not subject to depreciation include CWIP and land.

 

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Certain of Brookfield Renewable Group’s property, plant and equipment, comprised of hydroelectric, wind, and gas-fired generating units are carried at revalued amounts as opposed to historical cost. These items of property, plant and equipment were revalued by using a discounted cash flow valuation model that incorporates management’s expectations about future electricity prices in geographic areas in which it operates, anticipated LTA generation, estimated capital expenditures for each of Brookfield Renewable Group’s respective plants over a 20-year period, and assumptions about future inflation rates and discount rates. The valuation model also incorporates future cash inflows from PPAs that are in place with certain of Brookfield Renewable Group’s customers and Brookfield, and estimated future major maintenance expenditures over a 20-year period.

The key valuation metrics of the discounted cash flow valuation model at the dates of the last revaluations are set out in the following table:

 

       United States      Canada      Brazil  
           2011                 2010                 2011                2010                2011                2010       

Discount rate

     5.6%            7.4%             5.4%            6.4%             9.9%            10.8%       

Terminal capitalization rate

     7.2%             7.9%             6.8%            7.1%             N/A             N/A      

Exit date

     2031             2030             2031             2030            2029            2029      

The valuation metrics above are based on weighted-average, post-tax discount and terminal capitalization rates. The valuations are impacted primarily by the discount rate and anticipated long-term electricity prices.

A 50 bps change in discount rates would have approximately $1 billion impact on the net asset value.

A revaluation increase of $1,638 million was recorded through OCI on December 31, 2011 (2010: $959 million decrease, 2009: $136 million increase). Certain contract amendments and agreements related to the Combination resulted in changes in the fair value of certain power generating facilities. The impact of these changes is included in OCI. For the year ended December 31, 2011, Brookfield Renewable Group recognized a net revaluation impairment of $13 million included in “Other” in the consolidated statements of (loss) income (2010: $57 million recovery, 2009: $7 million) due to changes in discount rates and long-term electricity prices in the valuation model.

For the year ended December 31, 2011, $11 million of interest was capitalized (2010: $3 million, 2009: $8 million) and the average borrowing rate for the year was 5.16% (2010: 5.12%, 2009:7.66%).

Had Brookfield Renewable Group’s revalued property, plant and equipment been measured on a historical cost basis, the carrying amounts, net of accumulated depreciation would have been as follows:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Hydroelectric

   $ 4,137       $ 3,997   

Wind

     824         444   

Other (1)

     654         579   

Total

   $     5,615       $   5,020   

 

(1)

Included within the “Other” category are land, roads, decommissioning assets, leasehold improvements, gas-fired generating units and CWIP.

Brookfield Renewable Group has pledged a significant amount of its property, plant and equipment as collateral for its subsidiary borrowings.

In the normal course of operations, Brookfield Renewable Group has committed as at December 31, 2011, to spend approximately $46 million (2010: $71 million) on capital projects. Brookfield Renewable Group categorizes its capital spending as either sustaining or development and construction expenditures. Sustaining capital expenditures relate to maintaining currently owned power generating assets, whereas development and construction expenditures include project costs for new facilities.

 

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11. INTANGIBLE ASSETS

The composition of Brookfield Renewable Group’s intangible assets is presented in the following tables:

 

       Cost        Accumulated
Amortization
       Net book value      Net book value  

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Service concession arrangements

   $ 73         $ (18)         $ 55       $ 85   

 

FERC licenses

     2           -           2         2   
     $ 75         $ (18)         $ 57       $ 87   

The following table describes the changes in the carrying value of intangible assets during the year:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011        2010        2009  

Balance, beginning of year

   $ 87         $ 93         $ 79   

Foreign exchange and other

     (19)           2           22   

Amortization

     (11)           (8)           (8)   

Balance, end of year

   $ 57         $ 87         $ 93   

Brookfield Renewable Group’s U.S. operations holds licenses issued by the Federal Energy Regulatory Commission (“FERC”), the federal agency that regulates the licensing of substantially all hydro power plants in the U.S. FERC licenses allow for the use by the license holder of the defined “project facilities”, which generally include the land and water required for power generation. FERC licenses are recorded at cost and amortized either on a straight-line basis over the remaining life of the licenses.

12. OTHER LONG-TERM ASSETS

 

       Cost        Accumulated
Amortization
       Net book value      Net book value  

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Restricted cash

   $ 139         $ -         $ 139       $ 139   

 

Service concession arrangements

     125           (36)           89         96   

 

Unamortized financing fees

     33           (23)           10         20   

 

Other

     49           (2)           47         61   
     $ 346         $ (61)         $ 285       $ 316   

At December 31, 2011, $139 million of long-term restricted cash (2010: $139 million) was held to cover lease payments and meet debt service obligations.

The unamortized financing fees relate to the sale and leaseback arrangement of a hydroelectric facility. Unamortized financing fees are amortized on a straight-line basis over the term of the arrangement to interest expense. In 2011, Brookfield Renewable Group capitalized financing fees of $nil (2010: $5 million). Amortization of the unamortized financing fees included in other long-term assets was $1 million during 2011 (2010: $1 million; 2009: $1 million).

Brookfield Renewable Group is required to pay the Brazilian Federal Government for the usage of public assets (“Concessions payment”) over the concession terms associated with two of its Brazilian facilities. Concessions payments are monetarily adjusted by the Brazilian General Market Price Index. As at December 31, 2011, an asset of $89 million (2010: $96 million) was included in other long-term assets and corresponding liabilities of $nil and $107 million were recorded within accounts payable and accrued liabilities and other long-term liabilities, respectively (2010: $1 million and $123 million).

 

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13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The composition of accounts payable and other are as follows:

 

AS AT DECEMBER 31

(MILLIONS)

   2011        2010  

Accounts payable and accrued liabilities

   $ 128         $ 133   

Interest payable

     36           49   

Unitholders’ distribution and preferred dividends payable

     26           8   
     $ 190         $ 190   

 

 

 

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14. DEBT OBLIGATIONS

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Corporate borrowings

     

5.25% Series 3 (CDN$200) due November 2018

   $ 196       $ 200   

5.84% Series 4 (CDN$150) due November 2036

     147         150   

6.13% Series 6 (CDN$300) due November 2016

     294         301   

5.14% Series 7 (CDN$450) due October 2020

     440         451   
     $ 1,077       $ 1,102   

Unamortized financing fees, net (1)

     (6)         (6)   

Current maturities

     -         -   
     $ 1,071       $ 1,096   

Subsidiary borrowings

     

United States

   $ 2,021       $ 1,873   

Canada

     1,572         1,327   

Brazil

     653         678   
     $ 4,246       $ 3,878   

Unamortized financing fees, net (1)

     (49)         (44)   

Current maturities

     (650)         (127)   
     $ 3,547       $ 3,707   

Revolving credit facilities

     

Unsecured corporate and hydrology reserve facilities

   $ 251       $ 64   

Current maturities

     -         (8)   
     $ 251       $ 56   
     $ 4,869       $ 4,859   

 

(1)

Unamortized financing fees are amortized to interest expense over the terms of the borrowing.

The weighted-average duration and weighted-average interest rates of Brookfield Renewable Group’s debt obligations are as follows:

 

       2011      2010      2009  

AS AT DECEMBER 31

(MILLIONS)

   Interest
rate (%)
     Term
(years)
     Interest
rate (%)
     Term
(years)
     Interest
rate (%)
     Term
(years)
 

Corporate borrowings

     5.5         9.6         5.5         10.6         7.0         8.6   

Subsidiary borrowings

                 

United States

     7.0         12.6         7.4         13.2         5.4         9.3   

Canada

     6.2         8.3         6.6         10.2         6.6         11.9   

Brazil

     12.1         6.2         9.8         7.0         11.2         6.7   
       7.5         10.0         7.5         11.1         7.1         9.8   

Revolving credit facilities (1)

     2.8         2.3         3.0         3.0         1.1         1.2   

 

(1)

Interest rate is at the Canadian Dealer Offered Rate (“CDOR”) plus 1.75% for 2011 (2010: CDOR plus 1.75%; 2009: CDOR plus 0.75%).

Future maturities of Brookfield Renewable Group’s debt obligations, excluding $55 million in unamortized financing fees, for each of the next five years and thereafter are as follows:

 

AS AT DECEMBER 31, 2011

(MILLIONS)

   2012      2013      2014      2015      2016      Thereafter      Total  

Corporate borrowings

   $ -       $ -       $ -       $ -       $ 294       $ 783       $ 1,077   

Subsidiary borrowings

                    

United States

     328         53         207         46         71         1,316         2,021   

Canada

     261         390         13         14         11         883         1,572   

Brazil

     61         298         65         65         28         136         653   
     650         741         285         125         110         2,335         4,246   

Revolving credit facilities

     -         -         251         -         -         -         251   
     $ 650       $ 741       $ 536       $ 125       $ 404       $ 3,118       $ 5,574   

 

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The unamortized financing fees of each the debt obligations are as follows:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010      2009  

Corporate borrowings

        

Unamortized financing fees, beginning of year

   $ 6       $ 6       $ 5   

Additional financing fees

     -         3         7   

Amortization of financing fees

     -         (3)         (6)   

Unamortized financing fees, end of year

   $ 6       $ 6       $ 6   

Subsidiary borrowings

        

Unamortized financing fees, beginning of year

   $ 44       $ 43       $ 49   

Additional financing fees

     15         9         -   

Amortization of financing fees

     (10)         (8)         (6)   

Unamortized financing fees, end of year

   $ 49       $ 44       $ 43   

The fair value of each the debt obligations are as follows:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Corporate borrowings

   $ 1,203       $ 1,170   

Subsidiary borrowings

     

United States

   $ 2,187       $ 1,967   

Canada

     1,763         1,470   

Brazil

     653         678   
   $ 4,603       $ 4,115   

Revolving credit facilities

     251         64   
     $ 6,057       $ 5,349   

Corporate borrowings

Corporate borrowings are obligations of a finance subsidiary of Brookfield Renewable (Note 23: Subsidiary Public Issuers). The finance subsidiary may redeem some or all of the borrowings from time to time, pursuant to the terms of the indenture. The balance is payable upon maturity. Interest on corporate borrowings is paid semi-annually. For periods prior to November 28, 2011, interest on the corporate borrowings of $77 million (2010: $100 million; 2009: $58 million) was paid by BRPI on behalf of Brookfield Renewable Group.

Subsidiary borrowings

Subsidiary borrowings are generally asset-specific, long-term, non-recourse borrowings denominated in the domestic currency of the subsidiary. Subsidiary borrowings in the United States and Canada consist of both fixed and floating interest rate debt. Brookfield Renewable Group uses interest rate swap agreements to minimize its exposure to floating interest rates. Subsidiary borrowings in Brazil consist of floating interest rates of TJLP, the Brazil National Bank for Economic Development’s long-term interest rate, or Interbank Deposit Certificate rate, plus a margin.

 

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Future maturities of borrowings for subsidiaries accounted for an equity-accounted basis for each of the next five years and thereafter are as follows:

 

AS AT DECEMBER 31, 2011

(MILLIONS)

   2012        2013        2014        2015        2016        Thereafter        Total  

United States

   $ 118         $ 1         $ 1         $ 1         $ 1         $ 150         $ 272   

Canada

     -           -           -           34           93           20           147   

Brazil

     1           -           -           -           -           -           1   
     $ 119         $ 1         $ 1         $ 35         $ 94         $ 170         $ 420   

Revolving credit facilities

In November 2011, Brookfield Renewable Group negotiated a $600 million (Note 26) committed unsecured revolving credit facility used for general working capital purposes. The credit facility is available by way of advances in either Canadian or U.S. dollars of (i) prime rate loans (ii) bankers’ acceptance (“BA”) loans and (iii) letters of credit.

The facility expires in March 2014, and may be extended for additional one year periods. The credit facility bears interest at the applicable BA rate or London Interbank Offered Rate plus an applicable margin. The applicable margin is tiered on the basis of Brookfield Renewable Group’s unsecured long-term debt rating. At December 31, 2011, the margin was 1.75%. Standby fees are charged on the undrawn balance.

Brookfield provides a facility to be used to maintain cash distributions to unitholders due to changes in hydrology from year to year, with no annual drawdown limit (maximum drawdown in 2011- $nil). The facility is unsecured and bears interest at the prime rate or banker’s acceptance rate of a Canadian chartered bank plus 2% and is repayable from revenues in years when generation exceeded LTA levels. As at December 31, 2011, the balance owing on the facility was $1 million (2010: $8 million).

Brookfield Renewable Group issues letters of credit from its credit facilities for general corporate purposes, which include, but are not limited to, security deposits, performance bonds and guarantees for debt service reserve accounts.

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Available revolving credit facilities

   $ 601       $ 258   

Drawings

     (251)         (64)   

Issued letters of credit

     (160)         (92)   

Unutilized revolving credit facilities

   $ 190       $ 102   

15. INCOME TAXES

The major components of income tax expense are as follows:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011      2010      2009  

Total current income tax (expense)

   $ (22)       $ (32)       $ (23)   

Total deferred income tax recovery (origination and reversal of temporary differences)

     50         3         335   

Financial instruments designated as cash flow hedges

     194         -         8   

Origination and reversal of temporary differences in revaluation surplus

     (270)         383         (55)   

Effect of changes in tax rates in revaluation surplus

     315         61         -   
       239         444         (47)   

Total income tax recoveries

   $ 267       $ 415       $ 265   

 

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Brookfield Renewable Group’s effective income tax rate is different from Brookfield Renewable Group’s domestic statutory income tax rate due to the differences below:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

  

2011

%

    2010
%
    2009
%
 

Statutory income tax rate (calculated at the domestic rates applicable to the profits in the country concerned)

     (35     32        (30

(Reduction) increase in rate resulting from:

      

Foreign exchange gains and losses

     -        (9     -   

Non-taxable gain regarding equity-accounted investments

     -        1        -   

Deemed profit method differences in Brazil

     2        3        -   

Difference between statutory rate and future tax rate

     3        (33     (10

Other

     2        2        (4

Effective income tax rate, before change in Fund unit liability

     (28     (4     (44

Change in Fund unit liability

     22        15        9   

Effective income tax rate

     (6     11        (35

As Brookfield Renewable is not subject to tax, the above reconciliation has been prepared by aggregating the separate reconciliations for its subsidiaries using the domestic rate in each tax jurisdiction. The change in applicable tax rate in 2011 as compared to 2010 is a result of changes in the proportion of income (loss) relating to the various jurisdictions.

Brookfield Renewable Group’s loss in the Fund unit liability represented a loss for which Brookfield Renewable Group does not receive a tax benefit. During the year ended December 31, 2011, Brookfield Renewable Group recorded a loss of $376 million (2010: $159 million loss, 2009: $244 million loss) relating to the Fund unit liability. This loss decreased accounting income before income taxes, therefore creating a higher effective income tax rate. As a result of the reorganization of the renewable power generating operations of Brookfield on November 28, 2011, the terms of the newly-issued LP Units do not contain a redemption feature that requires a Fund unit liability to be calculated.

The following table details the expiry date, if applicable, of the unrecognized deferred tax assets:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

2012 to 2016

   $ 1       $ 1   

2017 and thereafter

     44         26   
     $         45       $         27   

Brookfield Renewable Group’s deferred income tax assets and liabilities relate to the following:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Deferred income tax assets

     

Non-capital losses

   $ 168       $ 124   

Capital losses

     -         5   

Amount available for future deductions

     138         147   

Total deferred income tax assets

   $ 306       $ 276   

Deferred income tax liabilities

     

Difference between tax and carrying value

   $ 2,374       $ 2,429   

Total deferred income tax liabilities

   $     2,374       $     2,429   

The deferred income tax liabilities include $2,157 million of liabilities (2010: $2,210 million) principally property plant and equipment revaluations included in accumulated OCI.

16. OTHER LONG-TERM LIABILITIES

Brookfield Renewable Group’s other long-term liabilities are comprised of the following:

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Concession payment liability

   $ 107       $ 123   

Decommissioning retirement obligations

     24         12   

Pension obligations (Note 19)

     17         21   

Other

     16         6   
     $   164       $   162   

 

 

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At December 31, 2011, Brookfield Renewable Group recorded a liability associated with a future obligation relating to Concessions payments of $107 million (2010: $123 million). The future obligation is being settled through monthly payments made over the concession term. In 2011, $1 million of concessions payments were made to the Brazilian Federal Government. See “— Note 12 - Other long-term assets” for additional details.

Brookfield Renewable Group has recorded decommissioning retirement obligations associated with its power generating assets. The estimated cost of the decommissioning activities is based on a third party assessment and has been discounted using the interest rate of the related property-specific debt. The decommissioning retirement liability of $24 million at December 31, 2011 (2010: $12 million), has been established for two separate wind operation sites in Canada and are expected to be restored in 2030 and 2033, respectively.

17. CAPITAL MANAGEMENT

Brookfield Renewable Group’s primary capital management objectives are to ensure the sustainability of its capital to support continuing operations, meet its financial obligations, allow for growth opportunities and provide stable distributions to its unitholders. Brookfield Renewable’s capital is monitored through total debt to total debt plus equity which is defined as the total long-term debt and credit facilities divided by total long-term debt and credit facilities plus equity.

Brookfield Renewable Group has provided covenants to certain of its lenders for its corporate borrowings and credit facilities. The covenants require Brookfield Renewable Group to meet minimum debt to capitalization ratios. Subsidiaries of Brookfield Renewable have provided covenants to certain of their lenders for their property-specific borrowings. These covenants vary from one agreement to another and include ratios that address debt service coverage. Certain lenders have also put in place requirements that oblige Brookfield Renewable and its subsidiaries to maintain debt and capital expenditure reserve accounts. The consequences to the subsidiaries as a result of failure to comply with their covenants could include a limitation of distributions from the subsidiaries to Brookfield Renewable, as well as repayment of outstanding debt. Brookfield Renewable is dependent on the distributions made by its subsidiaries to service its debt.

Financial covenants associated with Brookfield Renewable Group’s various banking and debt arrangements are reviewed regularly and controls are in place to maintain compliance with these covenants. Brookfield Renewable Group complied with all financial covenants for the years ended December 31, 2011 and 2010.

Brookfield Renewable Group’s strategy during 2011, which was unchanged from 2010, was to maintain the measure set out in the following schedule.

 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Total debt

     

Current portion of long-term debt and credit facilities

   $ 650       $ 135   

Long-term debt and credit facilities

     4,869         4,859   
     5,519         4,994   

Deferred income tax liability, net (1)

     2,068         2,153   

Fund unit liability

     -         1,355   

Participating non-controlling interests

     629         206   

Preferred equity

     241         252   

Limited partners’ equity

     6,330         3,372   

Total capitalization (total debt plus deferred income tax liability, net, non-controlling interests and equity)

   $ 14,787       $ 12,332   

Debt to total capitalization

     37%         40%   

 

(1)  

Deferred income tax liability, net is expressed as deferred income tax liability minus deferred income tax asset.

 

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18. PARTNERSHIP EQUITY

The number of general and LP Units issued and outstanding was as follows:

 

AUTHORIZED TO ISSUE   General partnership units     LP Units     Total  
December 31, 2010      
Unit issuance     1        132,827,124        132,827,125   
Redeemable unit issuance     -        129,658,623        129,658,623   
December 31, 2011     1        262,485,747        262,485,748   

Consistent with the basis of presentation for the Combination (Note 2(b) (ii)), (loss) income per unit has been calculated as if the LP Units had always been issued and outstanding.

Brookfield Renewable’s capital structure is comprised of two classes of Partnership units: general partnership units and LP Units. Income and distributions of Brookfield Renewable are allocated to the partners of record based on their respective interests in Brookfield Renewable. Distributions may be made by the general partner of Brookfield Renewable with the exception of instances that there is insufficient cash available, payment rends Brookfield Renewable unable to pay its debt or payment of which might leave Brookfield Renewable unable to meet any future contingent obligations.

BRELP, a subsidiary of Brookfield Renewable has issued Redeemable Partnership Units held 100% by Brookfield, which may, at the request of the holder, require BRELP to redeem the Redeemable Partnership Units for cash consideration after a mandatory two-year holding period from the date of issuance. The right is subject to Brookfield Renewable’s right of first refusal which entitles it, at its sole discretion, to elect to acquire all of the Redeemable Partnership Units so presented to BRELP that are tendered for redemption in exchange for Brookfield Renewable LP Units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with LP Units, the BRELP Redeemable Partnership Units are classified as LP Units.

Prior to the Combination, the Fund made distributions of $103 million consisting of $33 million paid to Brookfield and $70 million paid to the external unitholders of the Fund. In December 2011, Brookfield Renewable declared distributions on its LP Units of $45 million ($0.3375 per LP Unit) payable on January 31, 2012, consisting of $21 million payable to Brookfield and $24 million payable to external unitholders of Brookfield Renewable. On December 31, 2011, BRELP also declared redeemable limited partnership and general partnership distributions to Brookfield of $44 million payable on January 31, 2012.

This note should be read in conjunction with Note 2(b) - Basis of presentation. Brookfield Renewable Group’s consolidated balance sheet was adjusted for the effects of the following transactions that took place on the effective date of the Combination:

Settlement of the Fund unit liability

At December 31, 2010, Brookfield Renewable Group recorded a $1,355 million liability relating to the Fund unit liability. In 2010, Brookfield reduced its ownership in the Fund from 50.01% to 34%, on a fully-exchanged basis. Through various management, administration, agency and PPAs with the Fund, along with BRPI’s 34% ownership interest, BRPI continued to control the Fund, and therefore, consolidated its results. As at the date of the Combination, the Fund units, not previously owned by Brookfield, were transferred to Brookfield Renewable Group. The transfer was completed at fair value and satisfied by the issuance of LP Units of Brookfield Renewable. The result of this transaction is to reflect the settlement of the Fund unit liability at the date of the Combination of $1,568 million and the LP Units issued to satisfy the transfer are treated as equity of Brookfield Renewable. For the year ended December 31, 2011, and prior to the Combination, Brookfield Renewable Group recorded a mark-to-market loss of $306 million (2010: $82 million; 2009: $198 million) and expensed $70 million (2010: $77 million; 2009: $46 million) of distributions to external unitholders of the Fund.

Settlement of related party balances

Brookfield Renewable Group settled certain intercompany loans and transactions with Brookfield. The consolidated balance sheets include the reduction in amounts due from and amounts due to related parties, as they were exchanged for LP Units in lieu of a cash settlement.

Derivative balance

Amendments were made to certain energy revenue agreements with the related parties which resulted in those agreements no longer meeting the derivatives definition under the IFRS. Since this change arose from the common control reorganization with Brookfield Asset Management the amounts were adjusted directly into limited partners’ equity. In 2009, Brookfield Renewable Group and Brookfield amended certain PPAs to increase contract prices in consideration for an agreed upon amount. Refer to Note 8 for details on the contract amendments.

 

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19.

PENSION AND EMPLOYEE FUTURE BENEFITS

Brookfield Renewable Group offers a number of pension plans to its employees, as well as certain health care, dental care, life insurance and other benefits to certain retired employees pursuant to Brookfield Renewable Group’s policy. The plans are funded by contributions from Brookfield Renewable Group and from plan members. Pension benefits are based on length of service and final average earnings and some plans are indexed for inflation after retirement. The pension plans relating to employees of Brookfield Renewable Group have been included in the consolidated financial statements.

Actuarial valuations for Brookfield Renewable Group’s pension plans are required as per governing provincial regulations or state. For Québec registered plans, actuarial valuations are required annually. For Ontario registered plans, actuarial valuations are required on a triennial basis if the funding level of the plan is above a certain threshold. Currently, all Ontario registered plans are on a triennial schedule. The dates of the most recent actuarial valuations for Brookfield Renewable Group’s pension and non-pension benefit plans range from July 1, 2009 to May 31, 2011. Brookfield Renewable Group measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year.

Brookfield Renewable Group has elected under IFRS 1 to not disclose the five year history of the defined benefits obligations and plan assets, and of experience adjustments. The benefit liabilities represent the amount of pension and other employee future benefits that Brookfield Renewable Group’s employees and retirees have earned at year-end. The benefit obligation under these plans is determined through periodic actuarial reports which were based on the assumptions indicated in the following table.

 

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Actuarial assumptions:

 

       Defined benefit
pension plans
     Non-pension
benefit plans
     Defined benefit
pension plans
     Non-pension
benefit plans
 
AS AT DECEMBER 31    2011      2010  

Discount rate

           
 

Benefit obligation

                 4.2 - 5.3%               4.5 - 5.3%                     5.1 - 5.8%                 5.4 - 5.8%   
 

Benefit expense

     5.1 - 5.8%         5.4 - 5.8%         5.7 - 6.7%         5.9 - 6.7%   
 

Long-term rate of return on plan assets

     6.2 - 7.5%         N/A         7.5%         N/A   
 

Rate of compensation increases

     3.5 - 4.0%         3.5 - 4.0%         3.5 - 4.0%         3.5 - 4.0%   
           
                         Defined benefit
pension plans
     Non-pension
benefit plans
 
AS AT DECEMBER 31                      2009  

Discount rate

           
 

Benefit obligation

                       5.7 - 6.7%                 5.9 - 6.7%   
 

Benefit expense

           6.3 - 7.5%         6.3 - 7.5%   
 

Long-term rate of return on plan assets

           7.5%         N/A   
 

Rate of compensation increases

                       3.5 - 4.0%         3.5 - 4.0%   

Plan obligations and the annual pension expense are determined on an actuarial basis and are affected by numerous assumptions and estimates including the market value of plan assets, estimates of the long-term rate of return on plan assets, discount rates, rate of compensation increases and other assumptions. The discount rate, assumed long-term rate of return on plan assets and compensation increases are the assumptions that generally have the most significant impact on our pension cost and obligation.

The discount rate for benefit obligation and benefit expense purposes is the rate at which the pension obligation could be effectively settled. The long-term rate of return on assets for pension cost purposes is the weighted average of expected long-term asset rate of return assumptions for the various categories of plan assets held. The assessment of the expected return is based on historical return trends and analysts’ predictions of the market for the assets in the next twelve months. Rate of compensation increases reflect the best estimate of merit increases to be provided, consistent with assumed inflation rates.

The assumed health care cost trend had a minimal effect on the amounts reported. A one percentage point change in the assumed health care cost trend rate at December 31, 2011 would have had no significant effect on the post-retirement obligation and would have had no significant effect on the benefit expense for 2011.

 

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Expense recognized in the Statement of (loss) income

 

       Defined benefit
pension plans
     Non-pension
benefit plans
     Defined benefit
pension plans
     Non-pension
benefit plans
 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011      2010  

Current service costs

                       $ 2                       $ 1                             $    1                         $    1   
 

Interest on accrued benefits

     3         1         3         1   
 

Expected return on plan assets

     (3)         -         (3)         -   
 

Settlement/curtailment gain

     -         -         -         2   
                          $     2                        $     2         $    1         $    4   
           
                        
 
Defined benefit
pension plans
  
  
    
 
Non-pension
benefit plans
  
  

FOR THE YEAR ENDED DECEMBER 31

(MILLIONS)

                     2009  

Current service costs

                               $    1                         $    -   
 

Interest on accrued benefits

           4         1   
 

Expected return on plan assets

           (3)         -   
 

Settlement/curtailment gain

           -         -   
                         $    2         $    1   

Plan liabilities

 

       Defined benefit
pension plans
     Non-pension
benefit plans
     Defined benefit
pension plans
     Non-pension
benefit plans
 

AS AT DECEMBER 31

(MILLIONS)

   2011      2010  

Deficit for funded plans

                   $ 14                   $ -                       $ 11               $ -   
 

Present value of wholly unfunded obligations

     1         23         1         23   
 

Unrecognized net actuarial loss

     (15)         (5)         (9)         (4)   
 

Unrecognized past service cost

     -         (1)         -         (1)   

Accrued liability

                    $         -                   $       17                        $         3               $         18   

 

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Defined benefit obligations

The movement in the defined benefit obligation over the year is as follows:

 

       Defined benefit
pension plans
     Non-pension
benefit plans
     Defined benefit
pension plans
     Non-pension
benefit plans
 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS, EXCEPT AS NOTED)

   2011      2010  

Balance, beginning of year

                   $ 59                   $ 23                       $ 48                   $ 15   
 

Current service cost

     1         1         1         1   
 

Interest cost

     3         1         3         1   
 

Benefits paid

     (2)         (1)         (3)         (1)   
 

Actuarial loss (gain)

     3         (1)         8         3   
 

Plan settlements and amendments

     (2)         -         -         3   
 

Foreign exchange rate changes

     (1)         -         2         1   

Balance, end of year

                    $       61                   $     23                        $       59                   $     23   

Expected contributions to the defined pension plans for the year ended December 31, 2012 are $8 million.

Fair value of plan assets

The movement in the fair value of plan assets over the year is as follows:

 

       Defined benefit
pension plans
     Non-pension
benefit plans
     Defined benefit
pension plans
     Non-pension
benefit plans
 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011      2010  

Balance, beginning of year

   $ 47       $ -       $ 40       $ -   

 

Expected return on plan assets

     3         -         3         -   

 

Actuarial (loss) gain

     (3)         -         1         -   

 

Employer contributions

     5         1         5         1   

 

Benefits paid

     (2)         (1)         (4)         (1)   

 

Plan settlements

     (2)         -         -         -   

 

Foreign exchange rate changes

     (1)         -         2         -   

Balance, end of year

   $ 47       $ -       $ 47       $ -   

 

AS AT DECEMBER 31    2011        2010  

Asset category

       

Equity securities

     62%           62%   

Debt securities

     38%           38%   
       100%           100%   

 

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20. DIRECT OPERATING COSTS

Brookfield Renewable Group’s direct operating costs are comprised of the following:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011      2010      2009  

Operations, maintenance and administration

   $ 254       $ 201       $ 193   

Water royalties, property taxes and other

     97         90         86   

Management fees (Note 8)

     12         -         -   

Fuel and power purchases (Note 7)

     44         37         -   

Total direct operating costs

   $ 407       $ 328       $ 279   

The remuneration of key management personnel of Brookfield Renewable Group for the years ended December 31, was as follows:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011      2010      2009  

Salaries and benefits

   $ 3       $ 4       $ 4   

Share-based benefits

     6         5         6   
     $ 9       $ 9       $ 10   

Key management personnel include those individuals having authority and responsibility for planning, directing and controlling the activities of Brookfield Renewable Group, directly or indirectly. Key management personnel include the Chairman, Chief Executive Officer, Chief Financial Officers and Chief Operating Officer. Share-based benefits relate to costs allocated from Brookfield.

21. SUPPLEMENTAL INFORMATION

The net change in non-cash working capital shown in the consolidated statements of cash flows is comprised of the following:

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011        2010        2009  

Trade receivables and other current assets

   $ (12)         $ (9)         $ (85)   

Accounts payable, accrued liabilities, and other

     -           (20)           108   
     $ (12)         $ (29)         $ 23   

 

 

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22. NON-CONTROLLING INTERESTS

The net change in non-controlling interests is as follows:

 

(MILLIONS)    Brookfield
Americas
Infrastructure
Fund
       The Catalyst
Group
       Brascan
Energetica
       Other  (1)        Total  

Balance, January 1, 2009

   $ -         $ 162         $ 45         $ -         $ 207   

Net income

     -           26           2           -           28   

OCI

     -           (33)           11           -           (22)   

Capital contribution

     -           -           2           -           2   

Distributions

     -           (15)           (3)                (18)   

Balance, December 31, 2009

   $ -         $ 140         $ 57         $ -         $ 197   

Net income

   $ -         $ 23         $ 2         $ -         $ 25   

OCI

     -           7           3           -           10   

Other

     -           (3)           -           -           (3)   

Distributions

     -           (24)           1           -           (23)   

Balance, December 31, 2010

   $ -         $ 143         $ 63         $ -         $ 206   

Net income

   $ 1         $ 5         $ 5         $ -         $ 11   

OCI

     173           16           11           -           200   

Acquisitions

     209           -           -           14           223   

Other

     (3)           17           -           -           14   

Distributions

     -           (14)           (5)           (6)           (25)   

Balance, December 31, 2011

   $ 380         $ 167         $ 74         $ 8         $ 629   

 

(1)  

Includes the acquisition of a controlling interest in wind development project in Western-Canada.

23. SUBSIDIARY PUBLIC ISSUERS

On March 10, 2010, BRP Equity issued 10 million Series 1 preferred shares at a price of C$25 per share. The holders of the Series 1 preferred shares are entitled to receive fixed cumulative dividends at an annual rate of C$1.3125 per share, a yield of 5.25% for the initial five-year period ending April 30, 2015. The dividend rate will reset on April 30, 2015 and every five years thereafter at a rate equal to the then five-year Government of Canada Bond yield plus 2.62%. Brookfield Renewable, BRELP and certain key holding company subsidiaries fully and unconditionally guarantee the payment of dividends on the preferred shares, the amounts due on redemption, and the amounts due on the liquidation, dissolution or winding-up of BRP Equity. For the year ended December 31, 2011, dividends declared on the Series 1 preferred shares were $13 million (2010: $10 million).

As a result of the Combination, Brookfield Renewable created BRP Finance to contractually assume BRPI’s term notes with maturities ranging from 2016 and 2036 with a principal value of approximately C$1,100 million. BRP Finance assumed these term notes, including accrued interest, in exchange for an interest-bearing demand promissory note issued by another wholly-owned subsidiary of Brookfield Renewable. The term notes payable by BRP Finance are unconditionally guaranteed by Brookfield Renewable, BRELP and certain other subsidiaries.

 

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The following tables set forth certain consolidated summary financial information for Brookfield Renewable Group, BRP Equity, and BRP Finance:

 

(MILLIONS)    Brookfield
Renewable
Group (1)
       BRP Equity        BRP
Finance
      

Consolidating

adjustments (2)

       Brookfield
Renewable
consolidated
 

For the year ended December 31, 2011:

                        

Revenue

   $ 1,169         $ -         $ -         $ -         $ 1,169   

Net (loss) income

     (453)           -           2           -           (451)   
 

For the year ended December 31, 2010:

                        

Revenue

   $ 1,045         $ -         $ -         $ -         $ 1,045   

Net income

     293           1           -           -           294   
 

For the year ended December 31, 2009:

                        

Revenue

   $ 984         $         -         $         -         $         -         $ 984   

Net income

     (580)           -           -           -           (580)   

 

(1)  

Includes subsidiaries of Brookfield Renewable Group other than BRP Equity and BRP Finance.

(2)  

Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable Group on a consolidated basis.

 

(MILLIONS)   

Brookfield

Renewable (1)

      

BRP

Equity

       BRP
Finance
      

Consolidating

adjustments (2)

       Brookfield
Renewable
consolidated
 

As at December 31, 2011:

                        

Current assets

   $ 678         $ -         $ 1,087         $ (1,087)         $ 678   

Long-term assets

     15,024           244           -           (238)           15,030   

Current liabilities

     (2,148)           (8)           (9)           1,087           (1,078)   

Long-term liabilities

     (6,597)           -           (1,071)           238           (7,430)   

Participating non-controlling interests

     (629)           -           -           -           (629)   

Preferred equity

     -           (241)           -           -           (241)   
 

As at December 31, 2010:

                        

Current assets

   $ 734         $ -         $ -         $ -         $ 734   

Long-term assets

     12,890           250           -           -           13,140   

Current liabilities

     (915)           (2)           -           -           (917)   

Long-term liabilities

     (7,772)           -           -           -           (7,772)   

Fund unit liability

     (1,355)           -           -           -           (1,355)   

Participating non-controlling interests

     (206)           -           -           -           (206)   

Preferred equity

   $ -         $ (252)         $ -         $ -         $ (252)   

 

(1)  

Includes subsidiaries of Brookfield Renewable Group other than BRP Equity and BRP Finance.

(2)  

Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable Group on a consolidated basis.

 

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24. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following is a reconciliation of Brookfield Renewable Group’s accumulated other comprehensive income (“AOCI”) attributable to the limited partners’ equity:

 

(MILLIONS)    Foreign
currency
translation
       Revaluation
surplus
       Cash
flow
hedges
       Total  

Balance, January 1, 2009:

   $ 97         $ 4,869         $ (36)         $ 4,930   

OCI

     273           129           19           421   

Income taxes

     -           (55)           8           (47)   

Balance, December 31, 2009:

   $ 370         $ 4,943         $ (9)         $ 5,304   

OCI

     160           (967)           -           (807)   

Income taxes

     -           444           -           444   

Balance, December 31, 2010:

   $ 530         $ 4,420         $ (9)         $ 4,941   

OCI

     (143)           1,554           (774)           637   

Reversal of unrealized accounting losses on energy derivative contract

     -           -           527           527   

Income taxes

     -           45           194           239   

Balance, December 31, 2011

   $ 387         $ 6,019         $ (62)         $ 6,344   

During 2011, a loss of $4 million relating to cash flow hedges was realized (2010: $1 million loss; 2009: $1 million loss) and was reclassified from OCI to net (loss) income.

25. SEGMENTED INFORMATION

Brookfield Renewable Group operates mostly renewable power assets, which include conventional hydroelectric generating assets located in the United States, Canada and Brazil, a pumped storage hydroelectric facility located in the United States and wind farms located in Canada and the United States. Brookfield Renewable Group also operates two combined cycle natural gas-fired generating units (“co-gen”), one in Canada and one in the United States. Management evaluates the business based on the type of power generation (Hydroelectric, Wind and Other). Hydroelectric is further evaluated by major region (United States, Canada and Brazil). “Equity-accounted investments” includes Brookfield Renewable Group’s interest in hydroelectric and wind facilities. The other segment includes co-gen facilities, CWIP and corporate costs.

 

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In accordance with IFRS 8, Operating Segments, Brookfield Renewable Group discloses information about its reportable segments based upon the measures used by management in assessing the performance of those reportable segments. The accounting policies of the reportable segments are the same as those described in Note 2 of these consolidated financial statements. Brookfield Renewable Group analyzes the performance of its operating segments based on, revenues, earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”), and funds from operations (“FFO”). Adjusted EBITDA consists of 100% of revenues less direct costs (including energy marketing costs), plus Brookfield Renewable Group’s share of cash earnings from equity-accounted investments, before interest, current income taxes, depreciation, amortization and management service costs. FFO is defined as Adjusted EBITDA less interest, current income taxes and management service cost, which is then adjusted for the cash portion of non-controlling interests included in FFO. Transactions between the reportable segments occur at fair value.

 

       Conventional Hydroelectric                             
(MILLIONS)    United
States
     Canada      Brazil      Wind      Other      Total  

For the year ended December 31, 2011:

                 

Revenues

   $ 467       $ 237       $ 335       $ 70       $ 60       $ 1,169   

Adjusted EBITDA

     336         179         269         58         (38)         804   

Interest expense - borrowings

     149         68         94         25         75         411   

FFO prior to non-controlling interests

     189         116         160         33         (128)         370   

Cash portion of non-controlling interests

     (26)         -         (13)         -         (13)         (52)   

FFO

     163         116         147       $ 33         (141)         318   

Depreciation and amortization

   $ 130       $ 151       $ 138       $ 35       $ 14       $ 468   

For the year ended December 31, 2010:

                 

Revenues

   $ 459       $ 205       $ 271       $ 52       $ 58       $ 1,045   

Adjusted EBITDA

     332         160         201         45         13         751   

Interest expense - borrowings

     152         64         95         17         76         404   

FFO prior to non-controlling interests

     164         96         90         28         (63)         315   

Cash portion of non-controlling interests

     (31)         -         (4)         -         (11)         (46)   

FFO

     133         96         86         28         (74)         269   

Depreciation and amortization

   $ 144       $ 153       $ 118       $ 24       $ 7       $ 446   

For the year ended December 31, 2009:

                 

Revenues

   $ 453       $ 221       $ 215       $ 40       $ 55       $ 984   

Adjusted EBITDA

     360         188         163         35         (3)         743   

Interest expense - borrowings

     165         58         53         15         57         348   

FFO prior to non-controlling interests

     185         129         98         20         (60)         372   

Cash portion of non-controlling interests

     (43)         -         (5)         -         -         (48)   

FFO

     142         129         93         20         (60)         324   

Depreciation and amortization

   $ 146       $ 90       $ 71       $ 18       $ (4)       $ 321   

 

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The following table reconciles Adjusted EBITDA and FFO, presented in the above tables, to net (loss) income as presented in the consolidated statements of loss (income):

 

FOR THE YEARS ENDED DECEMBER 31

(MILLIONS)

   2011        2010        2009  

Revenue

   $ 1,169         $ 1,045         $ 984   

Other income

     19           12           9   

Share of cash earnings from equity-accounted investments

     23           22           29   

Direct operating costs

     (407)           (328)           (279)   

Adjusted EBITDA

   $ 804         $ 751         $ 743   

Interest expense - borrowings

     (411)           (404)           (348)   

Management service costs

     (1)           -           -   

Current income taxes

     (22)           (32)           (23)   

FFO prior to non-controlling interests

     370           315           372   

Less: cash portion of non-controlling interest

     (52)           (46)           (48)   

FFO

     318           269           324   

Depreciation and amortization

     (468)           (446)           (321)   

Unrealized financial instrument (losses) gains

     (20)           584           (791)   

Loss on Fund unit liability

     (376)           (159)           (244)   

Share of non-cash loss in equity-accounted investments

     (13)           (7)           (13)   

Deferred income tax recovery

     50           3           335   

Other

     6           4           82   

Add: cash portion of non-controlling interests

     52           46           48   

Net (loss) income

   $ (451)         $ 294         $ (580)   

The following is information about Brookfield Renewable Group’s certain balance sheet items:

 

       Conventional Hydroelectric                                      
(MILLIONS)    United
States
     Canada      Brazil      Wind      Equity-
accounted
investments
     Other      Total  

As at December 31, 2011:

                    

Property, plant and equipment

   $ 4,547       $ 4,908       $ 2,626       $ 1,400       $ -       $ 464       $ 13,945   

Addition to property, plant and equipment

     136         46         210         399         -         238         1,029   

Total assets

     5,064         5,139         2,963         1,315         405         822         15,708   

Total borrowings

     1,838         928         645         785         -         1,323         5,519   

Total liabilities

     3,008         2,098         869         1,070         -         1,463         8,508   

As at December 31, 2010:

                    

Property, plant and equipment

   $ 4,678       $ 4,386       $ 2,248       $ 554       $ -       $ 307       $ 12,173   

Addition to property, plant and equipment

     23         19         117         189         -         -         348   

Total assets

     5,093         4,713         2,814         645         269         340         13,874   

Total borrowings

     1,857         950         665         362         -         1,160         4,994   

Total liabilities

     1,428         2,683         955         406         -         3,217         8,689   

 

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The following is information about Brookfield Renewable Group’s total assets for its equity-accounted investment:

 

       Conventional Hydroelectric                                   
(MILLIONS)    United
States
       Canada        Brazil        Wind        Other        Total  

As at December 31, 2011

   $ 169         $ 70         $ 86         $ 80         $ -         $ 405   

 

As at December 31, 2010

   $ 95         $ 83         $ 80         $ 5         $ 6         $ 269   

26. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments

In the course of its operations, Brookfield Renewable Group has entered into agreements for the use of water, land and/or dams. Payment under those agreements varies with the amount of power generated. The various agreements are renewable and extend as far as the year 2054.

Brookfield Renewable Group has recorded decommissioning retirement obligations associated with its power generating assets. Refer to Note 16 - Other long-term liabilities for details.

At the balance sheet date, Brookfield Renewable Group had commitments for future minimum lease payments under non-cancellable leases which fall due as follows:

 

AS AT DECEMBER 31, 2011

(MILLIONS)

   2012        2013        2014        2015        2016        Thereafter        Total  

Operating leases

   $ 6         $ 6         $ 4         $ 4         $ 4         $ 30         $ 54   

Capital leases

     -           -           -           -           -           47           47   

Total

   $ 6         $ 6         $ 4         $ 4         $ 4         $ 77         $ 101   

Contingencies

Brookfield Renewable Group is subject to various legal proceedings, arbitrations and actions arising in the normal course of business. While the final outcome of such legal proceedings and actions cannot be predicted with certainty, it is the opinion of management that the resolution of such proceedings and actions will not have a material impact on Brookfield Renewable Group’s consolidated financial position or results of operations.

Guarantees

Brookfield Renewable Group, provided letters of credit, which include, but are not limited to, guarantees for debt service reserves, capital reserves, construction completion and performance. The activity on the issued letters of credit can be found in Note 14 - Debt Obligations.

In the normal course of operations, Brookfield Renewable Group executes agreements that provide for indemnification and guarantees to third parties of transactions such as business dispositions, capital project purchases, business acquisitions, and sales and purchases of assets and services. Brookfield Renewable Group has also agreed to indemnify its directors and certain of its officers and employees. The nature of substantially all of the indemnification undertakings prevents Brookfield Renewable Group from making a reasonable estimate of the maximum potential amount that Brookfield Renewable Group could be required to pay third parties as the agreements do not always specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, neither Brookfield Renewable nor its subsidiaries have made significant payments under such indemnification agreements.

27. SUBSEQUENT EVENTS

Growth developments

With certain institutional partners, Brookfield Renewable Group recently acquired new wind generation assets in California, including a 150 MW wind farm adjacent to the Coram wind project in the Tehachapi region. This new facility entered commercial operation in the first quarter of 2012 and comes with a 24-year PPA with Southern California Edison. Brookfield Renewable Group also acquired the remaining 50% stake previously held by its partner in Coram, along with a further 22 MW of additional operating wind generation capacity.

 

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In March 2012, the 102 MW Coram wind facility in California achieved commercial operation.

Unitholder distribution increase

In January 2012, Brookfield Renewable announced an increase in unitholder distributions to $1.38 per unit on an annualized basis, an increase of three cents per unit per year, to take effect during the first quarter distribution payable in April 2012.

Secondary offering and over-allotment option exercised

In the first quarter of 2012, a bought-deal secondary offering that was completed, through which a wholly-owned subsidiary of Brookfield sold 13,144,500 LP Units (11,430,000 LP Units plus 1,714,500 LP Units pursuant to an over-allotment option that was exercised in full) at an offering price of C$26.25 per LP Unit. Brookfield had previously owned approximately 73% of Brookfield Renewable on a fully-exchanged basis. Upon the completion of the secondary offering, and giving effect to the over-allotment option, Brookfield Asset Management now owns, directly and indirectly, 177,750,609 LP Units, representing approximately 68% of Brookfield Renewable on a fully-exchanged basis.

Medium-term note offering

In February 2012, Brookfield Renewable Group successfully completed a C$400 million offering of medium-term notes bearing interest at a rate of 4.79% per year that are due February 2022. Proceeds of the offering were used to refinance existing indebtedness and for general business purposes.

Distribution reinvestment plan

In the first quarter of 2012, the Board of Directors for Brookfield Renewable approved the adoption and implementation of a distribution reinvestment plan. The plan has been implemented in the current quarter and allows registered or beneficial holders of LP Units who are residents in Canada to acquire additional LP Units by reinvesting all or a portion of their cash distributions without paying commissions.

Credit facilities

In March 2012, Brookfield Renewable Group expanded its revolving credit facilities from $600 million to $900 million, with maturity dates to October 2016.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

INDEX TO FINANCIAL STATEMENTS

 

     Page  

Unaudited consolidated financial statements of Brookfield Renewable as at March  31, 2012 and for the three months ended March 31, 2012 and 2011

     F-59   

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED BALANCE SHEETS

 

UNAUDITED

(U.S. $ MILLIONS)

   Notes     

March 31,

2012

    

December 31,

2011

 

Assets

        

Current assets

        

Cash and cash equivalents

      $ 364       $ 267   

Trade receivables and other current assets

        183         158   

Due from related parties

              136         253   
        683         678   

Due from related parties

        27         32   

Equity-accounted investments

     6         329         405   

Property, plant and equipment, at fair value

     7         14,888         13,945   

Intangible assets

        57         57   

Deferred income tax assets

     10         352         306   

Other long-term assets

        232         285   
              $ 16,568       $ 15,708   

Liabilities and Partners’ equity

        

Current liabilities

        

Accounts payable and accrued liabilities

     8       $ 287       $ 190   

Financial instrument liabilities

     4         100         99   

Due to related parties

        125         139   

Current portion of long-term debt

     9         758         650   
        1,270         1,078   

Financial instrument liabilities

     4         34         15   

Due to related parties

        10         8   

Long-term debt and credit facilities

     9         5,226         4,869   

Deferred income tax liabilities

     10         2,448         2,374   

Other long-term liabilities

        165         164   
              $ 9,153       $ 8,508   

Non-controlling interests

        

Participating non-controlling interests

        760         629   

Preferred equity

     12         247         241   

Limited partners’ equity

     11         6,408         6,330   
                7,415         7,200   
       $ 16,568       $ 15,708   

The accompanying notes are an integral part of these interim consolidated financial statements.

Approved on behalf of Brookfield Renewable Energy Partners L.P.:

 

LOGO     LOGO
Patricia Zuccotti     David Mann
Director     Director

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

 

UNAUDITED

THREE MONTHS ENDED MARCH 31

(U.S. $ MILLIONS, EXCEPT PER SHARE AMOUNTS)

   Notes      2012      2011  

Revenues

     5       $ 426       $ 293   

Other income

        5         4   

Share of cash earnings from equity-accounted investments

     6         4         6   

Direct operating costs

        (117)         (88)   

Interest expense – borrowings

        (110)         (97)   

Management service costs

     5         (7)         -   

Current income taxes

     10         (6)         (4)   

Funds from operations prior to non-controlling interests

              195         114   

Other items

        

Depreciation and amortization

     7         (126)         (110)   

Unrealized financial instrument (loss) gain

     3, 4         (9)         18   

Loss on Fund unit liability

     11         -         (116)   

Share of non-cash loss from equity-accounted investments

     6         (3)         (8)   

Deferred income tax expense

     10         (13)         -   

Other

     3         (13)         9   

Net income (loss)

            $ 31       $ (93)   

Net income (loss) attributable to:

        

Non-controlling interests

        

Participating non-controlling interests

        (1)         (6)   

Preferred equity

        3         3   

Limited partners

        29         (90)   
              $ 31       $ (93)   

Basic and diluted earnings (loss) per share

            $ 0.11       $ (0.34)   

The accompanying notes are an integral part of these interim consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

UNAUDITED

THREE MONTHS ENDED MARCH 31

(U.S. $ MILLIONS)

   Notes      2012      2011  

Net income (loss)

      $ 31       $ (93)   

Other comprehensive income (loss)

                          

Revaluations of property, plant and equipment

     3, 6       $ (17)         -   

Financial instruments designated as cash-flow hedges

     4         28         13   

Foreign currency translation

        130         102   

Deferred income taxes on above items, net

     10         5         201   
                146         316   

Comprehensive income

            $ 177       $ 223   

Comprehensive income (loss) attributable to:

        

Non-controlling interests

        

Participating non-controlling interests

      $ -       $ (4)   

Preferred equity

        9         10   

Limited partners

        168         217   
              $ 177       $ 223   

The accompanying notes are an integral part of these interim consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

UNAUDITED

THREE MONTHS ENDED MARCH 31

(U.S. $ MILLIONS)

   Notes      2012      2011  

Participating non-controlling interests

        

Balance, beginning of period

      $ 629       $ 206   

Net loss

        (1)         (6)   

Other comprehensive income

        1         2   

Contributions and other

     3         131         -   

Balance, end of period

            $ 760       $ 202   

Preferred equity

     12         

Balance, beginning of period

      $ 241       $ 252   

Net income

        3         3   

Other comprehensive income

        6         7   

Distributions

        (3)         (3)   

Other

        -         (2)   

Balance, end of period

            $ 247       $ 257   

Limited partners’ equity

     11         

Balance, beginning of period

      $ (14)       $ (1,569)   

Net income (loss)

        29         (90)   

Distributions

        (90)         (2)   

Transfer from revaluation surplus

     3         5         -   

Other

        -         (50)   

Balance, end of period

              (70)         (1,711)   

Accumulated other comprehensive income

     13         6,478         5,248   
      $ 6,408       $ 3,537   

Fund unit liability

     11         -         1,488   
              $ 7,415       $ 5,484   

The accompanying notes are an integral part of these interim consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

UNAUDITED

THREE MONTHS ENDED MARCH 31

(U.S. $ MILLIONS)

   Notes      2012      2011  

Operating activities

        

Net income (loss)

      $ 31       $ (93)   

Adjustments for the following non-cash items:

        

Depreciation and amortization

     7         126         110   

Unrealized financial instrument loss (gain)

     3, 4         9         (18)   

Loss on Fund unit liability

     11         -         116   

Share of (earnings) loss from equity-accounted investments

     6         (1)         2   

Deferred income tax expense

     10         13         -   

Other non-cash items

        9         (2)   

Dividends received from equity-accounted investments

              -         2   
        187         117   

Net change in working capital balances

        16         (29)   
                203         88   

Financing activities

        

Long-term debt – borrowings

     9         574         131   

Long-term debt – repayments

     9         (664)         (22)   

Capital provided by participating non-controlling interests and preferred equity

        117         36   

Contributions from common parent

        -         50   

Distributions:

        

To participating non-controlling interests and preferred equity

     12         (3)         (3)   

To unitholders of Brookfield Renewable or the Fund

     11         (90)         (24)   
                (66)         168   

Investing activities

        

Due to (from) related parties

        82         -   

Acquisitions

     3         (131)         (54)   

Investment in:

        

Sustaining capital expenditures

        (12)         (13)   

Development and construction of renewable power generating assets

        (63)         (102)   

Restricted cash and other

        77         (13)   
                (47)         (182)   

Foreign exchange gain on cash held in foreign currencies

              7         2   

Cash and cash equivalents

        

Increase

        97         76   

Balance, beginning of period

        267         188   

Balance, end of period

            $ 364       $ 264   

Supplemental cash flow information:

        

Interest paid

      $ 41       $ 41   

Interest received

      $ 6       $ 5   

Income taxes paid

            $ 6       $ 9   

The accompanying notes are an integral part of these interim consolidated financial statements.

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND DESCRIPTION OF THE BUSINESS

The business activities of Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) consist of owning a portfolio of renewable power generating facilities in Canada, the United States and Brazil, which prior to November 28, 2011 were held as part of the power generating operations of Brookfield Renewable Power Inc. (“BRPI”) and Brookfield Renewable Power Fund ( the “Fund”).

Brookfield Renewable is a publicly traded limited partnership established under the laws of Bermuda pursuant to an amended and restated limited partnership agreement dated November 20, 2011.

The registered office of Brookfield Renewable is Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

2.    SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The unaudited interim consolidated financial statements have been prepared in accordance with IAS 34- Interim Financial Reporting on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2011, with the exception of the changes in accounting policies as disclosed below. Certain information and footnote disclosure normally included in annual audited financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) have been omitted or condensed. These interim consolidated financial statements should be read in conjunction with the audited 2011 annual consolidated financial statements.

The interim consolidated financial statements are unaudited and reflect any adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with IFRS.

The results reported in these interim consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain comparative figures have been reclassified to conform to the current year’s presentation.

These interim consolidated financial statements have been authorized for issuance by the Board of Directors of its general partner, Brookfield Renewable Partners Limited, on May 4, 2012.

All figures are presented in millions of United States (“U.S.”) dollars unless otherwise noted.

(b) Basis of presentation

(i)    Consolidation

These interim consolidated financial statements include the accounts of Brookfield Renewable and its subsidiaries, which are the entities over which Brookfield Renewable has control. Control exists when Brookfield Renewable has the power, directly or indirectly, to govern the financial and operating policies of an entity, so as to obtain benefits from its activities. Non-controlling interests in the equity of Brookfield Renewable’s subsidiaries are shown separately in partners’ equity in the consolidated balance sheets.

(ii)    Strategic combination of the renewable power generating operations

On November 28, 2011, upon completion of the strategic combination (the “Combination”) of the renewable power assets of BRPI and the Fund, the public unitholders of the Fund received one non-voting limited partnership unit of Brookfield Renewable in exchange for each trust unit of the Fund held, and the Fund was wound up.

Also as part of the Combination, Brookfield Renewable entered into a voting agreement with Brookfield Asset Management Inc. (“Brookfield Asset Management”), which provides Brookfield Renewable with control of the general partner of Brookfield Renewable Energy L.P. (“BRELP”). Accordingly, Brookfield Renewable consolidates the accounts of BRELP and its subsidiaries. In addition, BRELP issued redeemable partnership units, to a subsidiary of Brookfield Asset Management, pursuant to which the holder may at its request require BRELP to redeem the units for cash consideration after a mandatory two-year holding period from the date of issuance. This right is subject to Brookfield Renewable’s right of first refusal which entitles it, at its sole discretion, to elect to acquire all of the units so presented to BRELP that are tendered for redemption in exchange for Brookfield Renewable limited partnership units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with limited partnership units, the BRELP redeemable partnership units are classified as limited partnership units.

 

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Effective December 2011, Brookfield Renewable entered into voting arrangements with various affiliates of Brookfield Asset Management, whereby Brookfield Renewable gained control of the entities that own U.S. and Brazil renewable power generating operations (the “Voting Arrangements”). The Voting Arrangements provide Brookfield Renewable with all of the voting rights to elect the Boards of Directors of the relevant entities and therefore provides Brookfield Renewable with control. Accordingly, Brookfield Renewable consolidates the accounts of these entities.

Financial information for the periods prior to November 28, 2011 is presented based on the historical combined financial information for the contributed operations as previously reported by Brookfield Asset Management. For the period since completion of the Combination, the results are based on the actual results of the new entity, Brookfield Renewable.

(c) Change in accounting policies and estimates

(i)  Income Taxes

In December 2010, the IASB issued amendments to IAS 12, Income Taxes (“IAS 12”). Under these amendments, an entity is required to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment is effective for annual periods starting on or after January 1, 2012. Implementation of IAS 12 did not have a significant impact on the interim consolidated financial statements.

(ii)  Change in accounting estimates

Brookfield Renewable retained third party engineers to review the estimated useful lives of certain assets. As a result, Brookfield Renewable revised the estimated remaining useful life of certain assets to 60 years to more accurately reflect the period over which they provide economic benefits. Effective, January 1, 2012 Brookfield Renewable accounted for this change in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, which requires a change in accounting estimate to be applied prospectively from the date of the change. The interim consolidated statement of income (loss) reflects a decrease in deprecation of $20 million for the three months ended March 31, 2012 as a result of the change in accounting estimate.

(iii)  Future changes

There are no future changes to IFRS with potential impact on Brookfield Renewable in addition to the changes disclosed in the 2011 annual consolidated financial statements.

3.    ACQUISITIONS

California Wind Generation Assets

During the quarter, the following investments were made by Brookfield Renewable and certain institutional partners through the Brookfield Americas Infrastructure Fund (“BAIF”), in which Brookfield Renewable holds a 22% controlling interest. The investments were accounted for using the acquisition method, and the results of operations have been included in the interim consolidated financial statements since the respective dates of acquisition.

BAIF acquired 100% interests in two wind generation facilities. BAIF also acquired the remaining 50% interest in a wind generation facility, bringing Brookfield Renewable’s total investment to 100% (the “Step Acquisition”). Total consideration paid of $206 million for these interests included $180 million in cash and the settlement of certain liabilities.

The Step Acquisition required Brookfield Renewable to re-measure its previously held 50% interest to fair value of $63 million and to reverse any amounts previously recorded in other comprehensive income (“OCI”) related to the initial 50% interest. Net income for the three months ended March 31, 2012 reflects an expense of $11 million related to the reclassification from OCI on financial instruments designated as cash flow hedges prior to the Step Acquisition. In addition, $5 million related to revaluation surplus on the initial 50% interest was reclassified to limited partners’ equity.

Acquisition costs of $2 million related to the above acquisitions were expensed at the acquisition dates.

These wind generating facilities were all in commercial operation by quarter end.

 

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The preliminary estimated fair value of the assets acquired and liabilities assumed for the investments were as follows:

 

(MILLIONS)         

Current assets (1)

   $ 50   

Property, plant and equipment

     748   

Other long-term assets

     9   

 

Current liabilities

     (102)   

Long-term debt

     (436)   
     $ 269   

 

(1)  

Includes $49 million of cash and cash equivalents.

Any changes from the preliminary amounts will be directly attributable to both the finalization of valuations and revisions to current calculations. The estimated fair values of the assets acquired and liabilities assumed are expected to be finalized during the year.

 

4.    RISK

MANAGEMENT AND FINANCIAL INSTRUMENTS

RISK MANAGEMENT

Brookfield Renewable’s activities expose it to a variety of financial risks, including market risk (i.e., commodity price risk, interest rate risk, and currency risk), credit risk and liquidity risk. Brookfield Renewable and its subsidiaries use financial instruments primarily to manage these risks.

There have been no material changes in exposure to these risks since the audited 2011 annual consolidated financial statements.

FINANCIAL INSTRUMENT DISCLOSURES

The aggregate amount of Brookfield Renewable’s net financial instrument positions are as follows:

 

(MILLIONS)    March 31,
2012
     December 31,
2011
 

Energy derivative contracts

   $ (27)       $ (26)   

Interest rate swaps

     (107)         (88)   
     $ (134)       $ (114)   

Energy derivative contracts

Brookfield Renewable has entered into long-term energy derivative contracts primarily to eliminate the price risk on the sale of future power generation. All energy contracts are recorded in Brookfield Renewable’s interim consolidated financial statements at an amount equal to fair value, using quoted market prices or, in their absence, a valuation model using both internal and third-party evidence and forecasts.

For the three months ended March 31, 2012 an unrealized loss of $1 million was recognized in the statement of income (loss) (2011: $18 million unrealized gain related to energy derivatives with Brookfield Asset Management).

Interest rate swaps

Brookfield Renewable has entered into interest rate swap contracts primarily to minimize exposure to interest rate fluctuations on its variable rate debt or to lock in interest rates on future debt refinancing. All interest rate swap contracts are recorded in the interim consolidated financial statements at an amount equal to fair value.

For the three months ended March 31, 2012, unrealized gains of $17 million and $3 million were recognized in OCI and the statement of income (loss), respectively (2011: unrealized $13 million gain and $nil recognized in OCI and statement of income (loss), respectively).

 

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5.

RELATED PARTY TRANSACTIONS

Brookfield Renewable’s related party transactions are recorded at the exchange amount. Brookfield Renewable’s related party transactions are primarily with Brookfield Asset Management and its subsidiaries.

The following table reflects the related party agreements and transactions on the interim consolidated statements of income (loss):

 

FOR THE THREE MONTHS ENDED MARCH 31

(MILLIONS)

   2012      2011  

Revenues

     

Purchase and revenue support agreements

   $ 139       $   63   

Wind levelization agreement

     (2)         1   
     $   137       $   64   

Direct operating costs

     

Energy purchases

   $ 17       $   11   

Operations, maintenance and administration services

     5         3   

Energy derivative contracts

     4         4   
     $ 26       $   18   

Interest expense

   $ -       $   7   

Management service costs

   $ 7       $   -   

 

6.

EQUITY-ACCOUNTED INVESTMENTS

The following table presents the changes in Brookfield Renewable’s equity-accounted investments:

 

(MILLIONS)    March 31,
2012
     December 31,
2011
 

Balance, beginning of period

   $ 405       $ 269   

Share of net income

     1         10   

Share of OCI

     (4)         (7

Revaluation recognized through OCI

     (17)         136   

Step Acquisition (note 3)

     (63)           -   

Other

     7         (3

Balance, end of period

   $ 329       $ 405   

 

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7.

PROPERTY, PLANT AND EQUIPMENT, AT FAIR VALUE

The change to the net book value of property, plant and equipment, is presented in the following table:

 

(MILLIONS)    Hydroelectric     Wind     Other (1)     Total  

As at December 31, 2010

   $ 11,876      $   1,395      $ 674      $   13,945   

Foreign exchange

     186        33        17        236   

Additions/transfers (2)

     39        988        (197)        830   

Depreciation (3)

     (90     (23     (10     (123)   

As at December 31, 2011

   $ 12,011      $   2,393      $ 484      $   14,888   

 

(1)  

Included in “Other” is land, roads, decommissioning assets, leasehold improvements, gas-fired generating (“co-gen”) units and construction work-in-progress (“CWIP”).

(2)  

Includes acquisitions of $748 million.

(3)  

Assets not subject to depreciation include CWIP and land.

Brookfield Renewable has pledged a significant amount of its property, plant and equipment as collateral for its subsidiary borrowings.

 

8.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The composition of accounts payable and accrued liabilities are as follows:

 

(MILLIONS)   

March 31,

2012

    

December 31,

2011

 

Accounts payable and accrued liabilities

   $ 167       $ 128   

Interest Payable

     89         36   

Unitholders’ distribution and preferred dividends payable

     31         26   
     $ 287       $ 190   

 

9.

DEBT OBLIGATIONS

The composition of debt obligations is presented in the following table:

 

(MILLIONS)   

March 31,

2012

    

December 31,

2011

 

Corporate borrowings

   $ 1,504       $ 1,077   

Unamortized financing fees, net (1)

     (7)         (6)   
     $ 1,497       $ 1,071   

Subsidiary borrowings

   $ 4,502       $ 4,246   

Unamortized financing fees, net (1)

     (43)         (49)   

Current maturities

     (758)         (650)   
     $ 3,701       $ 3,547   

Revolving credit facilities

     

Unsecured corporate facilities

   $ 28       $ 251   
     $ 5,226       $ 4,869   

 

(1)  

Unamortized financing fees are amortized to interest expense over the term of the borrowing.

Corporate borrowings

During the three months ended March 31, 2012, Brookfield Renewable, through a wholly-owned subsidiary, successfully completed a C$400 million offering of medium-term corporate notes bearing interest at an annual rate of 4.79% that are due February 2022. Proceeds of the offerings were used to repay existing indebtedness and for general business purposes.

 

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Subsidiary borrowings

At the date of the investment in wind development and generation assets in California, Brookfield Renewable acquired $436 million of subsidiary borrowings.

Repayments of $293 million made during the three months ended March 31, 2012 were primarily funded from the proceeds of the C$400 million medium-term corporate notes offering.

Revolving credit facilities

 

(MILLIONS)    March 31,
2012
    

December 31,

2011

 

Available revolving credit facilities

   $ 900       $ 601   

Drawings

     (28)         (251)   

Issued letters of credit

     (176)         (160)   

Unutilized revolving credit facilities

   $ 696       $ 190   

Brookfield Renewable expanded its revolving credit facilities from $600 million to $900 million during the first quarter of 2012, and extended the maturity for the new facilities to October 2016.

Net repayments of $223 million during the three months ended March 31, 2012 were primarily funded from the proceeds of the C$400 million medium-term corporate notes offering and cash generated from operating activities.

Brookfield Renewable and its subsidiaries issue letters of credit under the credit facilities for general corporate purposes, which include, but are not limited to, security deposits, performance bonds and guarantees for debt service reserve accounts.

 

10.

INCOME TAXES

Brookfield Renewable’s effective income tax rate was 38% for the three months ended, March 31, 2012 (2011: 25%). The effective tax rate for the three months ended, March 31, 2012 is in excess of the statutory rate primarily due to losses for which Brookfield Renewable cannot record a tax benefit. The loss on the Fund unit liability for the three months ended, March 31, 2011 represents an amount for which Brookfield Renewable does not receive a tax benefit. This loss decreased accounting income before income taxes, therefore creating a higher effective income tax rate for the three months ended, March 31, 2011. Subsequent to the Combination the terms of the newly-issued partnership units do not contain a redemption feature that requires a Fund unit liability to be calculated.

During the three months ended March 31, 2011 the income tax recovery in OCI included $175 million related to the effect of changes in tax rates in revaluation surplus due to a reorganization that reduced the applicable income tax rate.

 

11.

PARTNERSHIP EQUITY

Brookfield Renewable’s capital structure is comprised of two classes of Partnership units: general partnership units and limited partnership units.

BRELP, a subsidiary of Brookfield Renewable has issued redeemable partnership units held 100% by Brookfield Asset Management, which may, at the request of the holder, require BRELP to redeem the units for cash consideration after a mandatory two-year holding period from the date of issuance. The right is subject to Brookfield Renewable’s right of first refusal which entitle it, at its sole discretion, to elect to acquire all of the units so tendered for redemption to BRELP in exchange for Brookfield Renewable units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with limited partnership units, the BRELP redeemable partnership units are classified as limited partnership units of Brookfield Renewable.

As at March 31, 2012, partnership units outstanding were 262,485,747, assuming the exchange of all redeemable limited partnership units discussed above, and one general partnership unit.

During the quarter, unitholder distributions were increased to $1.38 per unit, on an annualized basis, representing an increase of three cents per unit per year. The first distribution was paid in April 2012.

 

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For the three months ended March 31, 2012, Brookfield Renewable declared distributions of $90 million or $0.345 per limited partnership unit (for the three months ended December 31, 2011: $0.3375 per limited partnership unit). For the three months ended, March 31, 2011 the Fund recorded distributions of $35 million, consisting of $11 million to BRPI and $24 million to public unitholders of the Fund and Brookfield Renewable recorded a mark-to-market loss of $92 million on the Fund unit liability.

A Distribution Re-investment Plan was also implemented during the three months ended March 31, 2012, allowing holders of limited partnership units who are resident in Canada to acquire additional units by reinvesting all or a portion of their cash distributions without paying commissions.

 

12.

SUBSIDIARY PUBLIC ISSUERS

In March 2010, Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”) issued 10 million Series 1 preferred shares at a price of C$25 per share. The holders of the Series 1 preferred shares are entitled to receive fixed cumulative dividends at an annual rate of C$1.3125 per share, a yield of 5.25% for the initial five-year period ending April 30, 2015. The dividend rate will reset on April 30, 2015 and every five years thereafter at a rate equal to the then five-year Government of Canada Bond yield plus 2.62%. Brookfield Renewable, BRELP and certain key holding company subsidiaries fully and unconditionally guarantee the payment of dividends on the preferred shares, the amounts due on redemption, and the amounts due on the liquidation, dissolution or winding-up of BRP Equity. For the three months ended March 31, 2012, dividends declared on the Series 1 preferred shares were $3 million (2011: $3 million).

As a result of the Combination, Brookfield Renewable created BRP Finance ULC (“BRP Finance”) to contractually assume BRPI’s term notes with maturities ranging from 2016 and 2036 with a principal value of approximately C$1.1 billion. BRP Finance assumed these term notes, including accrued interest, in exchange for an interest-bearing demand promissory note issued by another wholly-owned subsidiary of Brookfield Renewable. The term notes payable by BRP Finance are unconditionally guaranteed by Brookfield Renewable, BRELP and certain other subsidiaries. During the quarter, BRP Finance issued C$400 million of 10-year term notes bearing interest at a rate of 4.79% per annum.

The following tables set forth certain consolidated summary financial information for Brookfield Renewable, BRP Equity, and BRP Finance:

 

(MILLIONS)   Brookfield
Renewable
(1)
    BRP Equity     BRP Finance     Consolidating
adjustments
(2)
   

Brookfield

Renewable
consolidated

 

For the three months ended March 31, 2012:

  

     

Revenue

  $ 426      $ -      $ -      $ -      $ 426   

Net income (loss)

    32        -        (1)        -        31   

For the three months ended March 31, 2011:

  

     

Revenue

  $ 293      $ -      $ -      $ -      $ 293   

Net loss

    (93)        -        -        -        (93)   

As at March 31, 2012:

         

Current assets

  $ 690      $ -      $ 1,532      $ (1,539)      $ 683   

Long-term assets

    15,902        251        -        (268)        15,885   

Current liabilities

    (2,773)        (9)        (28)        1,540        (1,270)   

Long-term liabilities

    (6,629)        -        (1,498)        244        (7,883)   

Participating non-controlling interests

    (760)        -        -        -        (760)   

Preferred equity

    -        (247)        -        -        (247)   

As at December 31, 2011:

         

Current assets

  $ 678      $ -      $ 1,087      $ (1,087)      $ 678   

Long-term assets

    15,024        244        -        (238)        15,030   

Current liabilities

    (2,148)        (8)        (9)        1,087        (1,078)   

Long-term liabilities

    (6,597)        -        (1,071)        238        (7,430)   

Participating non-controlling interests

    (629)        -        -        -        (629)   

Preferred equity

    -        (241)        -        -        (241)   

 

(1)  

Includes subsidiaries of Brookfield Renewable other than BRP Equity and BRP Finance.

(2)  

Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a consolidated basis.

 

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13.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following is a reconciliation of Brookfield Renewable’s accumulated other comprehensive income (“AOCI”) attributable to the limited partners’ equity:

 

(MILLIONS)    Foreign
currency
translation
     Revaluation
surplus
     Cash flow
hedges
     Total  

Balance, December 31, 2011

   $ 387       $ 6,019       $ (62)       $   6,344   

OCI

     118         (3)         19         134   

Transfer to limited partners’ equity (note 3)

     -         (5)         -         (5)   

Income taxes

     -         12         (7)         5   

Balance, March 31, 2012

   $ 505       $ 6,023       $ (50)       $ 6,478   

During the three months ended March 31, 2012, a gain of $1 million relating to cash flow hedges was realized and was reclassified from OCI to net income (loss) (2011: $1 million gain).

 

14.

SEGMENTED INFORMATION

Brookfield Renewable operates mostly renewable power assets, which include conventional hydroelectric generating assets located in the United States, Canada and Brazil, a pumped storage hydroelectric facility located in the United States and wind farms located in Canada and the United States. Brookfield Renewable also operates two co-gen facilities, one in Canada and one in the United States. Management evaluates the business based on the type of power generation (Hydroelectric, Wind and Other). Hydroelectric and wind are further evaluated by major region (United States, Canada and Brazil). “Equity-accounted investments” includes Brookfield Renewable’s interest in hydroelectric facilities. The “Other” segment includes co-gen facilities, CWIP and corporate costs.

In accordance with IFRS 8, Operating Segments, Brookfield Renewable discloses information about its reportable segments based upon the measures used by management in assessing performance. The accounting policies of the reportable segments are the same as those described in Note 2 of the audited 2011 consolidated financial statements. Brookfield Renewable analyzes the performance of its operating segments based on revenues, earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”), and funds from operations (“FFO”). Adjusted EBITDA consists of 100% of revenues less direct costs (including energy marketing costs), plus Brookfield Renewable’s share of cash earnings from equity-accounted investments, before interest, current income taxes, depreciation, amortization and management service costs. FFO is defined as Adjusted EBITDA less interest, current income taxes and management service cost, which is then adjusted for the cash portion of non-controlling interests included in FFO. Transactions between the reportable segments occur at fair value.

 

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       Conventional Hydroelectric      Wind                    
(MILLIONS)    United States      Canada      Brazil      United States      Canada      Other      Total  

For the three months ended March 31, 2012:

                    

Revenues

   $ 164       $ 100       $ 91       $ 7       $ 44       $ 20       $ 426   

Adjusted EBITDA

     130         83         68         5         39         (7)         318   

Interest expense - borrowings

     (34)         (17)         (31)         -         (10)         (18)         (110)   

FFO prior to non-controlling interests

     94         66         33         5         29         (32)         195   

Cash portion of non-controlling interests

     (11)         -         (3)         (3)         -         (3)         (20)   

FFO

     83         66         30         2         29         (35)         175   

Depreciation and amortization

     (32)         (24)         (42)         (4)         (19)         (5)         (126)   

For the three months ended March 31, 2011:

                    

Revenues

   $ 123       $ 54       $ 79       $ -       $ 16       $ 21       $ 293   

Adjusted EBITDA

     95         40         61         -         14         5         215   

Interest expense - borrowings

     (37)         (17)         (21)         -         (6)         (16)         (97)   

FFO prior to non-controlling interests

     57         23         37         -         8         (11)         114   

Cash portion of non-controlling interests

     (4)         -         (4)         -         -         (3)         (11)   

FFO

     53         23         33         -         8         (14)         103   

Depreciation and amortization

     (31)         (35)         (32)         -         (8)         (4)         (110)   

The following table reconciles Adjusted EBITDA and FFO, presented in the above tables, to net income (loss) as presented in the interim consolidated statements of income (loss):

 

FOR THE THREE MONTHS ENDED MARCH 31

(MILLIONS)

   2012      2011  

Revenues

   $ 426       $ 293   

Other Income

     5         4   

Share of cash earnings from equity-accounted investments

     4         6   

Direct operating costs

     (117)         (88)   

Adjusted EBITDA

   $ 318       $ 215   

Interest expense - borrowings

     (110)         (97)   

Management service costs

     (7)         -   

Current income taxes

     (6)         (4)   

Funds from operations prior to non-controlling interests

     195         114   

Less: cash portion of non-controlling interest

     (20)         (11)   

FFO

     175         103   

Add: cash portion of non-controlling interests

     20         11   

Depreciation and amortization

     (126)         (110)   

Unrealized financial instrument (loss) gain

     (9)         18   

Loss on Fund unit liability

     -         (116)   

Share of non-cash loss from equity-accounted investments

     (3)         (8)   

Deferred income tax expense

     (13)         -   

Other

     (13)         9   

Net income (loss)

   $ 31       $ (93)   

 

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      Conventional Hydroelectric     Wind                          
(MILLIONS)   United
States
    Canada     Brazil     United
States
    Canada     Equity-
accounted
investments
    Other     Total  

As at March 31, 2012:

               

Property, plant and equipment

  $ 4,517      $ 4,945      $ 2,669      $ 1,047      $ 1,417      $ -      $ 293      $ 14,888   

Additions to property, plant and equipment

    5        2        6        814        -        -        -        827   

Total assets

    4,887        5,128        3,025        1,126        1,448        329        625        16,568   

Total borrowings

    1,848        950        389        659        614        -        1,524        5,984   

Total liabilities

    3,002        2,103        612        728        926        -        1,782        9,153   
                 

As at December 31, 2011:

               

Property, plant and equipment

  $ 4,547      $ 4,908      $ 2,626      $ 57      $ 1,343      $ -      $ 464      $ 13,945   

Additions to property, plant and equipment

    136        46        210        397        2        -        238        1,029   

Total assets

    5,064        5,139        2,963        97        1,218        405        822        15,708   

Total borrowings

    1,838        928        645        164        621        -        1,323        5,519   

Total liabilities

    3,008        2,098        869        176        894        -        1,463        8,508   

 

15.

COMMITMENT, CONTINGENCIES AND GUARANTEES

Commitments

In the course of its operations, Brookfield Renewable and its subsidiaries has entered into agreements for the use of water, land and/or dams. Payment under those agreements varies with the amount of power generated. The various agreements are renewable and extend up to 2054.

Contingencies

Brookfield Renewable and its subsidiaries are subject to various legal proceedings, arbitrations and actions arising in the normal course of business. While the final outcome of such legal proceedings and actions cannot be predicted with certainty, it is the opinion of management that the resolution of such proceedings and actions will not have a material impact on Brookfield Renewable’s consolidated financial position or results of operations.

Guarantees

Brookfield Renewable, on behalf of Brookfield Renewable’s subsidiaries, provided letters of credit, which include, but are not limited to, guarantees for debt service reserves, capital reserves, construction completion and performance. The activity on the issued letters of credit can be found in Note 9: Debt Obligations.

In the normal course of operations, Brookfield Renewable and its subsidiaries execute agreements that provide for indemnification and guarantees to third parties of transactions such as business dispositions, capital project purchases, business acquisitions, and sales and purchases of assets and services. Brookfield Renewable has also agreed to indemnify its directors and certain of its officers and employees. The nature of substantially all of the indemnification undertakings prevents Brookfield Renewable from making a reasonable estimate of the maximum potential amount that Brookfield Renewable could be required to pay third parties as the agreements do not always specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, neither Brookfield Renewable nor its subsidiaries have made significant payments under such indemnification agreements.

 

16.

SUBSEQUENT EVENTS

Registration with the Securities Exchange Commission (“SEC”)

On April 30, 2012 Brookfield Renewable filed a registration statement with the SEC in connection with an anticipated listing on the New York Stock Exchange.

 

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Pumped storage facility refinancing

In May 2012, Brookfield Renewable refinanced indebtedness associated with its hydroelectric pumped storage facility in New England, of which Brookfield Renewable owns 50%, through a $125 million loan for a term of five years at a rate of London Interbank Offered Rate + 2.25%.

 

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Unaudited Pro Forma Condensed Combined Statements of (Loss)

Income for the Years Ended December 31, 2011 and 2010

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

 

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     PAGE  

Unaudited Pro Forma Condensed Combined Statements of (Loss) Income -
For the years ended December 31, 2011 and 2010

     F-78-F-79   

Notes to the Unaudited Pro Forma Condensed Combined Statements of (Loss) Income

     F-80-F-82   

 

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The unaudited pro forma condensed combined statements of (loss) income of Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) adjusts the audited consolidated statements of (loss) income of Brookfield Renewable for the years ended December 31, 2011 and 2010 to give effect to the following transactions that occurred on November 28, 2011 as if each occurred as of January 1, 2010:

 

   

the transfer of the Brookfield Renewable Power Division (the “Division”) and related transactions including the assumption of the term notes of Brookfield Renewable Power Inc. (“BRPI”) and the preferred shares of Brookfield Renewable Power Preferred Equity Inc. and the issuance by a holding entity of preferred shares to BRPI;

   

the transfer to Brookfield Renewable of the 66% ownership interest in Brookfield Renewable Power Fund (the “Fund”) not previously owned by the Division at fair value satisfied by the issuance of limited partnership units of Brookfield Renewable (the “LP Units”) and the subsequent dissolution of the Fund into an indirect, wholly-owned subsidiary of Brookfield Renewable. The result of this transaction is to reflect the settlement of the Fund unit liability and the issuance of LP Units as equity and to reflect a reduction in deferred tax balances of certain subsidiaries due to the dissolution of the Fund;

   

the amendment of the Power Purchase Agreement between BRPI and Brookfield Renewable Power Trust (“BRPT”) to increase the price paid for energy generated from the facilities owned by Great Lakes Power Limited (“GLPL”), a subsidiary of BRPT, from C$68 per megawatt hour (“MWh”) to C$82 per MWh. As a result of this amendment, energy revenues generated by facilities owned by GLPL will be increased;

   

the amendment of the Master Power Purchase and Sale Agreement between Brookfield Energy Marketing LP (“BEM LP”) and Mississagi Power Trust (“MPT”) to increase the price paid for energy from the facilities from C$68 per MWh to C$103 per MWh. As a result of this amendment, energy revenues generated by facilities owned by MPT will be increased;

   

the execution of an Energy Revenue Agreement between BEM LP and Brookfield Power US Holding America Co. (“BPUSHA”) to support the price for energy delivered by certain facilities in the United States at $75 per MWh. The contract price effectively replaces the market prices realized by BPUSHA for generation at these facilities;

   

changes in the fair value of certain facilities arising from the contract amendments and new agreement referred to above and changes in the accounting for certain power purchase agreements between the Division and BRPI;

   

the entry into a Master Services Agreement with Brookfield Asset Management Inc. (“Brookfield”) and an Energy Marketing Agreement with BEM LP; and

   

The settlement of certain intercompany balances with BRPI and its subsidiaries.

The unaudited pro forma condensed combined statements of (loss) income have been prepared based upon currently available information and assumptions deemed appropriate by management. The unaudited pro forma condensed combined statements of (loss) income are provided for information purposes only and may not be indicative of the results that would have occurred if the above transactions had been effected on January 1, 2010.

All financial data in these unaudited pro forma condensed combined statements of (loss) income is presented in U.S. dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 

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Unaudited Pro Forma Condensed Combined Statement of (Loss) Income

For the Year Ended December 31, 2011

$US Millions

 

 

 
   

Brookfield

Renewable

Consolidated

   

Transfer
of BRPF
Units

4(ii)

    Power
Purchase
Agreements
4(iii)
   

Financial

Instruments

4(iv)

   

Change in
depreciation
expense

4(v)

   

Management
service
agreements

4(vi)

   

Intercompany
settlements

4(vii)

   

Income
taxes

4(viii)

    Pro Forma  

 

 

Revenues

    $1,169        $     -        $140        $   -        $   -        $     -        $   -        $     -        $1,309   

Other income

    19                      19   

Share of cash earnings in equity-accounted investments

    23                      23   

Direct operating costs

    (407)                (18)            (425)   

Interest expense-borrowings

    (411)                      (411)   

Management service costs

    (1)                (21)            (22)   

Current income taxes

    (22)                      (22)   

 

 

Funds from operations prior to non-controlling interests

    $   370        $     -        $140        $   -        $   -        $(39)        $   -        $     -        $  471   

Other items

                 

Depreciation and amortization

    (468)              4              (464)   

Unrealized financial instruments losses

    (20)            20                -   

Loss on Fund unit liability

    (376)        376                    -   

Share of non-cash loss in equity-accounted investments

    (13)                      (13)   

Deferred income tax recovery

    50                    (37)        13   

Other

    6                  19          25   

 

 

Net (loss) income

    $ (451)        $376        $140        $20        $ 4        $(39)        $19        $(37)        $    32   

Net (loss) income attributable to

                 

Non-controlling interests

                 

Participating non-controlling interests

    11                      11   

Preferred equity

    13                      13   

Limited partners

    (475)        376        140        20        4        (39)        19        (37)        8   

 

 

Net (loss) income

    $   (451)        $376        $140        $20        $ 4        $(39)        $19        $(37)        $    32   

 

 

Basic and diluted earnings (loss) per share

    $(1.80)                      $0.03   

 

 

 

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Unaudited Pro Forma Condensed Combined Statement of (Loss) Income

For the Year Ended December 31, 2010

$US Millions

 

 

 
   

Brookfield

Renewable

Consolidated

   

Transfer
of
Division

4(i)

   

Transfer
of BRPF
Units

4(ii)

    Power
Purchase
Agreements
4(iii)
   

Financial

Instruments
4(iv)

   

Change in
depreciation
expense

4(v)

   

Management
service
agreements

4(vi)

   

Intercompany
settlements

4(vii)

   

Income
taxes

4(viii)

    Pro Forma  

 

 

Revenues

    $1,045        -        $    -        $120        $       -        $   -        $     -        $   -        $   -        $1,165   

Other income

    12                                                                        12   

Share of cash earnings in equity-accounted investments

    22                        22   

Direct operating costs

    (328)                  (18)            (346)   

Interest expense-borrowings

    (404)                        (404)   

Management service costs

    -                  (21)            (21)   

Current incom e taxes

    (32)                        (32)   

 

 

Funds from operations prior to non-controlling interests

    $    315        -        $    -        $120        $       -        $   -        $(39)        $   -        $   -        $   396   

Other items

                   

Depreciation and amortization

    (446)                25              (421)   

Unrealized financial instruments gains (losses)

    584              (606)                (22)   

Loss on Fund unit liability

    (159)          159                    -   

Share of non-cash loss in equity-accounted investments

    (7)                        (7)   

Deferred income tax recovery

    3                      106        109   

Other

    4                    27          31   

 

 

Net (loss) income

    $    294        -        $159        $120        $(606)        $25        $(39)        $27        $106        $     86   

Net (loss) income attributable to

                   

Non-controlling interests

                   

Participating non-controlling interests

    25                        25   

Preferred equity

    10                        10   

Common parent

    259        (259)                      -   

Limited partners

    -        259        159        120        (606)        25        (39)        27        106        51   

 

 

Net income

    $    294        $     -        $159        $120        $(606)        $25        $(39)        $27        $106        $     86   

 

 

Basic and diluted earnings per share

    $   0.98                        $  0.19   

 

 

 

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF (LOSS) INCOME

1. NATURE AND DESCRIPTION OF BROOKFIELD RENEWABLE

Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) was created to facilitate a corporate reorganization (the “Combination”) of the renewable power operations of Brookfield Renewable Power Inc. (“BRPI”). BRPI is a wholly-owned subsidiary of Brookfield Asset Management Inc. (“Brookfield Asset Management”). The Combination has resulted in Brookfield Renewable’s acquisition of BRPI’s renewable power operations (including the assumption of BRPI’s term notes with maturities ranging from 2016 to 2036 (the “BRPI Bonds”) and the preferred shares of Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”), the acquisition of the outstanding fund units of Brookfield Renewable Power Fund (the “Fund”) not previously owned by BRPI, the dissolution of the Fund and the execution or amendment of certain agreements described in Note 4. As a result of the Combination, Brookfield Asset Management held, directly or indirectly, approximately a 73% limited partnership interest on a fully exchanged basis and a 0.01% general partnership interest in Brookfield Renewable.

Brookfield Renewable was formed as a limited partnership established under the laws of Bermuda, pursuant to a limited partnership agreement dated June 27, 2011. In connection with the Combination, an amended and restated limited partnership agreement (the “Partnership Agreement”) dated November 20, 2011 has replaced the initial limited partnership agreement in its entirety. Brookfield Renewable and its subsidiaries are collectively referred to as “Brookfield Renewable Group”.

The registered office of Brookfield Renewable is Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

2. BASIS OF PRESENTATION

Brookfield Renewable’s unaudited pro forma condensed combined statements of income (loss) for the years ended December 31, 2011 and 2010 have been prepared assuming the transactions described above had each occurred as of January 1, 2010. The pro forma adjustments are described in Note 4 and are based upon currently available information and certain assumptions made.

Brookfield Renewable’s unaudited pro forma condensed combined statements of (loss) income have been prepared using the audited consolidated financial statements of Brookfield Renewable for the years ended December 31, 2011 and 2010.

The unaudited pro forma condensed combined statements of (loss) income have been prepared for informational purposes only and should be read in conjunction with the audited consolidated financial statements of Brookfield Renewable for the years ended December 31, 2011 and 2010 described above and the related disclosures used to prepare these statements. The preparation of these unaudited pro forma condensed combined statements of (loss) income requires management to make estimates and assumptions deemed appropriate. The unaudited pro forma condensed combined statements of (loss) income are not intended to present or be indicative of the results of operations that would have occurred if the transactions described above had been effected on the dates indicated.

3. SIGNIFICANT ACCOUNTING POLICIES

Brookfield Renewable presents its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The accounting policies used in the preparation of Brookfield Renewable’s unaudited pro forma condensed combined statements of (loss) income are those that are set out in Brookfield Renewable’s audited financial statements for the years ended December 31, 2011 and 2010.

4. PRO FORMA ADJUSTMENTS

To give effect to the transactions below resulting from the Combination as if they had occurred on January 1, 2010, the unaudited pro forma condensed combined financial statements of (loss) income of Brookfield Renewable for the years ended December 31, 2011 and 2010 were adjusted accordingly. The unaudited pro forma condensed combined statements of (loss) income for the years ended December 31, 2011 and 2010 adjust the consolidated statements of (loss) income of Brookfield Renewable for the years ended December 31, 2011 and 2010 to give effect to the following transactions discussed in these notes.

 

   

Transfer of the Brookfield Renewable Power Division (the “Division”)

   

Transfer of Fund units

   

Amendment and execution of power purchase agreements

   

Changes in fair value of property, plant and equipment

   

Settlement of intercompany transactions

   

Execution of management service agreements

 

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The unaudited pro forma condensed combined statements of (loss) income reflect the deferred tax adjustments arising from the above transactions and the computation of income per unit based on the units issued in connection with the transactions described in (i) and (ii) below and the terms of the Partnership Agreement.

The unaudited pro forma condensed combined statements of income (loss) do not reflect the impact of potential cost savings and other synergies.

 

(i)

Transfer of the Division

Through a series of transactions, BRPI has transferred the Division to Brookfield Renewable Energy L.P. (“BRELP”), in return for the issuance of limited partnership units of Brookfield Renewable (the “LP Units”) and redeemable partnership units of BRELP (the “Redeemable Partnership Units”). The transfer of the Division includes all of BRPI’s renewable power operations and the assumption of the BRPI Bonds and the preferred shares of BRP Equity.

BRPI owns the general partner of BRELP (the “BRELP General Partner”). Brookfield Renewable has entered into a voting agreement with BRPI to provide Brookfield Renewable with control of the BRELP General Partner and BRELP. Accordingly, Brookfield Renewable consolidates the accounts of BRELP and its subsidiaries.

BRPI has provided $5 million of working capital funding through a subscription for preferred shares of a subsidiary of BRELP (“Bermuda Holdco”). The impact of the preferred share dividends on the unaudited pro forma condensed combined statements of (loss) income is not material.

 

(ii)

Transfer of Brookfield Renewable Power Fund Units

The transfer of the 66% of the Fund units not previously owned by Brookfield Asset Management and its subsidiaries (collectively, “Brookfield”) was completed at fair value satisfied by the issuance of LP Units. The result of this transaction is to reflect the settlement of the Fund unit liability and the issuance of LP Units to satisfy the transfer as equity of Brookfield Renewable. As a result of this transaction, the loss on Fund unit liability of $376 million (2010: $159 million) related to the change in fair value of the units and the distributions made on such Fund units was eliminated. Subsequent to the transfer of the Fund units, the Fund was dissolved into a subsidiary of BRELP.

 

(iii)

Power Purchase Agreements

Pro forma income reflects an amendment to the power purchase agreement between Brookfield and an indirect wholly-owned subsidiary of Brookfield Renewable (the “GLPL PPA”). Under the amendment, Brookfield has agreed to guarantee the price of electricity generated by facilities owned by Great Lakes Power Limited, a subsidiary of Brookfield Renewable, at C$82 per MWh. This price is to be increased annually on January 1 by an amount equal to forty percent (40%) of the increase in the consumer price index during the previous calendar year.

In a separate transaction, Brookfield Energy Marketing LP (“BEM LP”) and Mississagi Power Trust (“MPT”), an indirect wholly-owned subsidiary of Brookfield Renewable, agreed to an amendment to the existing Master Power Purchase and Sale Agreement (the Mississagi PPA”) to adjust the price of electricity purchased to C$103 per MWh. This price is to be increased annually by an amount equal to twenty percent (20%) of the increase in the consumer price index during the previous calendar year.

Additionally, BEM LP and Brookfield Power U.S. Holding America Co. (“BPUSHA”), an indirect wholly-owned subsidiary of Brookfield Renewable, agreed to an Energy Revenue Agreement under which BEM LP will guarantee the price for energy delivered by certain facilities in the United States at $75 per MWh. This price is to be increased annually on January 1 by an amount equal to forty percent (40%) of the increase in the consumer price index during the previous calendar year, but not exceeding an increase of three percent (3%) in any calendar year. In conjunction with the Energy Revenue Agreement, BEM LP and each of the owners of the facilities entered into power agency agreements (the “Power Agency Agreements”) under which BEM LP will provide certain services. BEM LP will be entitled to be reimbursed for any third party costs incurred and, except in a few cases, receives no additional fee for its services under the Power Agency Agreements.

The impacts of these contract price amendments and agreements are summarized as follows:

 

 

 
     2011      2010  

 

 
For the year ended, December 31    Actual
generation
(GWh)
     Incremental
Revenue
     Actual
generation
(GWh)
     Incremental
Revenue
 

 

 

GLPL PPA

     964       $ 13         997       $ 13   

Mississagi PPA

     473         17         412         14   

Energy Revenue Agreements

     3,512         110         3,470         93   

 

 
     4,949       $ 140         4,879       $ 120   

 

 

 

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(iv)

Changes in Fair Value of Property, Plant and Equipment

Prior to November 28, 2011 certain power guarantee agreements between Brookfield Renewable and Brookfield were accounted for as financial instruments with an unrealized loss of $20 million (2010: $606 million unrealized gain).

As a result of new agreements and changes in existing agreements with Brookfield and its subsidiaries arising from the Combination, the contracts are not accounted for as financial instruments by Brookfield Renewable. Thus the unrealized financial instrument gains have been eliminated.

The amendments and agreements discussed in (iii) above and the change in accounting for the contracts discussed above resulted in changes in the fair value of the related power generating assets using the revaluation method since the fair value of such assets are determined using a discounted cash flow model.

 

(v)

Change in Depreciation Expense

The reduction in fair value of the power generating assets discussed in (iv) above results in a decrease in pro forma depreciation expense of $4 million for the year ended December 31, 2011 (2010: $25 million).

 

(vi)

Management Service Agreements

The unaudited pro forma condensed combined statements of (loss) income reflect an exclusive agreement with Brookfield to provide operating, management and consulting services to Brookfield Renewable Group (the “Master Services Agreement”) for a management service fee. The fee will be paid on a quarterly basis and will continue in perpetuity. The fee has a fixed quarterly component of $5 million and a variable component calculated as a percentage of the increase in the total capitalization value of Brookfield Renewable, as defined. Brookfield Renewable Group is also required to reimburse Brookfield for out-of-pocket costs incurred to provide required services to Brookfield Renewable Group. For the year ended December 31, 2011 pro forma results reflect an expense of $21 million (2010: $21 million) related to the Master Services Agreement.

In addition to the Management Service Agreement, the unaudited pro forma condensed combined statements of (loss) income reflect an agreement with BEM LP to provide energy marketing services (the “Energy Marketing Agreement”). Brookfield Renewable Group will pay an annual marketing service fee of $18 million to BEM LP. The fee will be increased annually on January 1 by an amount equal to the increase in the U.S. consumer price index during the previous calendar year. Pro forma results for the year ended December 31, 2011 reflect an expense of $18 million (2010: $18 million) related to the Energy Marketing Agreement.

 

(vii)

Intercompany Settlements

Brookfield Renewable Group and its subsidiaries settled certain intercompany loans and transactions with Brookfield upon completion of the Combination. During the year ended December 31, 2011, $19 million (2010: $27 million) of interest expense was recorded in the pro forma statements of (loss) income to reflect these transactions.

 

(viii)

Deferred Income Taxes

The unaudited pro forma condensed combined statements of (loss) income reflect a decrease in deferred income tax recovery of $37 million for the year ended December 31, 2011 (2010: $106 million increase).

 

(ix)

Earnings (loss) per share

Pro forma earnings (loss) per share have been calculated based on the 262.5 million units outstanding on a fully-exchanged basis.

 

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Unaudited Pro Forma Condensed Combined Statement of (Loss) Income for the Three Months Ended March 31, 2011

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

 

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     PAGE  

Unaudited Pro Forma Condensed Combined Statement of (Loss) Income -
For the three months ended March 31, 2011

     F-86   

Notes to the Unaudited Pro Forma Condensed Combined Statement of (Loss) Income

     F-87-F-89   

 

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The unaudited pro forma condensed combined statement of (loss) income of Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) adjusts the unaudited consolidated statement of loss of Brookfield Renewable for the three months ended March 31, 2011 to give effect to the following transactions that occurred on November 28, 2011 as if each occurred as of January 1, 2010:

 

   

the transfer of the Brookfield Renewable Power Division (the “Division”) and related transactions including the assumption of the term notes of Brookfield Renewable Power Inc. (“BRPI”) and the preferred shares of Brookfield Renewable Power Preferred Equity Inc. and the issuance by a holding entity of preferred shares to BRPI;

   

the transfer to Brookfield Renewable of the 66% ownership interest in Brookfield Renewable Power Fund (the “Fund”) not previously owned by the Division at fair value satisfied by the issuance of limited partnership units of Brookfield Renewable (the “LP Units”) and the subsequent dissolution of the Fund into an indirect, wholly-owned subsidiary of Brookfield Renewable. The result of this transaction is to reflect the settlement of the Fund unit liability and the issuance of LP Units as equity and to reflect a reduction in deferred tax balances of certain subsidiaries due to the dissolution of the Fund;

   

the amendment of the Power Purchase Agreement between BRPI and Brookfield Renewable Power Trust (“BRPT”) to increase the price paid for energy generated from the facilities owned by Great Lakes Power Limited (“GLPL”), a subsidiary of BRPT, from C$68 per megawatt hour (“MWh”) to C$82 per MWh. As a result of this amendment, energy revenues generated by facilities owned by GLPL will be increased;

   

the amendment of the Master Power Purchase and Sale Agreement between Brookfield Energy Marketing LP (“BEM LP”) and Mississagi Power Trust (“MPT”) to increase the price paid for energy from the facilities from C$68 per MWh to C$103 per MWh. As a result of this amendment, energy revenues generated by facilities owned by MPT will be increased;

   

the execution of an Energy Revenue Agreement between BEM LP and Brookfield Power US Holding America Co. (“BPUSHA”) to support the price for energy delivered by certain facilities in the United States at $75 per MWh. The contract price effectively replaces the market prices realized by BPUSHA for generation at these facilities;

   

changes in the fair value of certain facilities arising from the contract amendments and new agreement referred to above and changes in the accounting for certain power purchase agreements between the Division and BRPI;

   

the entry into a Master Services Agreement with Brookfield Asset Management Inc. (“Brookfield”) and an Energy Marketing Agreement with BEM LP; and

   

the settlement of certain intercompany balances with BRPI and its subsidiaries.

The unaudited pro forma condensed combined statement of (loss) income has been prepared based upon currently available information and assumptions deemed appropriate by management. The unaudited pro forma condensed combined statement of (loss) income is provided for information purposes only and may not be indicative of the results that would have occurred if the above transactions had been effected on January 1, 2010.

All financial data in the unaudited pro forma condensed combined statement of (loss) income is presented in U.S. dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 

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Unaudited Pro Forma Condensed Combined Statement of (Loss) Income

For the Three Months Ended March 31, 2011

$US Millions

 

 

 
   

Brookfield

Renewable

Consolidated

   

Transfer
of BRPF
Units

4(ii)

    Power
Purchase
Agreements
4(iii)
   

Financial

Instruments

4(iv)

   

Change in
depreciation
expense

4(v)

   

Management
service
agreements

4(vi)

   

Intercompany
settlements

4(vii)

   

Income
taxes

4(viii)

    Pro Forma  

 

 

Revenues

    $   293        $    -        $29        $    -        $ -        $     -        $  -        $  -        $  322   

Other income

    4                      4   

Share of cash earnings in equity-accounted investments

    6                      6   

Direct operating costs

    (88)                (5)            (93)   

Interest expense-borrowings

    (97)                      (97)   

Management service costs

    -                (5)            (5)   

Current income taxes

    (4)                      (4)   

 

 

Fund from operations prior to non-controlling interests

    $   114        $     -        $29        $    -        $ -        $(10)        $  -        $  -        $  133   

Other items

                 

Depreciation and amortization

    (110)              1              (109)   

Unrealized financial instruments gains

    18            (18)                -   

Loss on Fund unit liability

    (116)        116                    -   

Share of non-cash loss in equity-accounted investments

    (8)                      (8)   

Deferred income tax recovery

    -                    2        2   

Other

    9                  7          16   

 

 

Net (loss) income

    $   (93)        $116        $29        $(18)        $1        $(10)        $  7        $  2        $   34   

Net (loss) income attributable to:

                 

Non-controlling interests

                 

Participating non-controlling interests

    (6)                      (6)   

Preferred equity

    3                      3   

Limited partners

    (90)        116        29        (18)        1        (10)        7        2        37   

 

 

Net (loss) income

    $    (93)        $116        $29        $(18)        $1        $(10)        $  7        $  2        $   34   

 

 

Basic and diluted (loss) earnings per share

    $(0.34)                      $0.14   

 

 

 

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF (LOSS) INCOME

1. NATURE AND DESCRIPTION OF BROOKFIELD RENEWABLE

Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) was created to facilitate a corporate reorganization (the “Combination”) of the renewable power operations of Brookfield Renewable Power Inc. (“BRPI”). BRPI is a wholly-owned subsidiary of Brookfield Asset Management Inc. (“Brookfield Asset Management”). The Combination has resulted in Brookfield Renewable’s acquisition of BRPI’s renewable power operations (including the assumption of BRPI’s term notes with maturities ranging from 2016 to 2036 (the “BRPI Bonds”) and the preferred shares of Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”), the acquisition of the outstanding fund units of Brookfield Renewable Power Fund (the “Fund”) not previously owned by BRPI, the dissolution of the Fund and the execution or amendment of certain agreements described in Note 4. As a result of the Combination, Brookfield Asset Management held, directly or indirectly, approximately a 73% limited partnership interest on a fully exchanged basis and a 0.01% general partnership interest in Brookfield Renewable.

Brookfield Renewable was formed as a limited partnership established under the laws of Bermuda, pursuant to a limited partnership agreement dated June 27, 2011. In connection with the Combination, an amended and restated limited partnership agreement (the “Partnership Agreement”) dated November 20, 2011 has replaced the initial limited partnership agreement in its entirety. Brookfield Renewable and its subsidiaries are collectively referred to as “Brookfield Renewable Group”.

The registered office of Brookfield Renewable is Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

2. BASIS OF PRESENTATION

Brookfield Renewable’s unaudited pro forma condensed combined statement of (loss) income for the three months ended March 31, 2011 has been prepared assuming the transactions described above had each occurred as of January 1, 2010. The pro forma adjustments are described in Note 4 and are based upon currently available information and certain assumptions made.

Brookfield Renewable’s unaudited pro forma condensed combined statement of (loss) income has been prepared using the unaudited consolidated statement of loss of Brookfield Renewable for the three months ended March 31, 2011.

The unaudited pro forma condensed combined statement of (loss) income has been prepared for informational purposes only and should be read in conjunction with the unaudited consolidated financial statement of Brookfield Renewable for the three months ended March 31, 2011 described above and the related disclosures used to prepare this statement. The preparation of this unaudited pro forma condensed combined statement of (loss) income requires management to make estimates and assumptions deemed appropriate. The unaudited pro forma condensed combined statement of (loss) income is not intended to present or be indicative of the results of operations that would have occurred if the transactions described above had been effected on the dates indicated.

3. SIGNIFICANT ACCOUNTING POLICIES

Brookfield Renewable presents its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The accounting policies used in the preparation of Brookfield Renewable’s unaudited pro forma condensed combined statement of (loss) income are those that are set out in Brookfield Renewable’s unaudited consolidated financial statements for the three months ended March 31, 2011.

4. PRO FORMA ADJUSTMENTS

To give effect to the transactions below resulting from the Combination as if they had occurred on January 1, 2010, the unaudited pro forma condensed combined financial statement of (loss) income of Brookfield Renewable for the three months ended March 31, 2011 was adjusted accordingly. The unaudited pro forma condensed combined statement of (loss) income for the three months ended March 31, 2011 adjust the unaudited consolidated statement of loss of Brookfield Renewable for the three months ended March 31, 2011 to give effect to the following transactions discussed in these notes.

 

   

Transfer of the Brookfield Renewable Power Division (the “Division”)

   

Transfer of Fund units

   

Amendment and execution of power purchase agreements

   

Changes in fair value of property, plant and equipment

   

Settlement of intercompany transactions

   

Execution of management service agreements

 

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Table of Contents

The unaudited pro forma condensed combined statement of (loss) income reflects the deferred tax adjustments arising from the above transactions and the computation of income per unit based on the units issued in connection with the transactions described in (i) and (ii) below and the terms of the Partnership Agreement.

The unaudited pro forma condensed combined statement of (loss) income does not reflect the impact of potential cost savings and other synergies.

 

(i)

Transfer of the Division

Through a series of transactions, BRPI has transferred the Division to Brookfield Renewable Energy L.P. (“BRELP”), in return for the issuance of limited partnership units of Brookfield Renewable (the “LP Units”) and redeemable partnership units of BRELP (the “Redeemable Partnership Units”). The transfer of the Division includes all of BRPI’s renewable power operations and the assumption of the BRPI Bonds and the preferred shares of BRP Equity.

BRPI owns the general partner of BRELP (the “BRELP General Partner”). Brookfield Renewable has entered into a voting agreement with BRPI to provide Brookfield Renewable with control of the BRELP General Partner and BRELP. Accordingly, Brookfield Renewable consolidates the accounts of BRELP and its subsidiaries.

BRPI has provided $5 million of working capital funding through a subscription for preferred shares of a subsidiary of BRELP (“Bermuda Holdco”). The impact of the preferred share dividends on the unaudited pro forma condensed combined statement of (loss) income is not material.

 

(ii)

Transfer of Brookfield Renewable Power Fund Units

The transfer of the 66% of the Fund units not previously owned by Brookfield Asset Management and its subsidiaries (collectively, “Brookfield”) was completed at fair value satisfied by the issuance of LP Units. The result of this transaction is to reflect the settlement of the Fund unit liability and the issuance of LP Units to satisfy the transfer as equity of Brookfield Renewable. As a result of this transaction, the loss on the Fund unit liability of $116 million related to the change in fair value of the units and the distributions made on such Fund units was eliminated. Subsequent to the transfer of the Fund units, the Fund was dissolved into a subsidiary of BRELP.

 

(iii)

Power Purchase Agreements

Pro forma income reflects an amendment to the power purchase agreement between Brookfield and an indirect wholly-owned subsidiary of Brookfield Renewable (the “GLPL PPA”). Under the amendment, Brookfield has agreed to guarantee the price of electricity generated by facilities owned by Great Lakes Power Limited, a subsidiary of Brookfield Renewable, at C$82 per MWh. This price is to be increased annually on January 1 by an amount equal to forty percent (40%) of the increase in the consumer price index during the previous calendar year.

In a separate transaction, Brookfield Energy Marketing LP (“BEM LP”) and Mississagi Power Trust (“MPT”), an indirect wholly-owned subsidiary of Brookfield Renewable, agreed to an amendment to the existing Master Power Purchase and Sale Agreement (the Mississagi PPA”) to adjust the price of electricity purchased to C$103 per MWh. This price is to be increased annually by an amount equal to twenty percent (20%) of the increase in the consumer price index during the previous calendar year.

Additionally, BEM LP and Brookfield Power U.S. Holding America Co. (“BPUSHA”), an indirect wholly-owned subsidiary of Brookfield Renewable, agreed to an Energy Revenue Agreement under which BEM LP will guarantee the price for energy delivered by certain facilities in the United States at $75 per MWh. This price is to be increased annually on January 1 by an amount equal to forty percent (40%) of the increase in the consumer price index during the previous calendar year, but not exceeding an increase of three percent (3%) in any calendar year. In conjunction with the Energy Revenue Agreement, BEM LP and each of the owners of the facilities entered into power agency agreements (the “Power Agency Agreements”) under which BEM LP will provide certain services. BEM LP will be entitled to be reimbursed for any third party costs incurred and, except in a few cases, receives no additional fee for its services under the Power Agency Agreements.

The impact of these contract price amendments and agreements are summarized as follows:

 

 

 

For the three months ended March 31, 2011

(Millions)

   Actual
generation
(GWh)
     Incremental
Revenue
 

 

 

GLPL PPA

     267       $ 4   

Mississagi PPA

     128         5   

Energy Revenue Agreement

     890         20   

 

 
     1,285       $ 29   

 

 

 

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Table of Contents
(iv)

Changes in Fair Value of Property, Plant and Equipment

Prior to November 28, 2011 certain power guarantee agreements between Brookfield Renewable and Brookfield were accounted for as financial instruments with an unrealized loss of $18 million.

As a result of new agreements and changes in existing agreements with Brookfield and its subsidiaries arising from the Combination, the contracts are not accounted for as financial instruments by Brookfield Renewable. Thus the unrealized financial instrument gain of $18 million has been eliminated.

The amendments and agreements discussed in (iii) above and the change in accounting for the contracts discussed above resulted in changes in the fair value of the related power generating assets using the revaluation method since the fair value of such assets are determined using a discounted cash flow model.

 

(v)

Change in Depreciation Expense

The reduction in fair value of the power generating assets discussed in (iv) above results in a decrease in pro forma depreciation expense of $1 million for the three months ended March 31, 2011.

 

(vi)

Management Service Agreements

The unaudited pro forma condensed combined statement of (loss) income reflect an exclusive agreement with Brookfield to provide operating, management and consulting services to Brookfield Renewable Group (the “Master Services Agreement”) for a management service fee. The fee will be paid on a quarterly basis and will continue in perpetuity. The fee has a fixed quarterly component of $5 million and a variable component calculated as a percentage of the increase in the total capitalization value of Brookfield Renewable, as defined. Brookfield Renewable Group is also required to reimburse Brookfield for out-of-pocket costs incurred to provide required services to Brookfield Renewable Group. For the three months ended March 31, 2011 pro forma results reflect an expense of $5 million related to the Master Services Agreement.

In addition to the Management Service Agreement, the unaudited pro forma condensed combined statement of (loss) income reflects an agreement with BEM LP to provide energy marketing services (the “Energy Marketing Agreement”). Brookfield Renewable Group will pay an annual marketing service fee of $18 million to BEM LP. The fee will be increased annually on January 1 by an amount equal to the increase in the U.S. consumer price index during the previous calendar year. Pro forma results for the three months ended March 31, 2011 reflect an expense of $5 million related to the Energy Marketing Agreement.

 

(vii)

Intercompany Settlements

Brookfield Renewable Group and its subsidiaries settled certain intercompany loans and transactions with Brookfield upon completion of the Combination. During the three months ended March 31, 2011, $7 million of interest income was recorded in the pro forma statement of (loss) income to reflect these transactions.

 

(viii)

Deferred Income Taxes

The unaudited pro forma condensed combined statement of (loss) income reflect an increase in deferred income tax recovery of $2 million for the three months ended March 31, 2011.

 

(ix)

Earnings (loss) per share

Pro forma earnings (loss) per share have been calculated based on the 262.5 million units outstanding on a fully-exchanged basis.

 

F-89

Exhibit 1.1

Registration No. 45532

 

LOGO

BERMUDA

CERTIFICATE OF REGISTRATION

FOR A PARTNERSHIP TO BE REGISTERED AS AN

EXEMPTED PARTNERSHIP AND LIMITED PARTNERSHIP

I HEREBY CERTIFY THAT in accordance with section 9(4) of the Exempted Partnerships Act 1992 and amendments (“the Act”), the registration documents of Brookfield Renewable Energy Partner L.P. were delivered to the Office of the Registrar of Companies and registered on the 27 th day of June 2011. Facsimiles of the Certificate of Exempted Partnership and the Certificate of Limited Partnership pursuant to Section 5 of the Act, and Section 3 of the Limited Partnership Act 1883 and amendments, respectively, are attached to this Certificate of Registration.

 

LOGO

   

Given under my hand and the Seal of

the Registrar of Companies this

29 th day of June 2011

   

LOGO

 

For Registrar of Companies

   


Brookfield Renewable Energy Partner L.P.

General Partner(s) and Limited Partner(s)

GENERAL PARTNER(S) :

 

2288509 Ontario Inc.

181 Bay Street

Suite 300

Toronto, Ontario M5J 2T3

Canada

   General Partner

LIMITED PARTNER(S) :

Brookfield Renewable Power Inc.

181 Bay Street

Suite 300

Toronto, Ontario M5J 2T3

Canada

RESIDENT REPRESENTATIVE :

 

Appleby Services (Bermuda) Ltd.

Canon’s Court

22 Victoria Street

Hamilton HM 12

Bermuda

   Resident Representative

Exhibit 1.2

2288509 ONTARIO INC.

- and -

BROOKFIELD RENEWABLE POWER INC.

- and -

EACH PERSON WHO IS ADMITTED TO THE PARTNERSHIP AS A LIMITED

PARTNER FROM TIME TO TIME

 

 

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

OF BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

 

 

November 20, 2011


TABLE OF CONTENTS

 

ARTICLE 1 INTERPRETATION    2  
1.1   Definitions      2   
1.2   Headings and Table of Contents      9   
1.3   Interpretation      9   
1.4   Invalidity of Provisions      10   
1.5   Entire Agreement      10   
1.6   Waiver, Amendment      11   
1.7   Governing Law; Submission to Jurisdiction      11   
ARTICLE 2 ORGANIZATIONAL MATTERS      11   
2.1   Formation      11   
2.2   Purpose      12   
2.3   Powers      12   
2.4   Name      12   
2.5   Registered Office; Principal Office      13   
2.6   Power of Attorney      13   
2.7   Term      15   
ARTICLE 3 CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS      15   
3.1   Formation of the Partnership      15   
3.2   Initial Capital Contributions by the General Partner and the Initial Limited Partner/Adjustments to General Partner Capital Contributions      15   
3.3   Interest and Withdrawal      15   
3.4   Issuances of Additional Partnership Interests      15   
3.5   Pre-emptive Rights      16   
3.6   Splits and Combinations      16   
3.7   Fully Paid and Non-Assessable Nature of Units      17   
3.8   Take-Over Bid      17   
ARTICLE 4 ALLOCATIONS AND DISTRIBUTIONS      19   
4.1   Determination of Net Income or Loss      19   
4.2   General Allocations      19   
4.3   No Right to Withdraw Accounts      19   
4.4   Allocations for Tax Purposes      19   
4.5   Currency Translation      20   
4.6   Distributions      21   
4.7   Prohibition on Distributions      21   
ARTICLE 5 MANAGEMENT AND OPERATION OF PARTNERSHIP      21   
5.1   Management      21   
5.2   Restrictions on General Partner’s Authority      22   
5.3   Reimbursement of Partnership Expenses      23   
5.4   Outside Activities      23   
5.5   Disclosure of Interests      24   
            5.6   Indemnification      25   

 

[A&R LP AGR_BREP]

 


5.7   Resolution of Conflicts of Interest      27   
5.8   Other Matters Concerning the General Partner      28   
5.9   Title to Partnership Assets      28   
5.10   Purchase or Sale of Units      29   
5.11   Reliance by Third Parties      29   
5.12   Services      29   
ARTICLE 6 INVESTMENTS IN BRELP      30   
ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS      30   
7.1   Limitation of Liability      30   
7.2   Management of Partnership Affairs      30   
7.3   Outside Activities      30   
ARTICLE 8 BOOKS, RECORDS, ACCOUNTING AND REPORTS      31   
8.1   Books, Records and Accounting      31   
8.2   Fiscal Year      31   
8.3   Reports      31   
ARTICLE 9 TAX MATTERS      32   
9.1   Tax Information      32   
9.2   Preparation of Tax Returns      32   
9.3   Tax Elections      33   
9.4   Tax Controversies      33   
9.5   Withholding      33   
9.6   Election to be Treated as a Corporation      33   
9.7   FIRPTA      34   
ARTICLE 10 CERTIFICATES; RECORD HOLDERS; TRANSFERS OF PARTNERSHIP INTERESTS      34   
10.1   Certificates      34   
10.2   Mutilated, Destroyed, Lost or Stolen Certificates      34   
10.3   Record Holder      35   
10.4   Transfer Generally      36   
10.5   Registration and Transfer of Units      36   
10.6   Transfer of General Partner Unit      37   
          10.7   Restrictions on Transfers      38   
ARTICLE 11 ADMISSION OF ADDITIONAL OR SUCCESSOR PARTNERS      38   
11.1   Admission of Additional Limited Partners      38   
11.2   Admission of Successor General Partner      39   
ARTICLE 12 WITHDRAWAL OF PARTNERS      39   
12.1   Withdrawal of the General Partner      39   
12.2   Interest of Departing General Partner and Successor General Partner      40   
12.3   Withdrawal of Limited Partners      41   
ARTICLE 13 TERMINATION OF THE PARTNERSHIP      41   
13.1   General      41   

 

[A&R LP AGR_BREP]

- ii -


          13.2   Incapacity      42   
13.3   Liquidation      42   
13.4   Distributions in Kind      43   
13.5   Cancellation of Certificate of Limited Partnership      44   
13.6   Reasonable Time for Winding Up      44   
13.7   Return of Capital      44   
13.8   Waiver of Partition      44   
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE      44   
14.1   Amendment to be Adopted Solely by General Partner      44   
14.2   Amendment Procedures      46   
14.3   Amendment Requirements      46   
14.4   Meetings      47   
14.5   Notice of Meeting      48   
14.6   Record Date      48   
14.7   Adjournment      48   
14.8   Quorum      48   
14.9   Conduct of Meeting      49   
14.10   Action Without a Meeting      49   
14.11   Voting and Other Rights      50   
ARTICLE 15 GENERAL PROVISIONS      50   
15.1   Enurement      50   
15.2   Notices      50   
15.3   Further Assurances      52   
15.4   Counterparts      52   

 

[A&R LP AGR_BREP]

- iii -


AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

OF BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

THIS AGREEMENT is made as of the 20th day of November, 2011 among 2288509 ONTARIO INC. (the “ General Partner ”), a corporation existing under the laws of the Province of Ontario, as the General Partner, BROOKFIELD RENEWABLE POWER INC. , a corporation existing under the laws of the Province of Ontario (the “ Initial Limited Partner ”), and each person who is admitted to the Partnership as a limited partner in accordance with the provisions of this Agreement.

WHEREAS the General Partner and the Initial Limited Partner formed a limited partnership under the laws of Bermuda upon the entering into of a limited partnership agreement between the General Partner and the Initial Limited Partner dated as of June 27, 2011 (the “ Initial Limited Partnership Agreement ”). A Certificate of Registration for the Partnership (as hereinafter defined) confirming the registration of the Partnership as an “Exempted Partnership” pursuant to a Certificate of Exempted Partnership under the Exempted Partnerships Act 1992 (Bermuda) (as supplemented, the “ Certificate of Exempted Partnership ”) and as a “Limited Partnership” pursuant to a Certificate of Limited Partnership under the Limited Partnership Act 1883 (Bermuda) (as supplemented, the “ Certificate of Limited Partnership ”) was issued by the Bermuda Registrar of Companies on June 29, 2011;

AND WHEREAS the parties wish to amend the Initial Limited Partnership Agreement by making the modifications reflected herein, and to restate the Initial Limited Partnership Agreement as so amended;

AND WHEREAS this Amended and Restated Limited Partnership Agreement shall replace the Initial Limited Partnership Agreement in its entirety;

AND WHEREAS pursuant to a Combination Agreement by and among the Initial Limited Partner, Brookfield Renewable Power Fund (“ BRPF ”), the Partnership, and Brookfield Renewable Power Trust, dated September 12, 2011 (the “ Combination Agreement ”), each trust unit of BRPF (collectively, the “ BRPF Units ”) outstanding immediately prior to the effective time of the Combination Agreement, except for those BRPF Units held by Highvale (as hereinafter defined), will be deemed to have been transferred, at such times as specified in the Combination Agreement, to the Partnership in exchange for the allotment and issue by the Partnership to the holders of such BRPF Units (the “ BRPF Unitholders ”) of one Unit (as hereinafter defined) for each BRPF Unit then held (the “ Fund Conversion ”), at which point each BRPF Unitholder will be deemed to have become a limited partner of the Partnership and a party to this Amended and Restated Limited Partnership Agreement;

AND WHEREAS the Partners (as hereinafter defined) desire to set forth the rights, powers and duties of the Partners, the affairs of the Partnership and the conduct of the Partnership’s activities, all upon the terms and conditions provided for in this Amended and Restated Limited Partnership Agreement.

 

[A&R LP AGR_BREP]

 


NOW THEREFORE in consideration of the premises, mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties covenant and agree, each with the others, as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

  1.1.1. Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

 

  1.1.2. Agreement ” means this Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy Partners L.P.;

 

  1.1.3. Assets ” means all assets, whether tangible or intangible and whether real, personal or mixed, at any time owned by the Partnership (or by the General Partner, one or more of its Affiliates or one or more nominees for the benefit of the Partnership, in each case in accordance with Section 5.9) or acquired by the General Partner for the account of the Partnership in the course of carrying on the activities of the Partnership;

 

  1.1.4. BRELP ” means Brookfield Renewable Energy L.P., an exempted limited partnership existing under the law of Bermuda;

 

  1.1.5. BRELP Agreement ” means the limited partnership agreement for BRELP;

 

  1.1.6. BREP Group ” means the Partnership, BRELP, the Holding Entities, the Operating Entities and any other direct or indirect Subsidiary of a Holding Entity;

 

  1.1.7. Brookfield ” means Brookfield Asset Management Inc.;

 

  1.1.8. Brookfield Group ” means Brookfield and any Affiliates of Brookfield, other than any member of the BREP Group;

 

  1.1.9. BRPF ” has the meaning assigned to such term in the recitals;

 

  1.1.10. BRPF Unitholders ” has the meaning assigned to such term in the recitals;

 

  1.1.11. BRPF Units ” has the meaning assigned to such term in the recitals;

 

[A&R LP AGR_BREP]

2


  1.1.12. Business Day ” means every day except a Saturday or Sunday, or a day which is a statutory or civic holiday in Bermuda, the Province of Ontario, or the State of New York;

 

  1.1.13. Canadian Tax Purposes ” means for the purposes of determining liability for Tax pursuant to Canadian federal and provincial Tax Laws;

 

  1.1.14. CanHoldco ” means Brookfield BRP Holdings (Canada) Inc.;

 

  1.1.15. Capital Contribution ” means the amount of capital contributed to the Partnership by each Record Holder (or a Person from which the Record Holder purchased or acquired its Partnership Interests) in respect of the Partnership Interests purchased or acquired by or issued to that Record Holder;

 

  1.1.16. Certificate ” means a certificate issued by the Partnership evidencing ownership of one or more Units or any other Partnership Interests, or of options, rights, warrants or appreciation rights relating to Partnership Interests, in such form as may be adopted by the General Partner from time to time;

 

  1.1.17. Certificate of Exempted Partnership ” has the meaning assigned to such term in the recitals;

 

  1.1.18. Certificate of Limited Partnership ” has the meaning assigned to such term in the recitals;

 

  1.1.19. Code ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder, and any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provisions of future law;

 

  1.1.20. Combination Agreement ” has the meaning assigned to such term in the recitals;

 

  1.1.21. Conflicts Guidelines ” has the meaning assigned to such term in Section 5.7.2;

 

  1.1.22. Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example, the status of A being the general partner of B) or by virtue of the beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares or other securities to which are attached more than 50% of the votes permitted to be cast in the election of directors to the Governing Body of B, or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose; and the term “Controlled” has the corresponding meaning;

 

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  1.1.23. Departing General Partner ” means a former General Partner, from and after the effective date of any withdrawal of such former General Partner pursuant to Section 12.1;

 

  1.1.24. Event of Withdrawal ” has the meaning assigned to such term in Section 12.1.1;

 

  1.1.25. Exempted Partnerships Act ” means the Exempted Partnerships Act 1992 (Bermuda);

 

  1.1.26. fiscal year ” as such term relates to the Partnership shall be the fiscal year of the Partnership as determined in accordance with Section 8.2;

 

  1.1.27. Fund Conversion ” has the meaning assigned to such term in the recitals;

 

  1.1.28. General Partner ” means 2288509 Ontario Inc., a corporation existing under the laws of the Province of Ontario, and includes any person who becomes a successor or replacement general partner of the Partnership pursuant to the terms of this Agreement after the date hereof;

 

  1.1.29. General Partner Unit ” means the interest in the Partnership owned by the General Partner, having the rights and obligations specified in this Agreement, and which is designated as the General Partner Unit;

 

  1.1.30. Governing Body ” means (i) with respect to a corporation or limited company, the board of directors of such corporation or limited company, (ii) with respect to a limited liability company, the manager(s) or managing partner(s) of such limited liability company, (iii) with respect to a partnership, the board, committee or other body of each general partner or managing partner of such partnership, respectively, that serves a similar function (or if any such general partner is itself a partnership, the board, committee or other body of such general or managing partner’s general or managing partner that serves a similar function), and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

 

  1.1.31. Governing Instruments ” means (i) the Memorandum of Association and Bye-laws in the case of any exempted company existing under the Laws of Bermuda, (ii) the certificate of incorporation, amalgamation or continuance, as applicable, and bylaws in the case of a corporation, (iii) the memorandum and articles of association and by-laws, as applicable, in the case of a limited company, (iv) the partnership agreement in the case of a partnership, (v) the articles of formation and operating agreement in the case of a limited liability company, (vi) the trust instrument in the case of a trust, and (vii) any other similar governing document under which an entity was organized, formed or created and operates, in each case as amended, supplemented or otherwise modified from time to time;

 

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  1.1.32. Governmental Authority ” means any (i) international, multinational, national, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, agency or instrumentality, domestic or foreign, including ISO/RTOs, (ii) self-regulatory organization or stock exchange, (iii) subdivision, agent, commission, board, or authority of any of the foregoing, or (iv) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;

 

  1.1.33. Highvale ” means Highvale Power Corporation;

 

  1.1.34. Holding Entities ” means BRP Bermuda Holdings I Limited , Brookfield BRP Holdings (Canada) Inc. and any direct wholly-owned Subsidiary of BRELP created or acquired after the date of this Agreement;

 

  1.1.35. IFRS-IASB ” means International Financial Reporting Standards as issued by the International Accounting Standards Board consistently applied;

 

  1.1.36. “Income for Canadian Tax Purposes” means, in respect of any fiscal year of the Partnership, the income of the Partnership for that fiscal year, determined in accordance with the Income Tax Act;

 

  1.1.37. Income Tax Act ” means the Income Tax Act (Canada), and includes the regulations promulgated thereunder;

 

  1.1.38. Indemnified Party ” has the meaning assigned to such term in Section 5.6.1;

 

  1.1.39. Independent Committee ” means a committee of the board of directors of the General Partner made up of directors that are “independent” of Brookfield and its Affiliates, as contemplated by applicable securities Laws;

 

  1.1.40. Initial GP Capital Contribution ” has the meaning assigned to such term in Section 3.2;

 

  1.1.41. Initial Limited Partner ” has the meaning assigned to such term in the recitals;

 

  1.1.42. Initial Limited Partnership Agreement ” has the meaning assigned to such term in the recitals;

 

  1.1.43. Initial LP Capital Contribution ” has the meaning assigned to such term in Section 3.2;

 

  1.1.44. Interested Party ” has the meaning assigned to such term in Section 5.5.1;

 

  1.1.45. ISO/RTO ” means an independent electricity system operator, a regional transmission organization, national system operator and/or any other similar organization overseeing the transmission of electricity in any jurisdiction in which the BREP Group owns assets or operates;

 

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  1.1.46. Laws ” means any and all applicable (i) laws, constitutions, treaties, statutes, codes, ordinances, principles of common and civil law and equity, rules, regulations and municipal by-laws, whether domestic, foreign or international, (ii) judicial, arbitral, administrative, ministerial, departmental and regulatory judgments, orders, writs, injunctions, decisions, and awards of any Governmental Authority, and (iii) policies, practices and guidelines of any Governmental Authority which, although not actually having the force of law, are considered by such Governmental Authority as requiring compliance as if having the force of law; and the term “applicable”, with respect to such Laws and in the context that refers to one or more Persons, means such Laws that apply to such Person or Persons or its or their business, undertaking, property or securities at the relevant time and that emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;

 

  1.1.47. Liabilities ” has the meaning assigned to such term in Section 5.6.1;

 

  1.1.48. Limited Partner ” means a Person who is the direct beneficial owner of a Unit, without regard to the Record Holder (unless the Record Holder is such Person);

 

  1.1.49. Limited Partnership Act ” means the Limited Partnership Act 1883 (Bermuda);

 

  1.1.50. Liquidator ” means the General Partner or other Person approved pursuant to Section 13.3 who performs the functions described therein;

 

  1.1.51. “Loss for Canadian Tax Purposes” means, in respect of any fiscal year of the Partnership, the loss of the Partnership for that fiscal year, determined in accordance with the Income Tax Act;

 

  1.1.52. Managers ” means Brookfield Renewable Energy Group L.P., Brookfield Renewable Energy Group LLC, and Brookfield Renewable Energy Group (Bermuda) Inc.;

 

  1.1.53. Master Services Agreement ” means the master services agreement among the Managers, the Partnership, BRELP, the Holding Entities and others;

 

  1.1.54. Non-Tendering Offeree ” means, where a take-over bid is made for all of the Units other than those held by the offeror, a holder of Units who does not accept the take-over bid and includes a subsequent holder of that Unit who acquires it from the first mentioned holder;

 

  1.1.55. Notice ” has the meaning assigned to such term in Section 15.2;

 

  1.1.56. Offeree ” means a Person to whom a take-over bid is made;

 

  1.1.57. Offeror ” means a Person, other than an agent, who makes a Take-Over Bid, and includes two or more Persons who, directly or indirectly:

 

  1.1.57.1 make a Take-Over Bid jointly or in concert; or

 

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  1.1.57.2 intend to exercise jointly or in concert voting rights attached to the Units for which a Take-Over Bid is made;

 

  1.1.58. Operating Entities ” means, from time to time, the Persons that (i) directly hold the Power Operations, or (ii) indirectly hold the Power Operations but all of the interests of which are not held by the Service Recipients including, in the case of each of (i) and (ii), any joint ventures, partnerships and consortium arrangements;

 

  1.1.59. Opinion of Counsel ” means a written opinion of counsel acceptable to the General Partner and the Independent Committee, as the case may be;

 

  1.1.60. Outstanding ” means, with respect to Units or Partnership Interests, all Units or Partnership Interests that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination;

 

  1.1.61. Partner ” means the General Partner or a Limited Partner;

 

  1.1.62. Partnership ” means Brookfield Renewable Energy Partners L.P., the limited partnership heretofore formed and continued pursuant to this Agreement;

 

  1.1.63. Partnership Interest ” means any partnership interest, including any General Partner Unit or Unit;

 

  1.1.64. Percentage Interest ” means, as of the date of such determination:

 

  1.1.64.1 as to the General Partner, 0.01%;

 

  1.1.64.2 as to all Limited Partners, 99.99%; and

 

  1.1.64.3 as to any Limited Partner holding Units, a percentage of all the Limited Partners’ Percentage Interests equal to the number of Units held by such Limited Partner divided by the total number of all Units then Outstanding;

 

  1.1.65. Person ” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, Governmental Authority or other entity however designated or constituted and pronouns have a similarly extended meaning;

 

  1.1.66. Plan of Arrangement ” has the meaning assigned to such term under the Combination Agreement;

 

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  1.1.67. Power Operations ” means power generating operations or developments directly or indirectly held or acquired by members of the BREP Group from time to time;

 

  1.1.68. Quarter ” means a calendar quarter ending on the last day of March, June, September or December;

 

  1.1.69. Record Date ” means the date established by the General Partner for determining (a) the identity of Record Holders entitled to notice of any meeting of Limited Partners or entitled to consent to a Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners, or (b) the identity of Record Holders entitled to receive any report or distribution;

 

  1.1.70. Record Holder ” means, as of any particular Business Day, the Person in whose name a Unit is registered on the books of the Transfer Agent as of the opening of business on such Business Day, or with respect to other Partnership Interests, the Person in whose name any such other Partnership Interest is registered on the books which the General Partner has caused to be kept as of the opening of business on such Business Day;

 

  1.1.71. Redemption-Exchange Mechanism ” means the “Redemption Right” and the “Exchange Right” as such terms are defined in the BRELP Agreement;

 

  1.1.72. Relationship Agreement ” means the relationship agreement between certain members of the Brookfield Group, the Partnership, BRELP, the Holding Entities and others dated as of the date hereof;

 

  1.1.73. Securities Exchange ” means any stock exchange on which Units or other Partnership Interests are or will be listed for trading;

 

  1.1.74. Securities Exchange Act ” means the United States Securities Exchange Act of 1934 , as amended, supplemented or restated from time to time and any successor to such statute;

 

  1.1.75. Service Recipient ” means the Partnership, BRELP, the Holding Entities and any Person in which any of the foregoing or any combination of the foregoing holds all of the common equity or equivalent interests excluding any Operating Entities;

 

  1.1.76. Subsidiary ” means, with respect to any Person, (i) any other Person that is directly or indirectly Controlled by such Person, (ii) any trust in which such Person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such Person holds all of the interests other than the interests of any general partner, managing member or similar Person;

 

  1.1.77. Take-Over Bid ” has the meaning given to it in the Securities Act (Ontario);

 

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  1.1.78. Tax ” means all forms of taxation, whether direct or indirect and whether levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or other reference and statutory, governmental, national, federal, state, provincial, local governmental or municipal impositions, duties, contributions and levies (including social security contributions, national insurance contributions and any other payroll taxes), whenever and wherever imposed (whether imposed by way of a withholding or deduction for or on account of tax or otherwise) and in respect of any Person, and all penalties, charges, costs and interest relating thereto;

 

  1.1.79. transfer ” has the meaning assigned to such term in Section 10.4;

 

  1.1.80. Transfer Agent ” means the transfer agent duly appointed by the Partnership to act as registrar and transfer agent for the Units, from time to time;

 

  1.1.81. Treasury Regulations ” means the Income Tax Regulations promulgated under the Code, as amended from time to time;

 

  1.1.82. Uncertificated ” means, in respect of any Partnership Interest, a unit of a Partnership Interest, title to which is recorded on the relevant register of securities as being held in uncertificated form, and title to which may be transferred by means of any clearing system established for the Partnership;

 

  1.1.83. Unit ” means a limited partnership interest in the Partnership representing a fractional part of all the limited partner interests in the Partnership, which is designated as a “Unit”; and

 

  1.1.84. Withdrawal Opinion of Counsel ” an Opinion of Counsel (delivered by counsel acceptable to the Independent Committee) that withdrawal of the General Partner (following the selection of the successor general partner) would not (i) result in the loss of the limited liability of any Limited Partner, (ii) cause the Partnership or any BREP Group member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for tax purposes (to the extent not previously treated as such), or (iii) cause the Partnership or BRELP to become an “investment company” under the U.S. Investment Company Act of 1940 , as amended, or similar legislation in other jurisdictions.

1.2 Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

1.3 Interpretation

In this Agreement, unless the context otherwise requires:

 

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1.3.1. words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

1.3.2. the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

1.3.3. references to any Person include such Person’s successors and permitted assigns;

1.3.4. except as otherwise provided in this Agreement, any reference in this Agreement to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all rules and regulations made under such statute, in the case of a statute, to all amendments made to such statute, regulation, policy, rule or instrument, and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

1.3.5. any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

1.3.6. in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

1.3.7. except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

1.4 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable Law, the parties waive any provision of Law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

1.5 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations

 

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(including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, or any amendment or supplement hereto, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement or any amendment or supplement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

1.6 Waiver, Amendment

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement will be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement will constitute a waiver of any other provision nor will any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. A party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of that right or the exercise of any other right.

1.7 Governing Law; Submission to Jurisdiction

This Agreement will be governed by and construed in accordance with the laws of Bermuda. Each of the Partners (other than governmental entities prohibited from submitting to the jurisdiction of a particular jurisdiction) will submit to the non-exclusive jurisdiction of any court in Bermuda in any dispute, suit, action or proceeding arising out of or relating to this Agreement. Each Partner waives, to the fullest extent permitted by Law, any immunity from jurisdiction of any such court or from any legal process therein and further waives, to the fullest extent permitted by Law, any claim of inconvenient forum, improper venue or that any such court does not have jurisdiction over the Partner. Any final judgment against a Partner in any proceedings brought in any court in Bermuda will be conclusive and binding upon the Partner and may be enforced in the courts of any other jurisdiction of which the Partner is or may be subject, by suit upon such judgment. The foregoing submission to jurisdiction and waivers will survive the dissolution, liquidation, winding up and termination of the Partnership.

ARTICLE 2

ORGANIZATIONAL MATTERS

2.1 Formation

The Partnership has been formed as an exempted limited partnership on June 27, 2011, pursuant to the provisions of the Limited Partnership Act and the Exempted Partnerships Act. Except as expressly provided to the contrary in this Agreement, the rights, duties (including

 

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fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Limited Partnership Act and the Exempted Partnerships Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes and a Partner has no interest in any specific Partnership property.

2.2 Purpose

The purpose of the Partnership shall be to: (i) establish, acquire and/or hold interests in BRELP and, subject to the approval of the General Partner, in other Persons involved in the power generation and development business; (ii) engage in any activity related to the capitalization and financing of the Partnership’s interests in BRELP and such other Persons; and (iii) engage in any activity that is incidental to or in furtherance of the foregoing and that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized under the Limited Partnership Act and the Exempted Partnerships Act and this Agreement. Except as specified herein, the General Partner shall exercise its powers and carry out its functions honestly and in good faith and the General Partner shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, in each case, subject to, and after taking into account, the terms and conditions of the Relationship Agreement, the Master Services Agreement and the Conflicts Guidelines. Subject to the foregoing, to the fullest extent permitted by Law, the General Partner shall have no additional duty or obligation to propose or approve, and may decline to propose or approve, the conduct by the Partnership of any activity free of any additional duty (including any fiduciary duty) or obligation whatsoever to the Partnership or any Limited Partner or Record Holder and, in declining to so propose or approve, shall not be deemed to have breached this Agreement, any other agreement contemplated hereby, the Limited Partnership Act, the Exempted Partnerships Act or any other provision of Law. For greater certainty, the General Partner shall not be in breach of any duty owed to the Partnership if it takes an action or engages in an activity contemplated or permitted by this Agreement, the Relationship Agreement, the Master Services Agreement or the Conflicts Guidelines.

2.3 Powers

The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and activities described in Section 2.2 and for the protection and benefit of the Partnership.

2.4 Name

The name of the Partnership shall be “Brookfield Renewable Energy Partners L.P.” The Partnership’s activities and affairs may be conducted under any other name or names deemed necessary or appropriate by the General Partner, including the name of the General Partner or any Affiliate thereof. The words “Limited Partnership”, “L.P.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the Laws of any jurisdiction that so requires. Subject to compliance with the requirements of the Limited Partnership Act and the Exempted Partnerships Act, the General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify the Record Holders of such change in the next regular communication to Record Holders.

 

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If the General Partner ceases to be the general partner of the Partnership and the new general partner is not an Affiliate of Brookfield, the Partnership shall change its name so that it does not include “Brookfield” and could not be capable of confusion in any way with such name. This obligation shall be enforceable and waivable by the General Partner notwithstanding that it may have ceased to be the general partner of the Partnership.

2.5 Registered Office; Principal Office

Unless and until changed by the General Partner, the registered office of the Partnership shall be located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda, and the resident representative in Bermuda shall be Appleby Corporate Services (Bermuda) Limited, Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda. The head office of the Partnership and the General Partner shall be 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda, or such other place as the General Partner may from time to time designate by notice to the Record Holders. The Partnership may maintain offices at such other place or places within Bermuda as the General Partner deems necessary or appropriate.

2.6 Power of Attorney

 

  2.6.1. Each Limited Partner hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 13.3, the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to:

 

  2.6.1.1

execute, swear to, acknowledge, deliver, file and record in the appropriate public offices: (A) all certificates, documents and other instruments (including this Agreement, the Certificate of Limited Partnership and the Certificate of Exempted Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as an exempted limited partnership (or a partnership in which the limited partners have limited liability) in Bermuda and in all other jurisdictions in which the Partnership may conduct activities and affairs or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the General Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of

 

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  this Agreement; (D) all certificates, documents and other instruments relating to the admission or withdrawal of any Partner pursuant to, or other events described in, Article 11 or Article 12, or to the Capital Contribution of any Partner; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Units or other Partnership Interests issued pursuant to Section 3.5; and (F) any tax election with any Limited Partner or General Partner on behalf of the Partnership and/or all Partners including any such election contemplated by the Plan of Arrangement; and

 

  2.6.1.2 execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided, that when required by any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner or the Liquidator may exercise the power of attorney made in this Section 2.6.1.2 only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable.

Nothing contained in this Section 2.6.1 shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article 14 or as may be otherwise expressly provided for in this Agreement.

 

  2.6.2. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or the transfer of all or any portion of such Limited Partner’s Partnership Interest, and shall extend to such Limited Partner’s heirs, successors, assigns and personal representatives. Each Limited Partner hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each Limited Partner hereby waives any and all defenses that may be available to it to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the General Partner’s or the Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership.

 

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2.7 Term

The Partnership commenced upon the formation of the Partnership on June 27, 2011, pursuant to the Initial Limited Partnership Agreement, the Certificate of Limited Partnership and the Certificate of Exempted Partnership and shall continue in perpetual existence until the termination of the Partnership in accordance with the provisions of 13.1.

ARTICLE 3

CAPITAL CONTRIBUTIONS AND

ISSUANCE OF PARTNERSHIP INTERESTS

3.1 Formation of the Partnership

In connection with the formation of the Partnership, the General Partner has been admitted as the General Partner of the Partnership and the Initial Limited Partner has been admitted as the Limited Partner as of the date of the Initial Limited Partnership Agreement.

 

3.2 Initial Capital Contributions by the General Partner and the Initial Limited Partner/Adjustments to General Partner Capital Contributions

 

  3.2.1. The General Partner made a Capital Contribution of $100.00 to the Partnership (“ Initial GP Capital Contribution ”). The Initial Limited Partner made a Capital Contribution of $1.00 (“ Initial LP Capital Contribution ”).

 

  3.2.2. Notwithstanding any provision herein to the contrary, the General Partner shall be required to maintain its Partnership Interest as specified in section 1.1.64.1 by making additional Capital Contributions or effecting withdrawals of its Capital Contributions, as shall be necessary.

3.3 Interest and Withdrawal

No interest on Capital Contributions shall be paid by the Partnership. No Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon dissolution of the Partnership may be considered as such by Law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner shall have priority over any other Partner either as to the return of Capital Contributions or as to profits, losses or distributions.

3.4 Issuances of Additional Partnership Interests

 

  3.4.1. Subject to any approval required by applicable Law and the approval of any applicable Securities Exchange, the Partnership may issue additional Partnership Interests (including new classes of Partnership Interests) and options, rights, warrants and appreciation rights relating to Partnership Interests for any Partnership purpose (including in connection with any distribution reinvestment plan or the Redemption-Exchange Mechanism) at any time and from time to time to such Persons for such consideration and on such terms and conditions as the General Partner shall determine in its sole discretion, all without the approval of any Limited Partners.

 

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  3.4.2. Each additional Partnership Interest authorized to be issued by the Partnership pursuant to Section 3.5.1 may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Interests), as shall be fixed by the General Partner in its sole discretion, including: (i) the right to share in Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem the Partnership Interest (including sinking fund provisions); (v) whether such Partnership Interest is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which each Partnership Interest will be issued, evidenced by certificates and assigned or transferred; and (viii) the requirement, if any, of each such Partnership Interest to consent to certain partnership matters.

 

  3.4.3. The General Partner is hereby authorized to take all actions that it determines to be necessary or appropriate in connection with each issuance of Partnership Interests and options, rights, warrants and appreciation rights relating to Partnership Interests pursuant to this Section 3.5, including the admission of additional Limited Partners in connection therewith and any related amendment of this Agreement, and all additional issuances of Partnership Interests and options, rights, warrants and appreciation rights relating to Partnership Interests. The General Partner is authorized to do all things that it determines to be necessary or appropriate in connection with any future issuance of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests, including compliance with any Laws or guideline of any governmental agency or any Securities Exchange on which the Units or other Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests are listed for trading.

3.5 Pre-emptive Rights

Unless otherwise determined by the General Partner, in its sole discretion, no Person shall have any pre-emptive, preferential or other similar right with respect to the issuance of any Partnership Interest, whether unissued, held in the treasury or hereafter created.

3.6 Splits and Combinations

 

  3.6.1. Subject to Section 3.7.4, the Partnership may make a distribution of Partnership Interests to all Record Holders pro rata to their Percentage Interests or may effect a subdivision or combination of Partnership Interests so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event.

 

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  3.6.2. Whenever such a distribution, subdivision or combination of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause independent public accountants of international standing selected by it to calculate the number of Partnership Interests to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

 

  3.6.3. Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates to the Record Holders of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests as of the applicable Record Date representing the new number of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests held by such Record Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Interests Outstanding or outstanding options, rights, warrants or appreciation rights relating to Partnership Interests, the Partnership shall require, as a condition to the delivery to a Record Holder of any such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.

 

  3.6.4. The Partnership shall not be required to issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of this Section 3.7.4, each fractional Unit shall be rounded to the nearest whole Unit, with each half Unit being rounded to the next higher Unit.

3.7 Fully Paid and Non-Assessable Nature of Units

All Units issued pursuant to, and in accordance with the requirements of this Article 3 shall be fully paid and non-assessable Units in the Partnership.

3.8 Take-Over Bid

 

  3.8.1. If, within 120 days after a Take-Over Bid, the Take-Over Bid is accepted by the holders of not less than 90% of the Outstanding Units, other than Units held at the date of the Take-Over Bid by or on behalf of the Offeror or an Affiliate or associate (as such term is defined in the Canada Business Corporations Act ) of the Offeror, the Offeror is entitled, on complying with this section 3.8, to acquire the Units held by the Non-Tendering Offerees.

 

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  3.8.2. An Offeror may acquire Outstanding Units held by a Non-Tendering Offeree by sending by registered mail within 60 days after the date of termination of the Take-Over Bid and in any event within 180 days after the date of the Take-Over Bid, an Offeror’s notice to each Non-Tendering Offeree stating that:

 

  3.8.2.1 the Offerees holding not less than 90% of the Units to which the Take-Over Bid relates accepted the Take-Over Bid;

 

  3.8.2.2 the Offeror is bound to take up and pay for or has taken up and paid for the Units of the Offerees who accepted the Take-Over Bid;

 

  3.8.2.3 a Non-Tendering Offeree is required to transfer his Units to the Offeror on the terms on which the Offeror acquired the Units of the Offerees who accepted the Take-Over Bid; and

 

  3.8.2.4 a Non-Tendering Offeree who does not transfer his Units in accordance with Section 3.8.2.3 within 20 days after he receives the Offeror’s notice is deemed to have elected to transfer, and to have transferred, his Units to the Offeror on the same terms that the Offeror acquired the Units from the Offerees who accepted the Take-Over Bid.

 

  3.8.3. Concurrently with sending the Offeror’s notice under Section 3.8.2, the Offeror shall send to the General Partner a notice of adverse claim disclosing the name and address of the Offeror and the name of the Non-Tendering Offeree with respect to each Unit held by a Non-Tendering Offeree.

 

  3.8.4. A Non-Tendering Offeree to whom an Offeror’s notice is sent under Section 3.8.2 shall, within 20 days after he receives that notice, send his Units and all Certificates representing his Units or cause his Units to be sent to the General Partner.

 

  3.8.5. Within 20 days after the Offeror sends an Offeror’s notice under Section 3.8.2, the Offeror shall pay or transfer to the General Partner the amount of money or other consideration that the Offeror would have had to pay or transfer to a Non-Tendering Offeree if the Non-Tendering Offeree had tendered under the Take-Over Bid.

 

  3.8.6. The General Partner is deemed to hold on behalf of the Non-Tendering Offeree the money or other consideration it receives under Section 3.8.5, and the General Partner shall deposit the money in a separate account in a bank or other depositary of national standing in Canada or the United States, as applicable, and shall place the other consideration in the custody of a bank or such other body corporate.

 

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ARTICLE 4

ALLOCATIONS AND DISTRIBUTIONS

4.1 Determination of Net Income or Loss

Subject to section 4.4, the net income or loss of the Partnership for each fiscal year shall be determined by the General Partner in accordance with IFRS-IASB.

4.2 General Allocations

Limited Partners shall share in the net profits and net losses of the Partnership, generally in accordance with their respective Percentage Interests.

4.3 No Right to Withdraw Accounts

No Partner shall have the right to withdraw any or all of its Capital Contribution or to receive any distribution from the Partnership except as expressly provided in this Agreement and permitted by the Limited Partnership Act.

4.4 Allocations for Tax Purposes

 

  4.4.1. For United States federal income tax purposes, allocations of items of income, gain, loss, deduction, and credit for each taxable year or other relevant period of the Partnership shall be allocated among the Partners pro rata to their respective Percentage Interests, except to the extent (i) that any such allocations would not have substantial economic effect or are not in accordance with the Partners’ interests in the Partnership (in each case, as determined pursuant to Section 704(b) of the Code) or (ii) otherwise required by applicable Law or by reason of tax elections made by the General Partner on behalf of the Partnership, and, in the case of either clause (i) or (ii), the General Partner shall adjust allocations as necessary so as to comply with the requirements of Sections 704(b) and 704(c) of the Code and the Treasury Regulations promulgated thereunder, relevant provisions of Law, or elections made by the General Partner on behalf of the Partnership (as applicable); provided, however, that any such adjustments shall be made in the sole discretion of the General Partner. In furtherance of the foregoing, and for purposes of the proper administration of the Partnership and in order to preserve the uniformity of the Units, the General Partner, in its sole discretion, may (i) make such changes to the allocations as the General Partner deems necessary to (x) reflect the proposal, amendment or promulgation of Treasury Regulations under Section 704 of the Code or (y) otherwise preserve the uniformity of the Units, and (ii) adopt, employ or otherwise modify such conventions and methods as the General Partner determines to be appropriate for (a) the determination of the identities and tax classification of the Partners, (b) the valuation of Assets and the determination of the tax bases thereof, (c) the allocation of asset values and tax bases, (d) the adoption and maintenance of tax accounting methods and tax elections, and (e) the determination of allocations of items between transferors and transferees of Units, including the adoption of monthly, quarterly or other conventions that are consistent with Section 706 of the Code. The source and character of items of income, gain, loss and deduction allocated to a Partner will be the same source and character as the income or gain earned or the loss or deduction incurred by the Partnership.

 

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  4.4.2. The Income for Canadian Tax Purposes for a given fiscal year of the Partnership will be allocated to each Partner in an amount calculated by multiplying the Income for Canadian Tax Purposes by a fraction, the numerator of which is the sum of the distributions received by such Partner with respect to such fiscal year and the denominator of which is the aggregate amount of the distributions made by the Partnership to Partners with respect to such fiscal year. Generally, the source and character of items of income so allocated to a Partner with respect to a fiscal year of the Partnership will be the same source and character as the distributions received by such Partner with respect to such fiscal year. If, with respect to a given fiscal year, no distribution is made by the Partnership or the Partnership has a Loss for Canadian Tax Purposes, one quarter of the Income for Canadian Tax Purposes or the Loss for Canadian Tax Purposes, as the case may be, for such fiscal year, will be allocated to the Partners of record at the end of each Quarter ending in such fiscal year pro rata to their respective Percentage Interests at each such date. To such end, any Person who was a Partner at any time during such fiscal year but who has transferred all of such Person’s Units before the last day of that fiscal year may be deemed to be a Partner on the last day of such fiscal year for the purposes of subsection 96(1) of the Income Tax Act. Generally, the source and character of such income or losses so allocated to a Partner at the end of each Quarter will be the same source and character as the income or loss earned or incurred by the Partnership in such Quarter.

 

  4.4.3. Notwithstanding Sections 4.4.1and 4.4.2, any gain for Canadian Tax Purposes allocated by BRELP in accordance with Section 4.8.3.2 of the BRELP Agreement to the Partnership in respect of the disposition of common shares of CanHoldco by BRELP, shall be allocated for Canadian Tax Purposes firstly, in respect of any Units held by the Brookfield Group that were acquired pursuant to the Redemption Exchange Mechanism, such portion of the gain, if any, that would otherwise have been allocated for Canadian Tax Purposes to the Brookfield Group pursuant to Section 4.8.3.1 of the BRELP Agreement on the assumption that such Units had not been exchanged and remained Units of BRELP shall be allocated pro rata to the Brookfield Group in respect of the Units acquired pursuant to the Redemption Exchange Mechanism and secondly the remaining gain, if any, shall be allocated for Canadian Tax Purposes to Unitholders on a per Unit basis excluding Units owned by the Brookfield Group immediately after the completion of the Plan of Arrangement and Units acquired by the Brookfield Group pursuant to the Redemption Exchange Mechanism.

4.5 Currency Translation

Allocations of amounts other than in U.S. Dollars shall be undertaken following translation into the amount of U.S. Dollars into which such amount could have been converted on the last date of the relevant Quarter (or such other relevant period of determination) using the

 

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exchange rate between such other currency and the U.S. Dollars published in the “Exchange Rates” table of the Wall Street Journal on such date, or similar publication if The Wall Street Journal is no longer published or, in the event that the “Exchange Rates” table of the Wall Street Journal, or similar publication was not published on such date, the closest date immediately preceding the date of such payment on which the “Exchange Rates” table of the Wall Street Journal, or similar publication, was published provided that all such translations shall be in accordance with the applicable rules set forth in the Code and applicable Treasury Regulations.

4.6 Distributions

Subject to this Article 4, the General Partner may in its sole discretion make distributions at any time or from time to time to the Partners in accordance with their Percentage Interests, provided that all distributions to the Limited Partners shall be paid by the Partnership directly or through the Transfer Agent or through any other Person or agent only to the Record Holders pro rata according to their respective Percentage Interests as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise. The amount of Taxes withheld or paid by the Partnership or another member of the BREP Group in respect of a Partnership Interest held by a Partner shall be treated either as a distribution to such Partner or as a general expense of the Partnership, as determined by the General Partner in its sole discretion, and the General Partner shall report to the Partners on an annual basis the amount of such Taxes withheld or paid.

4.7 Prohibition on Distributions

The General Partner shall not cause the Partnership to make any distribution pursuant to this Article 4:

 

  4.7.1. unless there is sufficient cash available therefor;

 

  4.7.2. which would render the Partnership unable to pay its debts as and when they fall due; or

 

  4.7.3. which, in the opinion of the General Partner, would or might leave the Partnership with insufficient funds to meet any future or contingent obligations or which would contravene the Limited Partnership Act.

ARTICLE 5

MANAGEMENT AND OPERATION OF PARTNERSHIP

5.1 Management

 

  5.1.1.

The General Partner shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the activities and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management power over the activities and affairs of the Partnership. In addition

 

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  to the powers now or hereafter granted a general partner of a limited partnership under applicable Law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 5.2, shall have full power and authority to do all things and on such terms as it determines, in its sole discretion, to be necessary or appropriate to conduct the activities and affairs of the Partnership, to exercise all powers set forth in Section 2.3 and to effectuate the purposes set forth in Section 2.2.

 

  5.1.2. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by it. The General Partner and the Partnership shall not have any liability to a Limited Partner for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not derived by such Limited Partner in connection with the tax consequences of such decisions so long as (i) the General Partner has acted pursuant to its authority under this Agreement; and (ii) the General Partner has not acted in a grossly negligent manner or in bad faith or engaged in fraud or willful misconduct.

 

  5.1.3. Notwithstanding any other provision of this Agreement, the Limited Partnership Act, the Exempted Partnerships Act or any applicable Law, each Person who is a Partner on the date hereof and each other Person who may acquire a Partnership Interest hereby: (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the BRELP Agreement, the Combination Agreement, the Master Services Agreement, the Relationship Agreement and the other agreements described in or contemplated by the Combination Agreement; (ii) agrees that the General Partner (on its own or through any officer of the Partnership) is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Combination Agreement on behalf of the Partnership, without any further act, approval, or vote of the Persons who are Partners on the date hereof or the other Persons who may acquire a Partnership Interest; and (iii) agrees that the execution, delivery or performance by the General Partner, the Managers or any Affiliate of any of them, of this Agreement or the Combination Agreement or any agreement authorized or permitted under this Agreement or the Combination Agreement, shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty existing at Law, in equity or otherwise.

5.2 Restrictions on General Partner’s Authority

 

  5.2.1.

Except as provided in Article 13, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the BREP Group’s or the Partnership’s assets, taken as a whole, in a single transaction or a series of related transactions without the approval of holders of at least 66 2/3 % of the voting power of Outstanding Units; provided however that this provision shall not preclude or

 

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  limit the General Partner’s ability, in its sole discretion, to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership (including for the benefit of Persons who are not members of the BREP Group and Affiliates of the General Partner) or the BREP Group and shall not apply to any forced sale of any or all of the assets of the Partnership or the BREP Group pursuant to the foreclosure of, or other realization upon, any such encumbrance.

 

  5.2.2. The General Partner shall not, on behalf of the Partnership, except as permitted under Section 10.6 and Section 12.1, elect or cause the Partnership to elect a successor general partner of the Partnership.

 

  5.2.3. The General Partner shall not amend or agree to amend the Master Services Agreement or the Relationship Agreement without the approval of a majority of the members of the Independent Committee.

5.3 Reimbursement of Partnership Expenses

 

  5.3.1. Except as provided in this Section 5.3 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as General Partner of the Partnership.

 

  5.3.2. The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its reasonable discretion, for (i) all direct and indirect out-of-pocket expenses it incurs or payments it makes on behalf of the Partnership (including amounts paid to any Person to perform services for the Partnership or for the General Partner in the discharge of its duties to the Partnership), and (ii) all other necessary or appropriate out-of-pocket expenses allocable to the Partnership or otherwise reasonably incurred by the General Partner in connection with conducting the Partnership’s affairs (including out-of-pocket expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Reimbursements pursuant to this Section 5.3 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 5.6.

5.4 Outside Activities

 

  5.4.1. The General Partner shall, for so long as it is the general partner of the Partnership, (i) maintain as its sole activity the activity of acting as the general partner of the Partnership and undertaking activities that are ancillary or related thereto and (ii) not engage in any business or activity or incur or guarantee any debts or liabilities except in connection with or incidental to its performance as general partner as described above or incurring, guaranteeing, acquiring, owning or disposing of debt or equity securities of any other member of the BREP Group.

 

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  5.4.2. Each Indemnified Party (other than the General Partner) shall have the right to engage in businesses of every type and description and other activities for profit, and to engage in and possess interests in business ventures of any and every type or description, whether in activities similar to those of the General Partner, the Partnership or any other member of the BREP Group, in direct competition to, and/or in preference to, or to the exclusion of, the Partnership, the General Partner or any other member of the BREP Group. Such business interests, activities and engagements shall not constitute a breach of this Agreement or any duties stated or implied by Law or equity, including fiduciary duties, to any of the General Partner, the Partnership (or any of their respective investors) or any other member of the BREP Group (or any of their respective investors) and shall be deemed not to be a breach of the General Partner’s fiduciary duties or any other obligation of any type whatsoever of the General Partner. None of the General Partner, the Partnership or any other member of the BREP Group or any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby or otherwise in any business ventures of an Indemnified Party.

 

  5.4.3. To the extent permitted by Law, the General Partner and the Indemnified Parties shall have no obligation hereunder, to present business or investment opportunities to the Partnership, the Limited Partners or any member of the BREP Group.

 

  5.4.4. The Affiliates of the General Partner shall have no obligation to (i) permit the Partnership or any other member of the BREP Group to use any facilities or assets of the Affiliates of the General Partner (other than the Assets), except as may be provided in contracts, agreements or of the arrangements entered into from time to time specifically dealing with such use, or (ii) to enter into such contracts, agreements or other arrangements.

 

  5.4.5. Notwithstanding anything to the contrary in this Section 5.4, nothing in this Section 5.4 shall affect any obligation of an Indemnified Party to present a business or investment opportunity to the Partnership, the General Partner or any other member of the BREP Group pursuant to the Relationship Agreement or any other separate written agreement between such Indemnified Party and the Partnership, the General Partner or any other member of the BREP Group.

5.5 Disclosure of Interests

 

  5.5.1. The General Partner, its Affiliates and their respective partners, members, shareholders, directors, officers, employees and shareholders (each hereinafter referred to as an “ Interested Party ”) may become Limited Partners or beneficially interested in Limited Partners in the Partnership and may hold, dispose of or otherwise deal with Units with the same rights they would have if the General Partner were not party to this Agreement.

 

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  5.5.2. An Interested Party shall not be liable to account either to other Interested Parties or to the Partnership, the Partners or any other Persons for any profits or benefits made or derived by or in connection with any transaction contemplated by Section 5.4.2.

 

  5.5.3. Subject to applicable Laws, an Interested Party may sell investments to, purchase Assets from, vest Assets in and contract or enter into any contract, arrangement or transaction with the Partnership, any other member of the BREP Group or any other Person whose securities are held directly or indirectly by or on behalf of the Partnership or another member of the BREP Group, including any contract, arrangement or transaction relating to any financial, banking, investment banking, insurance, secretarial or other services, and may be interested in any such contract, transaction or arrangement and shall not be liable to account either to the Partnership, any other member of the BREP Group or any other Person in respect of any such contract, transaction, arrangement or interest, or any benefits or profits made or derived therefrom, by virtue only of the relationship between the parties concerned, provided that nothing herein contained shall permit an Interested Party or Limited Partner to enter into any such contract, transaction or arrangement as aforesaid, unless the terms thereof are permitted by or approved in accordance with the provisions of the Governing Instruments of the General Partner.

 

  5.5.4. Without limiting the generality of the foregoing, an Interested Party or Limited Partner may enter into any contract, transaction or arrangement with any member of the BREP Group to provide advice or services, including investment management, monitoring or oversight services, services with respect to corporate finance matters and valuations, services relating to the arrangement of new financing, mergers and acquisitions, services relating to the provision of directors or other manager of a Person and other investment banking services, including introduction and transaction organization services.

5.6 Indemnification

 

  5.6.1.

The General Partner and any of its Affiliates, and their respective officers, directors, agents, shareholders, partners, members and employees, any Person who serves on the board of directors or other Governing Body of any member of the BREP Group, and any Person that the General Partner designates as an indemnified person (each, an “ Indemnified Party ”) shall, to the fullest extent permitted by Law, be indemnified on an after Tax basis out of the Assets (and the General Partner shall be entitled to grant indemnities on behalf of the Partnership, and to make payments out of the Assets, to any Indemnified Party in each case in accordance with this Section 5.6) against any and all losses, claims, damages, liabilities, costs and expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements and other amounts (collectively, “ Liabilities ”) arising from any and all claims, demands, actions, suits and proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Party is or may be involved, or is threatened to be involved, as a

 

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  party or otherwise, in connection with the investments and activities of the Partnership or by reason of such Person being the General Partner, or an Affiliate of the General Partner, or an officer, director, agent, shareholder, partner, member or employee of the General Partner or an Affiliate of the General Partner, or a Person who serves on the board of directors or other Governing Body of any member of the BREP Group, provided that no such Indemnified Party shall be so indemnified, with respect to any matter for which indemnification is sought, to the extent that a court of competent jurisdiction determines pursuant to a final and non appealable judgment that, in respect of such matter, the Indemnified Party acted in a grossly negligent manner or in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with knowledge that the Indemnified Party’s conduct was unlawful. An Indemnified Party shall not be denied indemnification in whole or in part under this Section 5.6 because the Indemnified Party had an interest in the transaction with respect to which indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

 

  5.6.2. To the fullest extent permitted by Law, amounts incurred in respect of Liabilities incurred by an Indemnified Party in defending any claim, demand, action, suit or proceeding, whether civil, criminal, administrative or investigative, shall from time to time be advanced by the Partnership prior to a determination that the Indemnified Party is not entitled to be indemnified, upon receipt by the Partnership of an undertaking by or on behalf of the Indemnified Party to repay such amount if it shall be determined that the Indemnified Party is not entitled to be indemnified as provided by the proviso of Section 5.6.1.

 

  5.6.3. The indemnification provided by this Section 5.6 shall be in addition to any other rights to which an Indemnified Party may be entitled under any agreement, as a matter of the Law or otherwise, both as to actions in the Indemnified Party’s capacity as an Indemnified Party and as to actions in any other capacity, and shall continue as to any Indemnified Party who has ceased to serve in the capacity in which such Indemnified Party became entitled to indemnification under this Section 5.6, and shall inure to the benefit of such Person’s heirs, successors, assigns and administrators. The indemnification provisions of this Section 5.6 are for the benefit of each Indemnified Party, its heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Person.

 

  5.6.4. No amendment, modification or repeal of this provision or any other provision of this Agreement shall in any manner terminate, reduce or impair the right of any past, present or future Indemnified Party to be indemnified by the Partnership or the obligations of the Partnership to indemnify any such Indemnified Party under and in accordance with the provisions of this Agreement as in effect immediately prior to such amendment, modification or repeal with respect to any claim, demand, action, suit or proceeding, whether civil, criminal, administrative or investigative, arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claim, demand, action, suit or proceeding may arise or be asserted.

 

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  5.6.5. Notwithstanding anything to the contrary in this Agreement, (i) no Indemnified Party shall be liable to the Partnership, any Partner or any other Person who has acquired an interest in a Partnership Interest for any Liabilities sustained or incurred by such Person as a result of any act or omission of the Indemnified Party, except to the extent there has been a final and non appealable judgment entered by a court of competent jurisdiction determining that such Liabilities resulted from the Indemnified Party’s gross negligence, bad faith, fraud, wilful misconduct, or in the case of a criminal matter, actions with knowledge that the conduct was unlawful and (ii) subject to applicable Law, any matter that is approved by a majority of the members of the Independent Committee shall not constitute a breach of this Agreement or any duties to the Partnership or to the Partners stated or implied by Law or equity, including fiduciary duties.

 

  5.6.6. Any amendment, modification or repeal of this Section 5.6 (or that otherwise affects Section 5.6) that limits its scope shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnified Parties under this Section 5.6 as in effect immediately prior to such amendment, modification or repeal with respect to any claim, demand, action, suit or proceeding, whether civil, criminal, administrative or investigative, arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claim, demand, action, suit or proceeding may arise or be asserted, provided that the Indemnified Party became an Indemnified Party hereunder prior to such amendment, modification or repeal.

 

  5.6.7. The provisions of this Section 5.6 shall survive the dissolution of the Partnership.

5.7 Resolution of Conflicts of Interest

 

  5.7.1. Notwithstanding anything to the contrary in this Agreement, conflicts of interest and potential conflicts of interest that are approved by a majority of the members of the Independent Committee from time to time are hereby approved by all Partners.

 

  5.7.2. The parties acknowledge and agree that the Independent Committee may grant approvals for any matters that may give rise to a conflict of interest or potential conflict of interest pursuant to the guidelines, policies or procedures adopted by the Independent Committee at the date hereof and as amended from time to time with the approval of a majority of the members of the Independent Committee (the “ Conflicts Guidelines ”), and if and to the extent that such matters are permitted by the Conflicts Guidelines, no further special approval will be required in connection with such matter permitted thereby other than any approvals required by Law.

 

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5.8 Other Matters Concerning the General Partner

 

  5.8.1. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

  5.8.2. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters that such General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

 

  5.8.3. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers or any duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty that is permitted or required to be done by the General Partner hereunder.

 

  5.8.4. To the fullest extent permitted by applicable Law, any standard of care applicable to the General Partner shall be modified, waived or limited as required to permit the General Partner to act in accordance with the terms of this Agreement or any other agreement contemplated hereby.

5.9 Title to Partnership Assets

Title to Assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Assets or any portion thereof. Title to any or all of the Assets may be held in the name of the Partnership, the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Assets for which record title is held in the name of the General Partner or one or more Affiliates of the General Partner or one or more nominees shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its reasonable efforts to cause record title to such Assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be transferred into the name of the Partnership as soon as reasonably practicable; provided that, prior to the withdrawal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and prior to any such transfer, will provide for the use of such Assets in a manner satisfactory to the Partnership. All Assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Assets is held.

 

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5.10 Purchase or Sale of Units

The General Partner may, upon notice to the Transfer Agent, cause the Partnership to purchase or otherwise acquire Units. As long as Units are held by the Partnership, such Units shall not be considered Outstanding for any purpose, except as otherwise provided herein. The General Partner or any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Units for its own account, subject to the provisions of Article 10 and Article 11.

5.11 Reliance by Third Parties

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all Assets and to enter into any contracts on behalf of the Partnership, including contracts related to the incurrence or guarantee of indebtedness, and such Person shall be entitled to deal with the General Partner as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

5.12 Services

The General Partner may cause the Partnership to appoint any Person (including any Affiliate of the General Partner) to manage the affairs of the Partnership, in accordance with the Conflicts Guidelines. Any services rendered pursuant to such appointment shall be on terms that are fair and reasonable to the Partnership, provided that the requirements of this Section 5.12 shall be deemed satisfied as to (i) any services provided under the Master Services Agreement and any agreement contemplated thereby, (ii) any transaction approved by a majority of the members of the Independent Committee, subject to compliance with the requirements of applicable Law, or (iii) any transaction entered into in accordance with the Conflicts Guidelines, subject to compliance with the requirements of applicable Law. The provisions of Section 5.3 shall apply to the rendering of services described in this Section 5.12.

 

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ARTICLE 6

INVESTMENTS IN BRELP

Notwithstanding anything in this Agreement to the contrary, if and to the extent that the Partnership raises funds by way of the issuance of equity or debt securities, or otherwise, pursuant to a public offering, private placement or otherwise, the General Partner shall cause such funds to be invested in securities of BRELP in accordance with the terms of the BRELP Agreement.

ARTICLE 7

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

7.1 Limitation of Liability

The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Limited Partnership Act or the Exempted Partnerships Act.

If it were determined that a Limited Partner was participating in the control or management of the Partnership or conducting the affairs of, signing or executing documents for or otherwise binding the Partnership (or purporting to do any of the foregoing) within the meaning of the Limited Partnership Act or the Exempted Partnerships Act, such legislation provides that such Limited Partner would be liable as if it were a general partner of the Partnership in respect of all debts of the Partnership incurred while that Limited Partner was so acting or purporting to act.

7.2 Management of Partnership Affairs

No Limited Partner (other than the General Partner or any officer, director, employee, partner, agent or trustee of the General Partner, in its capacity as such, if such Person shall also be a Limited Partner) shall take part in the management or control of the activities and affairs of the Partnership or have any right or authority to act for or bind the Partnership or to take part or in any way to interfere in the conduct or management of the Partnership or to vote on matters relating to the Partnership, to have access to the books and records of the Partnership or any other member of the BREP Group other than as required by applicable Law or as set forth in this Agreement. The transaction of any such activities or affairs by the General Partner or any officer, director, employee, partner, agent or trustee of the General Partner, in its capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.

7.3 Outside Activities

Subject to the provisions of Section 5.4, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners, any Limited Partner shall be entitled to and may have interests and engage in activities in addition to activities relating to the Partnership, including interests and activities in direct competition with the Partnership or BRELP. Neither the Partnership nor any of the other Partners shall have any rights by virtue of this Agreement in any ventures of any Limited Partner.

 

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ARTICLE 8

BOOKS, RECORDS, ACCOUNTING AND REPORTS

8.1 Books, Records and Accounting

The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s activities and affairs. Any books and records maintained by or on behalf of the Partnership in the regular course of its activities and undertakings, including the record of the Record Holders, books of account and records of Partnership proceedings, may be kept on information storage devices, provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with IFRS-IASB. Such books, records and registers will be kept available for inspection by and at the sole expense of any Limited Partner or its duly authorized representatives upon notice to the General Partner during regular business hours at the office of the General Partner for any purpose relating to such Limited Partner’s Partnership Interest. Limited Partners shall not have access to any information of the Partnership contained in its books and records which the General Partner is required by legal or contractual restriction to keep confidential or which, in the opinion of the General Partner, acting reasonably, should be kept confidential in the interests of the Partnership or may be kept confidential as provided in this Agreement, and each Limited Partner hereby waives any right, statutory or otherwise, to greater access to the books and records of the Partnership than is permitted herein, to the greatest extent permitted by law.

8.2 Fiscal Year

Subject to Section 14.1.10, the fiscal year of the Partnership shall be the calendar year; provided, however, if the Code requires a taxable year of the Partnership other than a calendar year then, for U.S. tax purposes, the fiscal year of the Partnership shall be such taxable year.

8.3 Reports

8.3.1. Within the period of time required by applicable Law, including any rule of any stock exchange on which the Units or other partnership interests of BREP are or will be listed for trading, the General Partner shall prepare in accordance with IFRS-IASB and make publicly available as of a date selected by the General Partner in its reasonable discretion financial statements of the Partnership for such fiscal year of the Partnership audited by a firm of independent public accountants of international standing selected by the General Partner as well as a statement of the accounting policies used in their preparation, such information as may be required by applicable Laws and such information as the General Partner deems appropriate.

8.3.2. As and within the period of time required by any applicable Law, including any rule of any Securities Exchange, the General Partner shall prepare:

 

  8.3.2.1 in accordance with IFRS-IASB and make publicly available quarterly financial statements of the Partnership, which may be unaudited, as may be required by applicable Law, including any Securities Exchange on which the Units or other partnership interests of BREP are or will be listed for trading; and

 

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  8.3.2.2 all other press releases, proxy circulars and other disclosure documentation as may be required by applicable Law, including any Securities Exchange on which the Units or other partnership interests of BREP are or will be listed for trading.

ARTICLE 9

TAX MATTERS

9.1 Tax Information

9.1.1. Following each taxable year of the Partnership, the General Partner shall use commercially reasonable efforts to supply each Person that was a Partner at any time during such taxable year with a Schedule K-1 (or equivalent) within ninety (90) days after the close of such taxable year. In addition, following each taxable year of the Partnership, the General Partner shall use commercially reasonable efforts to cause the Partnership to, upon the request of any Person that was a Partner at any time during such taxable year, provide to such Partner information as to whether any non-U.S. corporation that is a Subsidiary of the Partnership and that is not itself also a Subsidiary of a non-U.S. corporation that is a Subsidiary of the Partnership is a “passive foreign investment company” within the meaning of Section 1297 of the Code; provided, that the General Partner and the Partnership shall not be required to comply with this sentence with respect to any taxable year during which the Partnership makes such information available in a Form 20-F or other publicly available document filed with the United States Securities and Exchange Commission. The General Partner shall also, where reasonably possible and applicable, prepare and send such Persons such other information required by any non-U.S. Limited Partner for U.S. federal income tax reporting purposes.

9.1.2. Within ninety (90) days following the end of each fiscal year of the Partnership and within the ninety (90) days after the date of the dissolution of the Partnership, the General Partner shall use commercially reasonable efforts to supply each Person that was a Partner at any time during such fiscal year and who is required to file an income tax return under the Income Tax Act (or, in the case of a Partner that is a partnership, that has one or more partners who is required to file an income tax return under the Income Tax Act) all necessary income tax reporting information with respect to such Partner’s income from the Partnership for such fiscal year.

9.2 Preparation of Tax Returns

The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for U.S. federal and state income tax purposes and, where applicable, Canadian federal income tax purposes. The classification, realization and recognition of income, gain, losses and deductions and other items shall be computed (i) for U.S. federal income tax purposes, on the accrual method of accounting, and (ii) for Canadian federal income tax purposes, in accordance with the Income Tax Act.

 

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9.3 Tax Elections

The General Partner shall determine whether to make, to refrain from making or to revoke the election provided for in Section 754 of the Code, and any and all other elections permitted by the Code, the Income Tax Act or any other national, federal, state or local tax Law, in its sole discretion, provided, however, that the General Partner shall make all elections that it is required to make under the Plan of Arrangement.

9.4 Tax Controversies

Subject to the provisions hereof, the General Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code) and the designated partner for the purposes of the Income Tax Act including subsections 152(1.4) to 152(1.8) thereof, and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings.

9.5 Withholding

Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines in its sole discretion to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code, the Income Tax Act or any other national, federal, state or local Law including pursuant to Chapters 3 and 4 of Subtitle A of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner, the amount withheld shall be treated as a distribution of cash or as a general expense of the Partnership pursuant to Section 4.6 in the amount of such withholding from such Partner. To the extent an amount otherwise payable to a member of the BREP Group is required to be withheld and paid over to any taxing authority, and such withheld amount is attributable to a Partner’s ownership of Units, then such withheld amount shall be treated as a distribution of cash to such Partner or as a general expense of the Partnership pursuant to Section 4.6 in the amount of such withholding.

9.6 Election to be Treated as a Corporation

Notwithstanding anything to the contrary contained herein, if the General Partner determines in its sole discretion that it is no longer in the best interests of the Partnership to continue as a partnership for U.S. federal income tax purposes, the General Partner may elect to treat the Partnership as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.

 

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9.7 FIRPTA

During the period beginning on the first Business Day following the day of the Combination and ending on the first Business Day on which any Units are regularly quoted on an established securities market located in the United States within the meaning of Treasury Regulations Section 1.897-9T(d)(2), the General Partner shall cause to be posted on an Internet website maintained by, or on behalf of, the Partnership a statement intended to satisfy the requirements set forth in Treasury Regulations Section 1.1445-11T(d)(2)(i) and shall update such statement at 30-day intervals in compliance with the foregoing requirements.

ARTICLE 10

CERTIFICATES; RECORD HOLDERS; TRANSFERS OF PARTNERSHIP

INTERESTS

10.1 Certificates

 

  10.1.1. Upon the Partnership’s issuance of Partnership Interests of all or any classes to any Person, the Partnership shall issue one or more Certificates in the name of such Person evidencing the number of such Partnership Interests being so issued. Certificates shall be executed on behalf of the Partnership by the General Partner. No Certificate evidencing the issuance of Partnership Interests shall be valid for any purpose until it has been countersigned by the Transfer Agent, provided that if the General Partner elects to issue Partnership Interests (including Units) in global form, the Certificates of such Partnership Interests (including Units) shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Partnership Interests have been duly registered in accordance with the directions of the Partnership.

 

  10.1.2. Notwithstanding Section 10.1.1, Partnership Interests (including Units) of any class may be traded through an electronic settlement system and held in Uncertificated form in accordance with such arrangements as may from time to time be permitted by any statute, regulation, order, instrument or rule in force affecting the Partnership. Amendments to any provisions of this Agreement which may be necessary or expedient for this purpose may be made by the General Partner in its sole discretion but will not be deemed to vary the rights of any class of Partnership Interests (including Units).

 

  10.1.3. Certificates may bear any legends required by applicable Law or otherwise determined to be appropriate by the General Partner.

10.2 Mutilated, Destroyed, Lost or Stolen Certificates

 

  10.2.1. If any mutilated Certificate is surrendered to the Transfer Agent, the General Partner on behalf of the Partnership shall execute, and upon its request the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number of Partnership Interests as the Certificate so surrendered.

 

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  10.2.2. The General Partner on behalf of the Partnership shall execute, and upon its request the Transfer Agent shall countersign and deliver a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate:

 

  10.2.2.1 makes proof by affidavit, in form and substance satisfactory to the General Partner, that a previously issued Certificate has been lost, destroyed or stolen;

 

  10.2.2.2 requests the issuance of a new Certificate before the Partnership has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

 

  10.2.2.3 if requested by the General Partner, delivers to the Partnership a bond, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may reasonably direct, in its sole discretion, to indemnify the Partnership, the General Partner and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and

 

  10.2.2.4 satisfies any other reasonable requirements imposed by the General Partner.

 

  10.2.3. If a Record Holder fails to notify the Partnership within a reasonable time after the holder has notice of the loss, destruction or theft of a Certificate, and a transfer of the Partnership Interests represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Record Holder shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate.

 

  10.2.4. As a condition to the issuance of any new Certificate under this Section 10.2, the General Partner may require the payment of a sum sufficient to cover any Tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith.

10.3 Record Holder

In accordance with Section 10.5.2, the Partnership shall be entitled to recognize the Record Holder as the Limited Partner with respect to any Units and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Units on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof, except as otherwise provided by applicable Law. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Units, as between the Partnership on the one hand and such other Person on the other hand, such representative Person shall be the Record Holder of such Partnership Interest. A Person may become a Record Holder without the consent or approval of any Partner.

 

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10.4 Transfer Generally

 

  10.4.1. The term “ transfer ”, when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General Partner assigns its General Partner Unit to another Person or (ii) by which the holder of a Unit assigns such Unit to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by Law or otherwise.

 

  10.4.2. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 10. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 10 shall be null and void.

 

  10.4.3. Nothing contained in this Agreement shall be construed to prevent the parent entity of the General Partner from disposing of all of the issued and outstanding capital stock of the General Partner.

10.5 Registration and Transfer of Units

 

  10.5.1. The General Partner shall cause to be kept at its registered office in Bermuda on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 10.5.2, the General Partner will provide for the registration and transfer of Units. The Transfer Agent is hereby appointed registrar and transfer agent for the purpose of registering Units and transfers of such Units as herein provided. The Partnership shall not recognize transfers of Certificates representing Units unless such transfers are effected in the manner described in this Section 10.5. Upon surrender for registration of transfer of any Units evidenced by a Certificate, and subject to the provisions of Section 10.5.2, the General Partner on behalf of the Partnership shall execute and deliver, and the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the same aggregate number of Units as was evidenced by the Certificate so surrendered.

 

  10.5.2. Except as otherwise provided in Article 11, the Partnership shall not recognize any transfer of Units until the Certificates evidencing such Units are surrendered for registration of transfer.

 

  10.5.3. Subject to (i) the foregoing provisions of this Section 10.5; (ii) Section 10.3; (iii) Section 10.7; (iv) with respect to any class or series of Units, the provisions of any statement of designations or amendment to this Agreement establishing such class or series; (v) any contractual provisions binding on any Limited Partner; and (vi) provisions of applicable Law including the Limited Partnership Act and the Exempted Partnerships Act, Units shall be freely transferable.

 

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  10.5.4. The General Partner shall have power to implement such arrangements as it may, in its sole discretion, determine fit in order for any class of Units to be admitted to settlement by means of any clearing system.

 

  10.5.5. The General Partner may, in its sole discretion and without giving a reason, refuse to register a transfer of any Unit in Certificated form or Uncertificated form (subject to Section 10.5.6) which is not fully paid or on which the Partnership has a lien.

 

  10.5.6. The General Partner may only decline to register a transfer of an Uncertificated Unit in the circumstances set out in this Agreement, the listing rules made by any Securities Exchange and the regulations of any clearing system implemented pursuant to Section 10.5.4, or as otherwise required by applicable Law.

10.6 Transfer of General Partner Unit

 

  10.6.1. The General Partner may transfer its General Partner Unit to a single transferee (including upon its merger, consolidation or other combination into any other Person or the transfer by it of all or substantially all of its assets to another Person) if, but only if, (i) the transferee is an Affiliate of the general partner of BRELP (or the transfer is being made concurrently with a transfer of the general partnership units of BRELP to an Affiliate of the transferee), (ii) the transferee agrees to assume and be bound by the provisions of this Agreement and (iii) the Partnership receives an Opinion of Counsel (delivered by counsel acceptable to the Independent Committee) that such transfer (or merger, consolidation or combination) would not result in the loss of limited liability of any Limited Partner or of any limited partner of BRELP or cause the Partnership or BRELP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for tax purposes; provided, however, that no such opinion shall be required in connection with an election described in Section 9.6 made by the General Partner or in connection with a transfer following such an election.

 

  10.6.2. In the case of a transfer pursuant to this Section 10.6, the transferee or successor (as the case may be) shall be admitted to the Partnership as the General Partner immediately after the transfer of the General Partner Unit, and the Partnership shall continue without dissolution.

 

  10.6.3. The Parties agree that no transfer under this Section 10.6 will occur without the notification to and approval of the relevant Bermuda regulatory authorities in accordance with Bermuda law.

 

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10.7 Restrictions on Transfers

Notwithstanding the other provisions of this Article 10, no transfer of any Partnership Interest shall be made if such transfer would (a) violate the then applicable securities Laws or rules and regulations of any securities commission of any jurisdiction or any other Governmental Authorities with jurisdiction over such transfer, (b) result in the taxation of the Partnership as an association taxable as a corporation or otherwise subject the Partnership to entity-level taxation for tax purposes (in either case, for U.S. tax purposes, to the extent not otherwise elected by the General Partner pursuant to Section 9.6 to be treated as such) or (c) affect the Partnership’s existence or qualification as an exempted limited partnership under the Limited Partnership Act or Exempted Partnerships Act.

ARTICLE 11

ADMISSION OF ADDITIONAL OR SUCCESSOR PARTNERS

11.1 Admission of Additional Limited Partners

 

  11.1.1. By acceptance of the transfer of any Units or the issuance of any Units in accordance with this Agreement, each Person to whom a Unit is transferred or issued (including any nominee holder or an agent or representative acquiring such Units for the account of another Person) shall:

 

  11.1.1.1 be admitted to the Partnership as a Limited Partner with respect to the Units so transferred or issued to such Person when any such transfer or issuance is reflected in the books and records of the Partnership, with or without execution of this Agreement;

 

  11.1.1.2 become bound by, and shall be deemed to have agreed to be bound by, the terms of this Agreement;

 

  11.1.1.3 shall become the Record Holder of the Units so transferred or issued;

 

  11.1.1.4 represents that the transferee or other recipient has the capacity, power and authority to enter into this Agreement;

 

  11.1.1.5 be deemed to grant the powers of attorney set forth in this Agreement;

 

  11.1.1.6 be deemed to make the consents and waivers contained in the Agreement, including with respect to the approval of the transactions and agreements entered into in connection with the formation of the Partnership and the Fund Conversion; and

 

  11.1.1.7 be deemed to ratify and confirm all contracts, agreements, assignments and instruments entered into on behalf of the Partnership, in accordance with this Agreement, including the granting of any charge or security interest over the Assets and the assumption of any indebtedness in connection with the affairs of the Partnership.

 

  11.1.2. The transfer of any Unit and/or the admission of any new Limited Partner to the Partnership will not constitute any amendment to this Agreement. A Person may become a Record Holder without the consent or approval of any of the Partners. A Person may not become a Limited Partner without acquiring a Unit.

 

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  11.1.3. Any transfer of a Unit shall not entitle the transferee to share in the profits and losses, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled until the transferee becomes a Limited Partner and a party to this Agreement pursuant to this Article 11.

11.2 Admission of Successor General Partner

A successor general partner approved pursuant to Section 12.1 or the transferee of or successor to the General Partner’s General Partner Unit pursuant to Section 10.6 shall be admitted to the Partnership as the general partner, subject to the requirements of the Limited Partnership Act and the Exempted Partnerships Act, effective immediately prior to the withdrawal of the General Partner pursuant to Section 12.1 or immediately after the transfer of the General Partner’s General Partner Unit pursuant to Section 10.6. Any such successor shall conduct the activities and affairs of the Partnership without the Partnership being dissolved. In each case, the admission shall be subject to the successor general partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. Any such successor is hereby authorized to and shall, subject to the terms hereof, conduct the activities and affairs of the Partnership without the Partnership being dissolved and shall be deemed to ratify and confirm all contracts, agreements, assignments and instruments entered into on behalf of the Partnership, in accordance with this Agreement, including the granting of any charge or security interest over the Assets and the assumption of any indebtedness in connection with the affairs of the Partnership.

ARTICLE 12

WITHDRAWAL OF PARTNERS

12.1 Withdrawal of the General Partner

 

  12.1.1. The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an “ Event of Withdrawal ”):

 

  12.1.1.1 the General Partner voluntarily withdraws from the Partnership by giving 180 days advance written notice to the other Partners;

 

  12.1.1.2 the General Partner transfers all of its rights as General Partner pursuant to Section 10.6;

 

  12.1.1.3 the General Partner (a) makes a general assignment for the benefit of creditors; (b) files a voluntary bankruptcy petition; (c) files a petition or answer seeking for itself a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any Law; (d) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in Sections (a)-(c) of this Section 12.1.1.3; or (e) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the General Partner or of all or any substantial part of its properties;

 

 

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  12.1.1.4 a final and non-appealable judgment is entered by a court with appropriate jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency Laws as now or hereafter in effect; or

 

  12.1.1.5 a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the Laws of its state of incorporation.

 

  12.1.2. If an Event of Withdrawal specified in Sections 12.1.1.3, 12.1.1.4 or 12.1.1.5 occurs or is expected, the withdrawing General Partner shall give notice as soon as reasonably practicable to the Limited Partners. The Partners hereby agree that only the Events of Withdrawal described in this Section 12.1 shall result in the withdrawal of the General Partner from the Partnership.

 

  12.1.3. Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) the General Partner voluntarily withdraws by giving at least 90 days’ advance notice to the Limited Partners, such withdrawal to take effect on the date specified in such notice; or (ii) at any time that the General Partner ceases to be a general partner pursuant to Section 12.1.1.2.

 

  12.1.4.

If the General Partner gives a notice of withdrawal pursuant to Sections 12.1.1.1 or 12.1.2, holders of at least 66  2 / 3 % of the voting power of the Outstanding Units may, prior to the effective date of such withdrawal, elect a successor general partner. If, prior to the effective date of the General Partner’s withdrawal, a successor is not selected by the Limited Partners as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance with Article 13. Any such successor general partner shall be subject to the provisions of Section 11.2.

12.2 Interest of Departing General Partner and Successor General Partner

 

  12.2.1. In the event of withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement, the Departing General Partner shall, at its option exercisable prior to the effective date of the departure of such Departing General Partner, promptly receive from its successor in exchange for its General Partner Unit an amount in cash equal to the fair market value of the General Partner Unit, such amount to be determined and payable as of the effective date of its departure. If the General Partner withdraws under circumstances where such withdrawal violates this Agreement, its successor shall have the option described in the immediately preceding sentence, and the Departing General Partner shall not have such option.

 

 

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  12.2.2. For purposes of this Section 12.2.2, the fair market value of the Departing General Partner Unit shall be determined by agreement between the Departing General Partner and its successor or, failing agreement within 30 days after the effective date of such Departing General Partner’s departure, by an independent investment banking firm or other independent expert selected by the Departing General Partner and its successor, which, in turn, may rely on other experts and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing General Partner shall designate an independent investment banking firm or other independent expert, the Departing General Partner’s successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which shall determine the fair market value of the General Partner Unit. In making its determination, such independent investment banking firm or other independent expert shall consider the then current trading price of Units on any Securities Exchange on which Units are then listed, the value of the Partnership’s Assets, the rights and obligations of the General Partner and other factors it may deem relevant.

 

  12.2.3. If the General Partner Unit is not acquired in the manner set forth in Section 12.2.1, the Departing General Partner shall become a Limited Partner and the General Partner Unit shall be converted into a Unit pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 12.2.1, without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor).

12.3 Withdrawal of Limited Partners

No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner’s Units becomes a Record Holder, such transferring Limited Partner shall, subject to Section 4.4.2, cease to be a Limited Partner with respect to the Units so transferred.

ARTICLE 13

TERMINATION OF THE PARTNERSHIP

13.1 General

Subject to the provisions of this Article 13, the Partnership shall terminate on the earlier to occur of:

 

  13.1.1. the date on which all Assets have been disposed of or otherwise realized by the Partnership and the proceeds of such disposals or realizations have been distributed to the Partners;

 

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  13.1.2. the service of notice by the General Partner, with the approval of a majority of the members of the Independent Committee that in the opinion of the General Partner the coming into force of any Law or binding authority renders illegal or impracticable the continuation of the Partnership; or

 

  13.1.3. the election of the General Partner, with the approval of a majority of the members of the Independent Committee, if the Partnership, as determined by the General Partner, based upon an Opinion of Counsel, is required to register as an “investment company” under the U.S. Investment Company Act of 1940, as amended, or similar legislation in other jurisdictions.

13.2 Incapacity

 

  13.2.1. Subject to Section 13.2.2, the Partnership shall be dissolved on the following:

 

  13.2.1.1 the date that the General Partner withdraws from the Partnership without the appointment of a successor pursuant to Section 12.1 having been implemented; or

 

  13.2.1.2 the date on which any court of competent jurisdiction enters a decree of judicial dissolution of the Partnership or an order to wind up or liquidate the General Partner without the appointment of a successor pursuant to Section 12.1 having been implemented.

 

  13.2.2. The Partnership shall be reconstituted and continue without dissolution, if within 30 days of the date of dissolution (and provided that a notice of dissolution with respect to the Partnership has not been provided to the Bermuda Monetary Authority) under this Section 13.2, a successor general partner appointed pursuant to this Agreement executes a transfer deed pursuant to which the new general partner assumes the rights and undertakes the obligations of the original general partner, but only if the Partnership receives an Opinion of Counsel that the admission of the new general partner will not result in the loss of limited liability of any Limited Partner.

13.3 Liquidation

Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 13.2, the General Partner shall act, or cause one or more Persons to act, as the Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by a majority of the members of the Independent Committee. If the General Partner is acting as the Liquidator, it shall not be entitled to receive any additional compensation for acting in such capacity. The Liquidator shall agree not to resign at any time without 15 days’ prior notice and (if other than the General Partner) may be removed at any time, with or without cause, by notice of removal approved by a majority of the members of the Independent Committee. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by a majority of the members of the Independent

 

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Committee. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Section 13.3, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding-up and liquidation of the Partnership as provided for herein. The Liquidator shall proceed to dispose of the Assets, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as the Liquidator determines to be in the best interest of the Partners, subject to applicable Laws and the following:

 

  13.3.1. the Assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidators and such Partners or Partners may agree; if any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 13.3.3 to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners; the Liquidator may distribute the Assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Partners;

 

  13.3.2. liabilities of the Partnership, including amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 13.3) and amounts to Partners otherwise than in respect of their distribution rights under Section 4.6, shall be discharged; with respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment; when paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds; and

 

  13.3.3. all property and all cash in excess of that required to discharge liabilities of the Partnership pursuant to Section 13.3.2 shall be distributed to the Partners in accordance with their Percentage Interests as of the date chosen by the Liquidator. Such distribution shall be made by the end of the taxable year in which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation).

13.4 Distributions in Kind

Notwithstanding the provisions of Section 13.3, which require the liquidation of the Assets, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership, the Liquidator determines that an immediate sale of part or all of the Assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its absolute

 

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discretion, defer for a reasonable time the liquidation of any Assets except those necessary to satisfy liabilities of the Partnership (including those to Partners as creditors) and/or distribute to the Partners or to specific classes of Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.3, undivided interests in such Assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Limited Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

13.5 Cancellation of Certificate of Limited Partnership

Upon the completion of the distribution of Partnership cash and property as provided in Sections 13.3 and 13.4, the Partnership shall be terminated and the Certificate of Limited Partnership and Certificate of Exempted Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than Bermuda shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken.

13.6 Reasonable Time for Winding Up

A reasonable time shall be allowed for the orderly winding up of the activities and affairs of the Partnership and the liquidation of its Assets pursuant to Section 13.3 in order to minimize any losses otherwise attendant upon such winding up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation.

13.7 Return of Capital

The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners, or any portion thereof, it being expressly understood that any such return shall be made solely from Assets.

13.8 Waiver of Partition

Each Partner hereby waives any right to partition of the Partnership property.

ARTICLE 14

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

14.1 Amendment to be Adopted Solely by General Partner

Subject to compliance with the requirements of the Limited Partnership Act and the Exempted Partnerships Act, each Limited Partner agrees that the General Partner (pursuant to its powers of attorney from the Limited Partners), without the approval of any Limited Partner, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:

 

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  14.1.1. a change in the name of the Partnership, the location of the registered office of the Partnership, the registered agent of the Partnership or the registered office of the Partnership;

 

  14.1.2. admission, substitution or withdrawal of Partners in accordance with this Agreement;

 

  14.1.3. a change that the General Partner determines is reasonable and necessary or appropriate to qualify or continue the qualification of the Partnership as an exempted limited partnership under Bermuda law or a partnership in which the limited partners have limited liability under the Laws of any jurisdiction, or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for tax purposes;

 

  14.1.4. an amendment that the General Partner determines to be necessary or appropriate to address changes in tax regulations, legislation or interpretation;

 

  14.1.5. an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership or the General Partner or its directors or officers from in any manner being subjected to the provisions of the U.S. Investment Company Act of 1940, as amended, or similar legislation in other jurisdictions;

 

  14.1.6. an amendment that the General Partner determines in its sole discretion to be necessary or appropriate in connection with the creation, authorization or issuance of any class or series of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests pursuant to Section 3.5;

 

  14.1.7. any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;

 

  14.1.8. any amendment that in the sole discretion of the General Partner is necessary or appropriate to reflect and account for the formation of the Partnership of, or its investment in, any Person, as otherwise permitted by the Agreement;

 

  14.1.9. a change in the Partnership’s fiscal year and related changes; or

 

  14.1.10.   any other amendments substantially similar to the matters described in Sections 14.1.1 through 14.1.10.

In addition, the General Partner may make amendments to this Agreement, without the approval of any Limited Partner, if those amendments, in the discretion of the General Partner:

 

  14.1.11.   do not adversely affect the Limited Partners considered as a whole (including any particular class of Partnership Interest as compared to other classes of Partnership Interests) in any material respect;

 

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  14.1.12.   are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion or binding directive, order, ruling or regulation of any Governmental Authority;

 

  14.1.13.   are necessary or appropriate to facilitate the trading of Units or to comply with any rule, regulation, guideline or requirement of any Securities Exchange on which any Units or any other Partnership Interests are or will be listed for trading;

 

  14.1.14.   are necessary or appropriate for any action taken by the General Partner relating to splits or combinations of Units or Partnership Interests made in accordance with the provisions of this Agreement; or

 

  14.1.15.   are required to effect the intent of the provisions of the Combination Agreement or the intent of the provisions of this Agreement or are otherwise contemplated by this Agreement.

14.2 Amendment Procedures

Except as provided in Sections 14.1 and 14.3, all amendments to this Agreement shall be made in accordance with the following procedures:

 

  14.2.1. amendments to this Agreement may only be proposed by or with the consent of the General Partner, provided that the General Partner shall have no duty or obligation to propose any amendment to this Agreement and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to propose or consent to an amendment to the fullest extent permitted by Law, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Limited Partnership Act or the Exempted Partnerships Act or any other Law or at equity;

 

  14.2.2.

a proposed amendment shall be effective upon its approval by the General Partner and, where required under this Agreement or by the Limited Partnership Act, on the consent, vote or approval of the amendment by the holders of at least 66  2 / 3 % of the voting power of the Outstanding Units; and

 

  14.2.3. each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of Outstanding Units or call a meeting of the Unitholders to consider and vote on such proposed amendment.

14.3 Amendment Requirements

 

  14.3.1.

Notwithstanding the provisions of Sections 14.1 and 14.2, no provision of this Agreement that establishes a percentage of the voting power of the Outstanding

 

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  Units required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting requirement unless such amendment is approved by the written consent or the affirmative vote of the voting power of Outstanding Units whose aggregate Outstanding Units constitute voting power not less than the voting requirement sought to be reduced.

 

  14.3.2. Notwithstanding the provisions of Sections 14.1 and 14.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent except if the same occurs as a result of any amendment approved pursuant to Section 14.3.3, or (ii) enlarge the obligations, restrict in any way any action by or rights of or reduce in any way the amounts distributable, reimbursable or otherwise payable by the Partnership to the General Partner or any of its Affiliates without the consent of the General Partner, which may be given or withheld in its sole discretion.

 

  14.3.3. Except as otherwise provided, and without limitation of the General Partner’s authority to adopt amendments to this Agreement as contemplated in Section 14.1, the General Partner may amend the Partnership Agreement without the approval of holders of Outstanding Units, except that any amendment that would have a material adverse effect on the rights or preferences of any class of Outstanding Units in relation to other classes of Partnership Interests must be consented to or approved by the holders of at least a majority of the Outstanding Partnership Interests of the class affected.

 

  14.3.4. Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 14.1, no amendments shall become effective without the approval of at least 90% of the voting power of the Outstanding Units unless the Partnership obtains an Opinion of Counsel to the effect that (a) such amendment will not cause the Partnership to be treated as an association taxable as a corporation or otherwise taxable as an entity for tax purposes (provided that for U.S. tax purposes the General Partner has not made the election contemplated by Section 9.6) and (b) such amendment will not affect the limited liability of any Limited Partner or any limited partner of BRELP under applicable Law.

 

  14.3.5. This Section 14.3 shall only be amended with the approval of not less than 90% of the Outstanding Units, and in the case of Section 14.3.2(ii), with the consent of the General Partner, which may be given or withheld in its sole discretion.

14.4 Meetings

All acts of Limited Partners to be taken hereunder shall be taken in the manner provided in this Article 14. Meetings of the Limited Partners may only be called by the General Partner. A meeting shall be held at a time and place (outside of Canada) determined by the General Partner on a date not less than 10 days and not more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the activities and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability under the Limited Partnership Act or the Law of any other jurisdiction in which the Partnership is qualified to conduct activities and affairs.

 

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14.5 Notice of Meeting

Notice of a meeting called pursuant to Section 14.4 shall be given to the Record Holders of the class or classes of Partnership Interests in writing by mail or other means of written communication in accordance with Section 15.2 and shall include details of any proposal or other matter required by any provision of this Agreement or Law to be submitted for the consideration and approval of the Limited Partners. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication. In addition, notices of special meetings pursuant to Section 14.4 shall be delivered, announced and/or published to the extent required for the Partnership to comply with applicable Law, including any rules of any Securities Exchange.

14.6 Record Date

For purposes of determining the Limited Partners entitled to notice of and participation in or to vote at a meeting of the Limited Partners or to provide consents or give approvals to any action by the Partnership as provided in Section 14.11 without a meeting as provided in Section 14.10, the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any applicable Law or rule, regulation, guideline or requirement of any Securities Exchange, in which case the more stringent requirement shall govern) or (b) in the event that consents or approvals to any action by the Partnership are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to provide such consents or approvals.

14.7 Adjournment

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting and/or the new Record Date, as applicable, shall be given in accordance with this Article 14.

14.8 Quorum

Twenty-five percent of the Outstanding Units of the class or classes for which a meeting has been called (including Units held by the General Partner) represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class or classes unless any such action by the Limited Partners requires approval by Limited Partners holding a greater percentage of the voting power of such Units, in which case the quorum shall be such greater percentage. At any meeting of the Limited Partners duly called and held in accordance with this

 

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Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Units that in the aggregate represent a majority of the Outstanding Units entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Units that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of the voting power of Outstanding Units specified in this Agreement (including Outstanding Units deemed owned by the General Partner). In the absence of a quorum, any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of Units holding at least a majority of the voting power of the Outstanding Units entitled to vote at such meeting (including Outstanding Units deemed owned by the General Partner) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 14.7.

14.9 Conduct of Meeting

The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of consents or approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 14.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting, in either case including a Partner or a director or officer of the General Partner. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable Law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of consents or approvals in writing.

14.10 Action Without a Meeting

If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if (i) written consent to such action is solicited by or on behalf of the General Partner, and (ii) an approval in writing setting forth the action to be taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Units that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted. Prompt notice of the taking of action by written consent or without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot from Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Units held by the Limited Partner, the Partnership shall be deemed to have failed to receive a ballot for the Units that were not voted.

 

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14.11 Voting and Other Rights

 

  14.11.1.   Only those Record Holders of Units on the Record Date set pursuant to Section 14.6 (and also subject to the limitations contained in the definition of “ Outstanding ”) shall be entitled to notice of, and to vote at, a meeting of Partners or to act with respect to matters as to which the holders of the Outstanding Units have the right to vote or to act. All references in this Agreement to votes, consents or approvals of, or other acts that may be taken by, the Outstanding Units shall be deemed to be references to the votes, consents, approvals or acts of the Record Holders of such Outstanding Units.

 

  14.11.2.   Each Outstanding Unit shall entitle the holder thereof to one vote for the purposes of any approval at a meeting of Limited Partners or by written consent.

 

  14.11.3.   With respect to Units that are held for a Person’s account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such other Person shall, in exercising the voting or consent rights in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 14.11.3 (as well as all other provisions of this Agreement) are subject to the provisions of Section 10.3.

ARTICLE 15

GENERAL PROVISIONS

15.1 Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

15.2 Notices

 

  15.2.1. To the Partnership and General Partner

 

  15.2.1.1 Any notice, payment demand, request, report or other document required or permitted to be given or made under this Agreement (“ Notice ”) by a Limited Partner to the Partnership or General Partner shall be given or sent by fax or letter post or by other means of written communication to the address of the General Partner specified below, or at such other address as the General Partner may notify to the Record Holders, in compliance with applicable Laws, including any rules of any Securities Exchange:

 

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       2288509 Ontario Inc.
       c/o Appleby Corporate Services
       Canon’s Court
       22 Victoria Street
       PO Box HM 1179 Hamilton
       HM 12
       Bermuda

 

       Attention:  Secretary
       Telecopier number:   441-298-3433

 

  15.2.2. To the Limited Partners

 

  15.2.2.1 Any Notice by the General Partner or Partnership to a Limited Partner shall, unless otherwise required by applicable Laws, including any rules of any Securities Exchange, be deemed given or made to the Limited Partner when delivered in person or when sent to the relevant Record Holder by fax, letter post or by other means of written communication at the address described in Section 15.2.2.2 or when provided as set forth in Section 15.2.2.3.

 

  15.2.2.2 Any Notice to be given or made to a Limited Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give any Notice shall, unless otherwise required by applicable Laws, including any rules of any Securities Exchange, be deemed conclusively to have been fully satisfied, upon sending of such Notice to the Record Holder of the Partnership Interests, at such Person’s address as shown on the records of the Transfer Agent, or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Interests by reason of any transfer or otherwise. An affidavit or certificate of making of any Notice in Section 15.2 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such Notice. If any Notice addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by letter post marked to indicate that the relevant postal service is unable to deliver it, such Notice and any subsequent Notices shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Limited Partner at the principal office of the Partnership for a period of one year from the date of the giving or making of such Notice to the other Limited Partners.

 

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  15.2.2.3 Any Notice to be given or made to a Limited Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give any Notice shall, unless otherwise required by applicable Laws, including any rules of any Securities Exchange, be deemed conclusively to have been fully satisfied, upon issuing a press release complying with applicable Laws, including any rules of any Securities Exchange, if deemed by the General Partner in its sole discretion to be a reasonable or appropriate means of providing such Notice.

15.3 Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

15.4 Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

 

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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of November 20, 2011.

 

GENERAL PARTNER:

 

2288509 ONTARIO INC.

By:   /s/ “Jane Sheere”
 

 

 

Name: Jane Sheere

Title: Authorized Signatory

 

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LIMITED PARTNERS:

 

INITIAL LIMITED PARTNER: BROOKFIELD

 

RENEWABLE POWER INC.

By:   /s/ “Patricia Bood”
 

 

 

Name: Patricia Bood

Title: Secretary, Senior Vice President of Legal Services and General Counsel

All Limited Partners now and hereafter admitted as limited partners of the Partnership, pursuant to Powers of Attorney now and hereafter executed in favor of, and granted and delivered to, the General Partner.

 

GENERAL PARTNER:

 

2288509 ONTARIO INC.

By:   /s/ “Jane Sheere”
 

 

 

Name: Jane Sheere

Title: Authorized Signatory

 

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Exhibit 1.3

 

FORM NO. 6   Registration No. 45524

LOGO

CERTIFICATE OF INCORPORATION

I hereby in accordance with section 14 of the Companies Act 1981 issue this Certificate of Incorporation and do certify that on the 22nd day of June 2011

Brookfield Renewable Partners Limited

was registered by me in the Register maintained by me under the provisions of the said section and that the status of the said company is that of an exempted company.

 

LOGO  

Given under my hand and the Seal of the REGISTRAR OF COMPANIES this 23rd day of June 2011

 

LOGO

 

for Registrar of Companies

Exhibit 1.4

B Y E - L A W S

of

Brookfield Renewable Partners Limited

I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-Laws of Brookfield Renewable Partners Limited as amended by written resolution of the sole Shareholder adopted with effect as of 4 May 2012 , in place of those adopted on 20 November 2011 in place of those approved at the Statutory Meeting of the above Company on 29 June 2011 .

 

Secretary

 

LOGO


BYE-LAWS

OF

Brookfield Renewable Partners Limited

I N D E X

 

BYE-LAW   SUBJECT    PAGE  
1   Interpretation      1   
2   Registered Office      3   
3   Share Rights      3   
4   Modification of Rights      4   
5   Shares      4   
6   Certificates      5   
7   Lien      6   
8   Calls on Shares      6   
9   Forfeiture of Shares      7   
10   Register of Shareholders      8   
11   Register of Directors and Officers      9   
12   Transfer of Shares      9   
13   Transmission of Shares      10   
14   Increase of Capital      11   
15   Alteration of Capital      11   
16   Reduction of Capital      12   
17   General Meetings and Resolutions in Writing      12   
18   Notice of General Meetings      13   
19   Proceedings at General Meetings      14   
20   Voting      15   
21   Proxies and Corporate Representatives      17   
22   Appointment and Removal of Directors      19   
23   Resignation and Disqualification of Directors      20   
24   Directors’ Fees      20   
25   Directors’ Interests      21   
26   Powers and Duties of the Board      21   
27   Delegation of the Board’s Powers      22   
28   Proceedings of the Board      23   
29   Officers      25   
30   Minutes      26   
31   Secretary and Resident Representative      26   


32   The Seal      26   
33   Dividends and Other Payments      27   
34   Reserves      29   
35   Capitalisation of Profits      29   
36   Record Dates      30   
37   Accounting Records      30   
38   Audit      30   
39   Service of Notices and Other Documents      31   
40   Winding Up      32   
41   Indemnity      33   
42   Amalgamation      34   
43   Continuation      34   
44   Alteration of Bye-Laws      35   


B Y E - L A W S

of

Brookfield Renewable Partners Limited

INTERPRETATION

 

1 Interpretation

 

  1.1 In these Bye-Laws, unless the context otherwise requires:

“affiliate” means a person controlled by, controlling or under common control with another person, whether directly or indirectly;

“Auditor” means the person or firm for the time being appointed as auditor of the Company;

“Bermuda” means the Islands of Bermuda;

“Board” means the Directors of the Company appointed or elected pursuant to these Bye-Laws and acting by resolution as provided for in the Companies Acts and in these Bye-Laws or the Directors present at a meeting of Directors at which there is a quorum;

“Brookfield” means Brookfield Asset Management Inc.;

“the Companies Acts” means every Bermuda statute from time to time in force concerning companies insofar as the same applies to the Company;

“Company” means the company incorporated in Bermuda under the name of Brookfield Renewable Partners Limited on 22 nd day of June 2011;

“Director” means such person or persons appointed or elected to the Board from time to time pursuant to these Bye-Laws;

“Energy Partnership” means Brookfield Renewable Energy L.P.;

“Indemnified Person” means any affiliate, Director, Officer, Resident Representative, member of a committee duly constituted under these Bye-Laws, shareholders and employees of the Company, any person who serves on a governing body of the Energy Partnership or any of its subsidiaries, or any liquidator, manager or trustee for the time being acting in relation to the affairs of the Company, and his heirs, executors and administrators;

“Independent Directors” means the duly appointed members of the Board who shall be at least three (3) in number (or such greater number as shall comprise a majority of the Board from time to time) who shall be determined to be independent of the Company, of Brookfield, or of any of its affiliates, according to the standards of independence established by the New York Stock Exchange from time to time;


“Officer” means a person appointed by the Board pursuant to these Bye-Laws but shall not include the Auditor;

“paid up” means paid up or credited as paid up;

“Partnership” means Brookfield Renewable Energy Partners L.P., a partnership formed in Bermuda as an exempted limited partnership, of which the Company has been appointed as general partner;

“Register” means the Register of Shareholders of the Company maintained by the Company in Bermuda;

“Registered Office” means the registered office of the Company which shall be at such place in Bermuda as the Board shall from time to time determine;

“Resident Representative” means (if any) the individual or the company appointed to perform the duties of resident representative set out in the Companies Acts and includes any assistant or deputy Resident Representative appointed by the Board to perform any of the duties of the Resident Representative;

“Resolution” means a resolution of the Shareholders passed in a general meeting or, where required, of a separate class or separate classes of shareholders passed in a separate general meeting or in either case adopted by resolution in writing, in accordance with the provisions of these Bye-Laws;

“Seal” means the common seal of the Company and includes any authorised duplicate thereof;

“Secretary” means the individual or company appointed by the Board to perform any of the duties of the Secretary and includes a temporary or assistant or deputy Secretary;

“share” means share in the capital of the Company and includes a fraction of a share;

“Shareholder” means a shareholder or member of the Company provided that for the purposes of Bye-Law 41 it shall also include any holder of notes, debentures or bonds issued by the Company; and

“these Bye-Laws” means these Bye-Laws in their present form or as from time to time amended.

 

  1.2 For the purposes of these Bye-Laws, a corporation which is a shareholder shall be deemed to be present in person at a general meeting if, in accordance with the Companies Acts, its authorised representative is present.

 

  1.3 Words importing only the singular number include the plural number and vice versa.

 

  1.4 Words importing only the masculine gender include the feminine and neuter genders respectively.

 

  1.5 Words importing persons include companies, associations, bodies of persons, whether corporate or not.

 

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  1.6 A reference to writing shall include typewriting, printing, lithography, photography and electronic record.

 

  1.7 Any words or expressions defined in the Companies Acts in force at the date when these Bye-Laws or any part thereof are adopted shall bear the same meaning in these Bye-Laws or such part (as the case may be).

 

  1.8 A reference to any statute or statutory provision (whether in Bermuda or elsewhere) includes a reference to any modification or re-enactment of it for the time being in force and to every rule, regulation or order made under it (or under any such modification or re-enactment) and for the time being in force and any reference to any rule, regulation or order made under any such statute or statutory provision includes a reference to any modification or replacement of such rule, regulation or order for the time being in force.

REGISTERED OFFICE

 

2 Registered Office

The Registered Office shall be at such place in Bermuda as the Board shall from time to time determine.

SHARES AND SHARE RIGHTS

 

3 Share Rights

 

  3.1 Subject to any special rights conferred on the holders of any share or class of shares, any share in the Company may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the Company may by Resolution determine or, if there has not been any such determination or so far as the same shall not make specific provision, as the Board may determine.

 

  3.2 Subject to the Companies Acts, any preference shares may, with the sanction of a resolution of the Board, be issued on terms:

 

  3.2.1 that they are to be redeemed on the happening of a specified event or on a given date; and/or,

 

  3.2.2 that they are liable to be redeemed at the option of the Company; and/or,

 

  3.2.3 if authorised by the memorandum of association of the Company, that they are liable to be redeemed at the option of the holder.

 

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The terms and manner of redemption shall be provided for in such resolution of the Board and shall be attached to but shall not form part of these Bye-Laws.

 

  3.3 The Board may, at its discretion and without the sanction of a Resolution, authorise the purchase by the Company of its own shares upon such terms as the Board may in its discretion determine, provided always that such purchase is effected in accordance with the provisions of the Companies Acts.

 

  3.4 The Board may, at its discretion and without the sanction of a Resolution, authorise the acquisition by the Company of its own shares, to be held as treasury shares, upon such terms as the Board may in its discretion determine, provided always that such acquisition is effected in accordance with the provisions of the Companies Acts. The Company shall be entered in the Register as a Shareholder in respect of the shares held by the Company as treasury shares and shall be a Shareholder of the Company but subject always to the provisions of the Companies Acts and for the avoidance of doubt the Company shall not exercise any rights and shall not enjoy or participate in any of the rights attaching to those shares save as expressly provided for in the Companies Act.

 

4 Modification of Rights

 

  4.1 Subject to the Companies Acts, all or any of the special rights for the time being attached to any class of shares for the time being issued may from time to time (whether or not the Company is being wound up) be altered or abrogated with the consent in writing of the holders of not less than seventy five percent (75%) of the issued shares of that class or with the sanction of a resolution passed at a separate general meeting of the holders of such shares voting in person or by proxy. To any such separate general meeting, all the provisions of these Bye-Laws as to general meetings of the Company shall mutatis mutandis apply, but so that the necessary quorum shall be one or more persons holding or representing by proxy any of the shares of the relevant class, that every holder of shares of the relevant class shall be entitled on a poll to one vote for every such share held by him and that any holder of shares of the relevant class present in person or by proxy may demand a poll.

 

  4.2 The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.

 

5 Shares

 

  5.1 Subject to the provisions of these Bye-Laws, the unissued shares of the Company (whether forming part of the original capital or any increased capital) shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration and upon such terms and conditions as the Board may determine.

 

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  5.2 The Board may, without the sanction of a resolution, authorise the purchase by the company of its own shares, of any class or series, at any price (whether at par or above or below par), and any shares to be so purchased may be selected in any manner whatsoever, upon such terms as the Board may in its discretion determine, provided always that such purchase is effected in accordance with the provisions of the Companies Act and any other applicable laws. The whole or any part of the amount payable on any such purchase may be paid or satisfied otherwise than in cash, to the extent permitted by the Companies Acts.

 

  5.3 Subject to the provisions of these Bye-Laws, any shares of the Company held by the Company as treasury shares shall be at the disposal of the Board, which may hold all or any of the shares, dispose of or transfer all or any of the shares for cash or other consideration, or cancel all or any of the shares.

 

  5.4 The Board may in connection with the issue of any shares exercise all powers of paying commission and brokerage conferred or permitted by law. Subject to the provisions of the Companies Acts, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one way and partly in the other.

 

  5.5 Except as ordered by a court of competent jurisdiction or as required by law, no person shall be recognised by the Company as holding any share upon trust and the Company shall not be bound by or required in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or in any fractional part of a share or (except only as otherwise provided in these Bye-Laws or by law) any other right in respect of any share except an absolute right to the entirety thereof in the registered holder.

 

6 Certificates

 

  6.1 The preparation, issue and delivery of certificates shall be governed by the Companies Acts. In the case of a share held jointly by several persons, delivery of a certificate to one of several joint holders shall be sufficient delivery to all.

 

  6.2 If a share certificate is defaced, lost or destroyed, it may be replaced without fee but on such terms (if any) as to evidence and indemnity and to payment of the costs and out of pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board may think fit and, in case of defacement, on delivery of the old certificate to the Company.

 

  6.3 All certificates for share or loan capital or other securities of the Company (other than letters of allotment, scrip certificates and other like documents) shall, except to the extent that the terms and conditions for the time being relating thereto otherwise provide, be issued under the Seal or signed by a Director, the Secretary or any person authorised by the Board for that purpose. The Board may by resolution determine, either generally or in any particular case, that any signatures on any such certificates need not be autographic but may be affixed to such certificates by some mechanical means or may be printed thereon or that such certificates need not be signed by any persons.

 

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7 Lien

 

  7.1 The Company shall have a first and paramount lien on every share (not being a fully paid share) for all monies, whether presently payable or not, called or payable, at a date fixed by or in accordance with the terms of issue of such share in respect of such share, and the Company shall also have a first and paramount lien on every share (other than a fully paid share) standing registered in the name of a Shareholder, whether singly or jointly with any other person, for all the debts and liabilities of such Shareholder or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such Shareholder, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Shareholder or his estate and any other person, whether a Shareholder or not. The Company’s lien on a share shall extend to all dividends payable thereon. The Board may at any time, either generally or in any particular case, waive any lien that has arisen or declare any share to be wholly or in part exempt from the provisions of this Bye-Law.

 

  7.2 The Company may sell, in such manner as the Board may think fit, any share on which the Company has a lien but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen (14) days after a notice in writing, stating and demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment, has been served on the holder for the time being of the share.

 

  7.3 The net proceeds of sale by the Company of any shares on which it has a lien shall be applied in or towards payment or discharge of the debt or liability in respect of which the lien exists so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the person who was the holder of the share immediately before such sale. For giving effect to any such sale, the Board may authorise some person to transfer the share sold to the purchaser thereof. The purchaser shall be registered as the holder of the share and he shall not be bound to see to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the sale.

 

8 Calls on Shares

 

  8.1

The Board may from time to time make calls upon the Shareholders (for the avoidance of doubt excluding the Company in respect of any nil or partly paid shares held by the Company as treasury shares) in respect of any monies unpaid on their shares (whether on account of the par value of the shares or by way of premium) and not by the terms of issue thereof made payable at a date fixed by or in accordance with such terms of issue, and each Shareholder shall (subject to the Company serving upon him at least fourteen (14) days notice specifying the time or times and place of

 

6


  payment) pay to the Company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the Board may determine.

 

  8.2 A call may be made payable by instalments and shall be deemed to have been made at the time when the resolution of the Board authorising the call was passed.

 

  8.3 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

 

  8.4 If a sum called in respect of the share shall not be paid before or on the day appointed for payment thereof the person from whom the sum is due shall pay interest on the sum from the day appointed for the payment thereof to the time of actual payment at such rate as the Board may determine, but the Board shall be at liberty to waive payment of such interest wholly or in part.

 

  8.5 Any sum which, by the terms of issue of a share, becomes payable on allotment or at any date fixed by or in accordance with such terms of issue, whether on account of the nominal amount of the share or by way of premium, shall for all the purposes of these Bye-Laws be deemed to be a call duly made, notified and payable on the date on which, by the terms of issue, the same becomes payable and, in case of non-payment, all the relevant provisions of these Bye-Laws as to payment of interest, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified.

 

  8.6 The Board may on the issue of shares differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment.

 

9 Forfeiture of Shares

 

  9.1 If a Shareholder fails to pay any call or instalment of a call on the day appointed for payment thereof, the Board may at any time thereafter during such time as any part of such call or instalment remains unpaid serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued.

 

  9.2 The notice shall name a further day (not being less than fourteen (14) days from the date of the notice) on or before which, and the place where, the payment required by the notice is to be made and shall state that, in the event of non-payment on or before the day and at the place appointed, the shares in respect of which such call is made or instalment is payable will be liable to be forfeited. The Board may accept the surrender of any share liable to be forfeited hereunder and, in such case, references in these Bye-Laws to forfeiture shall include surrender.

 

  9.3 If the requirements of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments and interest due in respect thereof has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

 

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  9.4 When any share has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder of the share but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice as aforesaid.

 

  9.5 A forfeited share shall be deemed to be the property of the Company and may be sold, re-offered or otherwise disposed of either to the person who was, before forfeiture, the holder thereof or entitled thereto or to any other person upon such terms and in such manner as the Board shall think fit, and at any time before a sale, re-allotment or disposition the forfeiture may be cancelled on such terms as the Board may think fit.

 

  9.6 A person whose shares have been forfeited shall thereupon cease to be a Shareholder in respect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay to the Company all monies which at the date of forfeiture were presently payable by him to the Company in respect of the shares with interest thereon at such rate as the Board may determine from the date of forfeiture until payment, and the Company may enforce payment without being under any obligation to make any allowance for the value of the shares forfeited.

 

  9.7 An affidavit in writing that the deponent is a Director of the Company or the Secretary and that a share has been duly forfeited on the date stated in the affidavit shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. The Company may receive the consideration (if any) given for the share on the sale, re-allotment or disposition thereof and the Board may authorise some person to transfer the share to the person to whom the same is sold, re-allotted or disposed of, and he shall thereupon be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the forfeiture, sale, re-allotment or disposal of the share.

REGISTER OF SHAREHOLDERS

 

10 Register of Shareholders

The Secretary shall establish and maintain the Register at the Registered Office in the manner prescribed by the Companies Acts. Unless the Board otherwise determines, the Register shall be open to inspection in the manner prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon on every working day. Unless the Board so determines, no Shareholder or intending Shareholder shall be entitled to have entered in the Register any indication of any trust or any equitable, contingent, future or partial interest in any share or any fractional part of a share and if any such entry exists or is permitted by the Board it shall not be deemed to abrogate any of the provisions of Bye-Law 5.4.

 

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REGISTER OF DIRECTORS AND OFFICERS

 

11 Register of Directors and Officers

The Secretary shall establish and maintain a register of the Directors and Officers of the Company as required by the Companies Acts. The register of Directors and Officers shall be open to inspection in the manner prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.

TRANSFER OF SHARES

 

12 Transfer of Shares

 

  12.1 Subject to the Companies Acts and to such of the restrictions contained in these Bye-Laws as may be applicable, any Shareholder may transfer all or any of his shares by an instrument of transfer in the usual common form or in any other form which the Board may approve. No such instrument shall be required on the redemption of a share or on the purchase by the Company of a share.

 

  12.2 The instrument of transfer of a share shall be signed by or on behalf of the transferor and where any share is not fully-paid, the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. All instruments of transfer when registered may be retained by the Company. The Board may, in its absolute discretion and without assigning any reason therefor, decline to register any transfer of any share which is not a fully-paid share. The Board may also decline to register any transfer unless:

 

  12.2.1 the instrument of transfer is duly stamped (if required by law) and lodged with the Company, accompanied by the certificate for the shares to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer,

 

  12.2.2 the instrument of transfer is in respect of only one class of share, and

 

  12.2.3 where applicable, the permission of the Bermuda Monetary Authority with respect thereto has been obtained.

 

  12.3 Subject to any directions of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under this Bye-Law provided such exercise must occur in Bermuda.

 

  12.4 If the Board declines to register a transfer it shall, within three (3) months after the date on which the instrument of transfer was lodged, send to the transferee notice of such refusal.

 

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  12.5 No fee shall be charged by the Company for registering any transfer, probate, letters of administration, certificate of death or marriage, power of attorney, stop notice, order of court or other instrument relating to or affecting the title to any share, or otherwise making an entry in the Register relating to any share.

TRANSMISSION OF SHARES

 

13 Transmission of Shares

 

  13.1 In the case of the death of a Shareholder, the survivor or survivors, where the deceased was a joint holder, and the estate representative, where he was sole holder, shall be the only person recognised by the Company as having any title to his shares; but nothing herein contained shall release the estate of a deceased holder (whether the sole or joint) from any liability in respect of any share held by him solely or jointly with other persons. For the purpose of this Bye-Law, estate representative means the person to whom probate or letters of administration has or have been granted in Bermuda or, failing any such person, such other person as the Board may in its absolute discretion determine to be the person recognised by the Company for the purpose of this Bye-Law.

 

  13.2 Any person becoming entitled to a share in consequence of the death of a Shareholder or otherwise by operation of applicable law may, subject as hereafter provided and upon such evidence being produced as may from time to time be required by the Board as to his entitlement, either be registered himself as the holder of the share or elect to have some person nominated by him registered as the transferee thereof. If the person so becoming entitled elects to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have his nominee registered, he shall signify his election by signing an instrument of transfer of such share in favour of his nominee. All the limitations, restrictions and provisions of these Bye-Laws relating to the right to transfer and the registration of transfer of shares shall be applicable to any such notice or instrument of transfer as aforesaid as if the death of the Shareholder or other event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer signed by such Shareholder.

 

  13.3 A person becoming entitled to a share in consequence of the death of a Shareholder or otherwise by operation of applicable law shall (upon such evidence being produced as may from time to time be required by the Board as to his entitlement) be entitled to receive and may give a discharge for any dividends or other monies payable in respect of the share, but he shall not be entitled in respect of the share to receive notices of or to attend or vote at general meetings of the Company or, save as aforesaid, to exercise in respect of the share any of the rights or privileges of a Shareholder until he shall have become registered as the holder thereof. The Board may at any time give notice requiring such person to elect either to be registered himself or to transfer the share and, if the notice is not complied with within sixty (60) days, the Board may thereafter withhold payment of all dividends and other monies payable in respect of the shares until the requirements of the notice have been complied with.

 

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  13.4 Subject to any directions of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under this Bye-Law provided such exercise occurs in Bermuda.

SHARE CAPITAL

 

14 Increase of Capital

 

  14.1 The Company may from time to time increase its capital by such sum to be divided into shares of such par value as the Shareholders by Resolution shall prescribe.

 

  14.2 The Company may, by the Resolution increasing the capital, direct that the new shares or any of them shall be offered in the first instance either at par or at a premium or (subject to the provisions of the Companies Acts) at a discount to all the holders for the time being of shares of any class or classes in proportion to the number of such shares held by them respectively or make any other provision as to the issue of the new shares.

 

  14.3 The new shares shall be subject to all the provisions of these Bye-Laws with reference to lien, the payment of calls, forfeiture, transfer, transmission and otherwise.

 

15 Alteration of Capital

 

  15.1 The Company may from time to time by Resolution:

 

  15.1.1 divide its shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions;

 

  15.1.2 consolidate and divide all or any of its share capital into shares of larger par value than its existing shares;

 

  15.1.3 sub-divide its shares or any of them into shares of smaller par value than is fixed by its memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

 

  15.1.4 make provision for the issue and allotment of shares which do not carry any voting rights;

 

  15.1.5 cancel shares which, at the date of the passing of the Resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled; and

 

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  15.1.6 change the currency denomination of its share capital.

 

  15.2 Where any difficulty arises in regard to any division, consolidation, or sub-division under this Bye-Law, the Board may settle the same as it thinks expedient and, in particular, may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the Shareholders who would have been entitled to the fractions, and for this purpose the Board may authorise some person to transfer the shares representing fractions to the purchaser thereof, who shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

 

  15.3 Subject to the Companies Acts and to any confirmation or consent required by law or these Bye-Laws, the Company may by Resolution from time to time convert any preference shares into redeemable preference shares.

 

16 Reduction of Capital

 

  16.1 Subject to the Companies Acts, its memorandum and any confirmation or consent required by law or these Bye-Laws, the Company may from time to time by Resolution authorise the reduction of its issued share capital or any share premium account in any manner.

 

  16.2 In relation to any such reduction, the Company may by Resolution determine the terms upon which such reduction is to be effected including, in the case of a reduction of part only of a class of shares, those shares to be affected.

GENERAL MEETINGS AND RESOLUTIONS IN WRITING

 

17 General Meetings and Resolutions in Writing

 

  17.1 Save and to the extent that the Company elects to dispense with the holding of one or more of its Annual General Meetings in the manner permitted by the Companies Acts, the Board shall convene and the Company shall hold general meetings of the Shareholders of the Company as Annual General Meetings in accordance with the requirements of the Companies Acts at such times and places as the Board shall appoint. The Board may, whenever it thinks fit, and shall, when required by the Companies Acts, convene general meetings other than Annual General Meetings which shall be called Special General Meetings.

 

  17.2

Except in the case of removal of Auditors or Directors, anything which may be done by resolution of the Shareholders in general meeting or by resolution of any class of Shareholders in a separate general meeting may be done by resolution in writing, signed by the Shareholders (or the holders of such class of shares) who at the date of

 

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  the notice of the resolution in writing represent the majority of votes that would be required if the resolution had been voted on at a meeting of the Shareholders. Such resolution in writing may be signed by the Shareholder or its proxy, or in the case of a Shareholder that is a corporation (whether or not a company within the meaning of the Companies Acts) by its representative on behalf of such Shareholder, in as many counterparts as may be necessary.

 

  17.3 Notice of any resolution in writing to be made under this Bye-Law shall be given to all the Shareholders who would be entitled to attend a meeting and vote on the resolution. The requirement to give notice of any resolution in writing to be made under this Bye-Law to such Shareholders shall be satisfied by giving to those Shareholders a copy of that resolution in writing in the same manner as that required for a notice of a general meeting of the Company at which the resolution could have been considered, except that the length of the period of notice shall not apply. The date of the notice shall be set out in the copy of the resolution in writing.

 

  17.4 The accidental omission to give notice, in accordance with this Bye-Law, of a resolution in writing to, or the non-receipt of such notice by, any person entitled to receive such notice shall not invalidate the passing of the resolution in writing.

 

  17.5 For the purposes of this Bye-Law, the date of the resolution in writing is the date when the resolution in writing is signed by, or on behalf of, the Shareholder who establishes the majority of votes required for the passing of the resolution in writing and any reference in any enactment to the date of passing of a resolution is, in relation to a resolution in writing made in accordance with this Bye-Law, a reference to such date.

 

  17.6 A resolution in writing made in accordance with this Bye-Law is as valid as if it had been passed by the Company in general meeting or, if applicable, by a meeting of the relevant class of Shareholders of the Company, as the case may be. A resolution in writing made in accordance with this Bye-Law shall constitute minutes for the purposes of the Companies Acts and these Bye-Laws.

 

18 Notice of General Meetings

 

  18.1 An Annual General Meeting shall be called by not less than five (5) days notice in writing and a Special General Meeting shall be called by not less than five (5) days notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and shall specify the place, day and time of the meeting, and, the nature of the business to be considered. Notice of every general meeting shall be given in any manner permitted by these Bye-Laws to all Shareholders other than such as, under the provisions of these Bye-Laws or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company and every Director and to any Resident Representative who or which has delivered a written notice upon the Registered Office requiring that such notice be sent to him or it.

 

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Notwithstanding that a meeting of the Company is called by shorter notice than that specified in this Bye-Law, it shall be deemed to have been duly called if it is so agreed:

 

  18.1.1 in the case of a meeting called as an Annual General Meeting, by all the Shareholders entitled to attend and vote thereat;

 

  18.1.2 in the case of any other meeting, by a majority in number of the Shareholders having the right to attend and vote at the meeting, being a majority together holding not less than ninety-five percent (95%) in nominal value of the shares giving that right.

 

  18.2 The accidental omission to give notice of a meeting or (in cases where instruments of proxy are sent out with the notice) the accidental omission to send such instrument of proxy to, or the non-receipt of notice of a meeting or such instrument of proxy by, any person entitled to receive such notice shall not invalidate the proceedings at that meeting.

 

  18.3 The Board may cancel or postpone a meeting of the Shareholders after it has been convened and notice of such cancellation or postponement shall be served in accordance with these Bye-Laws upon all Shareholders entitled to notice of the meeting so cancelled or postponed setting out, where the meeting is postponed to a specific date, notice of the new meeting in accordance with this Bye-Law.

 

19 Proceedings at General Meetings

 

  19.1 In accordance with the Companies Acts, a general meeting may be held with only one individual present provided that the requirement for a quorum is satisfied. No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman, which shall not be treated as part of the business of the meeting. Save as otherwise provided by these Bye-Laws, at least one Shareholder present in person or by proxy and entitled to vote shall be a quorum for all purposes.

 

  19.2 If within five (5) minutes (or such longer time as the chairman of the meeting may determine to wait) after the time appointed for the meeting, a quorum is not present, the meeting, if convened on the requisition of Shareholders, shall be dissolved. In any other case, it shall stand adjourned to such other day and such other time and place as the chairman of the meeting may determine and at such adjourned meeting one Shareholder present in person or by proxy and entitled to vote shall be a quorum. The Company shall give not less than five (5) days notice of any meeting adjourned through want of a quorum and such notice shall state that the one Shareholder present in person or by proxy (whatever the number of shares held by them) and entitled to vote shall be a quorum.

 

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  19.3 Each Director, and upon giving the notice referred to in Bye-Law 18.1 above, the Resident Representative, if any, shall be entitled to attend and speak at any general meeting of the Company.

 

  19.4 The Board may choose one of their number to preside as chairman at every general meeting. If there is no such chairman, or if at any meeting the chairman is not present within five (5) minutes after the time appointed for holding the meeting, or is not willing to act as chairman, the Directors present shall choose one of their number to act or if only one Director is present he shall preside as chairman if willing to act. If no Director is present, or if each of the Directors present declines to take the chair, the persons present and entitled to vote on a poll shall elect one of their number to be chairman.

 

  19.5 The chairman of the meeting may, with the consent by resolution of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for three (3) months or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as expressly provided by these Bye-Laws, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

 

20 Voting

 

  20.1 Save where a greater majority is required by the Companies Acts or these Bye-Laws, any question proposed for consideration at any general meeting shall be decided on by a simple majority of votes cast.

 

  20.2 At any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands or by a count of votes received in the form of electronic records, unless (before or on the declaration of the result of the show of hands or count of votes received as electronic records or on the withdrawal of any other demand for a poll) a poll is demanded by:

 

  20.2.1 the chairman of the meeting; or

 

  20.2.2 at least three (3) Shareholders present in person or represented by proxy; or

 

  20.2.3 any Shareholder or Shareholders present in person or represented by proxy and holding between them not less than one tenth (1/10) of the total voting rights of all the Shareholders having the right to vote at such meeting; or

 

  20.2.4 a Shareholder or Shareholders present in person or represented by proxy holding shares conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one tenth (1/10) of the total sum paid up on all such shares conferring such right.

 

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The demand for a poll may be withdrawn by the person or any of the persons making it at any time prior to the declaration of the result. Unless a poll is so demanded and the demand is not withdrawn, a declaration by the chairman that a resolution has, on a show of hands or count of votes received as electronic records, been carried or carried unanimously or by a particular majority or not carried by a particular majority or lost shall be final and conclusive, and an entry to that effect in the minute book of the Company shall be conclusive evidence of the fact without proof of the number or proportion of votes recorded for or against such resolution.

 

  20.3 If a poll is duly demanded, the result of the poll shall be deemed to be the resolution of the meeting at which the poll is demanded.

 

  20.4 A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken in such manner and either forthwith or at such time (being not later than three (3) months after the date of the demand) and place as the chairman shall direct. It shall not be necessary (unless the chairman otherwise directs) for notice to be given of a poll.

 

  20.5 The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll has been demanded and it may be withdrawn at any time before the close of the meeting or the taking of the poll, whichever is the earlier.

 

  20.6 On a poll, votes may be cast either personally or by proxy.

 

  20.7 A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way.

 

  20.8 In the case of an equality of votes at a general meeting, whether on a show of hands or count of votes received as electronic records or on a poll, the chairman of such meeting shall not be entitled to a second or casting vote and the resolution shall fail.

 

  20.9 In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register in respect of the joint holding.

 

  20.10 A Shareholder who is a patient for any purpose of any statute or applicable law relating to mental health or in respect of whom an order has been made by any Court having jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote, whether on a show of hands or on a poll, by his receiver, committee, curator bonis or other person in the nature of a receiver, committee or curator bonis appointed by such Court and such receiver, committee, curator bonis or other person may vote on a poll by proxy, and may otherwise act and be treated as such Shareholder for the purpose of general meetings.

 

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  20.11 No Shareholder shall, unless the Board otherwise determines, be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid.

 

  20.12 If:

 

  20.12.1 any objection shall be raised to the qualification of any voter; or,

 

  20.12.2 any votes have been counted which ought not to have been counted or which might have been rejected; or,

 

  20.12.3 any votes are not counted which ought to have been counted,

the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters shall be final and conclusive.

 

21 Proxies and Corporate Representatives

 

  21.1 The instrument appointing a proxy or corporate representative shall be in writing executed by the appointor or his attorney authorised by him in writing or, if the appointor is a corporation, either under its seal or executed by an officer, attorney or other person authorised to sign the same.

 

  21.2 Any Shareholder may appoint a proxy or (if a corporation) representative for a specific general meeting, and adjournments thereof, or may appoint a standing proxy or (if a corporation) representative, by serving on the Company at the Registered Office, or at such place or places as the Board may otherwise specify for the purpose, a proxy or (if a corporation) an authorisation. Any standing proxy or authorisation shall be valid for all general meetings and adjournments thereof or resolutions in writing, as the case may be, until notice of revocation is received at the Registered Office or at such place or places as the Board may otherwise specify for the purpose. Where a standing proxy or authorisation exists, its operation shall be deemed to have been suspended at any general meeting or adjournment thereof at which the Shareholder is present or in respect to which the Shareholder has specially appointed a proxy or representative. The Board may from time to time require such evidence as it shall deem necessary as to the due execution and continuing validity of any standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until such time as the Board determines that it has received the requested evidence or other evidence satisfactory to it.

 

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  21.3 Notwithstanding Bye-Law 21.2, a Shareholder may appoint a proxy which shall be irrevocable in accordance with its terms and the holder thereof shall be the only person entitled to vote the relevant shares at any meeting of the shareholders at which such holder is present. Notice of the appointment of any such proxy shall be given to the Company at its Registered Office, and shall include the name, address, telephone number and electronic mail address of the proxy holder. The Company shall give to the proxy holder notice of all meetings of Shareholders of the Company and shall be obliged to recognise the holder of such proxy until such time as the holder notifies the Company in writing that the proxy is no longer in force.

 

  21.4 Subject to Bye-Law 21.2 and 21.3, the instrument appointing a proxy or corporate representative together with such other evidence as to its due execution as the Board may from time to time require, shall be delivered at the Registered Office (or at such place as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case or the case of a resolution in writing, in any document sent therewith) prior to the holding of the relevant meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, before the time appointed for the taking of the poll, or, in the case of a resolution in writing, prior to the effective date of the resolution in writing and in default the instrument of proxy or authorisation shall not be treated as valid.

 

  21.5 Subject to Bye-Law 21.2 and 21.3, the decision of the chairman of any general meeting as to the validity of any appointments of a proxy shall be final.

 

  21.6 Instruments of proxy or authorisation shall be in any common form or in such other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting or any resolution in writing forms of instruments of proxy or authorisation for use at that meeting or in connection with that resolution in writing. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll, to speak at the meeting and to vote on any amendment of a resolution in writing or amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy or authorisation shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates.

 

  21.7 A vote given in accordance with the terms of an instrument of proxy or authorisation shall be valid notwithstanding the previous death or unsoundness of mind of the principal, or revocation of the instrument of proxy or of the corporate authority, provided that no intimation in writing of such death, unsoundness of mind or revocation shall have been received by the Company at the Registered Office (or such other place as may be specified for the delivery of instruments of proxy or authorisation in the notice convening the meeting or other documents sent therewith) at least one hour before the commencement of the meeting or adjourned meeting, or the taking of the poll, or the day before the effective date of any resolution in writing at which the instrument of proxy or authorisation is used.

 

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  21.8 Subject to the Companies Acts, the Board may at its discretion waive any of the provisions of these Bye-Laws related to proxies or authorisations and, in particular, may accept such verbal or other assurances as it thinks fit as to the right of any person to attend, speak and vote on behalf of any Shareholder at general meetings or to sign resolutions in writing.

BOARD OF DIRECTORS

 

22 Appointment and Removal of Directors

 

  22.1 The number of Directors shall be not less than three (3) and not more than eleven (11) or such other numbers as the Shareholders by Resolution may from time to time determine of whom not less than 3, or such greater number as shall constitute a majority of the Board from time to time, shall be Independent Directors and, subject to the Companies Acts and these Bye-Laws, the Directors shall be elected or appointed by the Shareholders by Resolution and shall serve for such term as the Shareholders by Resolution may determine, or in the absence of such determination, until the termination of the next Annual General Meeting following their appointment. All Directors, upon election or appointment (except upon re-election at an Annual General Meeting), must provide written acceptance of their appointment, in such form as the Board may think fit, by notice in writing to the Registered Office within thirty (30) days of their appointment.

 

  22.2 The Shareholders may by Resolution increase the maximum number of Directors. Any one or more vacancies in the Board not filled by the Shareholders at any general meeting of the Shareholders shall be deemed casual vacancies for the purposes of these Bye-Laws. Without prejudice to the power of the Shareholders by Resolution in pursuance of any of the provisions of these Bye-Laws to appoint any person to be a Director, the Board, so long as a quorum of Directors remains in office, shall have power at any time and from time to time to appoint any individual to be a Director so as to fill a casual vacancy, provided that not more than 50% of the Directors (as a group) or of the Independent Directors (as a group) be comprised of directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

  22.3 The Shareholders may by Resolution remove a Director. Any vacancy created by such removal of a Director may be filled by the election of another Director in his place or, in the absence of any such election, by the Board, provided that not more than 50% of the Directors (as a group), or the Independent Directors (as a group), be comprised of directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

  22.4 If the death, resignation or removal of an Independent Director results in the Board consisting of less than a majority of Independent Directors, the vacancy shall be filled as promptly as practicable. Pending the filling of such vacancy, the Board may temporarily consist of less than a majority of Independent Directors and those Directors who do not meet the standards for independence may continue to hold office.

 

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  22.5 At no time shall more than 50% of the Directors (as a group) or the Independent Directors (as a group) be comprised of directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

23 Resignation and Disqualification of Directors

The office of a Director shall be vacated upon the happening of any of the following events:

 

  23.1 if he resigns his office by notice in writing delivered to the Registered Office or tendered at a meeting of the Board;

 

  23.2 if he becomes of unsound mind or a patient for any purpose of any statute or applicable law relating to mental health and the Board resolves that his office is vacated;

 

  23.3 if he becomes bankrupt under the laws of any country or becomes subject to or institutes any proceedings, arrangements or compromise with his creditors;

 

  23.4 if he is prohibited by law from being a Director;

 

  23.5 if he ceases to be a Director by virtue of the Companies Acts or is removed from office pursuant to these Bye-Laws; or

 

  23.6 if requested in writing by all other Directors then holding office, after such Director shall have been absent without leave from three consecutive meetings of the Board.

 

24 Directors’ Fees and Additional Remuneration and Expenses

The amount, if any, of Directors’ fees shall from time to time be determined by the Company by Resolution or in the absence of such a determination, by the Board. Unless otherwise determined to the contrary, such fees shall be deemed to accrue from day to day. Each Director may be paid his reasonable travel, hotel and incidental expenses in attending and returning from meetings of the Board or committees constituted pursuant to these Bye-Laws or general meetings and shall be paid all expenses properly and reasonably incurred by him in the conduct of the Company’s business or in the discharge of his duties as a Director. Any Director who, by request, goes or resides abroad for any purposes of the Company or who performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Bye-Law.

 

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25 Directors’ Interests

 

  25.1 A Director may act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor) and he or his firm shall be entitled to remuneration for professional services as if he were not a Director.

 

  25.2 Subject to the provisions of the Companies Acts, and as provided herein, a Director may notwithstanding his office be a party to, or otherwise directly or indirectly interested in, any contract, transaction or arrangement with the Company, the Partnership or any entity in which the Company or the Partnership is otherwise interested, provided the nature of such interest shall be disclosed by such Director to each member of the Board at or in advance of any meeting of the Board in which the Board intend to discuss the participation of the Company in any such contract, transaction or arrangement. Such disclosure may take the form of a general notice to the Board to the effect that the Director has an interest in a specified company or firm and is to be regarded as interested in any contract, transaction or arrangement which may after the date of the notice be made with that company or firm or its affiliates.

 

  25.3 Subject to disclosure of the interest in such contract, transaction or arrangement, as aforesaid, the Director concerned shall be entitled to attend, participate and vote in any meeting with respect to such contract, transaction or arrangement, and any transaction approved by the Board at such meeting will not be void or voidable by reason thereof, provided the Board shall have authorised the transaction in good faith following the disclosure of interest by the Director(s) concerned or the transaction is fair to the Company and the Partnership at the time it is approved.

 

  25.4 So long as he declares the nature of his interest as aforesaid, a Director shall not by reason of his office be accountable to the Company for any benefit which he derives from any office or employment to which these Bye-Laws allow him to be appointed or from any contract, transaction or arrangement in which these Bye-Laws allow him to be interested.

POWERS AND DUTIES OF THE BOARD

 

26 Powers and Duties of the Board

 

  26.1 Subject to the provisions of the Companies Acts, these Bye-Laws and to any directions given by the Shareholders by Resolution, the Board shall manage the affairs of the Company and may pay all expenses incurred in promoting and incorporating the Company and may exercise all the powers of the Company. No alteration of these Bye-Laws and no such direction shall invalidate any prior act of the Board which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this Bye-Law shall not be limited by any special power given to the Board by these Bye-Laws and a meeting of the Board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Board.

 

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  26.2 The Board may exercise all the powers of the Company except those powers that are required by the Companies Acts or these Bye-Laws to be exercised by the Shareholders.

 

  26.3 All cheques, promissory notes, drafts, bills of exchange and other instruments, whether negotiable or transferable or not, and all receipts for money paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the Board shall from time to time by resolution determine.

 

  26.4 The Board on behalf of the Company may provide benefits, whether by the payment of gratuities or pensions or otherwise, for any person including any Director or former Director who has held any executive office or employment with the Company or with any body corporate which is or has been a subsidiary or affiliate of the Company or a predecessor in the affairs of the Company or of any such subsidiary or affiliate, and to any member of his family or any person who is or was dependent on him, and may contribute to any fund and pay premiums for the purchase or provision of any such gratuity, pension or other benefit, or for the insurance of any such person.

 

27 Delegation of the Board’s Powers

 

  27.1 The Board may by power of attorney appoint any company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Bye-Laws) and for such period and subject to such conditions as it may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney and of such attorney as the Board may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him. Such attorney may, if so authorised by the power of attorney, execute any deed, instrument or other document on behalf of the Company, provided that such attorney must not be a citizen or resident of any one of Canada, the United Kingdom or the United States of America.

 

  27.2 The Board may entrust to and confer upon any Director, Officer or, without prejudice to the provisions of Bye-Law 27.3, other person, provided that such person must not be a citizen or resident of any one of Canada, the United Kingdom or the United States of America, any of the powers, authorities and discretions exercisable by it upon such terms and conditions with such restrictions as it thinks fit, and either collaterally with, or to the exclusion of, its own powers, authorities and discretions, and may from time to time revoke or vary all or any of such powers, authorities and discretions, but no person dealing in good faith and without notice of such revocation or variation shall be affected thereby.

 

  27.3

The Board may delegate any of its powers, authorities and discretions to committees, consisting of such person or persons (whether a member or members of its body or

 

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  not) as it thinks fit, subject to the provisions of 27.4, 27.5 and 27.6 below. Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, and in conducting its proceedings conform to any regulations which may be imposed upon it by the Board. If no regulations are imposed by the Board the proceedings of a committee with two (2) or more members shall be, as far as is practicable, governed by the Bye-Laws regulating the proceedings of the Board. At no time shall more than 50% of the members of a committee be comprised of persons who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time.)

 

  27.4 The Board shall be required to establish and maintain an audit committee that operates pursuant to a written charter approved by the Board. Such committee shall consist solely of Independent Directors, all of whom are to be financially literate and one of whom shall be designated as ‘audit committee financial expert’. At no time shall more than 50% of the members of such committee consist of Directors who residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

  27.5 The Board shall be required to establish and maintain a nominating and governance committee that operates pursuant to a written charter approved by the Board. Such committee shall consist solely of directors who are Independent Directors. At no time shall more than 50% of the members of such committee consist of Directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

  27.6 The Board shall be required to establish and maintain a compensation committee that operates pursuant to a written charter approved by the Board. Such committee shall consist solely of Independent Directors. At no time shall more than 50% of the members of such committee consist of Directors who are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

28 Proceedings of the Board

 

  28.1 The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. Subject to any requirements requiring the approval of the Independent Directors, questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the motion shall be deemed to have been lost. A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Board.

 

  28.2 Notice of a meeting of the Board may be given to a Director by word of mouth or in any manner permitted by these Bye-Laws. A Director may retrospectively waive the requirement for notice of any meeting by consenting in writing to the business conducted at the meeting.

 

  28.3

The quorum necessary for the transaction of the business of the Board shall be at least two fifths of the Directors in office at such time provided that (1) not more

 

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  than 50% of all directors in attendance are residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time); and (2) at least 50% of directors in attendance are Independent Directors. Any Director who ceases to be a Director at a meeting of the Board may continue to be present and to act as a Director and be counted in the quorum until the termination of the meeting if no other Director objects and if otherwise a quorum of Directors would not be present.

 

  28.4 A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or proposed contract, transaction or arrangement with the Company and has complied with the provisions of the Companies Acts and these Bye-Laws with regard to disclosure of his interest shall be entitled to vote in respect of any contract, transaction or arrangement in which he is so interested and if he shall do so his vote shall be counted and he shall be taken into account in ascertaining whether a quorum is present.

 

  28.5 The Resident Representative shall, upon delivering written notice of an address for the purposes of receipt of notice to the Registered Office, be entitled to receive notice of, attend and be heard at, and to receive minutes of all meetings of the Board.

 

  28.6 So long as a quorum of Directors remains in office, the continuing Directors may act notwithstanding any vacancy in the Board but, if no such quorum remains, the continuing Directors or a sole continuing Director may act only for the purpose of calling a general meeting.

 

  28.7 The Board may choose one of their number to preside as chairman at every meeting of the Board. If there is no such chairman, or if at any meeting the chairman is not present within five (5) minutes after the time appointed for holding the meeting, or is not willing to act as chairman, the Directors present may choose one of their number to be chairman of the meeting.

 

  28.8 The meetings and proceedings of any committee consisting of two (2) or more members shall be governed by the provisions contained in these Bye-Laws for regulating the meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board.

 

  28.9 A resolution in writing signed by all the Directors for the time being entitled to receive notice of a meeting of the Board or by all the members of a committee for the time being shall be as valid and effectual as a resolution passed at a meeting of the Board or, as the case may be, of such committee duly called and constituted. Such resolution may be contained in one document or in several documents in the like form each signed by one or more of the Directors or members of the committee concerned.

 

  28.10

A meeting of the Board or a committee appointed by the Board may be held by means of such telephone, electronic or other communication facilities (including, without limiting the generality of the foregoing, by telephone or by video

 

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  conferencing) as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously and participation in such a meeting shall constitute presence in person at such meeting. At no time shall more than 50% of the Directors participating in such meeting participate from any one jurisdiction (other than Bermuda and any other jurisdiction designated by the Board from time to time).

 

  28.11 Save for acts of the audit committee, the nominating and governance committee, and the compensation committee, all acts done by the Board or by any committee or by any person acting as a Director or member of a committee or any person duly authorised by the Board or any committee shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the Board or such committee or person acting as aforesaid or that they or any of them were disqualified or had vacated their office, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director, member of such committee or person so authorised.

 

  28.12 If a question arises at a meeting of the Board or a committee of the Board as to the entitlement of a Director to vote or be counted in a quorum, the question may, before the conclusion of the meeting, be referred to the chairman of the meeting and his ruling in relation to any Director other than himself shall be final and conclusive except in a case where the nature or extent of the interests of the Director concerned have not been fairly disclosed. If any such question arises in respect of the chairman of the meeting, it shall be decided by resolution of the Board (on which the chairman shall not vote) and such resolution will be final and conclusive except in a case where the interests of the chairman have not been fairly disclosed.

OFFICERS

 

  29 Officers

 

  29.1 The Officers of the Company, who may or may not be Directors, may be appointed by the Board at any time. Any person appointed pursuant to this Bye-Law shall hold office for such period and upon such terms as the Board may determine and the Board may revoke or terminate any such appointment. Any such revocation or termination shall be without prejudice to any claim for damages that such Officer may have against the Company or the Company may have against such Officer for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Save as provided in the Companies Acts or these Bye-Laws, the powers and duties of the Officers of the Company shall be such (if any) as are determined from time to time by the Board.

 

  29.2 The provisions of these Bye-Laws as to resignation and disqualification of Directors shall mutatis mutandis apply to the resignation and disqualification of Officers.

 

25


MINUTES

 

30 Minutes

 

  30.1 The Board shall cause minutes to be made and books kept for the purpose of recording:

 

  30.1.1 all appointments of Officers made by the Board;

 

  30.1.2 the names of the Directors and other persons (if any) present at each meeting of the Board and of any committee; and

 

  30.1.3 all proceedings at meetings of the Company, of the holders of any class of shares in the Company, of the Board and of committees appointed by the Board or the Shareholders.

 

  30.2 Shareholders shall only be entitled to see the Register of Directors and Officers, the Register, the financial information provided for in Bye-Law 37.3 and the minutes of meetings of the Shareholders of the Company.

SECRETARY AND RESIDENT REPRESENTATIVE

 

31 Secretary and Resident Representative

 

  31.1 The Secretary (including one or more deputy or assistant secretaries) and, if required, the Resident Representative, shall be appointed by the Board at such remuneration (if any) and upon such terms as it may think fit and any Secretary and Resident Representative so appointed may be removed by the Board. The duties of the Secretary and the duties of the Resident Representative shall be those prescribed by the Companies Acts together with such other duties as shall from time to time be prescribed by the Board.

 

  31.2 A provision of the Companies Acts or these Bye-Laws requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as, or in the place of, the Secretary.

THE SEAL

 

32 The Seal

 

  32.1 The Board may authorise the production of a common seal of the Company and one or more duplicate common seals of the Company, which shall consist of a circular device with the name of the Company around the outer margin thereof and the country and year of registration in Bermuda across the centre thereof.

 

26


  32.2 Any document required to be under seal or executed as a deed on behalf of the Company may be

 

  32.2.1 executed under the Seal in accordance with these Bye-Laws; or

 

  32.2.2 signed or executed by any person authorised by the Board for that purpose, without the use of the Seal.

 

  32.3 The Board shall provide for the custody of every Seal. A Seal shall only be used by authority of the Board or of a committee constituted by the Board. Subject to these Bye-Laws, any instrument to which a Seal is affixed shall be attested by the signature of:

 

  32.3.1 a Director; or

 

  32.3.2 the Secretary; or

 

  32.3.3 any one person authorised by the Board for that purpose.

DIVIDENDS AND OTHER PAYMENTS

 

33 Dividends and Other Payments

 

  33.1 The Board may from time to time declare dividends or distributions out of contributed surplus to be paid to the Shareholders according to their rights and interests, including such interim dividends as appear to the Board to be justified by the position of the Company. The Board, in its discretion, may determine that any dividend shall be paid in cash or shall be satisfied, subject to Bye-Law 35, in paying up in full shares in the Company to be issued to the Shareholders credited as fully paid or partly paid or partly in one way and partly the other. The Board may also pay any fixed cash dividend which is payable on any shares of the Company half yearly or on such other dates, whenever the position of the Company, in the opinion of the Board, justifies such payment.

 

  33.2 Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide:

 

  33.2.1 all dividends or distributions out of contributed surplus may be declared and paid according to the amounts paid up on the shares in respect of which the dividend or distribution is paid, and an amount paid up on a share in advance of calls may be treated for the purpose of this Bye-Law as paid-up on the share;

 

27


  33.2.2 dividends or distributions out of contributed surplus may be apportioned and paid pro rata according to the amounts paid-up on the shares during any portion or portions of the period in respect of which the dividend or distribution is paid.

 

  33.3 The Board may deduct from any dividend, distribution or other monies payable to a Shareholder by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in respect of shares of the Company.

 

  33.4 No dividend, distribution or other monies payable by the Company on or in respect of any share shall bear interest against the Company.

 

  33.5 Any dividend, distribution or interest, or part thereof payable in cash, or any other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post or by courier addressed to the holder at his address in the Register or, in the case of joint holders, addressed to the holder whose name stands first in the Register in respect of the shares at his registered address as appearing in the Register or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first in the Register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two (2) or more joint holders may give effectual receipts for any dividends, distributions or other monies payable or property distributable in respect of the shares held by such joint holders.

 

  33.6 Any dividend or distribution out of contributed surplus unclaimed for a period of six (6) years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to the Company and the payment by the Board of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof.

 

  33.7 The Board may also, in addition to its other powers, direct payment or satisfaction of any dividend or distribution out of contributed surplus wholly or in part by the distribution of specific assets, and in particular of paid-up shares or debentures of any other company, and where any difficulty arises in regard to such distribution or dividend, the Board may settle it as it thinks expedient, and in particular, may authorise any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution or dividend purposes of any such specific assets and may determine that cash payments shall be made to any Shareholders upon the footing of the values so fixed in order to secure equality of distribution and may vest any such specific assets in trustees as may seem expedient to the Board, provided that such dividend or distribution may not be satisfied by the distribution of any partly paid shares or debentures of any company without the sanction of a Resolution.

 

28


34 Reserves

The Board may, before declaring any dividend or distribution out of contributed surplus, set aside such sums as it thinks proper as reserves which shall, at the discretion of the Board, be applicable for any purpose of the Company and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time think fit. The Board may also without placing the same to reserve carry forward any sums which it may think it prudent not to distribute.

CAPITALISATION OF PROFITS

 

35 Capitalisation of Profits

 

  35.1 The Board may from time to time resolve to capitalise all or any part of any amount for the time being standing to the credit of any reserve or fund which is available for distribution or to the credit of any share premium account and accordingly that such amount be set free for distribution amongst the Shareholders or any class of Shareholders who would be entitled thereto if distributed by way of dividend and in the same proportions, on the footing that the same be not paid in cash but be applied either in or towards paying up amounts for the time being unpaid on any shares in the Company held by such Shareholders respectively or in payment up in full of unissued shares, debentures or other obligations of the Company, to be allotted and distributed credited as fully paid amongst such Shareholders, or partly in one way and partly in the other, provided that for the purpose of this Bye-Law, a share premium account may be applied only in paying up of unissued shares to be issued to such Shareholders credited as fully paid.

 

  35.2 Where any difficulty arises in regard to any distribution under this Bye-Law, the Board may settle the same as it thinks expedient and, in particular, may authorise any person to sell and transfer any fractions or may resolve that the distribution should be as nearly as may be practicable in the correct proportion but not exactly so or may ignore fractions altogether, and may determine that cash payments should be made to any Shareholders in order to adjust the rights of all parties, as may seem expedient to the Board. The Board may appoint any person to sign on behalf of the persons entitled to participate in the distribution any contract necessary or desirable for giving effect thereto and such appointment shall be effective and binding upon the Shareholders.

 

29


RECORD DATES

 

36 Record Dates

Notwithstanding any other provisions of these Bye-Laws, the Company may by Resolution or the Board may fix any date as the record date for any dividend, distribution, allotment or issue and for the purpose of identifying the persons entitled to receive notices of any general meeting and to vote at any general meeting. Any such record date may be on or at any time before or after any date on which such dividend, distribution, allotment or issue is declared, paid or made or such notice is despatched.

ACCOUNTING RECORDS

 

37 Accounting Records

 

  37.1 The Board shall cause to be kept accounting records sufficient to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions, in accordance with the Companies Acts.

 

  37.2 The records of account shall be kept at the Registered Office or at such other place or places outside of Canada as the Board thinks fit, and shall at all times be open to inspection by the Directors, PROVIDED that if the records of account are kept at some place outside Bermuda, there shall be kept at an office of the Company in Bermuda such records as will enable the Directors to ascertain with reasonable accuracy the financial position of the Company at the end of each three (3) month period. No Shareholder (other than an Officer of the Company) shall have any right to inspect any accounting record or book or document of the Company except as conferred by law or authorised by the Board or by Resolution.

 

  37.3 A copy of every balance sheet and statement of income and expenditure, including every document required by law to be annexed thereto, which is to be laid before the Company in general meeting, together with a copy of the Auditors’ report, shall be sent to each person entitled thereto in accordance with the requirements of the Companies Acts.

AUDIT

 

38 Audit

Save and to the extent that an audit is waived in the manner permitted by the Companies Acts, Auditors shall be appointed and their duties regulated in accordance with the Companies Acts, any other applicable law and such requirements not inconsistent with the Companies Acts as the Board may from time to time determine.

 

30


SERVICE OF NOTICES AND OTHER DOCUMENTS

 

39 Service of Notices and Other Documents

 

  39.1 Any notice or other document (including but not limited to a share certificate, any notice of a general meeting of the Company, any instrument of proxy and any document to be sent in accordance with Bye-Law 37.3) may be sent to, served on or delivered to any Shareholder by the Company

 

  39.1.1 personally;

 

  39.1.2 by sending it through the post (by airmail where applicable) in a pre-paid letter addressed to such Shareholder at his address as appearing in the Register;

 

  39.1.3 by sending it by courier to or leaving it at the Shareholder’s address appearing in the Register;

 

  39.1.4 where applicable, by sending it by email or facsimile or other mode of representing or reproducing words in a legible and non-transitory form or by sending an electronic record of it by electronic means, in each case to an address or number supplied by such Shareholder for the purposes of communication in such manner; or

 

  39.1.5 by publication of an electronic record of it on a website and notification of such publication (which shall include the address of the website, the place on the website where the document may be found, and how the document may be accessed on the website) by any of the methods set out in paragraphs 39.1.1, 39.1.2, 39.1.3 or 39.1.4 of this Bye-Law, in accordance with the Companies Acts.

In the case of joint holders of a share, service or delivery of any notice or other document on or to one of the joint holders shall for all purposes be deemed as sufficient service on or delivery to all the joint holders.

 

  39.2 Any notice or other document shall be deemed to have been served on or delivered to any Shareholder by the Company

 

  39.2.1 if sent by personal delivery, at the time of delivery;

 

  39.2.2 if sent by post, forty-eight (48) hours after it was put in the post;

 

  39.2.3 if sent by courier or facsimile, twenty-four (24) hours after sending;

 

  39.2.4 if sent by email or other mode of representing or reproducing words in a legible and non-transitory form or as an electronic record by electronic means, twelve (12) hours after sending; or

 

31


  39.2.5 if published as an electronic record on a website, at the time that the notification of such publication shall be deemed to have been delivered to such Shareholder,

and in proving such service or delivery, it shall be sufficient to prove that the notice or document was properly addressed and stamped and put in the post, published on a website in accordance with the Companies Acts and the provisions of these Bye-Laws, or sent by courier, facsimile, email or as an electronic record by electronic means, as the case may be, in accordance with these Bye-Laws.

Each Shareholder and each person becoming a Shareholder subsequent to the adoption of these Bye-laws, by virtue of its holding or its acquisition and continued holding of a share, as applicable, shall be deemed to have acknowledged and agreed that any notice or other document (excluding a share certificate) may be provided by the Company by way of accessing them on a website instead of being provided by other means.

 

  39.3 Any notice or other document delivered, sent or given to a Shareholder in any manner permitted by these Bye-Laws shall, notwithstanding that such Shareholder is then dead or bankrupt or that any other event has occurred, and whether or not the Company has notice of the death or bankruptcy or other event, be deemed to have been duly served or delivered in respect of any share registered in the name of such Shareholder as sole or joint holder unless his name shall, at the time of the service or delivery of the notice or document, have been removed from the Register as the holder of the share, and such service or delivery shall for all purposes be deemed as sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share.

 

  39.4 Save as otherwise provided, the provisions of these Bye-Laws as to service of notices and other documents on Shareholders shall mutatis mutandis apply to service or delivery of notices and other documents to the Company or any Director or Resident Representative pursuant to these Bye-Laws.

WINDING UP

 

40 Winding Up

If the Company shall be wound up, the liquidator may, with the sanction of a Resolution of the Company and any other sanction required by the Companies Acts, divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purposes set such values as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders or different classes of Shareholders. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trust for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Shareholder shall be compelled to accept any shares or other assets upon which there is any liability.

 

32


INDEMNITY

 

41 Indemnity

 

  41.1 Subject to the proviso below, every Indemnified Person shall be indemnified and held harmless, to the fullest extent permitted by law, by and out of the assets of the Company against any and all losses, claims, damages, liabilities, costs or expenses, judgements, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions suits or proceedings, whether civil or criminal (including liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs including defence costs incurred in defending any legal proceedings, whether civil or criminal and expenses properly payable) incurred or suffered by such Indemnified Person by or by reason of any act done, conceived in or omitted in the conduct of the Company’s business, or in connection with the Partnership’s investments and activities, or in respect of or arising from the Indemnified Person holding its position or discharging the duties of such position, and the indemnity contained in this Bye-Law shall extend to any Indemnified Person acting in any office or trust in the reasonable belief that he has been appointed or elected to such office or trust notwithstanding any defect in such appointment or election, PROVIDED ALWAYS that the indemnity contained in this Bye-Law shall not extend to any matter which would render it void pursuant to the Companies Acts nor to any claims or rights of action arising out of the bad faith, fraud or wilful misconduct of such Indemnified Person, or in the case of a criminal matter, to the extent the Indemnified Person knew, or ought reasonably to have known, that the action concerned was unlawful.

 

  41.2 No Indemnified Person shall be liable to the Company for the acts, defaults or omissions of any other Indemnified Person.

 

  41.3 To the extent that any Indemnified Person is entitled to claim an indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by him, the relevant indemnity shall take effect as an obligation of the Company to reimburse the person making such payment or effecting such discharge.

 

  41.4 Each Shareholder and the Company agree:

 

  41.4.1

to waive to the fullest extent permitted by law any claim or right of action he or it may at any time have, whether individually or by or in the right of the Company, against any Indemnified Person on account of any action taken by such Indemnified Person or the failure of such Indemnified Person to take any action in the performance of his duties (fiduciary or otherwise) with or for the Company, PROVIDED HOWEVER that such waiver shall not apply to any claims or rights of action arising out of the bad faith, fraud or wilful

 

33


  misconduct of such Indemnified Person or to recover any gain, personal profit or advantage to which such Indemnified Person is not legally entitled, or in the case of a criminal matter, to the extent the Indemnified Person knew, or ought reasonably to have known, that the action concerned was unlawful; and

 

  41.4.2 any action taken or omitted to be taken, by any Indemnified Person with the approval of the Independent Directors will not constitute a breach of any duties stated or implied by law or equity, including fiduciary duties.

 

  41.5 The Company shall advance moneys to any Indemnified Person for the costs, charges and expenses incurred by the Indemnified Person in defending any civil or criminal proceedings against them, on condition and receipt of an undertaking in a form satisfactory to the Company that the Indemnified Person shall repay such portion of the advance attributable to any claim of fraud or dishonesty if such a claim is proved against the Indemnified Person.

 

  41.6 The advance of moneys would not be paid unless the advance was duly authorized upon a determination that the indemnification of the Indemnified Person was appropriate because the Indemnified Person had met the standard of conduct which would entitle the Indemnified Person to indemnification and further the determination referred to above must be made by: a majority vote of the Board at a meeting duly constituted by a quorum of Directors not party to the proceedings in respect of which the indemnification is, or would be, claimed; or, in the case such meeting cannot be constituted by lack of disinterested quorum, by an independent third party; or, alternatively, by a majority vote of the Shareholders.

AMALGAMATION AND MERGER

 

42 Amalgamation and Merger

Any resolution proposed for consideration at any general meeting to approve the amalgamation or merger of the Company with any other company, wherever incorporated, shall require the approval of a simple majority of votes cast at such meeting and the quorum for such meeting shall be that required in Bye-Law 19.1 and a poll may be demanded in respect of such resolution in accordance with the provisions of Bye-Law 20.2.

CONTINUATION

 

43 Continuation

Subject to the Companies Acts, the Board may approve the discontinuation of the Company in Bermuda and the continuation of the Company in a jurisdiction outside Bermuda. The Board, having resolved to approve the discontinuation of the Company, may further resolve not to proceed with any application to discontinue the Company in Bermuda or may vary such application as it sees fit.

 

34


ALTERATION OF BYE-LAWS

 

44 Alteration of Bye-Laws

These Bye-Laws may be amended from time to time by resolution of the Board, but subject to approval by Resolution.

 

35

Exhibit 4.1

BREP HOLDING L.P.

- and -

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

 

 

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

OF BROOKFIELD RENEWABLE ENERGY L.P.

 

 

November 20, 2011


TABLE OF CONTENTS

 

ARTICLE 1

  

INTERPRETATION

     2   

1.1 Definitions

     2   

1.2 Headings and Table of Contents

     13   

1.3 Interpretation

     14   

1.4 Invalidity of Provisions

     14   

1.5 Entire Agreement

     15   

1.6 Waiver, Amendment

     15   

1.7 Governing Law; Submission to Jurisdiction

     15   

ARTICLE 2

  

ORGANIZATIONAL MATTERS

     15   

2.1 Formation

     15   

2.2 Purpose

     16   

2.3 Powers

     16   

2.4 Name

     16   

2.5 Registered Office; Principal Office

     17   

2.6 Power of Attorney

     17   

2.7 Term

     18   

ARTICLE 3

  

CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

     19   

3.1 Formation of the Partnership

     19   

3.2 Initial Capital Contributions by the General Partner and the Initial Limited Partner

     19   

3.3 Interest and Withdrawal

     19   

3.4 Issuances of Additional Partnership Interests

     19   

3.5 Pre-emptive Rights

     20   

3.6 Splits and Combinations

     20   

3.7 Fully Paid and Non-Assessable Nature of Units

     21   

3.8 Issuance of Units to BREP

     21   

ARTICLE 4

  

ALLOCATIONS

     21   

4.1 Maintenance of Capital Accounts

     21   

4.2 Allocations – Overview

     22   

4.3 General Allocations

     22   

4.4 Special Allocations

     23   

4.5 Allocation of Nonrecourse Liabilities

     24   

4.6 Transfer of Interest

     24   

4.7 Allocations for U.S. Tax Purposes

     24   

4.8 Allocations for Canadian Federal Income Tax Purposes.

     25   

4.9 Currency Translation

     26   

4.10 Authority of General Partner

     26   

 

[A&R LP AGR_BRELP]

 


ARTICLE 5

  

DISTRIBUTIONS

     27   

5.1 In General

     27   

5.2 Distributions Prior to Dissolution

     27   

5.3 Distributions on or After Dissolution

     28   

5.4 Adjustment to Incentive Distributions Payable to General Partner

     28   

5.5 Incentive Distributions Paid in the Form of Redemption Exchange Units

     29   

5.6 Prohibition on Distributions

     29   

ARTICLE 6

  

REDEMPTION-EXCHANGE RIGHTS

     29   

6.1 Redemption-Exchange Rights

     29   

6.2 Redemption and Exchange Procedures

     29   

6.3 Redemption-Exchange Date

     30   

6.4 Withdrawal of Exercise

     31   

6.5 Effect of Exercise of the Redemption-Exchange Right

     31   

6.6 FIRPTA

     31   

ARTICLE 7

  

REDEMPTION AMOUNT AND EXCHANGE RATIO

     32   

7.1 Redemption Amount

     32   

7.2 Exchange Ratio and Adjustments

     32   

ARTICLE 8

  

ADJUSTMENTS

     32   

8.1 Unit Reorganization

     32   

8.2 Unit Reclassification

     32   

8.3 Adjustments Cumulative

     33   

ARTICLE 9

  

MANAGEMENT AND OPERATION OF PARTNERSHIP

     33   

9.1 Management

     33   

9.2 Restrictions on General Partner’s Authority

     34   

9.3 Reimbursement of Partnership Expenses

     34   

9.4 Outside Activities

     35   

9.5 Disclosure of Interests

     36   

9.6 Indemnification

     36   

9.7 Resolution of Conflicts of Interest

     38   

9.8 Other Matters Concerning the General Partner

     39   

9.9 Title to Partnership Assets

     39   

9.10 Purchase or Sale of Units

     40   

9.11 Reliance by Third Parties

     40   

9.12 Services

     40   

ARTICLE 10

  

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

     41   

10.1 Limitation of Liability

     41   

 

[A&R LP AGR_BRELP]

- ii -


10.2 Management of Partnership Affairs

     41   

10.3 Outside Activities

     41   

ARTICLE 11

  

BOOKS, RECORDS, ACCOUNTING AND REPORTS

     41   

11.1 Books, Records and Accounting

     41   

11.2 Fiscal Year

     42   

11.3 Delivery of Financial Statements

     42   

11.4 Reports

     42   

ARTICLE 12

  

TAX MATTERS

     43   

12.1 Tax Information

     43   

12.2 Preparation of Tax Returns

     43   

12.3 Tax Elections

     43   

12.4 Tax Controversies

     43   

12.5 Withholding

     44   

12.6 Election to be Treated as a Corporation

     44   

12.7 U.S. Tax Classification of the Partnership

     44   

ARTICLE 13

  

CERTIFICATES; RECORD HOLDERS; TRANSFERS OF PARTNERSHIP INTERESTS

     45   

13.1 Certificates

     45   

13.2 Mutilated, Destroyed, Lost or Stolen Certificates

     45   

13.3 Record Holder

     46   

13.4 Transfer Generally

     46   

13.5 Registration and Transfer of Units

     46   

13.6 Transfer of General Partner Units

     47   

13.7 Restrictions on Transfers

     48   

ARTICLE 14

  

ADMISSION OF ADDITIONAL OR SUCCESSOR PARTNERS

     48   

14.1 Admission of Additional Limited Partners

     48   

14.2 Admission of Successor General Partner

     49   

ARTICLE 15

  

WITHDRAWAL OF PARTNERS

     49   

15.1 Withdrawal of the General Partner

     49   

15.2 Removal of the General Partner

     50   

15.3 Interest of Departing General Partner and Successor General Partner

     51   

15.4 Withdrawal of Limited Partners

     52   

ARTICLE 16

  

TERMINATION OF THE PARTNERSHIP

     52   

16.1 Dissolution

     52   

16.2 Reconstitution of Partnership

     52   

16.3 Liquidation

     53   

 

[A&R LP AGR_BRELP]

- iii -


16.4 Distributions in Kind

     55   

16.5 Cancellation of Certificate of Limited Partnership

     55   

16.6 Reasonable Time for Winding Up

     55   

16.7 Return of Capital

     56   

16.8 No Capital Account Restoration

     56   

16.9 Waiver of Partition

     56   

ARTICLE 17

  

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

     56   

17.1 Amendment to be Adopted Solely by General Partner

     56   

17.2 Amendment Procedures

     58   

17.3 Amendment Requirements

     58   

17.4 Meetings

     59   

17.5 Notice of Meeting

     60   

17.6 Record Date

     60   

17.7 Adjournment

     60   

17.8 Quorum

     60   

17.9 Conduct of Meeting

     61   

17.10 Action Without a Meeting

     61   

17.11 Voting and Other Rights

     62   

ARTICLE 18

  

GENERAL PROVISIONS

     62   

18.1 Enurement

     62   

18.2 Notices

     62   

18.3 Further Assurances

     64   

18.4 Counterparts

     64   

 

[A&R LP AGR_BRELP]

- iv -


AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

OF BROOKFIELD RENEWABLE ENERGY L.P.

THIS AGREEMENT is made as of the 20th day of November, 2011 among BREP Holding L.P. (the “ General Partner ”), an exempted limited partnership existing under the laws of Bermuda, as the General Partner, and BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. (the “ Initial Limited Partner ” or “ BREP ”), an exempted limited partnership existing under the laws of Bermuda, as a limited partner;

WHEREAS the General Partner and the Initial Limited Partner formed a limited partnership under the laws of Bermuda upon the entering into of a limited partnership agreement between the General Partner and the Initial Limited Partner dated as of June 27, 2011 (the “ Initial Limited Partnership Agreement ”). A Certificate of Registration for the Partnership (as hereinafter defined) confirming the registration of the Partnership as an “Exempted Partnership” pursuant to a Certificate of Exempted Partnership under the Exempted Partnerships Act 1992 (Bermuda) (as supplemented, the “ Certificate of Exempted Partnership ”) and as a “Limited Partnership” pursuant to a Certificate of Limited Partnership under the Limited Partnership Act 1883 (Bermuda) (as supplemented, the “ Certificate of Limited Partnership ”) was issued by the Bermuda Registrar of Companies on June 29, 2011;

AND WHEREAS the parties wish to amend the Initial Limited Partnership Agreement by making the modifications reflected herein and to restate the Initial Limited Partnership Agreement as so amended;

AND WHEREAS this Amended and Restated Limited Partnership Agreement shall replace the Initial Limited Partnership Agreement in its entirety;

AND WHEREAS pursuant to the transactions contemplated by the Combination Agreement (the “ Fund Conversion ”), Class A Units will be held by BREP;

AND WHEREAS , pursuant to the Reorganization and following the execution of this Agreement, (i) the Partnership will issue Redemption-Exchange Units to Brookfield Renewable Power Inc. (“ BRPI ”), a corporation existing under the laws of the Province of Ontario, (ii) BRP Canada L.P. (“ HB LP ”), a limited partnership existing under the laws of the Province of Ontario, will acquire Redemption-Exchange Units through the acquisition of a note that is convertible into Redemption-Exchange Units, (iii) the Partnership will issue Redemption-Exchange Units to Brookfield Energy Marketing L.P. (“ BEM LP ”), a limited partnership existing under the laws of the Province of Ontario, and (iv) BRPI shall transfer all of its Redemption-Exchange Units to LB LP (as hereinafter defined) and thereafter HB LP shall transfer all of its Redemption-Exchange Units to BRPI;

AND WHEREAS the Partners (as hereinafter defined) desire to set forth the rights, powers and duties of the Partners, the affairs of the Partnership and the conduct of the Partnership’s activities, all upon the terms and conditions provided for in this Amended and Restated Limited Partnership Agreement.

 

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NOW THEREFORE in consideration of the premises, mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties covenant and agree, each with the others, as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

1.1.1. “ Adjusted Capital Account Deficit ” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

1.1.1.1 credit to such Capital Account any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed obligated to restore pursuant to the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and

1.1.1.2 debit to such Capital Account the items described in Treasury Regulations Sections 1.704-l(b)(2)(ii) (d)(4) , 1.704-1(b)(2)(ii) (d)(5) , and 1.704-1(b)(2)(ii) (d)(6).

The foregoing definition of “Adjusted Capital Account Deficit” is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)( d ) of the Treasury Regulations and shall be interpreted consistently therewith;

1.1.2. “ Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

1.1.3. “ Agreement ” means this Amended and Restated Limited Partnership Agreement of Brookfield Renewable Energy L.P.;

1.1.4. “ Applicable Number of BREP Units ” means the product of the number of Redemption-Exchange Units specified in an Exchange Notice multiplied by the Exchange Ratio;

1.1.5. “ Applied Incentive Amount ” has the meaning assigned to such term in Section 5.4;

1.1.6. “ Assets ” means all assets, whether tangible or intangible and whether real, personal or mixed, at any time owned by the Partnership (or by the General Partner, one or more of its Affiliates or one or more nominees for the benefit of the Partnership, in each case in accordance with Section 9.9) or acquired by the General Partner for the account of the Partnership in the course of carrying on the activities of the Partnership;

 

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1.1.7. “ Available Cash ” means all cash and cash equivalents of the BREP Group available for distribution by the Partnership determined as at the reasonable sole discretion of the General Partner in good faith, subject to Section 5.5, which, for greater certainty, is anticipated to be but may not in all cases equal to an amount of cash held by the Partnership after the payment of reasonable expenses, debt service obligations on any indebtedness and any other expense or reserve for any liability, working capital or capital expenditure;

1.1.8. “ BEM LP ” has the meaning assigned to such term in the recitals;

1.1.9. “ Bermuda Holdco ” means BRP Bermuda Holdings I Limited;

1.1.10. “Book Item” has the meaning assigned to such term in Section 4.7;

1.1.11. “ BREP ” has the meaning assigned to such term in the recitals;

1.1.12. “ BREP Group ” means BREP, the Partnership, the Holding Entities, the Operating Entities and any other direct or indirect Subsidiary of a Holding Entity;

1.1.13. “ BREP Partnership Agreement ” means the limited partnership agreement of BREP;

1.1.14. “ BREP Unit ” is a Unit (as that term is defined in the BREP Partnership Agreement) in BREP;

1.1.15. “ BRP Canada ” means Brookfield BRP Canada Corp.;

1.1.16. “ BRPI ” has the meaning assigned to such term in the recitals;

1.1.17. “ Brookfield ” means Brookfield Asset Management Inc.;

1.1.18. “ Brookfield Group Allocable Gain ” means the difference between the fair market value as at the effective time of the transactions contemplated in Section 2.2.15 of the Plan of Arrangement of the CanHoldco Shares transferred to the Partnership by any member of the Brookfield Group less the aggregate adjusted cost base of such shares to the Partnership as at such time;

1.1.19. “ Brookfield Group ” means Brookfield and any Affiliates of Brookfield, other than any member of the BREP Group;

1.1.20. “ Business Day ” means every day except a Saturday or Sunday, or a day which is a statutory or civic holiday in Bermuda, the Province of Ontario, or the State of New York;

1.1.21. “ Canadian Tax Purposes ” means for the purposes of determining liability for Tax pursuant to Canadian federal and provincial Tax Laws;

1.1.22. “ CanHoldco ” means Brookfield BRP Holdings (Canada) Inc.;

 

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1.1.23. “ CanHoldco Shares ” has the meaning assigned to such term in Section 4.8.3;

1.1.24. “ Capital Account ” means, in relation to each Partner, the account maintained in the books of the Partnership for each Partner in accordance with Section 4.1;

1.1.25. “ Capital Amount ” means, as of the date hereof and with respect to each Unit and General Partner Unit Outstanding as of the date hereof, $1.00; provided, however, that the Capital Amount with respect to each Unit and General Partner Unit shall hereafter be adjusted as provided in Section 3.4.3;

1.1.26. “ Capital Contribution ” means the amount of capital contributed to the Partnership by each Record Holder (or a Person from which the Record Holder purchased or acquired its Partnership Interests) in respect of the Partnership Interests purchased or acquired by or issued to that Record Holder;

1.1.27. “ Capital Surplus ” has the meaning assigned to such term in Section 5.2.3;

1.1.28. “ Cause ” means a court of competent jurisdiction has entered a final, non-appealable judgment finding the General Partner liable for actual fraud, gross negligence, bad faith or willful or wanton misconduct in its capacity as General Partner of the Partnership;

1.1.29. “ Certificate ” means a certificate issued by the Partnership evidencing ownership of one or more Units or any other Partnership Interests, or of options, rights, warrants or appreciation rights relating to Partnership Interests, in such form as may be adopted by the General Partner from time to time;

1.1.30. “ Certificate of Exempted Partnership ” has the meaning assigned to such term in the recitals;

1.1.31. “ Certificate of Limited Partnership ” has the meaning assigned to such term in the recitals;

1.1.32. “ Class A Units ” means the limited partner interests in the Partnership having the rights and obligations specified in this Agreement and that are designated as Class A Units;

1.1.33. “ Closing Date ” means the date that the Fund Conversion is effective;

1.1.34. “ Code ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder, and any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provisions of future law;

1.1.35. “ Combination Agreement ” means the Combination Agreement by and among BRPI, Brookfield Renewable Power Fund (“ BRPF ”), Brookfield Renewable Power Trust and BREP, dated September 12, 2011, as may be amended from time to time;

1.1.36. “ Conflicts Guidelines ” has the meaning assigned to such term in Section 9.7.2;

 

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1.1.37. “ Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example the status of A being the general partner of B) or by virtue of the beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares or other securities to which are attached more than 50% of the votes permitted to be cast in the election of directors to the Governing Body of B or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose, and the term “Controlled” has the corresponding meaning;

1.1.38. “ Departing General Partner ” means a former General Partner, from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 15.1 or 15.2;

1.1.39. Depreciation means, for each fiscal year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable for U.S. federal income tax purposes with respect to an asset for such fiscal year, except that (a) with respect to any asset the Gross Asset Value of which differs from its adjusted tax basis for U.S. federal income tax purposes at the beginning of such fiscal year and which difference is being eliminated by use of the “remedial method” as defined by Section 1.704-3(d) of the Treasury Regulations, Depreciation for such fiscal year shall be the amount of book basis recovered for such fiscal year under the rules prescribed by Section 1.704-3(d)(2) of the Treasury Regulations, and (b) with respect to any other asset the Gross Asset Value of which differs from its adjusted tax basis for U.S. federal income tax purposes at the beginning of such fiscal year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such fiscal year bears to such beginning adjusted tax basis; provided, however, that in the case of clause (b) above, if the adjusted tax basis for U.S. federal income tax purposes of an asset at the beginning of such fiscal year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner;

1.1.40. “ Effective Date ” has the meaning assigned to such term under the Combination Agreement;

1.1.41. “ Event of Withdrawal ” has the meaning assigned to such term in Section 15.1.1;

1.1.42. “ Exchange Notice ” has the meaning assigned to such term in Section 6.2.2;

1.1.43. “ Exchange Ratio ” has the meaning assigned to such term in Section 7.2;

1.1.44. “ Exchange Right ” has the meaning assigned to such term in Section 6.1.3;

1.1.45. “ Exempted Partnerships Act ” means the Exempted Partnerships Act 1992 (Bermuda);

 

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1.1.46. “ First Distribution Threshold ” means $0.375 per Unit per Quarter (pro rated for any Quarter in which (i) a Unit is not Outstanding for the entire Quarter or (ii) the Capital Amount in respect of a Unit is adjusted pursuant to Section 3.4.3);

1.1.47. “ fiscal year ” as such term relates to the Partnership shall be the fiscal year of the Partnership as determined in accordance with Section 11.2;

1.1.48. “ Fund Conversion ” has the meaning assigned to such term in the recitals;

1.1.49. “ General Partner ” means BREP Holding L.P., an exempted limited partnership existing under the laws of Bermuda, and includes any person who becomes a successor or replacement general partner of the Partnership pursuant to the terms of this Agreement after the date hereof;

1.1.50. “ General Partner Units ” means the interest in the Partnership owned by the General Partner, having the rights and obligations specified in this Agreement, and which are designated as General Partner Units;

1.1.51. “ Governing Body ” means (i) with respect to a corporation or limited company, the board of directors of such corporation or limited company, (ii) with respect to a limited liability company, the manager(s) or managing partner(s) of such limited liability company, (iii) with respect to a partnership, the board, committee or other body of each general partner or managing partner of such partnership, respectively, that serves a similar function (or if any such general partner is itself a partnership, the board, committee or other body of such general or managing partner’s general or managing partner that serves a similar function), and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

1.1.52. “ Governing Instruments ” means (i) the Memorandum of Association and Bye-laws in the case of any exempted company existing under the Laws of Bermuda, (ii) the certificate of incorporation, amalgamation or continuance, as applicable, and bylaws in the case of a corporation, (iii) the memorandum and articles of association and by-laws, as applicable, in the case of a limited company, (iv) the partnership agreement in the case of a partnership, (v) the articles of formation and operating agreement in the case of a limited liability company, (vi) the trust instrument in the case of a trust, and (vii) any other similar governing document under which an entity was organized, formed or created and operates, in each case as amended, supplemented or otherwise modified from time to time;

1.1.53. “ Governmental Authority ” means any (i) international, multinational, national, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, agency or instrumentality, domestic or foreign, including ISO/RTOs, (ii) self-regulatory organization or stock exchange, (iii) subdivision, agent, commission, board, or authority of any of the foregoing, or (iv) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;

 

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1.1.54. “ Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

1.1.54.1 the Gross Asset Value of any asset contributed by a Partner to the Partnership is the gross fair market value of such asset as determined by the General Partner at the time of contribution;

1.1.54.2 the Gross Asset Value of all Assets (i) shall be adjusted to equal their respective gross fair market values, as determined by the General Partner, effective as of the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution, unless the General Partner determines that such adjustment is not necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; and (ii) may be so adjusted, as determined by the General Partner, as of the following times: (a) the distribution by the Partnership to the Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; (b) the grant of an interest in the Partnership (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a Partner capacity, or by a new Partner acting in a Partner capacity or in anticipation of becoming a Partner; and (c) the liquidation of the Partnership within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii) (g); provided, however, that the adjustments pursuant to clauses (ii)(a) and (ii)(b) above shall be made only if the General Partner reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;

1.1.54.3 the Gross Asset Value of an Asset distributed to any Partner shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the General Partner; and

1.1.54.4 if the Gross Asset Value of an Asset has been determined or adjusted pursuant to 1.1.54.1 or 1.1.54.2 above, such Gross Asset Value shall thereafter be adjusted by Depreciation taken into account with respect to such asset for purposes of computing Net Income or Net Loss;

1.1.55. “ HB LP ” has the meaning assigned to such term in the recitals;

1.1.56. “ Holding Entities ” means Bermuda HoldCo, CanHoldco and any direct wholly-owned Subsidiary of the Partnership created or acquired after the date of this Agreement;

1.1.57. “ IFRS-IASB ” means International Financial Reporting Standards as issued by the International Accounting Standards Board consistently applied;

1.1.58. “ Incentive Distribution ” means any performance-based carried interest, dividend, distribution or other profit entitlement but, for greater certainty, does not include the Base Management Fee (as such term is defined in the Master Services Agreement), Service Agreement Fees or Creditable Operating Entity Payment (as such terms are defined in the Master Services Agreement);

 

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1.1.59. “ Incentive Distribution Account ” has the meaning assigned to such term in Section 5.4;

1.1.60. “ Income for Canadian Tax Purposes ” means in respect of any fiscal year of the Partnership, the income of the Partnership for that fiscal year, determined in accordance with the Income Tax Act;

1.1.61. “ Income Tax Act ” means the Income Tax Act (Canada), and includes the regulations promulgated thereunder;

1.1.62. “ Indemnified Party ” has the meaning assigned to such term in Section 9.6;

1.1.63. “ Independent Committee ” means a committee of the board of directors of the General Partner’s general partner made up of directors that are “ independent ” of Brookfield and its Affiliates, as contemplated by applicable securities Laws;

1.1.64. “ Initial Aggregate Gain ” means the difference between the fair market value immediately after the completion of the Fund Conversion of all CanHoldco Shares transferred to the Partnership less the aggregate adjusted cost base of such shares at that time;

1.1.65. “ Initial GP Capital Contribution ” has the meaning assigned to such term in Section 3.2;

1.1.66. “ Initial Limited Partner ” has the meaning assigned to such term in the recitals;

1.1.67. “ Initial Limited Partnership Agreement ” has the meaning assigned to such term in the recitals;

1.1.68. “ Initial LP Capital Contribution ” has the meaning assigned to such term in Section 3.2;

1.1.69. “ Interested Party ” has the meaning assigned to such term in Section 9.5.1;

1.1.70. “ Interim Capital Transactions ” means sales or other voluntary or involuntary dispositions of any Assets (other than cash, cash equivalents, marketable securities and the like) prior to the commencement of the dissolution and liquidation of the Partnership.

1.1.71. “ Invested Capital ” means, on any particular date, the amount of capital contributed (directly or indirectly and either as debt or equity) to an Operating Entity prior to such date;

1.1.72. “ ISO/RTO ” means an independent electricity system operator, a regional transmission organization, national system operator and/or any other similar organization overseeing the transmission of electricity in any jurisdiction in which the BREP Group owns assets or operates;

 

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1.1.73. “ Laws ” means any and all applicable (i) laws, constitutions, treaties, statutes, codes, ordinances, principles of common and civil law and equity, rules, regulations and municipal by-laws, whether domestic, foreign or international, (ii) judicial, arbitral, administrative, ministerial, departmental and regulatory judgments, orders, writs, injunctions, decisions, and awards of any Governmental Authority, and (iii) policies, practices and guidelines of any Governmental Authority which, although not actually having the force of law, are considered by such Governmental Authority as requiring compliance as if having the force of law; and the term “applicable”, with respect to such Laws and in the context that refers to one or more Persons, means such Laws that apply to such Person or Persons or its or their business, undertaking, property or securities at the relevant time and that emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;

1.1.74. “ LB LP ” means BRP Canada GP LP;

1.1.75. “ Liabilities ” has the meaning assigned to such term in Section 9.6.1;

1.1.76. “ Limited Partner ” means a Person who is the direct beneficial owner of a Unit, without regard to the Record Holder (unless the Record Holder is such Person), and includes holders of Class A Units and Redemption-Exchange Units;

1.1.77. “ Limited Partnership Act ” means the Limited Partnership Act 1883 (Bermuda);

1.1.78. “ Liquidator ” means the General Partner or other Person approved pursuant to Section 16.3 who performs the functions described therein;

1.1.79. “ Loss for Canadian Tax Purposes ” means, in respect of any fiscal year of the Partnership, the loss of the Partnership for that fiscal year, determined in accordance with the Income Tax Act;

Managers ” means Brookfield Renewable Energy Group L.P., Brookfield Renewable Energy Group LLC, and Brookfield Renewable Energy Group (Bermuda) Inc.;

1.1.80. “ Market Value ” means, at any time, the volume-weighted average trading price of a security traded on the principal stock exchange (determined on the basis of trading volumes) for the preceding five trading days;

1.1.81. “ Master Services Agreement ” means the master services agreement among the Managers, the Partnership, BREP, the Holding Entities and others;

1.1.82. “ Net Income and Net Loss ” means, for each fiscal year or other period, an amount equal to the Partnership’s taxable income or loss for such fiscal year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss) with the following adjustments:

1.1.82.1 any income of the Partnership that is exempt from U.S. federal income tax, and to the extent not otherwise taken into account in computing Net Income or Net Loss pursuant to this paragraph, shall be added to such taxable income or loss;

 

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1.1.82.2 any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv) (i) , and to the extent not otherwise taken into account in computing Net Income or Net Loss pursuant to this paragraph, shall be subtracted from such taxable income or loss;

1.1.82.3 in the event the Gross Asset Value of any Asset is adjusted pursuant to subdivisions 1.1.54.2 or 1.1.54.3 of the definition of Gross Asset Value herein, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;

1.1.82.4 gain or loss resulting from any disposition of Partnership property with respect to which gain or loss is recognized for U.S. federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

1.1.82.5 in lieu of depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year; and

1.1.82.6 any items which are specially allocated pursuant to the provisions of Section 4.4 shall not be taken into account in computing Net Income or Net Loss;

1.1.83. “ Net Proceeds ” has the meaning assigned to such term in Section 3.8;

1.1.84. “ Nonrecourse Deductions ” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(1) and 1.704-2(c);

1.1.85. “ Nonrecourse Liability ” has the meaning set forth in Treasury Regulations Section 1.752-1(a)(2);

1.1.86. “ Notice ” has the meaning assigned to such term in Section 18.2;

1.1.87. “ Operating Entities ” means, from time to time, the Persons that (i) directly hold the Power Operations, or (ii) indirectly hold the Power Operations but all of the interests of which are not held by the Service Recipients including, in the case of each of (i) and (ii), any joint ventures, partnerships and consortium arrangements;

1.1.88. “ Opinion of Counsel ” means a written opinion of counsel acceptable to the General Partner and the Independent Committee, as the case may be;

1.1.89. “ Outstanding ” means, with respect to Units or Partnership Interests, all Units or Partnership Interests that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination;

 

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1.1.90. “ Partner ” means the General Partner or a Limited Partner;

1.1.91. “ Partner Nonrecourse Debt ” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(4);

1.1.92. “ Partner Nonrecourse Debt Minimum Gain ” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if the Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)(3);

1.1.93. “ Partner Nonrecourse Deductions ” has the meaning set forth in Treasury Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2);

1.1.94. “ Partnership ” means Brookfield Renewable Energy L.P., the limited partnership heretofore formed and continued pursuant to this Agreement;

1.1.95. “ Partnership Interest ” means any partnership interest, including any General Partner Unit, Class A Unit or Redemption-Exchange Unit;

1.1.96. “ Partnership Minimum Gain ” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d);

1.1.97. “ Percentage Interest ” means, as of the date of such determination, as to any Partner, the quotient of the number of Partnership Interests held by such Partner divided by the total number of all Partnership Interests then Outstanding;

1.1.98. “ Person ” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, Governmental Authority or other entity however designated or constituted and pronouns have a similarly extended meaning;

1.1.99. “ Plan of Arrangement ” has the meaning assigned to such term under the Combination Agreement;

1.1.100. “ Power Operations ” means power generating operations or developments directly or indirectly held or acquired by members of the BREP Group from time to time;

1.1.101. “ Quarter ” means a calendar quarter ending on the last day of March, June, September or December;

1.1.102. “ Record Date ” means the date established by the General Partner for determining (a) the identity of Record Holders entitled to notice of any meeting of Limited Partners or entitled to consent to a Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners or (b) the identity of Record Holders entitled to receive any report or distribution;

 

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1.1.103. “ Record Holder ” means, as of any particular Business Day, the Person in whose name a Unit is registered on the books of the Partnership as of the opening of business on such Business Day, or with respect to other Partnership Interests, the Person in whose name any such other Partnership Interest is registered on the books which the General Partner has caused to be kept as of the opening of business on such Business Day;

1.1.104. “ Redemption Amount ” has the meaning assigned to such term in Section 7.1;

1.1.105. “ Redemption-Exchange Date ” has the meaning assigned to such term in Section 6.3;

1.1.106. “ Redemption-Exchange Unitholder ” means a holder of Redemption-Exchange Units;

1.1.107. “ Redemption-Exchange Units ” means the limited partner interests in the Partnership having the rights and obligations specified in this Agreement and that are designated as Redemption-Exchange Units;

1.1.108. “ Redemption Notice ” has the meaning assigned to such term in Section 6.2.1;

1.1.109. “ Redemption Right ” has the meaning assigned to such term in Section 6.1.2;

1.1.110. “ Relationship Agreement ” means the relationship agreement between certain members of the Brookfield Group, the Partnership, BREP, the Holding Entities and others dated as of the date hereof;

1.1.111. “ Reorganization ” means the transactions relating to the indirect acquisition of the Power Operations (other than those Power Operations held by Brookfield Renewable Power Trust) by the Holding Entities;

1.1.112. “ Second Distribution Threshold ” means $0.4225 per Unit per Quarter (pro rated for any Quarter in which (i) a Unit is not Outstanding for the entire Quarter or (ii) the Capital Amount in respect of a Unit is adjusted pursuant to Section 3.4.3);

1.1.113. “ Service Recipient ” means the Partnership, BREP and the Holding Entities and any Person in which any of the foregoing or any combination of the foregoing holds all of the common equity or equivalent interests excluding any Operating Entities;

1.1.114. “ Subscription Number ” has the meaning assigned to such term in Section 3.8;

1.1.115. “ Subsidiary ” means, with respect to any Person, (i) any other Person that is directly or indirectly Controlled by such Person, (ii) any trust in which such Person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such Person holds all of the interests other than the interests of any general partner, managing member or similar Person;

 

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1.1.116. “ Tax ” means all forms of taxation, whether direct or indirect and whether levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or other reference and statutory, governmental, national, federal, state, provincial, local governmental or municipal impositions, duties, contributions and levies (including social security contributions, national insurance contributions and any other payroll taxes), whenever and wherever imposed (whether imposed by way of a withholding or deduction for or on account of tax or otherwise) and in respect of any Person, and all penalties, charges, costs and interest relating thereto;

1.1.117. “ transfer ” has the meaning assigned to such term in Section 13.4.1;

1.1.118. “ Treasury Regulations ” means the Income Tax Regulations promulgated under the Code, as amended from time to time;

1.1.119. “ Underlying Incentive Distribution ” has the meaning assigned to such term in Section 5.4.1;

1.1.120. “ Unit ” means any Class A Unit or Redemption-Exchange Unit;

1.1.121. “ Unit Reclassification ” has the meaning assigned to such term in Section 8.2;

1.1.122. “ Unit Reorganization ” has the meaning assigned to such term in Section 8.1;

1.1.123. “Unrecovered Capital Amount” means, as of the relevant date of determination and with respect to any Unit or General Partner Unit, an amount equal to the excess of (i) the Capital Amount then applicable to such Unit or General Partner Unit over (ii) the amount of distributions made in respect of such Unit or General Partner Unit pursuant to Section 5.2.3 or Section 16.3.3.3.2 during the period of time beginning on the date the Capital Amount in respect of each Unit and General Partner Unit was last adjusted pursuant to Section 3.4.3 and ending on such date of determination; and

1.1.124. “ Withdrawal Opinion of Counsel ” an Opinion of Counsel (delivered by counsel acceptable to the Independent Committee) that withdrawal of the General Partner (following the selection of the successor general partner) would not (i) result in the loss of the limited liability of any Limited Partner, (ii) cause the Partnership or any BREP Group member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for tax purposes (to the extent not previously treated as such), or (iii) cause the Partnership or BREP to become an “investment company” under the U.S. Investment Company Act of 1940, as amended, or similar legislation in other jurisdictions.

 

1.2 Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

 

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1.3 Interpretation

In this Agreement, unless the context otherwise requires:

1.3.1. words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

1.3.2. the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

1.3.3. references to any Person include such Person’s successors and permitted assigns;

1.3.4. except as otherwise provided in this Agreement, any reference in this Agreement to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all rules and regulations made under such statute, in the case of a statute, all amendments made to such statute, regulation, policy, rule or instrument, and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

1.3.5. any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

1.3.6. in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

1.3.7. except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

 

1.4 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable Law, the parties waive any provision of Law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

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1.5 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, or any amendment or supplement hereto, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement or any amendment or supplement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

 

1.6 Waiver, Amendment

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement will be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement will constitute a waiver of any other provision nor will any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. A party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of that right or the exercise of any other right.

 

1.7 Governing Law; Submission to Jurisdiction

This Agreement will be governed by and construed in accordance with the laws of Bermuda. Each of the Partners (other than governmental entities prohibited from submitting to the jurisdiction of a particular jurisdiction) will submit to the non-exclusive jurisdiction of any court in Bermuda in any dispute, suit, action or proceeding arising out of or relating to this Agreement. Each Partner waives, to the fullest extent permitted by Law, any immunity from jurisdiction of any such court or from any legal process therein and further waives, to the fullest extent permitted by Law, any claim of inconvenient forum, improper venue or that any such court does not have jurisdiction over the Partner. Any final judgment against a Partner in any proceedings brought in any court in Bermuda will be conclusive and binding upon the Partner and may be enforced in the courts of any other jurisdiction of which the Partner is or may be subject, by suit upon such judgment. The foregoing submission to jurisdiction and waivers will survive the dissolution, liquidation, winding up and termination of the Partnership.

ARTICLE 2

ORGANIZATIONAL MATTERS

 

2 .1 Formation

The Partnership has been formed as an exempted limited partnership on June 27, 2011, pursuant to the provisions of the Limited Partnership Act and the Exempted Partnerships Act. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution

 

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and termination of the Partnership shall be governed by the Limited Partnership Act and the Exempted Partnerships Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes and a Partner has no interest in any specific Partnership property.

 

2.2 Purpose

The purpose of the Partnership shall be to (i) establish, acquire and/or hold interests in the Holding Entities and, subject to the approval of the General Partner, in other Persons involved in the power generation and development business; (ii) engage in any activity related to the capitalization and financing of the Partnership’s interests in those Holding Entities and such other Persons; and (iii) engage in any activity that is incidental to or in furtherance of the foregoing and that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized under the Limited Partnership Act and the Exempted Partnerships Act and this Agreement. Except as specified herein, the General Partner shall exercise its powers and carry out its functions honestly and in good faith and the General Partner shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, in each case, subject to, and after taking into account, the terms and conditions of the Relationship Agreement, the Master Services Agreement and the Conflicts Guidelines. Subject to the foregoing, to the fullest extent permitted by Law, the General Partner shall have no additional duty or obligation to propose or approve, and may decline to propose or approve, the conduct by the Partnership of any activity free of any additional duty (including any fiduciary duty) or obligation whatsoever to the Partnership or any Limited Partner or Record Holder and, in declining to so propose or approve, shall not be deemed to have breached this Agreement, any other agreement contemplated hereby, the Limited Partnership Act, the Exempted Partnerships Act or any other provision of Law. For greater certainty, the General Partner shall not be in breach of any duty owed to the Partnership if it takes an action or engages in an activity contemplated or permitted by this Agreement, the Relationship Agreement, the Master Services Agreement or the Conflicts Guidelines.

 

2.3 Powers

The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and activities described in Section 2.2 and for the protection and benefit of the Partnership.

 

2.4 Name

The name of the Partnership shall be “ Brookfield Renewable Energy L.P. ” The Partnership’s activities and affairs may be conducted under any other name or names deemed necessary or appropriate by the General Partner, including the name of the General Partner or any Affiliate thereof. The words “ Limited Partnership ”, “ L.P. ” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the Laws of any jurisdiction that so requires. Subject to compliance with the requirements of the Limited Partnership Act and the Exempted Partnerships Act, the General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify the Record Holders of such change in the next regular communication to Record Holders.

 

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If the General Partner ceases to be the general partner of the Partnership and the new general partner is not an Affiliate of Brookfield, the Partnership shall change its name so that it does not include “ Brookfield ” and could not be capable of confusion in any way with such name. This obligation shall be enforceable and waivable by the General Partner notwithstanding that it may have ceased to be the general partner of the Partnership.

 

2.5 Registered Office; Principal Office

Unless and until changed by the General Partner, the registered office of the Partnership shall be located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda, and the resident representative in Bermuda shall be Appleby Corporate Services (Bermuda) Limited, Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda. The head office of the Partnership and the General Partner shall be 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda, or such other place as the General Partner may from time to time designate by notice to the Record Holders. The Partnership may maintain offices at such other place or places within Bermuda as the General Partner deems necessary or appropriate.

 

2.6 Power of Attorney

2.6.1. Each Limited Partner hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 16.3, the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to:

2.6.1.1 execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement, the Certificate of Limited Partnership and the Certificate of Exempted Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as an exempted limited partnership (or a partnership in which the limited partners have limited liability) in Bermuda and in all other jurisdictions in which the Partnership may conduct activities and affairs or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the General Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal or removal of any Partner pursuant to, or other events described in, Article 14, Article 15 or to the Capital Contribution of any Partner; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Units or other Partnership Interests issued pursuant to Section 3.4; and (F) any tax election with any Limited Partner or General Partner on behalf of the Partnership and/or all Partners including any such election contemplated by the Plan of Arrangement; and

 

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2.6.1.2 execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided, that when required by any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner or the Liquidator may exercise the power of attorney made in this Section 2.6.1.2 only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable.

Nothing contained in this Section 2.6.1 shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article 17 or as may be otherwise expressly provided for in this Agreement.

2.6.2. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or the transfer of all or any portion of such Limited Partner’s Partnership Interest and shall extend to such Limited Partner’s heirs, successors, assigns and personal representatives. Each Limited Partner hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each Limited Partner hereby waives any and all defenses that may be available to it to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the General Partner’s or the Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership.

 

2.7 Term

The Partnership commenced upon the formation of the Partnership on June 27, 2011, pursuant to the Initial Limited Partnership Agreement, the Certificate of Limited Partnership and the Certificate of Exempted Partnership and shall continue in perpetual existence until the termination of the Partnership in accordance with the provisions of Section 16.1.

 

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ARTICLE 3

CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

 

3.1 Formation of the Partnership

In connection with the formation of the Partnership, the General Partner has been admitted as the General Partner of the Partnership and the Initial Limited Partner has been admitted as a Limited Partner as of the date of the Initial Limited Partnership Agreement.

 

3.2 Initial Capital Contributions by the General Partner and the Initial Limited Partner

The General Partner made a Capital Contribution of $100.00 to the Partnership (“ Initial GP Capital Contribution ”). The Initial Limited Partner made a Capital Contribution of $1.00 (“ Initial LP Capital Contribution ”).

 

3.3 Interest and Withdrawal

No interest on Capital Contributions shall be paid by the Partnership. No Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon dissolution of the Partnership may be considered as such by Law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner shall have priority over any other Partner either as to the return of Capital Contributions or as to profits, losses or distributions.

 

3.4 Issuances of Additional Partnership Interests

3.4.1. Subject to any approval required by applicable Law, the Partnership may issue additional Partnership Interests (including new classes of Partnership Interests) and options, rights, warrants and appreciation rights relating to Partnership Interests for any Partnership purpose (including in connection with any distribution reinvestment plan and any payment of an Incentive Distribution pursuant to Section 5.5) at any time and from time to time to such Persons for such consideration and on such terms and conditions as the General Partner shall determine in its sole discretion, all without the approval of any Limited Partners.

3.4.2. Upon the issuance of any Class A Units to BREP pursuant to Section 3.8 hereof, the Capital Amount attributable to each such newly issued Class A Unit shall equal the amount paid or contributed to the Partnership in respect of such Class A Unit.

3.4.3. If the General Partner deems it necessary or advisable so as to preserve the economic preferences and rights of the Partners, upon or with respect to any issuance of additional Units or General Partner Units (whether in connection with the issuance of Class A Units pursuant to Section 3.8 or otherwise), the General Partner may (subject to Section 11 of the Limited Partnership Act) adjust (which adjustment may be upward or downward) the Capital Amount attributable to each Unit and General Partner Unit Outstanding prior to such issuance of new Units or General Partner Units to equal the amount that would be distributed pursuant to Section 16.3.3 in respect of such Unit or General Partner Unit (as applicable) assuming the Partnership were liquidated at the end of the day immediately prior to such issuance of new Units or General Partners Units.

 

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3.4.4. Except with respect to Class A Units issued to BREP pursuant to Section 3.8, and except as provided in Section 3.4.2 or Section 3.4.3, each additional Partnership Interest authorized to be issued by the Partnership pursuant to Section 3.4.1 may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Interests), as shall be fixed by the General Partner in its sole discretion, including (i) the right to share in Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem the Partnership Interest (including sinking fund provisions); (v) whether such Partnership Interest is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which each Partnership Interest will be issued, evidenced by certificates and assigned or transferred; and (viii) the requirement, if any, of each such Partnership Interest to consent to certain partnership matters.

3.4.5. The General Partner is hereby authorized to take all actions that it determines to be necessary or appropriate in connection with each issuance of Partnership Interests and options, rights, warrants and appreciation rights relating to Partnership Interests pursuant to this Section 3.4, including the admission of additional Limited Partners in connection therewith and any related amendment of this Agreement, and all additional issuances of Partnership Interests and options, rights, warrants and appreciation rights relating to Partnership Interests. The General Partner is authorized to do all things that it determines to be necessary or appropriate in connection with any future issuance of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests, including compliance with any Laws or guideline of any governmental agency.

 

3.5 Pre-emptive Rights

Unless otherwise determined by the General Partner, in its sole discretion, no Person shall have any pre-emptive, preferential or other similar right with respect to the issuance of any Partnership Interest, whether unissued, held in the treasury or hereafter created.

 

3.6 Splits and Combinations

3.6.1. Subject to Section 3.6.4, the Partnership may make a distribution of Partnership Interests to all Record Holders pro rata to their Percentage Interests or may effect a subdivision or combination of Partnership Interests so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event.

3.6.2. Whenever such a distribution, subdivision or combination of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such

 

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Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause independent public accountants of international standing selected by it to calculate the number of Partnership Interests to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

3.6.3. Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates to the Record Holders of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests as of the applicable Record Date representing the new number of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests held by such Record Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Interests Outstanding or outstanding options, rights, warrants or appreciation rights relating to Partnership Interests, the Partnership shall require, as a condition to the delivery to a Record Holder of any such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.

3.6.4. The Partnership shall not be required to issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of this Section 3.6.4, each fractional Unit shall be rounded to the nearest whole Unit, with each half Unit being rounded to the next higher Unit.

 

3.7 Fully Paid and Non-Assessable Nature of Units

All Units issued pursuant to, and in accordance with the requirements of this Article 3 shall be fully paid and non-assessable Units in the Partnership.

 

3.8 Issuance of Units to BREP

If, and to the extent that, BREP raises funds by way of the issuance of equity or debt securities, or otherwise, and is required under the BREP Partnership Agreement to use the proceeds of such issuance of securities to subscribe for Class A Units, BREP shall invest an amount equal to the net proceeds of such issuance (the “Net Proceeds ) for a number of Class A Units (the “Subscription Number ) equal to the (i) the quotient of the amount of the Net Proceeds divided by the issue price of one BREP Unit (in the case of an issuance of BREP Units) or the Market Value of one BREP Unit (in the case of an issuance of another security) (ii) multiplied by the inverse of the Exchange Ratio.

ARTICLE 4

ALLOCATIONS

 

4.1 Maintenance of Capital Accounts

The General Partner will maintain a separate capital account (a “ Capital Account ”) for each Partner in accordance with the following provisions:

 

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4.1.1. to each Partner’s Capital Account there shall be credited the amount of cash and the Gross Asset Value of any property contributed to the Partnership by such Partner, such Partner’s distributive share of Net Income or any item in the nature of income or gain which is specially allocated pursuant to Section 4.4, and the amount of any Partnership liabilities assumed by such Partner or which are secured by any property distributed to such Partner;

4.1.2. to each Partner’s Capital Account there shall be debited the amount of cash and the Gross Asset Value of any property distributed to such Partner pursuant to any provision of this Agreement, such Partner’s distributive share of Net Loss and any item in the nature of expense or loss which is specially allocated pursuant to Section 4.4, and the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership; and

4.1.3. in the event all or a portion of an interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the transferred interest.

The provisions of this Section 4.1 and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.

 

4.2 Allocations – Overview

The rules set forth below in this Article 4 shall apply for the purpose of determining each Partner’s allocable share of the items of income, gain, loss and expense of the Partnership comprising Net Income or Net Loss of the Partnership for each fiscal year or other period, determining special allocations of other items of income, gain, loss and expense, and adjusting the balance of each Partner’s Capital Account to reflect the aforementioned general and special allocations. For each fiscal year, the special allocations in Section 4.4 shall be made immediately prior to the general allocations of Section 4.3.

 

4.3 General Allocations

4.3.1. Net Income and Net Loss of the Partnership shall be determined and allocated with respect to each fiscal year of the Partnership as of the end of each such year, at such times as the Gross Asset Value of any Partnership Asset is adjusted pursuant to the definition thereof, and more often as determined by the General Partner. The items of income, gain, loss and expense of the Partnership comprising Net Income or Net Loss for a fiscal year shall be allocated among the Persons who were Partners during such fiscal year or other period in a manner that will, as nearly as possible, cause the Capital Account balance of each Partner at the end of such fiscal year or other period to equal the excess (which may be negative) of:

4.3.1.1 the amount of the hypothetical distribution (if any) that such Partner would receive if, on the last day of the fiscal year, (x) all Assets, including cash and any amount required to be contributed to the Partnership by the General Partner, were sold for cash in an amount equal to their Gross Asset Values, taking

 

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into account any adjustments thereto for such fiscal year, (y) all Partnership liabilities were satisfied in cash according to their terms (limited, with respect to each Nonrecourse Liability or any Partner Nonrecourse Debt in respect of such Partner, to the Gross Asset Values of the assets securing such liability), and (z) the net proceeds thereof (after satisfaction of such liabilities) were distributed in full pursuant to Section 16.3.3 over

4.3.1.2 the sum of (x) the amount, if any, without duplication, that such Partner would be obligated to contribute to the capital of the Partnership, (y) such Partner’s share of Partnership Minimum Gain determined pursuant to Treasury Regulations Section 1.704-2(g) and (z) such Partner’s share of Partner Nonrecourse Debt Minimum Gain determined pursuant to Treasury Regulations Section 1.704-2(i)(5), all computed as of the hypothetical sale described in Section 4.3.1.1 above.

4.3.2. Notwithstanding anything to the contrary in this Article 4, the amount of items of Partnership expense and loss allocated pursuant to Section 4.3.1 to any Limited Partner shall not exceed the maximum amount of such items that can be so allocated without causing such Limited Partner to have an Adjusted Capital Account Deficit at the end of any fiscal year. All such items in excess of the limitation set forth in this Section 4.3.2 shall be allocated first, to Partners who would not have an Adjusted Capital Account Deficit, pro rata , in proportion to their Capital Account balances, adjusted as provided in Sections 1.1.1.1 and 1.1.1.2, until no Partner would be entitled to any further allocation, and thereafter to the General Partner.

 

4.4 Special Allocations

The following special allocations shall be made in the following order:

4.4.1. In the event that there is a net decrease during a fiscal year in either Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain, then notwithstanding any other provision of this Article 4, each Partner shall receive such special allocations of items of Partnership income and gain as are required in order to conform to Treasury Regulations Section 1.704-2.

4.4.2. Subject to Section 4.4.1, but notwithstanding any other provision of this Article 4, items of income and gain shall be specially allocated to the Partners in a manner that complies with the “qualified income offset” requirement of Treasury Regulations Section 1.704-1(b)(2)(ii) (d)(3) .

4.4.3. In the event that a Partner has a deficit Capital Account balance at the end of any fiscal year which is in excess of the sum of (i) the amount such Partner is then obligated to restore pursuant to this Agreement, and (ii) the amount such Partner is then deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), respectively, such Partner shall be specially allocated items of Partnership income and gain (consisting of a pro rata portion of each item of income and gain of the Partnership for such fiscal year in accordance with Treasury Regulations Section

 

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1.704-1(b)(2)(ii) (d)) in the amount of such excess as quickly as possible; provided, however, that any allocation under this Section 4.4.3 shall be made only if and to the extent that a Partner would have a deficit Capital Account balance in excess of such sum after all allocations provided for in this Article 4 have been tentatively made as if this Section 4.4.3 were not in this Agreement.

4.4.4. Partner Nonrecourse Deductions shall be specially allocated to the Partners in the manner in which they share the economic risk of loss (as defined in Treasury Regulations Section 1.752-2) for such Partner Nonrecourse Debt.

4.4.5. Each Nonrecourse Deduction of the Partnership shall be specially allocated to the Partners, pro rata , in proportion to their respective Percentage Interests.

4.4.6. The amounts of any Partnership income, gain, loss or expense available to be specially allocated pursuant to this Section 4.4 shall be determined by applying rules analogous to those set forth in Section 1.1.82 as modified by Sections 1.1.82.1 through 1.1.82.5.

 

4.5 Allocation of Nonrecourse Liabilities

For purposes of determining each Partner’s share of Nonrecourse Liabilities, if any, of the Partnership in accordance with Treasury Regulations Section 1.752-3(a)(3), the Partners’ interest in Partnership profits shall be determined in the same manner as prescribed by Section 4.4.5.

 

4.6 Transfer of Interest

In the event of a transfer of all or part of any Partnership Interest (in accordance with the provisions of this Agreement) at any time other than the end of a fiscal year, or the admission of an additional Limited Partner in connection with the issuance of additional Partnership Interests pursuant to Section 3.4, the shares of items of Net Income or Net Loss and specially allocated items allocable to the interest transferred shall be allocated between the transferor and the transferee in a manner determined by the General Partner in its sole discretion that is not inconsistent with the applicable provisions of the Code and Treasury Regulations.

 

4.7 Allocations for U.S. Tax Purposes

4.7.1. Each item of income, gain, loss, or deduction for U.S. federal income tax purposes that corresponds to an item of income, gain, loss or expense that is either taken into account in computing Net Income or Net Loss or is specially allocated pursuant to Section 4.4 (a “Book Item” ) shall be allocated among the Partners in the same proportion as the corresponding Book Item is allocated among them pursuant to Section 4.3 or Section 4.4 hereof.

4.7.2. In the event any property of the Partnership is credited to the Capital Account of a Partner at a value other than its tax basis (whether as a result of a contribution of such property or a revaluation of such property pursuant to Section 1.1.54.2, then allocations of taxable income, gain, loss and deductions with respect to such property shall be made in a

 

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manner which will comply with Section 704(b) and Section 704(c) of the Code and the Treasury Regulations thereunder. The Partnership, in the discretion of the General Partner, may make, or not make, “curative” or “remedial” allocations (within the meaning of the Treasury Regulations under Section 704(c) of the Code) including, but not limited to:

4.7.2.1 “curative” allocations which offset the effect of the “ceiling rule” for a prior fiscal year (within the meaning of Treasury Regulations Section 1.704-3(c)(3)(ii)); and

4.7.2.2 “curative” allocations from dispositions of contributed property (within the meaning of Treasury Regulations Section 1.704-3(c)(3)(iii)(B)).

4.7.3. All tax credits shall be allocated among the Partners as determined by the General Partner in its sole and absolute discretion, consistent with applicable Law.

 

4.8 Allocations for Canadian Federal Income Tax Purposes.

4.8.1. The Income for Canadian Tax Purposes for a given fiscal year of the Partnership will be allocated to each Partner in an amount calculated by multiplying the Income for Canadian Tax Purposes by a fraction, the numerator of which is the sum of the distributions received by such Partner with respect to such fiscal year and the denominator of which is the aggregate amount of the distributions made by the Partnership to Partners with respect to such fiscal year. Generally, the source and character of items of income so allocated to a Partner with respect to a fiscal year of the Partnership will be the same source and character as the distributions received by such Partner with respect to such fiscal year.

4.8.2. If, with respect to a given fiscal year, no distribution is made by the Partnership or the Partnership has a loss for Canadian federal income tax purposes, one quarter of the income, or loss, as the case may be, for Canadian federal income tax purposes of the Partnership for such fiscal year, will be allocated to the Partners of record at the end of each Quarter ending in such fiscal year pro rata to their respective Percentage Interests at each such date. To such end, any Person who was a Partner at any time during such fiscal year but who has disposed of all of such Person’s Units before the last day of that fiscal year may be deemed to be a Partner on the last day of such fiscal year for the purposes of subsection 96(1) of the Income Tax Act. Generally, the source and character of such income or losses so allocated to a Partner at the end of each Quarter will be the same source and character as the income or loss earned or incurred by the Partnership in such Quarter.

4.8.3. Notwithstanding Sections 4.8.1 and 4.8.2, in respect of the gain(s) for Canadian Tax Purposes realized by the Partnership on the disposition of the common shares of CanHoldco (the “ CanHoldco Shares ”) or any property substituted therefor for any given fiscal year of the Partnership, the lesser of: (i) the amount of the gain (if any) and (ii) the Initial Aggregate Gain less any amounts previously allocated pursuant to this Section 4.8.3 (taking into account such changes in the CanHoldco Shares or any property substituted therefor if any so as to trace the accrued gains to the original CanHoldco Shares), shall be allocated as follows:

 

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4.8.3.1 such portion thereof that (A) (i) the Brookfield Group Allocable Gain is to (ii) the Initial Aggregate Gain, multiplied by (B) the portion that (i) the holdings of Partnership Units by the Brookfield Group at such time is to (ii) the holdings of Partnership Units by the Brookfield Group at the date of Fund Conversion, shall be allocated to Brookfield Group pro rata in proportion to their respective Partnership Interests at the time of the disposition of the CanHoldco Shares or any property substituted therefor; and

4.8.3.2 the remainder of such gain shall be allocated to the Limited Partners (other than the Brookfield Group) in an amount equal to the aggregate Partnership Interests held by such Limited Partners at the time of the disposition of the CanHoldco Shares or any property substituted therefor .

Any gain (or loss) not allocated by Section 4.8.3 shall be allocated in accordance with Sections 4.8.1 and 4.8.2.

 

4.9 Currency Translation

Allocations of amounts other than in U.S. Dollars shall be undertaken following translation into the amount of U.S. Dollars into which such amount could have been converted on the last date of the relevant Quarter (or such other relevant period of determination) using the exchange rate between such other currency and the U.S. Dollars published in the “Exchange Rates” table of the Wall Street Journal on such date, or similar publication if The Wall Street Journal is no longer published or, in the event that the “Exchange Rates” table of the Wall Street Journal, or similar publication was not published on such date, the closest date immediately preceding the date of such payment on which the “Exchange Rates” table of the Wall Street Journal, or similar publication, was published provided that all such translations shall be in accordance with the applicable rules set forth in the Code and applicable Treasury Regulations.

 

4.10 Authority of General Partner

Except as otherwise specifically provided by this Agreement, all decisions and other matters concerning (i) the computation and allocation of specific items of income, gain, expense or loss among the Partners and (ii) accounting procedures to be employed by the Partnership shall be determined in good faith by the General Partner, which determination shall be final and conclusive as to all Partners. In furtherance of the foregoing, the General Partner may adjust allocations of items that would otherwise be made pursuant to the terms of this Agreement to the extent necessary to (A) comply with the requirements of the Code and Treasury Regulations (including the requirements of Section 704(b) and Section 704(c) of the Code and the Treasury Regulations promulgated thereunder), (B) comply with the requirements of the Income Tax Act, or (C) reflect the Partners’ interests in the Partnership. The General Partner may make or revoke, but shall not be obligated to make or revoke, any tax election provided for under the Code, or any provision of state, local or non-U.S. tax Law or under the Income Tax Act.

 

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ARTICLE 5

DISTRIBUTIONS

 

5.1 In General

Subject to this Article 5 and Section 16.3.3, the General Partner may in its sole discretion make distributions at any time or from time to time to the Partners in accordance with their Percentage Interests. Such payment shall constitute full payment and satisfaction of the Partnership’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise. The amount of Taxes withheld or paid by the Partnership or another member of the BREP Group in respect of taxable income allocated to a Partner shall be treated as a distribution to such Partner.

 

5.2 Distributions Prior to Dissolution

5.2.1. Prior to the dissolution of the Partnership pursuant to Section 16.1, distributions of Available Cash shall be made pursuant to this Section 5.2. Any distribution to the General Partner pursuant to Sections 5.2.2.3 to 5.2.2.4 shall be made to the General Partner in its capacity as the general partner and without regard to the number of General Partner Units held by the General Partner.

5.2.2. Subject to Section 5.2.3, any distributions of Available Cash made by the Partnership with respect to any Quarter shall be distributed:

5.2.2.1 first, 100% to BREP until there has been distributed pursuant to this Section 5.2.2.1 an amount equal to the amount of BREP’s outlays and expenses for the Quarter properly incurred;

5.2.2.2 second, 100% to all Partners pro rata in proportion to their respective Percentage Interests until there has been distributed pursuant to this Section 5.2.2.2 in respect of each Unit Outstanding as of the last day of such Quarter an amount equal to the First Distribution Threshold;

5.2.2.3 third, (i) 85% to all the Partners pro rata in proportion to their respective Percentage Interests and, (ii) 15% to the General Partner until there has been distributed pursuant to this Section 5.2.2.3 in respect of each Unit Outstanding as of the last day of such Quarter an amount equal to the excess of (x) the Second Distribution Threshold over (y) the First Distribution Threshold; and

5.2.2.4 thereafter, (i) 75% to all Partners pro rata in proportion to their respective Percentage Interests and, (ii) 25% to the General Partner.

 

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5.2.3. Available Cash that is deemed by the General Partner to be cash from Interim Capital Transactions and representative of unrecovered capital (“ Capital Surplus ”) shall be distributed:

5.2.3.1 first, to Partners pro rata in proportion to the Unrecovered Capital Amounts attributable to the Units and General Partner Units held by the Partners until the Unrecovered Capital Amount attributable to each Unit and General Partner Unit is equal to zero; and

5.2.3.2 thereafter, in accordance with Section 5.2.2.

 

5.3 Distributions on or After Dissolution

Upon a dissolution of the Partnership pursuant to Section 16.1, distributions shall be made in the manner prescribed in Section 16.3.3 hereof.

 

5.4 Adjustment to Incentive Distributions Payable to General Partner

5.4.1. The General Partner shall maintain a notional account (as adjusted pursuant to this Section 5.4, the “ Incentive Distribution Account ”) that will track the amount of Incentive Distributions that have been paid or are payable in respect of any period following the Closing Date by any Operating Entity to any member of the Brookfield Group with respect to the Partnership’s Invested Capital in such Operating Entity (“ Underlying Incentive Distributions ”).

5.4.2. Notwithstanding anything to the contrary in this Article 5, any amounts otherwise payable to the General Partner pursuant to clause (ii) of either Section 5.2.2.3 or Section 5.2.2.4 shall, subject to Section 5.4.3, be reduced by (but will not be less than zero) any amount in the Incentive Distribution Account at the time of the distribution (any such amount, once applied to reduce amounts otherwise payable, is referred to as an “ Applied Incentive Amount ”).

5.4.3. The amount of any reduction pursuant to Section 5.4.2 in the amounts otherwise payable to the General Partner shall be adjusted on an equitable basis as necessary in order to take into account the benefit that Limited Partners would have received had the Underlying Incentive Distributions not been paid or payable.

5.4.4. The Incentive Distribution Account shall be adjusted from time to time to deduct the amount of any Applied Incentive Amount or any clawback or similar amount paid or contributed to an Operating Entity in respect of an Underlying Incentive Distribution. For greater certainty, it is acknowledged that the Incentive Distribution Account may be negative as a result of the adjustment for such clawback or similar amount. In no event will a negative balance in the Incentive Distribution Account require a payment to the General Partner.

5.4.5. Any amounts in the Incentive Distribution Account shall be taken into account in a similar manner to the foregoing in effecting distributions pursuant to Section 16.3.3.

 

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5.5 Incentive Distributions Paid in the Form of Redemption Exchange Units

The General Partner may elect, at its sole discretion, to reinvest the distribution amounts paid or payable by the Partnership to the General Partner, as contemplated by clause (ii) of either Section 5.2.2.3 or Section 5.2.2.4, in exchange for a number of Redemption-Exchange Units issued by the Partnership to the General Partner equal to the amount of cash that would otherwise be paid to the General Partner divided by the Market Value of a BREP Unit on the date that the distribution is declared.

 

5.6 Prohibition on Distributions

The General Partner shall not cause the Partnership to make any distribution pursuant to this Article 5:

5.6.1. unless there is sufficient cash available therefor;

5.6.2. which would render the Partnership unable to pay its debts as and when they fall due; or

5.6.3. which, in the opinion of the General Partner, would or might leave the Partnership with insufficient funds to meet any future or contingent obligations or which would contravene the Limited Partnership Act.

ARTICLE 6

REDEMPTION-EXCHANGE RIGHTS

 

6.1 Redemption-Exchange Rights

6.1.1. Subject to Section 6.1.3, the Redemption-Exchange Units entitle the Redemption-Exchange Unitholder to redeem all or any portion of its Redemption-Exchange Units in accordance with this Article 6 at any time after the second anniversary of the Closing Date.

6.1.2. Subject to the provisions of this Agreement, a Redemption-Exchange Unitholder may require the Partnership to redeem all or any portion of the Redemption-Exchange Units (the “ Redemption Right ”) for an amount of cash equal to the Redemption Amount, provided that exercise of the Redemption Right or the payment of the Redemption Amount would not otherwise cause the Partnership to be in breach or violation of any agreement material to the Partnership or the BREP Group or applicable Law. Each Redemption-Exchange Unit to be redeemed by the Redemption-Exchange Unitholder must be tendered in accordance with the procedures set out in Section 6.2.

6.1.3. Subject to the provisions of this Agreement, BREP shall have the right (the “ Exchange Right ”), which shall be exercisable after presentation of the Redemption Notice in accordance with Section 6.2, to elect to acquire all (but not less than all) the Redemption-Exchange Units to be redeemed under the Redemption Notice in consideration for the Applicable Number of BREP Units.

 

6.2 Redemption and Exchange Procedures

6.2.1. In order to exercise its Redemption Right, a Redemption-Exchange Unitholder shall deliver to the Partnership and BREP a notice (the “ Redemption Notice ”) of its intention to redeem the Redemption-Exchange Units that contains all relevant information

 

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(including the Redemption-Exchange Date), and that is presented together with all related certificates and documents that the Partnership or BREP may reasonably require or as may be required by applicable Law to effect the Redemption Right, including the certificates representing the Redemption-Exchange Units being redeemed.

6.2.2. At any time within two Business Days from the date of BREP’s receipt of the Redemption Notice, BREP may elect to exercise the Exchange Right with respect to all (but not less than all) of the Redemption-Exchange Units to be redeemed pursuant to the Redemption Notice and shall give written notice to the Partnership and to the Redemption-Exchange Unitholder of such election (the “ Exchange Notice ”). The Exchange Notice shall contain all relevant information, and shall be presented together with all related certificates and documents that the Partnership and Redemption-Exchange Unitholder may reasonably require or as may be required by applicable Law to effect the Exchange Right.

6.2.3. If BREP exercises its Exchange Right, on the Redemption-Exchange Date, BREP will acquire the number of Redemption-Exchange Units specified in the Redemption Notice in exchange for the Applicable Number of BREP Units. BREP shall take all steps necessary under the BREP Partnership Agreement to effect the issuance of the Applicable Number of BREP Units to the Redemption-Exchange Unitholder, including by issuing a certificate in the name of the Redemption-Exchange Unitholder upon request and subject to the terms of the BREP Partnership Agreement. The General Partner and the Partnership shall take all steps necessary under this Agreement to effect the transfer of the Redemption-Exchange Units specified in the Redemption Notice to BREP, including the register of such transfer in the Partnership’s register of Limited Partners and, upon request, by issuing a new certificate in the name of BREP representing the Redemption-Exchange Units transferred to BREP in accordance with this Article 6, without expense to BREP.

6.2.4. If BREP does not exercise its Exchange Right, on the Redemption-Exchange Date, for each Redemption-Exchange Unit that is presented by the Redemption-Exchange Unitholder for redemption, the Partnership will pay to the Redemption-Exchange Unitholder cash in an amount equal to the Redemption Amount. Upon the surrender of certificates representing more Redemption-Exchange Units than the number of Redemption-Exchange Units to be redeemed under the Redemption Notice, the holder thereof will be entitled, upon request, to receive from the Partnership forthwith, without expense to such holder, a new certificate representing the Redemption-Exchange Units not being redeemed at that time.

 

6.3 Redemption-Exchange Date

The date specified in any Redemption Notice (the “ Redemption-Exchange Date ”) must be a Business Day and must not be less than five Business Days nor more than ten Business Days after the date upon which the Redemption Notice is received by the Partnership and BREP. If no such Business Day is specified in the Redemption Notice, the Redemption-Exchange Date shall be deemed to be the fifth Business Day after the date on which the Redemption Notice is received by the Partnership and BREP.

 

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6.4 Withdrawal of Exercise

At any time prior to the applicable Redemption-Exchange Date, any Redemption-Exchange Unitholder who delivers a Redemption Notice to the Partnership will be entitled to withdraw such Redemption Notice.

 

6.5 Effect of Exercise of the Redemption-Exchange Right

6.5.1. If the Redemption Right has been exercised, at 8:30 a.m. (Bermuda time) on the Redemption-Exchange Date:

6.5.1.1 the closing of the redemption contemplated by the Redemption Notice or, if applicable, the closing of the exchange contemplated by the Exchange Notice will be deemed to have occurred;

6.5.1.2 any Redemption-Exchange Unitholder who exercised the Redemption Right will cease to be a holder of such Redemption-Exchange Units and will not be entitled to exercise any of the rights in respect of such Redemption-Exchange Units, other than the right to receive the Redemption Amount or the Applicable Number of BREP Units deliverable hereunder and any right to receive distributions payable in respect of such Redemption-Exchange Units for any Quarter ending prior to the Redemption-Exchange Date;

6.5.1.3 immediately following the closing of the exchange contemplated by Section 6.5.1.1, if applicable, BREP shall exchange the Redemption-Exchange Units for Class A Units on a one for one basis and, in addition to any other Units previously held by BREP, BREP will be considered and deemed for all purposes to be the holder of the number of Class A Units equal to the number of Redemption-Exchange Units exchanged pursuant to the Exchange Right; and

6.5.1.4 other than as specifically contemplated herein, the BREP Units issued to any Redemption-Exchange Unitholder pursuant to Section 6.2.2 will be issued in accordance with the BREP Partnership Agreement.

 

6.6 FIRPTA

The General Partner, on behalf of the Brookfield Group, shall indemnify the Partnership and BREP for any Taxes imposed on the Partnership or BREP pursuant to Section 897, Section 1445, or Section 1461 of the Code as a result of the exercise of the Redemption Right or the Exchange Right by a member of the Brookfield Group. Notwithstanding the foregoing, such indemnification shall not be required unless at all times during the period beginning 30 days before such exercise and ending at the close of the Redemption-Exchange Date on which the Partnership pays to the Redemption-Exchange Unitholder cash in an amount equal to the Redemption Amount or BREP acquires the number of Redemption-Exchange Units specified in the Redemption Notice in exchange for the Applicable Number of BREP Units, whichever is applicable, each of the General Partner of the Partnership and the general partner of BREP is a member of the Brookfield Group.

 

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ARTICLE 7

REDEMPTION AMOUNT AND EXCHANGE RATIO

 

7.1 Redemption Amount

Subject to Section 8.2, the “ Redemption Amount ” shall be the product of (i) the Market Value of one BREP Unit multiplied by the number of Redemption-Exchange Units specified in a Redemption Notice to be redeemed and (ii) the Exchange Ratio.

 

7.2 Exchange Ratio and Adjustments

The “ Exchange Ratio ” shall initially be one and shall be adjusted from time to time pursuant to Sections 8.1 or 8.2.

ARTICLE 8

ADJUSTMENTS

 

8.1 Unit Reorganization

In the event that there is any change in the number of Redemption-Exchange Units or BREP Units Outstanding from time to time as a result of a subdivision, consolidation, reclassification, capital reorganization or similar change in the Redemption-Exchange Units or the BREP Units, as the case may be, (each such event, a “ Unit Reorganization ”), the Exchange Ratio shall be adjusted to be the number of BREP Units that would be received in respect of one Redemption-Exchange Unit immediately following the Unit Reorganization as if the Redemption Right and the Exchange Right had been exercised in respect of such Redemption-Exchange Unit immediately before the Unit Reorganization.

 

8.2 Unit Reclassification

In the event that there is any consolidation, amalgamation, arrangement, merger or other form of combination of BREP with or into any other entity resulting in a reclassification of the Outstanding BREP Units (“ Unit Reclassification ”), then the Exchange Ratio will be adjusted in a manner approved by the General Partner, acting reasonably, to ensure that:

8.2.1. the Redemption-Exchange Unitholders would receive the amount of cash equal to the Market Value (or, if no Market Value is available, the fair market value) of the securities that such Redemption-Exchange Unitholder would have been entitled to receive pursuant to the Unit Reclassification if, on the effective date of such Unit Reclassification, the holders had been the registered holders of the number of BREP Units that they would have received had such Redemption-Exchange Units been exchanged for the Applicable Number of BREP Units pursuant to the Exchange Right immediately before the effective date of the Unit Reclassification; and

8.2.2. the Redemption-Exchange Unitholders would receive the securities that such Redemption-Exchange Unitholders would have been entitled to receive pursuant to the Unit Reclassification if, on the effective date of the Unit Reclassification, the holders had been the registered holders of the number of BREP Units that they would have received had such Redemption-Exchange Units been exchanged for the Applicable Number of BREP Units pursuant to the Exchange Right immediately before the effective date of the Unit Reclassification.

 

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8.3 Adjustments Cumulative

The adjustments to the Exchange Ratio provided for in Section 8.1 and 8.2 shall be cumulative.

ARTICLE 9

MANAGEMENT AND OPERATION OF PARTNERSHIP

 

9.1 Management

9.1.1. The General Partner shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the activities and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management power over the activities and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable Law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 9.2, shall have full power and authority to do all things and on such terms as it determines, in its sole discretion, to be necessary or appropriate to conduct the activities and affairs of the Partnership, to exercise all powers set forth in Section 2.3 and to effectuate the purposes set forth in Section 2.2.

9.1.2. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by it. The General Partner and the Partnership shall not have any liability to a Limited Partner for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not derived by such Limited Partner in connection with the tax consequences of such decisions so long as (i) the General Partner has acted pursuant to its authority under this Agreement; and (ii) the General Partner has not acted in a grossly negligent manner or in bad faith or engaged in fraud or willful misconduct.

9.1.3. Notwithstanding any other provision of this Agreement, the Limited Partnership Act, the Exempted Partnerships Act or any applicable Law, each Person who is a Partner on the date hereof and each other Person who may acquire a Partnership Interest hereby: (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the Combination Agreement, the Master Services Agreement, the Relationship Agreement and the other agreements described in or contemplated by the Combination Agreement; (ii) agrees that the General Partner (on its own or through any officer of the Partnership) is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Combination Agreement on behalf of the Partnership without any further act, approval, or vote of the Persons who are Partners on the date hereof or the other

 

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Persons who may acquire a Partnership Interest; and (iii) agrees that the execution, delivery or performance by the General Partner, the Managers or any Affiliate of any of them, of this Agreement or any agreement authorized or permitted under this Agreement, shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty existing at Law, in equity or otherwise.

 

9.2 Restrictions on General Partner’s Authority

9.2.1. Except as provided in Article 16, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the BREP Group’s assets, taken as a whole, in a single transaction or a series of related transactions without the approval of holders of at least 50% of the voting power of Outstanding Units; provided however that this provision shall not preclude or limit the General Partner’s ability, in its sole discretion, to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the BREP Group (including for the benefit of Persons who are not members of the BREP Group and Affiliates of the General Partner) and shall not apply to any forced sale of any or all of the assets of the BREP Group pursuant to the foreclosure of, or other realization upon, any such encumbrance. The General Partner shall not, on behalf of the Partnership, except as permitted under Section 13.6, Section 15.1 and Section 15.2, elect or cause the Partnership to elect a successor general partner of the Partnership. The General Partner shall not amend or agree to amend the Master Services Agreement, the Relationship Agreement, or the Voting Agreement without the approval of a majority of members of the Independent Committee.

9.2.2. The General Partner covenants that it will cause: (i) CanHoldco not to dispose of any shares of BRP Canada (or the shares of any successor thereof) within 24 months of the Effective Date to any Person in a transaction that results in a current material net tax liability (as compared to the Brookfield Group Allocable Gain) to CanHoldco unless, prior to such disposition, BRP Canada (or its successor) is amalgamated or wound up into CanHoldco; and (ii) the Partnership not to dispose of any of its CanHoldco Shares (or any property substituted therefor) to a corporation on a tax-deferred rollover basis as part of a series of transactions by which such shares of CanHoldco (or any property substituted therefor) are disposed of by such corporation on a fully taxable basis that results in a material current net tax liability (as compared to the Brookfield Group Allocable Gain) to such corporation and where one of the purposes of such dispositions was the avoidance of the application of Section 4.8.3 hereof.

 

9.3 Reimbursement of Partnership Expenses

9.3.1. Except as provided in this Section 9.3 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as General Partner of the Partnership.

9.3.2. The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its reasonable discretion, for (i) all direct and indirect out-of-pocket expenses it incurs or payments it makes on behalf of the Partnership

 

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(including amounts paid to any Person to perform services for the Partnership or for the General Partner in the discharge of its duties to the Partnership), and (ii) all other necessary or appropriate out-of-pocket expenses allocable to the Partnership or otherwise reasonably incurred by the General Partner in connection with conducting the Partnership’s affairs (including out-of-pocket expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Reimbursements pursuant to this Section 9.3 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 9.6.

 

9.4 Outside Activities

9.4.1. The General Partner shall, for so long as it is the general partner of the Partnership, (i) maintain as its sole activity the activity of acting as the general partner of the Partnership and undertaking activities that are ancillary or related thereto and (ii) not engage in any business or activity or incur or guarantee any debts or liabilities except in connection with or incidental to its performance as general partner as described above or incurring, guaranteeing, acquiring, owning or disposing of debt or equity securities of any other member of the BREP Group.

9.4.2. Each Indemnified Party (other than the General Partner) shall have the right to engage in businesses of every type and description and other activities for profit, and to engage in and possess interests in business ventures of any and every type or description, whether in activities similar to those of the General Partner, the Partnership or any other member of the BREP Group, in direct competition to, and/or in preference to, or to the exclusion of, the Partnership, the General Partner or any other member of the BREP Group. Such business interests, activities and engagements shall not constitute a breach of this Agreement or any duties stated or implied by Law or equity, including fiduciary duties, to any of the General Partner, the Partnership (or any of their respective investors) or any other member of the BREP Group (or any of their respective investors) and shall be deemed not to be a breach of the General Partner’s fiduciary duties or any other obligation of any type whatsoever of the General Partner. None of the General Partner, the Partnership or any other member of the BREP Group or any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby or otherwise in any business ventures of an Indemnified Party.

9.4.3. To the extent permitted by Law, the General Partner and the Indemnified Parties shall have no obligation hereunder, to present business or investment opportunities to the Partnership, the Limited Partners or any member of the BREP Group.

9.4.4. The Affiliates of the General Partner shall have no obligation to (i) permit the Partnership or any other member of the BREP Group to use any facilities or assets of the Affiliates of the General Partner (other than the Assets), except as may be provided in contracts, agreements or of the arrangements entered into from time to time specifically dealing with such use, or (ii) to enter into such contracts, agreements or other arrangements.

 

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9.4.5. Notwithstanding anything to the contrary in this Section 9.4, nothing in this Section 9.4 shall affect any obligation of an Indemnified Party to present a business or investment opportunity to the Partnership, the General Partner or any other member of the BREP Group pursuant to the Relationship Agreement or any other separate written agreement between such Indemnified Party and the Partnership, the General Partner or any other member of the BREP Group.

 

9.5 Disclosure of Interests

9.5.1. The General Partner, its Affiliates and their respective partners, members, shareholders, directors, officers, employees and shareholders (each hereinafter referred to as an “ Interested Party ”) may become Limited Partners or beneficially interested in Limited Partners in the Partnership and may hold, dispose of or otherwise deal with Units with the same rights they would have if the General Partner were not party to this Agreement.

9.5.2. An Interested Party shall not be liable to account either to other Interested Parties or to the Partnership, the Partners or any other Persons for any profits or benefits made or derived by or in connection with any transaction contemplated by Section 9.4.2.

9.5.3. Subject to applicable Laws, an Interested Party may sell investments to, purchase Assets from, vest Assets in and contract or enter into any contract, arrangement or transaction with the Partnership, any other member of the BREP Group or any other Person whose securities are held directly or indirectly by or on behalf of the Partnership or another member of the BREP Group, including any contract, arrangement or transaction relating to any financial, banking, investment banking, insurance, secretarial or other services, and may be interested in any such contract, transaction or arrangement and shall not be liable to account either to the Partnership, any other member of the BREP Group or any other Person in respect of any such contract, transaction, arrangement or interest, or any benefits or profits made or derived therefrom, by virtue only of the relationship between the parties concerned, provided that nothing herein contained shall permit an Interested Party or Limited Partner to enter into any such contract, transaction or arrangement as aforesaid, unless the terms thereof are permitted by or approved in accordance with the provisions of the Governing Instruments of the General Partner.

9.5.4. Without limiting the generality of the foregoing, an Interested Party or Limited Partner may enter into any contract, transaction or arrangement with any member of the BREP Group to provide advice or services, including investment management, monitoring or oversight services, services with respect to corporate finance matters and valuations, services relating to the arrangement of new financing, mergers and acquisitions, services relating to the provision of directors or other manager of a Person and other investment banking services, including introduction and transaction organization services.

 

9.6 Indemnification

9.6.1. The General Partner and any of its Affiliates, and their respective officers, directors, agents, shareholders, partners, members and employees, any Person who serves on the board of directors or other Governing Body of any member of the BREP Group, and any

 

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Person that the General Partner designates as an indemnified person (each, an “ Indemnified Party ”) shall, to the fullest extent permitted by Law, be indemnified on an after Tax basis out of the Assets (and the General Partner shall be entitled to grant indemnities on behalf of the Partnership, and to make payments out of the Assets, to any Indemnified Party in each case in accordance with this Section 9.6) against any and all losses, claims, damages, liabilities, costs and expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements and other amounts (collectively, “ Liabilities ”) arising from any and all claims, demands, actions, suits and proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Party is or may be involved, or is threatened to be involved, as a party or otherwise, in connection with the investments and activities of the Partnership or by reason of such Person being the General Partner, or an Affiliate of the General Partner, or an officer, director, agent, shareholder, partner, member or employee of the General Partner or an Affiliate of the General Partner, or a Person who serves on the board of directors or other Governing Body of any member of the BREP Group, provided that no such Indemnified Party shall be so indemnified, with respect to any matter for which indemnification is sought, to the extent that a court of competent jurisdiction determines pursuant to a final and non-appealable judgment that, in respect of such matter, the Indemnified Party acted in a grossly negligent manner or in bad faith or engaged in fraud or willful misconduct, or, in the case of a criminal matter, acted with knowledge that the Indemnified Party’s conduct was unlawful. An Indemnified Party shall not be denied indemnification in whole or in part under this Section 9.6 because the Indemnified Party had an interest in the transaction with respect to which indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

9.6.2. To the fullest extent permitted by Law, amounts incurred in respect of Liabilities incurred by an Indemnified Party in defending any claim, demand, action, suit or proceeding, whether civil, criminal, administrative or investigative, shall from time to time be advanced by the Partnership prior to a determination that the Indemnified Party is not entitled to be indemnified, upon receipt by the Partnership of an undertaking by or on behalf of the Indemnified Party to repay such amount if it shall be determined that the Indemnified Party is not entitled to be indemnified as provided by the proviso of Section 9.6.1.

9.6.3. The indemnification provided by this Section 9.6 shall be in addition to any other rights to which an Indemnified Party may be entitled under any agreement, as a matter of the Law or otherwise, both as to actions in the Indemnified Party’s capacity as an Indemnified Party and as to actions in any other capacity, and shall continue as to any Indemnified Party who has ceased to serve in the capacity in which such Indemnified Party became entitled to indemnification under this Section 9.6, and shall inure to the benefit of such Person’s heirs, successors, assigns and administrators. The indemnification provisions of this Section 9.6 are for the benefit of each Indemnified Party, its heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Person.

9.6.4. No amendment, modification or repeal of this provision or any other provision of this Agreement shall in any manner terminate, reduce or impair the right of any past, present or future Indemnified Party to be indemnified by the Partnership or the obligations of the Partnership to indemnify any such Indemnified Party under and in accordance with the

 

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provisions of this Agreement as in effect immediately prior to such amendment, modification or repeal with respect to any claim, demand, action, suit or proceeding, whether civil, criminal, administrative or investigative, arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claim, demand, action, suit or proceeding may arise or be asserted.

9.6.5. Notwithstanding anything to the contrary in this Agreement, (i) no Indemnified Party shall be liable to the Partnership, any Partner or any other Person who has acquired an interest in a Partnership Interest for any Liabilities sustained or incurred by such Person as a result of any act or omission of the Indemnified Party, except to the extent there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that such Liabilities resulted from the Indemnified Party’s gross negligence, bad faith, fraud, wilful misconduct, or in the case of a criminal matter, actions with knowledge that the conduct was unlawful and (ii) subject to applicable Law, any matter that is approved by a majority of the members of the Independent Committee shall not constitute a breach of this Agreement or any duties to the Partnership or to the Partners stated or implied by Law or equity, including fiduciary duties.

9.6.6. Any amendment, modification or repeal of this Section 9.6 (or that otherwise affects Section 9.6) that limits its scope shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnified Parties under this Section 9.6 as in effect immediately prior to such amendment, modification or repeal with respect to any claim, demand, action, suit or proceeding, whether civil, criminal, administrative or investigative, arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claim, demand, action, suit or proceeding may arise or be asserted, provided that the Indemnified Party became an Indemnified Party hereunder prior to such amendment, modification or repeal.

9.6.7. The provisions of this Section 9.6 shall survive the dissolution of the Partnership.

 

9.7 Resolution of Conflicts of Interest

9.7.1. Notwithstanding anything to the contrary in this Agreement, conflicts of interest and potential conflicts of interest that are approved by a majority of the members of the Independent Committee from time to time are hereby approved by all Partners.

9.7.2. The parties acknowledge and agree that the Independent Committee may grant approvals for any matters that may give rise to a conflict of interest or potential conflict of interest pursuant to the guidelines, policies or procedures adopted by the Independent Committee at the date hereof and as amended from time to time with the approval of a majority of the members of the Independent Committee (the “ Conflicts Guidelines ”), and if and to the extent that such matters are permitted by the Conflicts Guidelines, no further special approval will be required in connection with such matter permitted thereby other than any approvals required by Law.

 

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9.8 Other Matters Concerning the General Partner

9.8.1. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

9.8.2. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters that such General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

9.8.3. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers or any duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty that is permitted or required to be done by the General Partner hereunder.

9.8.4. To the fullest extent permitted by applicable Law, any standard of care applicable to the General Partner shall be modified, waived or limited as required to permit the General Partner to act in accordance with the terms of this Agreement or any other agreement contemplated hereby.

 

9.9 Title to Partnership Assets

Title to Assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Assets or any portion thereof. Title to any or all of the Assets may be held in the name of the Partnership, the General Partner, the general partner of the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Assets for which record title is held in the name of the General Partner, its general partner or one or more Affiliates of the General Partner or one or more nominees shall be held by the General Partner, its general partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its reasonable efforts to cause record title to such Assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be transferred into the name of the Partnership as soon as reasonably practicable; provided that, prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and prior to any such transfer, will provide for the use of such Assets in a manner satisfactory to the Partnership. All Assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Assets is held.

 

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9.10 Purchase or Sale of Units

The General Partner may cause the Partnership to purchase or otherwise acquire Units. As long as Units are held by the Partnership, such Units shall not be considered Outstanding for any purpose, except as otherwise provided herein. The General Partner or any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Units for its own account, subject to the provisions of Article 13 and Article 14.

 

9.11 Reliance by Third Parties

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all Assets of the Partnership and to enter into any contracts on behalf of the Partnership, including contracts related to the incurrence or guarantee of indebtedness, and such Person shall be entitled to deal with the General Partner as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

 

9.12 Services

The General Partner may cause the Partnership to appoint any Person (including any Affiliate of the General Partner) to manage the affairs of the Partnership, in accordance with the Conflicts Guidelines. Any services rendered pursuant to such appointment shall be on terms that are fair and reasonable to the Partnership, provided that the requirements of this Section 9.12 shall be deemed satisfied as to (i) any services provided under the Master Services Agreement and any agreement contemplated thereby, (ii) any transaction approved by a majority of the members of the Independent Committee, subject to compliance with the requirements of applicable Law, or (iii) any transaction entered into in accordance with the Conflicts Guidelines, subject to compliance with the requirements of applicable Law. The provisions of Section 9.3 shall apply to the rendering of services described in this Section 9.12.

 

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ARTICLE 10

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

 

10.1 Limitation of Liability

The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Limited Partnership Act or the Exempted Partnerships Act.

If it were determined that a Limited Partner was participating in the control or management of the Partnership or conducting the affairs of, signing or executing documents for or otherwise binding the Partnership (or purporting to do any of the foregoing) within the meaning of the Limited Partnership Act or the Exempted Partnerships Act, such legislation provides that such Limited Partner would be liable as if it were a general partner of the Partnership in respect of all debts of the Partnership incurred while that Limited Partner was so acting or purporting to act.

 

10.2 Management of Partnership Affairs

No Limited Partner (other than the General Partner or any officer, director, employee, partner, agent or trustee of the General Partner, in its capacity as such, if such Person shall also be a Limited Partner) shall take part in the management or control of the activities and affairs of the Partnership or have any right or authority to act for or bind the Partnership or to take part or in any way to interfere in the conduct or management of the Partnership or to vote on matters relating to the Partnership, to have access to the books and records of the Partnership or any other member of the BREP Group other than as required by applicable Law or as set forth in this Agreement. The transaction of any such activities or affairs by the General Partner or any officer, director, employee, partner, agent or trustee of the General Partner, in its capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.

 

10.3 Outside Activities

Subject to the provisions of Section 9.4, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners, any Limited Partner shall be entitled to and may have interests and engage in activities in addition to activities relating to the Partnership, including interests and activities in direct competition with the Partnership or BREP. Neither the Partnership nor any of the other Partners shall have any rights by virtue of this Agreement in any ventures of any Limited Partner.

ARTICLE 11

BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

11.1 Books, Records and Accounting

The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s activities and affairs. Any books and records maintained by or on behalf of the Partnership in the regular course of its

 

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activities and undertakings, including the record of the Record Holders, books of account and records of Partnership proceedings, may be kept on information storage devices, provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with IFRS-IASB. Such books, records and registers will be kept available for inspection by and at the sole expense of any Limited Partner or its duly authorized representatives upon notice to the General Partner during regular business hours at the office of the General Partner for any purpose relating to such Limited Partner’s Partnership Interest. Limited Partners shall not have access to any information of the Partnership contained in its books and records which the General Partner is required by legal or contractual restriction to keep confidential or which, in the opinion of the General Partner, acting reasonably, should be kept confidential in the interests of the Partnership or may be kept confidential as provided in this Agreement, and each Limited Partner hereby waives any right, statutory or otherwise, to greater access to the books and records of the Partnership than is permitted herein, to the greatest extent permitted by law.

 

11.2 Fiscal Year

Subject to Section 17.1.9, the first fiscal year of the Partnership shall end on December 31, 2011 and subsequent fiscal years of the Partnership shall be the calendar year; provided, however, that if the Code requires the Partnership to use a taxable year other than a calendar year then, for U.S. tax purposes, the fiscal year of the Partnership shall be such taxable year.

 

11.3 Delivery of Financial Statements

The General Partner shall deliver to BREP (i) the annual financial statements of the Partnership and (ii) the accounts and financial statements of any Holding Entity or any other holding vehicle established by the Partnership.

 

11.4 Reports

11.4.1. Within the period of time required by applicable Law, including any rule of any stock exchange on which the BREP Units or other partnership interests of BREP are or will be listed for trading, the General Partner shall prepare in accordance with IFRS-IASB and make publicly available as of a date selected by the General Partner in its reasonable discretion financial statements of the Partnership for such fiscal year of the Partnership audited by a firm of independent public accountants of international standing selected by the General Partner as well as a statement of the accounting policies used in their preparation, such information as may be required by applicable Laws and such information as the General Partner deems appropriate.

11.4.2. As and within the period of time required by any applicable Law, including any rule of any stock exchange, the General Partner shall prepare in accordance with IFRS-IASB and make publicly available quarterly financial statements of the Partnership, which may be unaudited, as may be required by applicable Law, including any rule of any stock exchange on which the BREP Units or other partnership interests of BREP are or will be listed for trading.

 

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ARTICLE 12

TAX MATTERS

 

12.1 Tax Information

12.1.1. Following each taxable year of the Partnership, the General Partner shall use commercially reasonable efforts to supply each Person that was a Partner at any time during such taxable year with a Schedule K-1 (or equivalent) within ninety (90) days after the close of such taxable year. The General Partner shall also, where reasonably possible and applicable, prepare and send such Persons such other information required by any non-U.S. Limited Partner for U.S. federal income tax reporting purposes.

12.1.2. Within eighty (80) days following the end of each fiscal year of the Partnership and within the eighty (80) days after the date of the dissolution of the Partnership, the General Partner shall use commercially reasonable efforts to supply each Person that was a Partner at any time during such fiscal year and who is required to file an income tax return under the Income Tax Act (or, in the case of a Partner that is a partnership, that has one or more partners who is required to file an income tax return under the Income Tax Act) all necessary income tax reporting information with respect to such Partner’s income from the Partnership for such fiscal year.

 

12.2 Preparation of Tax Returns

The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for U.S. federal and state income tax purposes and, where applicable, Canadian federal income tax purposes. The classification, realization and recognition of income, gain, losses and deductions and other items shall be computed (i) for U.S. federal income tax purposes, on the accrual method of accounting, and (ii) for Canadian federal income tax purposes, in accordance with the Income Tax Act.

 

12.3 Tax Elections

The General Partner shall determine whether to make, to refrain from making or to revoke the election provided for in Section 754 of the Code, and any and all other elections permitted by the Code, the Income Tax Act or any other national, federal, state or local tax Law, in its sole discretion.

 

12.4 Tax Controversies

Subject to the provisions hereof, the General Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code) and the designated partner for the purposes of the Income Tax Act including subsections 152(1.4) to 152(1.8) thereof, and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting

 

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administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings.

 

12.5 Withholding

Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines in its sole discretion to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code, the Income Tax Act or any other national, federal, state or local Law including pursuant to Chapters 3 and 4 of Subtitle A of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner, the amount withheld shall be treated as a distribution of cash pursuant to Section 5.2 or Section 16.3 (as applicable) in the amount of such withholding from such Partner. To the extent an amount otherwise payable to a member of the BREP Group is required to be withheld and paid over to any taxing authority, and such withheld amount is attributable to a Partner’s ownership of Units, then such withheld amount shall be treated as a distribution of cash to such Partner pursuant to Section 5.2 or Section 16.3 (as applicable) in the amount of such withholding.

 

12.6 Election to be Treated as a Corporation

Notwithstanding anything to the contrary contained herein, if the General Partner determines in its sole discretion that it is no longer in the best interests of the Partnership to continue as a partnership for U.S. federal income tax purposes, the General Partner may elect to treat the Partnership as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.

 

12.7 U.S. Tax Classification of the Partnership

Prior to the General Partner making an election described in Section 12.7 hereof, it is intended that the Partnership be classified as a partnership for U.S. federal income tax purposes. In furtherance of the foregoing, and prior to the General Partner making an election described in Section 12.7, to ensure that interests in the Partnership are not traded on an established securities market within the meaning of Treasury Regulations Section 1.7704-1(b) or readily tradable on a secondary market or the substantial equivalent thereof within the meaning of Treasury Regulations Section 1.7704-1(c), notwithstanding anything to the contrary contained in this Agreement, (i) the Partnership shall not participate in the establishment of a market or the inclusion of its interests thereon, and (ii) the Partnership shall not recognize any transfer made on any market by (x) redeeming the transferor Partner (in the case of a redemption or repurchase by the Partnership) or (y) admitting the transferee as a Partner or otherwise recognizing any rights of the transferee, such as a right of the transferee to receive Partnership distributions (directly or indirectly) or to acquire an interest in the capital or profits of the Partnership.

 

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ARTICLE 13

CERTIFICATES; RECORD HOLDERS; TRANSFERS OF PARTNERSHIP

INTERESTS

 

13.1 Certificates

13.1.1. Upon the Partnership’s issuance of Partnership Interests of all or any classes to any Person and the request of such Person, the Partnership shall issue one or more Certificates in the name of such Person evidencing the number of such Partnership Interests being so issued. Certificates shall be executed on behalf of the Partnership by the General Partner. No Certificate evidencing the issuance of Partnership Interests shall be valid for any purpose until it has been countersigned by the General Partner.

13.1.2. Certificates may bear any legends required by applicable Law or otherwise determined to be appropriate by the General Partner.

 

13.2 Mutilated, Destroyed, Lost or Stolen Certificates

13.2.1. If any mutilated Certificate is surrendered to the General Partner, the General Partner on behalf of the Partnership shall execute, countersign and deliver in exchange therefor, a new Certificate evidencing the same number of Partnership Interests as the Certificate so surrendered.

13.2.2. The General Partner on behalf of the Partnership shall execute, countersign and deliver a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate:

13.2.2.1 makes proof by affidavit, in form and substance satisfactory to the General Partner, that a previously issued Certificate has been lost, destroyed or stolen;

13.2.2.2 requests the issuance of a new Certificate before the Partnership has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

13.2.2.3 if requested by the General Partner, delivers to the Partnership a bond, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may reasonably direct, in its sole discretion, to indemnify the Partnership, and the General Partner against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and

13.2.2.4 satisfies any other reasonable requirements imposed by the General Partner.

13.2.3. If a Record Holder fails to notify the Partnership within a reasonable time after the holder has notice of the loss, destruction or theft of a Certificate, and a transfer of the Partnership Interests represented by the Certificate is registered before the Partnership or the General Partner receives such notification, the Record Holder shall be precluded from making any claim against the Partnership or the General Partner for such transfer or for a new Certificate.

 

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13.2.4. As a condition to the issuance of any new Certificate under this Section 13.2, the General Partner may require the payment of a sum sufficient to cover any Tax or other governmental charge that may be imposed in relation thereto and any other expenses reasonably connected therewith.

 

13.3 Record Holder

In accordance with Section 13.5.2, the Partnership shall be entitled to recognize the Record Holder as the Limited Partner with respect to any Units and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Units on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof, except as otherwise provided by applicable Law. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Units, as between the Partnership on the one hand and such other Person on the other hand, such representative Person shall be the Record Holder of such Partnership Interest. A Person may become a Record Holder without the consent or approval of any Partner.

 

13.4 Transfer Generally

13.4.1. The term “ transfer ”, when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General Partner assigns its General Partner Units to another Person or (ii) by which the holder of a Unit assigns such Unit to another Person, and includes a sale, assignment (including the foreclosure of a pledge, encumbrance, hypothecation or mortgage), gift, or exchange; save that the term transfer shall not be deemed to include the grant of a security interest, mortgage, charge or pledge of any kind over a Partnership Interest.

13.4.2. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 13. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 13 shall be null and void.

13.4.3. Nothing contained in this Agreement shall be construed to prevent the parent entity of the General Partner from disposing of all of the issued and outstanding capital stock of the General Partner.

 

13.5 Registration and Transfer of Units

13.5.1. The General Partner shall cause to be kept at its registered office in Bermuda on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 13.5.2, the General Partner will provide for the registration and transfer of Units. The Partnership shall not recognize transfers of

 

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Certificates representing Units unless such transfers are effected in the manner described in this Section 13.5. Upon surrender for registration of transfer of any Units evidenced by a Certificate, and subject to the provisions of Section 13.5.2, the General Partner on behalf of the Partnership shall execute, countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the same aggregate number of Units as was evidenced by the Certificate so surrendered.

13.5.2. Except as otherwise provided in Article 14, the Partnership shall not recognize any transfer of Units until the Certificates evidencing such Units are surrendered for registration of transfer.

13.5.3. Subject to (i) the foregoing provisions of this Section 13.5; (ii) Section 13.3; (iii) Section 13.7; (iv) with respect to any class or series of Units, the provisions of any statement of designations or amendment to this Agreement establishing such class or series; (v) any contractual provisions binding on any Limited Partner; (vi) Section 12.7; and (vii) provisions of applicable Law including the Limited Partnership Act and the Exempted Partnerships Act, Units shall be freely transferable.

13.5.4. The General Partner may, in its sole discretion and without giving a reason, refuse to register a transfer of any Unit in Certificated form which is not fully paid or on which the Partnership has a lien.

 

13.6 Transfer of General Partner Units

13.6.1. The General Partner may transfer its General Partner Units to a single transferee (including upon its merger, consolidation or other combination into any other Person or the transfer by it of all or substantially all of its assets to another Person) if, but only if, (i) the transferee is an Affiliate of the general partner of BREP (or the transfer is being made concurrently with a transfer of the general partnership units of BREP to an Affiliate of the transferee), (ii) the transferee agrees to assume and be bound by the provisions of this Agreement and (iii) the Partnership receives an Opinion of Counsel (delivered by counsel acceptable to the Independent Committee) that such transfer (or merger, consolidation or combination) would not result in the loss of limited liability of any Limited Partner or of any limited partner of BREP or cause the Partnership or BREP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for tax purposes (to the extent not previously treated as such).

13.6.2. In the case of a transfer pursuant to this Section 13.6, the transferee or successor (as the case may be) shall be admitted to the Partnership as the General Partner immediately after the transfer of the General Partner Units, and the Partnership shall continue without dissolution.

13.6.3. The Parties agree that no transfer under this Section 13.6 will occur without the notification to and approval of the relevant Bermuda regulatory authorities in accordance with Bermuda law.

 

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13.7 Restrictions on Transfers

Notwithstanding the other provisions of this Article 13, no transfer of any Partnership Interest shall be made if such transfer would (a) violate the then applicable securities Laws or rules and regulations of any securities commission of any jurisdiction or any other Governmental Authorities with jurisdiction over such transfer, (b) result in the taxation of the Partnership as an association taxable as a corporation or otherwise subject the Partnership to entity-level taxation for tax purposes (in either case, for U.S. tax purposes, to the extent not otherwise elected by the General Partner pursuant to Section 12.6 to be treated as such) or (c) affect the Partnership’s existence or qualification as an exempted limited partnership under the Limited Partnership Act or Exempted Partnerships Act.

ARTICLE 14

ADMISSION OF ADDITIONAL OR SUCCESSOR PARTNERS

 

14.1 Admission of Additional Limited Partners

14.1.1. By acceptance of the transfer of any Units or the issuance of any Units in accordance with this Agreement, each Person to whom a Unit is transferred or issued (including any nominee holder or an agent or representative acquiring such Units for the account of another Person) shall:

14.1.1.1 be admitted to the Partnership as a Limited Partner with respect to the Units so transferred or issued to such Person when any such transfer or issuance is reflected in the books and records of the Partnership, with or without execution of this Agreement;

14.1.1.2 become bound by, and shall be deemed to have agreed to be bound by, the terms of this Agreement;

14.1.1.3 shall become the Record Holder of the Units so transferred or issued;

14.1.1.4 represents that the transferee or other recipient has the capacity, power and authority to enter into this Agreement;

14.1.1.5 be deemed to grant the powers of attorney set forth in this Agreement;

14.1.1.6 be deemed to make the consents and waivers contained in the Agreement, including with respect to the approval of the transactions and agreements entered into in connection with the formation of the Partnership, the Reorganization and the Fund Conversion; and

14.1.1.7 be deemed to ratify and confirm all contracts, agreements, assignments and instruments entered into on behalf of the Partnership, in accordance with this Agreement, including the granting of any charge or security interest over the Assets and the assumption of any indebtedness in connection with the affairs of the Partnership.

 

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14.1.2. The transfer of any Unit and/or the admission of any new Limited Partner to the Partnership will not constitute any amendment to this Agreement. A Person may become a Record Holder without the consent or approval of any of the Partners. A Person may not become a Limited Partner without acquiring a Unit.

14.1.3. Any transfer of a Unit shall not entitle the transferee to share in the profits and losses, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled until the transferee becomes a Limited Partner and a party to this Agreement pursuant to this Article 14.

 

14.2 Admission of Successor General Partner

A successor general partner approved pursuant to Sections 15.1 or 15.2 or the transferee of or successor to the General Partner’s General Partner Units pursuant to Section 13.6 shall be admitted to the Partnership as the general partner, subject to the requirements of the Limited Partnership Act and the Exempted Partnerships Act, effective immediately prior to the withdrawal or removal of the General Partner pursuant to Sections 15.1 or 15.2 or immediately after the transfer of the General Partner’s General Partner Units pursuant to Section 13.6. Any such successor shall conduct the activities and affairs of the Partnership without the Partnership being dissolved. In each case, the admission shall be subject to the successor general partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. Any such successor is hereby authorized to and shall, subject to the terms hereof, conduct the activities and affairs of the Partnership without the Partnership being dissolved and shall be deemed to ratify and confirm all contracts, agreements, assignments and instruments entered into on behalf of the Partnership, in accordance with this Agreement, including the granting of any charge or security interest over the Assets and the assumption of any indebtedness in connection with the affairs of the Partnership.

ARTICLE 15

WITHDRAWAL OF PARTNERS

 

15.1 Withdrawal of the General Partner

15.1.1. The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an “ Event of Withdrawal ”):

15.1.1.1 the General Partner voluntarily withdraws from the Partnership by giving 180 days advance written notice to the other Partners;

15.1.1.2 the General Partner transfers all of its rights as General Partner pursuant to Section 13.6;

15.1.1.3 the General Partner is removed pursuant to Section 15.2;

 

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15.1.1.4 the General Partner (a) makes a general assignment for the benefit of creditors; (b) files a voluntary bankruptcy petition; (c) files a petition or answer seeking for itself a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any Law; (d) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in Sections (a)-(c) of this Section 15.1.1.4; or (e) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the General Partner or of all or any substantial part of its properties;

15.1.1.5 a final and non-appealable judgment is entered by a court with appropriate jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency Laws as now or hereafter in effect; or

15.1.1.6 a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the Laws of its state of incorporation.

15.1.2. If an Event of Withdrawal specified in Sections 15.1.1.4, 15.1.1.5 or 15.1.1.6 or 15.1.1.6 occurs or is expected, the withdrawing General Partner shall give notice as soon as reasonably practicable to the Limited Partners. The Partners hereby agree that only the Events of Withdrawal described in this Section 15.1 shall result in the withdrawal of the General Partner from the Partnership.

15.1.3. Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) the General Partner voluntarily withdraws by giving at least 180 days’ advance notice to the Limited Partners, such withdrawal to take effect on the date specified in such notice; or (ii) at any time that the General Partner ceases to be a general partner pursuant to Section 15.1.1.2 or is removed pursuant to Section 15.2.

15.1.4. If the General Partner gives a notice of withdrawal pursuant to Sections 15.1.1.1 or 15.1.2, holders of at least a majority of the voting power of the Class A Units may, prior to the effective date of such withdrawal, elect a successor general partner. If, prior to the effective date of the General Partner’s withdrawal, a successor is not selected by the Limited Partners as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance with Section 16.2. Any such successor general partner shall be subject to the provisions of Section 14.2.

 

15.2 Removal of the General Partner

The General Partner may be removed if (i) such removal is approved by holders of at least 66  2 / 3 % of the voting power of the Outstanding Class A Units; and (ii) the Partnership receives a Withdrawal Opinion of Counsel. Any such action by such holders of Class A Units

 

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for removal of the General Partner must also provide for the election and succession of a new general partner. Such removal shall be effective immediately following the admission of the successor general partner pursuant to Article 14. The removal of the General Partner is subject to the approval of the successor general partner by holders of a majority of the voting power of the Outstanding Class A Units. Any such successor general partner shall be subject to the provisions of Section 14.2.

 

15.3 Interest of Departing General Partner and Successor General Partner

15.3.1. In the event of (i) withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement or (ii) removal of the General Partner by the Limited Partners under circumstances where Cause does not exist, the Departing General Partner shall, at its option exercisable prior to the effective date of the departure of such Departing General Partner, promptly receive from its successor in exchange for its General Partner Units an amount in cash equal to the fair market value of the General Partner Units, such amount to be determined and payable as of the effective date of its departure. If the General Partner is removed by the Limited Partners under circumstances where Cause exists or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement, its successor shall have the option described in the immediately preceding sentence, and the Departing General Partner shall not have such option.

15.3.2. For purposes of this Section 15.3.2, the fair market value of the Departing General Partner’s General Partner Units shall be determined by agreement between the Departing General Partner and its successor or, failing agreement within 30 days after the effective date of such Departing General Partner’s departure, by an independent investment banking firm or other independent expert selected by the Departing General Partner and its successor, which, in turn, may rely on other experts and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing General Partner shall designate an independent investment banking firm or other independent expert, the Departing General Partner’s successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which shall determine the fair market value of the General Partner Units. In making its determination, such independent investment banking firm or other independent expert shall consider the Partnership’s Assets, the rights and obligations of the General Partner and other factors it may deem relevant.

15.3.3. If the General Partner Units are not acquired in the manner set forth in Section 15.3.1, the Departing General Partner shall become a Limited Partner and the General Partner Units shall be converted into Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 15.3.1, without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor).

 

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15.4 Withdrawal of Limited Partners

No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner’s Units becomes a Record Holder, such transferring Limited Partner shall, subject to Section 4.8.2 cease to be a Limited Partner with respect to the Units so transferred.

ARTICLE 16

TERMINATION OF THE PARTNERSHIP

 

16.1 Dissolution

Subject to Section 16.2, the Partnership shall dissolve and its affairs shall be wound up, upon any of the following occurring:

16.1.1. the service of notice by the General Partner, with the approval of a majority of the members of the Independent Committee that in the opinion of the General Partner, the coming into force of any Law or binding authority renders illegal or impracticable the continuation of the Partnership; or

16.1.2. the election of the General Partner, with the approval of a majority of the members of the Independent Committee, if the Partnership, as determined by the General Partner, based upon an Opinion of Counsel, is required to register as an “investment company” under the U.S. Investment Company Act of 1940, as amended, or similar legislation in other jurisdictions;

16.1.3. the date that the General Partner withdraws from the Partnership without the appointment of a successor pursuant to Section 15.1 having been implemented;

16.1.4. the date on which any court of competent jurisdiction enters a decree of judicial dissolution of the Partnership or an order to wind up or liquidate the General Partner without the appointment of a successor pursuant to Section 15.1 or 15.2 having been implemented; or

16.1.5. the date on which the General Partner decides to dispose of, or otherwise realize proceeds in respect of, all or substantially all of the Assets in a single transaction or series of transactions.

 

16.2 Reconstitution of Partnership

The Partnership shall be reconstituted and continue without dissolution, if within 30 days of the date of dissolution (and provided that a notice of dissolution with respect to the Partnership has not been provided to the Bermuda Monetary Authority) under this Section 16.2, a successor general partner appointed pursuant to this Agreement executes a transfer deed pursuant to which the new general partner assumes the rights and undertakes the obligations of the original general partner, but only if the Partnership receives an Opinion of Counsel that the admission of the new general partner will not result in the loss of limited liability of any Limited Partner.

 

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16.3 Liquidation

Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 16.2, the General Partner shall act, or cause one or more Persons to act, as the Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by a majority of the members of the Independent Committee. If the General Partner is acting as the Liquidator, it shall not be entitled to receive any additional compensation for acting in such capacity. The Liquidator shall agree not to resign at any time without 15 days’ prior notice and (if other than the General Partner) may be removed at any time, with or without cause, by notice of removal approved by a majority of the members of the Independent Committee. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by a majority of the members of the Independent Committee. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Section 16.3, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding-up and liquidation of the Partnership as provided for herein. The Liquidator shall proceed to dispose of the Assets, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as the Liquidator determines to be in the best interest of the Partners, subject to applicable Laws and the following:

16.3.1. the Assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidators and such Partners or Partners may agree; if any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 16.3.3 to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners; the Liquidator may distribute the Assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Partners;

16.3.2. liabilities of the Partnership, including amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 16.3) and amounts to Partners otherwise than in respect of their distribution rights under Section 5.2, shall be discharged; with respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment; when paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds; and

 

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16.3.3. by the end of the taxable year in which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation), all property and cash in excess of that required to discharge liabilities of the Partnership pursuant to Section 16.3.2 shall be distributed to the Partners as provided in this Section 16.3.3:

16.3.3.1 an amount equal to the amount of cash or property held by the Partnership at such time, that is attributable to a realization event occurring prior to the date of an event specified in Section 16.1 and that has not been deemed by the General Partner as Capital Surplus shall be distributed in accordance with Section 5.2.2 as if such distribution were a distribution occurring prior to dissolution;

16.3.3.2 an amount equal to the amount of cash or property held by the Partnership at such time, that is attributable to a realization event occurring prior to the date of an event specified in Section 16.1 and that has been deemed by the General Partner as Capital Surplus shall be distributed in accordance with Section 5.2.3 as if such distribution were a distribution occurring prior to dissolution; and

16.3.3.3 all other cash and property of the Partnership shall be distributed to the Partners as follows:

16.3.3.3.1 first, 100% to BREP until BREP has received pursuant to this Section 16.3.3.3.1 an amount equal to the excess of (1) the amount of BREP’s outlays and expenses incurred during the term of the Partnership, over (2) the aggregate amount of distributions received by BREP pursuant to Section 5.2.2.1;

16.3.3.3.2 second, to the Partners pro rata in proportion to the Unrecovered Capital Amounts attributable to the Units and General Partner Units held by the Partners until the Unrecovered Capital Amount attributable to each Unit and General Partner Unit is equal to zero;

16.3.3.3.3 third, to the Partners pro rata in proportion to their respective Percentage Interests until there has been distributed pursuant to this Section 16.3.3.3.3 in respect of each Unit Outstanding an amount equal to the excess of (1) the First Distribution Threshold for each Quarter during the period beginning on the date the Capital Amount in respect of each Unit and General Partner Unit was last adjusted pursuant to Section 3.4.3 and ending on the date of distribution pursuant to this Section 16.3.3.3.3, over (2) the aggregate amount of distributions (if any) made in respect of a Unit pursuant to Section 5.2.2.2 during such period of time;

 

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16.3.3.3.4 fourth, 15% to the General Partner and 85% to the Partners, pro rata in proportion to their respective Percentage Interests, until there has been distributed pursuant to this Section 16.3.3.3.4 in respect of each Unit Outstanding an amount equal to the excess of (1) the Second Distribution Threshold less the First Distribution Threshold for each Quarter during the period beginning on the date the Capital Amount in respect of each Unit and General Partner Unit was last adjusted pursuant to Section 3.4.3 and ending on the date of distribution pursuant to this Section 16.3.3.3.4, over (2) the aggregate amount of distributions (if any) made in respect of a Unit pursuant to Section 5.2.2.3 during such period of time; and

16.3.3.3.5 thereafter, 25% to the General Partner and 75% to the Partners, pro rata in proportion to their respective Percentage Interests.

Any distribution to the General Partner pursuant to Sections 16.3.3.3.4-16.3.3.3.5 shall be made to the General Partner in its capacity as the general partner and without regard to the number of General Partner Units held by the General Partner.

 

16.4 Distributions in Kind

Notwithstanding the provisions of Section 16.3, which require the liquidation of the Assets, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership, the Liquidator determines that an immediate sale of part or all of the Assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its absolute discretion, defer for a reasonable time the liquidation of any Assets except those necessary to satisfy liabilities of the Partnership (including those to Partners as creditors) and/or distribute to the Partners or to specific classes of Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 16.3, undivided interests in such Assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Limited Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

 

16.5 Cancellation of Certificate of Limited Partnership

Upon the completion of the distribution of Partnership cash and property as provided in Sections 16.3 and 16.4, the Partnership shall be terminated and the Certificate of Limited Partnership and Certificate of Exempted Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than Bermuda shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken.

 

16.6 Reasonable Time for Winding Up

A reasonable time shall be allowed for the orderly winding up of the activities and affairs of the Partnership and the liquidation of its Assets pursuant to Section 16.3 in order to minimize any losses otherwise attendant upon such winding up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation.

 

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16.7 Return of Capital

The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners, or any portion thereof, it being expressly understood that any such return shall be made solely from Assets.

 

16.8 No Capital Account Restoration

No Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership.

 

16.9 Waiver of Partition

Each Partner hereby waives any right to partition of the Partnership property.

ARTICLE 17

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

 

17.1 Amendment to be Adopted Solely by General Partner

Subject to compliance with the requirements of the Limited Partnership Act and the Exempted Partnerships Act, each Limited Partner agrees that the General Partner (pursuant to its powers of attorney from the Limited Partners), without the approval of any Limited Partner, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:

17.1.1. a change in the name of the Partnership, the location of the registered office of the Partnership, the registered agent of the Partnership or the registered office of the Partnership;

17.1.2. admission, substitution or withdrawal or removal of Partners in accordance with this Agreement;

17.1.3. a change that the General Partner determines is reasonable and necessary or appropriate to qualify or continue the qualification of the Partnership as an exempted limited partnership under Bermuda law or a partnership in which the limited partners have limited liability under the Laws of any jurisdiction, or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for tax purposes;

17.1.4. an amendment that the General Partner determines to be necessary or appropriate to address changes in tax regulations, legislation or interpretation;

17.1.5. an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership or the General Partner or its directors or officers from in any manner being subjected to the provisions of the U.S. Investment Company Act of 1940, as amended, or similar legislation in other jurisdictions;

 

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17.1.6. an amendment that the General Partner determines in its sole discretion to be necessary or appropriate in connection with the creation, authorization or issuance of any class or series of Partnership Interests or options, rights, warrants or appreciation rights relating to Partnership Interests pursuant to Section 3.4;

17.1.7. any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;

17.1.8. any amendment that in the sole discretion of the General Partner is necessary or appropriate to reflect and account for the formation of the Partnership of, or its investment in, any Person, as otherwise permitted by the Agreement;

17.1.9. a change in the Partnership’s fiscal year and related changes;

17.1.10. any amendment concerning the computation or allocation of specific items of income, gain, expense or loss among the Partners that, in the sole discretion of the General Partner, is necessary or appropriate to (w) comply with the requirements of the Code and Treasury Regulations (including the requirements of Section 704(b) and Section 704(c) of the Code and the Treasury Regulations promulgated thereunder), (x) comply with the requirements of the Income Tax Act, (y) reflect the Partners’ interests in the Partnership or (z) consistently reflect the distributions made by the Partnership to the Partners pursuant to the terms of this Agreement;

17.1.11. any amendment that in the sole discretion of the General Partner is necessary or appropriate to address any statute, rule, regulation, notice, or announcement that affects or could affect the U.S. federal income tax treatment of any allocation or distribution related to any interest of the General Partner in the profits of the Partnership; or

17.1.12. any other amendments substantially similar to the matters described in Section 17.1.1 through 17.1.11.

In addition, the General Partner may make amendments to this Agreement, without the approval of any Limited Partner, if those amendments, in the discretion of the General Partner:

17.1.13. do not adversely affect the Limited Partners considered as a whole (including any particular class of Partnership Interest as compared to other classes of Partnership Interests) in any material respect;

17.1.14. are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion or binding directive, order, ruling or regulation of any Governmental Authority;

17.1.15. are necessary or appropriate for any action taken by the General Partner relating to splits or combinations of Units or Partnership Interests made in accordance with the provisions of this Agreement; or

 

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17.1.16. are required to effect the intent of the provisions of the Combination Agreement or the intent of the provisions of this Agreement or are otherwise contemplated by this Agreement.

 

17.2 Amendment Procedures

Except as provided in Sections 17.1 and 17.3, all amendments to this Agreement shall be made in accordance with the following procedures:

 

  17.2.1. amendments to this Agreement may only be proposed by or with the consent of the General Partner, provided that the General Partner shall have no duty or obligation to propose any amendment to this Agreement and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to propose or consent to an amendment to the fullest extent permitted by Law, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Limited Partnership Act or the Exempted Partnerships Act or any other Law or at equity;

 

  17.2.2.

a proposed amendment shall be effective upon its approval by the General Partner and, where required under this Agreement or by the Limited Partnership Act, on the consent, vote or approval of the amendment by the holders of at least 66  2 / 3 % of the voting power of the Outstanding Units; and

 

  17.2.3. each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of Outstanding Units or call a meeting of the Unitholders to consider and vote on such proposed amendment.

 

17.3 Amendment Requirements

17.3.1. Notwithstanding the provisions of Sections 17.1 and 17.2, no provision of this Agreement that establishes a percentage of the voting power of the Outstanding Units required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting requirement unless such amendment is approved by the written consent or the affirmative vote of the voting power of Outstanding Units whose aggregate Outstanding Units constitute voting power not less than the voting requirement sought to be reduced.

17.3.2. Notwithstanding the provisions of Sections 17.1 and 17.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent except if the same occurs as a result of any amendment approved pursuant to Section 17.3.3, or (ii) enlarge the obligations, restrict in any way any action by or rights of or reduce in any way the amounts distributable, reimbursable or otherwise payable by the Partnership to the General Partner or any of its Affiliates without the consent of the General Partner, which may be given or withheld in its sole discretion.

 

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17.3.3. Except as otherwise provided, and without limitation of the General Partner’s authority to adopt amendments to this Agreement as contemplated in Section 17.1, the General Partner may amend the Partnership Agreement without the approval of holders of Outstanding Units, except that any amendment that would have a material adverse effect on the rights or preferences of any class of Outstanding Units in relation to other classes of Partnership Interests must be consented to or approved by the holders of at least a majority of the Outstanding Partnership Interests of the class affected.

17.3.4. Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 17.1, no amendments shall become effective without the approval of at least 90% of the voting power of the Outstanding Units unless the Partnership obtains an Opinion of Counsel to the effect that (a) such amendment will not cause the Partnership to be treated as an association taxable as a corporation or otherwise taxable as an entity for tax purposes (provided that for U.S. tax purposes the General Partner has not made the election contemplated by Section 12.6) and (b) such amendment will not affect the limited liability of any Limited Partner or any limited partner of BREP under applicable Law; provided, however, that no such opinion shall be required in connection with an election described in Section 12.6 made by the General Partner or in connection with a transfer following such election.

17.3.5. This Section 17.3 shall only be amended with the approval of not less than 90% of the Outstanding Units.

 

17.4 Meetings

17.4.1. All acts of Limited Partners to be taken hereunder shall be taken in the manner provided in this Article 17. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners holding greater than 50% or more of the voting power of the Outstanding Partnership Interests of the class or classes for which a meeting is proposed, provided that, for this purpose, the Partnership Interests Outstanding shall not include Partnership Interests owned by the General Partner or any of its Affiliates other than any member of the BREP Group. (For the avoidance of doubt, the Class A Units and the Redemption-Exchange Units shall not constitute separate classes for this purpose.) Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any Laws, governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners.

17.4.2. A meeting shall be held at a time and place (outside of Canada) determined by the General Partner on a date not less than 10 days and not more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the activities and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability under the Limited Partnership Act or the Law of any other jurisdiction in which the Partnership is qualified to conduct activities and affairs.

 

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17.5 Notice of Meeting

Notice of a meeting called pursuant to Section 17.4 shall be given to the Record Holders of the class or classes of Partnership Interests in writing by mail or other means of written communication in accordance with Section 18.2 and shall include details of any proposal or other matter required by any provision of this Agreement or Law to be submitted for the consideration and approval of the Limited Partners. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication. In addition, notices of special meetings pursuant to Section 17.4 shall be delivered, announced and/or published to the extent required for the Partnership to comply with applicable Law.

 

17.6 Record Date

For purposes of determining the Limited Partners entitled to notice of and participation in or to vote at a meeting of the Limited Partners or to provide consents or give approvals to any action by the Partnership as provided in Section 17.11 without a meeting as provided in Section 17.10, the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any applicable Law, in which case the applicable Law shall govern) or (b) in the event that consents or approvals to any action by the Partnership are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to provide such consents or approvals.

 

17.7 Adjournment

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting and/or the new Record Date, as applicable, shall be given in accordance with this Article 17.

 

17.8 Quorum

A majority of the Outstanding Units of the class or classes for which a meeting has been called (including Units held by the General Partner) represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class or classes unless any such action by the Limited Partners requires approval by Limited Partners holding a greater percentage of the voting power of such Units, in which case the quorum shall be such greater percentage. At any meeting of the Limited Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Units that in the aggregate represent a majority of the Outstanding Units entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited

 

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Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Units that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of the voting power of Outstanding Units specified in this Agreement (including Outstanding Units deemed owned by the General Partner). In the absence of a quorum, any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of Units holding at least a majority of the voting power of the Outstanding Units entitled to vote at such meeting (including Outstanding Units deemed owned by the General Partner) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 17.7.

 

17.9 Conduct of Meeting

The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of consents or approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 17.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting, in either case including a Partner or a director or officer of the General Partner. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable Law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of consents or approvals in writing.

 

17.10 Action Without a Meeting

If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if (i) written consent to such action is solicited by or on behalf of the General Partner, and (ii) an approval in writing setting forth the action to be taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Units that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted. Prompt notice of the taking of action by written consent or without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot from Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Units held by the Limited Partner, the Partnership shall be deemed to have failed to receive a ballot for the Units that were not voted.

 

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17.11 Voting and Other Rights

17.11.1. Only those Record Holders of Units on the Record Date set pursuant to Section 17.6 (and also subject to the limitations contained in the definition of “ Outstanding ”) shall be entitled to notice of, and to vote at, a meeting of Partners or to act with respect to matters as to which the holders of the Outstanding Units have the right to vote or to act. All references in this Agreement to votes, consents or approvals of, or other acts that may be taken by, the Outstanding Units shall be deemed to be references to the votes, consents, approvals or acts of the Record Holders of such Outstanding Units.

17.11.2. Each Outstanding Unit shall entitle the holder thereof to one vote for the purposes of any approval at a meeting of Limited Partners or by written consent.

17.11.3. With respect to Units that are held for a Person’s account by another Person, in whose name such Units are registered, such other Person shall, in exercising the voting or consent rights in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 17.11.3 (as well as all other provisions of this Agreement) are subject to the provisions of Section 13.3.

ARTICLE 18

GENERAL PROVISIONS

 

18.1 Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

18.2 Notices

18.2.1. To the Partnership and General Partner

18.2.1.1 Any notice, payment demand, request, report or other document required or permitted to be given or made under this Agreement (“ Notice ”) by a Limited Partner to the Partnership or General Partner shall be given or sent by fax or letter post or by other means of written communication to the address of the General Partner specified below, or at such other address as the General Partner may notify to the Record Holders, in compliance with applicable Laws:

BREP Holding L.P.

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM 12

Bermuda

Attention: Secretary

Telecopier number: 441-298-3433

 

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18.2.2. To BREP

18.2.2.1 Any Notice by a Limited Partner to BREP shall be given or sent by fax or letter post or by other means of written communication to the address of the general partner of BREP specified below, or at such other address as the General Partner may notify to the Record Holders, in compliance with applicable Laws and regulations:

2288509 Ontario Inc.

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM 12

Bermuda

Attention: Secretary

Telecopier number: 441-298-3433

18.2.3. To the Limited Partners

18.2.3.1 Any Notice by the General Partner or Partnership to a Limited Partner shall, unless otherwise required by applicable Laws, be deemed given or made to the Limited Partner when delivered in person or when sent to the relevant Record Holder by fax, letter post or by other means of written communication at the address described in Section 18.2.3.2 or when provided as set forth in Section 18.2.3.3.

18.2.3.2 Any Notice to be given or made to a Limited Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give any Notice shall, unless otherwise required by applicable Laws, be deemed conclusively to have been fully satisfied, upon sending of such Notice to the Record Holder of the Partnership Interests, at such Person’s address as shown on the records of the Partnership, or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Interests by reason of any transfer or otherwise. An affidavit or certificate of making of any Notice in Section 18.2 executed by the General Partner, Partnership or the mailing organization shall be prima facie evidence of the giving or making of such Notice. If any Notice addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Partnership or the Partnership is returned by letter post marked to indicate that the relevant postal service is unable to deliver it, such Notice and any subsequent Notices shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Partnership of a change in his address) if they are available for the Limited Partner at the principal office of the Partnership for a period of one year from the date of the giving or making of such Notice to the other Limited Partners.

 

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18.2.3.3 Any Notice to be given or made to a Limited Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give any Notice shall, unless otherwise required by applicable Laws, be deemed conclusively to have been fully satisfied, upon issuing a press release complying with applicable Laws, if deemed by the General Partner in its sole discretion to be a reasonable or appropriate means of providing such Notice.

 

18.3 Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

18.4 Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

[NEXT PAGE IS SIGNATURE PAGE]

 

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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of November 20, 2011.

 

GENERAL PARTNER:

 

BREP HOLDING L.P., by its general partner, 2288508 Ontario Inc.

By:  

“Jane Sheere”

  Name: Jane Sheere
  Title: Authorized Signatory

 

LIMITED PARTNER:

 

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.,

by its general partner,

2288509 Ontario Inc.

By:  

“Jane Sheere”

  Name: Jane Sheere
  Title: Authorized Signatory

 

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65

Exhibit 4.2

EXECUTION VERSION

BROOKFIELD ASSET MANAGEMENT INC.

- and -

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

- and -

BROOKFIELD RENEWABLE ENERGY L.P.

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BROOKFIELD BRP HOLDINGS (CANADA) INC.

- and -

BRP BERMUDA HOLDINGS I LIMITED

- and -

BROOKFIELD BRP CANADA CORP.

- and -

BROOKFIELD BRP HOLDINGS (US) INC.

- and -

BROOKFIELD RENEWABLE POWER PREFERRED EQUITY INC.

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BRP FINANCE ULC

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BRP ENERGY GROUP L.P.

- and -

BROOKFIELD RENEWABLE ENERGY GROUP LLC

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BROOKFIELD RENEWABLE ENERGY GROUP (BERMUDA) LIMITED

 

 

MASTER SERVICES AGREEMENT

 

 

November 28, 2011

 

LOGO


TABLE OF CONTENTS

 

ARTICLE 1
INTERPRETATION

     2   

1.1

   Definitions      2   

1.2

   Headings and Table of Contents      9   

1.3

   Interpretation      9   

1.4

   Actions by the Manager or the Service Recipients      10   

1.5

   Generally Accepted Accounting Principles      10   

1.6

   Invalidity of Provisions      10   

1.7

   Entire Agreement      11   

1.8

   Waiver, Amendment      11   

1.9

   Governing Law      11   

ARTICLE 2
APPOINTMENT OF THE MANAGERS

     11   

2.1

   Appointment and Acceptance      11   

2.2

   Other Holding Entities      12   

2.3

   Subcontracting and Other Arrangements      12   

ARTICLE 3
SERVICES AND POWERS OF THE MANAGERS

     12   

3.1

   Services      12   

3.2

   Services Provided to BREP and BRELP      13   

3.3

   Supervision of Managers’ Activities      14   

3.4

   Restrictions on the Managers      14   

3.5

   Errors and Omissions Insurance      14   

ARTICLE 4
RELATIONSHIP BETWEEN THE MANAGERS AND THE SERVICE RECIPIENTS

     15   

4.1

   Other Activities      15   

4.2

   Exclusivity      15   

4.3

   Independent Contractor, No Partnership or Joint Venture      15   

ARTICLE 5
MANAGEMENT AND EMPLOYEES

     15   

5.1

   Management and Employees      15   

ARTICLE 6
INFORMATION AND RECORDS

     16   

6.1

   Books and Records      16   

6.2

   Examination of Records by the Service Recipients      16   

6.3

   Access to Information by Manager Group      16   

6.4

   Additional Information      17   


ARTICLE 7
FEES AND EXPENSES

     17   

7.1

   Net Base Management Fee and Base Management Fee Adjustment      17   

7.2

   Maximum Fees Payable by Service Recipients      18   

7.3

   Currency      18   

7.4

   Computation and Payment of Net Base Management Fee      18   

7.5

   Expenses      19   

7.6

   Governmental Charges      20   

7.7

   Computation and Payment of Expenses and Governmental Charges      20   

ARTICLE 8
BROOKFIELD’S OBLIGATION

     20   

ARTICLE 9
REPRESENTATIONS AND WARRANTIES
OF THE MANAGERS AND THE SERVICE RECIPIENTS

     20   

9.1

   Representations and Warranties of the Managers      20   

9.2

   Representations and Warranties of the Service Recipients      21   

ARTICLE 10
LIABILITY AND INDEMNIFICATION

     22   

10.1

   Indemnity      22   

10.2

   Limitation of Liability      23   

10.3

   Benefit to all Indemnified Parties      24   

ARTICLE 11
TERM AND TERMINATION

     24   

11.1

   Term      24   

11.2

   Termination by the Service Recipients      24   

11.3

   Termination by the Managers      25   

11.4

   Survival Upon Termination      26   

11.5

   Action Upon Termination      26   

11.6

   Release of Money or other Property Upon Written Request      26   

ARTICLE 12
ARBITRATION

     27   

12.1

   Dispute      27   

12.2

   Arbitration      27   

12.3

   Continued Performance      28   

ARTICLE 13
GENERAL PROVISIONS

     28   

13.1

   Limited Liability of Limited Partners of BREP and BRELP      28   

13.2

   Assignment      28   

13.3

   Failure to Pay When Due      29   

 

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13.4

   Enurement      29   

13.5

   Notices      29   

13.6

   Further Assurances      32   

13.7

   Counterparts      32   

 

- iii -


MASTER SERVICES AGREEMENT

THIS AGREEMENT made as of the 28th day of November, 2011.

A M O N G:

BROOKFIELD ASSET MANAGEMENT INC. (“ Brookfield ”), a corporation existing under the laws of the Province of Ontario

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. (“ BREP ”), an exempted partnership existing under the laws of Bermuda

- and -

BROOKFIELD RENEWABLE ENERGY L.P. (“ BRELP ”), an exempted partnership existing under the laws of Bermuda

- and -

BROOKFIELD BRP HOLDINGS (CANADA) INC. (“ CanHoldco”), a corporation existing under the laws of the Province of Ontario

- and -

BRP BERMUDA HOLDINGS I LIMITED (“ Bermuda Holdco ”), a corporation existing under the laws of Bermuda

- and -

BROOKFIELD BRP CANADA CORP. (“ BBCC ”), a corporation existing under the laws of the Province of Alberta

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BROOKFIELD BRP HOLDINGS (US) INC. (“ CanUSHoldco”), a corporation existing under the laws of Province of Ontario

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BROOKFIELD RENEWABLE POWER PREFERRED EQUITY INC. (“ BRPPE ”), a corporation existing under the laws of Canada

- and -

BRP FINANCE ULC (“ FinanceCo ”), an unlimited liability company existing under the laws of the Province of Alberta

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BRP ENERGY GROUP L.P. (the “ Canadian Manager”), a limited partnership existing under the laws of the Province of Manitoba

- and -

BROOKFIELD RENEWABLE ENERGY GROUP LLC (the “ US Manager ”), a limited liability company existing under the laws of the State of Delaware


- and -

BROOKFIELD RENEWABLE ENERGY GROUP (BERMUDA) LIMITED ( the “International Manager”), a corporation existing under the laws of Bermuda

RECITALS:

A. The Service Recipients (as defined below) indirectly hold interests in the Power Operations.

B. BREP, BRELP and the Holding Entities (as defined below) wish to engage the Managers to provide or arrange for other Service Providers (as defined below) to provide to the Service Recipients certain services, subject to the terms and conditions of this Agreement, and the Managers wish to accept such engagement.

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

In this Agreement, except where the context otherwise requires, the following terms will have the following meanings:

1.1.1 “ Act ” has the meaning assigned thereto in Section 12.2.1;

1.1.2 “ Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

1.1.3 “ Agreement ” means this Master Services Agreement, and “herein”, “hereof”, “hereby”, “hereunder” and similar expressions refer to this Agreement and include every instrument supplemental or ancillary to this Agreement and, except where the context otherwise requires, not to any particular article or section thereof;

1.1.4 “ Arbitration ” has the meaning assigned thereto in Section 12.2.1;

1.1.5 “ Arbitrator ” has the meaning assigned thereto in Section 12.2.3;

1.1.6 “ Base Management Fee ” means the base management fee, calculated quarterly in arrears, in an aggregate amount equal to the sum of (i) 25% per Quarter of the Fee Amount, plus (ii) 0.3125% of the Total Capitalization Value Increase for the preceding Quarter;

 

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1.1.7 “ Base Management Fee Adjustment ” has the meaning assigned thereto in Section 7.1.2;

1.1.8 “ BBCC ” has the meaning assigned thereto in the preamble;

1.1.9 “ Bermuda Holdco ” has the meaning assigned thereto in the preamble;

1.1.10 “ BRELP ” has the meaning assigned thereto in the preamble;

1.1.11 “ BRELP General Partner ” means 2288508 Ontario Inc., which is the general partner of the BRELP GP LP;

1.1.12 “ BRELP GP LP ” means BREP Holding L.P., which is the general partner of BRELP;

1.1.13 “ BRELP Units ” means the limited partnership units of BRELP;

1.1.14 “ BREP ” has the meaning assigned thereto in the preamble;

1.1.15 “ BREP Group ” means BREP, BRELP, the Holding Entities, the Operating Entities and any other direct or indirect Subsidiary of a Holding Entity;

1.1.16 “ BREP Indemnified Party ” has the meaning assigned thereto in Section 10.1.2;

1.1.17 “ Brookfield ” has the meaning assigned thereto in the preamble;

1.1.18 “ Brookfield Group ” means Brookfield and its Affiliates, other than any member of the BREP Group;

1.1.19 “ BRPPE ” has the meaning assigned thereto in the preamble;

1.1.20 “ Business ” means the business carried on from time to time by the BREP Group;

1.1.21 “ Business Day ” means every day except a Saturday or Sunday, or a day which is a statutory or civic holiday in Bermuda, the Province of Ontario, or the State of New York;

1.1.22 “ Canadian Manager ” has the meaning assigned thereto in the preamble;

1.1.23 “ CanHoldco ” has the meaning assigned thereto in the preamble;

1.1.24 “ CanHoldco Services ” has the meaning assigned thereto in Section 3.2.2;

1.1.25 “ CanUSHoldco ” has the meaning assigned thereto in the preamble;

1.1.26 “ Capital Commitment ” means, with respect to any Operating Entity, at any time, the amount that a Service Recipient has committed at such time to contribute (either as debt or equity) to such Operating Entity as set forth in the terms of the subscription agreement or other underlying documentation with respect to such Operating Entity at or prior to such time;

 

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1.1.27 “ Capital Contribution ” means, with respect to any Operating Entity, at any time, the amount of capital that a Service Recipient has contributed (either as debt or equity) to such Operating Entity at or prior to such time;

1.1.28 “ Capital Expenditure Plan ” means a plan setting out the plan, schedule and budget for Capital Maintenance and Improvements for the Power Operations;

1.1.29 “ Capital Maintenance and Improvement ” means any material change, enhancement, addition or modification to the Power Operations, which is intended to maintain or improve the performance of the Power Operations, including to increase the production of energy, capacity or ancillary services from the Power Operations;

1.1.30 “ Claims ” has the meaning assigned thereto in Section   10.1.1;

1.1.31 “ Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example the status of A being the general partner of B) or by virtue of beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares to which are attached more than 50% of the votes permitted to be cast in the election of directors to the Governing Body of B or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose, and the term “ Controlled ” has the corresponding meaning;

1.1.32 “ Creditable Operating Entity Payment ” means the proportion of each cash payment made by an Operating Entity to any member of the Brookfield Group, including any payment made in the form of a dividend, distribution or other profit entitlement, which the Managers determine to be comparable to the Base Management Fee that is attributable to the Partnership Capital invested in or committed to that Operating Entity, as applicable; provided that the aggregate amount of any Creditable Operating Entity Payments made by such Operating Entity in any Quarter shall not exceed an amount equal to 0.3125% of the amount of Partnership Capital invested in such Operating Entity;

1.1.33 “ delegatee ” has the meaning assigned thereto in Section 2.3;

1.1.34 “ Dispute ” has the meaning assigned thereto in Section 12.1;

1.1.35 “ Expenses ” has the meaning assigned thereto in Section 7.5.2;

1.1.36 “ Fair Market Value ” means, with respect to any Unit or Security, (i) if such Unit or Security is listed on a stock exchange or public quotation system, the Trading Price of such Unit or Security, as applicable, or (ii) if such Unit or Security is not listed on a stock exchange or public quotation system, the fair market value of such Unit or Security, as applicable, determined by the Governing Body of the Managing General Partner; provided that if the Units are listed on a stock exchange or public quotation system, the Fair Market Value of any BRELP Unit shall be deemed to be the Trading Price of a Unit;

1.1.37 “ Fee Amount ” means an amount equal to $20 million, which amount shall be adjusted for inflation annually beginning on January 1, 2013 at the Inflation Factor;

 

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1.1.38 “ FinanceCo ” has the meaning assigned thereto in the preamble;

1.1.39 “ Governing Body ” means (i) with respect to a corporation or limited company, the board of directors of such corporation or limited company, (ii) with respect to a limited liability company, the manager(s) or managing partner(s) of such limited liability company, (iii) with respect to a limited partnership, the board, committee or other body of the general partner of such partnership that serves a similar function (or if any such general partner is itself a limited partnership, the board, committee or other body of such general partner’s general partner that serves a similar function) and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

1.1.40 “ Governing Instruments ” means (i) the Memorandum of Association and Bye-laws in the case of the Managing General Partner and BRELP General Partner; (ii) the certificate of incorporation, amalgamation or continuance, as applicable, and bylaws in the case of a corporation, (iii) the memorandum and articles of association in the case of a limited company, (iv) the partnership agreement in the case of a partnership, (v) the articles of formation and operating agreement in the case of a limited liability company, (vi) the trust instrument in the case of a trust and (vii) any other similar governing document under which an entity was organized, formed or created and/or operates, including any conflict guidelines or protocols in place from time to time;

1.1.41 “ Governmental Authority ” means any (i) international, national, multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, agency or instrumentality, domestic or foreign, including ISO/RTOs, (ii) self-regulatory organization or stock exchange, (iii) subdivision, agent, commission, board, or authority of any of the foregoing, or (iv) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;

1.1.42 “ Governmental Charges ” has the meaning assigned thereto in Section 7.6;

1.1.43 “ Holding Entities ” means CanHoldco, Bermuda Holdco, BBCC, CanUSHoldco, BRPPE and FinanceCo and any direct wholly-owned Subsidiary of BRELP created or acquired on or after the date of this Agreement, excluding, for greater certainty, any Operating Entities;

1.1.44 “ Incentive Distribution ” means any performance-based dividend, distribution or other profit entitlement but, for greater certainty, does not include Service Agreement Fees or Creditable Operating Entity Payments;

1.1.45 “ Indemnified Party ” means a Person making a claim for indemnification pursuant to Article 10;

 

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1.1.46 “ Indemnifying Party ” means a Person against whom a claim for indemnification is asserted pursuant to Article 10;

1.1.47 “ Independent Committee ” means a committee of the Governing Body of the Managing General Partner made up of directors that are “independent” of Brookfield and its Affiliates, in accordance with the Managing General Partner’s Governing Instruments;

1.1.48 “ Inflation Factor ” means, at any time, the fraction obtained where the numerator is the Consumer Price Index for the United States of America (all items) for the then current year and the denominator is the Consumer Price Index for the United States of America (all items) for the year immediately preceding the then current year, with appropriate mathematical adjustment made to ensure that both the numerator and the denominator have been prepared on the same basis;

1.1.49 “ Interest Rate ” means, for any day, the rate of interest equal to the overnight U.S. dollar London interbank offered rate on such day;

1.1.50 “ International Manager ” has the meaning assigned thereto in the preamble;

1.1.51 “ ISO/RTO ” means an independent electricity system operator, a regional transmission organization, national system operator or any other similar organization overseeing the transmission of electricity in any jurisdiction in which the BREP Group owns assets or operates;

1.1.52 “ Laws ” means any and all applicable (i) laws, constitutions, treaties, statutes, codes, ordinances, principles of common and civil law and equity, rules, regulations and municipal by-laws whether domestic, foreign or international, (ii) judicial, arbitral, administrative, ministerial, departmental and regulatory judgments, orders, writs, injunctions, decisions, and awards of any Governmental Authority, and (iii) policies, practices and guidelines of any Governmental Authority which, although not actually having the force or law, are considered by such Governmental Authority as requiring compliance as if having the force of law, and the term “ applicable ”, with respect to such Laws and in the context that refers to one or more Persons, means such Laws that apply to such Person or Persons or its or their business, undertaking, property or securities at the relevant time and that emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;

1.1.53 “ Liabilities ” has the meaning assigned thereto in Section 10.1.1;

1.1.54 “ Licensing Agreement ” means the licensing agreement between Brookfield Global Asset Management Inc., BREP and BRELP dated as of the date hereof pursuant to which BREP and BRELP have been granted a non-exclusive, royalty-free license to use the “Brookfield” name and the Brookfield logo;

1.1.55 “ Manager Group ” means the Managers and any other Service Providers;

1.1.56 “ Manager Indemnified Parties ” has the meaning assigned thereto in Section 10.1.1;

 

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1.1.57 “ Managers ” means the Canadian Manager, the US Manager and the International Manager;

1.1.58 “ Managing General Partner ” means 2288509 Ontario Inc., which is BREP’s general partner;

1.1.59 “ Marketing Plan ” means a generation and marketing plan and related budget for the Power Operations;

1.1.60 “ Net Base Management Fee ” means the Base Management Fee, as adjusted pursuant to Section 7.1.2;

1.1.61 “ Opening Total Capitalization Value ” means the sum of (i) the volume-weighted average trading price of a Unit on the Toronto Stock Exchange for the twenty trading days following the date hereof (converted to U.S. dollars in accordance with the applicable exchange rate, as determined by the Managers acting reasonably) multiplied by the number of Units issued and outstanding on the last of those trading days (assuming full conversion of any limited partnership interests held by any member of the Brookfield Group in BRELP into Units), plus (ii) $1,460,763,250;

1.1.62 “ Operating Entities ” means, from time to time, the Persons that (i) directly hold the Power Operations, or (ii) indirectly hold the Power Operations but all of the interests of which are not held by the Service Recipients including, in the case of each of (i) and (ii), any joint ventures, partnerships and consortium arrangements;

1.1.63 “ Operational and Other Services ” means any services provided by any member of the Brookfield Group to the Operating Entities, including financial advisory, operations and maintenance, energy marketing, agency, development, operating management and other services;

1.1.64 “ Operating Plan ” means a plan setting out the operating costs and budget for the Power Operations and shall include incorporation of the Marketing Plan and scheduled maintenance outages;

1.1.65 “ Partnership Capital ” means any Capital Commitment and/or (as the context requires) any Capital Contribution;

1.1.66 “ Permit ” means any consent, license, approval, registration, permit or other authorization granted by any Governmental Authority;

1.1.67 “ Person ” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or Governmental Agency, authority or entity however designated or constituted and pronouns have a similarly extended meaning;

 

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1.1.68 “ Power Operations ” means the operations or developments directly or indirectly held or acquired by members of the BREP Group from time to time;

1.1.69 “ Principal Exchange ” means the principal stock exchange or public quotation system (determined on the basis of aggregate trading volume for the prior four months) on which the Units or such Security, as applicable, are listed;

1.1.70 “ Quarter ” means a calendar quarter ending on the last day of March, June, September or December;

1.1.71 “ Relationship Agreement ” means the agreement dated as of the date hereof entered into among BREP, BRELP, the Holding Entities, Brookfield and the Managers that governs aspects of the relationship among them;

1.1.72 “ Security ” means, with respect to each Service Recipient, any issued and outstanding security of such Service Recipient (other than, in the case of BREP, the Units) that is not held by any member of the BREP Group;

1.1.73 “ Service Agreement ” means any agreement or arrangement entered into pursuant to Section 2.3 between any Service Recipient and any Service Provider pursuant to which Services are provided;

1.1.74 “ Service Agreement Fee ” means any cash payment, including any such payment made in the form of a dividend, distribution or other profit entitlement, which the Managers determine to be comparable to the Base Management Fee, and which is payable by a Service Recipient to a member of the Brookfield Group;

1.1.75 “ Service Providers ” means the Managers and any member of the Brookfield Group that any Manager has arranged to provide the Services to any Service Recipient;

1.1.76 “ Service Recipient ” means BREP, BRELP, the Holding Entities and, at the option of the Holding Entities, the Operating Entities;

1.1.77 “ Services ” has the meaning assigned thereto in Section 3.1;

1.1.78 “ Subsidiary ” means, with respect to any Person, (i) any other Person that is directly or indirectly Controlled by such Person, (ii) any trust in which such Person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such Person holds all of the interests other than the interests of any general partner, managing member or similar Person;

1.1.79 “ Third Party Claim ” has the meaning assigned thereto in Section 10.1.3;

1.1.80 “ Total Capitalization Value ” means, in any Quarter, the sum of (i) the Fair Market Value of a Unit multiplied by the number of Units issued and outstanding on the last trading day of the Quarter (assuming full conversion of any limited partnership interests held by any member of the Brookfield Group in BRELP into Units), plus (ii) for

 

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each class or series of Security, the Fair Market Value of a Security of such class or series multiplied by the number of Securities of such class or series issued and outstanding on the last trading day of the Quarter (calculated on a fully-diluted basis), plus (iii) the principal amount of all debt not captured by paragraph (ii) of this Section 1.1.80 owed by each Service Recipient (excluding for this purpose any Operating Entity) on the last trading day of the Quarter to any Person that is not a member of the BREP Group, which debt has recourse to any Service Recipient, less any amount of cash held by all Service Recipients (excluding for this purpose any Operating Entity) on such day;

1.1.81 “ Total Capitalization Value Increase ” means, in any Quarter, an amount equal to the difference between (i) the Total Capitalization Value for such Quarter, and (ii) the Opening Total Capitalization Value; provided, however, that if the difference between (i) and (ii) in any Quarter is a negative number, the Total Capitalization Value Increase in such Quarter shall be deemed to be nil;

1.1.82 “ Trading Price ” means, in any Quarter, with respect to any Unit or Security (other than a BRELP Unit) that is listed on a stock exchange or public quotation system, the volume-weighted average trading price of such Unit or Security on the Principal Exchange for the five trading days ending on the last trading day of such Quarter; provided that where the Trading Price of any Unit or Security is calculated in any currency other than U.S. dollars, such amount shall be converted to U.S. dollars for purposes of this Agreement in accordance with the applicable exchange rate, as determined by the Managers acting reasonably;

1.1.83 “ Transaction Fees ” means fees paid or payable by the Service Recipients, which are on market terms, with respect to financial advisory services ordinarily carried out by investment banks in the context of mergers and acquisitions transactions;

1.1.84 “ Units ” means the limited partnership units of BREP; and

1.1.85 “ US Manager ” has the meaning assigned thereto in the preamble.

1.2 Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

1.3 Interpretation

In this Agreement, unless the context otherwise requires:

1.3.1 words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

1.3.2 the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

 

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1.3.3 references to any Person include such Person’s successors and permitted assigns;

1.3.4 any reference to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all amendments made to such statute, regulation, policy, rule or instrument and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

1.3.5 any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

1.3.6 in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

1.3.7 except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

1.4 Actions by the Manager or the Service Recipients

Unless the context requires otherwise, where the consent of or a determination is required by any Manager or Service Recipient hereunder, the parties shall be entitled to conclusively rely upon it having been given or taken, as applicable, if, such Manager or Service Recipient, as applicable, has communicated the same in writing.

1.5 Generally Accepted Accounting Principles

In this Agreement, references to “generally accepted accounting principles” mean the generally accepted accounting principles used by BREP in preparing its financial statements from time to time.

1.6 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

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1.7 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

1.8 Waiver, Amendment

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement will be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement will constitute a waiver of any other provision nor will any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. A party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of that right or the exercise of any other right.

1.9 Governing Law

This Agreement will be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

ARTICLE 2

APPOINTMENT OF THE MANAGERS

2.1 Appointment and Acceptance

2.1.1 Subject to and in accordance with the terms, conditions and limitations in this Agreement, the Service Recipients hereby appoint the Managers to provide or arrange for other Service Providers to provide the Services to the Service Recipients. This appointment will be subject to each Service Recipient’s Governing Body’s supervision of the Managers and obligation to manage and control the affairs of such Service Recipient.

2.1.2 The Managers hereby accept the appointment provided for in Section 2.1.1 and agree to act in such capacity and to provide or arrange for other Service Providers to provide the Services to the Service Recipients upon the terms, conditions and limitations in this Agreement.

 

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2.2 Other Holding Entities

The parties acknowledge that any Holding Entity that is not a party to this Agreement will execute a counterpart of this Agreement agreeing to be bound by the terms of this Agreement.

2.3 Subcontracting and Other Arrangements

The Managers may subcontract to any other Service Provider or any of its other Affiliates, or arrange for the provision of any or all of the Services to be provided by it under this Agreement by any other Service Provider or any other of its Affiliates, and the Service Recipients hereby consent to any such subcontracting or arrangement; provided that the Managers shall remain responsible to the Service Recipients for any Services provided by such other Service Provider or Affiliate.

ARTICLE 3

SERVICES AND POWERS OF THE MANAGERS

3.1 Services

The Managers will provide or arrange for the provision by other Service Providers of, and will have the exclusive power and authority to provide or arrange for the provision by other Service Providers of, the following services (the “Services ) to the Service Recipients:

3.1.1 causing or supervising the carrying out of all day to day management, secretarial, accounting, banking, treasury, administrative, liaison, representative, regulatory and reporting functions and obligations;

3.1.2 providing overall strategic advice to the Holding Entities in relation to the Business, including advising with respect to the expansion of the Business into new markets;

3.1.3 establishing and maintaining or supervising the establishment and maintenance of books and records;

3.1.4 identifying, evaluating and recommending to the Holding Entities acquisitions or dispositions from time to time and, where requested to do so, assisting in negotiating the terms of such acquisitions or dispositions;

3.1.5 recommending and, where requested to do so, assisting in the raising of funds whether by way of debt, equity or otherwise, including the preparation, review or distribution of any prospectus or offering memorandum in respect thereof and assisting with communications support in connection therewith;

3.1.6 causing or supervising the preparation and implementation of any Operating Plan, Capital Expenditure Plan or Marketing Plan;

3.1.7 recommending to the Holding Entities suitable candidates to serve on the Governing Bodies of the Operating Entities;

 

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3.1.8 making recommendations with respect to the exercise of any voting rights to which the Holding Entities are entitled in respect of the Operating Entities;

3.1.9 making recommendations with respect to the payment of dividends by the Holding Entities or any other distributions by the Service Recipients, including distributions by BREP to its unitholders;

3.1.10 monitoring and/or oversight of the applicable Service Recipient’s accountants, legal counsel and other accounting, financial or legal advisors and technical, commercial, marketing and other independent experts and managing litigation in which a Service Recipient is sued or commencing litigation after consulting with, and subject to the approval of, the relevant Governing Body;

3.1.11 attending to all matters necessary for any reorganization, bankruptcy proceedings, dissolution or winding up of a Service Recipient, subject to approval by the relevant Governing Body;

3.1.12 supervising the timely calculation and payment of taxes payable, and the filing of all tax returns due, by each Service Recipient;

3.1.13 causing or supervising the preparation of the Service Recipients’ annual consolidated financial statements, quarterly interim financial statements and other public disclosure;

3.1.14 making recommendations in relation to and effecting the entry into insurance of each Service Recipient’s assets, together with other insurances against other risks, including directors and officers insurance, as the relevant Service Provider and the relevant Governing Body may from time to time agree;

3.1.15 arranging for individuals to carry out the functions of the principal executive, accounting and financial officers for BREP only for purposes of applicable securities laws;

3.1.16 providing individuals to act as senior officers of Holding Entities as agreed from time to time, subject to the approval of the relevant Governing Body;

3.1.17 advising the Service Recipients regarding the maintenance of compliance with applicable Laws and other obligations; and

3.1.18 providing all such other services as may from time to time be agreed with the Service Recipients that are reasonably related to the Service Recipient’s day to day operations.

3.2 Services Provided to BREP and BRELP

3.2.1 Notwithstanding any provision herein to the contrary, the US Manager and the International Manager shall solely be responsible for the provision of Services to BREP and BRELP. The Canadian Manager shall not be responsible for, nor shall it provide, the provision of any Services to BREP and BRELP.

 

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3.2.2 For greater certainty and notwithstanding any other provision herein in the contrary, any Services provided to BRELP in connection with any securities, whether equity or debt, of CanHoldco that are held by BRELP (“ CanHoldco Services ”) shall be provided by the US Manager, the International Manager or an Affiliate of either the US Manager or the International Manager that is not resident in Canada with whom the US Manager or the International Manager, as the case may be, has made arrangements for the provision of the CanHoldco Services or to whom the US Manager or the International Manager, as the case may be, has subcontracted the provision of CanHoldco Services.

3.3 Supervision of Managers’ Activities

The Managers shall, at all times, be subject to the supervision of the relevant Service Recipient’s Governing Body and shall only provide or arrange for the provision of such Services as such Governing Body may request from time to time.

3.4 Restrictions on the Managers

3.4.1 The Managers shall, and shall cause any other Service Provider to, refrain from taking any action that is not in compliance with or would violate any Laws or that otherwise would not be permitted by the Governing Instruments of the Service Recipients. If any of the Managers or any Service Provider is instructed to take any action that is not in such compliance by a Service Recipient’s Governing Body, such person will promptly notify such Governing Body of its judgment that such action would not comply with or violate any such Laws or otherwise would not be permitted by such Governing Instrument.

3.4.2 In performing its duties under this Agreement, each member of the Manager Group shall be entitled to rely in good faith on qualified experts, professionals and other agents (including on accountants, appraisers, consultants, legal counsel and other, professional advisors) and shall be permitted to rely in good faith upon the direction of a Service Recipient’s Governing Body to evidence any approvals or authorizations that are required under this Agreement. All references in this Agreement to the Service Recipients or Governing Body for the purposes of instructions, approvals and requests to the Managers will refer to the Governing Body.

3.5 Errors and Omissions Insurance

Each of the Managers shall, and shall cause any other Service Provider to, at all times during the term of this Agreement maintain “errors and omissions” insurance coverage and other insurance coverage which is customarily carried by Persons performing functions that are similar to those performed by the Service Providers under this Agreement and in an amount which is comparable to that which is customarily maintained by such other Persons.

 

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ARTICLE 4

RELATIONSHIP BETWEEN THE MANAGERS AND THE SERVICE RECIPIENTS

4.1 Other Activities

Subject to the terms of the Relationship Agreement, no member of the Manager Group (and no Affiliate, director, officer, member, partner, shareholder or employee of any member of the Manager Group) shall be prohibited from engaging in other business activities or sponsoring, or providing services to, third parties that compete directly or indirectly with the Service Recipients.

4.2 Exclusivity

Except as expressly provided for herein, the Service Recipients shall not, during the term of this Agreement, engage any other Person to provide any services comparable to the Services without the prior written consent of the Managers, which may be withheld in the absolute discretion of the Managers.

4.3 Independent Contractor, No Partnership or Joint Venture

The parties acknowledge that the Managers are providing or arranging for the provision of the Services hereunder as independent contractors and that the Service Recipients and the Managers are not partners or joint venturers with or agents of each other, and nothing herein will be construed so as to make them partners, joint venturers or agents or impose any liability as such on any of them as a result of this Agreement; provided however that nothing herein will be construed so as to prohibit the Service Recipients and the Managers from embarking upon an investment together as partners, joint venturers or in any other manner whatsoever.

ARTICLE 5

MANAGEMENT AND EMPLOYEES

5.1 Management and Employees

5.1.1 The Managers shall arrange, or shall arrange for another member of the Manager Group to arrange, for such qualified personnel and support staff to be available to carry out the Services. Such personnel and support staff shall devote such of their time to the provision of the Services to the Service Recipients as the relevant member of the Manager Group reasonably deems necessary and appropriate in order to fulfill its obligations hereunder. Such personnel and support staff need not have as their primary responsibility the provision of the Services to the Service Recipients or be dedicated exclusively to the provision of the Services to the Service Recipients.

5.1.2 Each of the Service Recipients shall do all things reasonably necessary on its part as requested by any member of the Manager Group consistent with the terms of this Agreement to enable the members of the Manager Group to fulfill their obligations, covenants and responsibilities and to exercise their rights pursuant to this Agreement, including making available to the Manager Group, and granting the Manager Group access to, the employees and contractors of the Service Recipients as any member of the Manager Group may from time to time request.

 

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5.1.3 The Managers covenant and agree to exercise the power and discharge the duties conferred under this Agreement honestly and in good faith, and shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, subject to, and after taking into account, the terms and conditions of the Relationship Agreement.

ARTICLE 6

INFORMATION AND RECORDS

6.1 Books and Records

6.1.1 The Managers shall, or shall cause any other member of the Manager Group to, as applicable, maintain proper books, records and documents in which complete, true and correct entries, in conformity in all material respects with generally accepted accounting principles and all requirements of applicable Laws, will be made.

6.1.2 The Service Recipients shall maintain proper books, records and documents in which complete, true and correct entries, in conformity in all material respects with generally accepted accounting principles and all requirements of applicable Laws, will be made.

6.2 Examination of Records by the Service Recipients

Upon reasonable prior notice by the Service Recipients to the relevant member of the Manager Group, the relevant member of the Manager Group will make available to the Service Recipients and their authorized representatives, for examination during normal business hours on any Business Day, all books, records and documents required to be maintained under Section 6.1.1. In addition, the Manager Group will make available to the Service Recipients or their authorized representatives such financial and operating data in respect of the performance of the Services under this Agreement as may be in existence and as the Service Recipients or their authorized representatives will from time to time reasonably request, including for the purposes of conducting any audit in respect of expenses of the Service Recipients or other matters necessary or advisable to be audited in order to conduct an audit of the financial affairs of the Service Recipients. Any examination of records will be conducted in a manner which will not unduly interfere with the conduct of the Service Recipients’ activities or of the Manager Group’s business in the ordinary course.

6.3 Access to Information by Manager Group

 

  6.3.1 The Service Recipients shall:

6.3.1.1 grant, or cause to be granted, to the Manager Group full access to all documentation and information, including all of the books, records, and documents required to be maintained under Section 6.1.2, necessary in order for the Manager Group to perform its obligations, covenants and responsibilities pursuant to the terms hereof and to enable the Manager Group to provide the Services; and

 

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6.3.1.2 provide, or cause to be provided, all documentation and information as may be reasonably requested by any member of the Manager Group, and promptly notify the appropriate member of the Manager Group of any material facts or information of which the Service Recipients is aware, including any known, pending or threatened suits, actions, claims, proceedings or orders by or against any member of the BREP Group before any Governmental Authority, that may affect the performance of the obligations, covenants or responsibilities of the Manager Group pursuant to this Agreement, including maintenance of proper financial records.

6.4 Additional Information

The parties acknowledge and agree that conducting the activities and providing the Services contemplated herein may have the incidental effect of providing additional information which may be utilized with respect to, or may augment the value of, business interests and related assets in which any of the Service Providers or any of its Affiliates has an interest and that, subject to compliance with this Agreement, none of the Service Providers or any of their respective Affiliates will be liable to account to the Service Recipients with respect to such activities or results; provided, however, that the relevant Service Provider will not (and will cause its Affiliates not to), in making any use of such additional information, do so in any manner that the relevant Service Provider or its Affiliates knows, or ought reasonably to know, would cause or result in a breach of any confidentiality provision of agreements to which any Service Recipient is a party or is bound.

ARTICLE 7

FEES AND EXPENSES

7.1 Net Base Management Fee and Base Management Fee Adjustment

7.1.1 The Service Recipients hereby agree to pay as provided by this Article 7, during the term of this Agreement, the Net Base Management Fee, quarterly in arrears. The Net Base Management Fee will accrue commencing on the date hereof and will be pro-rated based on the number of days during the first Quarter in which this Agreement is in effect.

7.1.2 The amount of the Net Base Management Fee payable hereunder for any Quarter will be equal to the amount of the Base Management Fee reduced (the “ Base Management Fee Adjustment ”) by the following amounts, to the extent that such amounts have not previously reduced the amount of the Base Management Fee as a result of the application of the Base Management Fee Adjustment in a previous Quarter:

7.1.2.1 any Service Agreement Fees paid in or payable for that Quarter; and

7.1.2.2 any Creditable Operating Entity Payments paid in or payable for that Quarter.

7.1.3 For greater certainty, the Base Management Fee will not be reduced by operation of this Agreement by the amount of any (i) Incentive Distribution paid or payable by any Service Recipient or Operating Entity to any member of the Brookfield Group; (ii) any fees for Operational and Other Services that are paid or payable by any Operating Entity to any member of the Brookfield Group; or (iii) any Transaction Fees.

 

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7.2 Maximum Fees Payable by Service Recipients

In no event shall the Service Recipients be obligated under this Agreement and the Service Agreements to pay, in the aggregate in respect of any Quarter, any amount exceeding the Base Management Fee payable for that Quarter, after giving effect to any reductions for Creditable Operating Entity Payments contemplated by Section 7.1.2.

7.3 Currency

For the purposes of Section 7.1.2 hereof, if a payment giving rise to a Base Management Fee Adjustment was denominated in a currency other than the U.S. dollar, the amount of such payment will be deemed to be equal to the amount in U.S. dollars into which such payment could have been converted on the last day of the relevant Quarter using the exchange rate between such other currency and the U.S. dollars published in the “Exchange Rates” table of the Wall Street Journal on such date or, in the event that the “Exchange Rates” table of the Wall Street Journal was not published on such date, the closest date immediately preceding the date of such payment on which the “Exchange Rates” table of the Wall Street Journal was published.

7.4 Computation and Payment of Net Base Management Fee

7.4.1 The Managers or another Service Provider will compute each instalment and allocation of the Net Base Management Fee (including computation of the Base Management Fee Adjustment) as soon as practicable following the end of the Quarter with respect to which such instalment is payable, but in any event no later than five Business days following the end of such Quarter. A copy of the computations and allocations made will thereafter, for informational purposes only, promptly be delivered to each Service Recipient by the relevant Service Provider upon request. Payment of the Net Base Management Fee for any Quarter (whether in cash, Units, BRELP Units or any combination of the forgoing) shall be due and payable promptly after the 45th day following the end of such Quarter. For greater certainty, any Dispute relating to the computation of the Net Base Management Fee shall be resolved in accordance with Article 12.

7.4.2 For any Quarter in which the Governing Body of the Managing General Partner determines that the BREP Group has insufficient cash (taking into account any availability under any hydrology reserve facility) to pay the Net Base Management Fee as well as the next regular distribution on Units, the Service Recipients may elect to pay all or a portion of the Net Base Management Fee payable in such Quarter in Units or BRELP Units, provided that (i) any such election shall be made within 45 days following the end of the applicable Quarter, and (ii) no such payment shall be made in BRELP Units without the written consent of the Managers. If the Service Recipients elect to pay all or a portion of the Net Base Management Fee in Units or BRELP Units, BREP or BRELP, as applicable, shall issue, and the applicable Manager hereby agrees to acquire, Units or BRELP Units, as

 

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applicable, equal to the portion of the Net Base Management Fee elected to be paid in Units or BRELP Units divided by the Fair Market Value of a Unit on the date the Service Recipients make such election (provided that no fractional Units or BRELP Units shall be issued, and such number shall be rounded down to the nearest whole number with the remainder payable to the Managers in cash). In such case, BREP or BRELP, as applicable, is directed to apply such payment against the subscription price for such Units or BRELP Units, as applicable.

7.4.3 If the Service Recipients elect to pay all or any portion of the Net Base Management Fee for any Quarter in Units or BRELP Units, the Service Recipients shall take or cause to be taken all appropriate action to issue such Units or BRELP Units, as applicable, including any action required to ensure that such Units or BRELP Units, as applicable, are issued in accordance with applicable Laws and listed on any applicable stock exchanges and public quotation systems.

7.5 Expenses

7.5.1 The Managers acknowledge and agree that the Service Recipients will not be required to reimburse any member of the Manager Group for the salaries and other remuneration of the management, personnel or support staff who provide the Services to such Service Recipients or overhead for such persons.

7.5.2 Each of the Service Recipients shall reimburse the relevant member of the Manager Group for all out-of-pocket fees, costs and expenses, including those of any third party (other than those contemplated by Section 7.5.1) (“ Expenses ”), incurred by the relevant member of the Manager Group in connection with the provision of the Services. Such Expenses are expected to include, among other things:

7.5.2.1 fees, costs and expenses relating to any debt or equity financing;

7.5.2.2 fees, costs and expenses incurred in connection with the general administration of any Service Recipient;

7.5.2.3 taxes, licenses and other statutory fees or penalties levied against or in respect of a Service Recipient in respect of Services;

7.5.2.4 amounts paid by the relevant member of the Manager Group under indemnification, contribution or similar arrangements;

7.5.2.5 fees, costs and expenses relating to financial reporting, regulatory filings and investor relations and the fees, costs and expenses of agents, advisors and other Persons who provide Services to a Service Recipient;

7.5.2.6 any other fees, costs and expenses incurred by the relevant member of the Manager Group that are reasonably necessary for the performance by the relevant member of the Manager Group of its duties and functions under this Agreement or any Service Agreement; and

 

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7.5.2.7 fees, expenses and costs incurred in connection with the investigation, acquisition, holding or disposal of any asset or business that is made or that is proposed to be made.

7.6 Governmental Charges

Without limiting Section 7.5, the Service Recipients shall pay or reimburse the relevant member of the Manager Group for all sales taxes, use taxes, value added taxes, goods and services taxes, harmonized sales taxes, withholding taxes or other similar taxes, customs duties or other governmental charges (“ Governmental Charges ”) that are levied or imposed by any Governmental Authority by reason of this Agreement, any Service Agreement or any other agreement contemplated by this Agreement, or the fees or other amounts payable hereunder or thereunder, except for any income taxes, corporation taxes, capital taxes or other similar taxes payable by any member of the Manager Group which are personal to such member of the Manager Group. Any failure by the Manager Group to collect monies on account of these Governmental Charges shall not constitute a waiver of the right to do so.

7.7 Computation and Payment of Expenses and Governmental Charges

From time to time the Managers shall, or shall cause the other Service Providers to, prepare statements (each an “ Expense Statement ”) documenting the Expenses and Governmental Charges to be reimbursed pursuant to this Article 7 and shall deliver such statements to the relevant Service Recipient. All Expenses and Governmental Charges reimbursable pursuant to this Article 7 shall be reimbursed by the relevant Service Recipient no later than the date which is 30 days after receipt of an Expense Statement. The provisions of this Section 7.7 shall survive the termination of this Agreement.

ARTICLE 8

BROOKFIELD’S OBLIGATION

Brookfield’s sole obligation pursuant to this Agreement shall be to cause the Service Providers to provide Services to the Service Recipients in accordance with the terms of this Agreement.

ARTICLE 9

REPRESENTATIONS AND WARRANTIES

OF THE MANAGERS AND THE SERVICE RECIPIENTS

9.1 Representations and Warranties of the Managers

Each of the Managers hereby represents and warrants to the Service Recipients that:

9.1.1 it is validly organized and existing under the Laws governing its formation and existence;

9.1.2 it, or another Service Provider, holds such Permits necessary to perform its obligations hereunder and is not aware of any reason why such Permits might be cancelled;

 

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9.1.3 it has the power, capacity and authority to enter into this Agreement and to perform its obligations hereunder;

9.1.4 it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

9.1.5 the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its Governing Instruments, or under any mortgage, lease, agreement or other legally binding instrument, Permit or applicable Law to which it is a party or by which it or any of its properties or assets may be bound;

9.1.6 no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it of this Agreement; and

9.1.7 this Agreement constitutes a valid and legally binding obligation of it enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

9.2 Representations and Warranties of the Service Recipients

Each of the Service Recipients hereby represents and warrants to the Managers that:

9.2.1 it (and, if applicable, its general partner) is validly organized and existing under the Laws governing its formation and existence;

9.2.2 it, or the relevant Operating Entity, holds such Permits necessary to own and operate the Power Operations that it directly or indirectly owns or operates from time to time and is not aware of any reason why such Permits might be cancelled;

9.2.3 it (or, as applicable, its general partner on its behalf) has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder;

9.2.4 it (or, as applicable, its general partner) has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

9.2.5 the execution and delivery of this Agreement by it (or, as applicable, its general partner on its behalf) and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its Governing Instruments (or, if applicable, the Governing Instruments of its general partner), or under any mortgage, lease, agreement or other legally binding instrument, Permit or applicable Law to which it is a party or by which any of its properties or assets may be bound;

 

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9.2.6 no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it (or, as applicable, its general partner on its behalf) of this Agreement; and

9.2.7 this Agreement constitutes a valid and legally binding obligation of it enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

ARTICLE 10

LIABILITY AND INDEMNIFICATION

10.1 Indemnity

10.1.1 The Service Recipients hereby jointly and severally agree, to the fullest extent permitted by applicable Laws, to indemnify and hold harmless each member of the Manager Group, any of its Affiliates (other than any member of the BREP Group) and any directors, officers, agents, subcontractors, delegatees, members, partners, shareholders, employees and other representatives of each of the foregoing (each, an “ Manager Indemnified Party ”) from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) (“ Liabilities ”) incurred by them or threatened in connection with any and all actions, suits, investigations, proceedings or claims of any kind whatsoever, whether arising under statute or action of a Governmental Authority or otherwise or in connection with the business, investments and activities of the Service Recipients or in respect of or arising from this Agreement or the Services provided hereunder (“ Claims ”), including any Claims arising on account of the Governmental Charges contemplated by Section 7.6; provided that no Manager Indemnified Party shall be so indemnified with respect to any Claim to the extent that such Claim is finally determined by a final and non-appealable judgment entered by a court of competent jurisdiction, or pursuant to a settlement agreement agreed to by such Manager Indemnified Party, to have resulted from such Manager Indemnified Party’s bad faith, fraud, wilful misconduct, gross negligence or, in the case of a criminal matter, conduct undertaken with knowledge that the conduct was unlawful.

10.1.2 The Managers hereby jointly and severally agree, to the fullest extent permitted by applicable Laws, to indemnify and hold harmless each of the Service Recipients, any of its Affiliates (other than any member of the Manager Group), and any directors, officers, agents, members, partners, shareholders, employees and other representatives of each of the foregoing (each, a “ BREP Indemnified Party ”) from and against any Liabilities resulting from any Service Provider’s bad faith, fraud, wilful misconduct, gross negligence and, in the case of a criminal matter, conduct undertaken with the knowledge that the conduct was unlawful.

 

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10.1.3 If any action, suit, investigation, proceeding or claim is made or brought by any third party with respect to which an Indemnifying Party is obligated to provide indemnification under this Agreement (a “ Third Party Claim ”), the Indemnified Party will have the right to employ its own counsel in connection therewith, and the reasonable fees and expenses of such counsel, as well as the reasonable costs (excluding an amount reimbursed to such Indemnified Party for the time spent in connection therewith) and out-of-pocket expenses incurred in connection therewith will be paid by the Indemnifying Party in such case, as incurred but subject to recoupment by the Indemnifying Party if ultimately it is not liable to pay indemnification hereunder.

10.1.4 The Indemnified Party and the Indemnifying Party agree that, promptly after the receipt of notice of the commencement of any Third Party Claim, the Indemnified Party in such case will notify the Indemnifying Party in writing of the commencement of such Third Party Claim (provided that any accidental failure to provide any such notice will not prejudice the right of any such Indemnified Party hereunder) and, throughout the course of such Third Party Claim, such Indemnified Party will use its best efforts to provide copies of all relevant documentation to such Indemnifying Party and will keep the Indemnifying Party apprised of the progress thereof and will discuss with the Indemnifying Party all significant actions proposed.

10.1.5 The parties hereto expressly acknowledge and agree that the right to indemnity provided in this Section 10.1 shall be in addition to and not in derogation of any other liability which the Indemnifying Party in any particular case may have or of any other right to indemnity or contribution which any Indemnified Party may have by statute or otherwise at law.

10.1.6 The indemnity provided in this Section 10.1 shall survive the completion of Services rendered under, or any termination or purported termination of, this Agreement.

10.2 Limitation of Liability

10.2.1 The Managers assume no responsibility under this Agreement other than to render the Services in good faith and will not be responsible for any action of a Service Recipient’s Governing Body in following or declining to follow any advice or recommendations of the relevant Service Provider, including as set forth in Section 3.3 hereof.

10.2.2 The Service Recipients hereby agree that no Manager Indemnified Party will be liable to a Service Recipient, a Service Recipient’s Governing Body (including, for greater certainty, a director or officer of a Service Recipient or another individual with similar function or capacity) or any security holder or partner of a Service Recipient for any Liabilities that may occur as a result of any acts or omissions by the Manager Indemnified Party pursuant to or in accordance with this Agreement, except to the extent that such Liabilities are finally determined by a final and non appealable judgment entered by a court of competent jurisdiction to have resulted from the Manager Indemnified Party’s bad faith, fraud, wilful misconduct, gross negligence, or in the case of a criminal matter, conduct undertaken with knowledge that the conduct was unlawful.

 

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10.2.3 The maximum amount of the aggregate liability of the Manager Indemnified Parties pursuant to this Agreement will be equal to the amounts previously paid in respect of Services pursuant to this Agreement or any agreement or arrangement contemplated by this Agreement in the two most recent calendar years by the Service Recipients pursuant to Article 7.

10.2.4 For the avoidance of doubt, the provisions of this Section 10.2 shall survive the completion of the Services rendered under, or any termination or purported termination of, this Agreement.

10.3 Benefit to all Indemnified Parties

10.3.1 The Service Recipients hereby constitute the Managers as trustees for each of the Manager Indemnified Parties of the covenants of the Service Recipients under this Article 10 with respect to such Manager Indemnified Parties and the Managers hereby accept such trust and agree to hold and enforce such covenants on behalf of the Indemnified Parties.

10.3.2 The Managers hereby constitute the Service Recipients as trustees for each of the BREP Indemnified Parties of the covenants of the Managers under this Article 10 with respect to such BREP Indemnified Parties and the Service Recipients hereby accept such trust and agree to hold and enforce such covenants on behalf of the BREP Indemnified Parties.

ARTICLE 11

TERM AND TERMINATION

11.1 Term

This Agreement shall continue in full force and effect, in perpetuity, until terminated in accordance with Section 11.2 or Section 11.3.

11.2 Termination by the Service Recipients

11.2.1 The Service Recipients may, subject to Section 11.2.2, terminate this Agreement effective upon written notice of termination to the Managers without payment of any termination fee if:

11.2.1.1 any of the Managers defaults in the performance or observance of any material term, condition or agreement contained in this Agreement in a manner that results in material harm to the Service Recipients and such default continues for a period of 60 days after written notice thereof specifying such default and requesting that the same be remedied in such 60-day period; provided, however, that if the fact, circumstance or condition that is the subject of such obligation cannot reasonably be remedied within such 60-day period and if, within such period, the Managers provide reasonable evidence to the Service Recipients that they have commenced, and thereafter proceed with all due diligence, to remedy the fact, circumstance or condition that is the subject of such obligation, such period shall be extended for a reasonable period satisfactory to the Service Recipients, acting reasonably, for the Managers to remedy the same;

 

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11.2.1.2 any of the Managers engages in any act of fraud, misappropriation of funds or embezzlement against any Service Recipient that results in material harm to the Service Recipients;

11.2.1.3 there is an event of any gross negligence on the part of any of the Managers in the performance of its obligations under this Agreement and such gross negligence results in material harm to the Service Recipients; or

11.2.1.4 each of the Managers makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency.

11.2.2 This Agreement may only be terminated pursuant to Section 11.2.1 by the Managing General Partner on behalf of BREP with the prior unanimous approval of the members of the Independent Committee.

11.2.3 Each of the Service Recipients hereby agrees and confirms that this Agreement may not be terminated due solely to the poor performance or underperformance of any of the Power Operations or the Business or any investment made by any member of the BREP Group on the recommendation of any member of the Manager Group.

11.3 Termination by the Managers

11.3.1 The Managers may terminate this Agreement effective upon written notice of termination to the Service Recipients without payment of any termination fee if:

11.3.1.1 any Service Recipient defaults in the performance or observance of any material term, condition or agreement contained in this Agreement in a manner that results in material harm to the Managers and such default continues for a period of 60 days after written notice thereof specifying such default and requesting that the same be remedied in such 60-day period; provided, however, that if the fact, circumstance or condition that is the subject of such obligation cannot reasonably be remedied within such 60-day period and if, within such period, the Service Recipients provide reasonable evidence to the Managers that they have commenced, and thereafter proceed with all due diligence, to remedy the fact, circumstance or condition that is the subject of such obligation, such period shall be extended for a reasonable period satisfactory to the Managers, acting reasonably, for the Service Recipients to remedy the same; or

 

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11.3.1.2 any Service Recipient makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency.

11.4 Survival Upon Termination

If this Agreement is terminated pursuant to this Article 11, such termination will be without any further liability or obligation of any party hereto, except as provided in Section 6.4, Section 11.5, Section 11.6 and Section 13.3.

11.5 Action Upon Termination

11.5.1 From and after the effective date of the termination of this Agreement, the Managers shall not be entitled to receive the Base Management Fee for further Services under this Agreement, but will be paid all compensation accruing to and including the date of termination (including such day).

11.5.2 Upon any termination of this Agreement, the Managers shall forthwith:

11.5.2.1 after deducting any accrued compensation and reimbursements for any Expenses to which it is then entitled, pay over to the Service Recipients all money collected and held for the account of the Service Recipients pursuant to this Agreement;

11.5.2.2 deliver to the Service Recipients’ Governing Bodies a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Governing Bodies with respect to the Service Recipients; and

11.5.2.3 deliver to the Service Recipients’ Governing Bodies all property and documents of the Service Recipients then in the custody of the Manager Group.

11.6 Release of Money or other Property Upon Written Request

The Managers hereby agree that any money or other property of the Service Recipients or their Subsidiaries held by the Manager Group under this Agreement shall be held by the relevant member of the Manager Group as custodian for such Person, and the relevant member of the Manager Group’s records shall be appropriately marked clearly to reflect the ownership of such money or other property by such Person. Upon the receipt by the relevant member of the Manager Group of a written request signed by a duly authorized representative of a Service Recipient requesting the relevant member of the Manager Group to release to the Service Recipient any money or other property then held by the relevant member of the Manager Group for the account of such Service Recipient under this Agreement, the relevant member of the Manager Group shall release such money or

 

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other property to the Service Recipient within a reasonable period of time, but in no event later than 60 days following such request. The relevant member of the Manager Group shall not be liable to any Service Recipient, a Service Recipient’s Governing Body or any other Person for any acts performed or omissions to act by a Service Recipient in connection with the money or other property released to the Service Recipient in accordance with the second sentence of this Section 11.6. Each Service Recipient shall indemnify and hold harmless the relevant member of the Manager Group, any of its Affiliates (other than any member of the BREP Group) and any directors, officers, agents, subcontractors, delegatees, members, partners, shareholders and employees and other representatives of each of the foregoing from and against any and all Liabilities which arise in connection with the relevant member of the Manager Group’s release of such money or other property to the Service Recipient in accordance with the terms of this Section 11.6. Indemnification pursuant to this provision shall be in addition to any right of such Persons to indemnification under Section 10.1 hereof. For the avoidance of doubt, the provisions of this Section 11.6 shall survive termination of this Agreement. The Service Recipients hereby constitute the Managers as trustees for each Person entitled to indemnification pursuant to this Section 11.6 of the covenants of the Service Recipients under this Section 11.6 with respect to such Persons and the Managers hereby accept such trust and agree to hold and enforce such covenants on behalf of such Persons.

ARTICLE 12

ARBITRATION

12.1 Dispute

Any dispute or disagreement of any kind or nature between the parties arising out of or in connection with this Agreement (a “ Dispute ”) shall be resolved in accordance with this Article 12, to the extent permitted by applicable Laws.

12.2 Arbitration

12.2.1 Any Dispute shall be submitted to arbitration (the “ Arbitration ”) by one Arbitrator pursuant to the procedure set forth in this Section 12.2 and pursuant to the arbitration rules set forth in the Arbitration Act, 1991 (Ontario) (the “ Act ”). If the provisions of this Section 12.2 are inconsistent with the provisions of the Act and to the extent of such inconsistency, the provisions of this Section 12.2 shall prevail in any Arbitration.

12.2.2 Any party may make a demand for Arbitration by sending a notice in writing to another party, setting forth the nature of the Dispute, the amount involved and the name of the Arbitrator it proposes to be appointed. The demand for Arbitration shall be made no later than thirty (30) days after the event giving rise to the Dispute.

12.2.3 Within thirty (30) days after any demand for Arbitration under Section 12.2.2, the parties shall have agreed on the designation of the Arbitrator or should the parties fail to do so, the Arbitrator may be appointed by a judge of the Ontario Superior Court of Justice upon motion of either party (in either case, the “ Arbitrator ”).

 

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12.2.4 The Arbitration hearings shall be held in a location in Ontario specified in the demand for Arbitration and shall commence no later than thirty (30) days after the determination of the Arbitrator under Section 12.2.3. The decision of the Arbitrator shall be made not later than sixty (60) days after its appointment. The decision of the Arbitrator, shall be final without appeal and binding on the parties.

12.2.5 Each party shall bear the costs and expenses of all lawyers, consultants, advisors, witnesses and employees retained by it in any Arbitration. The expenses of the Arbitrator shall be paid equally by the parties unless the Arbitrator otherwise provides in its award.

12.3 Continued Performance

During the conduct of Dispute resolution procedures pursuant to this Article 12, the parties shall continue to perform their respective obligations under this Agreement and neither party shall exercise any other remedies to resolve a Dispute.

ARTICLE 13

GENERAL PROVISIONS

13.1 Limited Liability of Limited Partners of BREP and BRELP

13.1.1 Each of the parties acknowledges that (i) each of BREP and BRELP is a limited partnership formed under the laws of Bermuda, a limited partner of which is liable for any liabilities or losses of the relevant partnership only to the extent of the amount that such limited partner has contributed, or agreed to contribute, to the capital of the relevant partnership and such limited partner’s pro rata share of any undistributed income; (ii) BRELP General Partner is the sole general partner of BRELP GP LP; BRELP GP LP is the sole general partner of BRELP; and the Managing General Partner is the sole general partner of BREP; and (iii) the only Person with whom such party has had dealings on behalf of BRELP is BRELP GP LP; the only Person with whom such party has had dealings on behalf of the BRELP GP LP is BRELP General Partner; and the only Person with whom such party has had dealings on behalf of BREP is the Managing General Partner.

13.2 Assignment

13.2.1 This Agreement shall not be assigned by the Managers without the prior written consent of BREP, except (i) pursuant to Section 2.3, or (ii) in the case of assignment by any of the Managers to an Affiliate or a Person that is, in the reasonable and good faith determination of the Independent Committee, an experienced and reputable manager, in which case the Affiliate or assignee shall be bound under this Agreement and by the terms of the assignment in the same manner as such Manager is bound under this Agreement. In addition, provided that the Managers provide prior written notice to the Service Recipients for informational purposes only, nothing contained in this Agreement shall preclude any pledge, hypothecation or other transfer or assignment of any of the Managers’ rights under this Agreement, including any amounts payable to the Managers under this Agreement, to a bona fide lender as security.

 

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13.2.2 This Agreement shall not be assigned by any of the Service Recipients without the prior written consent of the Managers, except in the case of assignment by any such Service Recipient to a Person that is its successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as such Service Recipient is bound under this Agreement.

13.2.3 Any purported assignment of this Agreement in violation of this Article 13 shall be null and void.

13.3 Failure to Pay When Due

Any amount payable by any Service Recipient to any member of the Manager Group hereunder which is not remitted when so due will remain due (whether on demand or otherwise) and interest will accrue on such overdue amounts (both before and after judgment) at a rate per annum equal to the Interest Rate.

13.4 Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

13.5 Notices

Any notice or other communication required or permitted to be given hereunder will be in writing and will be given by prepaid first class mail, by facsimile or other means of electronic communication or by hand delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, will be deemed to have been received on the fourth Business Day after the post marked date thereof, or if sent by facsimile or other means of electronic communication, will be deemed to have been received on the Business Day following the sending, or if delivered by hand will be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address will also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock out or otherwise, notices or other communications will be delivered by hand or sent by facsimile or other means of electronic communication and will be deemed to have been received in accordance with this section. Notices and other communications will be addressed as follows:

 

  13.5.1 if to BREP:

2288509 Ontario Inc.

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda

Attention: Secretary

Telecopier number: 441-298-3304

 

- 29 -


  13.5.2 if to BRELP:

2288508 Ontario Inc.

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda

Attention: Secretary

Telecopier number: 441-298-3304

 

  13.5.3 if to Brookfield:

Brookfield Asset Management Inc.

Suite 300, Brookfield Place

181 Bay Street, Box 762

Toronto, Ontario

M5J 2T3

Attention: General Counsel

Telecopier number: 416-365-9642

 

  13.5.4 if to CanHoldco:

Brookfield BRP Holdings (Canada) Inc.

1700-180 Kent Street

Ottawa, Ontario

K1P 0B6

Attention: Secretary

Telecopier number: 819-561-7188

 

  13.5.5 if to Bermuda Holdco:

BRP Bermuda Holdings I Limited

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda Attention: Secretary

Telecopier number: 441-298-3304

 

- 30 -


  13.5.6 if to BBCC:

Brookfield BRP Canada Corp.

1700-180 Kent Street

Ottawa, Ontario

K1P 0B6

Attention: Secretary

Telecopier number: 819-561-7188

 

  13.5.7 if to CanUSHoldco:

Brookfield BRP Holdings (US) Inc.

1700-180 Kent Street

Ottawa, Ontario

K1P 0B6

Attention: Secretary

Telecopier number: 819-561-7188

 

  13.5.8 if to the Canadian Manager:

BRP Energy Group L.P.

Suite 300, Brookfield Place

181 Bay Street, Box 762

Toronto, Ontario

M5J 2T3

Attention: Chief Executive Officer

Telecopier number: 416-363-2856

 

  13.5.9 if to the International Manager:

Brookfield Renewable Energy Group (Bermuda) Limited

Cedar Court, 2nd Floor

Wildey Business Park

St. Michael, Barbados

Attention: Secretary

Telecopier number: 246-436-6967

 

- 31 -


  13.5.10 if to the US Manager:

Brookfield Renewable Energy Group LLC

Three World Financial Center

200 Vesey Street, 11 th Floor

New York, New York

10281-1021

Attention: President

Telecopier number: 212-417-7196

or to such other addresses or facsimile numbers as a party may from time to time notify the other in accordance with this Section 13.5.

13.6 Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

13.7 Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

[NEXT PAGE IS SIGNATURE PAGE]

 

- 32 -


IN WITNESS WHEREOF the parties have executed this Agreement as of the date first above written.

 

BROOKFIELD ASSET

MANAGEMENT INC.

by:   “Aleks Novakovic”
 

Name: Aleks Novakovic

Title: Managing Partner

 

BROOKFIELD RENEWABLE

ENERGY PARTNERS L.P., by its

general partner, 2288509 ONTARIO INC.

by:   “Jane Sheere”
 

Name: Jane Sheere

Title: Authorized Signatory

 

BROOKFIELD RENEWABLE

ENERGY L.P., by its general partner,

BREP HOLDINGS L.P., by its general

partner, 2288508 ONTARIO INC.

by:   “Jane Sheere”
 

Name: Jane Sheere

Title: Authorized Signatory


BROOKFIELD BRP HOLDINGS (CANADA) INC.
by:   “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory
BRP BERMUDA HOLDINGS I LIMITED
by:   “Jane Sheere”
 

Name: Jane Sheere

Title: Secretary

BROOKFIELD BRP CANADA CORP.
by:   “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory
BROOKFIELD BRP HOLDINGS (US) INC.
by:   “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory


BROOKFIELD RENEWABLE

POWER PREFERRED EQUITY INC.

by:   “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory

 

BRP FINANCE ULC
by:   “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory

 

BRP ENERGY GROUP L.P., by its

general partner, BROOKFIELD

RENEWABLE ENERGY GROUP G.P. INC.

by:   “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory

 

BROOKFIELD RENEWABLE

ENERGY GROUP LLC

by:   “David A. Bono”
 

Name: David A. Bono

Title: Vice President of Law and

          General Counsel, U.S. Operations


BROOKFIELD RENEWABLE

ENERGY GROUP (BERMUDA) LIMITED

by:   “Jane Sheere”
 

Name: Jane Sheere

Title: Secretary

Exhibit 4.3

BROOKFIELD ASSET MANAGEMENT INC.

- and -

BRP ENERGY GROUP L.P.

- and -

BROOKFIELD RENEWABLE ENERGY GROUP LLC

- and -

BROOKFIELD RENEWABLE ENERGY GROUP (BERMUDA) LIMITED

- and -

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

- and -

BROOKFIELD RENEWABLE ENERGY L.P.

- and -

BROOKFIELD BRP HOLDINGS (CANADA) INC.

- and –

BRP BERMUDA HOLDINGS I LIMITED

 

 

RELATIONSHIP AGREEMENT

 

 

November 28, 2011


TABLE OF CONTENTS

Page

 

ARTICLE 1

  

        INTERPRETATION

     2   

        1.1

  Definitions      2   

        1.2

  Headings and Table of Contents      4   

        1.3

  Interpretation      4   

        1.4

  Invalidity of Provisions      5   

        1.5

  Entire Agreement      5   

        1.6

  Waiver, Amendment      6   

        1.7

  Governing Law      6   

ARTICLE 2

  

        RELATIONSHIP

     6   

        2.1

  Primary Vehicle      6   

        2.2

  No Exclusivity and Limitations on Acquisition Opportunities      6   

        2.3

  BREP Group Acknowledgements      8   

        2.4

  Reporting      8   

ARTICLE 3

  

        REPRESENTATIONS AND WARRANTIES

     8   

        3.1

  Representations and Warranties of Brookfield and the Managers      8   

        3.2

  Representations and Warranties of the Holding Entities      9   

        3.3

  Representations and Warranties of BREP      10   

        3.4

  Representations and Warranties of BRELP      10   

ARTICLE 4

  

        TERMINATION

     11   

        4.1

  Term      11   

        4.2

  Termination      11   

ARTICLE 5

  

        RESOLUTION OF DISPUTES AND ARBITRATION

     11   

        5.1

  Dispute      11   

        5.2

  Arbitration      12   

        5.3

  Confidentiality      12   

        5.4

  Continued Performance      12   

 

[BREP RELATIONSHIP AGR]

 


TABLE OF CONTENTS

(continued)

Page

 

ARTICLE 6

    
        GENERAL PROVISIONS      13   
        6.1  

Assignment

     13   
        6.2  

Confidentiality and Disclosure of Material Changes

     13   
        6.3  

Enurement

     13   
        6.4  

Notices

     13   
        6.5  

Further Assurances

     16   
        6.6  

Counterparts

     16   
        6.7  

Other Holding Entities

     16   

 

[BREP RELATIONSHIP AGR]

 


RELATIONSHIP AGREEMENT

THIS AGREEMENT made as of the 28th day of November, 2011

B E T W E E N:

BROOKFIELD ASSET MANAGEMENT INC. (“ Brookfield ”), a corporation existing under the laws of the Province of Ontario

- and -

BRP ENERGY GROUP L.P. , (the “ Canadian Manager ”), a limited partnership existing under the laws of the Province of Manitoba

- and -

BROOKFIELD RENEWABLE ENERGY GROUP LLC , (the “ US Manager ”), a limited liability company existing under the laws of the State of Delaware

- and -

BROOKFIELD RENEWABLE ENERGY GROUP (BERMUDA) LIMITED , (the “ International Manager ”), a corporation existing under the laws of Bermuda

- and -

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. , (“ BREP ”), an exempted limited partnership existing under the laws of Bermuda

- and -

BROOKFIELD RENEWABLE ENERGY L.P. , (“ BRELP ”), an exempted limited partnership existing under the laws of Bermuda

- and -

BROOKFIELD BRP HOLDINGS (CANADA) INC. , (“ CanHoldco ”), a corporation existing under the laws of the Province of Ontario

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BRP BERMUDA HOLDINGS I LIMITED , (“ Bermuda Holdco ”), a corporation existing under the laws of Bermuda

RECITALS:

WHEREAS , members of the BREP Group (as defined below) directly or indirectly hold interests in renewable power generating operations or developments, primarily consisting of hydro-electric and wind, and will acquire from time to time interests in renewable power generating operations or developments;

 

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AND WHEREAS , BREP, BRELP, the Holding Entities (as defined below), the Managers (as defined below) and Brookfield wish to enter into this Agreement to govern certain aspects of the relationship between them and other members of the BREP Group and the Brookfield Group (as defined below).

NOW THEREFORE in consideration of the premises, mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties covenant and agree, each with the others, as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

In this Agreement, except where the context otherwise requires, the following terms will have the following meanings:

1.1.1 “ Act ” has the meaning ascribed thereto in Section 5.2.1;

1.1.2 “ Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

1.1.3 “ Agreement ” means this Relationship Agreement;

1.1.4 “ Arbitration ” has the meaning ascribed thereto in Section 5.2.1;

1.1.5 “ Arbitrator ” has the meaning ascribed thereto in Section 5.2.3;

1.1.6 “ BRELP ” has the meaning ascribed thereto in the preamble;

1.1.7 “ BREP ” has the meaning ascribed thereto in the preamble;

1.1.8 “ BREP Group ” means BREP, BRELP, the Holding Entities, the Operating Entities and any other direct or indirect Subsidiary of a Holding Entity;

1.1.9 “ BREP Power Operations ” means the Power Operations directly or indirectly held or acquired by members of the BREP Group from time to time;

1.1.10 “ Bermuda Holdco ” has the meaning ascribed thereto in the preamble;

1.1.11 “ Brookfield ” has the meaning ascribed thereto in the preamble;

1.1.12 “ Brookfield Fund ” has the meaning ascribed thereto in Section 2.2.2;

1.1.13 “ Brookfield Group ” means Brookfield and any Affiliates of the foregoing, other than any member of the BREP Group;

 

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1.1.14 “ Business Day ” means every day except a Saturday or Sunday, or a day which is a statutory or civic holiday in Bermuda, the Province of Ontario, or the State of New York;

1.1.15 “ CanHoldco ” has the meaning ascribed thereto in the preamble;

1.1.16 “ Canadian Manager ” has the meaning ascribed thereto in the preamble;

1.1.17 “ Confidential Information ” has the meaning ascribed thereto in Section 6.2;

1.1.18 “ Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example the status of A being the general partner of B) or by virtue of the beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares or other securities to which are attached more than 50% of the votes permitted to be cast in the election of directors to the Governing Body of B or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose, and the term “Controlled” has the corresponding meaning;

1.1.19 “ Dispute ” has the meaning ascribed thereto in Section 5.1;

1.1.20 “ Energy General Partner ” means 2288508 Ontario Inc., which is the general partner of the Energy GP LP;

1.1.21 “ Energy GP LP ” means BREP Holding L.P., which is the general partner of BRELP;

1.1.22 “ Governing Body ” means (i) with respect to a corporation or limited company, the board of directors of such corporation or limited company, (ii) with respect to a limited liability company, the manager(s) or managing partner(s) of such limited liability company, (iii) with respect to a partnership, the board, committee or other body of each general partner or managing partner of such partnership, respectively, that serves a similar function (or if any such general partner is itself a partnership, the board, committee or other body of such general or managing partner’s general or managing partner that serves a similar function) and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

1.1.23 “ Holding Entities ” means Bermuda Holdco, CanHoldco and any direct wholly-owned Subsidiary of BRELP created or acquired on or after the date of this Agreement, excluding, for greater certainty, any Operating Entities;

1.1.24 “ International Manager ” has the meaning ascribed thereto in the preamble;

1.1.25 “ Managers ” means the Canadian Manager, the US Manager and the International Manager;

 

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1.1.26 “ Managing General Partner ” means 2288509 Ontario Inc., which is BREP’s general partner;

1.1.27 “ Master Services Agreement ” means the master services agreement among the Managers, BRELP, BREP, the Holding Entities and others;

1.1.28 “ Operating Entities ” means, from time to time, the Persons that (i) directly hold the BREP Power Operations, or (ii) indirectly hold the BREP Power Operations but all of the interests of which are not held by the Service Recipients including, in the case of each of (i) and (ii), any joint ventures, partnerships and consortium arrangements;

1.1.29 “ Person ” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted and pronouns have a similarly extended meaning;

1.1.30 “ Power Operations ” means renewable power generating operations or developments, primarily consisting of hydro-electric and wind;

1.1.31 “ Service Recipient ” means BREP, BRELP, the Holding Entities and any Person in which any of the foregoing or any combination of the foregoing holds all of the common equity or equivalent interests excluding any Operating Entities;

1.1.32 “ Subsidiary ” means, with respect to any Person, (i) any other Person that is directly or indirectly Controlled by such Person, (ii) any trust in which such Person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such Person holds all of the interests other than the interests of any general partner, managing member or similar Person;

1.1.33 “ Term ” has the meaning ascribed thereto in Section 4.1; and

1.1.34 “ US Manager ” has the meaning ascribed thereto in the preamble.

 

1.2 Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

 

1.3 Interpretation

In this Agreement, unless the context otherwise requires:

1.3.1 words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

 

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1.3.2 the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

1.3.3 references to any Person include such Person’s successors and permitted assigns;

1.3.4 except as otherwise provided in this Agreement, any reference in this Agreement to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all rules and regulations made under such statute, in the case of a statute, all amendments made to such statute, regulation, policy, rule or instrument and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

1.3.5 any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

1.3.6 in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

1.3.7 except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

 

1.4 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

1.5 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, or any amendment or

 

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supplement hereto, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement or any amendment or supplement hereto, by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

 

1.6 Waiver, Amendment

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement will be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement will constitute a waiver of any other provision nor will any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. A party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of that right or the exercise of any other right.

 

1.7 Governing Law

This Agreement will be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each party irrevocably attorns and submits to the non-exclusive jurisdiction of the Ontario courts situated in the City of Toronto and waives objection to the venue of any proceeding in such court or any argument that such court provides an inconvenient forum.

ARTICLE 2

RELATIONSHIP

 

2.1 Primary Vehicle

Subject to the other terms in this Article 2, each of Brookfield and the Managers agrees that, during the Term, the BREP Group will serve as the primary vehicle through which the Brookfield Group will acquire Power Operations on a global basis.

 

2.2 No Exclusivity and Limitations on Acquisition Opportunities

Each of BREP, BRELP and the Holding Entities acknowledges and agrees that:

2.2.1 nothing in this Agreement shall require the Brookfield Group or any member of the Brookfield Group to allocate any minimum level of dedicated resources for the pursuit of Power Operation acquisition opportunities other than as may be contemplated in the Master Services Agreement or as otherwise agreed by a member of the Brookfield Group and a member of the BREP Group. Members of the Brookfield Group have established or advise, and may continue to establish or advise, other entities that rely on the diligence,

 

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skill and business contacts of the Brookfield Group’s professionals and the information and acquisition opportunities they generate during the normal course of their activities;

2.2.2 while the Brookfield Group may offer the acquisition opportunities contained in this Section 2.2.2 to the BREP Group, nothing in this Agreement shall require the Brookfield Group or any member of the Brookfield Group to offer the BREP Group or any member of the BREP Group the opportunity to acquire:

2.2.2.1 an integrated utility even if a significant component of such utility’s operations consist of renewable power generation;

2.2.2.2 a non-renewable power generating operation or development, such as a power generating operation that uses coal or natural gas;

2.2.2.3 a portfolio of Power Operations, if a significant component of such portfolio’s operations consist of non-renewable power generation; or

2.2.2.4 Power Operations that comprise part of a broader enterprise, unless the primary purpose of such acquisition, as determined by Brookfield acting in good faith, is to acquire the underlying Power Operations;

2.2.3 the members of the Brookfield Group carry on a diverse range of businesses worldwide, including the development, ownership and/or management of power, transmission and other infrastructure assets, and investing and advising on investing in any of the foregoing or loans, debt instruments and other securities with underlying infrastructure collateral or exposure including Power Operations, both as principal and through other public companies that are Affiliates of Brookfield or through private investment vehicles and accounts established or managed by Affiliates of Brookfield (each a, “ Brookfield Fund ”). Except as explicitly provided herein, nothing in this Agreement shall in any way limit or restrict members of the Brookfield Group from carrying on their respective business and in particular:

2.2.3.1 nothing shall limit or restrict the ability of the Brookfield Group from making any investment recommendation or taking any other action in connection with its public securities businesses;

2.2.3.2 nothing herein shall limit or restrict any member of the Brookfield Group from investing in any loans or debt securities outside of its public securities businesses or from taking any action in connection with any loan or debt security notwithstanding that the underlying collateral is comprised of or includes a Power Operation provided that the original purpose of the investment was not to acquire a controlling interest in a Power Operation; and

2.2.3.3 Brookfield has established and manages a number of Brookfield Funds whose investment objectives include the acquisition of Power Operations and may in the future establish similar funds. Nothing herein shall limit or restrict Brookfield from establishing or advising a Brookfield Fund or carrying out any investment, provided that for any investment carried out by a Brookfield Fund that involves the acquisition of a Power Operation the BREP Group will be offered the opportunity to take up Brookfield’s share of such acquisition;

 

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2.2.4 in the event that the BREP Group declines any Power Operation acquisition opportunity that Brookfield has made available, the Brookfield Group may pursue such acquisition for its own account, without restriction; and

2.2.5 nothing in this Agreement will restrict the Brookfield Group in connection with its lending, securities management, investment banking services, restructuring businesses or its construction businesses (where such construction is not undertaken with a view to owning the facilities upon completion of the project), including the acquisition or sale of any assets relating to such activities.

 

2.3 BREP Group Acknowledgements

Each of the BREP, BRELP and the Holding Entities acknowledges and agrees that Power Operation acquisition opportunities that are offered to the BREP Group pursuant to this Agreement may be carried out through joint ventures, partnerships, investment funds or consortium arrangements in which the BREP Group will not be the sole participant. In addition to third party participants, one or more Brookfield Group members may also participate in such opportunities if (i) the BREP Group does not have the financial capacity, as determined in good faith by Brookfield, in consultation with the BREP Group, to acquire all of the opportunity, or (ii) Brookfield, taking into consideration the purpose of the investment, return characteristics, risk profile, source of the investment opportunity and other such considerations, allocates participation in the investment opportunity available for Brookfield between the BREP Group and one or more other members of the Brookfield Group. Any such allocation or joint participation with one or more member of the Brookfield Group will be made in good faith and after consulting with the BREP Group.

 

2.4 Reporting

Subject to confidentiality obligations, Brookfield shall cause the Managers to provide a report to the BREP Group on a quarterly basis of all Power Operations acquired by the Brookfield Group that occurred during the quarter that were not offered to the BREP Group, including details of why such acquisition opportunities were not offered to the BREP Group.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of Brookfield and the Managers

Each of Brookfield and each of the Managers hereby represents and warrants to each of BREP, BRELP and the Holding Entities that:

 

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3.1.1 it is validly organized and existing under the relevant laws governing its formation and existence;

3.1.2 it has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder;

3.1.3 it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

3.1.4 the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its articles, by-laws, constituent documents or other organizational documents;

3.1.5 no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it of this Agreement; and

3.1.6 this Agreement constitutes a valid and legally binding obligation of it enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

 

3.2 Representations and Warranties of the Holding Entities

Each of the Holding Entities hereby represents and warrants to each of Brookfield and each of the Managers that:

3.2.1 it is validly organized and existing under the relevant laws governing its formation and existence;

3.2.2 it has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder;

3.2.3 it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

3.2.4 the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its articles, by-laws, constituent documents or other organizational documents;

3.2.5 no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it of this Agreement; and

 

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3.2.6 this Agreement constitutes a valid and legally binding obligation of it enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

 

3.3 Representations and Warranties of BREP

The Managing General Partner, in its capacity as the general partner of BREP hereby represents and warrants to Brookfield that:

3.3.1 each of BREP and the Managing General Partner is validly organized and existing under the relevant laws governing its formation and existence;

3.3.2 the Managing General Partner has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder on behalf of BREP;

3.3.3 the Managing General Partner has taken all necessary action to authorize the execution, delivery and performance of this Agreement on behalf of BREP;

3.3.4 the execution and delivery of this Agreement by the Managing General Partner on behalf of BREP and the performance by BREP of its obligations hereunder do not and will not contravene, breach or result in any default under the organizational documents of the Managing General Partner or BREP, as applicable;

3.3.5 no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by the Managing General Partner on behalf of BREP of this Agreement; and

3.3.6 this Agreement constitutes a valid and legally binding obligation of BREP enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

 

3.4 Representations and Warranties of BRELP

The Energy General Partner, in its capacity as the general partner of Energy GP LP, the general partner of BRELP hereby represents and warrants to Brookfield that:

3.4.1 each of the Energy General Partner and BRELP is validly organized and existing under the relevant laws governing its formation and existence;

 

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3.4.2 the Energy General Partner has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder on behalf of BRELP;

3.4.3 the Energy General Partner has taken all necessary action to authorize the execution, delivery and performance of this Agreement on behalf of BRELP;

3.4.4 the execution and delivery of this Agreement by the Energy General Partner on behalf of BRELP and the performance by BRELP of its obligations hereunder do not and will not contravene, breach or result in any default under the organizational documents of the Energy General Partner, Energy GP LP or BRELP, as applicable;

3.4.5 no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by the Energy General Partner on behalf of BRELP of this Agreement; and

3.4.6 this Agreement constitutes a valid and legally binding obligation of BRELP enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

ARTICLE 4

TERMINATION

 

4.1 Term

The term of this Agreement (the “ Term ”) will begin on the date hereof and will continue in full force and effect until terminated in accordance with Section 4.2.

 

4.2 Termination

The rights and obligations of the parties to this Agreement will terminate and no longer be of any effect concurrently with the termination of the Master Services Agreement in accordance with the terms of the Master Services Agreement.

ARTICLE 5

RESOLUTION OF DISPUTES AND ARBITRATION

 

5.1 Dispute

Any dispute or disagreement of any kind or nature between the parties arising out of or in connection with this Agreement (a “ Dispute ”) shall be resolved in accordance with this Article 5, to the extent permitted by applicable law.

 

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5.2 Arbitration

5.2.1 Any Dispute shall be submitted to arbitration (the “ Arbitration ”) by one Arbitrator pursuant to the procedure set forth in this Section 5.2 and pursuant to the arbitration rules set forth in the Arbitration Act, 1991 (Ontario) (the “ Act ”). If the provisions of this Section 5.2 are inconsistent with the provisions of the Act and to the extent of such inconsistency, the provisions of this Section 5.2 shall prevail in any Arbitration.

5.2.2 Any party may make a demand for Arbitration by sending a notice in writing to any other party, setting forth the nature of the Dispute, the amount involved and the name of the Arbitrator it proposes to be appointed. The demand for Arbitration shall be made no later than thirty (30) days after the event giving rise to the Dispute.

5.2.3 Within thirty (30) days after any demand for Arbitration under Section 5.2.2, the parties shall have agreed on the designation of the Arbitrator or should the parties fail to do so, the Arbitrator may be appointed by a judge of the Ontario Superior Court of Justice upon motion of any party (in either case, the “ Arbitrator ”).

5.2.4 The Arbitration hearings shall be held in a location in Ontario specified in the demand for Arbitration and shall commence no later than thirty (30) days after the determination of the Arbitrator under Section 5.2.3. The decision of the Arbitrator shall be made not later than sixty (60) days after its appointment. The decision of the Arbitrator, shall be final without appeal and binding on the parties.

5.2.5 Each party involved in the Dispute shall bear the costs and expenses of all lawyers, consultants, advisors, witnesses and employees retained by it in any Arbitration. The expenses of the Arbitrator shall be paid equally by the parties unless the Arbitrator otherwise provides in its award.

 

5.3 Confidentiality

All information disclosed by any party in relation to the resolution of Disputes pursuant to the terms hereof shall be subject to the provisions of Section 6.2 hereof and shall not be used for any purpose other than the resolution of a Dispute pursuant to the terms hereof.

 

5.4 Continued Performance

During the conduct of Dispute resolution procedures pursuant to this Article 5, the parties shall continue to perform their respective obligations under this Agreement and no party shall exercise any other remedies to resolve a Dispute.

 

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ARTICLE 6

GENERAL PROVISIONS

 

6.1 Assignment

6.1.1 None of the rights or obligations hereunder shall be assignable or transferable by any party without the prior written consent of the other parties.

6.1.2 Any purported assignment of this Agreement in violation of this Section 6.1 shall be null and void.

 

6.2 Confidentiality and Disclosure of Material Changes

Each of the parties hereby agrees that it will not at any time use, disclose or make available to any party, and will take reasonable steps to prevent such disclosure and restrain further disclosure by any other party, and will take reasonable steps to prevent such disclosure and restrain further disclosure by any other party, any information disclosed pursuant to this Agreement (the “ Confidential Information ”), except:

6.2.1 such use as may be expressly permitted in or necessary or advisable for the performance of this Agreement;

6.2.2 such disclosure as may be required in order to comply with any applicable law, including disclosure obligations of the BREP Group or the Brookfield Group;

6.2.3 such information as comes into the public domain independently where the person disclosing the same is not under an obligation of confidentiality to Brookfield; and

6.2.4 such information as can be demonstrated by the party desiring to disclose such information, to have come into its possession independently of anything done under this Agreement.

 

6.3 Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

6.4 Notices

Any notice or other communication required or permitted to be given hereunder will be in writing and will be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, will be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if sent by facsimile or other means of electronic communication, will be deemed to have been received on the Business Day following the sending, or if delivered by hand will be deemed to have been received at the

 

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time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address will also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications will be delivered by hand or sent by facsimile or other means of electronic communication and will be deemed to have been received in accordance with this section. Notices and other communications will be addressed as follows:

 

  6.4.1 if to BREP :

2288509 Ontario Inc.

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM 12

Bermuda

Attention: Secretary

Telecopier number: 441-298-3433

 

  6.4.2 if to BRELP :

BREP Holding L.P.

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM 12

Bermuda

Attention: Secretary

Telecopier number: 441-298-3304

 

  6.4.3 if to CanHoldco:

Brookfield BRP Holdings (Canada) Inc.

1700-180 Kent Street

Ottawa, Ontario

K1P 0B6

Attention: Secretary

Telecopier number: 819-561-7188

 

  6.4.4 if to Bermuda Holdco:

BRP Bermuda Holdings I Limited

c/o Appleby Corporate Services

 

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Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda

Attention: Secretary

Telecopier number: 441-298-3304

 

  6.4.5 if to Brookfield:

Brookfield Asset Management Inc.

Suite 300, Brookfield Place

181 Bay Street, Box 762,

Toronto, Ontario

M5J 2T3

Attention: General Counsel

Telecopier number: 416-365-9642

 

  6.4.6 if to the Canadian Manager:

BRP Energy Group L.P.

Suite 300, Brookfield Place

181 Bay Street, Box 762

Toronto, Ontario

M5J 2T3

Attention: Chief Executive Officer

Telecopier number: 416-363-2856

 

  6.4.7 if to the International Manager:

Brookfield Renewable Energy Group (Bermuda) Limited

Cedar Court, 2nd Floor

Wildey Business Park

St. Michael, Barbados

Attention: Secretary

Telecopier number: 246-436-6967

 

  6.4.8 if to the US Manager:

Brookfield Renewable Energy Group LLC

Three World Financial Center

200 Vesey Street, 11th Floor

New York, New York

10281-1021

 

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Attention: President

Telecopier number: 212-417-7196

or to such other addresses or facsimile numbers as a party may from time to time notify the other in accordance with this Section 6.4.

 

6.5 Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other parties hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

6.6 Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

 

6.7 Other Holding Entities

The parties acknowledge that any Holding Entity that is not a party to this Agreement will execute a counterpart of this Agreement agreeing to be bound by the terms of this Agreement.

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[BREP RELATIONSHIP AGR]

 

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IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written.

 

BROOKFIELD ASSET MANAGEMENT INC.
By:   /s/ “Joseph Freedman”
  Name: Joseph Freedman
  Title: Senior Managing Partner

 

BRP ENERGY GROUP L.P., by its general partner, BROOKFIELD RENEWABLE ENERGY GROUP G.P. INC.
By:   /s/ “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory

 

BROOKFIELD RENEWABLE ENERGY GROUP LLC
By:   /s/ “David A. Bono”
  Name: David A. Bono
 

Title: Vice President of Law and General

          Counsel, U.S. Operations

 

BROOKFIELD RENEWABLE ENERGY GROUP (BERMUDA) LIMITED
By:   /s/ “Jane Sheere”
  Name: Jane Sheere
  Title: Secretary

 

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. by its general partner, 2288509 ONTARIO INC.
By:   /s/ “Jane Sheere”
  Name: Jane Sheere
  Title: Authorized Signatory

 

BROOKFIELD RENEWABLE ENERGY L.P. by its general partner, BREP HOLDING L.P. by its general partner, 2288508 ONTARIO INC.
By:   /s/ “Jane Sheere”
  Name: Jane Sheere
  Title: Authorized Signatory

 

BROOKFIELD BRP HOLDINGS (CANADA) INC.
By:   /s/ “Patricia Bood”
  Name: Patricia Bood
  Title: Authorized Signatory

 

BRP BERMUDA HOLDINGS I LIMITED
By:   /s/ “Jane Sheere”
  Name: Jane Sheere
  Title: Secretary

 

[BREP RELATIONSHIP AGR]

 

Exhibit 4.4

BROOKFIELD RENEWABLE POWER INC.

- and -

 

 

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

 

 

 

REGISTRATION RIGHTS AGREEMENT

November 28, 2011


Article 1 INTERPRETATION      1   
1.1  

Definitions

     1   
1.2  

Headings and Table of Contents

     5   
1.3  

Interpretation

     5   
1.4  

Invalidity of Provisions

     6   
1.5  

Entire Agreement

     6   
1.6  

Waiver, Amendment

     6   
1.7  

Governing Law

     7   
Article 2 REGISTRATION RIGHTS      7   
2.1  

Demand Registration

     7   
2.2  

Piggyback Registrations

     10   
2.3  

Short-Form Filings

     11   
2.4  

Holdback Agreements

     12   
2.5  

Registration Procedures

     13   
2.6  

Suspension of Dispositions

     18   
2.7  

Registration Expenses

     18   
2.8  

Indemnification

     19   
2.9  

Transfer of Registration Rights

     22   
2.10  

Current Public Information

     22   
2.11  

Preservation of Rights

     23   

Article 3 TERMINATION

     23   
3.1  

Termination

     23   
Article 4 MISCELLANEOUS      23   
4.1  

Enurement

     23   
4.2  

Notices

     24   
4.3  

Authority

     25   
4.4  

Further Assurances

     25   
4.5  

Counterparts

     25   

 

[REGISTRATION RIGHTS AGR_BRPI & BREP]


REGISTRATION RIGHTS AGREEMENT

THIS AGREEMENT made as of the 28th day of November, 2011

B E T W E E N:

 

   BROOKFIELD RENEWABLE POWER INC. (“BRPI”)
   - and -
   BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. (“BREP”)

RECITALS:

WHEREAS , BREP desires to provide the Holders (as defined herein) with the registration rights specified in this Agreement with respect to Registrable Units (as defined herein) on the terms and subject to the conditions set forth herein.

NOW THEREFORE in consideration of the premises, mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties covenant and agree, each with the other, as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

1.1.1 “Adverse Effect” has the meaning assigned to such term in Section 2.1.5;

1.1.2 “ Advice ” has the meaning assigned to such term in Section 2.6;

1.1.3 “ Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

1.1.4 “ Agreement ” means this Registration Rights Agreement;

1.1.5 “ BREP ” has the meaning assigned to such term in the preamble;

 

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1.1.6 “ BRPI ” has the meaning assigned to such term in the preamble;

1.1.7 “ Business Day ” means every day except a Saturday or Sunday, or a day which is a statutory or civic holiday in Bermuda, the Province of Ontario, or the State of New York;

1.1.8 “ Canadian Commissions ” means the securities commissions or other securities regulatory authorities in each of the provinces or territories of Canada and any successor regulatory authorities having similar powers and, to the extent applicable, in any such province or territory, a federal securities commission or similar regulatory authority;

1.1.9 “ Canadian Securities Laws ” means, collectively, the applicable securities legislation, regulations, rules, policies, blanket rulings, decisions and orders of each of the provinces and territories of Canada and the Canadian Commissions;

1.1.10 “ Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example the status of A being the general partner of B) or by virtue of the beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares or other securities to which are attached more than 50% of the votes permitted to be cast in the election of directors to the Governing Body of B or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose, and the term “Controlled” has the corresponding meaning;

1.1.11 “ Demand Registration ” has the meaning assigned to such term in Section 2.1.1(a);

1.1.12 “ Demanding Unitholders ” has the meaning assigned to such term in Section 2.1.1(a);

1.1.13 “ Demand Request ” has the meaning assigned to such term in Section 2.1.1(a);

1.1.14 “ Effective ” means, in the case of a Registration Statement, a declaration by the SEC that such registration statement is effective, and in the case of a Prospectus, the issuance by the applicable Canadian Commission of a receipt for the final prospectus;

1.1.15 “ Effective Date ” means the date a Registration Statement or Prospectus becomes Effective;

1.1.16 “ Excluded Registration ” means a registration of (i) securities pursuant to one or more Demand Registrations pursuant to Section 2.1 hereof, (ii) securities registered under the U.S. Securities Act on Form S-8 or any similar successor form,

 

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and (iii) securities registered to effect the acquisition of, or combination with, another Person;

1.1.17 “ FINRA ” means Financial Industry Regulatory Authority, Inc.;

1.1.18 “ Holder ” means (i) BRPI and (ii) any direct or indirect transferee of BRPI who shall become a party to this Agreement in accordance with Section 2.9 and has agreed in writing to be bound by the terms of this Agreement;

1.1.19 “ Governing Body ” means (i) with respect to a corporation or limited company, the board of directors of such corporation or limited company, (ii) with respect to a limited liability company, the manager(s) or managing partner(s) of such limited liability company, (iii) with respect to a partnership, the board, committee or other body of each general partner or managing partner of such partnership, respectively, that serves a similar function (or if any such general partner is itself a partnership, the board, committee or other body of such general or managing partner’s general or managing partner that serves a similar function) and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

1.1.20 “ Inspectors ” has the meaning assigned to such term in Section 2.5(xiii);

1.1.21 “ Person ” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability company, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted and pronouns have a similarly extended meaning;

1.1.22 “ Piggyback Registration ” has the meaning assigned to such term in Section 2.2.1;

1.1.23 “ POP Issuer ” means an issuer eligible to use the POP System or equivalent system established from time to time by the Canadian Commissions;

1.1.24 “ POP System ” means the prompt offering prospectus qualification system under National Instrument 44-101 of the Canadian Securities Administrators entitled “Short Form Prospectus Distributions” or any successor policy, rule, regulation or similar instrument;

1.1.25 “ Prospectus ” means a prospectus, including any amendment or supplements thereto, prepared in accordance with applicable Canadian Securities Laws for the purpose of qualifying securities for distribution to the public in any province or territory of Canada;

 

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1.1.26 “ Records ” has the meaning assigned to such term in Section 2.5(xiii);

1.1.27 “ register ,” “ registered ” and “ registration ” refers to (i) a registration effected by preparing and filing a registration statement in compliance with the U.S. Securities Act, and the declaration or ordering of the effectiveness of such registration statement, and (ii) a qualification for distribution under Canadian Securities Laws effected by preparing and filing a Prospectus;

1.1.28 “ Registration Statement ” means a registration statement on Form F-1 or F-3 or any similar or successor to such forms under the U.S. Securities Act (which includes any preliminary prospectus, prospectus, prospectus supplement or free writing prospectus used in connection therewith);

1.1.29 “ Registrable Units ” means the Units owned by Holders, including Units, issuable to Holders on the conversion of securities convertible, exchangeable or exercisable into Units owned by a Holder, together with any securities owned by Holders issued with respect to such Units by way of dividend or split or in connection with a combination of units, recapitalization, merger, consolidation, amalgamation or other reorganization; provided, however, that Units that, pursuant to Section 3.1, no longer have registration rights hereunder shall not be considered Registrable Units;

1.1.30 “ Requesting Holders ” shall mean any Holder(s) requesting to have its (their) Registrable Units included in any Demand Registration or Shelf Registration;

1.1.31 “ Required Filing Date ” has the meaning assigned to such term in Section 2.1.1(b);

1.1.32 “ SEC ” means the Securities and Exchange Commission or any other federal agency at the time administering the U.S. Securities Act;

1.1.33 “ Securities Laws ” means Canadian Securities Laws or U.S. Securities Laws, applicable;

1.1.34 “ Seller Affiliates ” has the meaning assigned to such term in Section 2.8.1;

1.1.35 “ Shelf Prospectus ” means a shelf prospectus of BREP filed with the Canadian Commissions under Canadian Securities Laws for offers and sales of Registrable Units on a continuous basis;

1.1.36 “ Shelf Registration ” means a registration of the Registrable Units under a registration statement pursuant to Rule 415 under the U.S. Securities Act (or any successor rule);

1.1.37 “ Suspension Notice ” has the meaning assigned to such term in Section 2.6;

 

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1.1.38 “ Units ” means limited partnership units of BREP;

1.1.39 “ U.S. Exchange Act ” means the United States Securities Exchange Act of 1934 , as amended, or any similar federal statute, and the rules and regulations promulgated by the SEC thereunder;

1.1.40 “ U.S. Securities Act ” means the United States Securities Act of 1933 , as amended, or any similar federal statute and the rules and regulations promulgated by the SEC thereunder; and

1.1.41 “ U.S. Securities Laws ” means, collectively, the securities laws of the United States, including the U.S. Exchange Act, the U.S. Securities Act, state securities or “blue sky” laws within the United States, and all rules, regulations and ordinances promulgated thereunder.

 

1.2 Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

 

1.3 Interpretation

In this Agreement, unless the context otherwise requires:

1.3.1 words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

1.3.2 the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

1.3.3 references to any Person include such Person’s successors and permitted assigns;

1.3.4 except as otherwise provided in this Agreement, any reference in this Agreement to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all rules and regulations made under such statute, in the case of a statute, all amendments made to such statute, regulation, policy, rule or instrument and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

 

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1.3.5 any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

1.3.6 in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

1.3.7 except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

 

1.4 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

1.5 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, or any amendment or supplement hereto, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement or any amendment or supplement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

 

1.6 Waiver, Amendment

Except as expressly provided in this Agreement, no waiver of this Agreement will be binding unless executed in writing by the party to be bound thereby. No waiver of any

 

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provision of this Agreement will constitute a waiver of any other provision nor will any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. A party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of that right or the exercise of any other right. This Agreement may not be amended or modified in any respect except by a written agreement signed by BREP, BRPI (so long as BRPI owns any Units) and the Holders of a majority of the then outstanding Registrable Units.

 

1.7 Governing Law

This Agreement will be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each party irrevocably attorns and submits to the non-exclusive jurisdiction of the Ontario courts situated in the City of Toronto and waives objection to the venue of any proceeding in such court or any argument that such court provides an inconvenient forum.

ARTICLE 2

REGISTRATION RIGHTS

 

2.1 Demand Registration

 

  2.1.1 Request for Registration

 

  (a) Commencing on the date hereof, any Holder shall have the right to require BREP to file a Registration Statement and/or a Prospectus for a public offering of all or part of its Registrable Units (a “ Demand Registration ”), by delivering to BREP written notice stating that such right is being exercised, naming the Holders whose Registrable Units are to be included in such registration (collectively, the “ Demanding Unitholders ”), specifying the number of each such Demanding Unitholder’s Registrable Units to be included in such registration and, subject to Section 2.1.3 hereof, describing the intended method of distribution thereof (a “ Demand Request ”).

 

  (b) Each Demand Request shall specify the aggregate number of Registrable Units proposed to be sold. Subject to Section 2.1.6, BREP shall file a Registration Statement and/or Prospectus in respect of a Demand Registration as soon as practicable and, in any event, within forty-five (45) days after receiving a Demand Request (the “ Required Filing Date ”) and shall use commercially reasonable efforts to cause the same to be declared Effective as promptly as practicable after such filing; provided, however, that:

 

  (i) BREP shall not be obligated to file a Registration Statement or a Prospectus in respect of a Demand Registration pursuant to Section 2.1.1(a) within sixty (60) days after the Effective Date of a previous Demand Registration, other than a Shelf Registration pursuant to this Article 2; and

 

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  (ii) BREP shall not be obligated to file a Registration Statement or a Prospectus in respect of a Demand Registration pursuant to Section 2.1.1(a) unless the Demand Request is for a number of Registrable Units with a market value that is equal to at least $50,000,000 as of the date of such Demand Request.

2.1.2 Shelf Registration . With respect to any Demand Registration, the Requesting Holders may request BREP to file a Shelf Prospectus or effect a Shelf Registration.

2.1.3 Selection of Underwriters . At the request of a Requesting Holder, the offering of Registrable Units pursuant to a Demand Registration shall be in the form of a “firm commitment” underwritten offering. The Requesting Holder shall select the investment banking firm or firms to manage the underwritten offering; provided that such selection shall be subject to the consent of BREP, which consent shall not be unreasonably withheld or delayed. No Holder may participate in any registration pursuant to Section 2.1.1 unless such Holder (x) agrees to sell such Holder’s Registrable Units on the basis provided in any underwriting arrangements described above and (y) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; provided, however, that no such Holder shall be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Holder’s ownership of Registrable Units to be transferred free and clear of all liens, claims, and encumbrances, (ii) such Holder’s power and authority to effect such transfer, and (iii) such matters pertaining to compliance with Securities Laws as may be reasonably requested; provided, further, however, that the obligation of such Holder to indemnify pursuant to any such underwriting arrangements shall be several, not joint and several, among such Holders selling Registrable Units, and the liability of each such Holder will be in proportion thereto, and provided, further, that such liability will be limited to the net amount received by such Holder from the sale of his or its Registrable Units pursuant to such registration.

2.1.4 Rights of Nonrequesting Holders . Upon receipt of any Demand Request, BREP shall promptly (but in any event within ten (10) days) give written notice of such proposed Demand Registration to all other Holders, who shall have the right, exercisable by written notice to BREP within twenty (20) days of their receipt of BREP’s notice, to elect to include in such Demand Registration such portion of their Registrable Units as they may request. All Holders requesting to have their Registrable Units included in a Demand Registration in accordance with the preceding sentence shall be deemed to be “ Requesting Holders ” for purposes of this Section 2.1. BREP shall also have the right to issue and sell Units in such Demand Registration.

 

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2.1.5 Priority on Demand Registrations . No securities to be sold for the account of any Person (including BREP) other than a Requesting Holder shall be included in a Demand Registration unless the managing underwriter or underwriters shall advise the Requesting Holders in writing that the inclusion of such securities will not adversely affect the price, timing or distribution of the offering or otherwise adversely affect its success (an “ Adverse Effect ”). Furthermore, if the managing underwriter or underwriters shall advise the Requesting Holders that, even after exclusion of all securities of other Persons (including BREP) pursuant to the immediately preceding sentence, the amount of Registrable Units proposed to be included in such Demand Registration by Requesting Holders is sufficiently large to cause an Adverse Effect, the Registrable Units of the Requesting Holders to be included in such Demand Registration shall equal the number of Units which the Requesting Holders are so advised can be sold in such offering without an Adverse Effect and such Registrable Units shall be allocated pro rata among the Requesting Holders on the basis of the number of Registrable Units requested to be included in such registration by each such Requesting Holder.

2.1.6 Deferral of Filing . BREP may defer the filing (but not the preparation) of a Registration Statement or Prospectus, as applicable, required by Section 2.1 until a date not later than ninety (90) days after the Required Filing Date if (i) at the time BREP receives the Demand Request, BREP is engaged in confidential negotiations or other confidential activities, disclosure of which would be required in such Registration Statement or Prospectus, as applicable (but would not be required if such Registration Statement or Prospectus, as applicable, were not filed), and the Board of Directors of the general partner of BREP determines in good faith that such disclosure would be materially detrimental to BREP and its unitholders, (ii) prior to receiving the Demand Request, BREP had determined to effect a registered underwritten public offering of BREP’s securities for BREP’s account and BREP had taken substantial steps (including, but not limited to, selecting a managing underwriter for such offering) and is proceeding with reasonable diligence to effect such offering, or (iii) at the time BREP receives the Demand Request, BREP is currently engaged in a self-tender or exchange offer and the filing of a Registration Statement or Prospectus, as applicable, would cause a violation of applicable Securities Laws. A deferral of the filing of a Registration Statement or Prospectus, as applicable, pursuant to this Section 2.1.6 shall be lifted, and the requested Registration Statement or Prospectus, as applicable, shall be filed forthwith, if, in the case of a deferral pursuant to clause (i) of the preceding sentence, the negotiations or other activities are disclosed, otherwise become publicly known, or are terminated, or, in the case of a deferral pursuant to clause (ii) of the preceding sentence, the proposed registration for BREP’s account is abandoned. In order to defer the filing of a Registration Statement or Prospectus, as applicable, pursuant to this Section 2.1.6, BREP shall promptly (but in any event within ten (10) days), upon determining to seek such deferral, deliver to the Requesting Holders a certificate signed by an officer of the Board of Directors of

 

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the general partner of BREP stating that BREP is deferring such filing pursuant to this Section 2.1.6 and a general statement of the reason for such deferral and an approximation of the anticipated delay. Within twenty (20) days after receiving such certificate, the Requesting Holder may withdraw such Demand Request by giving notice to BREP; if withdrawn, the Demand Request shall be deemed not to have been made for all purposes of this Agreement. BREP may defer the filing of a particular Registration Statement or Prospectus, as applicable, pursuant to this Section 2.1.6 only once.

 

2.2 Piggyback Registrations

2.2.1 Right to Piggyback . Each time BREP proposes to (x) register any of its equity securities (other than pursuant to an Excluded Registration) under Canadian Securities Laws or U.S. Securities Laws for sale to the public (whether for the account of BREP or the account of any securityholder of BREP) or (y) sell any of its equity securities (other than pursuant to an Excluded Registration) and with respect to which a Shelf Registration and prospectus supplement are expressly being utilized to effect such sale, (clause (x) and (y) are each referred to as a “ Piggyback Registration ”), BREP shall give prompt written notice to each Holder of Registrable Units (which notice shall be given not less than twenty (20) days prior to the anticipated filing date of BREP’s Registration Statement or Prospectus, or not less than ten (10) days in the case of a “bought deal” or “registered direct” financing), which notice shall offer each such Holder the opportunity to include any or all of its Registrable Units in such Registration Statement, prospectus supplement or Prospectus, as applicable, subject to the limitations contained in Section 2.2.2 hereof. Each Holder who desires to have its Registrable Units included in such Registration Statement, prospectus supplement or Prospectus, as applicable, shall so advise BREP in writing (stating the number of Registrable Units desired to be registered) within ten (10) days after the date of such notice from BREP (or within one (1) Business Day in the case of a “bought deal” financing). Any Holder shall have the right to withdraw such Holder’s request for inclusion of such Holder’s Registrable Units in any Registration Statement, prospectus supplement or Prospectus, as applicable, pursuant to this Section 2.2.1 by giving written notice to BREP of such withdrawal. Subject to Section 2.2.2 below, BREP shall include in such Registration Statement, prospectus supplement or Prospectus, as applicable, all such Registrable Units so requested to be included therein; provided, however, that BREP may at any time withdraw or cease proceeding with any such registration or sale if it shall at the same time withdraw or cease proceeding with the registration or sale of all other equity securities originally proposed to be registered or sold.

2.2.2 Priority on Piggyback Registrations

 

  (a) If a Piggyback Registration is an underwritten offering, and if the managing underwriter advises BREP that the inclusion of Registrable Units requested to be included in a Registration Statement, prospectus supplement or Prospectus, as applicable, would cause an Adverse Effect, BREP shall only

 

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  be required to include such number of Registrable Units in such Registration Statement, prospectus supplement or Prospectus, as applicable, as such underwriter advises would not cause an Adverse Effect, with priority given as follows: (i) first, the securities BREP proposes to sell, (ii) second, the Registrable Units requested to be included in such registration or prospectus supplement, pro rata among the Holders of such Registrable Units on the basis of the number of Registrable Units owned by each such Holder, and (iii) third, any other securities requested to be included in such registration or prospectus supplement. If as a result of the provisions of this Section 2.2.2(a) any Holder shall not be entitled to include all Registrable Units in a registration or prospectus supplement that such Holder has requested to be so included, such Holder may withdraw such Holder’s request to include Registrable Units in such Registration Statement, prospectus supplement or Prospectus, as applicable.

 

  (b) No Holder may participate in any Registration Statement, prospectus supplement or Prospectus, as applicable, in respect of a Piggyback Registration hereunder unless such Holder (x) agrees to sell such Holder’s Registrable Units on the basis provided in any underwriting arrangements approved by BREP and (y) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents, each in customary form, reasonably required under the terms of such underwriting arrangements; provided, however, that no such Holder shall be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Holder’s ownership of Registrable Units to be sold or transferred free and clear of all liens, claims, and encumbrances, (ii) such Holder’s power and authority to effect such transfer, and (iii) such matters pertaining to compliance with applicable securities laws as may be reasonably requested; provided, further, however, that the obligation of such Holder to indemnify pursuant to any such underwriting arrangements shall be several, not joint and several, among such Holders selling Registrable Units, and the liability of each such Holder will be in proportion to, and provided, further, that such liability will be limited to, the net amount received by such Holder from the sale of his or its Registrable Units pursuant to such registration or prospectus supplement.

 

2.3 Short-Form Filings

 

  (a) SEC Form F-3 . BREP shall use its commercially reasonable efforts to cause Demand Registrations in the United States to be registered on Form F-3 (or any successor form) once BREP becomes eligible to use Form F-3, and if BREP is not then eligible under the U.S. Securities Laws to use Form F-3, Demand Registrations shall be registered on the form for which BREP then qualifies. BREP shall use its commercially reasonable efforts to become eligible to use Form F-3 and, after becoming eligible to use Form F-3, shall use its commercially reasonable efforts to remain so eligible.

 

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  (b) Short-Form Prospectus . BREP shall use its commercially reasonable efforts to cause Demand Registrations in Canada to be qualified by way of a short-form Prospectus prepared pursuant to the POP System if, at the time of such Demand Registration, BREP is a POP Issuer and is able to do so in all of the provinces and territories in which the Demand Registration is to be effected. For greater certainty, it is acknowledged that in the event that BREP is not a POP Issuer or is unable to utilize the POP System in one or more Canadian provinces or territories in which the Demand Registration is to be effected, BREP shall proceed by way of long-form Prospectus.

2.4 Holdback Agreements

 

  (a) BREP shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven (7) days prior to and during the ninety (90)-day period beginning on the Effective Date of a Demand Registration (other than a Shelf Registration or Shelf Prospectus, as applicable) or a Piggyback Registration, except pursuant to registrations on Form S-8 or any successor form or registrations to effect the acquisition of, or combination with, another Person, or unless the underwriters managing any such public offering otherwise agree.

 

  (b) If any Holders of Registrable Units notify BREP in writing that they intend to effect an underwritten sale of Units on a specified date registered pursuant to a Shelf Registration or Shelf Prospectus, as applicable, pursuant to Article 2 hereof, BREP shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for its equity securities, during the seven (7) days prior to and during the ninety (90)-day period beginning on the date specified in such notice, except pursuant to registrations on Form S-8 or any successor form or registrations to effect the acquisition of, or combination with, another Person, or unless the underwriters managing any such public offering otherwise agree.

 

  (c) Provided BREP has complied with Section 2.2, each Holder agrees, in the event of an underwritten offering by BREP (whether for the account of BREP or otherwise), not to offer, sell, contract to sell or otherwise dispose of any Registrable Units, or any securities convertible into or exchangeable or exercisable for such securities, including any sale pursuant to Rule 144 under the U.S. Securities Act (except as part of such underwritten offering), during the seven (7) days prior to, and during the ninety (90)-day period (or such lesser period as the lead or managing underwriters may require) beginning on, the Effective Date for such underwritten offering (or, in the case of an offering pursuant to an effective Shelf Registration or Shelf Prospectus, the pricing date for such underwritten offering).

 

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2.5 Registration Procedures

Whenever any Holder has requested that any Registrable Units be registered pursuant to this Agreement, BREP will use its commercially reasonable efforts to effect the registration and the sale of such Registrable Units in accordance with the intended method of disposition thereof as promptly as is practicable, and pursuant thereto BREP will as expeditiously as possible:

 

  (i) prepare and file, pursuant to Section 2.1.1(b) with respect to any Demand Registration, subject to Section 2.3, a Registration Statement or Prospectus, as applicable, with respect to such Registrable Units and use its commercially reasonable efforts to cause such Registration Statement or Prospectus, as applicable, to become Effective; provided that as far in advance as practicable before filing such Registration Statement or Prospectus, as applicable, or any amendment or supplement thereto, BREP will furnish to the selling Holders copies of reasonably complete drafts of all such documents prepared to be filed (including exhibits), and any such Holder shall have the opportunity to object to any information contained therein and BREP will make corrections reasonably requested by such Holder with respect to such information prior to filing any such Registration Statement or Prospectus, as applicable, or any amendment or supplement thereto;

 

  (ii) except in the case of a Shelf Registration or Shelf Prospectus, prepare and file with the SEC or the applicable Canadian Commissions, such amendments, post-effective amendments and supplements to such Registration Statement or Prospectus, as applicable, as may be necessary to keep such Registration Statement or Prospectus, as applicable, effective for a period of not less than one hundred eighty (180) days (or such lesser period as is necessary for the underwriters in an underwritten offering to sell unsold allotments) and comply with the provisions of the applicable Securities Laws with respect to the disposition of all securities covered by such Registration Statement or Prospectus, as applicable, during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or Prospectus, as applicable;

 

  (iii) in the case of a Shelf Registration or Shelf Prospectus, prepare and file with the SEC or the applicable Canadian Commissions, as applicable, such amendments and supplements to such Registration Statement or Shelf Prospectus, as applicable, as may be necessary to keep such Registration Statement or Shelf Prospectus, as applicable, effective and to comply with the provisions of the applicable Securities Laws with respect to the disposition of all

 

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  Registrable Units subject thereto for a period ending on the earlier of (x) twenty four (24) months after the Effective Date and (y) the date on which all the Registrable Units subject thereto have been sold pursuant to such Registration Statement or Shelf Prospectus, as applicable;

 

  (iv) furnish to each seller of Registrable Units and the underwriters of the securities being registered such number of copies of such Registration Statement or Prospectus, as applicable (in the English language and, if required, French language), each amendment and supplement thereto, any documents incorporated by reference therein and such other documents as such seller or underwriters may reasonably request in order to facilitate the disposition of the Registrable Units owned by such seller or the sale of such securities by such underwriters (it being understood that, subject to Section 2.6 and the requirements of the applicable Securities Laws, BREP consents to the use of the Registration Statement and Prospectus, as applicable, and any amendment or supplement thereto by each seller and the underwriters in connection with the offering and sale of the Registrable Units covered by the Registration Statement or Prospectus, as applicable);

 

  (v) use its commercially reasonable efforts to register or qualify such Registrable Units under such other securities or blue sky laws of such jurisdictions as the managing underwriter reasonably requests (or, in the event the Registration Statement or Prospectus, as applicable, does not relate to an underwritten offering, as the holders of a majority of such Registrable Units may reasonably request); use its commercially reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the period in which such Registration Statement or Prospectus, as applicable, is required to be kept effective; and do any and all other acts and things which may be reasonably necessary or advisable to enable each seller to consummate the disposition of the Registrable Units owned by such seller in such jurisdictions (provided, however, that BREP will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (B) subject itself to taxation in any such jurisdiction, or (C) consent to general service of process in any such jurisdiction);

 

  (vi) promptly notify each seller and each underwriter and (if requested by any such Person) confirm such notice in writing (A) when any supplement or amendment to the Registration Statement or Prospectus, as applicable, has been filed following the Effective Date, and when the same has become effective, (B) of the issuance

 

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  by any state securities or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Units under state securities or “blue sky” laws or the initiation of any proceedings for that purpose, and (C) of the happening of any event which makes any statement made in the Registration Statement or Prospectus, as applicable, untrue or which requires the making of any changes in such Registration Statement or Prospectus, as applicable, or documents so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, as promptly as practicable thereafter, prepare and file with the SEC and the applicable Canadian Commissions (as applicable) and furnish a supplement or amendment to such Registration Statement or Prospectus, as applicable, so that, as thereafter deliverable to the purchasers of such Registrable Units, such Registration Statement, or Prospectus, as applicable, will not contain any untrue statement of a material fact or omit a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

  (vii) permit any selling Holder, which in such Holder’s sole and exclusive judgment, might reasonably be deemed to be an underwriter or a controlling person of BREP, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to BREP in writing, which in the reasonable judgment of such Holder and its counsel should be included;

 

  (viii) make reasonably available personnel, as selected by the Holders of a majority of the Registrable Units included in such registration, for assistance in the selling effort relating to the Registrable Units covered by such registration, including, but not limited to, the participation of such members of BREP’s management in road show presentations;

 

  (ix) otherwise use its commercially reasonable efforts to comply with all applicable Securities Laws, and make generally available to BREP’s securityholders an earnings statement satisfying the provisions of Section 11(a) of the U.S. Securities Act no later than thirty (30) days after the end of the twelve (12) month period beginning with the first day of BREP’s first fiscal quarter commencing after the Effective Date, which earnings statement shall cover said twelve (12) month period, and which requirement will be deemed to be satisfied if BREP timely files complete and accurate information on Forms 20-F and 6-K under the Exchange Act which otherwise complies with Rule 158 under the U.S. Securities Act;

 

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  (x) if requested by the managing underwriter or any seller promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or any seller reasonably requests to be included therein, including, without limitation, with respect to the Registrable Units being sold by such seller, the purchase price being paid therefor by the underwriters and with respect to any other terms of the underwritten offering of the Registrable Units to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment;

 

  (xi) as promptly as practicable after filing of any document which is incorporated by reference into the Registration Statement or Prospectus, as applicable (in the form in which it was incorporated), deliver a copy of each such document to each seller;

 

  (xii) cooperate with the sellers and the managing underwriter to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under applicable law) representing securities sold under any Registration Statement or Prospectus, as applicable, and enable such securities to be in such denominations and registered in such names as the managing underwriter or such sellers may request and keep available and make available to BREP’s transfer agent prior to the Effective Date a supply of such certificates;

 

  (xiii) promptly make available for inspection by any seller, any underwriter participating in any disposition pursuant to any Registration Statement or Prospectus, as applicable, and any attorney, accountant or other agent or representative retained by any such seller or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of BREP (collectively, the “ Records ”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause BREP’s officers, directors and employees to supply all information requested by any such Inspector in connection with such Registration Statement or Prospectus, as applicable; provided, however, that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the Registration Statement or Prospectus, as applicable, or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, BREP shall not be required to provide any information under this subparagraph (xiii) if (A) BREP believes, after consultation with

 

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  counsel for BREP, that to do so would cause BREP to forfeit an attorney-client privilege that was applicable to such information or (B) if either (1) BREP has requested and been granted from the SEC or a Canadian Commission confidential treatment of such information contained in any filing with the SEC or a Canadian Commission or documents provided supplementally or otherwise or (2) BREP reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing, unless prior to furnishing any such information with respect to clause (B) such Holder of Registrable Units requesting such information agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided, further, that each Holder of Registrable Units agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to BREP and allow BREP, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential;

 

  (xiv) furnish to each seller and underwriter a signed counterpart of (A) an opinion or opinions of counsel to BREP, (B) a comfort letter or comfort letters from BREP’s independent auditors, addressed to the underwriters, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the managing underwriter reasonably requests and (C) if a Prospectus is filed in Quebec, opinions of Quebec counsel to BREP and the auditors of BREP addressed to the Holder and the underwriter or underwriters of such distribution relating to the translation of the Prospectus;

 

  (xv) cause the Registrable Units included in any Prospectus or Registration Statement, as applicable to be listed on the Toronto Stock Exchange and on the New York Stock Exchange;

 

  (xvi) provide a transfer agent and registrar for all Registrable Units registered hereunder;

 

  (xvii) cooperate with each seller and each underwriter participating in the disposition of such Registrable Units and their respective counsel in connection with any filings required to be made with FINRA;

 

  (xviii) during the period when the Registration Statement or Prospectus, as applicable, is required to be delivered under the applicable Securities Laws, promptly file all documents required to be filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act or with the Canadian Commissions pursuant to Canadian Securities Laws;

 

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  (xix) notify each seller of Registrable Units promptly of any request by the SEC or a Canadian Commission for the amending or supplementing of such Registration Statement or Prospectus, as applicable, or for additional information;

 

  (xx) enter into such agreements (including underwriting agreements in the managing underwriter’s customary form) as are customary in connection with an underwritten registration; and

 

  (xxi) advise each seller of such Registrable Units, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order or ruling by the SEC or a Canadian Commission suspending the effectiveness of such Registration Statement or Prospectus, as applicable, or the initiation or threatening of any proceeding for such purpose and promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued.

 

2.6 Suspension of Dispositions

Each Holder agrees by acquisition of any Registrable Units that, upon receipt of any notice (a “ Suspension Notice ”) from BREP of the happening of any event of the kind described in Section 2.5(vi)(C) such Holder will forthwith discontinue disposition of Registrable Units until such Holder’s receipt of the copies of the supplemented or amended prospectus, or until it is advised in writing (the “ Advice ”) by BREP that the use of the Registration Statement or Prospectus, as applicable, may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Registration Statement or Prospectus, as applicable, and, if so directed by BREP, such Holder will deliver to BREP all copies, other than permanent file copies then in such Holder’s possession, of the Registration Statement or Prospectus, as applicable, covering such Registrable Units current at the time of receipt of such notice. In the event BREP shall give any such notice, the time period regarding the effectiveness of Registration Statements or Prospectuses, as applicable, set forth in Sections 2.5(ii) and 2.5(iii) hereof shall be extended by the number of days during the period from and including the date of the giving of the Suspension Notice to and including the date when each seller of Registrable Units covered by such Registration Statement or Prospectus, as applicable, shall have received the copies of the supplemented or amended prospectus or the Advice. BREP shall use its commercially reasonable efforts and take such actions as are reasonably necessary to render the Advice as promptly as practicable.

 

2.7 Registration Expenses

All fees and expenses incident to any registration including, without limitation, BREP’s performance of or compliance with this Article 2, all registration and filing fees, all fees and expenses associated with filings required to be made with FINRA (including, if applicable, the reasonable fees and expenses of any “qualified independent

 

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underwriter” as such term is defined in Schedule E of the By-Laws of FINRA, and of its counsel), as may be required by the rules and regulations of FINRA, fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the Registrable Units), rating agency fees, printing expenses (including expenses of printing certificates for the Registrable Units and of printing prospectuses), messenger and delivery expenses, the fees and expenses incurred in connection with any listing or quotation of the Registrable Units, fees and expenses of counsel for BREP and its independent auditors (including the expenses of any special audit or “cold comfort” letters required by or incident to such performance), the fees and expenses of any special experts retained by BREP in connection with such registration, and the fees and expenses of other persons retained by BREP, will be borne by BREP (unless paid by a security holder that is not a Holder for whose account the registration is being effected) whether or not any Registration Statement or Prospectus becomes Effective; provided, however, that any underwriting discounts, commissions, or fees attributable to the sale of the Registrable Units will be borne by the Holders pro rata on the basis of the number of Units so registered and the fees and expenses of any counsel, accountants, or other persons retained or employed by any Holder will be borne by such Holder.

 

2.8 Indemnification

2.8.1 BREP agrees to indemnify and reimburse, to the fullest extent permitted by law, each seller of Registrable Units, and each of its employees, advisors, agents, representatives, partners, officers, and directors and each Person who Controls such seller and any agent or investment advisor thereof (collectively, the “ Seller Affiliates ”) (A) against any and all losses, claims, damages, liabilities, and expenses, joint or several (including, without limitation, reasonable attorneys’ fees and disbursements except as limited by Section 2.8.3) based upon, arising out of, related to or resulting from any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, (B) against any and all loss, liability, claim, damage, and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon, arising out of, related to or resulting from any such untrue statement or omission or alleged untrue statement or omission, and (C) against any and all costs and expenses (including reasonable fees and disbursements of counsel) as may be reasonably incurred in investigating, preparing, or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon, arising out of, related to or resulting from any such untrue statement or omission or alleged untrue statement or omission, or violation of the Securities Laws, to the extent that any such expense or cost is not paid under subparagraph (A) or (B) above; except insofar as any such statements are made in reliance upon and in strict conformity with information furnished in writing to BREP by such seller or any Seller Affiliate for use therein or arise from such seller’s or any Seller

 

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Affiliate’s failure to deliver a copy of the Registration Statement or Prospectus or any amendments or supplements thereto after BREP has furnished such seller or Seller Affiliate with a sufficient number of copies of the same. The reimbursements required by this Section 2.8.1 will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred.

2.8.2 In connection with any Registration Statement or Prospectus in which a seller of Registrable Units is participating, each such seller will furnish to BREP in writing such information and affidavits as BREP reasonably requests for use in connection with any such Registration Statement or Prospectus, as applicable, and, to the fullest extent permitted by law, each such seller will indemnify BREP and each of its employees, advisors, agents, representatives, partners, officers and directors and each Person who Controls BREP (excluding such Seller or any Seller Affiliate) and any agent or investment advisor thereof against any and all losses, claims, damages, liabilities, and expenses (including, without limitation, reasonable attorneys’ fees and disbursements except as limited by Section 2.8.3) resulting from any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus, as applicable, or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission is contained in any information or affidavit so furnished in writing by such seller or any of its Seller Affiliates specifically for inclusion in the Registration Statement or Prospectus, as applicable; provided that the obligation to indemnify will be several, not joint and several, among such sellers of Registrable Units, and the liability of each such seller of Registrable Units will be in proportion to, and will be limited to, the net amount received by such seller from the sale of Registrable Units pursuant to such Registration Statement or Prospectus, as applicable; provided, however, that such seller of Registrable Units shall not be liable in any such case to the extent that prior to the filing of any such Registration Statement or Prospectus, as applicable, or amendment thereof or supplement thereto, such seller has furnished in writing to BREP information expressly for use in such Registration Statement or Prospectus, as applicable, or any amendment thereof or supplement thereto which corrected or made not misleading information previously furnished to BREP.

2.8.3 Any Person entitled to indemnification hereunder will (A) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give such notice shall not limit the rights of such Person) and (B) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of

 

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such person unless (X) the indemnifying party has agreed to pay such fees or expenses, (Y) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person, or (Z) such counsel has been retained due to a conflict as described below. If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld or delayed). If such defense is assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable claim unless (1) such settlement or compromise contains a full and unconditional release of the indemnified party without any admission of liability on the part of such indemnified party or (2) the indemnified party otherwise consents in writing. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim (together with appropriate local counsel), unless in the reasonable judgment of any indemnified party, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and disbursements of such additional counsel or counsels.

2.8.4 Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 2.8.1 or Section 2.8.2 are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities, or expenses (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, liabilities, or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions which resulted in the losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.8.4 were determined by pro rata allocation (even if the Holders or any underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 2.8.4. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities, or expenses (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or, except as provided in Section 2.8.3, defending any such action or claim. Notwithstanding the

 

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provisions of this Section 2.8.4, no Holder shall be required to contribute an amount greater than the dollar amount by which the net proceeds received by such Holder with respect to the sale of any Registrable Units exceeds the amount of damages which such Holder has otherwise been required to pay by reason of any and all untrue or alleged untrue statements of material fact or omissions or alleged omissions of material fact made in any Registration Statement or Prospectus, as applicable, or any amendment thereof or supplement thereto related to such sale of Registrable Units. No person guilty of fraudulent misrepresentation shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations in this Section 2.8.4 to contribute shall be several in proportion to the amount of Registrable Units registered by them and not joint.

2.8.5 If indemnification is available under this Section 2.8, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 2.8.1 and Section 2.8.2 without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in Section 2.8.4 subject, in the case of the Holders, to the limited dollar amounts set forth in Section 2.8.2.

2.8.6 The indemnification and contribution provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, or controlling Person of such indemnified party and will survive the transfer of securities.

 

2.9 Transfer of Registration Rights

The rights of each Holder under this Agreement may, in the Holder’s discretion, be assigned, in whole or in part, to any direct or indirect transferee of all or any portion of such Holder’s Registrable Units who agrees in writing to be subject to and bound by all the terms and conditions of this Agreement. For greater clarity, in the case of a transfer of less than all of such Holder’s Registrable Units, no such assignment will limit or otherwise impair the transferor’s rights under this Agreement.

 

2.10 Current Public Information

BREP will file the reports required to be filed by it under applicable Securities Laws (or, if BREP is not required to file such reports, will, upon the request of the Holders, make publicly available other information) and will take such further action as any of the Holders may reasonably request, all to the extent required from time to time to enable the Holders to sell Units without registration under, and subject to the limitations of, applicable Securities Laws. Upon the reasonable request of any Holder, BREP will deliver to such parties a written statement as to whether it has complied with such requirements and will, at its expense, forthwith upon the request of any such Holder, deliver to such Holder a certificate, signed by an officer, stating (a) BREP’s name, address and telephone number (including area code), (b) BREP’s Internal Revenue Service identification number, (c) BREP’s SEC and SEDAR file numbers, (d) the number

 

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of Units outstanding as shown by the most recent report or statement published by BREP, and (e) whether BREP has filed the reports required to be filed under the Exchange Act for a period or at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder.

 

2.11 Preservation of Rights

BREP will not directly or indirectly (i) grant any registration rights to third parties which are more favorable than or inconsistent with the rights granted hereunder or (ii) enter into any agreement, take any action, or permit any change to occur, with respect to its securities that violates or subordinates the rights expressly granted to the Holders in this Agreement.

ARTICLE 3

TERMINATION

 

3.1 Termination

The Holders may exercise the registration rights granted hereunder in such manner and proportions as they shall agree among themselves. The registration rights hereunder shall cease to apply to any particular Registrable Unit when: (a) a Registration Statement or Prospectus, as applicable, with respect to the sale of such Units (or other securities) shall have become Effective and such Units shall have been disposed of in accordance with such Registration Statement or Prospectus, as applicable; (b) such Units (or other securities) shall have been sold to the public pursuant to an exemption under applicable Securities Laws; (c) such Units (or other securities) shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by BREP and subsequent public distribution of them shall not require registration under applicable Securities Laws; (d) such Units (or other securities) shall have ceased to be outstanding or (e) such Registrable Units are eligible for sale pursuant to Rule 144(b)(1) (without the requirement for BREP to be in compliance with the current public information required under Rule 144) under the U.S. Securities Act (or any successor provision). BREP shall promptly upon the request of any Holder furnish to such Holder evidence of the number of Registrable Units then outstanding.

ARTICLE 4

MISCELLANEOUS

 

4.1 Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

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4.2 Notices

Any notice or other communication required or permitted to be given hereunder will be in writing and will be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, will be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if sent by facsimile or other means of electronic communication, will be deemed to have been received on the Business Day following the sending, or if delivered by hand will be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address will also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications will be delivered by hand or sent by facsimile or other means of electronic communication and will be deemed to have been received in accordance with this section. Notices and other communications will be addressed as follows:

4.2.1 if to BRPI:

Brookfield Renewable Power Inc.

Brookfield Place, 181 Bay Street

Suite 300, P.O. Box 762

Toronto, Ontario M5J 2T3

Attention: Counsel

Facsimile: 416-363-2856

4.2.2 if to BREP:

2288509 Ontario Inc.

c/o Appleby Corporate Services

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM 12

Bermuda

Attention: Secretary

Facsimile: 441-298-3433

or to such other addresses or facsimile numbers as a party may from time to time notify the other in accordance with this Section 4.2.

 

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If to any other Holder, the address indicated for such Holder in BREP’s stock transfer records with copies, so long as BRPI owns any Registrable Units, to BRPI as provided above.

 

4.3 Authority

Each of the parties hereto represents to the other that (i) it has the corporate or partnership power and authority to execute, deliver and perform this Agreement, (ii) the execution, delivery and performance of this Agreement by it has been duly authorized by all necessary corporate or partnership action and no such further action is required, (iii) it has duly and validly executed and delivered this Agreement, and (iv) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

 

4.4 Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use commercially reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

4.5 Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

[NEXT PAGE IS SIGNATURE PAGE]

 

[REGISTRATION RIGHTS AGR_BRPI & BREP]

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IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written.

 

BROOKFIELD RENEWABLE POWER INC.
By:   /s/ “ Patricia Bood”        
 

Name: Patricia Bood

Title: Authorized Signatory

 

BROOKFIELD RENEWABLE ENERGY

PARTNERS L.P. by its general partner 2288509 ONTARIO INC.

By:   /s/ “ Jane Sheere”        
 

Name: Jane Sheere

Title: Authorized Signatory

 

[REGISTRATION RIGHTS AGR_BRPI & BREP]

Exhibit 4.5

EXECUTION COPY

BROOKFIELD RENEWABLE POWER INC.

and

BROOKFIELD RENEWABLE POWER FUND

and

BROOKFIELD RENEWABLE POWER TRUST

and

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.

 

 

COMBINATION AGREEMENT

September 12, 2011

 

 


TABLE OF CONTENTS

 

ARTICLE 1 INTERPRETATION

     1   

1.1   Defined Terms

     1   

1.2   Schedules

     17   

1.3   Headings and Table of Contents

     17   

1.4   Interpretation

     17   

1.5   Knowledge

     18   

1.6   Accounting Terms

     18   

ARTICLE 2 THE ARRANGEMENT

     18   

2.1   Arrangement

     18   

2.2   Interim Order

     18   

2.3   Meetings

     19   

2.4   Circular

     20   

2.5   Filing of Form 20-F Prior to the Effective Time

     21   

2.6   Securities Law Compliance

     21   

2.7   Final Order

     22   

2.8   Court Proceedings

     22   

2.9   Articles of Arrangement and Effective Date

     22   

2.10 United States Tax Considerations

     22   

2.11 United States Securities Law

     22   

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BRPI

     23   

3.1   Representations and Warranties Regarding the BRPI Entities

     23   

3.2   Representations and Warranties Regarding BRPI

     37   

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BREP

     39   

4.1   Representations and Warranties of BREP

     39   

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE FUND ENTITIES

     40   

5.1   Representations and Warranties of the Fund Entities

     40   

ARTICLE 6 COVENANTS OF THE PARTIES

     41   

6.1   Access to Books and Records

     41   

6.2   Announcements

     41   

6.3   Expenses

     41   

6.4   BRP Equity Preferred Shares

     42   

6.5   Insurance and Indemnification

     42   

6.6   Update of Disclosure Letter

     43   

6.7   Replacement of Security

     43   

ARTICLE 7 PRE-CLOSING COVENANTS OF THE PARTIES

     44   

7.1   Covenants of BRPI Regarding Conduct of Businesses Prior to Closing

     44   

7.2   Covenants of the Fund Entities Regarding Conduct of Business Prior to Closing

     45   

7.3   Actions to Satisfy Closing Conditions

     46   

7.4   Filings and Authorizations

     46   

7.5   Pre-Closing Reorganization

     46   

7.6   Notice of Untrue Representation or Warranty

     46   

7.7   Access for Due Diligence

     47   

7.8   Fund Entities

     47   


ARTICLE 8 CONDITIONS OF CLOSING

     47   

8.1 Mutual Conditions Precedent

     47   

8.2 Conditions for the Benefit of the Fund Entities

     48   

8.3 Conditions for the Benefit of BRPI

     49   

8.4 Satisfaction of Conditions

     50   

ARTICLE 9 CLOSING DELIVERIES

     50   

9.1     Deliveries by BRPI

     50   

9.2     Deliveries by the Fund Entities

     50   

ARTICLE 10 TERMINATION

     50   

10.1   Termination Rights

     50   

10.2   Effect of Termination

     51   

ARTICLE 11 CLOSING

     51   

11.1   Date, Time and Place of Closing

     51   

11.2   Delivery of Books and Records

     52   

ARTICLE 12 INDEMNIFICATION

     52   

12.1   Survival

     52   

12.2   No Effect of Knowledge

     53   

12.3   Indemnification in Favour of BREP and the Fund Entities

     53   

12.4   Indemnification in Favour of BRPI

     54   

12.5   Limitations on Amount of Damages

     54   

12.6   Notification

     55   

12.7   Procedure for Direct Claims

     55   

12.8   Procedure for Third Party Claims

     55   

12.9   Exclusion of Other Remedies

     57   

12.10 No Consequential Damages

     57   

ARTICLE 13 MISCELLANEOUS

     57   

13.1   Notices

     57   

13.2   Time is of the Essence

     59   

13.3   Third Party Beneficiaries

     59   

13.4   Amendments

     59   

13.5   Waiver

     60   

13.6   Entire Agreement

     60   

13.7   Successors and Assigns

     60   

13.8   Severability

     61   

13.9   Governing Law

     61   

13.10 Brokers

     61   

13.11 Further Assurances

     61   

13.12 Counterparts

     61   

 

- ii -


COMBINATION AGREEMENT

THIS COMBINATION AGREEMENT dated September 12, 2011 between Brookfield Renewable Power Inc., a corporation formed under the laws of the Province of Ontario (“ BRPI ”), Brookfield Renewable Power Fund, a trust governed by the laws of the Province of Québec (the “ Fund ”), Brookfield Renewable Power Trust, a trust governed by the laws of the Province of Québec (“ BRPT ”, and together with the Fund, the “ Fund Entities ”), and Brookfield Renewable Energy Partners L.P., an exempted partnership formed under the laws of Bermuda (“ BREP ”).

WHEREAS:

BRPI owns, directly and indirectly, all the interests it purports to own in each of the BRPI Entities (as defined herein);

The Fund Entities and BRPI wish to combine all of the renewable power operations held by the Fund and the BRPI Entities pursuant to a reorganization whereby the Fund, the Fund-Owned Entities (as defined herein) and the BRPI Entities shall be reorganized under BREP;

The foregoing transactions will be implemented by way of an arrangement under the OBCA (as defined herein);

The board of directors of BRPI has: (a) determined that this business combination and reorganization to be effected pursuant to the Arrangement (as defined herein) is advisable and in the best interests of BRPI; and (b) unanimously approved the transactions contemplated by this Agreement and the Plan of Arrangement (each as defined herein); and

Each of the board of trustees of BRPT (the “ Trustees ”) and the board of directors of Brookfield Renewable Power Preferred Equity Inc. (“ BRP Equity ”) has: (a) determined that this business combination and reorganization to be effected pursuant to the Arrangement is advisable and in the best interests of the Fund and its Unitholders (as defined herein) and BRP Equity and its Preferred Shareholders (as defined herein), respectively; (b) unanimously approved the transactions contemplated by this Agreement and the Plan of Arrangement; and (c) resolved unanimously to recommend that Unitholders and Preferred Shareholders, respectively, vote in favour of the Arrangement.

NOW, THEREFORE , in consideration of the mutual covenants and agreements contained herein, the Parties hereby covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Defined Terms

As used in this Agreement, the following terms have the following meanings:

$2,000,000 De Minimis Representations ” means the representations and warranties of BRPI set forth in Sections 3.1.9, 3.1.11, 3.1.14, 3.1.15, 3.1.16, 3.1.23 and 3.1.25.1.

$2,000,000 Threshold ” has the meaning specified in Section 12.5.1.

1933 Act ” mean the U.S. Securities Act of 1933 , as amended, and the rules and regulations promulgated thereunder.


1934 Act ” means the U.S. Securities Exchange Act of 1934 , as amended, and the rules and regulations promulgated thereunder.

3(a)(10) Exemption ” has the meaning ascribed thereto in Section 2.11.

Adjusted Net Working Capital ” means the net working capital of the BRPI Entities as reflected in the unaudited carve-out combined comparative interim balance sheet as at June 30, 2011 relating to the BRPI Entities, as adjusted for the items set forth on Section 3.1.32 of the Disclosure Letter.

Affiliate ” has the meaning attributed to such term in National Instrument 45—106 Prospectus and Registration Exemptions .

Agreement ” means this combination agreement and the Disclosure Letter as the same may be amended and/or restated from time to time pursuant to Section 6.6; and the expressions “Article”, “Schedule” and “Section” followed by a number mean and refer to the specified Article, Schedule or Section of this Agreement.

Amended and Restated BRELP Partnership Agreement ” means the amended and restated limited partnership agreement of BRELP to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Amended and Restated BREP Partnership Agreement ” means the amended and restated limited partnership agreement of BREP to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Amended and Restated Partnership Agreements ” means (i) the Amended and Restated BREP Partnership Agreement, and (ii) the Amended and Restated BRELP Partnership Agreement.

Ancillary Agreements ” means all agreements, certificates and other instruments delivered or given pursuant to this Agreement, including (i) the Contract Amendments, (ii) the Energy Revenue Agreement, (iii) the Energy Marketing Agreement, (iv) the Master Services Agreement, (v) the Relationship Agreement, (vi) the Registration Rights Agreement, (vii) the Voting Agreement, (viii) the Amended and Restated Partnership Agreements, (ix) the Development Projects Agreements; (x) the Power Agency Agreements and (xi) Parent Guaranty Agreement.

Arrangement ” means the arrangement under Section 182 of the OBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Section 13.4 hereof or Article 5 of the Plan of Arrangement or made at the direction of the Court in the Final Order.

Arrangement Resolutions ” means the Preferred Shareholder Arrangement Resolution and the Unitholder Arrangement Resolution.

Articles of Arrangement ” has the meaning set out in the Plan of Arrangement.

Assets ” means all property and assets of each of the BRPI Entities of every nature and kind and wheresoever situate and includes the rights, benefits and interests of each of the BRPI Entities under any Contract or Authorization.

 

- 2 -


Authorization ” means, with respect to any Person, any order, permit, approval, certificate, consent, waiver, licence or similar authorization of any Governmental Authority having jurisdiction over the Person (including, without limitation, any such order, permit, approval, certificate, consent, waiver, licence or similar authorization relating to the use of water).

BEM LP ” means Brookfield Energy Marketing LP.

BEMI ” means Brookfield Energy Marketing Inc.

Benefit Plans ” means all “employee benefit plans” as defined in Section 3(3) of ERISA (whether or not subject to ERISA) and all other plans, programs, policies, practices and arrangements, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, registered or unregistered, which any of the BRPI Entities is a party to, has or may have any liability (actual or contingent) under, or is bound by or in which the Employees participate, pursuant to which payments are made, or benefits are provided to, or an entitlement to payments or benefits may arise with respect to Employees or former employees, directors or officers of any of the BRPI Entities relating to retirement savings, pensions, bonuses, profit sharing, deferred compensation, incentive compensation, stock options, stock purchases, stock appreciation, phantom stock, other stock-based compensation, life or accident insurance, hospitalization, health, medical or dental treatment or expenses, disability, unemployment insurance benefits, employee loans, vacation pay, severance or termination pay or other benefits, but excludes Statutory Plans.

Bond Indenture ” means the trust indenture dated December 16, 2004 between BRPI, BNY Trust Company of New York and BNY Trust Company of Canada, as supplemented, amended and restated from time to time.

Bondholder Approval ” means the approval by the holders of BRPI Bonds, in accordance with the Bond Indenture, of the completion of the following as at the Effective Time: (i) the assumption of the obligations of BRPI under the Bond Indenture and the BRPI Bonds by an indirect subsidiary of BRELP (“ Finco ”); (ii) the substitution of Finco for BRPI as the issuer of the BRPI Bonds; (iii) the release of BRPI of all of its obligations under the BRPI Bonds and the Bond Indenture and (iv) the amendment of the Bond Indenture to reflect the foregoing and certain additional changes.

Books and Records ” means all books of account, financial and accounting information and records, personnel records, tax records, sales and purchase records, production reports and records, equipment logs, operating guides and manuals and marketing and advertising materials and all other documents, files, correspondence and other information (whether in written, printed, electronic or computer printout form, or stored on computer discs or other data and software storage and media devices), in any form relating to any of the Businesses.

BRELP ” means Brookfield Renewable Energy L.P.

BREP ” means Brookfield Renewable Energy Partners L.P.

BREP LP Units ” means limited partnership units of BREP.

Brookfield ” means Brookfield Asset Management Inc.

BRP Equity ” means Brookfield Renewable Power Preferred Equity Inc.

 

- 3 -


BRP Equity Preferred Shares ” means the issued and outstanding Class A preference shares in the capital of BRP Equity.

BRPI ” means Brookfield Renewable Power Inc.

BRPI Bonds ” means all outstanding bonds issued by BRPI pursuant to the Bond Indenture namely the Series 3 Bonds, the Series 4 Bonds, the Series 6 Bonds and the Series 7 Bonds.

BRPI Entities ” means all entities in which BRPI owns, directly or indirectly, any shares or other ownership interests as of the date hereof except for the Fund, the Fund-Owned Entities and the Excluded Entities.

BRPI Fundamental Representations ” means the representations and warranties of BRPI set forth in Sections 3.1.1.1, 3.1.4, 3.1.5, 3.1.6 and 3.2.1.

BRPI Guarantees ” has the meaning specified in Section 6.7.

BRPI Indemnified Parties ” has the meaning specified in Section 6.7.

BRPI Material Adverse Effect ” means any change, effect, event, situation or condition that, when considered individually or in the aggregate together with all other adverse changes or effects with respect to which such phrase is used in this Agreement, is, or would reasonably be expected to be, materially adverse to the business, operations, performance, liabilities, results of operations, assets, properties or condition (financial or otherwise) of the BRPI Entities taken as a whole; provided, however, that in determining whether there has been a BRPI Material Adverse Effect, any material adverse effect attributable to: (i) general economic, business or financial market conditions, including without limitation, changes in the markets or industry in which the BRPI Entities operate and which do not have a materially disproportionate adverse effect on the BRPI Entities taken as a whole compared to other companies of a similar size operating in the industries in which the BRPI Entities operate; (ii) the announcement of the entering into of this Agreement; (iii) any adoption, proposed implementation or change in applicable Law or any interpretation thereof by any Governmental Authority that does not have a materially disproportionate adverse effect on the BRPI Entities taken as a whole compared to other companies of a similar size operating in the industries in which the BRPI Entities operate; or (iv) the breach by any of the Fund Entities of this Agreement (unless caused directly or indirectly by BRPI or any of its Affiliates), will be disregarded; for greater certainty, no material adverse effect attributable to the Fund or the Fund-Owned Entities shall be taken into account in determining whether there has been a BRPI Material Adverse Effect.

BRPI Public Disclosure Record ” means all documents filed by or on behalf of BRPI on the System for Electronic Document Analysis and Retrieval (SEDAR) after December 31, 2010.

BRPI Security ” has the meaning specified in Section 6.7.

BRPI Surviving Representations ” means the representations and warranties of BRPI set forth in Sections 3.1.2, 3.2.2 and 3.2.3.

BRPT ” means Brookfield Renewable Power Trust.

Buildings and Fixtures ” means the Facilities and all buildings, structures, erections, improvements, appurtenances and fixtures (including fixed machinery and fixed equipment) situated on the Owned Real Property, the Leased Properties or the lands subject to the Real Property Contracts, that are in each case owned or leased by the BRPI Entities in connection with the operation of the Facilities.

 

- 4 -


Businesses ” means, in relation to any BRPI Entity, the ownership, construction, development, operation and use by such BRPI Entity, of the Facilities to generate power and all matters incidental and/or ancillary thereto.

Business Day ” means every day except a Saturday or Sunday, or a day which is a statutory or civic holiday in Bermuda, the Province of Ontario, or the State of New York.

“Cap Amount means $937.5 million.

Circular ” means the notice of the Unitholder Meeting, notice of the Preferred Shareholder Meeting and accompanying management information circular, including all schedules, appendices and exhibits thereto and enclosures therewith, to be sent to Unitholders and Preferred Shareholders in connection with the Meetings, as amended, supplemented or otherwise modified from time to time.

Code ” means the United States Internal Revenue Code of 1986.

Collective Agreements ” means collective agreements or collective bargaining agreements under applicable Laws (and related documents) and similar documents.

Consents ” means those consents or approvals required from any third parties in respect of the completion of the Arrangement in respect of those agreements that are described under the heading entitled “Consents” in Section 1.1 of the Disclosure Letter.

Contaminants ” means any Hazardous Substance in such a concentration or under such conditions as to create, or which could reasonably be expected to create, a material violation, liability or duty under any Environmental Law.

Contract ” means any agreement, contract, licence, undertaking, engagement or commitment, whether written or oral, of any nature.

Contract Amendments ” means (i) the Mississagi Master Power Purchase and Sale Agreement Amendment, (ii) the Toll LP Agreement Amendment, and (iii) the GLPL Agreement Amendment.

Corporate Records ” means (A) the following for each of the BRPI Entities that is a corporation: (i) all constating documents and by-laws; (ii) all minutes of meetings and resolutions of shareholders and directors and all committees, if any, thereof; and (iii) the share certificate books, securities register, register of transfers and register of directors and officers and (B) the equivalent of (i), (ii) and (iii) for each of the BRPI Entities that is not a corporation.

Court ” means the Ontario Superior Court of Justice.

Damages ” means any loss, liability, damage (excluding incidental and consequential damages and lost profits other than incidental and consequential damages and lost profits of a third party in respect of a Third Party Claim), cost or expense (including reasonable legal fees, accountants’, investigators’, engineers’ and consultants’ fees and expenses, interest, penalties and amounts paid in settlements), whether resulting from any action, suit, proceeding, arbitration, claim or demand that is instituted or asserted by a third party, or any cause, matter, thing, act or omission or state of facts not involving a third party.

 

- 5 -


Data Room ” means the secure website at https://services.intralinks.com as of 12:00 p.m. (Toronto Time) on September 12, 2011.

“Deductible ” means $35,000,000.

Development Projects Agreements ” means collectively (i) the development projects agreement between BRPI and certain subsidiaries of BRELP to be entered into on or before the Effective Date, (ii) the royalty agreements between BRPI and certain subsidiaries of BRELP to be entered into on or before the Effective Date, and (iii) the series conditions for special shares to be issued by a subsidiary of BRELP to be created under the laws of Bermuda on or before the Effective Date, in each case, substantially in the form of such documents attached to the Disclosure Letter.

Direct Claim ” means any cause, matter, thing, act, omissions or state of facts not involving a Third Party Claim which entitles an Indemnified Person to make a claim for indemnification under this Agreement.

Director ” means the Director appointed pursuant to Section 278 of the OBCA.

Disclosure Letter ” means the letter dated the date of this Agreement from BRPI to the Fund Entities in respect of the representations, warranties and covenants of BRPI hereunder.

Dissent Rights ” means the rights of dissent in respect of the Arrangement described in the Plan of Arrangement.

Easements ” means all easements, rights-of-way, servitudes and rights in the nature of easements necessary for the development, maintenance or operation of the Facilities.

Effective Date ” has the meaning set out in the Plan of Arrangement.

Effective Time ” has the meaning set out in the Plan of Arrangement.

Employees ” means those individuals employed by any of the BRPI Entities on a full-time, part-time or temporary basis and who are engaged in the Business, including those employees on disability leave, parental leave or other authorized absence.

Energy Marketing Agreement ” means the marketing agreement between BEM LP and BEMI to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Energy Revenue Agreement ” means the power purchase agreement between BEM LP and Brookfield Power US Holding America Co, to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Environmental Activities ” means any activity, event or circumstance in respect of a Hazardous Substance, including, without limitation, its storage, use, holding, collection, purchase, accumulation, assessment, management, generation, manufacture, construction, processing,

 

- 6 -


treatment, stabilization, disposition, handling or transportation or its release into the natural environment, including movement through or in the air, soil, subsoil, sediments, surface water or groundwater.

Environmental Laws ” means all applicable Laws relating to the protection of the environment, occupational health and safety and/or Environmental Activities, and the manufacture, processing, distribution, use, treatment, storage, disposal, discharge, transport or handling of any Hazardous Substances.

ERISA ” shall mean the Employee Retirement Income Security Act of 1974 , as amended, and the regulations and rules thereunder.

ERISA Affiliate ” with respect to any Person, shall mean any entity that, together with such Person, is required to be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

Excluded Entities ” means the entities identified under the heading “Excluded Entities” in Section 1.1 of the Disclosure Letter.

Facilities ” means the power generating facilities that will be owned by the BRPI Entities as of the Effective Date.

Final Order ” means the final order of the Court pursuant to Section 182(5) of the OBCA approving the Arrangement, as such order may be amended by the Court at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended on appeal.

Financial Statements ” means the audited carve-out combined comparative financial statements of BRPI for the years ended December 31, 2010 and December 30, 2009 and the unaudited carve-out combined comparative interim financial statements for the six month periods ended June 30, 2011 and June 30, 2010 relating to the BRPI Entities, which includes for the purposes of this definition the Fund and the Fund-Owned Entities, which are contained in the Circular.

Financing Agreements ” means all financing agreements in respect of the BRPI Entities disclosed under the heading “Financing Agreements” in Section 1.1 of the Disclosure Letter.

Financing Liens ” means all Liens granted under or in connection with the Financing Agreements.

Finco Bonds ” means the bonds of Finco to be issued in substitution of the BRPI Bonds on the Effective Date;

Form 20-F ” means the registration statement on Form 20-F, if any, filed by BREP with the SEC pursuant to Section 12 of the 1934 Act.

Fund ” means Brookfield Renewable Power Fund.

Fund Entities ” means the Fund and BRPT.

Fund-Owned Entities ” means all entities in which the Fund owns, directly or indirectly, any shares or other ownership interests as of the date hereof.

 

- 7 -


Fund Material Adverse Effect ” means any change, effect, event, situation or condition that, when considered individually or in the aggregate together with all other adverse changes or effects with respect to which such phrase is used in this Agreement, is, or would reasonably be expected to be, materially adverse to the business, operations, performance, liabilities, results of operations, assets, properties or condition (financial or otherwise) of the Fund and the Fund-Owned Entities taken as a whole; provided, however, that in determining whether there has been a Fund Material Adverse Effect, any material adverse effect attributable to: (i) general economic, business or financial market conditions, including without limitation, changes in the markets or industry in which the Fund and the Fund-Owned Entities operate and which do not have a materially disproportionate adverse effect on the Fund and the Fund-Owned Entities taken as a whole compared to other companies of similar size operating in the industries in which the Fund and the Fund-Owned Entities operate; (ii) the announcement of the entering into of this Agreement; (iii) any adoption, proposed implementation or change in applicable Law or any interpretation thereof by any Governmental Authority that does not have a materially disproportionate adverse effect on the Fund and the Fund-Owned Entities taken as a whole compared to other companies of similar size operating in the industries in which the Fund and the Fund-Owned Entities operate; or (iv) the breach by BRPI of this Agreement (unless caused directly or indirectly by any of the Fund Entities), will be disregarded.

Fund Units ” means the issued and outstanding interests in the Fund, represented by trust units.

GAAP ” means accounting principles generally accepted in Canada as set out in the Handbook of the Canadian Institute of Chartered Accountants, at the relevant time applied on a consistent basis.

GLPL ” means Great Lakes Power Limited.

GLPL Agreement Amendment ” means the amendment to the agreement between BRPI and BRPT dated July 6, 2009 to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Governmental Authority ” means any (i) international, multinational, national, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, agency or instrumentality, domestic or foreign, including ISO/RTOs, (ii) self-regulatory organization or stock exchange, (iii) subdivision, agent, commission, board, or authority of any of the foregoing, or (iv) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing.

GP Co ” means 2288509 Ontario Inc.

Grid ” means the electrical transmission network directed and monitored by the applicable Governmental Authority.

Hazardous Substances ” means any waste or other substance that is hazardous, radioactive or toxic or a pollutant or a contaminant, including any mixture or solution thereof, which is defined, governed or may form the basis of liability under any Environmental Law.

IFRS ” means international financial reporting standards adopted by the International Accounting Standards Board.

 

- 8 -


Indemnified Person ” means a Person with indemnification rights or benefits under Sections 6.5, 12.3, or 12.4 of this Agreement.

“Indemnifying Party ” means a Party against which a claim may be made for indemnification pursuant to Section 6.5 or Article 12 of this Agreement.

“Individual Threshold ” has the meaning specified in Section 12.5.1.

Intellectual Property ” means domestic and foreign: (i) patents, applications for patents and reissues, divisions, continuations, renewals, extensions and continuations-in-part of patents or patent applications; (ii) proprietary and non-public business information, including inventions (whether patentable or not), invention disclosures, improvements, trade secrets, know-how, processes, designs, technology, technical data, schematics and formulae, and documentation relating to any of the foregoing; (iii) copyrights, copyright registrations and applications for copyright registration; (iv) mask works, mask work registrations and applications for mask work registrations; (v) designs, design registrations, design registration applications and integrated circuit topographies; and (vi) trade names, business names, corporate names, domain names, website names and world wide web addresses, trade-mark registrations, trade-mark applications, trade dress and logos, and the goodwill associated with any of the foregoing.

Interim Order ” means the interim order of the Court contemplated by Section 2.2 of this Agreement and made pursuant to Section 182(5) of the OBCA providing for, among other things, the calling and holding of the Meetings, as the same may be amended by the Court.

Interim Period ” means the period between the execution of this Agreement and the Effective Date.

IRS ” means the United States Internal Revenue Service or any successor agency thereto, including its agents, representatives and attorneys.

ISO/RTO ” means an independent electricity system operator, a regional transmission organization, national system operator or any other similar organization overseeing the transmission of electricity in any jurisdiction in which the BRPI Entities own assets or operate.

Laws ” means any and all applicable (i) laws, constitutions, treaties, statutes, codes, ordinances, principles of common and civil law and equity, rules, regulations and municipal by-laws whether domestic, foreign or international, (ii) judicial, arbitral, administrative, ministerial, departmental and regulatory judgments, orders, writs, injunctions, decisions, and awards of any Governmental Authority, and (iii) policies, practices and guidelines of any Governmental Authority which, although not actually having the force of law, are considered by such Governmental Authority as requiring compliance as if having the force of law, and the term “applicable”, with respect to such Laws and in the context that refers to one or more Persons, means such Laws that apply to such Person or Persons or its or their business, undertaking, property or securities at the relevant time and that emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities.

Leased Properties ” means the lands and premises that are the subject of the Leases, and “ Leased Property ” means any one of the foregoing.

Leases ” has the meaning specified in Section 3.1.15.

 

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Lien ” means any mortgage, deed of trust, deed to service debt, charge, pledge, hypothecation, security interest, assignment, lien (statutory or otherwise), easement, title retention agreement or arrangement, deemed or statutory trust, restrictive covenant, adverse claim, exception, reservation, right of occupation, any matter capable of registration against title, option, right of pre-emption, privilege or other encumbrance of any nature or any other arrangement or condition which, in substance, secures payment or performance of an obligation.

Master Services Agreement ” means the master services agreement among the Managers (as defined in the Master Services Agreement), BREP, BRELP, the Holding Entities (as defined in the Master Services Agreement) and others to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Material Authorizations ” has the meaning specified in Section 3.1.10.

Material Contracts ” has the meaning specified in Section 3.1.18.

Material Environmental Authorizations ” has the meaning specified in Section 3.1.25.1.2.

Meetings ” means the Preferred Shareholder Meeting and the Unitholder Meeting.

MI 61-101 ” means Multilateral Instrument 61-101— Protection of Minority Security Holders in Special Transactions .

Minority Unitholders ” means Unitholders whose votes may be counted for purposes of obtaining minority approval of the Unitholder Arrangement Resolution in accordance with Section 8.1 of MI 61-101.

Misrepresentation ” means (a) an untrue statement of material fact or (b) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

Mississagi Master Power Purchase and Sale Agreement Amendment ” means the amendment to the master power purchase and sale agreement between Mississagi Power Trust and BEM LP dated November 27, 2003, as amended on July 6, 2009, to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

NI 51-102F5 ” means Form 5 to National Instrument 51-102 - Continuous Disclosure Obligations .

Notice ” has the meaning specified in Section 13.1.

OBCA ” means the Business Corporations Act (Ontario).

Ordinary Course ” means, with respect to an action taken by a Person, that such action is generally consistent with the past practices of the Person and is taken in the ordinary course of the normal operations of the Person.

Outside Date ” means (i) December 31, 2011, provided however that if at that time all conditions to closing of the Arrangement shall have been satisfied or waived, other than the condition set forth in Section 8.1.2 (and those conditions that by their terms are to be satisfied at the Effective Time), then any Party may extend the Outside Date by a specified period of not less

 

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than five Business Days, provided that in the aggregate such extensions shall not exceed six months, by giving written notice to the other Parties to such effect no later than 5:00 p.m. (Toronto time) on the date that is five days (or such shorter period as is practical in the circumstances) prior to the then current Outside Date, or (ii) such later date as may be agreed to in writing by the Parties.

Owned Real Property ” has the meaning specified in Section 3.1.15.

Parent Guaranty Agreement ” means the parent guaranty agreement between BRPI and Brookfield Power US Holding America Co. to be entered into on the Effective Date substantially in the form attached to the Disclosure Letter.

Parties ” means, collectively, BRPI, the Fund Entities and BREP and any other Person who may become a party to this Agreement, and “ Party ” means any one of them.

Pension Plans ” means all Benefit Plans relating to retirement, retirement savings, pensions or supplemental pensions, including any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA).

Permitted Liens ” means, in respect of any of the BRPI Entities or the Assets, any one or more of the following:

 

  (a) Liens for Taxes, rates, assessments or other governmental charges or levies not yet due, or for which instalments have been paid based on reasonable estimates pending final assessments, or if due, the validity of which is being contested diligently and in good faith by appropriate proceedings in that regard, provided that adequate reserves have been established therefore in accordance with IFRS;

 

  (b) undetermined or inchoate or statutory Liens of contractors, subcontractors, mechanics, workers, suppliers, materialmen, carriers and others in respect of the construction, maintenance, repair or operation of any of the Assets, provided that such Liens are related to obligations not due or payable or in respect of which adequate provision has been made in the Books and Records, are not registered against title to any Assets and in respect of which adequate holdbacks are being maintained as required by applicable Law;

 

  (c) the right reserved to or vested in any Governmental Authority or any other Person by any statutory provision or by the terms of any lease, Easement, license, permit, right of way agreement or similar right or agreement, Contract or Authorization made with or with respect to any of the BRPI Entities or the Assets, to terminate the same, or to require annual or other payments as a condition of its continuance;

 

  (d) the Financing Liens;

 

  (e) zoning (including, without limitation, airport zoning regulations), use and building by-laws and ordinances and federal, provincial or municipal by-laws and regulations as to the use of any of the Assets, which do not materially interfere with the use of the Assets for the purposes for which they are held or materially impair the value thereof;

 

  (f) subdivision, site plan control, development, reciprocal, servicing, facility, facility cost sharing or similar agreements currently existing or entered into with a Governmental Authority, from time to time in respect of any of the Assets, which do not materially interfere with the use of the Assets for the purposes for which they are held;

 

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  (g) encumbrances respecting encroachments by any of the Assets or any Buildings and Fixtures over neighbouring lands provided that they are permitted under agreements with the owners of such lands, provided such agreements have been complied with, are in good standing and any security required under the agreements has been given;

 

  (h) encumbrances respecting encroachments by any buildings, improvements or other facilities over the lands comprising the Assets which do not materially interfere with the use thereof for the purposes for which they are held or materially impair the value thereof;

 

  (i) permits, licenses, agreements, leases, Easements (including heritage Easements and agreements relating thereto), restrictions, restrictive covenants, reciprocal rights, rights-of-way, public ways, rights in the nature of an Easement and other similar rights in land granted to or reserved by other Persons (including permits, licenses, agreements, easements, rights-of-way, sidewalks, public ways, and rights in the nature of Easements or servitudes for sewers, drains, steam, gas and water mains or electric light and power or telephone and telegraph conduits, poles, wires and cables) or which are contemplated or provided for or which any of the BRPI Entities is bound to enter into pursuant to any subdivision, development, site plan control or similar agreement in respect of any part of the Assets which in the aggregate do not materially impair the value of the Assets or materially interfere with the use thereof for the purposes for which they are held;

 

  (j) security given to a public utility or any municipality or Governmental Authority when required by the operations of any of the BRPI Entities in the ordinary course of business, including the right of the municipality to acquire portions of any lands for road widening or interchange construction and the right of the municipality to complete improvements, landscaping or remedy deficiencies in any traffic control or monitoring to be provided to the Assets;

 

  (k) title defects or irregularities that are of a minor nature and do not materially impair the use of the Assets for the purposes for which they are held or materially impair the value thereof;

 

  (l) any subsisting reservations, limitations, provisions and conditions contained in any original grants from the Crown of any land or interest therein, reservations of undersurface rights to mines and minerals of any kind;

 

  (m) statutory reservations and exceptions to title;

 

  (n) any and all statutory Liens, charges, adverse claims, prior claims, security interests, deemed trusts or other Liens of any nature whatsoever claimed or held by any Governmental Authority under or pursuant to any applicable legislation, statute or regulation securing indebtedness not yet due or delinquent which in the aggregate do not materially impair the value of the Assets or materially interfere with the use thereof for the purposes for which they are held;

 

  (o) Liens constituting revendication or reclamation rights, purchase-money security interests and similar statutory rights in favour of sellers of goods or other property so long as such Liens only secure the purchase price of such goods and apply only to the goods or other property sold;

 

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  (p) Liens of contractors, subcontractors, mechanics, workers, suppliers, materialmen, carriers and others in respect of the construction, maintenance, repair or operation of any of the Assets, provided that such Liens are being contested diligently and in good faith and adequate holdbacks are being maintained as required by applicable Law or surety bonds have been received in respect of such holdback;

 

  (q) Liens resulting from the deposit of cash or securities in connection with: (i) Contracts, tenders or expropriation proceedings; (ii) public, statutory and other similar obligations incurred in the Ordinary Course; (iii) workmen’s compensation, unemployment insurance, surety or appeal bonds; (iv) litigation; and/or (v) any construction, mechanics’, warehousemen’s, carriers’ or other similar Lien, incurred in the Ordinary Course;

 

  (r) Liens created by others over lands in respect of which leaseholds or license rights and/or through which easements or rights-of-way have been or will be acquired by a BRPI Entity which do not materially detract from the value of such easements or right-of-way or materially impair their use in the operation of the business of such BRPI Entity;

 

  (s) Liens or rights granted in favour of any one or more BRPI Entities or BRELP or any Subsidiary of BRELP;

 

  (t) Liens as described under the heading “ Permitted Liens ” in Section 1.1 of the Disclosure Letter;

 

  (u) work orders or similar orders issued by Governmental Authorities in respect of Assets that are currently under development or in respect of which construction is ongoing, provided that the same are not material and will be cleared in the normal course of such development or construction; and

 

  (v) all agreements, Easements, title retention agreements or arrangements, statutory rights or encumbrances, restrictive covenants, adverse claims, title exceptions, reservations, leases, licenses, rights of occupation, or similar rights that exist as at the date hereof, whether or not the same are registered against title to the Assets or any part thereof, provided that the same do not materially interfere with the use of the Assets for the purposes for which they are currently held or materially impair the value of the Assets.

Person ” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, Governmental Authority or other entity however designated or constituted and pronouns have a similarly extended meaning.

Personal Information ” has the meaning ascribed to that term under PIPEDA and/or any other Law relating to the protection of personal information.

PIPEDA ” means the Personal Information Protection and Electronic Documents Act (Canada), and any regulations thereunder.

 

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Plan of Arrangement ” means the plan of arrangement substantially in the form of Schedule C, and any amendments or variations thereto made in accordance with Section 13.4 hereof and Article 5 of the Plan of Arrangement or upon the direction of the Court in the Final Order.

Power Agency Agreements ” means the power agency agreements between BEM LP and each of the owners of the U.S. Facilities subject to the Energy Revenue Agreement and the Parent Guaranty Agremeent to be entered into on or before the Effective Date, substantially in the forms attached to the Disclosure Letter.

Pre-Closing Reorganization ” has the meaning specified in Section 7.5.

Preferred Share Redemption ” means the redemption or repurchase of all the BRP Equity Preferred Shares in accordance with the provisions of the BRP Equity Preferred Shares as at the date hereof.

Preferred Shareholder Approval ” means the approval of the Preferred Shareholder Arrangement Resolution by at least two-thirds of the votes cast by Preferred Shareholders present in person or represented by proxy at the Preferred Shareholder Meeting.

Preferred Shareholder Arrangement Resolution ” means the special resolution approving the Arrangement to be considered at the Preferred Shareholder Meeting substantially in the form of Schedule A hereto.

Preferred Shareholder Meeting ” means the special meeting of Preferred Shareholders, including any adjournment or postponement thereof, to be called and held in accordance with the Interim Order to consider the Preferred Shareholder Arrangement Resolution.

Preferred Shareholders ” means the holders of BRP Equity Preferred Shares.

Privacy Laws ” means PIPEDA and all other Laws relating to the protection of Personal Information.

Prudent Industry Practice ” means any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry in the jurisdiction in which the Business is principally conducted during the relevant time period, or any of the practices, methods, and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Industry Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather is intended to include acceptable practices, methods, and acts generally accepted in the jurisdiction in which the Business is principally conducted.

Real Property Contracts ” has the meaning specified in Section 3.1.15.

Registration Rights Agreement ” means the registration rights agreement between BRPI and BREP to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Regulatory Approvals ” means the approvals, decisions and confirmations set out under the heading “Regulatory Approvals” in Section 1.1 of the Disclosure Letter (including by way of any expiration, waiver or termination of any relevant waiting period in relation to any Governmental Authority), as well as any other material approvals, decisions and confirmations that the Parties agree, acting reasonably, are required in order to complete the Arrangement.

 

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Relationship Agreement ” means the agreement among BREP, BRELP, the Holding Entities (as defined in the Relationship Agreement), Brookfield and the Managers (as defined in the Relationship Agreement) that governs certain aspects of the relationship among them to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

SEC ” means the United States Securities and Exchange Commission.

Series 3 Bonds ” means the 5.25% medium term notes, Series 3, due 2018, issued on November 1, 2006 pursuant to the second supplemental indenture relating to the Bond Indenture, dated October 27, 2006.

Series 4 Bonds ” means the 5.84% medium term notes, Series 4, due 2036, issued on November 1, 2006 pursuant to the second supplemental indenture relating to the Bond Indenture, dated October 27, 2006.

Series 6 Bonds ” means the 6.132% notes, Series 6, due 2016, issued on November 30, 2009 pursuant to the fourth supplemental indenture relating to the Bond Indenture, dated November 27, 2009.

Series 7 Bonds ” means the 5.14% medium term notes, Series 7, due 2020, issued on October 13, 2010 pursuant to the fifth supplemental indenture relating to the Bond Indenture, dated October 13, 2010.

Special Committee of BRP Equity ” has the meaning specified in Section 5.1.3.

Special Committee of the Fund ” has the meaning specified in Section 5.1.3.

Statutory Plans ” means statutory benefit plans which the BRPI Entities are required to participate in, or comply with, including plans administered pursuant to applicable medicare, health tax, workplace safety insurance and employment insurance legislation.

Subsidiary ” has the meaning ascribed thereto in the National Instrument 45-106— Prospectus and Registration Exemptions .

Tax Act ” means the Income Tax Act (Canada).

“tax assessment period” has the meaning specified in Section 12.1.1.2.

Tax Returns ” means any and all returns, reports, declarations, elections, notices, forms, designations, filings, and statements (including estimated tax returns and reports, withholding tax returns and reports, and information returns and reports) filed or required to be filed in respect of Taxes.

Taxes ” means: (i) any and all taxes, duties, fees, excises, premiums, assessments, imposts, levies and other charges or assessments of any kind whatsoever imposed by any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or other basis, including those levied on, or measured by, or described with respect to, income, gross receipts,

 

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profits, gains, windfalls, capital, capital stock, production, recapture, transfer, land transfer, license, gift, occupation, wealth, environment, net worth, indebtedness, surplus, sales, goods and services, harmonized sales, use, value-added, excise, special assessment, stamp, withholding, business, franchising, real or personal property, health, employee health, payroll, workers’ compensation, employment or unemployment, severance, social services, social security, education, utility, surtaxes, customs, import or export, and including all license and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions; (ii) all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority on or in respect of amounts of the type described in clause (i) above or this clause (ii) and (iii) all liabilities for any amount described in the foregoing clauses (i) and (ii), as a current or former member of a consolidated, combined or unified group for tax purposes, as a transferee or successor, by contract or otherwise.

Third Party Claim ” means any action, suit, proceeding, arbitration, claim or demand that is instituted or asserted by a third party, including a Governmental Entity, against an Indemnified Person which entitles the Indemnified Person to make a claim for indemnification under this Agreement.

Toll LP ” means GLPT Toll LP.

Toll LP Agreement Amendment ” means the amendment to the agreement between GLPL and Toll LP dated July 6, 2009 to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

Treasury Regulations ” means the Treasury Regulations promulgated under the Code.

Trust Indenture ” means the trust indenture dated September 14, 1999, as amended and restated on October 27, 1999, and further amended on April 28, 2003 and May 13, 2011, pursuant to which the Fund was created, as the same may be amended or restated from time to time.

Trustees ” means the board of trustees of BRPT.

TSX ” means the Toronto Stock Exchange.

Union Plans ” means Benefit Plans which are, or are required to be, established and maintained pursuant to a Collective Agreement and which are not maintained or administered by the BRPI Entities.

Unitholder Approval ” means the approval of the Unitholder Arrangement Resolution by: (i) a majority of the votes cast by Minority Unitholders present in person or represented by proxy at the Unitholder Meeting; and (ii) at least two-thirds of the votes cast by Unitholders present in person or represented by proxy at the Unitholder Meeting.

Unitholder Arrangement Resolution ” means the special resolution approving the Arrangement to be considered at the Unitholder Meeting substantially in the form of Schedule B hereto.

Unitholder Meeting ” means the special meeting of Unitholders, including any adjournment or postponement thereof, to be called and held in accordance with the Interim Order to consider the Unitholder Arrangement Resolution.

 

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Unitholders ” means the holders of Fund Units.

Voting Agreement ” means the voting agreement between BRPI and BREP to be entered into on or before the Effective Date, substantially in the form attached to the Disclosure Letter.

1.2 Schedules

The following schedules are annexed to this Agreement and are incorporated by reference into this Agreement and form a part thereof:

 

Schedule A

           Preferred Shareholder Arrangement Resolution

Schedule B

           Unitholder Arrangement Resolution

Schedule C

           Plan of Arrangement

1.3 Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

1.4 Interpretation

In this Agreement, unless the context otherwise requires:

1.4.1 words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

1.4.2 (i) the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement; (ii) the phrases “the aggregate of”, “the total of”, “ the sum of ”, or a phrase of similar meaning mean “ the aggregate (or total or sum), without duplication, of ”, and (iii) “ over ”, in the context of an encroachment or easement, means “in, on, over, under or through”.

1.4.3 references to any Person include such Person’s successors and permitted assigns;

1.4.4 except as otherwise provided in this Agreement, any reference in this Agreement to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all rules and regulations made under such statute, in the case of a statute, all amendments made to such statute, regulation, policy, rule or instrument and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

1.4.5 except as otherwise provided in this Agreement, any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified and will include all schedules (including the Disclosure Letter) to it;

 

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1.4.6 in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

1.4.7 except where otherwise expressly provided, all references to dollars or to $ in this Agreement are expressed in United States currency.

1.5 Knowledge

Where any representation or warranty contained in this Agreement is expressly qualified by reference to the knowledge of BRPI it will be deemed to refer to the actual knowledge of those Persons listed in Section 1.5 of the Disclosure Letter, after due and diligent inquiry.

1.6 Accounting Terms

All accounting terms not specifically defined in this Agreement are to be interpreted in accordance with IFRS.

ARTICLE 2

THE ARRANGEMENT

2.1 Arrangement

The Parties agree that the Arrangement will be implemented in accordance with and subject to the terms and conditions contained in this Agreement and the Plan of Arrangement.

2.2 Interim Order

As soon as reasonably practicable following the date of this Agreement, BRPI shall, in consultation with the Fund Entities, pursuant to Section 182 of the OBCA, prepare, file and diligently pursue an application to the Court for the Interim Order, which shall provide, among other things:

2.2.1 for the class of Persons to whom notice is to be provided in respect of the Arrangement and the Meetings and for the manner in which such notice is to be provided;

2.2.2 for the Unitholder Approval;

2.2.3 for the Preferred Shareholder Approval or the Preferred Share Redemption;

2.2.4 that, in all other respects, the terms, conditions and restrictions of the Trust Indenture or the BRP Equity articles and by-laws, as applicable, including quorum requirements and other matters, shall apply in respect of the Meetings;

2.2.5 for the grant of Dissent Rights;

2.2.6 for the notice requirements with respect to the presentation of the application to the Court for the Final Order;

2.2.7 that the Unitholder Meeting may be adjourned or postponed from time to time by the Trustees subject to the terms of this Agreement without the need for additional approval of the Court;

 

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2.2.8 that the Preferred Shareholder Meeting may be adjourned or postponed from time to time by the directors of BRP Equity subject to the terms of this Agreement without the need for additional approval of the Court;

2.2.9 that the record date for Unitholders and Preferred Shareholders entitled to notice of and to vote at the Meetings will not change in respect of any adjournment(s) of the Meetings, unless required by applicable securities Laws;

2.2.10 that it is the Parties’ intention to rely on the 3(a)(10) Exemption with respect to the issuance of BREP Units and, if applicable, the Finco Bonds pursuant to the Arrangement based on the Court’s approval of the Arrangement; and

2.2.11 for such other matters as BRPI or the Fund Entities may reasonably require, subject to obtaining the prior consent of the Fund Entities or BRPI, as the case may be, such consent not to be unreasonably withheld or delayed.

2.3 Meetings

Subject to the terms of this Agreement and the Interim Order:

2.3.1 The Fund will, and will cause BRP Equity to, convene and conduct the Meetings in accordance with the Interim Order, the Trust Indenture and BRP Equity’s articles, by-laws and applicable Law on a date to be agreed with BRPI but in any event on or before November 30, 2011. The Fund will, in consultation with and subject to the approval of BRPI, fix and publish a record date for the purposes of determining the Unitholders and Preferred Shareholders entitled to receive notice of and vote at the Meetings.

2.3.2 If either the Preferred Shareholder Approval or the Bondholder Approval is not obtained, BRPI will notify the Fund Entities as soon as reasonably possible but, in any event, prior to the date of the Unitholder Meeting of its intention to do one of the following: (i) terminate the Agreement in accordance with Section 10.1.1.3; (ii) waive its right to terminate the Agreement in accordance with Section 10.1.1.3; or (iii) request that the Fund adjourn the Unitholder Meeting in accordance with Section 2.3.3 (and will make a public announcement to this effect).

2.3.3 The Fund shall, and shall cause BRP Equity to, not adjourn, postpone or cancel (or propose or permit the adjournment, postponement or cancellation of) the Unitholder Meeting and Preferred Shareholder Meeting, respectively, without BRPI’s prior written consent, except in the case of adjournment, as required for quorum purposes, by-law or by valid Unitholder or Preferred Shareholder action (which action is not solicited or proposed by the Fund, BRP Equity, the Trustees or the directors of BRP Equity), or except as permitted by this Agreement. Notwithstanding the foregoing, if either Preferred Shareholder Approval or Bondholder Approval is not obtained and BRPI has not terminated this Agreement in accordance with Section 10.1, upon the request of BRPI, the Fund shall adjourn the Unitholder Meeting for a reasonable period of time as agreed to by the Parties, acting reasonably.

2.3.4 Subject to the terms of this Agreement, the Fund shall, and shall cause BRP Equity to, solicit proxies in favour of the applicable Arrangement Resolution and against any resolution submitted by any Unitholder or Preferred Shareholder that is inconsistent with the applicable Arrangement Resolution and the completion of any of the transactions contemplated by this Agreement, and take all actions that are reasonably necessary or desirable to seek the approval of the Arrangement by Unitholders and Preferred Shareholders.

 

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2.4 Circular

2.4.1 As soon as reasonably practicable, the Fund and BRP Equity shall, in consultation with BRPI (i) prepare the Circular together with any other documents required by applicable Laws, (ii) file the Circular in all jurisdictions where the same is required to be filed, and (iii) mail the Circular as required under applicable Laws and by the Interim Order.

2.4.2 BRPI shall provide the Fund and BRP Equity with all information regarding BREP, BRPI and the BRPI Entities, including any financial statements, required by applicable Laws for inclusion in the Circular or in any amendments or supplements to the Circular, and BRPI shall also use its commercially reasonable efforts to obtain any necessary consents from its auditors and any other advisors to the use of any financial, technical or other expert information required to be included in the Circular and to the identification in the Circular of each such advisor. BRPI shall take all reasonable steps to ensure that such information does not include any Misrepresentation concerning BREP, BRPI and the BRPI Entities and enables the Fund and BRP Equity to ensure that the Circular complies with applicable Laws, including, without limitation, the requirement to include prospectus form disclosure required under NI 51-102F5.

2.4.3 On the date of mailing thereof, the Fund, subject to BRPI complying with its obligations under Section 2.4.2 shall ensure that the Circular complies in all material respects with all applicable Laws and the Interim Order and shall contain sufficient detail to permit the Unitholders and Preferred Shareholders to form a reasoned judgment concerning the matters to be placed before them at the Unitholder Meeting and the Preferred Shareholder Meeting, respectively.

2.4.4 The Circular shall contain the unanimous recommendations of the Trustees and the directors of BRP Equity to Unitholders and the Preferred Shareholders, respectively, that they vote in favour of the Unitholder Arrangement Resolution and Preferred Shareholder Resolution, respectively, and a statement that each Trustee and each director of BRP Equity, as the case may be, intends to vote all of such individual’s Fund Units and BRP Equity Preferred Shares in favour of the Unitholder Arrangement Resolution and Preferred Shareholder Arrangement Resolution, respectively, and against any resolution submitted by any Unitholder or Preferred Shareholder that is inconsistent with the Arrangement. For greater certainty, nothing in this Agreement restricts or prohibits the Trustees or the board of directors of BRP Equity from, in good faith and upon advice of legal counsel, acting in accordance with their fiduciary duties including, without limitation, withdrawing or proposing to withdraw the approval or recommendation of the Trustees or the directors of BRP Equity, as the case may be, to the Unitholders and Preferred Shareholders, respectively, to vote for the applicable Arrangement Resolutions or adjourning or postponing the applicable Meeting to consider the applicable Arrangement Resolution in the event that there will have developed, occurred or come into effect or existence any event, action, state, condition or occurrence of national or international consequence, or other occurrence of any nature whatsoever, or any adoption, proposed implementation or change in applicable Law or any interpretation thereof by any Governmental Authority which, in the Fund Entities’ reasonable opinion, seriously and adversely affects, or would be expected to seriously and adversely affect, the national or international financial markets in general or the business, operations or affairs of the Fund and the Fund-Owned Entities or the BRPI Entities.

2.4.5 Each Party shall promptly notify the other if, at any time before the earlier of the Effective Date and the termination of this Agreement in accordance with its terms, it becomes aware that the Circular contains a Misrepresentation, or that the Circular otherwise requires an amendment or supplement, and the Parties shall co-operate in the preparation of any amendment or supplement to the Circular, as required or appropriate, and the Fund shall promptly mail or

 

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otherwise publicly disseminate any amendment or supplement to the Circular to the Unitholders and Preferred Shareholders and, if required by the Court or applicable Laws, file the same as required under applicable securities Laws and as otherwise required.

2.5 Filing of Form 20-F Prior to the Effective Time

2.5.1 If BREP files the Form 20-F on or prior to the Effective Time:

2.5.1.1 BREP shall provide the Fund Entities and its outside counsel and other representatives with a reasonable opportunity to review and comment upon drafts of the Form 20-F (and any amendments thereto) and all material to be filed with the SEC in connection with the Form 20-F, and will give reasonable consideration to all such comments. The Parties each acknowledge the importance of consistency across all public documents and, in that context, the disclosure included in the Form 20-F will be consistent with the disclosure in the Circular, as applicable;

2.5.1.2 the Fund Entities shall provide BREP with all information regarding the Fund Entities and their Subsidiaries and BRPI shall provide BREP with all information regarding BRPI and its Subsidiaries, in each case including financial statements and other financial information, in the form required to be included in the Form 20-F (including by reason of any SEC comments thereto or subsequent requests thereon), as well as any other information required by applicable Laws for inclusion in the Form 20-F or in any amendments or supplements to the Form 20-F, and the Fund Entities and BRPI shall also use their commercially reasonable efforts to obtain any necessary consents from their respective advisors to the use of any financial, technical or other expert information required to be included in the Form 20-F and to the identification in the Form 20-F of each such advisor.

2.5.1.3 BRPI shall cause BREP to take all reasonable steps to ensure that the Form 20-F does not contain any Misrepresentation concerning BREP, BRPI and the BRPI Entities and enables BREP to ensure that the Form 20-F complies with applicable Laws. If at any time any event or circumstance should be discovered by BREP, BRPI or the Fund Entities that should be set forth in an amendment to the Form 20-F so that any of such document would not include any Misrepresentation BREP, BRPI or the Fund Entities, as applicable, will promptly notify the other Parties and, to the extent required by applicable Laws, an appropriate amendment to the Form 20-F describing such information will be promptly filed with the SEC. The Parties will advise each other, promptly after any of them receives notice thereof, of any request by the SEC for amendment of the Form 20-F or comments thereon and responses thereon or requests by the SEC for additional information.

2.6 Securities Law Compliance

The Parties and their counsel shall co-operate and use commercially reasonable efforts in good faith to take, or cause to be taken, all reasonable actions, including the preparation of the Form 20F (if filed), the Circular, any amendments to the Form 20-F (if filed), applications for orders, registrations, consents, filings, rulings, exemptions, no-action letters and approvals, required in connection with this Agreement and the Arrangement and the preparation of any required documents, in each case as reasonably necessary to discharge their respective obligations under this Agreement, the Arrangement and the Plan of Arrangement, and to complete any of the transactions contemplated by this Agreement, in accordance with applicable securities Laws.

 

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2.7 Final Order

If (i) the Interim Order is obtained, and (ii) the Arrangement Resolution is passed at the Meetings by the Unitholders as provided for in the Interim Order and as required by applicable Law, subject to the terms of this Agreement, the Parties shall diligently pursue and take all steps necessary or desirable to have the hearing before the Court of the application for the Final Order pursuant to Section 182 of the OBCA held as soon as reasonably practicable and, in any event, within three Business Days following the approval of the Arrangement Resolution at the Meetings.

2.8 Court Proceedings

Subject to the terms of this Agreement, the Parties will cooperate with and assist each other in seeking the Interim Order and the Final Order. The Parties will provide each other’s outside counsel with reasonable opportunity to review and comment upon drafts of all material to be filed with the Court in connection with the Arrangement, and will give reasonable consideration to all such comments. Subject to applicable Laws, the Parties will not file any material with the Court in connection with the Arrangement or serve any such material, and will not agree to modify or amend materials so filed or served, except as contemplated by this Section 2.8 or with the prior written consent of the other Parties, such consent not to be unreasonably withheld, conditioned or delayed.

2.9 Articles of Arrangement and Effective Date

The Articles of Arrangement shall implement the Plan of Arrangement. After the satisfaction or, where not prohibited, the waiver of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Effective Date, but subject to the satisfaction or, where not prohibited, the waiver of those conditions as of the Effective Date) set forth in Article 8, on a date agreed to in writing by the Parties, the Articles of Arrangement shall be filed by BRPI with the Director, provided that the Articles of Arrangement shall not be sent to the Director, for endorsement and filing by the Director, except as contemplated hereby or with the Fund’s prior written consent. From and after the Effective Time, the Plan of Arrangement will have all of the effects provided by applicable Laws, including the OBCA. The Parties agree to amend the Plan of Arrangement at any time prior to the Effective Time in accordance with Section 13.4 of this Agreement to include such other terms determined to be necessary or desirable by the Parties, acting reasonably, provided that the Plan of Arrangement shall not be amended in any manner which is inconsistent with the provisions of this Agreement, which would reasonably be expected to delay, impair or impede the satisfaction of any condition set forth in Article 8 or which is otherwise prejudicial to the Unitholders and the Preferred Shareholders or other parties to be bound by the Plan of Arrangement.

2.10 United States Tax Considerations

The Parties intend that the series of transactions relating to the conversion of the Fund to be conducted pursuant to and described in Sections 2.2.30 through 2.2.41 of the Plan of Arrangement, considered together as a single integrated transaction for United States federal income tax purposes, will qualify as a “reorganization” within the meaning of Section 368(a)(1) of the Code. This Agreement is intended to constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).

2.11 United States Securities Law

The Arrangement will be structured such that the issuance of securities under the Arrangement qualifies in the United States for the exemption from the registration requirements of the 1934 Act provided by Section 3(a)(10) of the 1933 Act (the “3(a)(10) Exemption”) and applicable state securities Laws in

 

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reliance upon similar exemptions under applicable state securities Laws. Each Party agrees to act in good faith, consistent with the intent of the Parties and the intended treatment of the Arrangement as set forth in this Section 2.11. In order to ensure the availability of the 3(a)(10) Exemption, the Parties agree that the Arrangement will be carried out on the following basis:

 

  (a) the Arrangement will be subject to the approval of the Court;

 

  (b) the Court will be advised as to the intention of the Parties to rely on the 3(a)(10) Exemption prior to the Court hearing at which the Final Order will be sought;

 

  (c) the Court will be required to satisfy itself as to the fairness of the Arrangement;

 

  (d) the Final Order will expressly state that the Arrangement is approved by the Court as being fair to the securityholders to whom securities will be issued;

 

  (e) the parties will ensure that each securityholder entitled to receive securities on completion of the Arrangement will be given adequate notice advising them of their right to attend the Court hearing and providing them with sufficient information necessary for them to exercise that right; and

 

  (f) the Interim Order approving the Meetings to approve the Arrangement Resolution will specify that each securityholder will have the right to appear before the Court at the Court hearing on the Final Order so long as such securityholder enters an appearance within a reasonable time.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF BRPI

3.1 Representations and Warranties Regarding the BRPI Entities

BRPI hereby represents and warrants as follows to the Fund Entities and BREP and acknowledges and confirms that the Fund Entities and BREP are relying upon such representations and warranties in connection with transactions contemplated in this Agreement.

3.1.1 Incorporation, Formation and Qualification

3.1.1.1 Each of the BRPI Entities is duly organized and validly existing under the laws of its jurisdiction of incorporation or organization and has the full power and authority to own (or lease) and operate its property and to carry on its business as now owned or operated by it.

3.1.1.2 Each of the BRPI Entities is qualified, licensed or registered to carry on business in each jurisdiction in which the nature of any of the Assets owned by it or the Business operated by it makes such qualification necessary, except where any failure to be so qualified, licensed or registered would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect.

 

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3.1.2 No Conflict . Subject to obtaining the Regulatory Approvals and the Consents, (i) the execution, delivery and performance by BRPI of this Agreement and the execution, delivery and performance by each of the BRPI Entities and BRPI of each of the Ancillary Agreements to which it is a party and (ii) the completion of the transactions contemplated hereby (including the Pre-Closing Reorganization) and thereby:

3.1.2.1 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a violation or breach of, or conflict with, or allow any other Person to exercise any rights under, any of the terms or provisions of the constating documents or by-laws of any of the BRPI Entities or resolutions of the board of directors, shareholders or unitholders of any of the BRPI Entities, as applicable;

3.1.2.2 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a breach or violation of, or conflict with or allow any other Person to exercise any right of termination under, any of the terms or provisions of any Contracts or any instruments to which any of the BRPI Entities is a party or may be bound by or subject to or pursuant to which any of their respective Assets or property may be affected, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect;

3.1.2.3 do not and will not result in the violation by any BRPI Entities of any Law, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect;

3.1.2.4 will not result in a breach of or cause the termination or revocation of, any Material Authorization held by any of the BRPI Entities necessary to the operation of any of the Businesses or the ownership of the Assets; and

3.1.2.5 will not result in the creation or imposition of any Lien on any of the Assets (other than Permitted Liens).

3.1.3 Regulatory Approvals . Subject to obtaining the Regulatory Approvals and the Consents, compliance with any applicable securities Laws (in relation to the transactions contemplated by this Agreement), stock exchange rules and policies (in relation to the transactions contemplated by this Agreement), the Interim Order, the Final Order and the filing of the Articles of Arrangement, there is no requirement for BRPI or any of the BRPI Entities to make any filing with, give any notice to or to obtain any consent or approval of, or to obtain any Authorization of, any Governmental Authority as a condition to the lawful completion of any of the transactions contemplated by this Agreement (including the Pre-Closing Reorganization) or any of the Ancillary Agreements, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect.

3.1.4 Issued Capital . All of the outstanding shares and other ownership interests owned, directly or indirectly, by BRPI in the capital of each of the BRPI Entities are duly issued and all shares are outstanding as fully-paid and non-assessable. At the Effective Date, all of the issued and outstanding shares and other ownership interests owned, directly or indirectly, by BRPI in each of the BRPI Entities will be owned (directly or indirectly) by BREP with good and marketable title and the full legal right power and authority to sell, assign and transfer such interests to BRELP, free and clear of all Liens, other than as disclosed in Section 3.1.4 of the Disclosure Letter, those restrictions on transfer, if any, contained in the constating documents of the BRPI Entities and the Permitted Liens.

 

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3.1.5 No Other Agreements to Purchase or Sell . Except as part of the Pre-Closing Reorganization or except as disclosed in Section 3.1.5 of the Disclosure Letter, this Agreement and the transactions contemplated thereby and hereby, no Person has any written or oral agreement, option or warrant or any right or privilege (whether by Law, pre-emptive or contractual) capable of becoming such for the purchase of any of BRPI’s interests in any of the BRPI Entities or the subscription, allotment or issuance of any of BRPI’s interests in any of the BRPI Entities that is material to the Businesses taken as a whole.

3.1.6 Subsidiaries . Except as disclosed in Section 3.1.6 of the Disclosure Letter, as of the Effective Date, none of the BRPI Entities will have any direct or indirect subsidiaries or will hold, directly or indirectly, any shares or other ownership, equity or proprietary interests in any Person or will have any agreement of any nature to acquire, directly or indirectly, any shares or other ownership, equity or proprietary interests in any other Person, in each case other than with respect to another BRPI Entity, the Fund Entities or a Fund-Owned Entity.

3.1.7 Corporate Records . Except as disclosed in Section 3.1.7 of the Disclosure Letter, the Corporate Records are complete and accurate in all material respects and all proceedings and actions reflected in the Corporate Records have been conducted or taken in compliance in all material respects with all applicable Laws and with the applicable constating documents and by-laws (or the equivalent) of the BRPI Entities.

3.1.8 Conduct of Business in Ordinary Course . Since December 31, 2010 and except for the transactions contemplated by this Agreement or except as disclosed in Section 3.1.8 of the Disclosure Letter (i) each of the Businesses has been carried on in the Ordinary Course and (ii) there has not been any change in the affairs, operations or condition of any of the BRPI Entities or any of the Assets or Businesses which has had, or could reasonably be expected to have, a BRPI Material Adverse Effect and, to the knowledge of BRPI, no event has occurred or circumstance exists which could reasonably be expected to have a BRPI Material Adverse Effect. None of the BRPI Entities carries on any business outside of Canada, the United States or Brazil except as set out in Section 3.1.8 of the Disclosure Letter.

3.1.9 Compliance with Laws . Except as disclosed in Section 3.1.9 of the Disclosure Letter, BRPI and the BRPI Entities have at all times conducted the Businesses in compliance, in all material respects, with all applicable Laws.

3.1.10 Authorizations . Except as disclosed in Section 3.1.10 of the Disclosure Letter, the BRPI Entities hold or possess and lawfully use in the operation of the Businesses and the ownership of their Assets, all Authorizations required to conduct the Businesses as presently conducted or for the lease of or ownership and use of their Assets as presently used (the “ Material Authorizations ”) in compliance with all applicable Laws, except for any non-compliance that would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect. Each Material Authorization is valid, subsisting and in good standing and none of the BRPI Entities is in default or breach of any Material Authorization, except for any non-compliance that would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect.

3.1.11 Sufficiency of Assets . On the Effective Date, the Businesses are the only business operations carried on by the BRPI Entities. Except as disclosed in Section 3.1.11 of the Disclosure Letter, the Assets include all rights, interests and property necessary to enable the BRPI Entities to conduct each of the Businesses in all material respects after the Effective Date in the same manner as conducted prior to the Effective Date. The BRPI Entities have adequate rights of ingress and

 

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egress with respect to the Leased Properties, the Owned Real Property and the properties which are the subject of the Real Property Contracts or, in the case of any development properties as of the date hereof, will have adequate rights of ingress and egress upon commercial operation for such development property, necessary for the operation of each of the Businesses in the Ordinary Course.

3.1.12 Title to the Assets . Section 3.1.12 of the Disclosure Letter contains a true and complete list of all the Facilities. Each of the BRPI Entities has good and marketable title to all of the Assets (whether real, personal or mixed and whether tangible or intangible) that it owns or purports to own, including all the properties and assets reflected as being owned by the BRPI Entities in the financial Books and Records. The BRPI Entities own their Assets free and clear of all Liens, except for Permitted Liens.

3.1.13 No Options, etc. to Purchase Assets . Except in connection with the Pre-Closing Reorganization or except as disclosed in Section 3.1.13 of the Disclosure Letter, no Person has any written or oral agreement, option, understanding or commitment, or any right or privilege capable of becoming such for the purchase, lease, license or other acquisition of any of the Assets that is material to the Businesses, taken as a whole.

3.1.14 Condition of Tangible Assets . Except (i) as disclosed in Section 3.1.14 of the Disclosure Letter or (ii) where any such condition, state or lack of adequacy or suitability would reasonably be expected to be material to each of the Businesses, to the knowledge of BRPI: (A) the buildings, structures, equipment (including, without limitation, all machinery, vehicles, turbines, metering equipment, office material and the like), dams, dikes, tunnels, reservoirs, water lots and water intakes, and all ancillary assets, moveable or immovable, corporeal or incorporeal and other tangible personal property of the BRPI Entities (including the Buildings and Fixtures) owned, leased or otherwise used in connection with any of the Businesses are structurally sound, in good operating condition and repair having regard to their use and age and are adequate and suitable for the uses to which they are being put and are maintained in accordance with Prudent Industry Practice; (B) the electricity delivery lines owned by the BRPI Entities connecting the Facilities to the applicable Grid are in good operating condition and repair having regard to their use and age and are adequate and suitable for the uses to which they are being put; and (C) to the extent owned by any of the BRPI Entities, the meters and related equipment used to measure the energy delivered by the Facilities to the applicable Grid are in good operating condition and repair and are adequate and suitable for the purposes of measuring the delivery of electricity delivered by the Facilities.

3.1.15 Real Property . Except as disclosed in Section 3.1.15 of the Disclosure Letter, the relevant BRPI Entities: (i) own, lease, license or have valid rights to use all real property that is material to the conduct of its respective business, as presently conducted (the “ Lands ”); (ii) with respect to such Lands that are owned by them (the “ Owned Real Property ”), have good and marketable title to such Owned Real Property free and clear of all Liens, except Permitted Liens; (ii) with respect to such Lands that are leased by them, have valid leasehold interests in such Lands pursuant to leases (the “ Leases ”); and (iii) with respect to such Lands that are not owned or leased, have valid licenses, permits, rights of way agreements, Easements or similar agreements (the “ Real Property Contracts ”) pursuant to which the BRPI Entities have the right to occupy or use such property or interests therein. The use of the Owned Real Property and Leased Properties, as currently operated, complies, in all material respects, with all applicable zoning by-laws and regulations. No condemnation or expropriation proceeding is pending or, to the knowledge of BRPI, threatened which would preclude or impair, in any material respect, the use of any of the Leased Properties, the Owned Real Property or any of the properties subject to the Real Property Contracts for the purposes for which they are currently used, as well as for the purposes for which they are intended to be used.

 

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3.1.16 No Breach of Leases and Real Property Contracts.  Except as would not, individually or in the aggregate, be material to each of the Businesses or except as disclosed in Section 3.1.16 of the Disclosure Letter: (i) each of the BRPI Entities has complied with all of its obligations under the Leases and Real Property Contracts; (ii) all rents and other charges (including statutory charges) due and payable by any BRPI Entity under any Lease or Real Property Contract (the non-payment of which would entitle any party to any such Lease or Real Property Contract other than a BRPI Entity to terminate the same) have been paid, and there exists no event of default (howsoever described) or, to the knowledge of BRPI, no event, occurrence, condition or act (including the purchase of any of the BRPI Entities or any part of the Pre-Closing Reorganization) which, with the giving of notice, the lapse of time or the happening of any other event or condition, could become an event of default (howsoever described) or which could result in the expiry of the term of the Lease or Real Property Contract on a date which is on or prior to the expiry date set out in the relevant Lease or Real Property Contract or the tenant being deemed to be overholding on a date which is on or prior to the expiry date set out in any of the Leases or Real Property Contracts; (iii) the relevant BRPI Entities, as applicable, have a good and valid right to use and occupy all the Leased Properties and all other properties which are the subject of any Real Property Contract to the extent required to operate and maintain each of the Businesses as currently operated and, in the case of any development properties as of the date hereof, as contemplated to be operated upon commercial operation for such development property, by way of good and valid title or leasehold title, easement rights, rights of way, licenses of occupation, land use permits or similar rights and interests and, in each case, the relevant BRPI Entity’s interest therein is free and clear of all Liens other than Permitted Liens; (iv) the relevant BRPI Entities have the right to use all Easements and all such Easements have been validly created for use in the operation of the Facilities; (v) the BRPI Entities have acquired all necessary rights with respect to the Owned Real Property or under the Leases and Real Property Contracts to occupy, enter in, on, under or over, and/or use, and, in the case of any development properties as of the date hereof, as contemplated to be operated upon commercial operation for such development property will have the necessary rights to occupy, enter in, on, under or over, and/or use, all lands required for the connection of the Facilities located on the Owned Real Property and the Leased Property to the applicable Grid and to construct, develop, service and maintain the Assets; and (vi) none of the BRPI Entities has sublet, assigned, licensed, or otherwise conveyed or encumbered any rights in any of the Owned Real Property, the Leased Properties or in the Real Property Contracts except for the Permitted Liens and any subleases, assignments, licenses, conveyances or encumbrances of non-material components thereof that do not, individually or in the aggregate, adversely affect the ability of the BRPI Entities to use such property.

3.1.17 Aboriginal Matters . Except as disclosed in Section 3.1.17 of the Disclosure Letter or as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect, to the knowledge of BRPI there is no valid basis for any assertion by any aboriginal person or group, or any Person acting on behalf of any aboriginal Person or group, by virtue of its aboriginal status of:

3.1.17.1 any claim or proceeding against any property of any of the BRPI Entities;

3.1.17.2 any right, title, benefit or interest in any Owned Real Property;

3.1.17.3 any claim of jurisdiction over any of the Businesses or any interest in the Owned Real Property; or

 

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3.1.17.4 any right to be consulted with respect to any use, development or improvement of any interest in the Owned Real Property.

3.1.18 Contracts . Except for the Financing Agreements, the Contracts disclosed in Section 3.1.18 of the Disclosure Letter and the Leases and Real Property Contracts, none of the BRPI Entities is a party to or bound by:

3.1.18.1 any continuing Contract pursuant to which it is obligated to make or expects to receive payments of or related to indebtedness for borrowed money of more than $15,000,000 over the life of the Contract;

3.1.18.2 any Contract that expires or may be renewed at the option of any Person other than any BRPI Entity so as to expire more than one year after the date of this Agreement, having a value, in the case of any such Contract, of more than $15,000,000 over the life of the Contract;

3.1.18.3 any Contract that if terminated or modified or if it ceased to be in effect, would have or could reasonably be expected to have a BRPI Material Adverse Effect;

3.1.18.4 any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any currency exchange, interest rate, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with IFRS;

3.1.18.5 other than non-disclosure agreements entered into in the Ordinary Course, any Contract limiting in any material respect the freedom of any BRPI Entity to engage in any line of business, compete with any other Person, solicit any Persons for any purpose, operate its Assets at maximum production capacity or otherwise conduct its business;

3.1.18.6 any Contract made out of the Ordinary Course;

3.1.18.7 any confidentiality, secrecy or non-disclosure Contract relating to any proprietary or confidential information, in each case to the extent such Contract and the subject matter therein is material to the ownership, construction, development or operation of any of the Businesses;

3.1.18.8 any Contract with any Person with whom any of the BRPI Entities does not deal at arm’s length within the meaning of the Tax Act (excluding agreements among one or more of the BRPI Entities); or

3.1.18.9 any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of more than $15,000,000 of any other Person who is not a BRPI Entity;

(collectively, the “ Material Contracts ”).

3.1.19 No Breach of Material Contracts . Except as disclosed in Section 3.1.19 of the Disclosure Letter, each of the BRPI Entities has performed, in all material respects, all of the obligations required to be performed by it under the Material Contracts. Except as disclosed in

 

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Section 3.1.19 of the Disclosure Letter, to the knowledge of BRPI, each of the Material Contracts is in full force and effect, unamended, and there exists no default, breach, termination event, (p)repayment event or alleged default (in each case, howsoever described) or event, occurrence, condition or act (including the transactions contemplated hereby or any part of the Pre-Closing Reorganization) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default, a breach, a termination event or a (p)repayment event, respectively (in each case, howsoever described), under any Material Contract, except in each case where any such default, breach, event, occurrence, condition or act would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect. The Data Room contains true, correct and complete copies of all Material Contracts.

3.1.20 Intellectual Property.

3.1.20.1 The BRPI Entities own or possess valid, subsisting and enforceable licenses to use all Intellectual Property that is material to the conduct of each of the Businesses as currently conducted.

3.1.20.2 To the knowledge of BRPI, the operation of each of the Businesses does not infringe upon the Intellectual Property rights of any Person and BRPI has not received written or actual notice from any Person alleging such infringement.

3.1.21 Books and Records . Except as disclosed in Section 3.1.21 of the Disclosure Letter, all accounting and financial Books and Records: (i) have been maintained in all material respects in accordance with good business practices and in accordance with IFRS and with the accounting principles generally accepted in the country of domicile of each entity, on a basis consistent with prior years (except for greater certainty as a result of BRPI’s conversion to IFRS) and (ii) accurately and fairly reflect all material transactions relating to the Business.

3.1.22 Financial Statements . The Financial Statements have been or will be prepared in accordance with GAAP consistently applied throughout the periods indicated. The Financial Statements will fairly present, in all material respects:

3.1.22.1 the assets, liabilities (whether accrued, absolute, contingent or otherwise) and financial position of the BRPI Entities, on a combined basis, as at the respective dates of the relevant statements; and

3.1.22.2 the sales and earnings of the BRPI Entities, on a combined basis, during the periods covered by the Financial Statements.

3.1.23 No Liabilities . None of the BRPI Entities has any liabilities or obligations required by GAAP consistently applied in accordance with BRPI’s past practice (except for greater certainty as a result of BRPI’s conversion to IFRS) to be reflected on an audited consolidated balance sheet except for (i) liabilities and obligations reflected or reserved against in the Financial Statements, (ii) liabilities and obligations incurred after June 30, 2011 in the Ordinary Course that would not, individually or in the aggregate, be material to the Businesses (taken as a whole), or (iii) liabilities and obligations incurred pursuant to the Pre-Closing Reorganization or the transactions contemplated by this Agreement or the Ancillary Agreements, or (iv) except as disclosed in Section 3.1.23 of the Disclosure Letter.

 

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3.1.24 Securities Laws . None of the BRPI Entities is a reporting issuer (as such term is defined in applicable securities Laws) and none of the securities of the BRPI Entities are listed for trading on any stock exchange.

3.1.25 Environmental Matters .

3.1.25.1 Except as disclosed in Section 3.1.25 of the Disclosure Letter:

3.1.25.1.1 BRPI and the BRPI Entities are in compliance in all material respects with all applicable Environmental Laws;

3.1.25.1.2 The BRPI Entities possess and lawfully use all Authorizations issued by a Governmental Authority pursuant to Environmental Laws that are material to the conduct of the Business, as presently conducted, or to the use of the Assets, as presently used, (the “Material Environmental Authorizations”), in each case in compliance in all material respects with all applicable Environmental Laws. To the knowledge of BRPI, (i) each Material Environmental Authorization is in force; and (ii) none of the BRPI Entities is in non-compliance with any Material Environmental Authorization and no proceeding is pending or threatened to revoke or limit any Material Environmental Authorization;

3.1.25.1.3 To the knowledge of BRPI, there are no Contaminants located in the ground or in groundwater under any of the Owned Real Property or the Leased Properties or the properties subject to the Real Property Contracts;

3.1.25.1.4 To the knowledge of BRPI, none of the Owned Real Property or the Leased Properties or the properties subject to any of the Real Property Contracts (i) has been used by any Person as a waste disposal site or as a landfill, or (ii) has been used for any Environmental Activity except (A) in compliance in all material respects with Environmental Law or (B) the impacts or other consequences that resulted from such Environmental Activities have been remediated in all material respects;

3.1.25.1.5 To the knowledge of BRPI, there are no outstanding orders issued by a Governmental Authority relating to any Environmental Activities or occupational health and safety matters requiring any material work, repairs, construction or capital expenditures with respect to the Business or any Assets or the BRPI Entities, nor is BRPI or any of the BRPI Entities in receipt of notice of any of the same; and

3.1.25.1.6 To the knowledge of BRPI, there is currently no outstanding requirement of any Governmental Authority for the BRPI Entities to (i) alter any of the Owned Real Property, the Leased Properties or properties that are subject to any of the Real Property Contracts in order to be in compliance with Environmental Laws, or (ii) perform any environmental closure, decommissioning, rehabilitation, restoration or post-remedial investigations, on, about, or in connection with any Owned Real Property, any Leased Property or any property that is subject to any of the Real Property Contracts.

 

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3.1.25.2 Other than those reports and documents which have been superseded by newer reports and documents with respect to the same topic, the Data Room contains true, correct and complete copies of all reports and documents in the possession or under the control of any of the BRPI Entities or BRPI relating to any actual or anticipated material liability pursuant to Environmental Law for Environmental Activities affecting any of the BRPI Entities or any of the Owned Real Property, the Leased Properties or any of the properties subject to any of the Real Property Contracts.

3.1.26 Employment Matters

3.1.26.1 Except as disclosed in Section 3.1.26 of the Disclosure Letter:

3.1.26.1.1 Each of the BRPI Entities has been and is being operated in compliance with all applicable Laws relating to employees and employment practices except where the failure to so operate would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect; and

3.1.26.1.2 There are no pending or outstanding claims or complaints nor, to the knowledge of BRPI, are there any threatened or anticipated claims or complaints, against any of the BRPI Entities or any of their respective directors, officers or agents alleging breach of any express or implied contract of employment, any Laws governing employment or termination thereof or other discriminatory, wrongful or tortious conduct in connection with, or arising out of, the employment relationship except where such claims or complaints would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect.

3.1.27 Collective Agreements

3.1.27.1 The Data Room contains true, correct and complete copies of all Collective Agreements. Except as disclosed in Section 3.1.27.1 of the Disclosure Letter, no collective agreement is currently being negotiated or is currently subject to negotiation or renegotiation with respect to any Employee.

3.1.27.2 Except as disclosed in Section 3.1.27.2 of the Disclosure Letter: (i) there are no outstanding or, to the knowledge of BRPI, threatened material unfair labour practices, complaints, grievances, pending arbitration cases or applications of any kind; (ii) there are no current or, to the knowledge of BRPI, threatened or union organizing activities involving any Employee, not already covered by the material Collective Agreements; (iii) there is no strike, work stoppage, slow-down or lock-out occurring or, to the knowledge of BRPI, threatened affecting any of the material BRPI Entities; and (iv) no union has bargaining rights with respect to any Employee of any material BRPI Entity.

3.1.27.3 Except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect, none of the BRPI Entities is in violation of any provision under any Collective Agreement.

 

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3.1.28 Benefit Plans

3.1.28.1 The Data Room contains true and correct copies of all material Benefit Plans. Except as disclosed in Section 3.1.28 of the Disclosure Letter or as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect:

3.1.28.1.1 Each Benefit Plan is, and has been, established, registered, qualified, administered, funded, and invested, in compliance with the terms of such Benefit Plan, all applicable Laws and, if applicable, the Collective Agreements;

3.1.28.1.2 Neither BRPI nor the BRPI Entities has made any commitment to improve any benefit provided under any Benefit Plan;

3.1.28.1.3 Neither the entering into of this Agreement, nor the completion of the transactions contemplated herein will, in and of itself, constitute an event under any Benefit Plan that will result in any payment, acceleration of payment or vesting of benefits, forgiveness of indebtedness, acceleration or increase in funding obligations, vesting, distribution, increase or acceleration in benefits or obligation to fund benefits with respect to any Employee;

3.1.28.1.4 All employer and employee payments, contributions or premiums required to be remitted, paid to or in respect of each Benefit Plan and each Statutory Plan have been paid or remitted in a timely fashion in accordance with the terms of the applicable Benefit Plan, Statutory Plans and all applicable Laws;

3.1.28.1.5 No Benefit Plan subject to ERISA is, and neither BRPI, any BRPI Entity or any ERISA Affiliate of the foregoing contributes to, has ever contributed or has any liability or obligation, whether actual or contingent, with respect to any (A) “multiemployer plan” (within the meaning of Section 3(37) of ERISA), (B) “multiple employer plan” (within the meaning of ERISA or the Code), (C) a single employer plan or other pension plan subject to Title IV or Section 302 of ERISA or Section 412 of the Code, (D) a multiple employer welfare arrangement (within the meaning of Section 3(40) of ERISA),or (E) any other plan that provides defined benefits;

3.1.28.1.6 With respect to each Pension Plan: (i) no liability to the Pension Benefit Guaranty Corporation (“ PBGC ”) has been incurred (other than for premiums not yet due); (ii) no notice of intent to terminate any such Pension Plan has been filed with the PBGC or distributed to participants therein and no amendment terminating any such Pension Plan has been adopted; (iii) no proceedings to terminate any such Pension Plan instituted by the PBGC are pending or, to the knowledge of BRPI, are threatened and no event or condition has occurred which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any such Pension Plan; (iv) no such Pension Plan is in “at risk” status, within the meaning of Section 430 of the Code or Section 303 of ERISA; (v) except for the execution and delivery of this Agreement and the transactions contemplated by this Agreement, no “reportable event” within the meaning of

 

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Section 4043 of ERISA (for which the 30-day notice requirement has not been waived by the PBGC) has occurred within the last six (6) years; (vi) no lien has arisen or would reasonably be expected to arise as a result of actions or inactions under ERISA or the Code on the assets of any BRPI Entity (other than any lien imposed by the PBGC to the extent arising under Section 4062(e) of ERISA as a result of the transactions contemplated by this Agreement); (vii) there has been no cessation of operations at a facility subject to the provisions of Section 4062(e) of ERISA (“4062(e) Event”) within the last six (6) years (other than a 4062(e) Event to the extent arising from the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement); and (viii) no such Pension Plan has failed to satisfy the minimum funding standards set forth in Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA;

3.1.28.1.7 Each Pension Plan is funded in accordance with applicable Laws and the most recently filed actuarial valuation for such Pension Plan;

3.1.28.1.8 All Employee data necessary to administer each Benefit Plan is in the possession of the BRPI Entities and is in a form which is sufficient for the proper administration of the Benefit Plan in accordance with its terms and all applicable Laws and, to the knowledge of BRPI, such data are complete and correct;

3.1.28.1.9 None of the Benefit Plans, other than the Pension Plans provide benefits beyond retirement or other termination of service to Employees or former Employees or to their beneficiaries or dependents of such Employees;

3.1.28.1.10 None of the BRPI Entities sponsors, administers or contributes to any Union Plans;

3.1.28.1.11 There are no actions, suits, claims, trials, demands, investigations, arbitrations or other proceedings pending or, to the knowledge of BRPI, threatened with respect to the Benefit Plans against the BRPI Entities, the funding agent, the insurers or the fund of such Benefit Plans, other than claims for benefits in the Ordinary Course. No order has been made or notice given pursuant to any applicable Law requiring (or proposing to require) the BRPI Entities to take (or refrain from taking) any action in respect of any Benefit Plan;

3.1.28.1.12 No event has occurred and no condition or circumstances exist that has resulted or could reasonably result in any Benefit Plan: (i) being ordered or required to be terminated or wound-up; (ii) having its registration under any applicable Law refused or revoked; (iii) being placed under the administration of any trustee or any regulatory authority; (iv) being required to pay any taxes or penalties under any applicable Laws; or (v) having, if applicable, its tax status revoked in whole or in part;

3.1.28.1.13 Each Benefit Plan and each other contract, plan, program, agreement, or arrangement maintained, established or entered into by any BRPI Entity has been maintained and operated in all material respects, in documentary and operational compliance with Code Section 409A or an available exemption therefrom; and

 

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3.1.28.1.14 As of the completion of the transactions contemplated by this Agreement, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, either alone or in combination with another event (whether contingent or otherwise) will result in any “parachute payment” under Section 280G of the Code (whether or not such payment would be considered reasonable compensation for services rendered).

3.1.28.1.15 Each Benefit Plan intended to be qualified under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code (i) is qualified under Section 401(a) or Section 501(a) of the Code, as applicable, and (ii) has either applied for, prior to the requisite period under applicable Treasury Regulations or IRS pronouncements, or obtained a favorable determination letter issued by the IRS with respect to its qualified status, or has been established under a prototype or volume submitter plan for which an IRS opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer. For each Benefit Plan that is intended to be qualified under Section 401(a) of the Code, to the knowledge of BRPI, there has been no event, condition or circumstance that has adversely affected or could reasonably be expected to adversely affect such qualified status.

3.1.29 Insurance

3.1.29.1 Except as disclosed in Section 3.1.29 of the Disclosure Letter:

3.1.29.1.1 Each of the BRPI Entities has insurance in place, issued by responsible insurers, as is appropriate to their Business and Assets, in such amounts and against such risks as are customarily carried and insured against by owners of comparable businesses and assets;

3.1.29.1.2 None of the BRPI Entities is in default with respect to the payment of any premiums under any insurance policy or has failed to give any notice or to present any claim under any insurance policy in a due and timely fashion, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect; and

3.1.29.1.3 There are no outstanding claims that have been made under any policies of insurance maintained by or for the benefit of any of the BRPI Entities, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect.

3.1.30 Litigation . Except as disclosed in Section 3.1.30 of the Disclosure Letter, there are no (i) actions, suits or proceedings, at law or in equity, by any Person, (ii) grievances, arbitrations or alternative dispute resolution proceedings, or (iii) administrative or other proceeding by or before (or to the knowledge of BRPI, any investigation by) any Governmental Authority, pending, or, to the knowledge of BRPI, threatened against any of the BRPI Entities, any of the Business or any of the Assets that, in any such case described in (i), (ii) or (iii) would, individually or in the aggregate, have or could reasonably be expected to have a BRPI Material Adverse Effect and, to the knowledge of BRPI, there are no facts, events or circumstances that can reasonably be

 

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anticipated would result in any such action, complaint, grievance, suit, proceeding, arbitration or investigation against any of the BRPI Entities. None of the BRPI Entities is subject to any judgment, order or decree entered in any lawsuit or proceeding which has had or would, individually or in the aggregate, reasonably be expected to have a BRPI Material Adverse Effect.

3.1.31 Taxes

3.1.31.1 Except as disclosed in Section 3.1.31 of the Disclosure Letter and except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect:

3.1.31.1.1 The BRPI Entities have filed or caused to be filed with the appropriate Governmental Authority, within the times and in the manner prescribed by applicable Laws, all federal, provincial, state, local and foreign Tax Returns which are required to be filed by or with respect to any of the BRPI Entities. The information contained in such Tax Returns for the BRPI Entities is correct and complete;

3.1.31.1.2 The BRPI Entities have paid all Taxes due and payable as reflected on such Tax Returns within the time required by applicable Law, and have paid all assessments and reassessments they have received in respect of Taxes. With respect to Taxes accruing on or before the Effective Date which are not reflected in the BRPI Entities’ Tax Returns, the BRPI Entities have made adequate provision for such Taxes in the Books and Records. Since June 30, 2011, none of the BRPI Entities has incurred any liability for Taxes outside the Ordinary Course;

3.1.31.1.3 There are no claims, actions, suits, audits, proceedings, investigations or other action pending or, to the knowledge of BRPI, threatened against any of the BRPI Entities in respect of Taxes. As at the date hereof, none of the BRPI Entities is negotiating any final or draft assessment or reassessment in respect of Taxes with any Governmental Authority;

3.1.31.1.4 The BRPI Entities have withheld and collected all amounts required by applicable Law to be withheld or collected by them on account of Taxes and have remitted all such amounts that have become due to the appropriate Governmental Authority within the time prescribed under any applicable Laws;

3.1.31.1.5 None of the BRPI Entities has acquired property from a non-arm’s length person (within the meaning of the Tax Act) in circumstances which would subject any of the BRPI Entities to a liability under section 160 of the Tax Act or any analogous provision under the Laws of any other jurisdiction, other than property acquired from another BRPI Entity;

3.1.31.1.6 None of the BRPI Entities has acquired property from, or disposed of property to, a non-arm’s length person (within the meaning of the Tax Act) in circumstances which would cause section 69 of the Tax Act to apply to any of the BRPI Entities;

 

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3.1.31.1.7 For all transactions between any of the BRPI Entities which are resident in Canada and any person that is not a resident of Canada and with whom any of such BRPI Entities was not dealing at arm’s length during a taxation year (or portion thereof) ending on or before the Effective Date, each has made or obtained records or documents that meet the requirements of paragraphs 247(4)(a) to (c) of the Tax Act;

3.1.31.1.8 None of the BRPI Entities will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Effective Time as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Effective Date, (B) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Effective Date, (C) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law), (D) installment sale or open transaction disposition made on or prior to the Effective Date, (E) prepaid amount received on or prior to the Effective Date or (F) election made pursuant to Section 108(i) of the Code on or prior to the Effective Date;

3.1.31.1.9 Each of the BRPI Entities which will be owned directly by BRELP immediately after the Effective Time is properly classified as a corporation for U.S. federal income tax purposes;

3.1.31.1.10 None of the BRPI Entities has claimed or will claim in any Tax Return for any taxation year (or fiscal year in the case of a partnership) ending on or before the Effective Date any reserve of any amount which could be included in the income of any of the BRPI Entities for any period ending after the Effective Date;

3.1.31.1.11 Except as already provided in an applicable Tax Return which has already been filed with the appropriate Governmental Authority or otherwise been disclosed to the Fund Entities, to the knowledge of BRPI, there will not be any circumstances existing at or prior to the Effective Date which could, in and of themselves, result in the application of any of sections 78, 80, 80.01, 80.03 or 80.04 to any of the BRPI Entities for taxation years (or fiscal years in the case of BRPI Entities that are partnerships) ending after the Effective Date;

3.1.31.1.12 At no time during the period beginning on the formation of BREP and ending at the time of the completion of the Arrangement, will more than 50% of the fair market value of any interest in BREP be derived directly or indirectly from one or any combination of (i) real or immovable property situated in Canada, (ii) Canadian resource properties, (iii) timber resource properties, and (iv) options in respect of, or interests in, or for civil law rights in, any of the foregoing properties, whether or not any such property exists as at the date hereof;

 

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3.1.31.1.13 At no time during the period beginning on the formation of BRELP and ending at the time of the completion of the Arrangement, will more than 50% of the fair market value of any interest in BRELP be derived directly or indirectly from one or any combination of (i) real or immovable property situated in Canada, (ii) Canadian resource properties, (iii) timber resource properties, and (iv) options in respect of, or interests in, or for civil law rights in, any of the foregoing properties, whether or not any such property exists as at the date hereof; and

3.1.31.1.14 The information set out on Section 3.1.31 of the Disclosure Letter under the heading “Section 3.1.31.1.14“ constitutes the principal historic information related to the assets of the BRPI Entities upon which the tax assumptions made or contained (whether expressly or otherwise) in any BREP projections or models provided in writing to the Fund Entities (including those provided in writing to CIBC World Markets Inc., the financial advisor to the Independent Committee of BRPT and BRP Equity) by BRPI were based, and such information is, as at the date hereof, accurate in all material respects.

3.1.32 Adjusted Net Working Capital. As at June 30, 2011, the amount of Adjusted Net Working Capital was $277 million and this amount reflects adjustments to the net working capital of the BRPI Entities as at such date that BRPI considered to be appropriate and reasonable, acting in good faith. The amount of adjusted net working capital of the BRPI Entities, calculated using the same accounting principles, methodology and adjustments as used to calculate the amount of Adjusted Net Working Capital, is, as at the date hereof, not less than $277 million.

3.1.33 Privacy Matters.  Each of the BRPI Entities is conducting, and has at all times conducted, each of the Businesses in compliance in all material respects with all applicable Privacy Laws. None of the BRPI Entities has received any notice or other communication from any Person asserting any actual, alleged, possible or potential violation of, or failure to comply with, any Privacy Laws.

3.1.34 Full Disclosure. BRPI has disclosed to the Fund Entities all facts known to BRPI relating to the Businesses and the Assets which could reasonably be expected to be material to a Unitholder or a Preferred Shareholder making a decision to vote on the Arrangement.

3.2 Representations and Warranties Regarding BRPI

BRPI hereby represents and warrants to the Fund Entities and acknowledges and confirms that the Fund Entities are relying upon such representations and warranties in connection with the transactions contemplated in this Agreement:

3.2.1 Incorporation and Qualification.  BRPI is a corporation duly incorporated and validly existing under the laws of Ontario and has the corporate power and authority to enter into and perform its obligations under this Agreement and each of the Ancillary Agreements to which it is a party.

3.2.2 No Conflict.  Subject to obtaining the Regulatory Approvals and the Consents, the execution, delivery and performance by BRPI of this Agreement and the Ancillary Agreements to which it is a party and the completion of the transactions contemplated hereby (including the Pre-Closing Reorganization) and thereby:

 

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3.2.2.1 have been duly authorized by all necessary corporate action on the part of BRPI;

3.2.2.2 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a violation or breach of, or conflict with, or allow any other Person to exercise any rights under, any of the terms or provisions of BRPI’s constating documents or by-laws or any resolutions of BRPI’s board of directors or shareholders;

3.2.2.3 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a breach or violation of, or conflict with or allow any other Person to exercise any right under, any of the terms or provisions of any Contracts or instruments to which BRPI is a party or may be bound by or subject to (including, for greater certainty, the Bond Indenture) or pursuant to which any of the Assets or property of BRPI may be affected, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect; and

3.2.2.4 do not and will not result in the violation by BRPI of any Law, except as would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect.

3.2.3 Execution and Binding Obligation.  This Agreement has been and, as at the Effective Date, each of the Ancillary Agreements will be, duly executed and delivered by BRPI or its Affiliates, as applicable, and constitutes, or will constitute as at the Effective Date, a legal, valid and binding obligation of BRPI or its Affiliates, as applicable, enforceable against each of them in accordance with its terms subject only to any limitation under applicable Laws relating to (i) bankruptcy, winding-up, insolvency, arrangement and other Laws of general application affecting the enforcement of creditors’ rights, and (ii) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction.

3.2.4 Authorization . The execution and delivery of and performance by BRPI of this Agreement, the Ancillary Agreements to which it is a party and the completion of the transactions contemplated hereby (including the Pre-Closing Reorganization) and thereby have been duly authorized by all necessary action on the part of BRPI.

3.2.5 Securities Matters.  BRPI is a “reporting issuer” under applicable securities Laws in each of the provinces of Canada and is not in default, in any material respect, of any applicable securities Laws in such jurisdictions. No suspension of trading in or cease trading order with respect to the BRPI Bonds or any BRPI security is pending or, to the knowledge of BRPI, threatened. The documents comprising the BRPI Public Disclosure Record did not at the respective time they were filed with securities authorities, contain any Misrepresentation. BRPI has timely filed with the securities authorities all material forms, reports, schedules, statements and other documents required to be filed by the Company with the securities authorities since December 31, 2008. BRPI has not filed any confidential material change report which, at the date hereof, remains confidential.

 

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BREP

4.1 Representations and Warranties of BREP

BREP hereby represents and warrants as follows to the Fund Entities and acknowledges and confirms that the Fund Entities are relying on such representations and warranties in connection with the transactions contemplated in this Agreement:

4.1.1 Formation and Qualification of the Partnership and GP Co . BREP is a partnership formed under the laws of Bermuda and GP Co, in its capacity as general partner of BREP, has the power and authority to enter into and perform BREP’s obligations under this Agreement and each of the Ancillary Agreements to which BREP is a party. GP Co is a corporation formed under the laws of Ontario and has the power and authority to enter into and perform its obligations under this Agreement and each of the Ancillary Agreements to which it is a party.

4.1.2 Authorization . The execution and delivery of and performance by GP Co, in its capacity as general partner of BREP, of this Agreement, the Ancillary Agreements to which it, as general partner of BREP, is a party and the completion of the transactions contemplated hereby (including the Pre-Closing Reorganization) and thereby have been duly authorized by all necessary action on the part of GP Co, in its capacity as general partner of BREP. The execution and delivery of and performance by GP Co of this Agreement, the Ancillary Agreements to which it is a party and the completion of the transactions contemplated hereby (including the Pre-Closing Reorganization) and thereby have been duly authorized by all necessary action on the part of GP Co.

4.1.3 No Conflict . Subject to obtaining the Regulatory Approvals and the Consents, the execution and delivery of and performance by BREP of this Agreement and the Ancillary Agreements to which it is a party and the completion of the transactions contemplated hereby (including the Pre-Closing Reorganization) and thereby:

4.1.3.1 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a violation or breach of, or conflict with, or allow any other Person to exercise any rights under, any of the terms or provisions of its partnership agreement or other constating documents;

4.1.3.2 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a material breach or violation of, or material conflict with or allow any other Person to exercise any material rights under, any of the terms or provisions of any Contracts or instruments to which it is a party; and

4.1.3.3 do not and will not result in the material violation of any Law by BREP.

4.1.4 Execution and Binding Obligation.  This Agreement has been duly executed and, as at the Effective Date, each of the Ancillary Agreements to which BREP will be a party will be duly executed and delivered by BREP, and constitutes, or will constitute as at the Effective Date, a legal, valid and binding agreement of BREP, enforceable against it in accordance with its terms subject only to any limitation under applicable Laws relating to (i) bankruptcy, winding-up insolvency, arrangement, fraudulent preference and conveyance, assignment and preference and other similar Laws of general application affecting creditors’ rights, and (ii) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction.

 

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ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE FUND ENTITIES

5.1 Representations and Warranties of the Fund Entities

The Fund Entities hereby jointly and severally represent and warrant as follows to BRPI and BREP and acknowledge and confirm that BRPI and BREP are relying on such representations and warranties in connection with the transactions contemplated in this Agreement:

5.1.1 Formation and Qualification of the Trusts . Each of the Fund Entities is a trust formed under the laws of Québec and has the power and authority to enter into and perform its obligations under this Agreement.

5.1.2 Authorization . The execution and delivery of and performance by each of the Fund Entities of this Agreement, the Ancillary Agreements to which they are a party and the completion of the transactions contemplated thereby have been duly authorized by all necessary action on the part of each of the Fund Entities, other than the Unitholder Approval.

5.1.3 Independent Trustees . Prior to entering into this Agreement, the Trustees and the board of directors of BRP Equity each formed a special committee of trustees and directors, respectively, each of whom is independent of BRPI (the “ Special Committees of the Fund ” and the “ Special Committee of BRP Equity ” respectively). The Special Committee of the Fund engaged an independent financial advisor to perform a formal valuation in accordance with MI 61-101 and to deliver an opinion to the Special Committee of the Fund as to the fairness, from a financial point of view, to the Minority Unitholders of the transactions contemplated hereby. The financial advisor has delivered the formal valuation to the Special Committee of the Fund and has also delivered its opinion that the transactions contemplated hereby are fair, from a financial point of view, to the Minority Unitholders. The Special Committee of BRP Equity has also engaged a financial advisor to provide advisory services regarding the transactions contemplated hereby. Based on the information available to them as of the date hereof, the Special Committee of the Fund and the Special Committee of BRP Equity has recommended that the Trustees and the board of directors of BRP Equity, respectively approve this Agreement, the Ancillary Agreements and the completion of the transactions contemplated hereby and thereby.

5.1.4 No Conflict . Subject to obtaining the Regulatory Approvals and the Consents, the execution and delivery of and performance by each of the Fund Entities of this Agreement and the Ancillary Agreements to which it is a party and the completion of the transactions contemplated hereby and thereby:

5.1.4.1 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a violation or breach of, or conflict with, or allow any other Person to exercise any rights under, any of the terms or provisions of its trust indenture or other constating documents;

5.1.4.2 do not and will not (and would not with the giving of notice, the lapse of time or the happening of any other event or condition) constitute or result in a breach or violation of, or conflict with or allow any other Person to exercise any rights under, any of the terms or provisions of any Contracts or instruments to which it is a party, except as would not, individually or in the aggregate, have or reasonably be expected to have a Fund Material Adverse Effect; and

 

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5.1.4.3 do not and will not result in the violation of any Law by it, except as would not, individually or in the aggregate, have or reasonably be expected to have a Fund Material Adverse Effect.

5.1.5 Execution and Binding Obligation . This Agreement has been duly executed and, as at the Effective Date, each of the Ancillary Agreements to which they are a party will be, duly executed and delivered by each of the Fund Entities, as applicable, and constitutes, or will constitute as at the Effective Date, a legal, valid and binding agreement of the Fund Entities, as applicable, enforceable against each of them in accordance with its terms subject only to any limitation under applicable Laws relating to (i) bankruptcy, winding-up insolvency, arrangement, fraudulent preference and conveyance, assignment and preference and other similar Laws of general application affecting creditors’ rights, and (ii) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction.

ARTICLE 6

COVENANTS OF THE PARTIES

6.1 Access to Books and Records

For a period as may be required by Law, and in accordance with Prudent Industry Practice regarding document retention, the Managers (as defined in the Master Services Agreement) of BREP will retain all material original Books and Records for the period prior to the Effective Date, provided that they will not be responsible or liable for or as a result of any accidental loss or destruction of or damage to any such Books and Records. So long as any material Books and Records are required to be retained pursuant to this Agreement, BRPI will have the reasonable right to inspect and to make copies (at its own expense) of them at any time upon reasonable request during normal business hours and upon reasonable notice for any proper purpose and without undue interference to the business operations of the BRPI Entities. BREP will have the right to have its representatives present during any such inspection.

6.2 Announcements

No press release or other announcement concerning the terms of this Agreement or any of the Ancillary Agreements will be made by any Party without the prior written consent of the other Parties (such consent not to be unreasonably withheld) provided, however, that any Party may, without such consent, make such disclosure if the same is required under applicable securities Laws, by any stock exchange on which any of the securities of such Party or any of its Affiliates are listed or by any securities commission or other similar regulatory authority having jurisdiction over such Party or any of its Affiliates, and if such disclosure is required, the Party making the disclosure will use its best efforts to give prior oral or written notice to the other Parties, and if such prior notice is not possible, to give such notice immediately following the making of such disclosure.

6.3 Expenses

6.3.1 The Fund and BRPI will each pay one half of all fees payable in connection with the Regulatory Approvals. Except as otherwise expressly provided in this Agreement, each Party will pay for all other costs and expenses incurred by it in connection with this Agreement and the transactions contemplated by this Agreement. The fees and expenses referred to in this Section 6.3 are those which are incurred in connection with: (i) the negotiation, preparation,

 

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execution and performance of this Agreement, and the transactions contemplated by this Agreement (including the Pre-Closing Reorganization) and the Ancillary Agreements; (ii) the preparation of the Form 20-F (if filed prior to the Effective Date); (iii) obtaining the Bondholder Approval; (iv) obtaining the Unitholder Approval and the Preferred Shareholder Approval; and (v) the fees and expenses of legal counsel, accountants and other advisors.

6.3.2 If the Arrangement is completed, all fees and expenses incurred by BRPI in connection with the transactions contemplated hereunder, including BRPI’s share of the fees and expenses incurred in connection with obtaining the Regulatory Approvals under Section 7.4 but excluding the costs of the Preferred Share Redemption (if applicable), shall be borne by BREP.

6.4 BRP Equity Preferred Shares

If all conditions to completion of the Arrangement have been satisfied or waived except for the condition set forth in Section 8.3.4 and BRPI does not exercise its right to terminate this Agreement pursuant to Section 10.1.2 as a result of such condition not having been satisfied and complete the Arrangement then BRPI shall fund, or cause one or more of its Affiliates (other than the Fund, the Fund-Owned Entities, BREP and its Subsidiaries) to fund, the Preferred Share Redemption on terms and conditions which have been agreed to by the Parties.

6.5 Insurance and Indemnification

6.5.1 From and after the Effective Date, BRPI agrees that for the period from the Effective Date until six years after the Effective Date, BRPI will, or will cause its Affiliates to, maintain the current directors’ and officers’ insurance policies applicable to the Trustees and to the directors of BRP Equity or policies that are reasonably equivalent and, in any event, no less favourable in the aggregate to the current Trustees and directors of BRP Equity than the current policies applicable to the Trustees and the directors of BRP Equity, respectively, subject in either case to terms and conditions no less advantageous to the Trustees and the directors of BRP Equity than those contained in the policies in effect on the date hereof, for all present and former Trustees and directors of BRP Equity, covering claims arising from facts or events which occurred on or prior to the Effective Date.

6.5.2 BREP agrees that it shall honour, and as applicable shall cause BRP Equity to honour, all rights to indemnification or exculpation now existing in favour of the Trustees of BRPT and the directors of BRP Equity, and acknowledges that such rights shall survive the completion of the Plan of Arrangement and shall continue in full force and effect in accordance with their terms for a period of not less than six (6) years from the Effective Date. To evidence such rights of indemnification or exculpation, on or prior to the Effective Date, BREP shall enter into an agreement with each Trustee and BREP shall cause BRP Equity to enter into an agreement with each director of BRP Equity, and in each case the scope of such rights to indemnification or exculpation is to be substantially the same as the existing rights to indemnification or exculpation currently held by such Trustee or director of BRP Equity, respectively.

6.5.3 The provisions of this Section 6.5 are intended for the benefit of, and shall be enforceable by, each insured or indemnified Person, his or her heirs and his or her legal representatives and, for such purpose, the Fund Entities hereby confirm that they are acting as trustees on their behalf, and agrees to enforce the provisions of this Section on their behalf. Furthermore, this Section 6.5 shall survive the termination of this Agreement as a result of the occurrence of the Effective Date for a period of six (6) years.

 

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6.6 Update of Disclosure Letter

6.6.1 Prior to the Effective Date, BRPI may, at its sole option, update the Disclosure Letter with additional disclosures that have arisen since the date of this Agreement. In the event that BRPI chooses to exercise such option, BRPI shall provide such additional disclosures to the Fund Entities by written notice no later than seven Business Days prior to the Effective Date.

6.6.2 Upon receipt of written notice, the Fund Entities shall have until five Business Days after receipt of such notice to terminate this Agreement pursuant to Section 10.1.1.2 on the basis that the condition in Section 8.2.1 has not been satisfied by delivering written notice thereof to BRPI. In the event that the Fund Entities do not exercise such termination right, the additional disclosures delivered by BRPI shall be deemed to be part of the Disclosure Letter as delivered to Purchaser on the date of this Agreement for all purposes of this Agreement.

6.6.3 In furtherance of the foregoing, each party acknowledges that, except as set forth in this Section 6.6, the exercise, or failure to exercise, by either party of any right, power or privilege pursuant to this Section 6.6 shall not operate as a waiver of any other right, power or privilege of such party under this Agreement.

6.7 Replacement of Security.

The Fund Entities acknowledge that BRPI and its Subsidiaries (other than the BRPI Entities) (collectively with each of their shareholders, directors, officers, employees, agents and representatives, the “ BRPI Indemnified Parties ”) have (i) granted guarantees or indemnities in respect of the obligations of one or more of the BRPI Entities and the Subsidiaries of the Fund Entities pursuant to the agreements identified in Section 6.7 of the Disclosure Letter (the “ BRPI Guarantees ”), and (ii) provided letters of credit or collateral in favour of third parties on behalf or for the benefit of one or more of the BRPI Entities and the Subsidiaries of the Fund Entities pursuant to the agreements identified in Section 6.7 of the Disclosure Letter (the “ BRPI Security ”). Subject to the Effective Date having occurred, BREP agrees that it will, within a reasonable period of time following the Effective Date (a) make commercially reasonable efforts to deliver replacement letters of credit or collateral under the agreements pursuant to which the BRPI Security was delivered and return all BRPI Security to the relevant BRPI Indemnified Parties; and (b) deliver replacement guarantees or indemnities of BRELP and any subsidiary of BRELP as the counterparty to the relevant agreement may require, in favour and for the benefit of such counterparty, and in such form as the original guarantee or indemnity delivered by the BRPI Indemnified Party(ies). From and after the Effective Date, BREP and each of the Fund Entities hereby agrees to indemnify and save each of the BRPI Indemnified Parties harmless from and against all Damages suffered or incurred by, imposed upon or asserted against any of them as a result of, in respect of, connected with, or arising out of, under or pursuant to any of the BRPI Guarantees or the BRPI Security. To the extent BRPI and/or any of its Subsidiaries provided a BRPI Guarantee and/or a BRPI Security, BRPI and/or the relevant Subsidiary agrees that until such BRPI Guarantee or BRPI Security is replaced as contemplated by this Section 6.7, BRPI and/or such Subsidiary will maintain in full force and effect, unamended, such BRPI Guarantee and/or BRPI Security and shall, subject to the rights of the Fund Entities in this Agreement, use commercially reasonable efforts to do, make, execute, deliver or cause to be done, made, executed or delivered, all such further acts, documents and things as BREP or the beneficiaries of the BRPI Guarantees or the holders of the BRPI Security may reasonably require from time to time for the purpose of giving effect to such BRPI Guarantees or BRPI Security. The Parties agree that the provisions of Sections 12.6, 12.7 and 12.8, will apply to any indemnity claim made by BRPI pursuant to this Section 6.7.

 

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ARTICLE 7

PRE-CLOSING COVENANTS OF THE PARTIES

7.1 Covenants of BRPI Regarding Conduct of Businesses Prior to Closing

7.1.1 Subject to Section 7.7, during the Interim Period, except as set forth in Section 7.1 of the Disclosure Letter or otherwise provided for in, or contemplated by, this Agreement, including pursuant to the Pre-Closing Reorganization, or unless the Fund Entities shall otherwise agree in writing in accordance with Section 13.4, BRPI will, and will cause each of the BRPI Entities to, conduct the Business in the Ordinary Course.

7.1.2 Subject to Section 7.7, without limiting the generality of Section 7.1.1, BRPI will, and will cause each of the BRPI Entities to, during the Interim Period:

7.1.2.1 preserve intact the current business organization of the BRPI Entities, and maintain good relations with, and the goodwill of, all material suppliers, customers, landlords, creditors and all other Persons having material business relationships with the BRPI Entities;

7.1.2.2 pay and discharge all liabilities of each of the BRPI Entities, in the Ordinary Course, except those being contested in good faith;

7.1.2.3 not cause or permit to exist a breach of any representations and warranties of BRPI contained in this Agreement and use commercially reasonable efforts to ensure that on the Effective Date such representations and warranties will be true, correct and complete as if they were made on and as of such date;

7.1.2.4 continue to maintain in full force and effect all policies of insurance or renewals thereof now in effect, and give all notices and present all claims under all policies of insurance in a due and timely fashion;

7.1.2.5 ensure that maintenance operations continue in accordance with any existing maintenance schedule and, in any event, in accordance with Prudent Industry Practice;

7.1.2.6 periodically and otherwise on request report to the Fund Entities concerning the state of the Businesses;

7.1.2.7 not amend, terminate or cancel or cause to amend, terminate or cancel the articles, partnership agreements or other constating documents of the BRPI Entities or the terms of any of the BRPI Entities’ outstanding securities, including any outstanding indebtedness and Financing Liens, to the extent prejudicial to (i) the transactions contemplated by this Agreement (including the Pre-Closing Reorganization) and/or the Ancillary Agreements, or (ii) the BRPI Entities in any material respect;

7.1.2.8 not authorize, recommend or propose to terminate, transfer, amend, modify or change (or authorize, recommend or propose to do so) in any material respect any Material Contract or waive, release or grant any right thereunder, except where doing so would not, individually or in the aggregate, have or reasonably be expected to have a BRPI Material Adverse Effect; and

 

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7.1.2.9 not declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of the securities of such BRPI Entity other than (i) distributions made to other BRPI Entities or (ii) any distribution made by a non-wholly owned BRPI Entity consistent with past practice as regards to declaration, record and payment dates.

7.2 Covenants of the Fund Entities Regarding Conduct of Business Prior to Closing

7.2.1 During the Interim Period, except as set forth in Section 7.2 of the Disclosure Letter or otherwise provided for in, or contemplated by, this Agreement, including pursuant to the Pre-Closing Reorganization, or unless BRPI shall otherwise agree in writing in accordance with Section 13.4, the Fund Entities will, and will cause each of their Subsidiaries to, conduct their business in the Ordinary Course.

7.2.2 Without limiting the generality of Section 7.2.1, the Fund Entities will, and will cause each of their Subsidiaries to, during the Interim Period:

7.2.2.1 preserve intact their respective current business organizations, and maintain good relations with, and the goodwill of, all material suppliers, customers, landlords, creditors and all other Persons having material business relationships with any of them;

7.2.2.2 pay and discharge all their respective liabilities in the Ordinary Course, except those being contested in good faith;

7.2.2.3 not cause or permit to exist a breach of any representations and warranties of the Fund Entities contained in this Agreement and use commercially reasonable efforts to ensure that on the Effective Date such representations and warranties will be true, correct and complete as if they were made on and as of such date;

7.2.2.4 not issue, deliver or sell, or authorize the issuance, delivery or sale of any Fund Units or BRP Equity Preferred Shares or other securities of the Fund Entities or any of its Subsidiaries;

7.2.2.5 not redeem, purchase or offer to purchase (i) any Fund Units or BRP Equity Preferred Shares, or (ii) except for the redemption of BRPT notes in the Ordinary Course, other securities of the Fund Entities or any shares or other securities of their Subsidiaries;

7.2.2.6 not declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any Fund Units or BRP Equity Preferred Shares other than as is consistent as regards to amount per Fund Unit or BRP Equity Preferred Share, as the case may be, with the Fund’s and BRP Equity’s current dividend policies and consistent with past practice as regards to declaration, record and payment dates;

7.2.2.7 not amend, terminate or cancel or cause to amend, terminate or cancel the articles, partnership agreements or other constating documents of the Fund Entities and their Subsidiaries or the terms of any of such entities’ outstanding securities, including any outstanding indebtedness and financing liens, to the extent prejudicial to (i) the transactions contemplated by this Agreement (including the Pre-Closing Reorganization) and the Ancillary Agreements, or (ii) the Fund Entities or their Subsidiaries in any material respect; and

 

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7.2.2.8 not authorize, recommend or propose to terminate, transfer, amend, modify or change (or authorize, recommend or propose to do so) in any material respect any material Contract or waive, release or grant any right thereunder, except where doing so would not, individually or in the aggregate, have or reasonably be expected to have a Fund Material Adverse Effect.

7.3 Actions to Satisfy Closing Conditions

7.3.1.1 BRPI will take all such actions as are within its power to control so as to ensure compliance with all of the conditions set forth in Sections 8.1 and 8.2.

7.3.1.2 The Fund Entities will take all such actions as are within their power to control so as to ensure compliance with all of the conditions set forth in Sections 8.1 and 8.3.

7.4 Filings and Authorizations

Each of the Parties, as promptly as practicable after the execution of this Agreement, will (i) make, or cause to be made, all such filings and submissions under all Laws applicable to it, as may be required for it to complete the transactions contemplated by the Pre-Closing Reorganization and/or this Agreement and each of the Ancillary Agreements, (ii) use its commercially reasonable efforts to obtain, or cause to be obtained, all Regulatory Approvals to be obtained by it in order to complete such transactions, and (iii) use all reasonable efforts to complete the Pre-Closing Reorganization and to take, or cause to be taken, all other actions necessary, proper or advisable in order for it to fulfil its obligations under this Agreement and each of the Ancillary Agreements. The Parties will coordinate and cooperate with each other in exchanging such information and supplying such assistance as may be reasonably requested by each in connection with the foregoing including, without limitation, making available to each other all notices and information supplied to or filed with any Governmental Authority (except for notices and information which a Party, acting reasonably, considers confidential and sensitive which may be filed on a confidential basis), and all notices and correspondence received from any Governmental Authority.

7.5 Pre-Closing Reorganization

The Fund Entities acknowledge and agree that, following the execution of this Agreement and prior to the Effective Date, BRPI will complete, or cause the completion of, a series of transactions (the “ Pre-Closing Reorganization ”) as set out in Section 7.5 of the Disclosure Letter. Correct and complete copies of all documents pertaining to the Pre-Closing Reorganization to which any of the BRPI Entities is a party will be provided to the Fund Entities no later than 10 Business Days prior to the Effective Date. The Parties agree that they will cooperate to make refinements to the Pre-Closing Reorganization as may be considered necessary or desirable if doing so would facilitate the completion of the transactions contemplated by this Agreement provided that neither the Fund Entities, BREP nor BRPI is adversely affected thereby as mutually determined by the Fund Entities, BREP and BRPI, all acting reasonably.

7.6 Notice of Untrue Representation or Warranty

Each Party will promptly notify the other Parties upon (i) any representation or warranty made by it contained in this Agreement becoming untrue, incorrect or misleading during the Interim Period (and for the purposes of this Section 7.6 each representation and warranty will be deemed to be given at and as of

 

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all times during the Interim Period), and (ii) becoming aware that any representation or warranty made by it contained in any of the Ancillary Agreements will not be true and correct as at the Effective Date. Any such notification will set out particulars of the untrue, incorrect or misleading representation or warranty and details of any actions being taken by the applicable Party to rectify that state of affairs.

7.7 Access for Due Diligence

Subject to applicable Law, during the Interim Period, BRPI will: (a) upon reasonable notice, permit the Fund Entities and their employees, agents, counsel, accountants or other representatives, to have reasonable access during normal business hours to (i) the premises of BRPI and each of the BRPI Entities, (ii) the Assets, including all Books and Records whether retained by BRPI or otherwise, (iii) all Authorizations and Contracts, and (iv) the senior personnel of BRPI, so long as the access does not unduly interfere with the ordinary conduct of each of the Businesses; and (b) upon request from the Fund Entities, on their own behalf or on behalf of their lenders and insurers, use reasonable commercial efforts to assist the Fund Entities in obtaining access to all information with respect to each of the Businesses, the Assets and the BRPI Entities, that is deemed relevant by the Fund Entities, acting reasonably, to the transactions contemplated hereby.

7.8 Fund Entities

The Parties acknowledge that BRPI, through its Subsidiaries, is the administrator of the Fund, the manager of BRPT, and the manager, administrator and/or operator of the assets of the Fund. Accordingly, notwithstanding any provision contained in this Agreement, where either of the Fund Entities are required to take, or cause to be taken any actions to comply with the covenants, agreements and obligations in this Agreement applicable to the Fund Entities and their Subsidiaries, BRPI, through its Subsidiaries, shall take such actions and do such things on behalf of the Fund Entities and their Subsidiaries at the direction of the applicable Special Committee.

ARTICLE 8

CONDITIONS OF CLOSING

8.1 Mutual Conditions Precedent

The obligations of the Parties to complete the transactions contemplated by this Agreement are subject to the fulfillment of each of the following conditions precedent on or before the Effective Time, each of which may only be waived with the mutual consent of the Parties:

8.1.1 Interim Order and Final Order . The Interim Order and the Final Order shall each have been obtained on terms consistent with this Agreement, and shall not have been set aside or modified in a manner unacceptable to the Parties, acting reasonably, on appeal or otherwise.

8.1.2 Consents and Regulatory Approvals . The Consents and Regulatory Approvals shall have been obtained, in form and substance satisfactory to the Fund Entities and BRPI, each acting reasonably.

8.1.3 No Legal Action . No action or proceeding will be pending or threatened or order made by any Person (other than the Party or any Affiliate thereof) in any jurisdiction, to enjoin, restrict or prohibit the completion of the Arrangement, the other transactions contemplated by this Agreement or the right of the Fund Entities, BREP, BRELP or any of the other BRPI Entities to conduct their Businesses after the Effective Time on substantially the same basis as such parties conducted their Businesses prior to the Effective Time.

 

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8.1.4 TSX Listing . The TSX shall have approved the listing of the BREP LP Units, subject only to the satisfaction of customary listing conditions of the TSX. If Preferred Shareholder Approval is obtained, the TSX shall have confirmed the continued listing of the BRP Equity Preferred Shares subject only to customary listing conditions.

8.1.5 Ancillary Agreements . Each of the Ancillary Agreements will have been executed and delivered by the parties thereto.

8.1.6 Pre-Closing Reorganization . The Pre-Closing Reorganization shall have been completed, all on terms and conditions and in form and substance satisfactory to each of the Parties, acting reasonably.

8.1.7 Termination of Agreements . Each of the agreements set out in Section 8.1.7 of the Disclosure Letter shall have been terminated.

8.1.8 BRPI Bonds—Ratings . If Bondholder Approval is obtained, the Finco Bonds shall have received a provisional rating of “BBB(High)” with a stable outlook or higher by DBRS Limited and a preliminary rating of “BBB” or higher by Standard & Poor’s Ratings Services.

8.1.9 BRP Equity Preferred Shares—Ratings . If Preferred Shareholder Approval is obtained, the BRP Equity Preferred Shares shall have received a provisional rating of “Pfd-3 (high)” or higher by DBRS Limited and a preliminary rating of “P-3 (high)” or higher by Standard & Poor’s Ratings Services.

8.2 Conditions for the Benefit of the Fund Entities

The obligations of the Fund Entities to complete the transactions contemplated by this Agreement are subject to the fulfillment of each of the following conditions precedent on or before the Effective Time, which conditions are for the exclusive benefit of the Fund Entities and may only be waived by the Fund Entities (acting jointly):

8.2.1 Truth of Representations and Warranties. The representations and warranties of BRPI and BREP contained in this Agreement shall be true and correct in all respects, without regard to any materiality or BRPI Material Adverse Effect qualifications contained in them as of the Effective Time, as though made on and as of the Effective Time (except for such representations and warranties that are made as of a specified date in which case they will be true and correct in all respects as of the specified date), except where the failure of such representations and warranties to be so true and correct in all respects, individually and in the aggregate, has not had a BRPI Material Adverse Effect, provided that the representations and warranties of BRPI set out in Sections 3.1.4 and 3.1.32 shall be true and correct in all material respects, and BRPI and BREP will each have executed and delivered in favour of the Fund Entities a certificate of a senior officer to that effect.

8.2.2 Performance of Covenants. Each of BRPI and BREP will have fulfilled or complied in all material respects with all covenants contained in this Agreement to be fulfilled or complied with by it at or prior to the Effective Time, including the covenants in Section 9.1, and BRPI and BREP will each have executed and delivered a certificate of a senior officer to that effect in favour of the Fund Entities.

8.2.3 No BRPI Material Adverse Effect . Between the date hereof and the Effective Date, there will not have occurred a BRPI Material Adverse Effect.

 

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8.2.4 Opinion of Counsel . The Fund Entities shall have received opinions of counsel to BRPI in form and substance satisfactory to the Fund Entities, acting reasonably, with respect to such matters that are customarily provided in transactions such as the transactions contemplated by this Agreement. In rendering such opinion, counsel to BRPI shall be entitled to rely, as to matters of fact, on certificates of senior officers of BRPI or the BRPI Entities and shall be entitled to qualify, by reference to knowledge after appropriate inquiries and investigations, those portions of the opinion which it is reasonable and customary to so qualify.

8.3 Conditions for the Benefit of BRPI

The obligations of BRPI to complete the transactions contemplated by this Agreement are subject to the fulfillment of each of the following conditions, which conditions are for the exclusive benefit of BRPI and may only be waived by BRPI:

8.3.1 Truth of Representations and Warranties. The representations and warranties of the Fund Entities contained in this Agreement shall be true and correct in all respects, without regard to any materiality or Fund Material Adverse Effect qualifications contained in them as of the Effective Time, as though made on and as of the Effective Time (except for such representations and warranties that are made as of a specified date in which case they will be true and correct in all respects as of the specified date), except where the failure of such representations and warranties to be so true and correct in all respects, individually and in the aggregate, has not had a Fund Material Adverse Effect, and the Fund Entities will each have executed and delivered in favour of BRPI a certificate of a senior officer to that effect.

8.3.2 Performance of Covenants. Each of the Fund Entities will have fulfilled or complied in all material respects with all covenants contained in this Agreement to be fulfilled or complied with by it at or prior to the Effective Time, including the covenants in Section 9.2, and each of the Fund Entities will have executed and delivered a certificate of a senior officer to that effect in favour of BRPI.

8.3.3 Bondholder Approval . Bondholder Approval shall have been obtained, on terms and conditions satisfactory to BRPI, acting reasonably.

8.3.4 Preferred Shareholder Approval . Preferred Shareholder Approval shall have been obtained, on terms and conditions satisfactory to BRPI, acting reasonably.

8.3.5 No Fund Material Adverse Effect . Between the date hereof and the Effective Time, there will not have occurred a Fund Material Adverse Effect.

8.3.6 Absence of Certain Events . Between the date hereof and the receipt of Unitholder Approval, there will not have developed, occurred or come into effect or existence any event, action, state, condition or occurrence of national or international consequence, or other occurrence of any nature whatsoever, or any adoption, proposed implementation or change in applicable Law or any interpretation thereof by any Governmental Authority which, in BRPI’s reasonable opinion, seriously and adversely affects, or would be expected to seriously and adversely affect, the national or international financial markets in general or the business, operations or affairs of BRPI and its Subsidiaries, taken as a whole.

 

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8.4 Satisfaction of Conditions

The conditions precedent set out in Section 8.1, Section 8.2 and Section 8.3 shall be conclusively deemed to have been satisfied, waived or released when the certificate of arrangement is issued by the Director following filing of the Articles of Arrangement with the consent of the Parties in accordance with the terms of this Agreement.

ARTICLE 9

CLOSING DELIVERIES

9.1 Deliveries by BRPI

BRPI will deliver or cause to be delivered to the Fund Entities at the Effective Time the following in form and substance satisfactory to the Fund Entities, acting reasonably:

9.1.1 evidence that all Regulatory Approvals have been obtained;

9.1.2 evidence that the Consents have been obtained on terms that are satisfactory to the Fund Entities, acting reasonably;

9.1.3 the certificates referred to in Sections 8.2.1 and 8.2.2; and

9.1.4 copies or originals of such other documents, instruments, agreements, certificates necessary or advisable to complete the transactions contemplated by this Agreement, as the Fund Entities shall reasonably request.

9.2 Deliveries by the Fund Entities

The Fund Entities will deliver or cause to be delivered to BRPI at the Effective Time the following in form and substance satisfactory to BRPI, acting reasonably:

9.2.1 the certificates referred to in Sections 8.3.1 and 8.3.2; and

9.2.2 copies or originals of such other documents, instruments, agreements, certificates necessary or advisable to complete the transactions contemplated by this Agreement, as BRPI shall reasonably request.

ARTICLE 10

TERMINATION

10.1 Termination Rights

This Agreement may be terminated:

10.1.1 by notice in writing given prior to the Effective Time:

10.1.1.1 by mutual consent of the Parties;

10.1.1.2 by the Fund Entities (acting jointly) if any of the conditions in Section 8.1 or Section 8.2 have not been satisfied at or prior to the Effective Time and the Fund Entities (acting jointly) have not waived such condition at or prior to the Effective Time, unless such condition has not been satisfied because there has been a material breach of this Agreement by either of the Fund Entities;

 

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10.1.1.3 by BRPI if any of the conditions in Section 8.1 or Section 8.3 (other than the condition set forth in Section 8.3.6) have not been satisfied at or prior to the Effective Time and BRPI has not waived such condition at or prior to the Effective Time, unless such condition has not been satisfied because there has been a material breach of this Agreement by BRPI;

10.1.1.4 by the Fund Entities (acting jointly) if the Effective Time has not occurred on or before the Outside Date, unless the Effective Time has not occurred by such date because there has been a material breach of this Agreement by the Fund Entities;

10.1.1.5 by BRPI if the Effective Time has not occurred on or before the Outside Date, unless the Effective Time has not occurred by such date because there has been a material breach of this Agreement by BRPI; or

10.1.2 by BRPI by notice in writing given to the other prior to receipt of Unitholder Approval if the condition in Section 8.3.6 has not been satisfied, unless such condition has not been satisfied because there has been a material breach of this Agreement by BRPI.

10.2 Effect of Termination

10.2.1 Each Party’s right of termination under this Article is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. Nothing in this Article limits or affects any other rights or causes of action any Party may have with respect to the representations, warranties and covenants and indemnities in its favour contained in this Agreement. If a Party waives compliance with any of the conditions, obligations or covenants contained in this Agreement, the waiver will be without prejudice to any of its rights of termination in the event of non-fulfillment, non-observance or non-performance of any other condition, obligation or covenant in whole or in part.

10.2.2 If this Agreement is terminated pursuant to Section 10.1, all obligations of the Parties under this Agreement will terminate, except that:

10.2.2.1 if this Agreement is terminated by a Party because of a breach of this Agreement by the other Party or because a condition for the benefit of the terminating Party has not been satisfied because the other Party has failed to perform any of its obligations or covenants under this Agreement, the terminating Party’s right to pursue all legal remedies will survive such termination unimpaired; and

10.2.2.2 each Party’s obligations under Sections 6.2 and 6.3 will survive.

ARTICLE 11

CLOSING

11.1 Date, Time and Place of Closing

The completion of the transactions contemplated by this Agreement will take place at the offices of Torys LLP at 79 Wellington Street West, Suite 3000, Toronto, Ontario at 8:30 a.m. (Toronto time) on the Effective Date.

 

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11.2 Delivery of Books and Records

Upon the written request of the Fund Entities, BRPI will promptly deliver, or cause to be delivered, to or as directed by the Fund Entities all of the Books and Records of and relating to the BRPI Entities, the Assets and the Business, including the Corporate Records, that are in the possession of BRPI.

ARTICLE 12

INDEMNIFICATION

12.1 Survival

12.1.1 The representations and warranties of BRPI contained in this Agreement and the certificates to be delivered pursuant to Section 9.1.3 will survive the completion of the Arrangement and continue in full force and effect for a period of three years from the date hereof, except that:

12.1.1.1 the BRPI Fundamental Representations, the BRPI Surviving Representations and the corresponding representations and warranties set out in the certificate to be delivered pursuant to Section 8.1.1 will survive the completion of the Arrangement and continue in full force and effect without limitation of time;

12.1.1.2 the representations and warranties set out in Section 3.1.31 (and the corresponding representations and warranties set out in the certificate to be delivered pursuant to Section 8.2.1) will survive and continue in full force and effect until six (6) months after the expiration of the period (the “tax assessment period”) during which a tax assessment may be issued by a Governmental Entity in respect of any taxation year to which such representations and warranties extend. The tax assessment period will be determined without regard to any consent, waiver, agreement or other document, made or filed after the Effective Date that extends the period during which a Governmental Entity may issue a tax assessment. A tax assessment includes any assessment, reassessment or other form of recognized document assessing liability for Taxes under applicable Law; and

12.1.1.3 any representation and warranty involving fraud or fraudulent misrepresentation by BRPI will survive and continue in full force and effect without limitation of time.

12.1.2 The representations and warranties of BREP contained in this Agreement will survive the completion of the Arrangement and continue in full force and effect for a period of three years from the date hereof, except that:

12.1.2.1 the representations and warranties set out in Section 4.1.1 and the corresponding representations and warranties set out in the certificates to be delivered pursuant to Section 8.2.1 will survive the completion of the Arrangement and continue in full force and effect without limitation of time; and

12.1.2.2 any representation and warranty involving fraud or fraudulent misrepresentation by BREP will survive and continue in full force and effect without limitation of time.

 

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12.1.3 The representations and warranties of the Fund Entities contained in this Agreement and the certificates to be delivered pursuant to Section 9.2.1 will survive the completion of the Arrangement and continue in full force and effect for a period of three years from the date hereof, except that:

12.1.3.1 the representations and warranties set out in Section 5.1.1, and the corresponding representations and warranties set out in the certificates to be delivered pursuant to Section 8.3.1 will survive the completion of the Arrangement and continue in full force and effect without limitation of time; and

12.1.3.2 any representation and warranty involving fraud or fraudulent misrepresentation by the Fund Entities will survive and continue in full force and effect without limitation of time.

12.1.4 No Party has any obligation or liability with respect to any representation or warranty made by such Party in this Agreement or the certificates to be delivered pursuant to Sections 9.1.3 and 9.2.1, as the case may be, after the end of the applicable time period specified in Sections 12.1.1, 12.1.2 or 12.1.3, as the case may be, except for claims relating to the representations and warranties that the Party has been notified of prior to the end of the applicable time period.

12.1.5 Where a Party has a right to make a claim for breach of representation or warranty under this Agreement, the right to enforce that claim in court proceedings remains subject to applicable limitation periods mandatorily imposed by Law.

12.2 No Effect of Knowledge

The right to indemnification or other remedy of any Party based on the representations, warranties, covenants and obligations contained in this Agreement and the certificates to be delivered pursuant to Sections 9.1.3 and 9.2.1, exists notwithstanding the completion of the Arrangement and notwithstanding any investigation or knowledge acquired prior to the Effective Time.

12.3 Indemnification in Favour of BREP and the Fund Entities

12.3.1 Subject to Section 12.5, BRPI indemnifies and saves BREP and the Fund Entities and each of their respective trustees or directors (as applicable), officers, employees, agents and representatives, as the case may be (excluding, for greater certainty, the unitholders of the Fund or BREP), harmless of and from, and will pay for, any Damages suffered by, imposed upon or asserted against any of them as a result of, in respect of, connected with, or arising out of, under or pursuant to:

12.3.1.1 any breach or inaccuracy of any representation or warranty given by BRPI pursuant to this Agreement or the corresponding representations and warranties set out in the certificate to be delivered pursuant to Section 8.2.1, as the case may be, for which a notice of claim under Section 12.6 has been provided to BRPI within the applicable period specified in Section 12.1.1 (which, except for Sections 3.1.8, 3.1.22, 3.1.31.1.14 and 3.1.34, shall be determined (including any defined terms used in any such representation or warranty) without regard to any qualifications as to “material”, “materiality”, “material respects” or “BRPI Material Adverse Effect” or any derivative proposition therein); and

 

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12.3.1.2 any failure of BRPI to perform or fulfill any of its covenants or obligations under this Agreement.

12.4 Indemnification in Favour of BRPI

12.4.1 Subject to Section 12.5, the Fund Entities, and on and after the Effective Date, BREP, will jointly and severally indemnify and save BRPI and its shareholders (excluding, for greater certainty, the shareholders of Brookfield Asset Management Inc.), directors, officers, employees, agents and representatives harmless of and from and will pay for any Damages suffered by, imposed upon or asserted against any of them as a result of, in respect of, connected with, or arising out of, under or pursuant to:

12.4.1.1 any breach or inaccuracy of any representation or warranty given by the Fund Entities contained in this Agreement or the certificate to be delivered pursuant to Section 8.3.1, for which a notice of claim under Section 12.6 has been provided to any of the Fund Entities, or after the Effective Date, BREP, within the applicable period specified in Section 12.1.3; and

12.4.1.2 any failure of any of the Fund Entities, and on and after the Effective Date, BREP, to perform or fulfill any of their respective covenants or obligations under this Agreement.

12.5 Limitations on Amount of Damages

12.5.1 Any claims for indemnification made by an Indemnified Person pursuant to Sections 12.3.1 and 12.4.1, other than any claim for indemnification in respect of any breach of or inaccuracy of any $2,000,000 De Minimis Representation, will be paid only if individual Damages or a series of related Damages exceed $1,000,000 (the “ Individual Threshold ”). Any claims for indemnification made by an Indemnified Person pursuant to Section 12.3.1 in respect of any breach of or any inaccuracy of a $2,000,000 De Minimis Representation will be paid if individual Damages or a series of related Damages exceed $2,000,000 (the “ $2,000,000 Threshold ”). For greater certainty, if the Individual Threshold or $2,000,000 Threshold (as applicable) is exceeded, subject to Section 12.5.2, an Indemnified Person shall be entitled to be indemnified for the aggregate amount of all related Damages (starting with the first dollar).

12.5.2 An Indemnified Person shall not be indemnified until the aggregate amount of such Damages by such Indemnified Person exceeds $120,000,000, at which point the Indemnified Person shall be entitled to recover only the aggregate amount of all such Damages in excess of the Deductible, up to a maximum amount, in the aggregate, equal to the Cap Amount.

12.5.3 Notwithstanding Section 12.5.1 and Section 12.5.2, none of the Individual Threshold, the $2,000,000 Threshold, the Deductible and/or the Cap Amount shall apply:

12.5.3.1 to any claim for indemnification pursuant to Section 12.3.1.1 in respect of any breach of or inaccuracy or misrepresentation in any BPRI Fundamental Representation; or

12.5.3.2 in respect of any breach of or inaccuracy or misrepresentation in any representation or warranty involving fraud or fraudulent misrepresentation; or

 

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12.5.3.3 to any claim for indemnification pursuant to Section 12.4.1.1 in respect of any breach of or inaccuracy or misrepresentation in any representation or warranty contained in Section 5.1.1.

12.5.4 Notwithstanding any other provision hereof, no claim for Damages may be reduced or avoided on the basis that the relevant Indemnified Person failed to provide notice of a Third Party Claim if the failure to give such notice was caused by the failure of BRPI with knowledge of such claim giving such notice on behalf of the relevant Indemnified Person.

12.6 Notification

12.6.1 If a Third Party Claim is instituted or asserted against an Indemnified Person, the Indemnified Person will promptly notify the Indemnifying Party in writing of the Third Party Claim.

12.6.2 If an Indemnified Person becomes aware of a Direct Claim, the Indemnified Person will promptly notify the Indemnifying Party in writing of the Direct Claim.

12.6.3 Notice to an Indemnifying Party under this Section 12.6 of a Direct Claim or Third Party Claim is assertion of a claim for indemnification against the Indemnifying Party under this Agreement. Upon receipt of such notice, the provisions of Section 12.7 will apply to any Direct Claim and the provisions of Section 12.8 will apply to any Third Party Claim.

12.6.4 The omission to notify the Indemnifying Party will not relieve the Indemnifying Party from any obligation to indemnify the Indemnified Person, unless the notification occurs after the expiration of the specified period set out in Section 12.1 or (and only to that extent that) the omission to notify materially prejudices the ability of the Indemnifying Party to exercise its right to defend provided in Sections 12.7 and 12.8.

12.7 Procedure for Direct Claims

With respect to any Direct Claim, following receipt of notice from the Indemnified Person of the Direct Claim, the Indemnifying Party will have thirty (30) days to make such investigation of the Direct Claim as is considered necessary or desirable. For the purpose of such investigation, the Indemnified Person will make available to the Indemnifying Party the information relied upon by the Indemnified Person to substantiate the Direct Claim, together with all such other information as the Indemnifying Party may reasonably request. If both Parties agree at or prior to the expiration of such thirty (30) day period (or any mutually agreed upon extension thereof) to the validity and amount of such Direct Claim, the Indemnifying Party will immediately pay to the Indemnified Person the full agreed upon amount of the Direct Claim, failing which the matter may be referred to binding arbitration in such manner as the parties may agree or to a court of competent jurisdiction.

12.8 Procedure for Third Party Claims

12.8.1 Upon receiving notice of a Third Party Claim, the Indemnifying Party may, at its expense, participate in the investigation and defence of the Third Party Claim, subject to the terms of this Section 12.8. The Indemnifying Party may also assume the investigation and defence of the Third Party Claim, subject to the terms of this Section 12.8.

12.8.2 In order to assume the investigation and defence of a Third Party Claim, the Indemnifying Party must give the Indemnified Person written notice of its election to do so within 10 Business Days of the Indemnifying Party’s receipt of notice of the Third Party Claim.

 

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12.8.3 The Indemnifying Party may not assume the investigation and defence of a Third Party Claim if:

12.8.3.1 the Indemnifying Party is also a party to the Third Party Claim and the Indemnified Person determines acting reasonably and in good faith that joint representation would be inappropriate; or

12.8.3.2 the Indemnifying Party fails to provide reasonable assurance to the Indemnified Person of its financial capacity to defend the Third Party Claim and provide indemnification with respect to the Third Party Claim.

12.8.4 If the Indemnifying Party assumes the investigation and defence of a Third Party Claim:

12.8.4.1 the Indemnifying Party will pay for all costs and expenses of the investigation and defence of the Third Party Claim except that the Indemnifying Party will not, so long as it diligently conducts such defence, be liable to the Indemnified Person for any fees of other counsel or any other expenses with respect to the defence of the Third Party Claim incurred by the Indemnified Person after the date the Indemnifying Party validly exercised its right to assume the investigation and defence of the Third Party Claim;

12.8.4.2 the Indemnifying Party will reimburse the Indemnified Person for all reasonable costs and expenses incurred by the Indemnified Person in connection with the investigation and defence of the Third Party Claim prior to the date the Indemnifying Party validly exercised its right to assume the investigation and defence of the Third Party Claim;

12.8.4.3 the Indemnified Person will not contact or communicate with the Person making the Third Party Claim without the prior written consent of the Indemnifying Party, unless required by applicable Law; and

12.8.4.4 legal counsel chosen by the Indemnifying Party to defend the Third Party Claim must be satisfactory to the Indemnified Person, acting reasonably.

12.8.5 If the Indemnifying Party (i) is not entitled to assume the investigation and defence of a Third Party Claim under Section 12.8.3, (ii) does not elect to assume the investigation and defence of a Third Party Claim, or (iii) assumes the investigation and defence of a Third Party Claim but fails to diligently pursue such investigation and defence, the Indemnified Person has the right (but not the obligation) to undertake the investigation and defence of the Third Party Claim. In the case where the Indemnifying Party fails to diligently pursue the investigation and defence of the Third Party Claim, the Indemnified Person may not assume the investigation and defence of the Third Party Claim unless the Indemnified Person gives the Indemnifying Party written demand to diligently pursue the investigation and defence and the Indemnifying Party fails to do so within 10 Business Days after receipt of the demand, or such shorter period as may be required to respond to any deadline imposed by a court, arbitrator or other tribunal.

12.8.6 If the Indemnified Person undertakes the investigation and defense of a Third Party Claim pursuant to Section 12.8.5, the Indemnifying Party will not be bound by any compromise or settlement of the Third Party Claim effected without its prior consent (which consent may not be unreasonably withheld or delayed).

 

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12.8.7 The Indemnifying Party will not be permitted to compromise and settle or to cause a compromise and settlement of a Third Party Claim without the prior written consent of the Indemnified Person, which consent may not be unreasonably withheld or delayed unless:

12.8.7.1 the terms of the compromise and settlement require only the payment of money for which the Indemnified Person is entitled to full indemnification under this Agreement; and

12.8.7.2 the Indemnified Person is not required to admit any wrongdoing, take or refrain from taking any action, acknowledge any rights of the Person making the Third Party Claim or waive any rights that the Indemnified Person may have against the Person making the Third Party Claim.

12.8.8 The Indemnified Person and the Indemnifying Party agree to keep the other fully informed of the status of any Third Party Claim and any related proceedings and to use their reasonable efforts to minimize Damages with respect to any Third Party Claim. If the Indemnifying Party assumes the investigation and defence of a Third Party Claim, the Indemnified Person will use its reasonable efforts to make available to the Indemnifying Party, on a timely basis, those employees whose assistance, testimony or presence is necessary or desirable to assist the Indemnifying Party in investigating and defending the Third Party Claim. The Indemnified Person will, at the request and expense of the Indemnifying Party, make available to the Indemnifying Party, or its representatives, on a timely basis all documents, records and other materials in the possession, control or power of the Indemnified Person, reasonably required by the Indemnifying Party for its use in defending any Third Party Claim which it has elected to assume the investigation and defence of. The Indemnified Person will reasonably cooperate on a timely basis with the Indemnifying Party in the defence of any Third Party Claim.

12.9 Exclusion of Other Remedies

Except as provided in this Section, the indemnities provided in Sections 12.3 and 12.4 will constitute the only remedy of the Fund Entities or BRPI, respectively, against the other Party in the event of any breach of a representation, warranty, covenant or agreement of such Party contained in this Agreement.

12.10 No Consequential Damages

Notwithstanding anything to the contrary in this Agreement, no Indemnified Person shall be entitled to recover from another Party (including an Indemnitor), for any Damages, any amount in excess of the actual compensatory damages, court costs and reasonable lawyers’ and other advisor fees suffered by such Indemnified Person. The Parties waive any right to recover punitive, incidental, indirect, special, exemplary and consequential damages, and economic loss and damages in respect of loss of opportunity arising in connection with or respect to this Agreement. The provisions of this Section 12.10 shall not apply to indemnification for a Third Party Claim.

ARTICLE 13

MISCELLANEOUS

13.1 Notices

Any notice or other communication (each a “ Notice ”) required or permitted to be given hereunder will be in writing and will be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if

 

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mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, will be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if sent by facsimile or other means of electronic communication, will be deemed to have been received on the Business Day following the sending, or if delivered by hand will be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address will also be governed by this Section 13.1. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications will be delivered by hand or sent by facsimile or other means of electronic communication and will be deemed to have been received in accordance with this Section 13.1. Sending a copy of a Notice to a Party’s legal counsel as contemplated below is for information purposes only and does not constitute delivery of the Notice to that Party. The failure to send a copy of a Notice to legal counsel does not invalidate delivery of that Notice to a Party. Notices and other communications will be addressed as follows:

 

  (a) to the Fund Entities and BREP at:

c/o Brookfield Renewable Power Trust

480 de la Cite Blvd.

Gatineau, Québec J8T 8R3

Attention: General Counsel

Facsimile: (819) 561-7188

with a copy (that does not constitute Notice) to:

Heenan Blaikie LLP

Bay Adelaide Centre, Suite 2900

333 Bay Street

South Tower, Royal Bank Plaza

Toronto, Ontario M5H 2T4

Attention: Neil Wiener / Allen Garson

Facsimile: (416) 360-8425

 

  (b) to BRPI at:

c/o Brookfield Renewable Power Inc.

1700-180 Kent Street

Ottawa, Ontario K1P 0B6

Attention: General Counsel

Facsimile: (819) 561-7188

 

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with a copy (that does not constitute Notice) to:

Torys LLP

Suite 3000, 79 Wellington St. W.

Toronto, Ontario M5K 1N2

Attention: Karrin Powys-Lybbe

Facsimile: (416) 865-7380

or to such other addresses or facsimile numbers as a party may from time to time notify the other in accordance with this Section 13.1.

13.2 Time is of the Essence

Time is of the essence in this Agreement.

13.3 Third Party Beneficiaries

Except as otherwise provided in Sections 6.5, 12.3 and 12.4, the Parties intend that this Agreement will not benefit or create any right or cause of action in favour of any Person, other than the Parties. Except for the insured and indemnified Persons identified in Sections 6.5, 12.3 and 12.4, no Person, other than the Parties, will be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. Despite the foregoing, BRPI acknowledges to such insured and indemnified Persons their direct rights against it under Sections 6.5, 12.3 and 12.4 of this Agreement. To the extent required by Law to give full effect to these direct rights, BRPI and the Fund Entities agree and acknowledge that they are acting as agent and/or as trustee of their respective insured and indemnified Persons identified in Sections 6.5, 12.3 and 12.4. The Parties reserve the right to vary or rescind the rights at any time and in any way whatsoever, if any, granted by or under this Agreement to any Person who is not a Party, without notice to or consent of that Person, including any insured and indemnified Persons identified in Sections 6.5, 12.3 and 12.4.

13.4 Amendments

Subject to the provisions of the Interim Order, the Plan of Arrangement and applicable Laws, this Agreement and the Plan of Arrangement may, at any time and from time to time before the holding of the Meetings but not later than the Effective Time, be amended by mutual written agreement of the Parties, without further notice to or authorization on the part of the Unitholders or Preferred Shareholders, and any such amendment may without limitation:

13.4.1 change the time for performance of any of the obligations or acts of the Parties;

13.4.2 waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto;

13.4.3 waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the Parties; and

13.4.4 waive compliance with or modify any mutual conditions precedent herein contained.

 

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13.5 Waiver

No waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar). No waiver will be binding unless executed in writing by the Party to be bound by the waiver. A Party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a Party from any other or further exercise of that right or the exercise of any other right.

13.6 Entire Agreement

This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, or any amendment or supplement hereto, by any Party to this Agreement or its directors, officers, employees or agents, to any other Party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the Parties to this Agreement has been induced to enter into this Agreement or any amendment or supplement hereto by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

13.7 Successors and Assigns

13.7.1 This Agreement becomes effective only when executed by the Parties. After that time, it will be binding upon and enure to the benefit of the Parties and their respective successors and permitted assigns.

13.7.2 Except as provided in this Section 13.7, neither this Agreement nor any of the rights or obligations under this Agreement are assignable or transferable by any Party without the prior written consent of the other Parties. Upon notice to the other Parties, any Party is entitled to assign this Agreement or any of its rights and/or obligations under this Agreement to any of its Affiliates subject to the following conditions:

13.7.2.1 the assignee will become jointly and severally liable with the assigning Party, as a principal and not as a surety, with respect to all of the obligations of the assigning Party, including the representations, warranties, covenants, indemnities and agreements of the assigning Party and the assigning Party will continue to be bound by the terms of this Agreement as if the assignment had not occurred;

13.7.2.2 the assignee must execute an agreement confirming the assignment and the assumption by the assignee of all obligations of the assigning Party under this Agreement; and

13.7.2.3 such assignment will not have any adverse effect on the other Parties to this Agreement (as determined by the other Parties, acting reasonably).

 

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13.8 Severability

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable Law, the Parties waive any provision of Law which renders any provision of this Agreement invalid or unenforceable in any respect. The Parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

13.9 Governing Law

13.9.1 This Agreement will be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

13.9.2 Each Party irrevocably attorns and submits to the non-exclusive jurisdiction of the Ontario courts situated in the City of Toronto and waives objection to the venue of any proceeding in such court or any argument that such court provides an inconvenient forum.

13.10 Brokers

BRPI will indemnify and save harmless the Fund Entities from and against any and all claims, losses and costs whatsoever for any commission or other remuneration payable or alleged to be payable to any broker, agent or other intermediary who purports to act or have acted for BRPI. The Fund Entities will jointly and severally indemnify and save harmless BRPI from and against any and all claims, losses and costs whatsoever for any commission or other remuneration payable or alleged to be payable to any broker, agent or other intermediary who purports to act or have acted for the Fund and/or BRPT. These indemnities are not subject to any of the limitations set out in Article 12.

13.11 Further Assurances

Each of the Parties will promptly do, make, execute, deliver all such further acts, documents and things as any other Party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

13.12 Counterparts

This Agreement may be executed in any number of counterparts (including counterparts by facsimile) and all such counterparts taken together will be deemed to constitute one and the same instrument.

[NEXT PAGE IS SIGNATURE PAGE]

 

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IN WITNESS WHEREOF the Parties have executed this Agreement.

 

BROOKFIELD RENEWABLE POWER INC.
By:  

        “Richard Legault”

  Name:     Richard Legault
  Title:       Chief Executive Officer
By:  

        “Donald Tremblay”

  Name:    Donald Tremblay
  Title:      Executive Vice-President
BROOKFIELD RENEWABLE POWER FUND, by its administrator, BROOKFIELD ENERGY MARKETING INC.
By:  

        “Richard Legault”

  Name:    Richard Legault
  Title:      Chief Executive Officer
By:  

        “Donald Tremblay”

  Name:    Donald Tremblay
  Title:      Executive Vice-President
BROOKFIELD ENERGY MARKETING INC. on behalf of BROOKFIELD RENEWABLE POWER TRUST
By:  

        “Richard Legault”

  Name:    Richard Legault
  Title:      Chief Executive Officer
By:  

        “Donald Tremblay”

  Name:    Donald Tremblay
  Title:      Executive Vice-President

[ Signature page to Combination Agreement ]


BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. by its general partner, 2288509 ONTARIO INC.
By:  

         “Richard Legault”

  Name:    Richard Legault
  Title:      Chief Executive Officer
By:  

        “Donald Tremblay”

  Name:    Donald Tremblay
  Title:      Executive Vice-President

[ Signature page to Combination Agreement ]


SCHEDULE A

PREFERRED SHAREHOLDER ARRANGEMENT RESOLUTION

BE IT RESOLVED THAT:

 

1. The arrangement (the “ Arrangement ”) under Section 182 of the Business Corporations Act (Ontario) (the “ OBCA ”), as more particularly described and set forth in the management information circular (the “ Circular ”) dated n , 2011 of Brookfield Renewable Power Fund (the “ Fund ”) and Brookfield Renewable Power Preferred Equity Inc. (“ BRP Equity ”) accompanying the notice of this meeting (as the Arrangement may be amended, modified or supplemented in accordance with the combination agreement (the “ Combination Agreement ”) made as of September 12, 2011, between Brookfield Renewable Power Inc., the Fund, Brookfield Renewable Power Trust (“ BRPT ”) and Brookfield Renewable Energy Partners L.P.) is hereby authorized, approved and adopted.

 

2. The plan of arrangement (as it has been or may be amended, modified or supplemented in accordance with the Combination Agreement (the “ Plan of Arrangement ”)), the full text of which is set out in Schedule C to the Combination Agreement, is hereby authorized, approved and adopted.

 

3. The Combination Agreement and related transactions, and any amendments, modifications or supplements thereto, are hereby ratified and approved.

 

4. BRP Equity be and is hereby authorized to apply for a final order from the Ontario Superior Court of Justice to approve the Arrangement on the terms set forth in the Combination Agreement and the Plan of Arrangement (as they may be amended, modified or supplemented and as described in the Circular).

 

5. The amendments to the articles of incorporation of BRP Equity as necessary to facilitate the Arrangement, as provided in the Plan of Arrangement and as described in the Circular, be and are hereby authorized and approved.

 

6. Notwithstanding that this resolution has been duly passed (and the Arrangement adopted) by the preferred shareholders of BRP Equity or that the Arrangement has been approved by the Ontario Superior Court of Justice, the board of directors of BRP Equity may, without notice to or approval of the preferred shareholders of BRP Equity (i) amend, modify or supplement the Plan Arrangement to the extent permitted by the Combination Agreement and (ii) subject to the terms of the Combination Agreement, not proceed with the Arrangement and related transactions.

 

7. Any director or officer of BRP Equity is hereby authorized and directed, for and on behalf of BRP Equity, to execute and deliver for filing with the Director under the Canada Business Corporations Act articles of amendment and to execute or cause to be executed and to deliver or cause to be delivered such other documents as are necessary or desirable to give effect to the Arrangement in accordance with the Combination Agreement, such determination to be conclusively evidenced by the execution and delivery of any such documents.


8. Any director or officer of BRP Equity is hereby authorized and directed, for and on behalf of BRP Equity, to execute or cause to be executed and to deliver or cause to be delivered all such other documents and instruments and to perform or cause to be performed all such other acts and things as such person determines may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document or instrument or the doing of any such act or thing.


SCHEDULE B

UNITHOLDER ARRANGEMENT RESOLUTION

BE IT RESOLVED THAT:

 

1. The arrangement (the “ Arrangement ”) under Section 182 of the Business Corporations Act (Ontario) (the “ OBCA ”), as more particularly described and set forth in the management information circular (the “ Circular ”) dated n , 2011 of Brookfield Renewable Power Fund (the “ Fund ”) and Brookfield Renewable Power Preferred Equity Inc. (“ BRP Equity ”) accompanying the notice of this meeting (as the Arrangement may be amended, modified or supplemented in accordance with the combination agreement (the “ Combination Agreement ”) made as of September 12, 2011, between Brookfield Renewable Power Inc., the Fund, Brookfield Renewable Power Trust (“ BRPT ”) and Brookfield Renewable Energy Partners L.P.) is hereby authorized, approved and adopted.

 

2. The plan of arrangement (as it has been or may be amended, modified or supplemented in accordance with the Combination Agreement (the “ Plan of Arrangement ”)), the full text of which is set out in Schedule C to the Combination Agreement, is hereby authorized, approved and adopted.

 

3. The (i) Combination Agreement and related transactions, (ii) actions of the trustees of the Fund and BRPT in approving the Combination Agreement, and (iii) actions of the trustees, directors and officers of the Fund, BRPT, and Brookfield Energy Marketing Inc. (“ BEMI ”) in executing and delivering the Combination Agreement for and on behalf of the Fund and BRPT, and any amendments, modifications or supplements thereto, are hereby ratified and approved.

 

4. The Fund and BRPT be and are hereby authorized to apply for a final order from the Ontario Superior Court of Justice to approve the Arrangement on the terms set forth in the Combination Agreement and the Plan of Arrangement (as they may be amended, modified or supplemented and as described in the Circular).

 

5. The amendments to the declarations of trust of each of the Fund and BRPT as necessary to facilitate the Arrangement and as provided in the Plan of Arrangement be and are hereby authorized and approved.

 

6. Notwithstanding that this resolution has been duly passed (and the Arrangement adopted) by the holders of trust units of the Fund or that the Arrangement has been approved by the Ontario Superior Court of Justice, the board of trustees of BRPT may, without notice to or approval of the holders of trust units of the Fund (i) amend, modify or supplement the Combination Agreement or the Plan Arrangement to the extent permitted by the Combination Agreement and (ii) subject to the terms of the Combination Agreement, not proceed with the Arrangement and related transactions.

 

7. Any trustee, director or officer of the Fund, BRPT, or BEMI is hereby authorized and directed, for and on behalf of the Fund and BRPT, to execute or cause to be executed and to deliver or cause to be delivered such documents as are necessary or desirable to give effect to the Arrangement in accordance with the Combination Agreement, such determination to be conclusively evidenced by the execution and delivery of any such documents.


8. Any trustee, director or officer of the Fund, BRPT, or BEMI is hereby authorized and directed, for and on behalf of the Fund and BRPT, to execute or cause to be executed and to deliver or cause to be delivered all such other documents and instruments and to perform or cause to be performed all such other acts and things as such person determines may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document or instrument or the doing of any such act or thing.

Exhibit 4.6

BRP FINANCE ULC

Issuer

-and-

BNY TRUST COMPANY OF CANADA,

Trustee

-and-

THE BANK OF NEW YORK MELLON,

Trustee

AMENDED AND RESTATED INDENTURE

Dated as of November 23, 2011


TABLE OF CONTENTS

 

ARTICLE 1

    

INTERPRETATION

     6   

1.1

  Definitions      6   

1.2

  Meaning of “outstanding” for Certain Purposes      14   

1.3

  Interpretation Not Affected by Headings      15   

1.4

  Extended Meanings      15   

1.5

  Day Not a Business Day      15   

1.6

  Currency      15   

1.7

  Other Currencies      16   

1.8

  Statutes      16   

1.9

  Applicable Law      16   

1.10

  Conflict of Any Provision of the Indenture with the Trust Indenture Act      16   

ARTICLE 2

    

THE DEBENTURES

     16   

2.1

  No Fixed Limitation      16   

2.2

  Issuance in Series      16   

2.3

  Form of Debentures      17   

2.4

  Debentures to Rank Equally      18   

2.5

  Book-Entry Only Debentures      19   

2.6

  Signatures on Debentures      20   

2.7

  Authentication      20   

2.8

  Concerning Interest      20   

2.9

  Interim Debentures      22   

2.10

  Issue of Substitute Debentures      22   

2.11

  Option of Holder as to Place of Payment      23   

2.12

  Record of Payments      23   

2.13

  Surrender for Cancellation      23   

2.14

  Right to Receive Indenture      23   

ARTICLE 3

    

REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP OF DEBENTURES

     23   

3.1

  Registers      23   

3.2

  Transfer of Debentures      24   

3.3

  Restrictions on Transfer of Global Debentures      25   

3.4

  Transferee Entitled to Registration      25   

3.5

  Closing of Registers      25   

3.6

  Exchange of Debentures      26   

3.7

  Ownership and Entitlement to Payment      26   

3.8

  Evidence of Ownership      27   

3.9

  No Notice of Trusts      27   

3.10

  Charges for Transfer and Exchange      27   

ARTICLE 4

    

ISSUE AND DELIVERY OF DEBENTURES

     28   

4.1

  Issuance of Debentures      28   

ARTICLE 5

    

REDEMPTION AND PURCHASE OF DEBENTURES

     29   

5.1

  General      29   

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]


5.2

  Partial Redemption of Debentures      29   

5.3

  Notice of Redemption      30   

5.4

  Debentures Due on Redemption Date      30   

5.5

  Purchase of Debentures      31   

5.6

  Cancellation of Debentures      31   

ARTICLE 6

    

COVENANTS OF THE CORPORATION

     31   

6.1

  Covenants      31   

6.2

  Limitations on Indebtedness      32   

6.3

  Limitation on Liens      32   

6.4

  Limitation on Sale and Leaseback Transactions      33   

6.5

  Limitation on Distributions      33   

6.6

  Limitations on Debt and Preferred Stock of Subsidiaries      33   

6.7

  Maintenance of Offices or Agencies      34   

6.8

  Money for Payments to Be Held in Trust      34   

6.9

  Trustee’s Remuneration and Expenses      35   

6.10

  Not to Extend Time for Payment of Interest      35   

6.11

  Examination and Audit      36   

ARTICLE 7

    

HOLDERS’ LISTS AND REPORTS BY TRUSTEES AND CORPORATION

     36   

7.1

  Disclosure of Names and Addresses of Holders      36   

7.2

  Reports by Trustees      36   

7.3

  Reports by the Corporation      37   

ARTICLE 8

    

DEFAULTS AND REMEDIES

     37   

8.1

  Events of Default      37   

8.2

  Notice of Event of Default      39   

8.3

  Acceleration      39   

8.4

  Waiver of Event of Default      40   

8.5

  Enforcement by the Trustee      40   

8.6

  Suits by Debentureholders      41   

8.7

  Undertaking for Costs      42   

8.8

  Application of Money      42   

8.9

  Distribution of Proceeds      43   

8.10

  Remedies Cumulative      43   

8.11

  Judgment Against the Corporation      43   

8.12

  Immunity of Shareholders, Directors and Officers      44   

ARTICLE 9

    

CANCELLATION, DISCHARGE AND DEFEASANCE

     44   

9.1

  Cancellation and Destruction      44   

9.2

  Payment of Amounts Due on Maturity      44   

9.3

  Discharge      44   

9.4

  Defeasance      45   

ARTICLE 10

    

SUCCESSORS

     46   

10.1

  Requirements for Successors      46   

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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10.2

  Vesting of Powers in Successor      47   

ARTICLE 11

    

MEETINGS OF DEBENTUREHOLDERS

     48   

11.1

  Right to Convene Meetings      48   

11.2

  Notices of Meetings      48   

11.3

  Chairman      48   

11.4

  Quorum      48   

11.5

  Power to Adjourn      48   

11.6

  Show of Hands      49   

11.7

  Poll      49   

11.8

  Voting      49   

11.9

  Regulations      49   

11.10

  Corporation and Trustee May Be Represented      50   

11.11

  Powers Exercisable by Unanimous Consent of Debentureholders      50   

11.12

  Powers Exercisable by Debentureholders by Extraordinary Resolution      51   

11.13

  Meaning of Ordinary Resolution      52   

11.14

  Meaning of Extraordinary Resolution      52   

11.15

  Powers Cumulative      53   

11.16

  Minutes      53   

11.17

  Instruments in Writing      53   

11.18

  Binding Effect of Resolutions      53   

11.19

  Serial Meetings      53   

11.20

  Record Dates      54   

11.21

  Meetings U.S Dollar Debenture Holders      55   

ARTICLE 12

    

NOTICES

     55   

12.1

  Notice to the Corporation      55   

12.2

  Notice to Debentureholders      55   

12.3

  Notice to the Trustee      55   

12.4

  When Publication Not Required      56   

12.5

  Waiver of Notice      56   

ARTICLE 13

    

CONCERNING THE TRUSTEE

     56   

13.1

  U.S. and Canadian Trustees      56   

13.2

  Corporate Trustees Required Eligibility      56   

13.3

  Certain Duties and Responsibilities of Trustees      57   

13.4

  No Conflict of Interest      58   

13.5

  Conditions Precedent to Trustee’s Obligation to Act      58   

13.6

  Resignation and Removal; Appointment of Successor      59   

13.7

  Acceptance of Appointment by Successor      60   

13.8

  Trustees May Deal in Debentures      60   

13.9

  No Person Dealing with Trustees Need Inquire      61   

13.10

  Investment of Money Held by Trustees      61   

13.11

  Trustees Not Required to Give Security      61   

13.12

  Trustee Not Required to Possess Debentures      61   

13.13

  Evidence of Compliance      61   

13.14

  Form of Evidence      61   

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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13.15

  Certain Rights of Trustees      62   

13.16

  Merger, Conversion, Consolidation or Succession to Business      63   

13.17

  Action by Trustees to Protect Interests      63   

13.18

  Protection of Trustees      63   

13.19

  Authority to Carry on Business      65   

13.20

  Trustees Not Liable in Respect of Depository      65   

13.21

  Global Debentures      65   

13.22

  Trustees Appointed Attorney      66   

13.23

  Acceptance of Trusts      66   

13.24

  Preferential Collection of Claims Against Corporation      66   

13.25

  No Liability for Certain Deposited Monies      66   

ARTICLE 14

    

SUPPLEMENTAL INDENTURES

     66   

14.1

  Supplemental Indentures      66   

14.2

  Effect of Supplemental Indentures      67   

14.3

  Execution of Supplemental Indentures      67   

14.4

  Reference in Securities to Supplemental Indentures      68   

ARTICLE 15

    

EVIDENCE OF RIGHTS OF DEBENTUREHOLDERS

     68   

15.1

  Evidence of Rights of Debentureholders      68   

ARTICLE 16

    

EXECUTION AND FORMAL DATE

     68   

16.1

  Counterpart Execution      68   

16.2

  Formal Date      68   

SCHEDULE A

  

Form of n % Debentures due n (Series n )

  

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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AMENDED AND RESTATED INDENTURE

This Amended and Restated Indenture is made as of November 23, 2011,

AMONG

 

   BRP FINANCE ULC , a corporation incorporated under the laws of Alberta (the “ Corporation ”)
   - and -
   BNY TRUST COMPANY OF CANADA , a trust company incorporated under the laws of Canada, as Canadian Trustee (the “ Canadian Trustee ”)
   - and -
   THE BANK OF NEW YORK MELLON , a banking corporation under the laws of New York (the “ U.S. Trustee ”)

WHEREAS Brookfield Renewable Power Inc. (the “ Original Issuer ”) entered into an indenture (as amended or supplemented prior to the date hereof, the “ Original Indenture ”) dated as of December 16, 2004, for the purposes of creating and issuing Debentures from time to time in the manner provided for therein;

AND WHEREAS the Debentureholders have, by an Extraordinary Resolution, approved the assumption by the Corporation of the obligations of the Original Issuer under the Original Indenture and the amendments to the Original Indenture that are reflected in this amended and restated indenture;

AND WHEREAS the Corporation, under the laws relating thereto, is duly authorized to assume the obligations under the Original Indenture and all Debentures issued as at the date hereof, and to create and issue the Debentures from time to time in one or more series as herein provided;

AND WHEREAS all necessary resolutions of the directors of the Corporation have been duly passed and other proceedings taken and conditions complied with to make the creation and issue of the Debentures proposed to be issued hereunder and this Indenture and the execution thereof legal, valid and binding on the Corporation in accordance with the laws relating to the Corporation;

AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Corporation and not by the Trustees;

NOW THEREFORE THIS INDENTURE WITNESSES and it is hereby covenanted, agreed and declared as follows.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]


ARTICLE 1

INTERPRETATION

 

1.1 Definitions

In this Indenture and in the Debentures, unless there is something in the subject matter or context inconsistent therewith, the following expressions have the respective meanings indicated:

“Affiliate” means, with respect to any Person, any other Person which, directly or indirectly through one or more Persons, Controls, is Controlled by, or is under common Control with, such Person.

“Book-Entry Only Debentures” means Debentures of a Series which, in accordance with the terms applicable to such Series, are to be held only by or on behalf of the Depository.

“BRELP” means Brookfield Renewable Energy L.P., an exempted partnership formed under the laws of Bermuda.

“BREP” means Brookfield Renewable Energy Partners L.P., a exempted partnership formed under the laws of Bermuda.

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day when banking institutions in Toronto, Ontario or New York, New York are authorized or obligated by law or regulation to close.

“CDS” means The Canadian Depository for Securities Limited and its successors.

“Canadian GAAP” means, as at any date of determination, accounting principles generally accepted in Canada, which, as at the date hereof, mean the international financial reporting standards adopted by the International Accounting Standards Board.

“Canadian Trustee” means BNY Trust Company of Canada or such other Person appointed as Canadian Trustee in a Supplemental Indenture.

“Capital Lease Obligation” of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with Canadian GAAP from time to time and which has a term to stated maturity of at least 18 months. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

“Capital Stock” of any Person means any and all shares, units, interests, participations or other equivalents (however designated) of corporate stock or equity of such Person.

“Certified Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation to have been duly passed by the Directors and to be in full force and effect on the date of such certification.

“Commission” means the United States Securities and Exchange Commission.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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“Common Shares” of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding-up of such Person, to shares of Capital Stock of any other class of such Person.

“Control” , “ Controlled” and similar expressions mean a relationship between two Persons wherein one of such Persons has the power, through the ownership of Securities, by contract or otherwise, to directly or indirectly, direct the management and policies of the other of such Persons, and includes: (i) in the case of a corporation, the ownership, either directly or indirectly through one or more Persons, of Securities of such corporation carrying more than 50% of the votes that may be cast to elect the directors of such corporation either under all circumstances or under some circumstances that have occurred and are continuing (other than Securities held as collateral for a bona fide debt where the holder thereof is not entitled to exercise the voting rights attached thereto), provided that such votes, if exercised, are sufficient to elect a majority of the directors of such corporation; and (ii) in the case of a limited partnership, acting or having the power to act as the general partner of such limited partnership or to otherwise Control such general partner.

“Corporate Trust Office” means the principal trust office of the Canadian Trustee or the U.S. Trustee, as the case may be, at which, at any particular time, its corporate trust business relative to this Indenture is administered. At the date hereof, the Corporate Trust Office for the Canadian Trustee is located at Suite 320 Bay Street, 11 th floor, Toronto, Ontario, M5H 4A6 and the Corporate Trust Office for the U.S. Trustee is located at 101 Barclay Street, 4E, New York, New York, 10286.

“Corporation” means BRP Finance ULC and its Successors.

“Corporation’s Auditors” means, at any time, a firm of chartered accountants duly appointed as auditors of the Corporation.

“Corporation Counsel” means legal counsel retained by the Corporation.

“Corporation Request” means an instrument signed in one or more counterparts by any two Officers of the Corporation requesting or directing the Trustees to take or refrain from taking the action or proceeding specified therein.

“Debentures” means unsecured debentures of the Corporation issued or to be issued pursuant to this Indenture and represented in the form of fully registered global debentures held by, or on behalf of the Depository.

“Debentureholder” or “ Holder” means, at a particular time, a Person entered in a Register as a holder of one or more Debentures outstanding at such time.

“Debentureholders’ Request” means, in respect of a particular Series, an instrument signed in one or more counterparts by Debentureholders holding not less than 25% of the aggregate principal amount of the outstanding Debentures of such Series or, in respect of all Debentures, an instrument signed in one or more counterparts by Debentureholders holding not less than 25% of the aggregate principal amount of all outstanding Debentures, in each case requesting or directing the Trustees to take or refrain from taking the action or proceeding specified therein.

“Debt Accounts” has the meaning ascribed to such term in Section 9.2.

“Depository” means CDS or such other Person as is designated in writing by the Corporation to act as depository in respect of a Series of Book-Entry Only Debentures, or with respect to a U.S. Dollar Debenture, the term “Depository” means The Depository Trust Company, or such other clearing agency registered under the Exchange Act.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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“Directors” means the directors of the Corporation or, whenever duly empowered by a resolution of the directors of the Corporation in accordance with applicable law, a committee of the directors of the Corporation, and reference to action by the Directors means action by the directors of the Corporation or action by any such committee.

“Event of Default” has the meaning ascribed to such term in Section 8.1.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Extraordinary Resolution” has the meaning ascribed to such term in Section 11.14.

“Financial Instrument Obligations” of any Person, means, with respect to any Person, obligations for transactions arising under:

 

  (a) any interest swap agreement, forward rate agreement, floor, cap or collar agreement, futures or options, insurance or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by such Person where the subject matter of the same is interest rates or the price, value, or amount payable thereunder is dependent or based upon the interest rates or fluctuations in interest rates in effect from time to time (but, for certainty, shall exclude conventional floating rate debt);

 

  (b) any currency swap agreement, cross-currency agreement, forward agreement, floor, cap or collar agreement, futures or options, insurance or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by such Person where the subject matter of the same is currency exchange rates or the price, value or amount payable thereunder is dependent or based upon currency exchange rates or fluctuations in currency exchange rates in effect from time to time; and

 

  (c) any agreement, whether financial or physical, for the purchase, sale, exchange, making or taking of any commodity (including natural gas, oil, electricity, coal, emission credits or other energy products), any commodity swap agreement, floor, cap or collar agreement or commodity future or option or other similar agreements or arrangements, or any combination thereof, entered into or guaranteed by such Person where the subject matter of the same is any commodity or the price, value or amount payable thereunder is dependent or based upon the price of any commodity or fluctuations in the price of any commodity in effect from time to time,

to the extent of the net amount due or accruing due thereunder (determined by marking-to-market the same in accordance with their terms).

“Funded Indebtedness” means, with respect to any Person, Indebtedness but excludes (i) any Indebtedness of such Person that, on the date of issue or assumption of liability, has a term to maturity (including any right of extension or renewal) of 18 months or less, (ii) Inter-Company Indebtedness of such Person, and (iii) Qualifying Subordinated Indebtedness of such Person.

“Global Debenture” means a Debenture representing the aggregate principal amount of a Series of Debentures.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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“Guarantee” means a guarantee agreement executed by a Guarantor in favour of the Canadian Trustee; and “ Guarantees ” means all of them, including the Guarantees executed by BREP, BRELP, Brookfield BRP Holdings (Canada) Inc. and BRP Bermuda Holdings I Limited.

“Guarantors” means, collectively, BREP, BRELP, Brookfield BRP Holdings (Canada) Inc. and BRP Bermuda Holdings I Limited, and each other wholly-owned material Subsidiary of BRELP which is directly owned by BRELP and which delivers a Guarantee; and “ Guarantor ” means any of them.

“Indebtedness” of any Person means (without duplication), whether recourse is to all or a portion of the assets of such Person and whether or not contingent, obligations treated in accordance with Canadian GAAP from time to time as indebtedness, including: (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), (v) the Net Swap Exposure of such Person (vi) every Capital Lease Obligation of such Person, (vii) the maximum fixed redemption or repurchase price, as at the time of determination, of all Redeemable Stock of such Person that is not Qualifying Redeemable Stock, and (viii) every obligation of the type referred to in clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or for which such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, excluding any obligation in respect of Qualifying Redeemable Stock and any obligation of another Person in relation to Net Swap Exposure, the payment of which such Person has guaranteed and which guarantee is included above as indebtedness in accordance with Canadian GAAP from time to time.

“Interest Payment Date” means, for each Series of interest-bearing Debentures, a date on which interest is due and payable in accordance with the terms pertaining to such Series.

“Inter-Company Indebtedness” means, with respect to any of the Corporation, a Guarantor or any of their respective Subsidiaries, Indebtedness owing to any one or more of the Corporation, a Guarantor and/or any Subsidiary of the Corporation or a Guarantor.

“Limited Recourse Indebtedness” as applied to any Indebtedness of any Person means any Indebtedness that is or was incurred to finance a specific facility or portfolio of facilities or the acquisition of financial assets, provided that if such Indebtedness is with recourse to the Corporation or a Guarantor or any of their respective Subsidiaries, or such other entities as is available, such recourse is on an unsecured basis to the Corporation or a Guarantor (except as subsequently provided herein) and is limited to liabilities or obligations relating to the specific facility or portfolio of facilities or financial assets, and provided further that such Indebtedness may be secured by a lien on only (i) the property that constitutes such facility, portfolio of facilities or financial assets, as the case may be, (ii) the income from and proceeds of such facility, portfolio of facilities or financial assets, as the case may be, (iii) the Capital Stock of any Subsidiary of the Corporation or a Guarantor, or other entity, that owns an interest in such facility, portfolio of facilities or financial assets, or any interest that any such Subsidiary, or other entity, holds of any other Person owning any interest in such facility, portfolio of facilities or financial assets, and (iv) the contracts pertaining to such facility, portfolio of facilities or financial assets.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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“Maturity Date” means, with respect to any Debenture, the date on which the principal of such Debenture becomes due and payable as therein or herein provided, whether at the Stated Maturity thereof or by declaration of acceleration, call for redemption or otherwise.

“Net Swap Exposure” means the net position of Financial Instrument Obligations of any Person that are: (i) in excess of 18 months from the time the relevant calculation is made; and (ii) considered as indebtedness in accordance with Canadian GAAP from time to time.

Net Worth ” means an amount equal to the sum of (i) the equity or capital of BREP (including the partners’ capital, retained earnings or deficits, accumulated other comprehensive income or loss, and contributed and revaluation surplus of BREP) and all preferred equity and equity components of capital securities of BREP, (ii) the principal amount of all Qualifying Subordinated Indebtedness of BREP, and (iii) the consolidated Qualifying Redeemable Stock of BREP, determined in each case on a consolidated basis in accordance with Canadian GAAP as at the date of the most recent financial statements of BREP.

“Non-Controlling Interests” of means, at the time of any determination thereof, the amount that would be shown on a consolidated financial statement of BREP at such time, prepared in accordance with Canadian GAAP at such time, of non-controlling interests owned by minority stakeholders in BREP’s consolidated entities, and includes preferred shares, limited partnership interests and trust units.

“Officer” means (a) with respect to any Person that is a corporation, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Controller, the Secretary or any Vice-President of such Person and (b) with respect to any other Person, the individuals selected by such Person to perform functions similar to those of the officers listed in clause (a).

“Officers’ Certificate” means a certificate of the Corporation signed by any two Officers of the Corporation in their capacities as officers of the Corporation and not in their personal capacities provided that each Officers’ Certificate shall be signed on behalf of the Corporation by two or more Officers of the Corporation, one of whom must be either the principal executive officer, the principal financial officer or the principal accounting officer of the Corporation, and each Officers’ Certificate delivered to the U.S. Trustee shall comply with the requirements of the Trust Indenture Act.

“Opinion of Corporation Counsel” means a written opinion of Corporation Counsel or internal legal counsel and who shall be reasonably acceptable to the Trustees.

“Ordinary Resolution” has the meaning ascribed to such term in Section 11.13.

“Paying Agent” means a Person authorized by the Corporation to pay the principal, Premium or interest payable in respect of any Debentures on behalf of the Corporation, and may include the Corporation and the Trustees.

“Permitted Encumbrances” means any of the following, with respect to the Corporation or a Guarantor and any of its respective Subsidiaries:

 

  (a) any encumbrance existing as of the date of the first issuance of Debentures issued pursuant to this Indenture, or arising thereafter pursuant to contractual commitments entered into prior to such issuance;

 

  (b) any encumbrance created, incurred or assumed to secure any purchase money obligation;

 

  (c) any Capital Lease Obligation;

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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  (d) any encumbrance created, incurred or assumed to secure any Limited Recourse Indebtedness;

 

  (e) any encumbrance for collateral pledged (including parental guarantees) for Financial Instrument Obligations and energy purchase and sales agreements incurred in the ordinary course of business;

 

  (f) any encumbrance to secure any borrowed money if the sum of the amount of borrowed money secured by all encumbrances does not exceed the greater of 5% of Net Worth or $100 million;

 

  (g) any encumbrance in favour of any Subsidiary of the Corporation or any Guarantor;

 

  (h) any encumbrance on property of a corporation or any entity in which it has an interest which encumbrance exists at the time such corporation is merged into, or amalgamated or consolidated with the Corporation, a Guarantor or any Subsidiary of any of them, or such property is otherwise directly or indirectly acquired by the Corporation, a Guarantor or any Subsidiary of any of them, other than an encumbrance incurred in contemplation of such merger, amalgamation, consolidation or acquisition;

 

  (i) any encumbrance securing any Indebtedness to any bank or banks or other lending institution or institutions incurred in the ordinary course of business and for the purpose of carrying on the same, repayable on demand or maturing within 18 months of the date when such Indebtedness is incurred or the date of any renewal or extension thereof;

 

  (j) any encumbrance on or against cash or marketable debt securities pledged to secure Financial Instrument Obligations;

 

  (k) any encumbrance on or against cash or marketable debt securities in a sinking fund account established in support of a Series of Debentures issued pursuant to the Indenture;

 

  (l) any encumbrance or right of distress reserved in or exercisable under any lease for rent to which the Corporation, a Guarantor or any of their Subsidiaries is a party and for compliance with the terms of the lease;

 

  (m) any encumbrance reserved in or exercisable under any subdivision, site plan control, development, reciprocal, servicing, facility, facility cost sharing or similar agreements with a governmental entity currently existing or hereafter entered into (in accordance with the provisions of this Indenture) with a governmental authority, which do not materially interfere with the use of the property for the purposes for which it is held or materially detract from the value thereof;

 

  (n) encumbrances respecting encroachments by facilities on neighboring lands over the property which do not materially interfere with the use thereof for the purposes for which the property is held or materially detract from the value thereof;

 

  (o) permits, licenses, agreements, easements (including, without limitation, heritage easements and agreements relating thereto), restrictions, restrictive covenants, reciprocal rights, rights-of-way, public ways, rights in the nature of an easement and other similar rights in land granted to or reserved by other Persons (including, without in any way limiting the generality of the foregoing, permits, licenses, agreements, easements, rights-of-way, sidewalks, public ways, and rights in the nature of easements or servitudes for sewers, drains, steam, gas and water mains or electric light and power or telephone and telegraph conduits, poles, wires and cables);

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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  (p) liens incurred in the ordinary course of business, other than in connection with the incurrence of Indebtedness, that do not individually or in the aggregate with all other Permitted Encumbrances materially detract from the value of the properties encumbered or materially interfere with their use in the ordinary course of business; and

 

  (q) any extension, renewal, alteration or replacement (or successive extensions, renewals, alterations or replacements) in whole or in part, of any encumbrance referred to in the foregoing clauses (a) through (p) inclusive, provided that the extension, renewal, alteration or replacement of such encumbrance is limited to all or any part of the same property that secured the encumbrance extended, renewed, altered or replaced (plus improvements on such property) and the principal amount of the Indebtedness secured thereby is not increased.

“Person” means any individual, corporation, body corporate, limited partnership, general partnership, joint stock company, association, joint venture, association, company, trust, bank, fund, governmental authority or other entity or organization, whether or not recognized as a legal entity.

“Preferred Stock” of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person.

“Premium” means, with respect to any Debenture at a particular time, the excess, if any, of the then applicable Redemption Price of such Debenture over the principal amount of such Debenture.

“Prime Rate” means the rate of interest expressed as a rate per annum which the Corporation’s principal Canadian bank designates as its prime rate and which establishes from time to time the reference rate of interest such bank will use to determine the rate of interest, expressed as its prime rate of interest, that it will charge for demand loans in Canadian dollars made in Canada, as such rate may be adjusted from time to time.

“Qualifying Redeemable Stock” of any Person means any Redeemable Stock of such Person that can be satisfied or acquired, in the sole discretion of the Person who issued such Redeemable Stock, BREP or a Subsidiary of BREP, with or in exchange for Capital Stock of such Person, BREP or a Subsidiary of BREP that is not itself Reedemable Stock.

“Qualifying Subordinated Indebtedness” of any Person means Indebtedness of such Person (i) which by its terms provides that the payment of principal of (and Premium, if any) and interest on and all other payment obligations in respect of such Indebtedness shall be subordinate to the prior payment in full of the Debentures to at least the extent that no payment of principal of (or Premium, if any) or interest on or otherwise due in respect of such Indebtedness may be made for so long as there exists any default in the payment of principal (or Premium, if any) or interest on the Debentures or any other default that with the passing of time or the giving of notice, or both, would constitute an Event of Default with respect to the Debentures and (ii) which expressly by its terms gives such Person the right to make payments of principal (and Premium, if any) and interest and all other payment obligations in respect of such Indebtedness in equity of the Corporation, a Guarantor or any of their respective Subsidiaries.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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“Record Date” means the date for determining the Holders of Debentures of a Series entitled to receive payment of interest on an Interest Payment Date for such Series, which date shall be the fifteenth Business Day prior to such Interest Payment Date or such other date as shall be specified in a Certified Resolution delivered to the Trustee or as provided for in a Supplemental Indenture.

“Redeemable Stock” of any Person means any Capital Stock of such Person which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the final stated maturity of the Debentures .

“Redemption Date” has the meaning ascribed to such term in Section 5.3.

“Redemption Price” means, in respect of a Debenture, the amount, excluding interest, payable on the Redemption Date fixed for such Debenture.

“Redemption Price Calculation Date” has the meaning ascribed to such term in Section 5.3.

“Register” has the meaning ascribed to such term in Section 3.1.

“Registrar” means a Trustee or a Person other than a Trustee designated by the Corporation to keep a Register.

“Responsible Officer” when used with respect to the Trustee, means any vice president, any assistant vice president, any senior trust officer or assistant trust officer, any trust officer, or any other officer associated with the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such person’s knowledge of and familiarity with the particular subject.

“Sale and Leaseback Transaction” of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset.

“Securities” means any stock, shares, units, installment receipts, voting trust certificates, bonds, debentures, notes, other evidences of indebtedness, or other documents or instruments commonly known as securities or any certificates of interest, shares or participations in temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe for, purchase or acquire any of the foregoing.

“Series” means a series of Debentures which, unless otherwise specified in a Supplemental Indenture or a Term Schedule, consists of those Debentures which have identical terms and were or are to be issued at the same time, regardless of whether such Debentures are designated as a series.

“Stated Maturity” means the date specified in a Debenture as the date on which the principal of such Debenture is due and payable.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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“Subsidiary” of any Person means a corporation, partnership, limited partnership, trust or other entity 50% or more of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof, excluding any publicly listed entities and their Subsidiaries provided, however, that an involuntary delisting which is subsequently cured within 14 business days will not be considered a delisting for these purposes.

“Successor” has the meaning ascribed to such term in Section 10.1.

“Supplemental Indenture” means an indenture supplemental to this Indenture pursuant to which, among other things, Debentures may be authorized for issue or the provisions of this Indenture may be amended.

“Term Schedule” has the meaning ascribed to such term in Section 4.1(c).

“Total Consolidated Capitalization” means (without duplication), in accordance with Canadian GAAP from time to time, on a consolidated basis, the sum of (i) Net Worth, (ii) the Non-Controlling Interests, and (iii) all Funded Indebtedness of BREP.

“Trust Indenture Act” means the U.S. Trust Indenture Act of 1939, as amended.

“Trustee or Trustees” means the Persons named as the “ Canadian Trustee ” and the “ U.S. Trustee” in this Indenture, unless a successor of either or both of such Persons shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “ Trustee ” and “ Trustees ” shall refer instead to such successor Trustee or Trustees.

“Trustee Counsel” means legal counsel retained by the Trustees, which may or may not be counsel to the Corporation.

“U.S. Dollar Debentures” shall mean Debentures denominated in United States dollars.

“U.S. Trustee” means The Bank of New York Mellon, a New York banking corporation or such other Person appointed as U.S. Trustee in a Supplemental Indenture.

“Voting Stock” of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or Persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.

 

1.2 Meaning of “outstanding” for Certain Purposes

Every Debenture certified and delivered by the Trustees hereunder shall be deemed to be outstanding until it is cancelled or delivered to either Trustee for cancellation or money for the payment thereof has been set aside pursuant to Article 9, provided that if a new Debenture has been issued in substitution for a Debenture that has been mutilated, lost, stolen or destroyed, only one of such Debentures shall be counted for the purpose of determining the aggregate principal amount of Debentures outstanding and provided further that,

 

  (a) Debentures that have been partially redeemed, purchased or converted shall be deemed to be outstanding only to the extent of the unredeemed, unpurchased or unconverted part of the principal amount thereof, and

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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  (b) for the purpose of any provision of this Indenture entitling Holders of outstanding Debentures to vote, sign consents, requisitions or other instruments or take any other action under this Indenture or to constitute a quorum at any meeting of Debentureholders, Debentures owned directly or indirectly by the Corporation or any Affiliate of the Corporation shall be disregarded, provided that,

 

  (i) for the purpose of determining whether the Trustees shall be protected in relying on any such vote, consent, requisition or other instrument or action or on the Debentureholders present or represented at any meeting of Debentureholders constituting a quorum, only the Debentures which the Trustees know are so owned shall be so disregarded, and

 

  (ii) Debentures so owned that have been pledged in good faith other than to the Corporation or a Subsidiary or an Affiliate of the Corporation shall not be disregarded if the pledgee shall establish to the satisfaction of the Trustees the pledgee’s right to vote, sign consents, requisitions or other instruments or take such other actions free from the control of the Corporation, a Subsidiary or any Affiliate of the Corporation.

 

1.3 Interpretation Not Affected by Headings

The division of this Indenture into Articles, Sections and clauses, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

 

1.4 Extended Meanings

In this Indenture, unless otherwise expressly provided herein or unless the context otherwise requires, words importing the singular number include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders; references to “ Indenture” , “ this Indenture” , “ hereto” , “ herein” , “ hereof” , “ hereby” , “hereunder” and similar expressions refer to this amended and restated indenture, and not to any particular Article, Section, clause or other portion hereof, and include all Schedules and amendments hereto, modifications or restatements hereof, and any and every Supplemental Indenture and Term Schedule; and the expressions “ Article” , “ Section” , “ clause” and “ Schedule” followed by a number, letter, or combination of numbers and letters refer to the specified Article, Section or clause of or Schedule to this Indenture.

 

1.5 Day Not a Business Day

If any day on which an amount is to be determined or an action is to be taken hereunder at a particular location is not a Business Day at such location, then such amount shall be determined or such action shall be taken at or before the requisite time on the next succeeding day that is a Business Day at such location.

 

1.6 Currency

Except as otherwise provided herein, all references in this Indenture to “ Canadian dollars” , “ dollars” and “ $” are to lawful money of Canada.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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1.7 Other Currencies

For the purpose of making any computation under this Indenture, any currency other than Canadian dollars shall be converted into Canadian dollars at the Bank of Canada noon rate of exchange on the date on which such computation is to be made, unless otherwise provided in a Supplemental Indenture.

 

1.8 Statutes

Each reference in this Indenture to a statute is deemed to be a reference to such statute as amended, re-enacted or replaced from time to time.

 

1.9 Applicable Law

This Indenture and the Debentures shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario and shall be treated in all respects as Ontario contracts; provided, that the rights, protections, duties, obligations and immunities of the U.S. Trustee hereunder shall be governed by and construed under the laws of the State of New York; and provided, further that U.S. Dollar Debentures and the Supplemental Indenture under which such U.S. Dollar Debenture are issued shall be governed by and construed in accordance with the laws of the State of New York.

 

1.10 Conflict of Any Provision of the Indenture with the Trust Indenture Act

Each of the Corporation and the U.S. Trustee agrees to comply with all provisions of the Trust Indenture Act applicable to or binding upon it in connection with this Indenture and the Debentures. If and to the extent that any provision of this Indenture or the Debentures or applicable law as set forth in Section 1.9 limits, qualifies or conflicts with any mandatory requirement of the Trust Indenture Act (and notwithstanding any provisions of this Indenture or the Debentures to the contrary), such mandatory requirement shall prevail. For greater certainty, if and to the extent that any provision of this Indenture or the Debentures or applicable law as set forth in Section 1.9 limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, or conflicts with any provision (an “incorporated provision”) required by or deemed to be included in this Indenture by operation of such Trust Indenture Act sections (and notwithstanding any provisions of this Indenture or the Debentures to the contrary), the Trust Indenture Act shall control.

ARTICLE 2

THE DEBENTURES

 

2.1 No Fixed Limitation

The aggregate principal amount of Debentures which may be issued under this Indenture is unlimited, but Debentures may be issued hereunder only upon the terms and subject to the conditions herein provided.

 

2.2 Issuance in Series

Debentures may be issued in one or more Series. The Debentures of each Series shall be designated in such manner, shall bear such title, date or dates and mature on such date or dates, shall bear interest, if any, at such rate or rates accruing from and payable on such date or dates, may be issued at

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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such times and in such denominations, may be redeemable before maturity in such manner and subject to payment of such Premium, may be payable as to principal, interest and Premium at such place or places and in such currency or currencies, may be payable as to principal, interest and Premium in Securities of the Corporation or any other Person, may provide for such mandatory redemption, sinking fund or other analogous repayment obligations, may contain such provisions for the exchange or transfer of Debentures including different denominations and forms, may have attached thereto or issued therewith Securities entitling the Holders to subscribe for, purchase or acquire Securities of the Corporation or any other Person upon such terms, may give the Holders thereof the right to convert Debentures into Securities of the Corporation or any other Person upon such terms, may be defeasible at the option of the Corporation, and may contain such other provisions, not inconsistent with the provisions of this Indenture (except as otherwise permitted herein) or applicable law, as may be determined by the Directors by a resolution passed at or prior to the time of issue of the Debentures of such Series and set forth in a Term Schedule or, to such extent as the Directors may deem appropriate, in a Supplemental Indenture pertaining to the Debentures of such Series. At the option of the Corporation, the maximum principal amount of Debentures of any Series may be limited, such limitation to be expressed in the Term Schedule or Supplemental Indenture providing for the issuance of the Debentures of such Series, and any such limitation may be increased at any time by the Corporation without the consent of the Debentureholders by means of a resolution of the Directors.

If any of the terms of a Series are established by action taken pursuant to a board resolution, a copy of an appropriate record of such action will be certified by the Secretary or an Assistant Secretary of the Corporation and delivered to the Trustee concurrently with or prior to the delivery of the Officers’ Certificate setting forth the terms of the series.

 

2.3 Form of Debentures

The Debentures of any Series may be of different denominations and forms and may contain such variations of tenor and effect, not inconsistent with the provisions of this Indenture (except as otherwise permitted herein) or applicable law, as are incidental to such differences of denomination and form, including variations in the provisions for the exchange of Debentures of different denominations or forms and in the provisions for the registration or transfer of Debentures, and any Series of Debentures may consist of Debentures having different dates of issue, different dates of maturity, different rates of interest, different redemption prices, different sinking fund provisions, and partly of Debentures carrying the benefit of a sinking fund and partly of Debentures with no sinking fund provided therefor.

Subject to the foregoing provisions and subject to any limitation as to the maximum principal amount of Debentures of any particular Series, any Debenture may be issued as part of any Series of Debentures previously issued.

The Debentures and the registration panel and certificate of the Trustees endorsed thereon may be in the form set out in Schedule “A” or in such other form or forms (which may include legends) as the Directors shall by resolution determine at or prior to the time of issue thereof and set forth in a Term Schedule, or to the extent as the Directors may deem appropriate, in a Supplemental Indenture pertaining thereto.

The Debentures of any Series may be engraved, lithographed, printed, mimeographed or typewritten, or partly in one form and partly in another, as the Corporation may determine, provided that if a Debenture is issued in mimeographed or typewritten form, the Corporation, on the demand of the Holder thereof, shall make available within a reasonable time after such demand, without expense to such Holder, an engraved, lithographed or printed Debenture in exchange therefor.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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Unless otherwise specified in the Term Schedule or the Supplemental Indenture authorizing a Series of Debentures, every Global Debenture of such Series authenticated and delivered by the Trustees shall bear a legend in substantially the following form:

THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE CANADIAN DEPOSITORY FOR SECURITIES LIMITED (“CDS”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL BECAUSE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS AN INTEREST HEREIN.

Notwithstanding the foregoing, a Global Debenture evidencing U.S. Dollar Debentures shall bear a legend in substantially the following form, or such other applicable legend, unless otherwise specified in the Supplemental Indenture:

THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS DEBENTURE MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR DEBENTURES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITARY OR A NOMINEE THEREOF, AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY DEBENTURE AUTHENTICATED AND DELIVERED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS DEBENTURE WILL BE A GLOBAL DEBENTURE SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES.

 

2.4 Debentures to Rank Equally

The Debentures shall be direct unsecured obligations of the Corporation. The Debentures of each Series shall rank equally and pari passu with each other and with the Debentures of every other Series (regardless of their actual dates or terms of issue) and, subject to statutory preferred exceptions, with all other existing and future unsubordinated and unsecured Indebtedness of the Corporation, except as to sinking fund provisions applicable to different Series of Debentures.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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2.5 Book-Entry Only Debentures

Except as otherwise provided in a Term Schedule or Supplemental Indenture applicable to a Series of Debentures, each Series of Debentures shall be issued as Book-Entry Only Debentures represented by a Global Debenture. Each Global Debenture authenticated in accordance with any Supplemental Indenture shall be registered in the name of the Depository designated for such Global Debenture or a nominee thereof and delivered to such Depository or a nominee thereof or custodian therefor, and each such Global Debenture shall constitute a single Debenture for all purposes of this Indenture and all Supplemental Indentures. None of the Corporation, the Trustees or any other Paying Agent shall have any responsibility or liability for any aspects of the records relating to or payments made by any Depository on account of the beneficial interest in any Global Debenture. Except as provided in this Section 2.5, owners of beneficial interests in any Global Debenture shall not be entitled to have Debentures registered in their names, shall not receive or be entitled to receive Debentures in definitive form and shall not be considered owners or holders thereof under this Indenture or any Supplemental Indenture. Nothing herein or in a Supplemental Indenture shall prevent the owners of beneficial interests in Global Debentures from voting such Debentures using duly executed proxies.

Notwithstanding any other provision in this Indenture or any provision in any Supplemental Indenture, no Global Debenture may be exchanged in whole or in part for Debentures registered, and no transfer of a Global Debenture in whole or in part may be registered in the name of any Person other than the Depository for such Global Debenture or a nominee thereof unless:

 

  (a) the Depository notifies the Corporation that it is unwilling or unable to continue to act as depository in connection with such Debentures and the Corporation is unable to locate a qualified successor,

 

  (b) the Depository ceases to be a clearing agency or otherwise ceases to be eligible to be a depository and the Corporation is unable to locate a qualified successor,

 

  (c) the Corporation determines that such Debentures shall no longer be held as Book-Entry Only Debentures, or

 

  (d) such right is required by applicable law, as determined by the Corporation and the Corporation Counsel,

following which Debentures in fully registered form shall be issued to the beneficial owners of such Debentures or their nominees.

Subject to the provisions of this Section 2.5, any exchange of a Global Debenture for Debentures which are not Global Debentures may be made in whole or in part in accordance with the provisions of Section 2.9, mutatis mutandis . All such Debentures issued in exchange for a Global Debenture or any portion thereof shall be registered in such names as the Depository for such Global Debenture shall direct and shall be entitled to the same benefits and subject to the same terms and conditions (except insofar as they relate specifically to Global Debentures) as the Global Debenture or portion thereof surrendered upon such exchange.

Every Debenture authenticated and delivered upon registration of transfer of a Global Debenture, or in exchange for or in lieu of a Global Debenture or any portion thereof, whether pursuant to this Section 2.5 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Debenture, unless such Debenture is registered in the name of a Person other than the Depository for such Global Debenture or a nominee thereof.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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2.6 Signatures on Debentures

All Debentures shall be signed (either manually or by facsimile signature) by any two of the chairman of the Corporation’s board of directors, the president and chief executive officer of the Corporation, the chief financial officer of the Corporation and the secretary of the Corporation. A facsimile signature on any Debenture shall for all purposes of this Indenture be deemed to be the signature of the individual whose signature it purports to be and to have been signed at the time such facsimile signature was reproduced, and each Debenture so signed shall be valid and binding upon the Corporation notwithstanding that any individual whose signature (either manual or facsimile) appears on a Debenture is not at the date of this Indenture or at the date of the Debenture or at the date of the authentication and delivery thereof an officer of the Corporation.

2.7 Authentication

No Debenture shall be issued or, if issued, shall be obligatory or entitle the Holder thereof to the benefit thereof until it has been authenticated by or on behalf of one of the Trustees substantially in the form set out in Schedule “A” or in a Term Schedule or Supplemental Indenture or in some other form acceptable to the Trustees. Such execution of the certificate of authentication on any Debenture shall be conclusive evidence that such Debenture has been duly issued hereunder and is a valid obligation of the Corporation. The execution of the certificate of authentication by the shall be deemed to be a representation and warranty by the authenticating Trustee that such Trustee has examined the form of Debenture so authenticated and delivered and has found the same to be in substantially the form called for by the Indenture

Notwithstanding the foregoing, if any Debenture shall have been authenticated and delivered hereunder but never issued and sold by the Corporation and the Corporation shall deliver such Debenture to the Trustee for cancellation, for all purposes of this Indenture such Debenture will be deemed never to have been authenticated and delivered hereunder and will never be entitled to the benefits of this Indenture. The Debentures shall be dated the date of their authentication.

2.8 Concerning Interest

Except as otherwise provided in a Term Schedule or Supplemental Indenture applicable to a Series of Debentures,

 

  (a) each Debenture of a Series, whether issued originally or in exchange or in substitution for previously issued Debentures, shall bear interest from and including the later of

 

  (i) its date of issue and

 

  (ii) the last Interest Payment Date to which interest shall have been paid or made available for payment on the outstanding Debentures of such Series;

 

  (b) interest shall be payable semi-annually in arrears in equal instalments;

 

  (c) interest payable shall be computed on the basis of a year of 365 days; and

 

  (d) whenever interest is computed on the basis of a year (the “deemed year”) which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing such product by the number of days in the deemed year.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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Subject to accrual of any interest on unpaid interest from time to time, interest on each Debenture shall cease to accrue from the earlier of the Maturity Date of such Debenture and, if such Debenture is called for redemption, the Redemption Date fixed for such Debenture, unless, in each case, upon due presentation and surrender of such Debenture for payment on or after such Maturity Date or Redemption Date, as the case may be, such payment is improperly withheld or refused.

Wherever in this Indenture or a Debenture there is mention, in any context, of the payment of interest, such mention is deemed to include the payment of interest on amounts in default to the extent that, in such context, such interest is, was or would be payable pursuant to this Indenture or such Debenture, and express mention of interest on amounts in default in any of the provisions of this Indenture shall not be construed as excluding such interest in those provisions of this Indenture in which such express mention is not made.

Except as otherwise provided in a Term Schedule or Supplemental Indenture applicable to a Series of Debentures, if the date for payment of any amount of principal or interest in respect of a Debenture is not a Business Day at the place of payment, then payment shall be made on the next Business Day at such place and the Holder of such Debenture shall not be entitled to any further interest or other payment in respect of the delay.

Except as otherwise provided in a Term Schedule or Supplemental Indenture applicable to a Series of Debentures, the Corporation shall pay the interest due upon the principal amount of an interest-bearing Debenture (except interest payable on maturity or redemption of such Debenture which, at the option of the Corporation, may be paid only upon presentation of such Debenture for payment) by forwarding or causing to be forwarded by wire or by prepaid ordinary mail (or in the event of mail service interruption, by such other means as the Corporation and the Trustees determine to be appropriate) a cheque for such interest (less any tax required by law to be deducted or withheld) payable on the applicable Interest Payment Date to the Holder of such Debenture on the Record Date for such payment at the address appearing on the Register unless otherwise directed in writing by such Holder or, in the case of joint Holders, payable to all such joint Holders and addressed to one of them at the last address appearing in the applicable Register and negotiable at par at each of the places at which interest upon such Debenture is payable. The forwarding of such cheque or wire shall satisfy and discharge the liability for the interest on such Debenture to the extent of the sum represented thereby (plus the amount of any tax deducted or withheld) unless such cheque is not paid on presentation at any of the places at which such interest is payable. In the event of the non-receipt of a cheque by the applicable Debentureholder or the loss, theft or destruction thereof, the Corporation, upon being furnished with evidence of such non-receipt, loss, theft or destruction and indemnity reasonably satisfactory to it, shall issue or cause to be issued to such Debentureholder a replacement cheque for the amount of such cheque. Notwithstanding the foregoing, the Corporation, at its option, may cause the amount payable in respect of interest to be paid to a Debentureholder by wire transfer to an account maintained by such Debentureholder or in any other manner reasonably acceptable to the Trustees and the Debentureholder.

If payment of interest is made by cheque, such cheque shall be forwarded at least three Business Days prior to the applicable Interest Payment Date, and if payment is made in any other manner, such payment shall be made in a manner whereby the recipient receives credit for such payment on the applicable Interest Payment Date, provided the Trustees and the Paying Agents shall only forward such cheques upon receipt of the full amount of interest being paid in immediately available funds pursuant to Section 6.8.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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2.9 Interim Debentures

Subject to the provisions of any Supplemental Indenture authorizing any Series of Debentures, definitive Debentures, other than Global Debentures, of such Series shall be lithographed or printed with steel engraved borders. Pending the preparation and delivery to the Trustees of definitive Debentures of any Series, the Corporation may execute in lieu thereof (but subject to the same provisions, conditions and limitations as herein set forth) and the Trustees may certify interim printed, mimeographed or typewritten Debentures, in such forms and in such denominations and with such appropriate omissions, insertions and variations as may be approved by any two officers of the Corporation (whose authentication or signature, either manual or facsimile, on any such interim Debentures shall be conclusive evidence of such approval) entitling the Holders thereof to receive definitive Debentures of such Series in any authorized denominations and forms when the same are prepared and ready for delivery, without expense to such Holders, but the total amount of interim Debentures of any Series so issued shall not exceed the total amount of Debentures of such Series for the time being authorized.

Forthwith after the issuance of any such interim Debentures, the Corporation shall cause to be prepared the appropriate definitive Debentures for delivery to the Holders of such interim Debentures. After the preparation of definitive Debentures of a Series, the interim Debenture or Debentures of such Series shall be exchangeable for definitive Debentures of such Series upon surrender of such interim Debenture or Debentures at the Corporate Trust Office or at the principal office of any other Paying Agent, without charge to the holder thereof. Upon surrender of any such interim Debenture, the Corporation shall execute and the Trustees shall authenticate and deliver in exchange for all or any part of such interim Debenture, one or more definitive Debentures of the same Series, of any authorized denomination and of like tenor and for an aggregate principal amount equal to the aggregate principal amount of the interim Debenture or part thereof that is being exchanged for such definitive Debenture or Debentures and if part only of such interim Debenture is being exchanged for such definitive Debenture or Debentures, together with such interim Debenture with the reduction of the principal amount thereof endorsed thereon or on a Schedule “A” annexed thereto by the Trustees or such Paying Agent or together with a new interim Debenture or Debentures, executed by the Corporation and authenticated and delivered by the Trustees, of the same Series, of any authorized denomination and of like tenor and for an aggregate principal amount equal to the remaining principal amount of the surrendered interim Debenture or Debentures. Upon the exchange of the entire principal amount of an interim Debenture for definitive Debentures or for definitive Debentures together with new interim Debentures, the interim Debenture so exchanged shall be cancelled.

Any interim Debentures when duly issued shall, until exchanged for definitive Debentures, entitle the Holders thereof to rank for all purposes as Debentureholders and otherwise in respect of this Indenture to the same extent and in the same manner as though such exchange had actually been made. Any interest paid upon interim Debentures shall be noted thereon by the Paying Agent at the time of payment unless paid by warrant or cheque to the Holder thereof.

2.10 Issue of Substitute Debentures

If any Debenture issued and certified hereunder becomes mutilated or is lost, destroyed or stolen, the Corporation, in its discretion, may issue, and thereupon the Trustee shall authenticate and deliver, a replacement Debenture of like date and tenor as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Debenture or in lieu of and in substitution for such lost, destroyed or stolen Debenture. The substituted Debenture shall be in a form reasonably approved by the Corporation and shall be entitled to the benefit hereof and rank equally in accordance with its terms with all other Debentures. The applicant for a replacement Debenture shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a condition precedent to the issue

 

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thereof, furnish to the Corporation and to the Trustees such evidence of ownership and of the loss, destruction or theft of the Debenture so lost, destroyed or stolen as shall be satisfactory to the Corporation and to the Trustees in their discretion, and such applicant shall also furnish indemnity, in amount and form satisfactory to the Corporation and the Trustees in their discretion, and shall pay the reasonable charges and expenses of the Corporation and the Trustees in connection therewith.

2.11 Option of Holder as to Place of Payment

Except as herein otherwise provided, all amounts which at any time become payable on account of any Debenture or any interest or Premium thereon shall be payable at the option of the Holder at any of the places at which the principal and interest in respect of such Debenture are payable.

2.12 Record of Payments

The Canadian Trustee (or, upon issuance of U.S. Dollar Debentures, the U.S. Trustee) shall maintain accounts and records evidencing each payment of principal of and Premium and interest on Debentures, which accounts and records shall constitute, in the absence of manifest error, prima facie evidence thereof.

None of the Corporation, the Trustees, any Registrar or any Paying Agent shall be liable or responsible to any Person for any aspect of the records related to or payments made on account of beneficial interests in any Global Debenture or for maintaining, reviewing, or supervising any records relating to such beneficial interests.

2.13 Surrender for Cancellation

If the principal amount due upon any Debenture shall become payable before the Stated Maturity thereof, the Person presenting such Debenture for payment shall surrender the same for cancellation to the Corporate Trust Office of the Canadian Trustee (or in the case of U.S. Dollar Debentures, the U.S. Trustee) and the Corporation shall pay or cause to be paid the interest accrued and unpaid thereon (computed on a per diem basis if the date fixed for payment is not an Interest Payment Date).

2.14 Right to Receive Indenture

Each Debentureholder is entitled to receive from the Corporation a copy of this Indenture on written request and upon payment of a reasonable copying charge.

ARTICLE 3

REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP OF DEBENTURES

3.1 Registers

The Corporation shall cause to be kept at the Corporate Trust Office of the Canadian Trustee (and, if the Corporation shall so direct, the U.S. Trustee in the case of U.S. Dollar Debentures) or at such other place as shall be agreed by the Corporation and the Trustees, a register (the “Register”) in which shall be entered the names and latest known addresses of Holders of Debentures and the other particulars, as prescribed by law, of the Debentures held by each of them and of all transfers of such Debentures. Such registration shall be noted on such Debentures by the appropriate Trustee or other Registrar. Every Registrar (including the appropriate Trustees) from time to time shall, when requested in writing so to do by the Corporation or by the Trustees, furnish the Corporation or the Trustees, as the case may be, with a

 

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list of the names and addresses of the Holders of Debentures entered on the Register kept by such Registrar, showing the principal amount and serial numbers of such Debentures held by each Holder. The Trustees shall preserve, in as current a form as is reasonably practicable, all such information provided by the Corporation.

The Corporation shall, or shall cause the Registrar or Registrars to, furnish to the Trustees, in writing at least seven Business Days before each Interest Payment Date and at such other times as the Trustees may request in writing, a list in such form and as of such date as the Trustees may reasonably require of the names and addresses of Debentureholders.

The Registers referred to in this Section 3.1 shall at all reasonable times be open for inspection by the Corporation, the Trustees, any Debentureholder and any Person who has a beneficial interest in a Global Debenture and provides a sworn affidavit confirming such beneficial ownership.

It is understood that the U.S. Trustee shall be obligated to maintain such Register only in the event that U.S. Dollar Debentures are issued, and only in respect of such U.S. Dollar Debentures.

3.2 Transfer of Debentures

A Holder of a Debenture may at any time and from time to time have such Debenture transferred at any of the places at which a Register is kept pursuant to the provisions of Section 3.1. A Holder of a Debenture may at any time and from time to time have the registration of such Debenture transferred from the Register in which the registration of such Debenture appears to another Register maintained in another place authorized for that purpose under the provisions of this Indenture upon payment of a reasonable fee to be fixed by the Corporation and the Trustees.

No transfer of a Debenture shall be effective as against the Corporation unless:

 

  (a) such transfer is made by the Holder of the Debenture or the executor, administrator or other legal representative of, or any attorney for, the Holder, duly appointed by an instrument in form and execution satisfactory to the appropriate Trustee or other Registrar, upon surrender to the appropriate Trustee or other Registrar of the Debenture and a duly executed form of transfer,

 

  (b) such transfer is made in compliance with applicable law,

 

  (c) such transfer is made in compliance with requirements as the appropriate Trustee or other Registrar may prescribe, and

 

  (d) such transfer has been duly noted on such Debenture and on one of the appropriate Registers by the appropriate Trustee or other Registrar.

The Trustees shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Debenture (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Debenture) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

 

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Notwithstanding anything to the contrary contained herein, the provisions governing the transfer of, and restrictions of transfer on, U.S. Dollar Debentures may be set forth in the Supplemental Indenture under which the U.S. Dollar Debentures are issued.

3.3 Restrictions on Transfer of Global Debentures

Notwithstanding any other provision of this Indenture, a Global Debenture registered in the name of the Depository or a nominee of the Depository may not be transferred by the Depository or such nominee except in the following circumstances or as otherwise specified in a Term Schedule or Supplemental Indenture relating to such Debenture:

 

  (a) such Global Debenture may be transferred by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or to another nominee of the Depository or by the Depository or its nominee to a successor Depository or its nominee;

 

  (b) such Global Debenture may be transferred at any time after the Depository for such Global Debenture has notified the Corporation that it is unwilling or unable or no longer eligible to continue as Depository for such Global Debenture;

 

  (c) such Global Debenture may be transferred at any time after the Corporation has determined, in its sole discretion, that the Debentures represented by such Global Debenture shall no longer be held as Book-Entry Only Debentures; and

 

  (d) such Global Debenture may be transferred at any time after the Trustees have determined that an Event of Default has occurred and is continuing with respect to the Debentures of the Series issued in the form of such Global Debenture, provided that at the time of such transfer such Event of Default has not been waived in accordance with the provisions of this Indenture.

3.4 Transferee Entitled to Registration

The transferee of a Debenture shall be entitled, after the appropriate form of transfer is lodged with the Trustee or other Registrar and upon compliance with all other conditions in that regard required by this Indenture or by law, to be entered on a Register as the Holder of such Debenture free from all equities or rights of setoff or counterclaim between the Corporation and the transferor or any previous Holder of such Debenture, except in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.

3.5 Closing of Registers

The Corporation shall have power at any time to close any Register. The Corporation shall transfer the registration of any Debentures registered on a Register which the Corporation closes to another existing Register or to a new Register and thereafter such Debentures shall be deemed to be registered on such existing or new Register, as the case may be. If the Register in any place is closed and the records are transferred to a Register in another place, notice of such change shall be given to each Debentureholder registered in the Register so closed and the particulars of such change shall be recorded in the Central Register.

 

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None of the Corporation, the Trustees nor any Registrar shall be required to:

 

  (a) effect transfers or exchanges of Debentures of any Series on any Interest Payment Date for Debentures of that Series or during the 15 preceding Business Days, or

 

  (b) effect transfers or exchanges of Debentures of any Series

 

  (i) from the day of any selection by the Trustees of Debentures of that Series to be redeemed until the day on which notice of redemption is mailed pursuant to Section 5.3, or

 

  (ii) that have been selected or called for redemption in whole or in part unless, upon due presentation thereof for redemption, such Debentures are not redeemed.

3.6 Exchange of Debentures

Subject to Section 3.5, Debentures in any authorized form or denomination may be exchanged upon reasonable notice for Debentures in any other authorized form or denomination, any such exchange to be for an equivalent aggregate principal amount of Debentures of the same Series, carrying the same rate of interest and having the same Maturity Date and the same redemption and sinking fund provisions, if any.

Debentures of any Series may be exchanged at the respective Corporate Trust Offices or at such other place or places as may be specified in the Debentures of such Series or in the Term Schedule or Supplemental Indenture providing for the issuance thereof, and at such other place or places as may from time to time be designated by the Corporation pursuant to Section 6.7. Any Debentures tendered for exchange shall be surrendered to either Trustee. The Corporation shall execute and the Trustees shall authenticate all Debentures necessary to carry out such exchanges. All Debentures surrendered for exchange shall be cancelled.

Debentures issued in exchange for Debentures which at the time of such issue have been selected or called for redemption at a later date shall be deemed to have been selected or called for redemption in the same manner and shall have noted thereon a statement to that effect, provided that

 

  (a) Debentures which have been selected or called for redemption may not be exchanged for Debentures of larger denominations, and

 

  (b) if a Debenture that has been selected or called for redemption in part is presented for exchange into Debentures of smaller denominations, the Trustees shall designate, according to such method as the Trustees shall deem equitable, particular Debentures of those issued in exchange, which shall be deemed to have been selected or called for redemption, in whole or in part, and the Trustees shall note thereon a statement to that effect.

3.7 Ownership and Entitlement to Payment

The Person in whose name a Debenture is registered shall be deemed to be the beneficial owner thereof for all purposes of this Indenture and payment of or on account of the principal of and Premium and interest on such Debenture shall be made only to or upon the order in writing of such Person, and each such payment shall be a good and sufficient discharge to the Corporation, the Trustees, any Registrar and any Paying Agent for the amount so paid.

 

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If a Debenture is registered in the name of more than one Person, the principal, Premium and interest from time to time payable in respect thereof may be paid to the order of all such Persons, failing written instructions from them to the contrary, and each such payment shall be a good and sufficient discharge to the Corporation, the Trustees, any Registrar and any Paying Agent for the amount so paid.

Notwithstanding any other provision of this Indenture, all payments in respect of Debentures represented by a Global Debenture shall be made to the Depository or its nominee for subsequent payment by the Depository or its nominee to holders of interests in such Global Debenture.

The Holder for the time being of a Debenture shall be entitled to the principal, Premium and interest evidenced by such Debenture, free from all equities or rights of setoff or counterclaim between the Corporation and the original or any intermediate Holder thereof, and all Persons may act accordingly. The receipt by any such Holder of any such principal, Premium or interest shall be a good and sufficient discharge to the Corporation, the Trustees, any Registrar and any Paying Agent for the amount so paid, and none of the Corporation, the Trustee, any Registrar and any Paying Agent shall be bound to inquire into the title of any such Holder.

3.8 Evidence of Ownership

The Corporation and the Trustees may treat the registered Holder of a Debenture as the beneficial owner thereof without actual production of such Debenture for the purpose of any Debentureholders’ Request, requisition, direction, consent, instrument or other document to be made, signed or given by the Holder of such Debenture.

3.9 No Notice of Trusts

Neither the Corporation nor the Trustees nor any Registrar nor any Paying Agent shall be bound to take notice of or see to the performance or observance of any duty owed to a third Person (whether under a trust, express, implied, resulting or constructive, in respect of any Debenture or otherwise) by the beneficial owner or the Holder of a Debenture or any Person whom the Corporation or the Trustees treat, as permitted or required by law, as the beneficial owner or the Holder of such Debenture, and the Corporation, the Trustees or any Registrar may transfer such Debenture on the direction of the Person so treated or registered as the Holder thereof, whether named as trustee or otherwise, as though that Person was the beneficial owner of such Debenture.

Notwithstanding anything to the contrary contained herein, the Trustees, Paying Agents and Corporation may treat the Person in whose name the Debenture is registered as the sole owner for all purposes whatsoever.

3.10 Charges for Transfer and Exchange

For each Debenture exchanged or transferred, the appropriate Trustee or other Registrar, except as otherwise herein provided, may charge a reasonable amount for its services and in addition may charge a reasonable amount for each new Debenture issued (such amounts to be agreed upon by the appropriate Trustee or other Registrar and the Corporation from time to time), and payment of such charges and reimbursement of the appropriate Trustee or other Registrar for any stamp taxes or governmental or other charges required to be paid shall be made by the Person requesting such exchange or transfer as a condition precedent thereto.

 

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Notwithstanding the foregoing, no charge (except a charge to reimburse the appropriate Trustee or other Registrar for any stamp taxes or governmental or other charges) shall be made to a Debentureholder

 

  (a) for any exchange or transfer of Debentures of a Series applied for within a period of 45 days from the date of the first delivery of Debentures of such Series;

 

  (b) for any exchange of Debentures in denominations in excess of $1,000 for Debentures in lesser denominations, provided that the Debentures surrendered for exchange shall not have been issued as a result of any previous exchange other than an exchange pursuant to Section 3.10(a);

 

  (c) for any exchange of any interim Debenture that has been issued pursuant to Section 2.9; or

 

  (d) for any exchange of any Debenture resulting from a partial redemption pursuant to Section 5.2.

ARTICLE 4

ISSUE AND DELIVERY OF DEBENTURES

4.1 Issuance of Debentures

Provided no Event of Default has occurred and is continuing, the Corporation may issue, and the Trustees shall authenticate and deliver to or to the order of the Corporation, Debentures issuable under this Indenture, but only upon receipt by the Trustee of the following:

 

  (a) a Certified Resolution authorizing the issuance and requesting the certification and delivery of a specified principal amount of Debentures and determining the attributes thereof;

 

  (b) an Officers’ Certificate stating that no default exists in respect of any of the covenants, agreements or provisions of this Indenture or, if any such default exists, specifying the nature thereof and the action, if any, being taken by the Corporation to remedy such default;

 

  (c) an order of the Corporation for the authentication and delivery of such Debentures specifying the principal amount requested to be certified and delivered and having attached a schedule (a “Term Schedule”) specifying the date, principal amount, Stated Maturity, interest rate, if any, Interest Payment Dates, and place of delivery and all other provisions for each Debenture requested to be certified and delivered or, at the option of the Corporation, a Supplemental Indenture providing for the issue of such Debentures; and

 

  (d) an Opinion of Corporation Counsel which shall state:

 

  (1) that the form of such Debentures has been established by a Supplemental Indenture or by or pursuant to a resolution of the Board of Directors in accordance with and in conformity with the provisions of this Indenture;

 

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  (2) that the terms of such Debentures have been established in accordance with and in conformity with the other provisions of this Indenture;

 

  (3) that the Supplemental Indenture and such Debentures, when authenticated and delivered by the U.S. Trustee and issued by the Corporation in the manner and subject to any conditions specified in such Opinion of Corporation Counsel, will constitute valid and legally binding obligations of the Corporation, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors’ rights and to general equity principles; and

 

  (4) that all applicable laws and requirements in respect of the execution and delivery by the Corporation of such Debentures have been complied with.

Upon the authentication and delivery by the Trustees of Debentures in accordance with an order of the Corporation, the Term Schedule or Supplemental Indenture attached to such order of the Corporation shall be deemed to be a Schedule to and form part of this Indenture.

ARTICLE 5

REDEMPTION AND PURCHASE OF DEBENTURES

5.1 General

The Corporation shall have the right at its option to redeem, either in whole at any time or in part from time to time before Stated Maturity, Debentures of any Series which by their terms are made so redeemable, at such rate or rates of Premium, on such date or dates and on such terms and conditions as shall have been determined at the time of issue of such Debentures and as shall be expressed in such Debentures or in the Supplemental Indenture or Term Schedule authorizing or providing for the issue thereof.

5.2 Partial Redemption of Debentures

If less than all of the Debentures of a Series for the time being outstanding are to be redeemed, the Corporation shall, at least 30 days and not more than 60 days before the date upon which notice of redemption is to be given to Holders of such Debentures, notify the Trustees in writing of the Corporation’s intention to redeem Debentures of such Series and of the aggregate principal amount of Debentures to be redeemed. The Debentures so to be redeemed shall be selected by the Trustees on a pro rata basis (to the nearest multiple of $1,000) in accordance with the principal amount of Debentures of such Series registered in the name of each Holder or by lot or by such other means as the Trustees may deem equitable and expedient. For this purpose the Trustees may make regulations with regard to the manner in which such Debentures may be so selected, and regulations so made shall be valid and binding upon all Debentureholders. Debentures in denominations in excess of $1,000 may be selected and called for redemption in part only (such part being $1,000 or an integral multiple thereof), and, unless the context otherwise requires, reference to Debentures in this Article 5 shall be deemed to include any such part of the principal amount of Debentures which shall have been so selected and called for redemption. The Holder of any Debenture called for redemption in part only, upon surrender of such Debenture for payment, shall be entitled to receive, without expense to such Holder, one or more new Debentures for the unredeemed part of the Debenture so surrendered, and the Trustees shall certify and deliver such new Debenture or Debentures upon receipt of the Debenture so surrendered.

 

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5.3 Notice of Redemption

Notice of intention to redeem any Debentures shall be given by or on behalf of the Corporation to the Holders of the Debentures which are to be redeemed, not more than 60 days and not less than 30 days prior to the date fixed for redemption (the “Redemption Date”), in the manner provided in Section 12.2. Every notice of redemption shall specify the Series and the Stated Maturity of the Debentures called for redemption, the Redemption Date, the Redemption Price or, where applicable only, the date upon which the Redemption Price shall be calculated in connection with the Debentures called for redemption (“Redemption Price Calculation Date”) and the place or places of payment, and shall state that all interest thereon shall cease from and after the Redemption Date. In addition, unless all the outstanding Debentures of a Series are to be redeemed, the notice of redemption shall specify

 

  (a) in the case of a notice mailed to a Holder, the distinguishing letters and numbers of the Debentures which are to be redeemed (or of such thereof as are registered in the name of such Holder);

 

  (b) in the case of a published notice, the distinguishing letters and numbers of the Debentures which are to be redeemed or, if such Debentures are selected by terminal digit or other similar system, such particulars as may be sufficient to identify the Debentures so selected;

 

  (c) in the case of Book-Entry Only Debentures, that the redemption shall take place in such manner as may be agreed by the Depository, the Trustees and the Corporation; and

 

  (d) in all cases, the principal amount of each Debenture to be redeemed or, if any such Debenture is to be redeemed in part only, the principal amount of such part.

If a notice of redemption specifies a Redemption Price Calculation Date for any Debentures, the Corporation shall deliver to the Trustees, not later than the second Business Day prior to the Redemption Date for such Debentures, an Officers’ Certificate which specifies the Redemption Price of such Debentures.

5.4 Debentures Due on Redemption Date

Upon notice of redemption having been given as specified in Section 5.3, all the Debentures so called for redemption shall thereupon be and become due and payable at the Redemption Price and on the Redemption Date specified in such notice, in the same manner and with the same effect as if such date was the Stated Maturity specified in such Debentures, anything therein or herein to the contrary notwithstanding, and from and after such Redemption Date, if the money necessary to redeem such Debentures shall have been irrevocably deposited as provided in Section 9.2 and affidavits or other proof satisfactory to the Trustees as to the publication or mailing of such notice shall have been lodged with the Trustee, such Debentures shall not be considered as outstanding hereunder and interest upon such Debentures shall cease.

If any question shall arise as to whether any deposit with the Trustees has been made, such question shall be decided by the Trustees, whose decision shall be final and binding upon all parties in interest.

 

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5.5 Purchase of Debentures

So long as no Event of Default has occurred and is continuing, the Corporation may purchase all or any of the Debentures in the open-market (which shall include purchase from or through an investment dealer or a firm holding membership on a recognized stock exchange) or by tender or by private contract, at any price and at any time. All Debentures so purchased shall forthwith be delivered to either Trustee and shall be cancelled by it and, subject to the following paragraph of this Section 5.5, no Debentures shall be issued in substitution therefor.

If, upon an invitation for tenders, more Debentures are tendered at the same lowest price than the Corporation is prepared to accept, the Debentures to be purchased by the Corporation shall be selected by the Trustees, in such manner (which may include selection by lot, selection on a pro rata basis, random selection by computer or any other method) as the Trustees consider appropriate, from the Debentures tendered by each tendering Debentureholder who tendered at such lowest price. For this purpose the Trustees may make, and from time to time amend, regulations with respect to the manner in which Debentures may be so selected, and regulations so made shall be valid and binding upon all Debentureholders, notwithstanding the fact that, as a result thereof, one or more of such Debentures become subject to purchase in part only. The Holder of a Debenture of which a part only is purchased, upon surrender of such Debenture for payment, shall be entitled to receive, without expense to such Holder, one or more new Debentures for the unpurchased part so surrendered, and the Trustees shall certify and deliver such new Debenture or Debentures upon receipt of the Debenture so surrendered.

5.6 Cancellation of Debentures

Subject to the provisions of Sections 5.2 and 5.5 as to Debentures redeemed or purchased in part, all Debentures redeemed or purchased in whole or in part by the Corporation shall not be reissued or resold and shall be forthwith delivered to and cancelled by either Trustee, and no Debentures of the same Series shall be issued in substitution therefor.

ARTICLE 6

COVENANTS OF THE CORPORATION

6.1 Covenants

In addition to any covenants specified in a Term Schedule or Supplemental Indenture relating to a series of Debentures or except as otherwise provided in any such Term Schedule or Supplemental Indenture, the Corporation hereby covenants and agrees with the Trustees for the benefit of the Trustees and the Debentureholders as follows:

 

  (a) the Corporation will duly and punctually pay or cause to be paid to each Holder of Debentures the principal thereof, interest accrued thereon and any Premium payable thereon on the dates, at the places, in the currency, and in the manner specified herein or as otherwise provided in such Debentures;

 

  (b) the Corporation will annually, within 90 days (or such longer period as the Trustees in their discretion may consent) after the end of each of its and BREP’s fiscal years (at the date hereof December 31), furnish to the Canadian Trustee (or the U.S. Trustee in the case of a U.S. Dollar Debenture) a copy of the consolidated financial statements of the Corporation and BREP and of the reports of their auditors thereon which are furnished to their shareholders, and will furnish to such Trustee any other notice, statement or circular issued to such shareholders at the time they are so issued;

 

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  (c) within 90 days after the end of each fiscal year of the Corporation, and at any other time if requested by the Trustee, the Corporation shall furnish the Canadian Trustee (or the U.S. Trustee in the case of a U.S. Dollar Debenture) with an Officers’ Certificate stating that in the course of the performance by the signers thereof of their duties as officers or directors of the Corporation they would normally have knowledge of any default by the Corporation in the performance of its covenants under this Indenture or of any Event of Default and certifying that the Corporation has complied with all covenants, conditions or other requirements contained in this Indenture the non-compliance with which would, with notification or with the lapse of time or otherwise, constitute an Event of Default hereunder or, if such is not the case, setting forth with reasonable particulars the circumstances of any failure to comply; and

 

  (d) the Corporation will quarterly, within 45 days (or such longer period as the Trustee in its discretion may consent) after the end of each of its and BREP’s fiscal quarters, furnish to the Canadian Trustee (or the U.S. Trustee in the case of a U.S. Dollar Debenture) a copy of the unaudited consolidated financial statements of the Corporation and BREP which were provided to their respective shareholders.

Delivery of such reports, information and documents to the Trustees is for informational purposes only and the Trustees’ receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Corporation’s compliance with any of its covenants hereunder (as to which the Trustees are entitled to rely exclusively on Officers’ Certificates).

6.2 Limitations on Indebtedness

The Corporation will not, and will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Funded Indebtedness unless, after giving effect thereto, the Funded Indebtedness of BREP, calculated on a consolidated basis, would not exceed 75% of Total Consolidated Capitalization.

6.3 Limitation on Liens

The Corporation will not create or permit to exist any lien on any present or future assets of the Corporation to secure any borrowed money, or permit any of its Subsidiaries to create or permit to exist any lien on any present or future assets of such Subsidiary to secure any borrowed money, unless at the same time the Debentures are secured equally and ratably with such borrowed money, provided that this shall not apply to Permitted Encumbrances. Upon being advised by the Corporation in writing in an Officers’ Certificate that security has been provided for the Debentures on an equal and ratable basis in connection with the grant to a third party of security for borrowed money and subsequently that such security to the third party has been released, the Trustees will forthwith release the security granted for the Debentures.

 

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6.4 Limitation on Sale and Leaseback Transactions

The Corporation will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction unless:

 

  (a) the Sale and Leaseback Transaction is entered into prior to, concurrently with, or within 180 days after the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operations of the relevant property, and the Corporation or such Subsidiary applies within 60 days after the sale an amount equal to the net proceeds of the sale (i) to the repayment of Indebtedness which is pari passu to the Debentures, (ii) to the redemption of the Debentures, or (iii) to the reinvestment in its core business or the core business of the Corporation, a Guarantor or any Subsidiary of the Corporation or a Guarantor; or

 

  (b) the Corporation or the Subsidiary could otherwise grant a security interest on the property as a Permitted Encumbrance.

6.5 Limitation on Distributions

The Corporation may not, and may not permit any of its Subsidiaries to, suffer to exist any encumbrance or restriction on the ability of any Subsidiary of the Corporation (i) to pay directly or indirectly dividends permitted by applicable law or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Corporation or any other such Subsidiary; (ii) to make loans or advances to the Corporation or any other such Subsidiary; or (iii) to transfer any or all of its property or assets to the Corporation or any other such Subsidiary.

Notwithstanding the foregoing, the Corporation or any such Subsidiary may suffer to exist any such encumbrance or restriction (a) pursuant to any agreement in effect on the date of the Debentures as described in this Indenture; (b) pursuant to an agreement relating to any Indebtedness incurred by any such Subsidiary prior to the date on which such Subsidiary was acquired by the Corporation and outstanding on such date and not incurred in anticipation of becoming a Subsidiary of the Corporation; (c) pursuant to an agreement relating to any Limited Recourse Indebtedness of the Corporation or any such Subsidiary; or (d) pursuant to an agreement effecting a renewal, refunding or extension of Indebtedness incurred pursuant to an agreement referred to in clauses (a) through (c) of this paragraph, provided however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the Directors.

6.6 Limitations on Debt and Preferred Stock of Subsidiaries

The Corporation will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Indebtedness or issue any Preferred Stock except: (a) Inter-Company Indebtedness of the Subsidiary; (b) Preferred Stock issued to any one or more of the Corporation, a Guarantor or any Subsidiary of the Corporation or a Guarantor; (c) Limited Recourse Indebtedness of the Subsidiary; (d) Net Swap Exposure of the Subsidiary; (e) Capital Lease Obligations of the Subsidiary; (f) purchase money obligations of the Subsidiary; and/or (g) any other Indebtedness or Preferred Stock of the Subsidiary (in addition to the Indebtedness and Preferred Stock referred to in paragraphs (a) to (f)) if, after giving effect to such other Indebtedness or Preferred Stock, the aggregate consolidated amount of all Indebtedness and Preferred Stock of BREP that does not constitute Inter-Company Indebtedness, Preferred Stock issued to the Corporation, a Guarantor or any Subsidiary of the Corporation or a Guarantor, Limited Recourse Indebtedness, Net Swap Exposure, Capital Lease Obligations or purchase money obligations, would not exceed 5% of the Net Worth. For the purposes of this covenant, the assignment by the Corporation to a third party of Inter-Company Indebtedness owing by a Subsidiary will be considered to be incurrence of Indebtedness by that Subsidiary.

 

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6.7 Maintenance of Offices or Agencies

The Corporation will maintain in Toronto, Ontario or New York, New York offices or agencies where Debentures may be presented or surrendered for payment, where Debentures may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Corporation in respect of the Debentures and this Indenture may be served. The Corporate Trust Offices of the Trustees shall be such offices or agencies of the Corporation, unless the Corporation shall designate and maintain some other office or agency for one or more of such purposes. The Corporation will give prompt notice to the Trustees of any change in the location of any such offices or agencies. If at any time the Corporation shall fail to maintain any such required offices or agencies or shall fail to furnish the Trustees with the addresses thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of either Trustee, and the Corporation hereby appoints the Trustees as its agent to receive all such presentations, surrenders, notices and demands.

The Corporation may from time to time designate one or more other offices or agencies (in or outside of Toronto, Ontario or New York, New York) where the Debentures may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain offices or agencies in Toronto, Ontario or New York, New York for such purposes. The Corporation will give prompt written notice to the Trustees of any such designation or rescission and any change in the location of any such office or agency.

6.8 Money for Payments to Be Held in Trust

If the Corporation shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of and Premium and interest on any of the Debentures, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of and Premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustees of its action or failure to so act.

Whenever the Corporation shall have one or more Paying Agents for the Debentures, it will, on or before each due date of the principal of and Premium and interest on any Debentures, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal of and Premium and interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, Premium or interest and (unless such Paying Agent is a Trustee) the Corporation will promptly notify the Trustees of such action or any failure so to act.

The Corporation will cause each Paying Agent other than the Trustees to execute and deliver to the Trustees an instrument in which such Paying Agent shall agree with the Trustees, subject to the provisions of this Section, that such Paying Agent will:

 

  (a) hold all sums held by it for the payment of the principal of and Premium and interest on Debentures in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

 

  (b) give the Trustees notice of any default by the Corporation (or any other obligor upon the Debentures) in the making of any payment of principal of and Premium and interest; and

 

  (c) at any time during the continuance of any such default, upon the written request of the Trustees, forthwith pay to either Trustee all sums so held in trust by such Paying Agent.

 

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The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by an order of the Corporation direct any Paying Agent to pay, to the Trustee all sums held in trust by the Corporation or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Corporation or such Paying Agent; and, upon such payment by any Paying Agent to the Trustees, such Paying Agent shall be released from all further liability with respect to such money.

Any money deposited with any Trustee or any Paying Agent, or then held by the Corporation, in trust for the payment of the principal of and Premium and interest on any Debenture and remaining unclaimed for two years after such principal of and Premium and interest has become due and payable shall be paid to the Corporation on the delivery of a Corporation Request, or (if then held by the Corporation) shall be discharged from such trust; and the Holder of such Debenture shall thereafter, as an unsecured general creditor, look only to the Corporation for payment thereof, and all liability of such Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation as trustee thereof, shall thereupon cease.

6.9 Trustee’s Remuneration and Expenses

The Corporation will pay each Trustee remuneration for its services as trustee hereunder in accordance with such Trustee’s standard fee schedule as it may exist from time to time and will pay or reimburse the Trustees upon their request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in the administration or execution of the trusts hereby created (including the reasonable compensation and the disbursements of Trustee Counsel and all other advisers and assistants not regularly in its employ who have been retained by the Trustee) both before any default hereunder and thereafter until all the duties of the Trustees shall be firmly and fully performed, except any such expense, disbursement or advance as may arise from its gross negligence or wilful default. Any amount due under this section and unpaid thirty days after request for such payment shall bear interest from the expiration of such thirty days at a rate per annum equal to the Prime Rate, payable on demand. After default, all amounts so payable and the interest thereon shall be payable out of any funds coming into the possession of the Trustees or their successors in the trusts hereunder in priority to any payment of the principal of or interest or Premium on the Debentures. Such remuneration shall continue to be payable until the trusts hereof shall be finally wound up, whether or not the trusts of this Indenture shall be in course of administration by or under the direction of a court.

When the Trustees incur expenses or renders services in connection with an Event of Default specified in Section 8.1(g) or Section 8.1(h), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable bankruptcy law.

The provisions of this Section shall survive the termination of the Indenture.

6.10 Not to Extend Time for Payment of Interest

Subject to the provisions of Section 11.11 or Section 11.12 as applicable, in order to prevent any accumulation after maturity of unpaid interest, the Corporation will not directly or indirectly extend or assent to the extension of time for payment of interest upon any Debentures or directly or indirectly be or become a party to or approve any such arrangement by purchasing or funding interest on the Debentures or in any other manner.

 

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If the time for the payment of any interest shall be so extended, whether or not such extension is by or with the consent of the Corporation, notwithstanding anything herein or in the Debentures contained, such interest shall not be entitled in case of default hereunder to the benefit of this Indenture until such time as payment in full has been made of the principal of all the Debentures and of all interest on such Debentures the payment of which has not been so extended.

6.11 Examination and Audit

So long as any Debentures are outstanding, the Corporation will annually, within 90 days after the end of its fiscal year, have an examination and audit of the accounts, affairs and condition of the Corporation, BREP and their Subsidiaries made by their respective auditors.

ARTICLE 7

HOLDERS’ LISTS AND REPORTS BY TRUSTEES AND CORPORATION

7.1 Disclosure of Names and Addresses of Holders

 

  (a) Upon application to the U.S. Trustee in accordance with the Trust Indenture Act, Holders may communicate pursuant to the Trust Indenture Act with other Holders with respect to their rights under this Indenture or the Debentures.

 

  (b) In addition, a Holder may, upon payment to the U.S. Trustee or the Canadian Trustee of a reasonable fee and subject to compliance with any applicable requirement of the Trust Indenture Act, require such Trustee to furnish within five Business Days after receiving the affidavit or statutory declaration referred to below, a list setting out (i) the name and address of every registered Holder, (ii) the aggregate principal amount of Debentures owned by each registered Holder and (iii) the aggregate principal amount of outstanding Debentures, each as shown on the records of such Trustee on the day that the affidavit or statutory declaration is delivered to such Trustee. The affidavit or statutory declaration, as the case may be, shall contain (1) the name, address and occupation of the Holder, (2) where the Holder is a corporation, its name and address for service and (3) a statement that the list will not be used except in connection with an effort to influence the voting of the Holders, an offer to acquire Debentures or any other matter relating to the Debentures or the affairs of the Corporation. Where the Holder is a corporation, the affidavit or statutory declaration shall be made by a director or officer of the Corporation.

 

  (c) Every Holder of Debentures, by receiving and holding the same, agrees with the Corporation and the Trustees that none of the Corporation, the Trustees or any Registrar shall be held accountable by reason of the disclosure of such list of the names and addresses of the Holders, regardless of the source from which such information was derived, and that neither Trustee shall be held accountable by reason of mailing any material pursuant to a request made under the Trust Indenture Act.

7.2 Reports by Trustees

In the event any U.S. Dollar Debentures are outstanding, within 60 days after May 15 th of each year commencing with July 15, 2005, the U.S. Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Registers, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May 15 th as and if required by Trust Indenture Act Section 313(a).

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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7.3 Reports by the Corporation

In the event any U.S. Dollar Debentures are outstanding, the Corporation shall:

 

  (a) file with the U.S. Trustee, within 10 days after the Corporation is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Corporation may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Corporation is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustees and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;

 

  (b) provide the U.S. Trustee an incumbency certificate setting out the names and sample signatures of persons authorized by the Corporation to give instructions on its behalf and the U.S. Trustee shall be entitled to rely on this certificate unless a revised certificate is provided. The U.S. Trustee shall be entitled to refuse to act upon any instruction or direction from the Corporation which is signed by a Person other than a Person described in such incumbency certificate;

 

  (c) file with the Trustees and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Corporation, as the case may be, with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

 

  (d) transmit by mail to all Holders, as their names and addresses appear in the Registers, within 30 days after the filing thereof with the Trustees, in the manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Corporation pursuant to subsections (a) and (b) of this Section 7.3 as may be required by rules and regulations prescribed from time to time by the Commission.

Delivery of such reports, information and documents to the U.S. Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Corporation’s compliance with any of its covenants hereunder (as to which the Trustees are entitled to rely exclusively on Officers’ Certificates).

ARTICLE 8

DEFAULTS AND REMEDIES

8.1 Events of Default

In addition to any events specified in a Term Schedule or Supplemental Indenture relating to a Series of Debentures or except as otherwise provided in any such Term Schedule or Supplemental Indenture, each of the following events shall be an “Event of Default” in respect of each Series of Debentures:

 

  (a) failure to pay principal of (or Premium, if any, on) any Debenture when due;

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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  (b) failure to pay any interest on any Debenture when due, continued for 30 days;

 

  (c) failure to perform or comply with Section 10.1;

 

  (d) failure to perform any other covenant or agreement of the Corporation under this Indenture or the Debentures for the benefit of the Holders continued for 60 days after written notice to the Corporation by the Trustees or Holders of at least 25% in aggregate principal amount of outstanding Debentures;

 

  (e) default by the Corporation or any Guarantor in payment of principal of, Premium, if any, or interest on any obligation for borrowed money (other than an obligation payable on demand or maturing less than 18 months from the creation or issue thereof) having an outstanding principal amount in excess of 5% of consolidated Net Worth in the aggregate at the time of default or in the performance of any other covenant of the Corporation or any Guarantor contained in any instrument under which such obligations are created or issued resulting in the acceleration of the final maturity of such obligations;

 

  (f) the rendering of a final judgment or judgments (not subject to appeal) against the Corporation or any Guarantor in an amount in excess of 5% of the consolidated Net Worth which remains undischarged or unstayed for a period of 60 days after the date on which the right to appeal has expired;

 

  (g) proceedings are commenced for the winding-up, liquidation or dissolution of the Corporation or any Guarantor (except as otherwise permitted under this Indenture), a decree or order of a court of competent jurisdiction is entered adjudging the Corporation or any Guarantor, a bankrupt or insolvent, or a petition seeking reorganization, arrangement or adjustment of or in respect of the Corporation or any Guarantor is approved under applicable law relating to bankruptcy, insolvency or relief of debtors, unless such proceedings, decrees, orders or approvals are actively and diligently contested by the Corporation or such Guarantor in good faith and are dismissed or stayed within 60 days of commencement;

 

  (h) the Corporation or any Guarantor makes an assignment for the benefit of its creditors, or petitions or applies to any court or tribunal for the appointment of a receiver or trustee for itself or any substantial part of its property, or commences for itself or acquiesces in any proceeding under any bankruptcy, insolvency, reorganization, arrangement or readjustment of debt law or statute or any proceeding for the appointment of a receiver or trustee for itself or any substantial part of its property, or suffers any such receivership or trusteeship and allows it to remain undischarged or unstayed for 30 days;

 

  (i) a resolution is passed for the winding-up or liquidation of the Corporation or any Guarantor except in the course of carrying out or pursuant to a transaction in respect of which the conditions of Section 10.1 are duly observed and performed; and

 

  (j) the occurrence of any “Event of Default” under any Guarantee while it is outstanding (as that term is defined in such Guarantee).

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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Subject to the provisions of this Indenture relating to the duties of the Trustees, in case an Event of Default shall occur and be continuing, the Trustees will be under no obligation to exercise any of their rights or powers under this Indenture at the request or direction of any of the Holders, unless such Holders shall have provided the Canadian Trustee with sufficient funds for the purpose of exercising such rights or powers or in the case of a U.S. Trustee, reasonable indemnity. Subject to such provisions, the Holders of a majority in aggregate principal amount of the outstanding Debentures will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustees or exercising any trust or power conferred on the Trustees.

8.2 Notice of Event of Default

Each Trustee shall, promptly after it has received notice of the occurrence of any Event of Default, give the other Trustee notice of such Event of Default. If an Event of Default shall occur and be continuing, either Trustee shall, within 30 days after it has received notice of the occurrence of such Event of Default, give notice of such Event of Default to the Debentureholders in the manner specified in Section 12.2 provided, however, that, except in the case of a default in the payment of the principal of (or Premium, if any) or interest on any Debenture, the Trustees shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or responsible officers of each Trustee in good faith determines that the withholding of such notice is in the best interests of the Holders and the Trustees so advise the Corporation in writing. It is understood that the obligations of the U.S. Trustee shall be solely in connection with the holders of U.S. Dollar Debentures.

If notice of an Event of Default has been given to Debentureholders and such Event of Default is thereafter remedied or cured prior to the acceleration of the Indebtedness of the Corporation hereunder pursuant to Section 8.3, notice that such Event of Default is no longer continuing shall be given by the Trustees to the Persons to whom notice of such Event of Default was given pursuant to this Section 8.2, such notice to be given within a reasonable time, not to exceed 30 days, after the Trustees become aware that such Event of Default has been remedied or cured during such period of time.

8.3 Acceleration

If an Event of Default other than an Event of Default described in subsection 8.1(g), (h) or (i) shall occur and be continuing, either the Trustees or the Holders of at least 25% in aggregate principal amount of the outstanding Debentures may accelerate the maturity of all Debentures; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of outstanding Debentures may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in this Indenture. If an Event of Default specified in subsection 8.1(g), (h) or (i) occurs, the outstanding Debentures will ipso facto become immediately due and payable without any declaration or other act on the part of the Trustees or any holder.

No Debentureholder will have any right to institute any proceeding with respect to this Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default and unless also the Holders of at least 25% in aggregate principal amount of the outstanding Debentures shall have made written request and provided sufficient funds to the Canadian Trustee (or in the case of the U.S. Trustee, reasonable indemnity) to institute such proceedings as Trustee, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the outstanding Debentures a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a Debentureholder for enforcement of payment of the principal of and Premium, if any, or interest on such Debenture on or after the respective due dates expressed in such Debenture.

 

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Notwithstanding anything contained in this Indenture or the Debentures to the contrary, if such a declaration is made, the Corporation shall pay to the Trustees forthwith for the benefit of the Debentureholders the amount of principal of and Premium and accrued and unpaid interest (including interest on amounts in default) on all Debentures and all other amounts payable in regard thereto under this Indenture, together with interest thereon at the rate borne by such Debentures from the date of such declaration until payment is received by the Trustees. Such payments, when made, shall be deemed to have been made in discharge of the Corporation’s obligations under this Indenture and any amounts so received by the Trustees shall be applied in the manner specified in Section 8.8.

8.4 Waiver of Event of Default

Upon the happening of an Event of Default which is continuing, the Holders of not less than 66 2/3% of the principal amount of the Series of Debentures with respect to which an Event of Default shall have occurred and be continuing (or not less than 100% in the case of a failure to make payment of principal or in respect of a covenant or provision hereof which pursuant to Section 11.11 hereof cannot be modified or amended without the consent of the holder of each outstanding Debenture affected) shall have the power, exercisable by requisition in writing, to instruct the Trustees to waive such Event of Default and to cancel any declaration made by either Trustee pursuant to Section 8.3, and the Trustees shall thereupon waive such Event of Default or cancel such declaration upon such terms and conditions as shall be prescribed in such requisition.

No delay or omission of the Trustees or of the Debentureholders in exercising any right or power accruing upon the occurrence of an Event of Default shall impair any such right or power or shall be construed to be a waiver of such Event of Default or acquiescence therein, and no act or omission, either of the Trustees or of the Debentureholders, shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or the rights resulting therefrom.

8.5 Enforcement by the Trustee

Upon the occurrence of an Event of Default, the Trustees shall exercise the rights and powers vested in them under this Indenture in accordance with the provisions hereof.

Subject to the provisions of Section 8.4 and to the provisions of any Extraordinary Resolution, if the Corporation fails to pay to the Trustees, forthwith after the same shall have been declared to be due and payable under Section 8.3, the principal of and Premium and interest on all Debentures then outstanding together with any other amounts due hereunder, either or both Trustees shall, upon receipt of a Debentureholders’ Request and upon being provided with sufficient funds by pay all costs, expenses and liabilities to be incurred, proceed in its or their names as Trustee hereunder to obtain or enforce payment of such principal of and Premium and interest on all the Debentures then outstanding together with any other amounts due hereunder by such proceedings authorized by this Indenture or by law or equity as such Trustee(s) in such request shall have been directed to take, or if such request contains no such direction, then by such proceedings authorized by this Indenture or by suit at law or in equity as such Trustee(s) shall deem expedient.

The Trustees or either of them shall be entitled and empowered, either in its own name or as trustee of an express trust, or as attorney-in-fact for the Debentureholders, or in any one or more of such capacities, to file such proof of debt, amendment of proof of debt, claim, petition or other document as may be necessary or advisable in order to have the claims of such Trustee(s) and of the Debentureholders

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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allowed in any insolvency, bankruptcy, liquidation or other judicial proceedings relative to the Corporation or its creditors or relative to or affecting its property. The Trustees are hereby irrevocably appointed (and the successive respective Debentureholders by taking and holding Debentures shall be conclusively deemed to have so appointed the Trustees) the true and lawful attorneys-in-fact of the respective Debentureholders with authority to make and file in the respective names of the Debentureholders or on behalf of the Debentureholders as a class, subject to deduction from any such claims of the amounts of any claims filed by any of the Debentureholders themselves, any proof of debt, amendment of proof of debt, claim, petition or other document in any such proceedings and to receive payment of any sums becoming distributable on account thereof, and to execute any such other documents and to do and perform any and all such acts and things, for and on behalf of such Debentureholders, as may be necessary or advisable, in the opinion of the Trustees acting on the advice of Trustee Counsel, in order to have the respective claims of the Trustees and of the Debentureholders against the Corporation or its property allowed in any such proceeding, and to receive payment of or on account of such claims, provided that nothing contained in this Indenture shall be deemed to give to the Trustees, unless so authorized by Extraordinary Resolution, any right to accept or consent to any plan of reorganization or otherwise by action of any character in such proceeding to waive or change in any way any right of any Debentureholder.

The Trustees shall also have power at any time and from time to time to institute and to maintain such suits and proceedings as it may be advised shall be necessary or advisable to preserve and protect their interests and the interests of the Debentureholders.

All rights of action hereunder may be enforced by the Trustees without the possession of any of the Debentures or the production thereof on the trial or other proceedings relative thereto. Any such suit or proceeding instituted by the Trustees or either of them shall be brought in the name of such Trustee(s) as trustee(s) of an express trust, and any recovery of judgment shall be for the rateable benefit of the Debentureholders subject to the provisions of this Indenture. In any proceeding brought by the Trustees or either of them (and also in any proceeding in which a declaratory judgment of a court may be sought as to the interpretation or construction of any provision of this Indenture to which the Trustees or either of them shall be a party), such Trustee(s) shall be held to represent all the Debentureholders, and it shall not be necessary to make any Debentureholders parties to any such proceeding.

8.6 Suits by Debentureholders

No Debentureholders of any Series shall have any right to institute any action, suit or proceeding at law or in equity for the purpose of enforcing payment of the principal of or any Premium or interest on the Debentures of such Series or for the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or for a receiving order under applicable law, including the Bankruptcy and Insolvency Act (Canada) or to have the Corporation wound up or to file or prove a claim in any liquidation or bankruptcy proceeding or for any other remedy unless:

 

  (a) the Debentureholders of such Series, by Extraordinary Resolution or by Debentureholders’ Request, shall have made a request to the Trustees and the Trustees shall have been afforded reasonable opportunity either themselves to proceed to exercise the powers conferred upon them or to institute an action, suit or proceeding in their name for such purpose,

 

  (b) the Debentureholders of such Series or any of them shall have furnished to the Trustees, when so requested by the Trustees, sufficient funds to pay the costs, expenses and liabilities to be incurred therein or thereby,

 

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  (c) the Trustees shall have failed to act within a reasonable time after such notification, request and provision of sufficient funds (or indemnity in respect of the U.S. Trustee); and

 

  (d) no direction inconsistent with such written request has been received by the Trustees from Holders of a majority in principal amount of the outstanding Debentures of such Series.

If a Debentureholder has the right to institute proceedings under this Section 8.6, such Debentureholder, acting on behalf of itself and all other Debentureholders, shall be entitled to commence proceedings in any court of competent jurisdiction in which the Trustee might have commenced proceedings under Section 8.5, but in no event shall any Debentureholder or combination of Debentureholders have any right to seek any other remedy or institute proceedings out of court. No one or more Debentureholders shall have any right in any manner whatsoever to enforce any right under this Indenture or under any Debenture, except in accordance with the conditions and in the manner provided in this Indenture.

8.7 Undertaking for Costs

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against either Trustee for any action taken or omitted to be taken by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.7 does not apply to a suit instituted by either Trustee, a suit by the Corporation, a suit instituted by a Holder for the enforcement of the payment of any principal of or Premium or interest on a Debenture or a suit by Holders of more than 10% in outstanding principal amount of the Debentures.

8.8 Application of Money

Except as herein otherwise expressly provided, any money received by the Trustees or a Debentureholder pursuant to the provisions of this Article 8 or as a result of legal or other proceedings against the Corporation or any Subsidiary pursuant hereto, or from any trustee in bankruptcy or liquidator of the Corporation, shall be applied, together with other money available to the Trustees for such purpose, as follows:

 

  (a) first, in payment or in reimbursement to the Trustees of their fee, costs, charges, expenses, borrowings, advances or other amounts furnished or provided by or at the request of the Trustees in or about the administration and execution of their trusts under, or otherwise in relation to, this Indenture, with interest thereon as herein provided;

 

  (b) second, subject to the provisions of Section 6.10 and this Section 8.8, in payment of the principal of and Premium and accrued and unpaid interest and interest on amounts in default on the Debentures which shall then be outstanding in the priority of principal first and then Premium and then accrued and unpaid interest and interest on amounts in default unless otherwise directed by an Extraordinary Resolution, and in that case in such order or priority as between principal, Premium and interest as may be directed by such resolution; and

 

  (c) third, in payment of the surplus, if any, of such money to the Corporation or its assigns;

 

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provided, however, that no payment shall be made pursuant to Section 8.8(b) in respect of the principal of or Premium or interest on any Debenture which either Trustee has been advised in writing to be held, directly or indirectly, by or for the benefit of the Corporation or any Affiliate of the Corporation (other than any Debenture pledged for value and in good faith to a Person other than the Corporation or any Affiliate of the Corporation, but only to the extent of such Person’s interest therein) until the prior payment in full of the principal of and Premium and interest on all Debentures which are not so held.

8.9 Distribution of Proceeds

Payments to Debentureholders pursuant to Section 8.8(b) shall be made as follows:

 

  (a) at least 15 days’ notice of every such payment shall be given in the manner specified in Section 12.2, specifying the time and the place or places at which the Debentures are to be presented and the amount of the payment and the application thereof as between principal, Premium and interest;

 

  (b) payment in respect of any Debenture shall be made upon presentation thereof at any one of the places specified in such notice and any such Debenture thereby paid in full shall be surrendered, otherwise a memorandum of such payment shall be endorsed thereon, but the Trustees may in their discretion dispense with presentation and surrender or endorsement in any case upon such indemnity being given as the Trustees shall consider sufficient;

 

  (c) from and after the date of payment specified in such notice, interest shall accrue only on the amount owing on each Debenture after giving credit for the amount of the payment specified in such notice unless the Debenture in respect of which such amount is owing is duly presented on or after the date so specified and payment of such amount is not made; and

 

  (d) the Trustee shall not be required to make any payment to Debentureholders unless the amount available to them for such purpose, after reserving therefrom such amount as the Trustees may think necessary to provide for the payments referred to in Section 8.8(a), exceeds two per cent of the aggregate principal amount of the Debentures then outstanding.

8.10 Remedies Cumulative

No remedy herein conferred upon or reserved to the Trustees or upon or to the Debentureholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now existing or hereafter to exist by law.

8.11 Judgment Against the Corporation

In case of any judicial or other proceedings to enforce the rights of the Debentureholders, judgment may be rendered against the Corporation in favour of the Debentureholders or in favour of the Trustees, as trustee for the Debentureholders, for any amount which may remain due in respect of the Debentures and the interest thereon.

 

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8.12 Immunity of Shareholders, Directors and Officers

The Debentureholders and the Trustees hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, director or officer of the Corporation or of any Successor for the payment of the principal of or Premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Corporation herein or in the Debentures contained.

ARTICLE 9

CANCELLATION, DISCHARGE AND DEFEASANCE

9.1 Cancellation and Destruction

All Debentures surrendered to the Corporation, a Registrar or a Paying Agent for any purpose shall be delivered to either Trustee forthwith. Each such Debenture and each Debenture surrendered to a Trustee shall be cancelled by such Trustee forthwith after all payments required in respect thereof to the date of surrender have been made. Subject to applicable law, all Debentures cancelled or required to be cancelled under this or any other provision of this Indenture shall be destroyed by either Trustee in accordance with such Trustee’s ordinary practice.

9.2 Payment of Amounts Due on Maturity

Except as otherwise provided in a Term Schedule or Supplemental Indenture applicable to a Series of Debentures, the Corporation shall prior to 9:00 a.m., Toronto, Ontario time, on each Maturity Date for outstanding Debentures, deposit with the Paying Agent or Trustee an amount sufficient to pay the amount payable in respect of such Debentures on such Maturity Date (less any taxes required by law to be deducted or withheld). The Trustees shall pay to the Holder of a Debenture entitled to receive payment on such Maturity Date, the principal amount of, accrued interest, if any, and Premium on such Debenture upon surrender of such Debenture at a Corporate Trust Office or at such other place as shall be designated for such purpose from time to time by the Corporation and the Trustees. The deposit of such amount with the Trustee shall satisfy and discharge the liability of the Corporation for the Debentures to which the deposit relates to the extent of the amount deposited (plus the amount of any taxes deducted or withheld) and thereafter such Debentures shall not to that extent be considered to be outstanding and such Holders thereof shall have no right with respect thereto other than to receive out of the amount so deposited the respective amounts to which such Holders are entitled upon surrender of such Debentures. Failure to make a deposit as required pursuant to this Section 9.2 shall constitute default in payment on the Debentures in respect of which the deposit was required to have been made.

9.3 Discharge

Upon notice being given to the Trustees that the principal of all the Debentures and the Premium thereon and interest (including interest on amounts in default) thereon and other amounts payable hereunder have been paid or satisfied, or that all the outstanding Debentures have matured or have been duly called for redemption, or the Trustees having been given irrevocable instructions by the Corporation to publish within 90 days of receipt of such instructions a notice of redemption of all the outstanding Debentures, such payment or redemption has been duly, irrevocably and effectually provided for by payment to the Trustees or otherwise, and upon payment of all costs, charges and expenses properly incurred by the Trustees in relation to this Indenture and all interest thereon and the remuneration of the Trustees, or upon provision satisfactory to the Trustees being made therefor, the Trustees shall, at the request and at the expense of the Corporation, and upon receipt of an Opinion of Corporation Counsel and

 

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Officers’ Certificate that all conditions precedent to the discharge of the Indenture have been complied with, execute and deliver to the Corporation an acknowledgement of discharge or such deeds or other instruments as shall be requested of them to evidence the satisfaction and discharge of this Indenture and to release the Corporation from its covenants herein contained other than those relating to the indemnification of the Trustees.

9.4 Defeasance

The Corporation shall have the right (the “defeasance option”) to be released from the terms of this Indenture relating to the outstanding Debentures of a Series specified by the Corporation in a notice to the Trustees, and upon receipt of such notice the Trustees shall, at the request and expense of the Corporation, execute and deliver to the Corporation such deeds and other instruments as shall be necessary to release the Corporation from the terms of this Indenture relating to the Debentures of the Series specified in such notice, except those relating to the indemnification of the Trustees, subject to the following:

 

  (a) the Corporation shall have delivered to the Trustee evidence that the Corporation has

 

  (i) deposited sufficient funds for payment of all principal, Premium, interest and other amounts due or to become due on the Debentures of such Series to the Stated Maturity thereof,

 

  (ii) deposited funds or made provision for the payment of all remuneration and expenses of the Trustees to carry out its duties under this Indenture in respect of the Debentures of such Series, and

 

  (iii) deposited funds for the payment of taxes arising with respect to all deposited funds or other provision for payment in respect of the Debentures of such Series, in each case irrevocably, pursuant to the terms of a trust agreement in form and substance satisfactory to the Corporation and the Trustees;

 

  (b) the Trustees shall have received an Opinion or Opinions of Corporation Counsel to the effect that the Holders of the Debentures of such Series will not be subject to any additional Canadian or U.S. taxes (as applicable) as a result of the exercise by the Corporation of the defeasance option with respect to such Debentures and that such Holders will be subject to taxes, if any, including those in respect of income (including taxable capital gains), on the same amount, in the same manner and at the same time or times as would have been the case if the defeasance option had not been exercised in respect of such Debentures;

 

  (c) no Event of Default shall have occurred and be continuing on the date of the deposit referred to in Section 9.4(a);

 

  (d) such release does not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Corporation is a party or by which the Corporation is bound;

 

  (e) the Corporation shall have delivered to the Trustees an Officers’ Certificate stating that the deposit referred to in Section 9.4(a) was not made by the Corporation with the intent of preferring the Holders of the Debentures of such Series over the other creditors of the Corporation or with the intent of defeating, hindering, delaying or defrauding creditors of the Corporation or others; and

 

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  (f) the Corporation shall have delivered to the Trustees an Officers’ Certificate and an Opinion of Corporation Counsel as required pursuant to Sections 13.13 and 13.14, stating that all conditions precedent provided for or relating to the exercise of such defeasance option have been complied with.

The Corporation shall be deemed to have made due provision for the depositing of funds if it deposits or causes to be deposited with the Trustees under the terms of an irrevocable trust agreement in form and substance satisfactory to the Corporation and the Trustee (each acting reasonably), solely for the benefit of the Holders of the Debentures of the Series specified therein, money or Securities denominated in the currency in which principal is payable constituting direct obligations of Canada (or a Province thereof) or the United States (or a State thereof) or an agency or instrumentality of Canada or the United States, which will be sufficient, in the opinion of a firm of independent chartered accountants or an investment dealer acting reasonably and acceptable to the Trustees, to provide for payment in full of the Debentures of such Series and all other amounts from time to time due and owing under this Indenture which pertain to the Debentures of such Series.

The Trustees shall hold in trust all money or Securities deposited with it pursuant to this Section 9.4 and shall apply the deposited money and the money derived from such Securities in accordance with this Indenture to the payment of principal of and Premium and interest on the Debentures and, as applicable, other amounts.

If the Trustees are unable to apply any money or Securities in accordance with this Section 9.4 by reason of any legal proceeding or any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Corporation’s obligations under this Indenture and the Debentures shall be revived and reinstated as though no money or Securities had been deposited pursuant to this Section 9.4 until such time as the Trustees are permitted to apply all such money or Securities in accordance with this Section 9.4 , provided that if the Corporation has made any payment in respect of principal, Premium or interest on Debentures or, as applicable, other amounts because of the reinstatement of its obligations, the Corporation shall be subrogated to the rights of the Holders of such Debentures to receive such payment from the money or Securities held by the Trustees.

ARTICLE 10

SUCCESSORS

10.1 Requirements for Successors

So long as any Debentures are outstanding, the Corporation will not enter into any transaction, directly or indirectly through a Subsidiary of the Corporation, whereby all or substantially all of the undertaking, property and assets of the Corporation would become the property of any other Person (any such Person being herein referred to as a “ Successor ”), whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, provided that nothing contained in this Indenture will prevent any such transaction if:

 

  (a) the Corporation shall be the surviving Person, or the Successor shall be a company organized and validly existing under the federal laws of Canada or any province or territory thereof;

 

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  (b) the Successor shall have executed, prior to or contemporaneously with the consummation of any such transaction, a Supplemental Indenture and such other instruments as in the opinion of the Corporation’s Counsel are necessary or advisable to evidence the assumption by the Successor of the due and punctual payment of the principal of, Premium, if any, and interest on all the Debentures and all other amounts payable hereunder and the covenant of the Successor to pay the same and its agreement to observe and perform all the covenants and obligations of the Corporation under this Indenture;

 

  (c) no condition or event shall exist as to the Corporation or the Successor either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto or immediately after compliance by the Successor with the provisions of Section 10.1(a) which constitutes or would constitute after the giving of notice or lapse of time, or both, an Event of Default;

 

  (d) the Corporation shall have delivered to the Trustee an Opinion of the Corporation Counsel and Officers’ Certificate stating that the conditions precedent in this Section 10.1 have been satisfied; and

 

  (e) neither the Corporation nor the Successor, either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto, or immediately after compliance by the Successor with the provisions of Section 10.1(a), will be insolvent or generally fail to meet, or admit in writing its inability or unwillingness to meet, its obligations as they generally become due;

provided, however, the provisions of this Section 10.1 shall not be applicable to any transaction between or among any one or more of the Corporation, a Guarantor and/or any Subsidiary of the Corporation or a Guarantor.

10.2 Vesting of Powers in Successor

Whenever the conditions of Section 10.1 have been duly observed and performed, the Trustee shall execute and deliver the supplemental indenture provided for in Article 14 and thereupon:

 

  (a) the Successor shall possess and from time to time may exercise each and every right and power of the Corporation under this Indenture, in the name of the Corporation or otherwise, and any act or proceeding required by any provision of this Indenture to be done or performed by any directors or officers of the Corporation may be done and performed with like force and effect by the directors or officers of the Successor; and

 

  (b) the Corporation who was a party to this Indenture prior to the transaction described in Section 10.1, shall be released and discharged from liability under this Indenture and the Trustee will execute any documents which it may be advised are necessary or advisable for effecting or evidencing such release and discharge.

 

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ARTICLE 11

MEETINGS OF DEBENTUREHOLDERS

11.1 Right to Convene Meetings

The Trustees may at any time and from time to time convene a meeting of Debentureholders, and the Trustees shall convene a meeting of Debentureholders upon receipt of a request of the Corporation or a Debentureholders’ Request and upon being provided with reasonable indemnity or sufficient funds by the Corporation or by the Debentureholders signing such request against the costs which may be incurred in connection with the calling and holding of such meeting. If the Trustees fail within 30 days after receipt of any such request and such sufficient funds or indemnity, as applicable, to give notice convening a meeting, the Corporation or such Debentureholders, as the case may be, may convene such meeting. Every such meeting shall be held in Toronto, Ontario, or at such other place as may be approved or determined by such of the Trustees, the Corporation or the Debentureholders as convened the meeting in accordance with this Section 11.1.

11.2 Notices of Meetings

Notice of a meeting of Debentureholders shall be given to the Debentureholders in the manner specified in Section 12.2 at least 25 days prior to the date of the meeting, and a copy of any notice sent by mail to Debentureholders shall be sent by mail to the Trustees (unless the meeting has been called by it) and to the Corporation (unless the meeting has been called by it). A notice of a meeting of Debentureholders shall state the time and place at which the meeting is to be held and shall state briefly the general nature of the business to be transacted thereat, and it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Article 11.

11.3 Chairman

The Debentureholders present in person or represented by proxy shall choose an individual present to be the chairman of the meeting.

11.4 Quorum

Subject to the provisions of Section 11.13, the quorum for a meeting of Debentureholders shall be two or more Debentureholders present in person or represented by proxy and owning or representing at least 25% of the aggregate principal amount of the Debentures then outstanding. If a quorum is not present within 30 minutes from the time fixed for the holding of a meeting, the meeting, if convened by the Debentureholders, shall be dissolved, but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day, in which case it shall be adjourned to the next following Business Day thereafter) at the same time and place, and no notice shall be required to be given in respect of such adjourned meeting. At the adjourned meeting, the Debentureholders present in person or represented by proxy shall constitute a quorum and may transact the business for which the meeting was originally convened notwithstanding that they may not represent at least 25% of the aggregate principal amount of the Debentures then outstanding.

11.5 Power to Adjourn

The chairman of a meeting at which a quorum of Debentureholders is present may, with the consent of the Holders of a majority of the aggregate principal amount of the Debentures present or represented thereat, adjourn such meeting, and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.

 

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11.6 Show of Hands

Except as otherwise provided in this Indenture, every resolution submitted to a meeting shall be decided by a majority of the votes cast on a show of hands, and unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact.

11.7 Poll

On every resolution proposed to be passed as an Extraordinary Resolution and on any other resolution submitted to a meeting in respect of which the chairman of the meeting or one or more Debentureholders or proxyholders for Debentureholders holding at least $10,000 principal amount of Debentures demands a poll, a poll shall be taken in such manner and either at once or after an adjournment as the chairman of the meeting shall direct.

11.8 Voting

On a show of hands, every Person who is present and entitled to vote, whether as a Debentureholder or as proxyholder for one or more Debentureholders or both, shall have one vote. On a poll, each Debentureholder present in person or represented by a proxy duly appointed by an instrument in writing shall be entitled to one vote in respect of each $1,000 principal amount of Debentures held by such Debentureholder on the record date fixed for the meeting. A proxyholder need not be a Debentureholder. In the case of joint Holders of a Debenture, any one of them present in person or represented by proxy at the meeting may vote in the absence of the other or others, but if more than one of them are present in person or represented by proxy, they shall vote together in respect of the Debentures of which they are joint Holders. Subject to the provisions of Section 11.9, in the case of Debentures held by a Person other than an individual, an officer or representative of such Person may vote the Debentures held by it unless there shall be more than one (1) officer or representative of such Person present at the meeting, and those officers or individuals present do not agree on how the Debentures may be voted, in which case a written proxy shall be required to determine who may vote the Debentures and how such Debentures are to be voted. In the case of a Global Debenture, the Depository may appoint or cause to be appointed a Person or Persons as proxies and shall designate the number of votes entitled to each such Person, and each such Person shall be entitled to be present at any meeting of Debentureholders and shall be the Persons entitled to vote at such meeting in accordance with the number of votes set out in the Depository’s designation.

11.9 Regulations

The Trustees, or the Corporation with the approval of the Trustees, may from time to time make and from time to time vary such regulations as it shall from time to time think fit providing for or governing the following:

 

  (a) voting by proxy by Debentureholders, the form of the instrument appointing a proxyholder (which shall be in writing) and the manner in which it may be executed, and the authority to be provided by any Person signing a proxy on behalf of a Debentureholder;

 

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  (b) the deposit of instruments appointing proxyholders at such place as the Trustees, the Corporation or the Debentureholders convening the meeting, as the case may be, may, in the notice convening the meeting, direct and the time, if any, before the holding of the meeting or any adjournment thereof by which the same shall be deposited; and

 

  (c) the deposit of instruments appointing proxyholders at an approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxyholders to be provided before the meeting to the Corporation or to the Trustees at the place at which the meeting is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting.

Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Except as such regulations may provide, the only Persons who shall be recognized at a meeting as the Holders of any Debentures, or as entitled to vote or be present at the meeting in respect thereof, shall be registered Debentureholders and Persons whom registered Debentureholders have by instrument in writing duly appointed as their proxyholders.

11.10 Corporation and Trustee May Be Represented

The Corporation and the Trustees, by their respective officers, directors and employees, and the legal advisers of the Corporation and the Trustees may attend any meeting of the Debentureholders, but shall have no voting rights.

11.11 Powers Exercisable by Unanimous Consent of Debentureholders

The following powers of the Debentureholders shall be exercisable from time to time only with the consent of the Holder of each outstanding Debenture of each affected Series:

 

  (a) reduce the principal amount at maturity of, extend the fixed maturity of, or alter the redemption provisions of, such Debentures;

 

  (b) change the currency in which any Debentures or any Premium or accrued interest thereon is payable;

 

  (c) reduce the percentage in principal amount at maturity outstanding of such Debentures that must consent to an amendment, supplement or waiver or consent to take any action under the Indenture, Supplemental Indenture or such Debentures;

 

  (d) impair the right to institute suit for the enforcement of any payment on or with respect to such Debentures;

 

  (e) waive a default in payment with respect to such Debentures;

 

  (f) reduce the rate or extend the time for payment of interest on such Debentures;

 

  (g) affect the ranking of such Debentures in a manner adverse to the holder of the Debentures; or

 

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  (h) make any changes to the Indenture, Supplemental Indenture or such Debentures that would result in the Corporation being required to make any withholding or deduction from payments made under or with respect to such Debentures.

11.12 Powers Exercisable by Debentureholders by Extraordinary Resolution

Subject to the provisions of Sections 8.4 and 11.11 of this Indenture, the following powers of the Debentureholders shall be exercisable from time to time only by Extraordinary Resolution:

 

  (a) power to sanction any modification, abrogation, alteration, compromise or arrangement of the rights of the Debentureholders or any of them or the Trustees against the Corporation or against its property, whether such rights arise under this Indenture or the Debentures or otherwise, provided that such sanctioned actions are not prejudicial to the Trustees;

 

  (b) power to assent to any modification of or change in or addition to or omission from the provisions contained in this Indenture which shall be agreed to by the Corporation and to authorize the Trustees to concur in and execute any Supplemental Indenture embodying any modification, change, addition or omission;

 

  (c) power to sanction any scheme for the reconstruction or reorganization of the Corporation or for the consolidation, amalgamation or merger of the Corporation with or into any other Person or for the sale, leasing, transfer or other disposition of the undertaking, property and assets of the Corporation or any part thereof, provided that no such sanction shall be necessary in respect of any transaction which is completed in compliance with the provisions of Section 10.1;

 

  (d) power to direct or authorize the Trustees to exercise any power, right, remedy or authority given to them by this Indenture in any manner specified in any such Extraordinary Resolution or to refrain from exercising any such power, right, remedy or authority;

 

  (e) power to waive and direct the Trustees to waive any Event of Default and to cancel any declaration made by the Trustees pursuant to Section 8.3 either unconditionally or upon any condition specified in such Extraordinary Resolution;

 

  (f) power to restrain any Debentureholder from taking or instituting any suit, action or proceeding for the purpose of enforcing payment of the principal of or interest or Premium on any Debentures or for the purpose of executing any trust or power hereunder;

 

  (g) power to direct any Debentureholder who, as such, has brought any action, suit or proceeding to stay or discontinue or otherwise deal with the same upon payment, if the taking of such suit, action or proceeding shall have been permitted by Section 8.6, of the costs, charges and expenses reasonably and properly incurred by such Debentureholder in connection therewith;

 

  (h) power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other Securities of the Corporation; and

 

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  (i) power to appoint a committee with power and authority (subject to such limitations, if any, as may be prescribed in the resolution) to exercise, and to direct the Trustees to exercise, on behalf of the Debentureholders, such of the powers of the Debentureholders as are exercisable by Extraordinary Resolution or otherwise as shall be included in the resolution appointing the committee. The resolution making such appointment may provide for payment of the expenses and disbursements of and compensation to such committee and the Trustees. Such committee shall consist of such number of individuals as shall be prescribed in the resolution appointing it and the members need not be Debentureholders. Every such committee may elect its chairman and may make regulations respecting its quorum, the calling of its meetings, the filling of vacancies occurring in its number and its procedure generally. Such regulations may provide that the committee may act at a meeting at which a quorum is present or may act by minutes signed by the number of members thereof necessary to constitute a quorum. All acts of any such committee within the authority delegated to it shall be binding upon all Debentureholders. Neither the committee nor any member thereof nor the Trustees shall be liable for any loss arising from or in connection with any action taken or omitted to be taken by them in good faith.

Except as otherwise provided in this Indenture, all other powers of and matters to be determined by the Debentureholders may be exercised or determined from time to time by Ordinary Resolution.

11.13 Meaning of Ordinary Resolution

The expression “Ordinary Resolution” when used in this Indenture means, except as otherwise provided in this Indenture, a resolution proposed to be passed as an ordinary resolution at a meeting of Debentureholders duly convened for the purpose and held in accordance with the provisions of this Article 11 at which a quorum of the Debentureholders is present and passed by the affirmative votes of Debentureholders present in person or represented by proxy at the meeting who hold more than 50% of the aggregate principal amount of the Debentures voted in respect of such resolution.

11.14 Meaning of Extraordinary Resolution

The expression “Extraordinary Resolution” when used in this Indenture means, except as otherwise provided in this Indenture, a resolution proposed to be passed as an extraordinary resolution at a meeting of Debentureholders duly convened for the purpose and held in accordance with the provisions of this Article at which the Holders of at least 51% of the aggregate principal amount of the Debentures then outstanding are present in person or represented by proxy and passed by the affirmative votes of Debentureholders present in person or represented by proxy at the meeting who hold not less than 66 2/3% of the aggregate principal amount of the Debentures voted in respect of such resolution.

If, at any such meeting, the Holders of at least 51% of the aggregate principal amount of the Debentures then outstanding are not present in person or represented by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by or on the requisition of Debentureholders, shall be dissolved, but in any other case the meeting shall stand adjourned to such date, being not less than 21 nor more than 60 days later, and to such place and time as may be appointed by the chairman of the meeting. Notice of the time and place of such adjourned meeting shall be given to the Debentureholders in the manner specified in Article 12 at least 10 days prior to the date of the adjourned meeting. Such notice shall state that at the adjourned meeting the Debentureholders present in person or represented by proxy shall constitute a quorum, but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting, the Debentureholders present in person or represented by proxy shall constitute a quorum and may transact

 

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the business for which the meeting was originally convened, and a resolution proposed to be passed as an extraordinary resolution at such adjourned meeting and passed by the requisite vote as provided in this Section 11.13 shall be an Extraordinary Resolution within the meaning of this Indenture, notwithstanding that the Holders of at least 51% of the aggregate principal amount of the Debentures then outstanding are not present in person or represented by proxy at such adjourned meeting.

11.15 Powers Cumulative

Any one or more of the powers or any combination of the powers in this Indenture stated to be exercisable by the Debentureholders may be exercised from time to time, and the exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the rights of the Debentureholders to exercise the same or any other such power or powers or combination of powers thereafter from time to time. No powers exercisable by the Debentureholders shall derogate in any way from the rights of the Corporation under or pursuant to this Indenture or any Debentures.

11.16 Minutes

Minutes of all resolutions and proceedings at every meeting of Debentureholders shall be made and duly entered in books to be from time to time provided for that purpose by the Trustees at the expense of the Corporation, and any such minutes, if signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Debentureholders, shall be prima facie evidence of the matters therein stated and, unless the contrary is proved, every such meeting, in respect of the proceedings of which minutes shall have been made, shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings had shall be deemed to have been duly passed and had.

11.17 Instruments in Writing

All actions which may be taken and all powers which may be exercised by the Debentureholders at a meeting held as provided in this Article 11 may also be taken and exercised by an instrument in writing signed in one or more counterparts by the Holders of more than 50%, in the case of an Ordinary Resolution, or not less than 66 2/3%, in the case of an Extraordinary Resolution, of the aggregate principal amount of the outstanding Debentures, and the expressions “Ordinary Resolution and “Extraordinary Resolution when used in this Indenture shall include any instrument so signed.

11.18 Binding Effect of Resolutions

Every resolution passed in accordance with the provisions of this Article 11 at a meeting of Debentureholders shall be binding upon all the Debentureholders, whether present at or absent from such meeting, and every instrument in writing signed by Debentureholders in accordance with Section 11.17 shall be binding upon all the Debentureholders, whether signatories thereto or not, and each and every Debentureholder and each of the Trustees (subject to the provisions for its remuneration, indemnification and protection herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.

11.19 Serial Meetings

If any business to be transacted at a meeting of Debentureholders or any action to be taken or power to be exercised by instrument in writing pursuant to Section 11.17 especially affects the rights of the Holders of Debentures of one or more Series in a manner or to an extent substantially differing from that in which it affects the rights of the Holders of Debentures of any other Series, then

 

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  (a) reference to such fact, indicating the Debentures of each Series so especially affected, shall be made in the notice of such meeting and the meeting shall be and is herein called a “serial meeting ;

 

  (b) the Holders of Debentures of a Series so especially affected shall not be bound by any action taken or power exercised at a serial meeting unless in addition to the other provisions of this Article 11

 

  (i) there are present in person or represented by proxy at such meeting Holders of at least 25% (or, for the purpose of passing an Extraordinary Resolution, at least 51%) of the aggregate principal amount of the Debentures of such Series then outstanding, subject to the provisions of this Article as to adjourned meetings, and

 

  (ii) the resolution is passed by the favourable votes of the Holders of more than 50% (or, in the case of an Extraordinary Resolution, not less than 66 2/3%) of the aggregate principal amount of Debentures of such Series voted on the resolution; and

 

  (c) the Holders of Debentures of a Series so especially affected shall not be bound by any action taken or power exercised by instrument in writing under Section 11.17 unless, in addition to the other provisions of this Article 11, such instrument is signed in one or more counterparts by the Holders of more than 50%, in the case of an Ordinary Resolution, or not less than 66 2/3%, in the case of an Extraordinary Resolution, of the aggregate principal amount of the Debentures of such Series then outstanding.

Notwithstanding anything herein contained, any covenant or other provision contained herein which is expressed to be effective only so long as any Debentures of a particular Series remain outstanding may be modified by the required resolution or consent of the Holders of the Debentures of such Series in the same manner as if the Debentures of such Series were the only Debentures outstanding hereunder. In addition, if any business to be transacted at any meeting or any action to be taken or power to be exercised by instrument in writing does not adversely affect the rights of the Holders of Debentures of one or more particular Series, the provisions of this Article 11 shall apply as if the Debentures of such Series were not outstanding and no notice of any such meeting need be given to the Holders of Debentures of such Series.

11.20 Record Dates

If the Corporation shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other action, the Corporation may, at its option, by or pursuant to a Certified Resolution, fix in advance a record date for the determination of such Holders entitled to provide such request, demand, authorization, direction, notice, consent, waiver or other action, but the Corporation shall have no obligation to do so. Any such record date shall be the record date specified in or pursuant to such Certified Resolution.

If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Debentures then outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Debentures then outstanding shall be computed as of such record date.

 

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11.21 Meetings U.S Dollar Debenture Holders

A Supplemental Indenture under which U.S. Dollar Debentures are issued may include provisions relating to the acts of Holders and meetings applicable to the Holders of such U.S. Dollar Debentures and the U.S. Trustee

ARTICLE 12

NOTICES

12.1 Notice to the Corporation

Any notice to the Corporation under the provisions hereof shall be valid and effective if delivered to the Chief Financial Officer of the Corporation at 1700—180 Kent Street, Ottawa, Ontario, K1P 0B6, or if sent by facsimile transmission (with receipt confirmed) to the attention of the Chief Financial Officer of the Corporation at (819) 561-7188, and shall be deemed to have been validly given at the time of delivery or transmission if it is received prior to 4:00 p.m. on a Business Day, failing which it shall be deemed to have been given on the next Business Day. The Corporation may from time to time notify the Trustees of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Corporation for all purposes of this Indenture.

12.2 Notice to Debentureholders

Unless otherwise expressly provided in this Indenture, any notice to Debentureholders under the provisions hereof shall be valid and effective if in the case of holders of registered Debentures or a Global Debenture, it is delivered, sent by electronic communication or mailed postage prepaid, addressed to such Debentureholders, at their addresses or electronic address, if any, appearing in any of the registers hereinbefore mentioned and, subject to this Section 12.2, shall be deemed to have been received at the time of delivery or sending by electronic communication or on the fifth (5th) Business Day after mailing. Any notice made by delivery or sent by electronic communication on a day other than a Business Day, or after 4:00 p.m. (Toronto time) on a Business Day, shall be deemed to be received on the next following Business Day. All notices to joint holders of any Debentures may be given to whichever one of the holders thereof is named first in the registers hereinbefore mentioned, and any notice so given shall be sufficient notice to all holders of such Debenture. In the event of a postal disruption, notice to Debentureholders shall be given or sent by other appropriate means. Any notice to the Debentureholders who are not registered Holders shall be valid and effective and deemed to have been received by all such holders if published once in a newspaper of general circulation published in Toronto, Ontario, and such other cities, if any, at which Registers in respect of such Debentures are required to be kept.

12.3 Notice to the Trustee

Any notice to the Trustees under the provisions hereof shall be valid and effective if delivered to an officer of the Canadian Trustee at 320 Bay Street, 11 th floor, Toronto, Ontario, M5H 4A6, Attention: Vice President, Transaction Management Group, or if sent by facsimile transmission (with receipt confirmed) to BNY Trust Company of Canada, Attention: Manager, Corporate Trust Services at (416) 360-1711, and to an officer of the U.S. Trustee at 101 Barclay Street, 4E, New York, New York, 10286, Attention: Corporate Trust Department, or if sent by facsimile transmission (with receipt confirmed) to The Bank of New York Mellon, Attention: Corporate Trust Department at (212) 815-5802, shall be deemed to have been validly given at the time of delivery or transmission if it is received prior to 4:00 p.m. on a Business Day, failing which it shall be deemed to have been given on the next Business Day. Either Trustee may from time to time notify the Corporation of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of such Trustee for all purposes of this Indenture. No notice to either Trustee shall be deemed effective or validly given until it is actually received by the applicable Trustee.

 

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12.4 When Publication Not Required

If at any time a notice is required by this Indenture to be published in a particular city and no newspaper of general circulation is then being published and circulated on a daily basis in that city, the Corporation shall not be required to publish such notice in that city.

12.5 Waiver of Notice

Any notice provided for in this Indenture may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Debentureholders shall be filed with the Trustees, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waivers.

ARTICLE 13

CONCERNING THE TRUSTEE

13.1 U.S. and Canadian Trustees

It is the intent of this Indenture that the duties and obligations of the U.S. Trustee relate to the U.S Dollar Debentures and the Holders thereof, and that the duties and obligations of the Canadian Trustee relate to the Canadian denominated Debentures and the Holders thereof.

13.2 Corporate Trustees Required Eligibility

 

  (a) There shall be at all times a Canadian Trustee under this Indenture. The Canadian Trustee shall at all times be a corporation organized under the laws of Canada or any province thereof and authorized under such laws and the laws of the Province of Ontario to carry on trust business therein and, together with its parent, shall have a combined capital and surplus of at least $15,000,000. If at any time the Canadian Trustee shall cease to be eligible in accordance with this Article 13, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 13.

 

  (b) The U.S. Trustee hereunder shall at all times satisfy the requirements of Sections 310(a)(1), 310(a)(2) and 310(a)(5) of the Trust Indenture Act and, together with its parent, shall have a combined capital and surplus of at least U.S.$100,000,000 and have its Corporate Trust Office in New York City to the extent there is such an institution eligible and willing to serve. If such U.S. Trustee publishes reports of condition at least annually, pursuant to law or to the requirements of U.S. federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 13.2 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the U.S. Trustee shall cease to be eligible in accordance with the provisions of this Section 13.2, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 13.

 

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13.3 Certain Duties and Responsibilities of Trustees

 

  (a) In the exercise of the rights, powers and duties prescribed or conferred by the terms of this Indenture, the Canadian Trustee shall act honestly and in good faith and exercise that degree of care, diligence and skill that a professional trustee would exercise in comparable circumstances and shall duly observe and comply with the provisions of any legislation and regulations which relate to the functions or role of the Canadian Trustee as a fiduciary hereunder.

 

  (b) Except during the continuance of an Event of Default,

 

  (1) the Trustees undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustees; and

 

  (2) in the absence of bad faith on its part, the Trustees may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to such Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, such Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

 

  (c) In case an Event of Default has occurred and is continuing, the Trustees shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

 

  (d) No provision of this Indenture shall be construed to relieve the Trustees from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

 

  (1) this Subsection shall not be construed to limit the effect of Subsection 13.3(b)

 

  (2) the Trustees shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that such Trustee was negligent in ascertaining the pertinent facts;

 

  (3) the Trustees shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Trustees, or exercising any trust or power conferred upon such Trustee, under this Indenture with respect to the Debentures of such series; and

 

  (4) no provision of this Indenture shall require the Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers.

 

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Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 13.3 and Section 13.4.

Either Trustee, upon the occurrence or at any time during the continuance of any act, action or proceeding, may require the Debentureholders at whose instance it is acting to deposit with it Debentures held by them, for which Debentures such Trustee shall issue receipts.

No provision of this Indenture shall operate to confer any obligation, duty or power on the Trustees in any jurisdiction in which it does not have the legal capacity required to assume, hold or carry out such obligation, duty or power. For the purposes of this Section 13.3, legal capacity includes, without limitation, the capacity to act as a fiduciary in such jurisdiction.

13.4 No Conflict of Interest

 

  (a) Each Trustee represents to the Corporation that at the date of the execution and delivery of this Indenture there exists no material conflict of interest in such Trustee’s role as a fiduciary hereunder. If at any time a material conflict of interest (including conflicting interest as defined in Section 310(b) of the Trust Indenture Act) exists in respect of either Trustee’s role as a fiduciary under this Indenture that is not eliminated within 90 days after such Trustee becomes aware that such a material conflict of interest exists, such Trustee shall resign from the trusts under this Indenture by giving notice in writing of such resignation and the nature of such conflict to the Corporation at least 21 days prior to the date upon which such resignation is to take effect, and shall on such date be discharged from all further duties and liabilities hereunder. The validity and enforceability of this Indenture and any Debentures shall not be affected in any manner whatsoever by reason only of the existence of a material conflict of interest of either Trustee.

 

  (b) If at any time a Trustee fails to comply with the provisions of Section 13.4(a), such Trustee shall within 10 days after the expiration of the 90-day period referred to therein, transmit notice of such failure to the other Trustee, and to the Holders in the manner provided for notices to the Holders in Section 12.2.

13.5 Conditions Precedent to Trustee’s Obligation to Act

Neither Trustee shall be bound to give any notice or take any action or proceeding unless it is required to do so under the terms of this Indenture. Neither Trustee shall be required to take notice of an Event of Default under this Indenture, other than in respect of payment of any money required by any provision of this Indenture to be paid to it, unless and until such Trustee has received notice in writing of such Event of Default by any Debentureholder or the Corporation or unless an officer of such Trustee has specific knowledge of such Event of Default. In the absence of receipt of such notice or knowledge, the Trustees may for all purposes of this Indenture assume that no Event of Default has occurred.

 

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The obligation of each Trustee to commence or continue any act, action or proceeding under this Indenture shall be subject to Section 13.3(d) and conditional upon its receipt of the following:

 

  (a) an Extraordinary Resolution, Ordinary Resolution, Debentureholders’ Request, requisition in writing, or such other notice or direction as is applicable and as required pursuant to this Indenture, specifying the action or proceeding which the Trustee is requested, directed or authorized to take,

 

  (b) sufficient funds to commence or continue such act, action or proceeding, and

 

  (c) an indemnity satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges, expenses and liabilities to be incurred thereby and any loss and damages it may suffer by reason thereof except in the event of gross negligence or willful misconduct of such Trustee; and

 

  (d) at the Trustee’s election, the Opinion of Corporation Counsel and Officer’s Certificate under Section 13.13;

The Trustees may refuse to follow any direction that conflicts with applicable law or this Indenture, that the Trustee determines may be unduly prejudicial to other Holders, or that may involve the Trustee in personal liability

13.6 Resignation and Removal; Appointment of Successor

 

  (a) No resignation or removal of either Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 13.7.

 

  (b) Either Trustee may resign at any time by giving two months written notice thereof to the Corporation. If an instrument of acceptance by a successor Trustee shall not have been delivered to the resigning Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

  (c) Either Trustee may be removed at any time by an Extraordinary Resolution of the Debentureholders.

 

  (d) If at any time:

 

  (i) a Trustee shall fail to comply with the provisions of Section 13.4, or

 

  (ii) a Trustee shall cease to be eligible under Section 13.2 and shall fail to resign immediately in the case of the U.S. Trustee after written request therefor by the Corporation or by any Holder who has been a bona fide Debentureholder for at least six months in the case of the Canadian Trustee, or

 

  (iii) a Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of such Trustee or of its property shall be appointed or any public officer shall take charge or control of such Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Corporation by a Certified Resolution may remove such Trustee, or (ii) subject to Section 8.7, in the case of clause (1) above, a Debentureholder and any other interested party, and in the case of clauses (2) and (3) above, any Debentureholder who has been a bona fide Holder of a Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor Trustee.

 

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  (e) If either Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Canadian Trustee or U.S. Trustee for any cause, the Corporation, by a Certified Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by act of the Holders of a majority in principal amount of the outstanding Debentures delivered to the Corporation and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 13.7, become the successor Trustee and supersede the successor Trustee appointed by the Corporation. If no successor Trustee shall have been so appointed by the Corporation or the Holders of the Debentures and so accepted appointment, the remaining Trustee or a Debentureholder who has been a bona fide Holder for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

  (f) The Corporation shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the remaining Trustee and to the Debentureholders as their names and addresses appear in the Registers. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

13.7 Acceptance of Appointment by Successor

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Corporation and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Corporation, the successor Trustee or the remaining Trustee, such retiring Trustee shall, upon payment of all amounts due it under Sections 6.9 and 13.18, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder subject to the claim provided for in Sections 6.9 and 13.18. Upon request of any such successor Trustee, the Corporation shall execute any and all instruments for more fully and certainly vesting in and conforming to such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article 13.

13.8 Trustees May Deal in Debentures

The Trustees may buy, sell, lend upon and deal in the Debentures and generally contract and enter into financial transactions with the Corporation or otherwise, without being liable to account for any profits made thereby.

 

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13.9 No Person Dealing with Trustees Need Inquire

No Person dealing with the Trustees shall be required to inquire as to whether the powers that the Trustees are purporting to exercise have become exercisable, or whether any amount remains due upon the Debentures or to see to the application of any amount paid to the Trustees.

13.10 Investment of Money Held by Trustees

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Corporation the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys or independent contractors and the Trustee will not be responsible for any misconduct or negligence on the part of any agent, attorney or independent contractor appointed with due care by it hereunder.

13.11 Trustees Not Required to Give Security

The Trustees shall not be required to give any bond or security in respect of the execution of the trusts and powers of this Indenture or otherwise in respect of this Indenture.

13.12 Trustee Not Required to Possess Debentures

All rights of action under this Indenture may be enforced by the Trustees without the possession of any of the Debentures or the production thereof on any trial or other proceedings relative thereto.

13.13 Evidence of Compliance

Upon any application or demand by the Corporation to the Trustees to take any action under any of the provisions of this Indenture, the Corporation shall furnish to such Trustee an Officers Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Corporation Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such document is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.

13.14 Form of Evidence

Any Officers’ Certificate or Opinion of Corporation Counsel may be based, insofar as it relates to any accounting matters, upon a certificate or opinion of, or representations by, the Corporation’s Auditors or an accountant or another firm of accountants engaged by the Corporation, unless such Officer or counsel, as the case may be, knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such accounting matters are erroneous. Any certificate or opinion or any independent firm of chartered accountants filed with and directed to the Trustees shall contain a statement that such firm is independent. In addition, the Corporation shall comply with Section 314(c)(3) of the Trust Indenture Act.

 

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Evidence furnished to the Trustees with respect to compliance with a condition or covenant pursuant to Section 13.13, other than the Officers’ Certificate required by Section 6.1(b) shall include:

 

  (a) a statement by the Person giving the evidence declaring that such Person has read and understands the provisions hereof relating to the conditions precedent with respect to compliance with which such evidence is being given,

 

  (b) a statement describing the nature and scope of the examination or investigation upon which the statements or opinions contained in the evidence are based,

 

  (c) a statement declaring that, in the belief of the Person giving the evidence, such Person has made such examination or investigation as is necessary to enable such Person to make the statements or give the opinions contained or expressed therein; and

 

  (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an opinion of Corporation Counsel may rely on an Officers’ Certificate or certificates of public officials.

13.15 Certain Rights of Trustees

Subject to the provisions of Section 13.3,

 

  (a) the Trustees may conclusively act and rely as to the truth of the statements and correctness of the opinions expressed in, shall not be bound to make any investigation into the facts or matters of, and shall be fully protected in acting or relying or refraining from acting upon, any resolution, certificate, statement, statutory declaration, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

 

  (b) any request or direction of the Corporation shall be sufficiently evidenced by a request of the Corporation or order of the Corporation and any resolution of the Directors shall be sufficiently evidenced by a Certified Resolution;

 

  (c) whenever in the administration of this Indenture either Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, such Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, rely and act upon an Officers’ Certificate;

 

  (d) either Trustee at the expense of the Corporation may consult with Trustee Counsel and such other experts and advisers as such Trustee believes is necessary to enable it to perform its duties hereunder, and the advice or opinion of such Trustee Counsel, experts or advisers shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

  (e) neither Trustee shall be under any obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Debentureholders pursuant to this Indenture unless such Debentureholders shall have offered to such Trustee at the discretion of the Trustee, sufficient funds or sufficient security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction, and provisions of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 13.15(e).

 

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  (f) neither Trustee shall be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

 

  (g) the rights, privileges, protections, immunities and benefits given to the Trustees, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustees in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder;

 

  (h) each Trustee may request the Corporation deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture;

 

  (i) in no event shall either Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of god, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that such Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances; and

 

  (j) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys or independent contractors and the Trustee will not be responsible for any misconduct or negligence on the part of any agent, attorney or independent contractor appointed with due care by it hereunder, provided such appointment has been made with the prior written consent of the Corporation.

13.16 Merger, Conversion, Consolidation or Succession to Business

Any corporation into which either Trustee may be merged or with which it may be amalgamated or consolidated, or any corporation resulting from any merger, amalgamation or consolidation to which such Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article 13, without the execution or filing of any instrument or any further act on the part of any of the parties hereto.

13.17 Action by Trustees to Protect Interests

Each Trustee shall have power to institute and maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the Debentureholders.

13.18 Protection of Trustees

The Corporation hereby indemnifies and saves harmless each Trustee and its directors, officers and employees from and against all claims, demands, losses, actions, causes of action, costs, charges, expenses, damages, taxes (other than income or capital taxes), penalties and liabilities whatsoever brought against or incurred by such Trustee which it may suffer or incur as a result of or arising in connection

 

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with the performance of its duties and obligations under this Indenture, including any and all legal fees and disbursements of whatever kind or nature, except only in the event of the gross negligence, wilful misconduct, breach of fiduciary duty or bad faith of such Trustee. This indemnity shall survive the removal or resignation of a Trustee under this Indenture and the termination of this Indenture.

Neither Trustee shall be liable for or by reason of any statements of fact in this Indenture or in the Debentures (except for the representations contained in Sections 13.4 and 13.19 and in the authentication of the Trustees on the Debentures) or required to verify such statements, and all such statements are and shall be deemed to be made by the Corporation.

Neither Trustee shall be bound to give notice to any Person of the execution of this Indenture.

Neither Trustee shall incur any liability or responsibility whatever or in any way be responsible for the consequence of any breach on the part of the Corporation of any of the covenants contained in this Indenture or in any Debentures or of any acts of the agents or employees of the Corporation.

Neither Trustee nor any Affiliate of either Trustee shall be appointed a receiver or receiver and manager or liquidator of all or any part of the assets or undertaking of the Corporation.

Nothing in this Indenture shall impose on either Trustee any obligation to see to, or to require evidence of, the registration or filing (or renewal thereof) of this Indenture or any instrument ancillary or supplemental to this Indenture in any jurisdiction.

Neither Trustee shall:

 

  (a) be responsible or liable for any debts contracted by it, for damages to Persons or property, for salaries, or for nonfulfillment of contracts in any period during which the Trustee is managing or in possession of assets of the Corporation,

 

  (b) be liable to account as mortgagee in possession or for anything other than actual receipts or be liable for any loss on realization or for any default or omission for which a mortgagee in possession may be liable,

 

  (c) be bound to do, observe or perform or to see to the observance of performance by the Corporation of any obligations or covenants imposed upon the Corporation, or

 

  (d) in the case of any chattel paper, security or instrument, be obligated to preserve rights against any other Persons,

and the Corporation waives any provision of applicable law permitted to be waived by it which imposes higher or greater obligations upon either Trustee.

The Trustees shall not be responsible or liable in any manner whatever for the sufficiency, correctness, genuineness or validity of any security deposited with it.

The Trustees shall incur no liability with respect to the delivery or non-delivery of any certificate or certificates whether delivered by hand, mail or any other means.

The Trustees shall not be responsible for ensuring that the proceeds from the sale of Debentures are used in a manner contemplated by any prospectus pursuant to which such Debentures were offered or sold.

 

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The Trustees shall be entitled to rely on, and act upon any direction, order, notice, instruction or other communication provided to it hereunder which is sent to it by facsimile transmission.

13.19 Authority to Carry on Business

The Canadian Trustee represents to the Corporation that at the date of execution and delivery by it of this Indenture it is authorized to carry on the business of a trust company in each of the provinces of Canada. If the Canadian Trustee ceases to be authorized to carry on such business in any province of Canada, the validity and enforceability of this Indenture and the Debentures issued under this Indenture shall not be affected in any manner whatsoever by reason only of such event, but within 90 days after ceasing to be authorized to carry on the business of a trust company in any province of Canada the Canadian Trustee either shall become so authorized or shall resign in the manner and with the effect specified in Section 13.6.

13.20 Trustees Not Liable in Respect of Depository

The Trustees shall not have any liability whatsoever for

 

  (a) any aspect of the records relating to or payments made on account of beneficial ownership interests in the Debentures held by and registered in the name of a Depository,

 

  (b) maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or

 

  (c) any advice or representation made or given by or with respect to a Depository and made or given herein with respect to rules of such Depository or any action to be taken by a Depository or at the direction of a participant of a Depository.

13.21 Global Debentures

Debentures issued to a Depository in the form of a Global Debenture shall be subject to the following:

 

  (a) the Trustees may deal with such Depository as the authorized representative of the beneficial owners of such Debentures;

 

  (b) the rights of the beneficial owners of such Debentures shall be exercised only through such Depository and shall be limited to those established by law and by agreement between the beneficial owners of such Debentures and such Depository or direct participants of such Depository;

 

  (c) such Depository will make book-entry transfers among the direct participants of such Depository and will receive and transmit distributions of principal, Premium and interest on the Debentures to such direct participants; and

 

  (d) the direct participants of such Depository shall have no rights under this Indenture or under or with respect to any of the Debentures held on their behalf by such Depository, and such Depository may be treated by either Trustee and its agents, employees, officers and directors as the absolute owner of the Debentures represented by such Global Debenture for all purposes whatsoever.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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13.22 Trustees Appointed Attorney

The Corporation hereby irrevocably appoints the Canadian Trustee to be the attorney of the Corporation in the name and on behalf of the Corporation to execute any documents and to do any acts and things which the Corporation ought to execute and do, and has not executed or done, under the covenants and provisions contained in this Indenture and generally to use the name of the Corporation in the exercise of all or any of the powers hereby conferred on the Canadian Trustee, with full powers of substitution and revocation.

13.23 Acceptance of Trusts

The Trustees hereby accept the trusts in this Indenture declared and provided for and agree to perform the same upon the terms and conditions set forth in this Indenture and in trust for the Debentureholders from time to time, subject to the terms and conditions of this Indenture.

13.24 Preferential Collection of Claims Against Corporation

The Trustees shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to 311(a) of the Trust Indenture Act to the extent indicated therein.

13.25 No Liability for Certain Deposited Monies

The Trustees will bear no liability for monies deposited other than with the Trustees. The Trustees will disburse monies according to this Indenture only to the extent that monies have been deposited with it.

ARTICLE 14

SUPPLEMENTAL INDENTURES

14.1 Supplemental Indentures

From time to time the Trustees and, when authorized by a resolution of its Directors, the Corporation, may without the consent of any Debentureholder, and they shall when required by this Indenture, execute, acknowledge and deliver by their proper officers Supplemental Indentures, which thereafter shall form part of this Indenture, for any one or more of the following purposes:

 

  (a) adding limitations or restrictions to be observed upon the amount or issue of Debentures hereunder, provided that such limitations or restrictions shall not be materially adverse to the interests of the Debentureholders;

 

  (b) adding to the covenants of the Corporation herein contained for the protection of the Debentureholders or providing for Events of Default in addition to those herein specified;

 

  (c) making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder, including the making of any modifications in the form of the Debentures which do not affect the substance thereof and which it may be expedient to make, provided that such provisions and modifications will not adversely affect the interests of the Debentureholders;

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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  (d) providing for the issue, as permitted hereby, of Debentures of any one or more Series;

 

  (e) evidencing the succession, or successive successions, of successors to the Corporation and the covenants of and obligations assumed by any such successor in accordance with the provisions of this Indenture;

 

  (f) giving effect to any Extraordinary Resolution or Ordinary Resolution;

 

  (g) adding to, changing, or eliminating any of the provisions of this Indenture in respect of one or more Series of Debentures, provided that any such addition, change, or elimination (i) will neither (A) apply to any Debenture of any Series created prior to the execution of such Supplemental Indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Debenture with respect to such provision or (ii) will become effective only when there is no such Debenture outstanding; and

 

  (h) evidencing and providing for the acceptance of appointment by the U.S. Trustee with respect to the U.S. Dollar Debentures of one of more Series, and adding or changing any of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by such U.S. Trustee.

It shall not be necessary for the U.S Trustee to execute any Supplemental Indenture under which only Canadian denominated Debentures are issued.

The Trustees may also, without the consent or concurrence of the Debentureholders, by Supplemental Indenture or otherwise, concur with the Corporation in making any changes or corrections in this Indenture which it shall have been advised by the Corporation’s Counsel are required for the purpose of curing or correcting any ambiguity or defective or inconsistent provision or clerical omission or mistake or manifest error contained herein or in any Supplemental Indenture, provided that the rights of the Debentureholders are in no way adversely affected thereby.

14.2 Effect of Supplemental Indentures

Upon the execution of any Supplemental Indenture, this Indenture shall be modified in accordance therewith, such Supplemental Indenture shall form a part of this Indenture for all purposes, and every Holder of Debentures shall be bound thereby. Any Supplemental Indenture may contain terms which add to, modify or negate any of the terms contained in this Indenture, and to the extent that there is any difference between the terms of this Indenture and the terms contained in a Supplemental Indenture, the terms contained in the Supplemental Indenture shall be applicable to the Debentures to which such Supplemental Indenture relates and the corresponding terms contained in this Indenture shall not be applicable unless otherwise indicated in such Supplemental Indenture.

14.3 Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any Supplemental Indenture permitted by this Indenture or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Corporation Counsel stating that the execution of such Supplemental Indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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14.4 Reference in Securities to Supplemental Indentures

Securities of any series authenticated and delivered after the execution of any Supplemental Indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by such Trustee as to any matter provided for in such Supplemental Indenture.

ARTICLE 15

EVIDENCE OF RIGHTS OF DEBENTUREHOLDERS

15.1 Evidence of Rights of Debentureholders

Any instrument which this Indenture may require or permit to be signed or executed by the Debentureholders may be in any number of concurrent instruments of similar tenor and may be signed or executed by such Debentureholders in person or by attorney duly appointed in writing. Proof of the execution of any such instrument, or of a writing appointing any such attorney or of the holding by any Person of Debentures shall be sufficient for any purpose of this Indenture if the fact and date of the execution by any Person of such instrument or writing are proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded at the place at which such certificate is made that the Person signing such request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, or in any other manner which the Trustees may consider adequate.

The Trustees may, nevertheless, in their discretion, require further proof when they deem further proof desirable or may accept such other proof as they shall consider proper.

The ownership of Debentures shall be proved by the Registers as herein provided.

ARTICLE 16

EXECUTION AND FORMAL DATE

16.1 Counterpart Execution

This Indenture may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument.

16.2 Formal Date

For the purpose of convenience, this Indenture may be referred to as bearing the formal date of December 16, 2004, irrespective of the actual date of execution hereof.

IN WITNESS WHEREOF the parties hereto have executed this Indenture.

 

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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BRP FINANCE ULC
By:       “Patricia Bood”
  Name:   Patricia Bood
  Title:   Secretary, Senior Vice President of Legal Services and General Counsel
BNY TRUST COMPANY OF CANADA , as Canadian Trustee
By:       “Moran Chiu”
  Name:   Moran Chiu
  Title:   Authorized Signatory
THE BANK OF NEW YORK MELLON , as U.S. Trustee
By:       “Erica Walker”
  Name:   Erica Walker
  Title:   Vice President

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 


SCHEDULE “A”

Form of n % Debentures due n (Series )

CUSIP n

ISIN n

No. $

BRP FINANCE ULC

(Incorporated under the laws of Alberta)

DEBENTURE

 

Issue Date    n   
Stated Maturity    n   
Interest Rate Per Annum    n %   
Interest Payment Dates    n and n in each year   
Initial Interest Payment Date    n   
Principal Amount    $ n   

BRP Finance ULC (the “Corporation”) for value received hereby promises to pay to the registered holder hereof on the Stated Maturity, or on such earlier date as the Principal Amount may become due in accordance with the provisions of the Indenture (as defined below), on presentation and surrender of this Debenture, the Principal Amount in lawful money of n at the Corporate Trust Office of the n Trustee and to pay interest on the Principal Amount at the interest rate from the later of the Issue Date and the last Interest Payment Date on which interest has been paid or made available for payment on this Debenture, at the Corporate Trust Office of the n Trustee, in like money n on the Interest Payment Dates in each year, the first such payment to be payable on the Interest Payment Date, and if the Corporation at any time defaults in the payment of any principal or interest, to pay interest on the amount in default at the same rate, in like money, at the Corporate Trust Office of the n Trustee and n on the same dates. Prior to each Interest Payment Date, the Corporation (except in case of payment at maturity or on redemption at which time payment of interest will be made only upon surrender of this Debenture) shall mail to the registered address of the registered holder of this Debenture, or in the case of joint holders to the registered address of the joint holder first named in the register, a cheque for the interest, less any tax required by law to be deducted or withheld, payable to the order of such holder or holders and negotiable at par at any of the branches at which interest on this Debenture is payable. The mailing of such cheque shall satisfy and discharge the liability for interest upon this Debenture to the extent of the sum represented thereby (plus the amount of any tax deducted or withheld) unless such cheque is not paid on presentation.

This Debenture is one of a series of the Debentures of the Corporation issued and to be issued under an amended and restated indenture (the “Indenture”) dated as of November 23, 2011 made among the Corporation, BNY Trust Company of Canada (the “Canadian Trustee”) and The Bank of New York Mellon (the “U.S. Trustee”, and together with the Canadian Trustee, the “Trustee”), as Trustee. The Indenture specifies the terms and conditions upon which the Debentures are issued or may be issued and held and the rights of the holders of the Debentures, the Corporation and the Trustee, all of which are incorporated by reference in this Debenture and to all of which the holder of this Debenture, by acceptance hereof, agrees.

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 


The Debentures may be issued in one or more series and without limitation as to aggregate principal amount, but only upon the terms and subject to the restrictions set out in the Indenture.

At any time when the Corporation is not in default under the Indenture, the Corporation may purchase Debentures in the open-market or by tender or by private contract at any price.

The Principal Amount may become or be declared due before the Stated Maturity on the conditions, in the manner, with the effect and at the times set forth in the Indenture.

The Indenture contains provisions for the holding of meetings of Debentureholders and making resolutions passed at such meetings and instruments in writing signed by the holders of a specified majority of the Debentures outstanding binding on all Debentureholders, subject to the provisions of the Indenture.

This Debenture may be transferred only upon compliance with the conditions prescribed in the Indenture on one of the registers kept at the principal offices of the Trustees in Toronto, Ontario and New York, New York and at such other place or places, if any, and by such other registrar or registrars, if any, as the Corporation may designate, by the registered holder hereof or the holder’s legal representative or attorney duly appointed by an instrument in writing in form and execution satisfactory to the Trustee, and upon compliance with such reasonable requirements as the Trustee or other registrar may prescribe, and such transfer shall be duly noted hereon by the Trustee or other registrar.

This Debenture shall not become obligatory for any purpose until it shall have been certified by the manual signature of one of the Trustees under the Indenture.

IN WITNESS WHEREOF BRP Finance ULC has caused this Debenture to be signed by n and n .

 

BRP FINANCE ULC
   
n
 
n

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

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(FORM OF TRUSTEES’ CERTIFICATE OF AUTHENTICATION)

TRUSTEES’ CERTIFICATE OF AUTHENTICATION

This Debenture is one of the Debentures referred to in the Indenture referred to above.

 

BNY TRUST COMPANY OF CANADA , as Canadian Trustee
 
By:   Certifying Officer
or  
THE BANK OF NEW YORK MELLON , as U.S. Trustee
 
By:   Certifying Officer

(FORM OF REGISTRATION PANEL)

(NO WRITING HEREON EXCEPT BY THE TRUSTEES OR OTHER REGISTRAR)

 

DATE OF

REGISTRY

  

IN WHOSE NAME

REGISTERED

  

SIGNATURE OF TRUSTEE

OR OTHER REGISTRAR

 

[A&R INDENTURE_FINCO & BNY CANADA & BNY USA]

 

Exhibit 4.7

THIS AMENDED AND RESTATED GUARANTEE INDENTURE dated as of November 25, 2011;

AMONG:

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. , an exempted limited partnership formed under the laws of Bermuda,

(hereinafter referred to as “ BREP ”),

- and -

BROOKFIELD RENEWABLE ENERGY L.P. , an exempted limited partnership formed under the laws of Bermuda,

(hereinafter referred to as “ BRELP ”),

- and -

BROOKFIELD BRP HOLDINGS (CANADA) INC. , a corporation incorporated under the laws of the Province of Ontario,

(hereinafter referred to as “ CanHoldco ”),

- and -

BRP BERMUDA HOLDINGS I LIMITED , a corporation formed under the laws of Bermuda,

(hereinafter referred to as “ Bermuda Holdco ” and collectively with BREP, BRELP and CanHoldco, the “ Guarantors ”),

- and -

BROOKFIELD RENEWABLE POWER PREFERRED EQUITY INC. , a corporation incorporated under the federal laws of Canada,

(hereinafter referred to as the “ Corporation ”),

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA , a trust company organized and existing under the laws of Canada,

(hereinafter referred to as the “ Security Trustee ”).


WHEREAS Brookfield Renewable Power Fund (the “ Fund ”), the Corporation and the Security Trustee entered into a guarantee indenture (the “ Original Indenture ”) dated as of March 3, 2010 pursuant to which the Fund agreed to guarantee in favour of the Holders (as defined below) the payment of the Series 1 Share Obligations (as defined below), pursuant to the terms of the Series 1 Shares (as defined below) in the manner provided for therein;

AND WHEREAS pursuant to a plan of arrangement under the Business Corporations Act (Ontario) (the “ Plan of Arrangement ”), the Fund has been wound up into a wholly-owned subsidiary of CanHoldco, and all of the assets of the Fund are now indirectly held by CanHoldco;

AND WHEREAS CanHoldco and the Corporation are subsidiaries of BREP and BRELP;

AND WHEREAS the Holders have approved the Plan of Arrangement, including the amendments to the Original Indenture that are reflected in this amended and restated guarantee indenture (the “ Guarantee ”);

AND WHEREAS pursuant to the terms of this Guarantee the Guarantors have agreed to guarantee in favour of the Holders the payment of the Series 1 Share Obligations, pursuant to the terms of the Series 1 Shares;

AND WHEREAS as at the date hereof, the Corporation has authorized for issuance up to 10,000,000 Series 1 Shares;

AND WHEREAS the Series 1 Shares are, on certain terms and conditions, convertible to Series 2 Shares (as defined below) and the Series 2 Shares are, on certain terms and conditions, convertible to Series 1 Shares;

AND WHEREAS all necessary acts and proceedings have been done and taken and all necessary resolutions have been passed to authorize the execution and delivery of this Guarantee and to make the same legal, valid and binding upon the Guarantors;

AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Guarantors and not by the Security Trustee;

NOW THEREFORE THIS GUARANTEE WITNESSES that for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties), the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 

1.1 Definitions

For all purposes of this Guarantee, except as otherwise expressly provided or unless the context otherwise requires:

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

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  (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

 

  (b) the words “ herein ”, “ hereof ” and “ hereunder ” and other words of similar import refer to this Guarantee as a whole and not to any particular Article, Section or other subdivision; and

 

  (c) all references to “ the Guarantee ” or “ this Guarantee ” are to this Guarantee as modified, supplemented or amended from time to time.

The following terms shall have the following meanings:

Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

Authorized Investments ” has the meaning given to such term in Section 5.7;

Bermuda Holdco ” means BRP Bermuda Holdings I Limited;

Board Resolution ” means, with respect to a Guarantor, a copy of a resolution duly passed by the board of directors (or the equivalent) of the Governing Body of such Guarantor, to be in full force and effect on the applicable date, and delivered to the Security Trustee;

BRELP ” means Brookfield Renewable Energy L.P.;

BREP ” means Brookfield Renewable Energy Partners L.P.;

Business Day ” means a day other than a Saturday, a Sunday or any other day that is a statutory or civic holiday in the place where the Corporation has its head office;

CanHoldco ” means Brookfield BRP Holdings (Canada) Inc.

CBCA ” means the Canada Business Corporations Act ;

Class A Preference Shares ” means class A preference shares, of which the Corporation is authorized to issue an unlimited number pursuant to its articles of incorporation;

Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example the status of A being the general partner of B) or by virtue of beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares to which are attached more than 50% of the votes permitted to be cast in the election of directors to the board of directors (or the equivalent) of the Governing Body of B or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose, and the term “ Controlled ” has the corresponding meaning;

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

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Corporate Trust Office ” means the office of the Security Trustee, at which at any particular time its corporate trust business shall be principally administered, which office on the date of execution of this Guarantee is located at 2001 University Street, Montréal, Québec, H3A 2A6;

Corporation ” means Brookfield Renewable Power Preferred Equity Inc. and its successors and assigns;

Event of Default ” has the meaning given to such term in Section 4.2;

Governing Body ” means (i) with respect to a corporation or limited company, such corporation or limited company, (ii) with respect to a limited liability company, a manager or managing partner of such limited liability company, (iii) with respect to a limited partnership, a general partner of such limited partnership (or if any such general partner is itself a partnership, such general partner’s general partner), (iv) with respect to a general partnership, the managing partner (or if there is no managing partner, each partner) and (v) with respect to any other Person, the Person that has the power to determine the management and policies of such Person by status, and in the case of each of (i) through (v) includes any Person to whom such Person has delegated any power or authority;

Guaranteed Obligations ” has the meaning given to such term in Section 3.4;

Guarantors ” means, collectively, BREP, BRELP, CanHoldco and Bermuda Holdco and their respective successors and assigns; and “ Guarantor ” means any of them;

Guarantor Order ” or “ Guarantor Request ” means, with respect to a Guarantor, a written request or order signed in the name of such Guarantor by any officer or director (or the equivalent) of the Governing Body of such Guarantor and delivered to the Security Trustee;

Holders ” means the registered holders of the Series 1 Shares from time to time, provided that, in determining whether the Holders of the requisite percentage of the aggregate Liquidation Amount of outstanding Series 1 Shares have given any request, notice, consent or waiver hereunder, “Holders” shall not include the Guarantors or any Affiliate of the Guarantors;

Liquidation Amount ” means an amount equal to $25.00 per Series 1 Share or Series 2 Share plus an amount equal to all declared and unpaid dividends up to, but excluding, the date fixed for payment or distribution;

Officer’s Certificate ” means, with respect to a Guarantor, a certificate signed by any officer or director (or the equivalent) of the Governing Body of such Guarantor and delivered to the Security Trustee;

Opinion of Counsel ” means a written opinion of counsel, who may be counsel for a Guarantor, including an employee of a Guarantor, a Governing Body of a Guarantor or the Corporation, and who shall be acceptable to the Security Trustee;

Person ” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof;

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

- 4 -


Preference Share Obligation ” means either a Series 1 Share Obligation or a Series 2 Share Obligation;

Responsible Officer ”, when used with respect to the Security Trustee, means any President, Chief Executive Officer, Chief Financial Officer, Controller, Senior Vice President, Vice President, Treasurer, Secretary, General Manager, Branch Manager, Director, Broker Products, Regional Manager, Service Delivery, Manager, Client Services, Manager, Corporate Actions, Manager, Corporate Administration, Manager, Corporate Trust, Manager, Employee Plans, Manager, MBS, Manager, Oil Royalties, Manager, Stock Transfer, Manager, Stock Transfer & Client Services, Manager, Stock Transfer/Operations, Professional, Client Services, Professional, Corporate Actions, Associate Trust Officer, Corporate Trust Officer, Professional, Employee Plans, Professional, MBS, Professional, Service Delivery, Professional, Stock Transfer of the Security Trustee and any other officer of the Security Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject;

Security Trustee ” means Computershare Trust Company of Canada;

Senior Indebtedness ” shall mean, in respect of any Guarantor, the principal of and the interest and premium (or any other amounts payable thereunder), if any, on:

 

  (i) all indebtedness (including any indebtedness to trade creditors), liabilities and obligations of such Guarantor (other than the Series 1 Share Obligations and the Guaranteed Obligations), whether outstanding on the date of this Guarantee or thereafter created, incurred, assumed or guaranteed; and

 

  (ii) all renewals, extensions, restructurings, refinancings and refundings of any such indebtedness, liabilities or obligations;

except only for any such indebtedness, liabilities or obligations that are, pursuant to the terms of the instrument creating or evidencing such indebtedness, liabilities or obligations, expressly pari passu with or subordinate in right of payment to the Series 1 Share Obligations;

Series 1 Redemption Price ” means $25.00 per Series 1 Share redeemed;

Series 1 Share Obligations ” means all financial liabilities and obligations of the Corporation to the Holders in respect of the Series 1 Shares including or in respect of (i) any declared and unpaid dividends on the Series 1 Shares, (ii) the Series 1 Redemption Price and all declared and unpaid dividends up to, but excluding, the date fixed for redemption with respect to Series 1 Shares called for redemption, and (iii) the Liquidation Amount payable on the Series 1 Shares upon a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, without regard to the amount of assets of the Corporation available for distribution;

Series 1 Shares ” means the Class A Preference Shares, Series 1 of the Corporation;

Series 2 Redemption Price ” means the following per Series 2 Share redeemed: (i) $25.00 in the case of redemptions on April 30, 2020 and on April 30 every five years thereafter (each a “ Series 2 Share Conversion Date ”); or (ii) $25.50 in the case of redemptions on any date which is not a Series 2 Conversion Date on or after April 30, 2015;

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

- 5 -


Series 2 Share Obligations ” means all financial liabilities and obligations of the Corporation to the Holders in respect of the Series 2 Shares including or in respect of (i) any declared and unpaid dividends on the Series 2 Shares, (ii) the Series 2 Redemption Price and all declared and unpaid dividends up to, but excluding, the date fixed for redemption with respect to Series 2 Shares called for redemption, and (iii) the Liquidation Amount payable on the Series 2 Shares upon a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, without regard to the amount of assets of the Corporation available for distribution; and

Series 2 Shares ” means the Class A Preference Shares, Series 2 of the Corporation.

 

1.2 Compliance Certificates and Opinions

Upon any application or request by a Guarantor to the Security Trustee to take any action under any provision of this Guarantee, such Guarantor shall furnish to the Security Trustee an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Guarantee (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Guarantee relating to such particular application or request, no additional certificate or opinion need be furnished.

In addition to the foregoing, every certificate or opinion with respect to compliance with a covenant or condition provided for in this Guarantee (other than as otherwise specified herein) shall include:

 

  (a) a statement that each individual signing such certificate or opinion has read and understood such covenant or condition and the definitions herein relating thereto;

 

  (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

  (c) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

  (d) a statement as to whether, in the opinion of each such individual, such covenant or condition has been complied with.

 

1.3 Form of Documents Delivered to Security Trustee

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

- 6 -


covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Governing Body of a Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Governing Body of a Guarantor stating that the information with respect to such factual matters is in the possession of such Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Guarantee, they may, but need not, be consolidated and form one instrument.

 

1.4 Acts of Holders

 

  (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Guarantee to be given or taken by one or more Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed by them in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Security Trustee and, where it is hereby expressly required, to the Guarantors and/or the Corporation. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “ Act ” of the Holders signing such instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Series 1 Share, shall be sufficient for any purpose of this Guarantee and conclusive in favour of the Security Trustee, the Guarantors and the Corporation, if made in the manner provided in this Section.

 

  (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Security Trustee deems sufficient.

 

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  (c) If a Guarantor shall solicit from the Holders of Series 1 Shares any request, demand, authorization, direction, notice, consent, waiver or other Act, such Guarantor may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but such Guarantor shall have no obligation to do so. Such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite percentage of outstanding Series 1 Shares have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Series 1 Shares shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Guarantee not later than eleven months after the record date.

 

1.5 Notices, Etc. to Security Trustee and Guarantors

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Guarantee to be made upon, given or furnished to, or filed with,

 

  (a)

the Security Trustee by any Holder, any Guarantor or the Corporation shall be sufficient for every purpose hereunder if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to the Security Trustee at 100 University Ave, 8 th Floor, Toronto ON M5J 2Y1 Attention: Manager, Corporate Trust, Facsimile No. 416-981-9777; or

 

  (b) BREP by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to BREP addressed to it at c/o Appleby Corporate Services, Canon’s Court, 22 Victoria Street, P. O. Box HM 1179, Hamilton HM EX, Bermuda or at any other address previously furnished in writing to the Security Trustee by BREP, Attention: Secretary, Facsimile No. 441-298-3304; or

 

  (c)

BRELP by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage

 

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prepaid) or sent by facsimile to BRELP addressed to it at c/o Appleby Corporate Services, Canon’s Court, 22 Victoria Street, P. O. Box HM 1179, Hamilton HM EX, Bermuda or at any other address previously furnished in writing to the Security Trustee by BRELP, Attention: Secretary, Facsimile No. 441-298-3304; or

 

  (d) CanHoldco by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to CanHoldco addressed to it at 480 de la Cité Blvd., Gatineau, Québec, J8T 8R3, or at any other address previously furnished in writing to the Security Trustee by CanHoldco, Attention: Corporate Secretary, Facsimile No. (416) 363-2856; or

 

  (e) Bermuda Holdco by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to Bermuda Holdco addressed to it at c/o Appleby Corporate Services, Canon’s Court, 22 Victoria Street, P. O. Box HM 1179, Hamilton HM EX, Bermuda or at any other address previously furnished in writing to the Security Trustee by Bermuda Holdco, Attention: Secretary, Facsimile No. 441-298-3304; or

 

  (f) the Corporation by any Holder, the Security Trustee or any Guarantor shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to the Corporation addressed to it at 480 de la Cité Blvd., Gatineau, Québec, J8T 8R3, or at any other address previously furnished in writing to the Security Trustee by the Corporation, Attention: Corporate Secretary, Facsimile No. (416) 363-2856.

Any delivery made or facsimile sent on a day other than a Business Day, or after 3:00 p.m. (Toronto time) on a Business Day, shall be deemed to be received on the next following Business Day. Anything mailed shall not be deemed to have been given until it is actually received. A Guarantor or the Corporation may from time to time notify the Security Trustee of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Guarantor or the Corporation for all purposes of this Guarantee.

 

1.6 Notice to Holders; Waiver

Where this Guarantee provides for notice of any event to the Holders of Series 1 Shares by the Guarantors or the Security Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at the Holder’s address as it appears in the list of Holders as provided by the Corporation, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice or in any other manner from time to time permitted by

 

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applicable laws, including, without limitation, internet-based or other electronic communications. In any case where notice to the Holders of Series 1 Shares is given by mail, neither the accidental failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Series 1 Shares, but upon such failure to mail or such defect in any notice so mailed being discovered, the notice (as corrected to address any defects) shall be mailed forthwith to such Holder. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.

Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Guarantee shall be in the English language.

Where this Guarantee provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Security Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

1.7 Effect of Headings and Table of Contents

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

1.8 Successors and Assigns

All covenants and agreements in this Guarantee by the Guarantors shall bind their respective successors and assigns, whether so expressed or not.

 

1.9 Severability Clause

In case any provision in this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

1.10 Governing Law

This Guarantee shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

 

1.11 No Recourse Against Certain Persons

A director (or the equivalent for a Guarantor that is not a corporation), officer, employee or securityholder, as such, of a Guarantor or the Governing Body of a Guarantor shall not have any liability for any obligations of such Guarantor under this Guarantee or for any claim based on, in respect of or by reason of such obligations or its creation. Each of the parties hereto acknowledges that BREP and BRELP are limited partnerships and that there is no recourse to the limited partners of BREP or BRELP.

 

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1.12 Multiple Originals

The parties may sign any number of copies of this Guarantee. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Guarantee.

 

1.13 Language

Les parties aux présentes ont exigé que la présente convention ainsi que tous les documents et avis qui s’y rattachent et/ou qui en decouleront soient rediges et exécutés en langue anglaise. The parties hereto have required that this Guarantee and all documents and notices related thereto be drafted and executed in English.

ARTICLE 2

GUARANTEE

 

2.1 Guarantee

The Guarantors irrevocably and unconditionally, jointly and severally, guarantee in favour of the Holders the due and punctual payment of the Series 1 Share Obligations, regardless of any defense (except for the defense of payment by the Corporation), right of set-off or counterclaim which a Guarantor may have or assert. Each Guarantor’s obligation to pay Series 1 Share Obligations may be satisfied by (i) direct payment to the Holders or (ii) payment to the Holders through the facilities of the Security Trustee. A Guarantor shall give prompt written notice to the Security Trustee in the event it makes a direct payment to the Holders hereunder.

 

2.2 Waiver of Notice

Each Guarantor hereby waives notice of acceptance of this Guarantee.

 

2.3 Guarantee Absolute

Each Guarantor guarantees that the Series 1 Share Obligations will be paid strictly in accordance with the terms of the Series 1 Shares and this Guarantee within the time required by Section 2.1, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any such terms or the rights of the Holders with respect thereto. The liability of each Guarantor under this Guarantee shall be absolute and unconditional irrespective of:

 

  (a) any sale, transfer or assignment by any Holder of any Series 1 Shares or any right, title, benefit or interest of such Holder therein or thereto;

 

  (b) any amendment or change in or to, or any waiver of, any of the terms of the Series 1 Shares;

 

  (c) any change in the name, objects, constitution, capacity, capital or the constating documents of a Guarantor;

 

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  (d) any change in the name, objects, constitution, capacity, capital or the constating documents of the Corporation;

 

  (e) any partial payment by the Corporation, or any release or waiver, by operation of law or otherwise, of the performance or observance by the Corporation of any express or implied agreement, covenant, term or condition relating to the Series 1 Shares to be performed or observed by the Corporation;

 

  (f) the extension of time for the payment by the Corporation of all or any portion of the Series 1 Share Obligations or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Series 1 Shares;

 

  (g) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Series 1 Shares, or any action on the part of the Corporation granting indulgence or extension of any kind;

 

  (h) subject to Section 4.1(b), the recovery of any judgment against the Corporation, any voluntary or involuntary liquidation, dissolution, sale of any collateral, winding up, merger or amalgamation of the Corporation or a Guarantor, any sale or other disposition of all or substantially all of the assets of the Corporation, or any judicial or extrajudicial receivership, insolvency, bankruptcy, assignment for the benefit of, or proposal to, creditors, reorganization, moratorium, arrangement, composition with creditors, or readjustment of debt of, or other proceedings affecting the Corporation, a Guarantor or any of the assets of the Corporation or a Guarantor;

 

  (i) any circumstance, act or omission that would prevent subrogation operating in favour of a Guarantor;

 

  (j) any invalidity of, or defect or deficiency in, the Series 1 Shares or this Guarantee;

 

  (k) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

 

  (l) any other circumstance, act or omission that might otherwise constitute a defence available to, or a discharge of, the Corporation in respect of any of the Series 1 Share Obligations, or a Guarantor in respect of any of the Series 1 Share Obligations (other than, and to the extent of, the payment or satisfaction thereof);

it being the intent of the Guarantors that their obligations in respect of the Series 1 Share Obligations shall be absolute and unconditional under all circumstances and shall not be discharged except by payment in full of the Series 1 Share Obligations. The Holders shall not be bound or obliged to exhaust their recourse against the Corporation or any other Persons or to take any other action before being entitled to demand payment from the Guarantors hereunder.

There shall be no obligation of the Holders to give notice to, or obtain the consent of, any or all of the Guarantors with respect to the happening of any of the foregoing.

 

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2.4 Continuing Guarantee

This Guarantee shall apply to and secure any ultimate balance due or remaining due to the Holders in respect of the Series 1 Share Obligations and shall be binding as an absolute and continuing obligation of each Guarantor. This Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Series 1 Share Obligations must or may be rescinded, is declared or may become voidable, or must or may otherwise be returned by the Holders for any reason, including the insolvency, bankruptcy, dissolution or reorganization of the Corporation or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Corporation or any substantial part of its property, all as though such payment had not been made. If at any time the Corporation is precluded from making payment when due in respect of any Series 1 Share Obligations by reason of the provisions of the CBCA or otherwise, such amounts shall nonetheless be deemed to be due and payable by the Corporation to the Holders for all purposes of this Guarantee and the Series 1 Share Obligations shall be immediately due and payable to the Holders. This is a guarantee of payment, and not merely a deficiency or collection guarantee.

 

2.5 Rights of Holders

Each Guarantor expressly acknowledges that: (i) this Guarantee will be deposited with the Security Trustee to be held for the benefit of the Holders; and (ii) the Security Trustee has the right to enforce this Guarantee on behalf of the Holders.

 

2.6 Guarantee of Payment

If the Corporation shall fail to pay any of the Series 1 Share Obligations when due, the Guarantors shall, jointly and severally, pay to the Holders the Series 1 Share Obligations immediately after demand made in writing by one or more Holders or the Security Trustee, but in any event within 15 days of any failure by the Corporation to pay the Series 1 Share Obligations when due, without any evidence that the Holders or the Security Trustee have demanded that the Corporation or the Guarantors pay any of the Series 1 Share Obligations or that the Corporation has failed to do so.

 

2.7 Subrogation

The Guarantors shall have no right of subrogation in respect of any payment made to the Holders hereunder until such time as the Series 1 Share Obligations have been fully satisfied. In the case of the liquidation, dissolution, winding-up or bankruptcy of the Corporation (whether voluntary or involuntary), or if the Corporation makes an arrangement or compromise or proposal with its creditors, the Holders shall have the right to rank for their full claim and to receive all dividends or other payments in respect thereof until their claims have been paid in full, and the Guarantors shall continue to be liable, jointly and severally, to the Holders for any balance which may be owing to the Holders by the Corporation. The Series 1 Share Obligations shall not, however, be released, discharged, limited or affected by the failure or omission of the Holders to prove the whole or part of any claim against the Corporation. If any amount is paid to a Guarantor on account of any subrogation arising hereunder at any time when the Series 1 Share Obligations have not been fully satisfied, such amount shall be held in trust by such Guarantor for the benefit of the Holders and shall forthwith be paid to the Holders to be credited and applied against the Series 1 Share Obligations.

 

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2.8 Independent Obligations

Each Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Corporation with respect to the Series 1 Shares and that such Guarantor shall be liable to make payment of the Series 1 Share Obligations pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (l), inclusive, of Section 2.3 and regardless of whether the Holders make a demand upon such Guarantor. Each Guarantor will pay the Series 1 Share Obligations without regard to any equities between it and the Corporation or any defence or right of set-off, compensation, abatement, combination of accounts or cross-claim that it or the Corporation or the other Guarantors may have.

 

2.9 Guarantors to Investigate Financial Condition of the Corporation

Each Guarantor acknowledges that it has fully informed itself about the financial condition of the Corporation. Each Guarantor assumes full responsibility for keeping fully informed of the financial condition of the Corporation and all other circumstances affecting the Corporation’s ability to pay the Series 1 Share Obligations.

ARTICLE 3

SUBORDINATION OF OBLIGATIONS TO SENIOR INDEBTEDNESS

 

3.1 Applicability of Article

The obligations of each Guarantor hereunder shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth in the following sections of this Article 3, to the prior payment in full of all Senior Indebtedness of such Guarantor, and the Security Trustee and each Holder of Series 1 Shares as a condition to and by acceptance of the benefits conferred hereby agrees to and shall be bound by the provisions of this Article 3.

 

3.2 Order of Payment

Upon any distribution of the assets of a Guarantor on any dissolution, winding up, liquidation or reorganization of such Guarantor (whether in bankruptcy, insolvency or receivership proceedings, or upon an “assignment for the benefit of creditors” or any other marshalling of the assets and liabilities of such Guarantor, or otherwise):

 

  (a) all Senior Indebtedness of such Guarantor shall first be paid in full, or provision made for such payment, before any payment is made on account of the Series 1 Share Obligations; and

 

  (b)

any payment or distribution of assets of such Guarantor, whether in cash, property or securities, to which the Holders of the Series 1 Shares or the Security Trustee on behalf of such Holders would be entitled except for the provisions of this Article 3, shall be paid or delivered by the trustee in bankruptcy, receiver,

 

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  assignee for the benefit of creditors, or other liquidating agent making such payment or distribution, directly to the holders of Senior Indebtedness of such Guarantor or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness may have been issued, to the extent necessary to pay all Senior Indebtedness of such Guarantor in full after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Senior Indebtedness.

 

3.3 Subrogation to Rights of Holders of Senior Indebtedness

Subject to the payment in full of all Senior Indebtedness of a Guarantor, the Holders of the Series 1 Shares shall be subrogated to the rights of the holders of Senior Indebtedness of such Guarantor to receive payments or distributions of assets of such Guarantor (to the extent of the application thereto of such payments or other assets which would have been received by the Holders of the Series 1 Shares but for the provisions hereof) until the Series 1 Share Obligations shall be paid in full, and no such payments or distributions to the Holders of the Series 1 Shares of cash, property or securities, which otherwise would be payable or distributable to the holders of such Senior Indebtedness, shall, as between such Guarantor, its creditors (other than the holders of Senior Indebtedness), and the Holders of Series 1 Shares, be deemed to be a payment by such Guarantor to the holders of such Senior Indebtedness or on account of such Senior Indebtedness, it being understood that the provisions of this Article 3 are and are intended solely for the purpose of defining the relative rights of the Holders of the Series 1 Shares, on the one hand, and the holders of Senior Indebtedness of such Guarantor, on the other hand.

 

3.4 Pari Passu Ranking

Notwithstanding anything herein contained to the contrary, the obligations of each Guarantor hereunder rank on a pro rata and pari passu basis with the obligations of such Guarantor under the Series 2 Share Obligations and with any other obligations of such Guarantor in respect of similar guarantees that may be provided by such Guarantor in respect of other series of Class A Preference Shares of the Corporation (collectively, the “ Guaranteed Obligations ”).

 

3.5 Obligation to Pay Not Impaired

Nothing contained in this Article 3 or elsewhere in this Guarantee or in the Series 1 Shares is intended to or shall impair, as between a Guarantor, its creditors (other than the holders of Senior Indebtedness), and the Holders of the Series 1 Shares, the obligation of such Guarantor, which is absolute and unconditional, to pay to the Holders of the Series 1 Shares the Series 1 Share Obligations in accordance herewith, as and when the same shall become due and payable in accordance with this Guarantee, or affect the relative rights of the Holders of the Series 1 Shares and creditors of such Guarantor other than the holders of the Senior Indebtedness; nor shall anything herein or therein prevent the Security Trustee or the Holder of any Series 1 Share from exercising all remedies otherwise permitted by applicable law upon default under this Guarantee, subject to the rights, if any, under this Article 3 of the holders of Senior Indebtedness in respect of cash, property or securities of such Guarantor that are received upon the exercise of any such remedy.

 

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3.6 No Payment if Senior Indebtedness in Default

Upon the maturity of any Senior Indebtedness of a Guarantor by lapse of time, acceleration, demand or otherwise, then, except as provided in Section 3.7, all principal of and interest on all such matured Senior Indebtedness shall first be paid in full, or shall first have been duly provided for, before any payment by such Guarantor is made on account of the Series 1 Share Obligations.

In case of default with respect to any Senior Indebtedness of a Guarantor permitting the holders thereof to accelerate the maturity thereof, unless and until such default shall have been cured or waived or shall have ceased to exist, no payment (by purchase of the Series 1 Shares or otherwise) shall be made by such Guarantor with respect to the Series 1 Share Obligations, and neither the Security Trustee nor the Holders of Series 1 Shares shall be entitled to demand, institute proceedings for the collection of, or receive any payment or benefit from such Guarantor (including without limitation by set-off, combination of accounts or otherwise in any manner whatsoever) on account of the Series 1 Share Obligations after the happening of such a default (except as provided in Section 3.8), and unless and until such default shall have been cured or waived or shall have ceased to exist, such payments received from such Guarantor shall be held in trust for the benefit of, and, if and when the Senior Indebtedness of such Guarantor shall have become due and payable, shall be paid over to, the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing an amount of such Senior Indebtedness remaining unpaid, until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness.

The fact that any payment hereunder is prohibited by this Section 3.6 shall not prevent the failure to make such payment from being an Event of Default hereunder.

 

3.7 Payment on Series 1 Shares Permitted

Nothing contained in this Article 3 or elsewhere in this Guarantee, or in any of the Series 1 Shares, shall affect the obligation of a Guarantor to make, or prevent such Guarantor from making, at any time except during the pendency of any dissolution, winding up or liquidation of such Guarantor or reorganization proceedings specified in Section 3.2 affecting the affairs of such Guarantor, any payment on account of the Series 1 Share Obligations, except that such Guarantor shall not make any such payment other than as contemplated by this Article 3, if it is in default in payment of any of its Senior Indebtedness. The fact that any such payment is prohibited by this Section 3.7 shall not prevent the failure to make such payment from being an Event of Default hereunder. Nothing contained in this Article 3 or elsewhere in this Guarantee, or in any of the Series 1 Shares, shall prevent the application by the Security Trustee of any moneys deposited with the Security Trustee hereunder for the purpose so deposited, to the payment of or on account of the Series 1 Share Obligations unless and until the Security Trustee shall have received written notice from a Guarantor or from the holder of Senior Indebtedness or from the representative of any such holder of default with respect to any Senior Indebtedness permitting the holders thereof to accelerate the maturity thereof.

 

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3.8 Confirmation of Subordination

As a condition to the benefits conferred hereby on each Holder of Series 1 Shares, each such Holder by acceptance thereof authorizes and directs the Security Trustee, on the Holder’s behalf, to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 3, and appoints the Security Trustee as the Holder’s attorney-in-fact for any and all such purposes. Upon request of a Guarantor, and upon being furnished with an Officer’s Certificate stating that one or more named persons are holders of Senior Indebtedness of such Guarantor, or the representative or representatives of such holders, or the trustee or trustees under which any instrument evidencing such Senior Indebtedness may have been issued, and specifying the amount and nature of such Senior Indebtedness, the Security Trustee shall enter into a written agreement or agreements with such Guarantor and the person or persons named in such Officer’s Certificate providing that such person or persons are entitled to all the rights and benefits of this Article 3 as the holder or holders, representative or representatives, or trustee or trustees of such Senior Indebtedness specified in such Officer’s Certificate and in such agreement. Such agreement shall be conclusive evidence that the indebtedness specified therein is Senior Indebtedness, however, nothing herein shall impair the rights of any holder of Senior Indebtedness who has not entered into such an agreement.

 

3.9 Security Trustee May Hold Senior Indebtedness

The Security Trustee is entitled to all the rights set forth in this Article 3 with respect to any Senior Indebtedness at the time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Guarantee deprives the Security Trustee of any of its rights as such holder.

 

3.10 Rights of Holders of Senior Indebtedness Not Impaired

No right of any present or future holder of any Senior Indebtedness to enforce the subordination herein will at any time or in any way be prejudiced or impaired by any act or failure to act on the part of a Guarantor or by any non-compliance by a Guarantor with the terms, provisions and covenants of this Guarantee, regardless of any knowledge thereof which any such holder may have or be otherwise charged with.

 

3.11 Altering Senior Indebtedness

A holder of Senior Indebtedness has the right to extend, renew, modify or amend the terms of such Senior Indebtedness or any security therefor and to release, sell or exchange such security and otherwise to deal freely with a Guarantor or any other Person, all without notice to or consent of the Holders of the Series 1 Shares or the Security Trustee and without affecting the subordination herein, the liabilities and obligations of the parties to this Guarantee or the Holders of the Series 1 Shares or the Security Trustee.

 

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3.12 Additional Indebtedness

This Guarantee does not restrict any of the Guarantors from incurring any indebtedness for borrowed money or otherwise or mortgaging, pledging or charging its properties to secure any indebtedness.

ARTICLE 4

TERMINATION AND REMEDIES

 

4.1 Termination of Guarantee

 

  (a) This Guarantee shall terminate upon the occurrence of the following events:

 

  (i) either

 

  (A) all of the outstanding Series 1 Shares and Series 2 Shares shall have been purchased and cancelled; or

 

  (B) all of the Series 1 Shares and Series 2 Shares shall have been redeemed,

and, in each case, all amounts payable on the Series 1 Shares, including all accrued and unpaid dividends, shall have been paid in full by the Corporation and/or the Guarantors, as the case may be; and

 

  (ii) all other sums payable by the Corporation in respect of the Series 1 Share Obligations have been paid; and the Guarantors shall confirm to the Security Trustee in writing the occurrence of either event under Section 4.1(a)(i).

 

  (b) All of the rights, obligations and liabilities of a Guarantor pursuant to this Guarantee shall terminate upon the conveyance, distribution, transfer or lease (including pursuant to a reorganization, consolidation, liquidation, dissolution, sale of any collateral, winding up, merger, amalgamation, arrangement or otherwise) of all or substantially all of such Guarantor’s properties, securities and assets to a Person that is a Guarantor immediately prior to such conveyance, distribution, transfer or lease.

 

  (c) Upon termination (including any partial termination with respect to a Guarantor) of this Guarantee the Security Trustee shall, upon request of a Guarantor, provide to such Guarantor written documentation acknowledging the termination (or partial termination with respect to a Guarantor) of this Guarantee. Notwithstanding the termination (including any partial termination with respect to a Guarantor) of this Guarantee, the obligations of each Guarantor to the Security Trustee under Section 5.3 shall survive.

 

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4.2 Suits for Enforcement by the Security Trustee

In the event that the Guarantors fail to pay the Series 1 Share Obligations as required (an “ Event of Default ”) pursuant to the terms of this Guarantee, the Holders may institute judicial proceedings for the collection of the moneys so due and unpaid, may prosecute such proceedings to judgment or final decree and may enforce the same against the Corporation and/or the Guarantors and may collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Guarantors.

If an Event of Default occurs and is continuing, the Security Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders, upon being indemnified and funded to its satisfaction by the Holders, by such appropriate judicial proceedings as the Security Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Guarantee or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

4.3 Security Trustee May File Proofs of Claim

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to a Guarantor or the property of a Guarantor, the Security Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise,

 

  (a) to file and prove a claim for any Series 1 Share Obligation then due and payable and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Security Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Security Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and

 

  (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Security Trustee.

Nothing herein contained shall be deemed to authorize the Security Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Series 1 Shares or the rights of any Holder thereof or to authorize the Security Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

4.4 Security Trustee May Enforce Claims Without Possession of Series 1 Shares

All rights of action and claims under this Guarantee may be prosecuted and enforced by the Security Trustee without the possession of any of the Series 1 Shares in any proceeding relating thereto, and any such proceeding instituted by the Security Trustee shall be

 

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brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Security Trustee, its agents and counsel, be for the rateable benefit of the Holders of the Series 1 Shares in respect of which such judgment has been recovered.

 

4.5 Application of Money Collected

Any money collected by the Security Trustee pursuant to this Article shall be applied in the following order:

FIRST , To the payment of all amounts due to the Security Trustee including, without limitation, the reasonable compensation, expenses, disbursements and advances of the Security Trustee in or about the execution of its trust, or otherwise in relation hereto, with interest thereon as herein provided;

SECOND , To the payment of all amounts due to the Holders of the Series 1 Shares in respect of the costs, charges, expenses and advances incurred in connection with enforcing their rights hereunder;

THIRD , To the payment of any Preference Share Obligation then due and unpaid on a pro rata basis; and

FOURTH , The balance, if any, to the Person or Persons entitled thereto.

 

4.6 Limitation on Suits

No Holder of any outstanding Series 1 Shares shall have any right to institute any proceeding, judicial or otherwise, with respect to this Guarantee, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

 

  (a) such Holder has previously given written notice to the Security Trustee of a continuing Event of Default with respect to this Guarantee;

 

  (b) the Holders representing not less than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares affected by such Event of Default (determined as one class), shall have made written request to the Security Trustee to institute proceedings in respect of such Event of Default in its own name as Security Trustee hereunder;

 

  (c) such Holder or Holders have provided to the Security Trustee reasonable funding, if requested by the Security Trustee, and reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

 

  (d) the Security Trustee for 15 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

 

  (e) no direction inconsistent with such written request has been given to the Security Trustee during such 15-day period by the Holders representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares affected by such Event of Default (determined as one class);

 

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it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Guarantee to affect, disturb or prejudice the rights of any other Holders of the outstanding Series 1 Shares, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Guarantee, except in the manner herein provided and for the equal and rateable benefit of all Holders of the outstanding Series 1 Shares.

 

4.7 Restoration of Rights and Remedies

If the Security Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Security Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Guarantors, the Security Trustee and the Holders of Series 1 Shares shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Security Trustee and the Holders shall continue as though no such proceeding had been instituted.

 

4.8 Rights and Remedies Cumulative

No right or remedy herein conferred upon or reserved to the Security Trustee or to the Holders of Series 1 Shares is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

 

4.9 Delay or Omission Not Waiver

No delay or omission of the Security Trustee or of any Holder of any Series 1 Shares to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Security Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Security Trustee or by the Holders, as the case may be.

 

4.10 Control by Holders

The Holders representing not less than a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares affected by an Event of Default (determined as one class) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Security Trustee, or exercising any trust or power conferred on the Security Trustee, with respect to this Guarantee, provided that in each case:

 

  (a) such direction shall not be in conflict with any rule of law or with this Guarantee;

 

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  (b) the Security Trustee may take any other action deemed proper by the Security Trustee which is not inconsistent with such direction; and

 

  (c) the Security Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders of outstanding Series 1 Shares not consenting to any such direction.

 

4.11 Waiver of Stay or Extension Laws

Each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Guarantee; and each Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Security Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

4.12 Undertaking for Costs

All parties to this Guarantee agree, and each Holder of any Series 1 Shares by acceptance thereof and by acceptance of the benefits hereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Guarantee, or in any suit against the Security Trustee for any action taken, suffered or omitted by it as Security Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable lawyers’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (i) any suit instituted by a Guarantor, (ii) any suit instituted by the Security Trustee, (iii) any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares, or (iv) any suit instituted by any Holder for the enforcement of the payment of the Series 1 Share Obligations.

ARTICLE 5

THE SECURITY TRUSTEE

 

5.1 Certain Duties and Responsibilities

 

  (a) The Security Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Security Trustee.

 

  (b) The Security Trustee, in exercising its powers and discharging its duties prescribed or conferred by this Guarantee, shall

 

  (i) act honestly and in good faith with a view to the best interests of the Holders of the Series 1 Shares, and

 

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  (ii) exercise that degree of care, diligence and skill a reasonably prudent trustee, appointed in respect of a guarantee indenture would exercise in comparable circumstances.

 

  (c) In the absence of bad faith on its part, the Security Trustee, in the exercise of its rights and duties hereunder, may conclusively act and rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions or other evidence furnished to the Security Trustee and conforming to the requirements of this Guarantee. The Security Trustee shall not be liable for or by reason of any statements of fact or recitals in this Guarantee or be required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Guarantors (or by their agents). The Security Trustee shall not in any way be responsible for the consequence of any breach on the part of a Guarantor (or by its agents) of any of the Guarantor’s covenants herein.

 

  (d) No provision of this Guarantee shall be construed to relieve the Security Trustee from the duties imposed on it in Section 5.1(b) or from liability for its own gross negligence or its own wilful misconduct, except that:

 

  (i) this Section 5.1(d) shall not be construed to limit the effect of Section 5.1(a) and (b);

 

  (ii) the Security Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Security Trustee was grossly negligent in ascertaining the pertinent facts;

 

  (iii) the Security Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an appropriate direction of the Holders pursuant to Section 4.10 relating to the time, method and place of conducting any proceeding for any remedy available to the Security Trustee, or exercising any trust or power conferred upon the Security Trustee, under this Guarantee; and

 

  (iv) no provision of this Guarantee shall require the Security Trustee to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers except as herein expressly provided.

 

  (e) Whether or not herein expressly so provided, every provision of this Guarantee relating to the conduct or affecting the liability of or affording protection to the Security Trustee shall be subject to the provisions of this Section.

 

5.2 Certain Rights of Security Trustee

Subject to the provisions of Section 5.1:

 

  (a)

the Security Trustee may rely absolutely and shall be protected in acting or refraining from acting upon any resolution, Officer’s Certificate or other

 

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certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties, not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth or accuracy of any information therein contained;

 

  (b) any order, request or direction of a Guarantor mentioned herein shall be sufficiently evidenced by a Guarantor Request or Guarantor Order and any resolution shall be sufficiently evidenced by a Board Resolution;

 

  (c) whenever in the administration of this Guarantee the Security Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Security Trustee (unless other evidence be herein specifically prescribed) may act and rely upon an Officer’s Certificate (i) as evidence of the truth of any statements of fact, and (ii) to the effect that any particular dealing or transaction or step or thing is, in the opinion of the officers so certifying, expedient, as evidence that it is expedient; provided that the Security Trustee may in its sole discretion, acting reasonably, require from any Guarantor or otherwise further evidence or information before acting or relying on such certificate;

 

  (d) the Security Trustee may employ or retain such agents, counsel and other assistants as it may reasonably require for the proper determination and discharge of its duties hereunder and shall be entitled to receive reasonable remuneration for all services performed by it and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and shall not be responsible for any misconduct on the part of any of them, any such costs and expenses which shall immediately become and form part of the Security Trustee’s fees hereunder;

 

  (e) the Security Trustee may, in relation to this Guarantee, act and rely on the opinion or advice of or on information obtained from any counsel, notary, valuer, surveyor, engineer, broker, auctioneer, accountant or other expert, whether retained by the Security Trustee or by any Guarantor or otherwise;

 

  (f) the Security Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in reliance thereon;

 

  (g)

the Security Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any of the Holders pursuant to this Guarantee, unless such Holders shall have furnished to the Security Trustee reasonable funding and a reasonable indemnity, satisfactory to the Security Trustee, to protect and hold harmless the Security Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction and/or damage it may suffer by reason thereof as a

 

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condition to the commencement or continuation of such act, action or proceeding. The Security Trustee may, before commencing or at any time during the continuance of any such act, action or proceeding require the Holders at whose instance it is acting, to deposit with the Security Trustee the share certificates held by them respecting the Series 1 Shares for which such share certificates the Security Trustee shall issue receipts;

 

  (h) the Security Trustee shall not be required to take notice of any default under this Guarantee, other than payment of any moneys required by any provision of this Guarantee to be paid to it, unless and until notified in writing of such default, which notice shall clearly set out the nature of the default desired to be brought to the attention of the Security Trustee;

 

  (i) prior to the occurrence of an Event of Default under this Guarantee and after the curing of any such Event of Default which may have occurred, the Security Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document or any investigation of the books and records of any Guarantor (but the Security Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Security Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of a Guarantor, personally or by agent or attorney), unless requested to do so by the Act of the Holders representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares; provided, however, that the Security Trustee may require reasonable indemnity against the costs, expenses or liabilities likely to be incurred by it in the making of such investigation; and

 

  (j) the Security Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Security Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Any solicitors employed or consulted by the Security Trustee as counsel may, but need not be solicitors for a Guarantor.

 

5.3 Protection of Security Trustee

By way of supplement to the provisions of any law for the time being relating to trustees, it is expressly declared and agreed as follows:

 

  (a) the recitals contained herein, shall be taken as the statements of the Guarantors, and the Security Trustee shall not be liable for or assume any responsibility for their correctness;

 

  (b) the Security Trustee makes no representations as to, and shall not be liable for, the validity or sufficiency of this Guarantee;

 

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  (c) nothing herein contained shall impose any obligation on the Security Trustee to see or to require evidence of registration or filing (or renewals thereof) of this Guarantee or any instrument ancillary or supplemental hereto;

 

  (d) the Security Trustee shall not be bound to give any notice of the execution hereof;

 

  (e) the Security Trustee shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of a Guarantor of any of the covenants herein contained or of any act of the agents or servants of a Guarantor; and

 

  (f) the Guarantors shall indemnify the Security Trustee (including its directors, officers, employees, representatives and agents) for, and hold it harmless against, any claim, demand, suit, loss, liability or expense (including any and all reasonable legal and adviser fees and disbursements) incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnity will survive the termination (including any partial termination with respect to a Guarantor) or discharge of this Guarantee and the resignation or removal of the Security Trustee.

 

5.4 Security Trustee Not Required to Give Security

The Security Trustee shall not be required to give security for the execution of the trusts or its conduct or administration hereunder.

 

5.5 No Person Dealing with Security Trustee Need Enquire

No person dealing with the Security Trustee shall be concerned to enquire whether the powers that the Security Trustee is purporting to exercise have become exercisable, or whether any money remains due upon the Series 1 Shares or to see to the application of any money paid to the Security Trustee.

 

5.6 May Hold Series 1 Shares

Subject to applicable law, the Security Trustee or any other agent of a Guarantor, in its individual or in any other capacity, may become the owner or pledgee of the Series 1 Shares and, subject to Section 5.8, may otherwise deal with the Guarantors with the same rights it would have if it were not the Security Trustee, and without being liable to account for any profit made thereby.

 

5.7 Moneys Held in Trust

Upon receipt of a direction from the Guarantors (acting jointly), the Security Trustee shall invest funds held by the Security Trustee in Authorized Investments in its name in accordance with such direction. Any direction from the Guarantors to the Security Trustee shall

 

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be in writing and shall be provided to the Security Trustee no later than 9:00 a.m. on the day on which the investment is to be made. Any such direction received by the Security Trustee after 9:00 a.m. ET or received on a non-Business Day, shall be deemed to have been given prior to 9:00 a.m. ET the next Business Day. Any direction from the Guarantors (acting jointly) for the release of the funds must be received prior to 11:00 a.m. ET on the day on which the release of funds is to be made. Any such direction for the release of funds received after 11:00 a.m. ET or on a non-Business Day, will be handled on a commercially reasonable efforts basis and may result in funds being released on the next Business Day. For the purposes of this section, “Authorized Investments” means short term interest bearing or discount debt obligations issued or guaranteed by the Government of Canada or a Province or a Canadian chartered bank (which may include an Affiliate or related party of the Security Trustee) provided that such obligation is rated at least R1 (middle) by DBRS Limited or an equivalent rating service.

In the event that the Security Trustee does not receive a direction or only a partial direction, the Security Trustee may hold cash balances constituting part or all of the funds and may, but need not, invest same in its deposit department, the deposit department of one of its Affiliates, or the deposit department of a Canadian chartered bank; but the Security Trustee, its Affiliates or a Canadian chartered bank shall not be liable to account for any profit to any parties to this Guarantee or to any other person or entity other than at a rate, if any, established from time to time by the Security Trustee, its Affiliates or a Canadian chartered bank. For the purpose of this Section, “Affiliate” means affiliated companies within the meaning of the CBCA, and includes Computershare Investor Services Inc. and each of their affiliates within the meaning of the Business Corporations Act (Ontario).

 

5.8 Conflict of Interest

 

  (a) The Security Trustee represents to the Guarantors that at the time of the execution and delivery hereof no material conflict of interest exists in respect of the Security Trustee’s role as a fiduciary hereunder and agrees that in the event of a material conflict of interest arising hereafter it will, within 90 days after becoming aware that a material conflict of interest exists, either eliminate the same or resign its trust hereunder.

 

  (b) If, notwithstanding Section 5.8(a), the Security Trustee has a material conflict of interest, the validity and enforceability of this Guarantee shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest.

 

  (c) If the Security Trustee contravenes Section 5.8(a), the Holders representing not less than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares and Series 2 Shares affected thereby may apply to the Ontario Superior Court of Justice for an order that the Security Trustee be replaced, and such court may make an order on such terms as it thinks fit.

 

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5.9 Corporate Trustee Required; Eligibility

There shall at all times be a trustee hereunder which shall be a corporation resident or authorized to carry on the business of a trust company in Canada. None of the Guarantors nor any Affiliate of a Guarantor shall serve as trustee. If at any time the Security Trustee shall cease to be eligible in accordance with the provisions of this Section, the Security Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article.

 

5.10 Resignation and Removal; Appointment of Successor

 

  (a) Notwithstanding any other provisions hereof, no resignation or removal of the Security Trustee and no appointment of a successor trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor trustee in accordance with the applicable requirements of Section 5.11.

 

  (b) The Security Trustee may resign its trust and be discharged from all further duties and liabilities hereunder at any time with respect to the Guarantee by giving to the Guarantors two months’ notice in writing or such shorter notice as the Guarantors may accept as sufficient. If the instrument of acceptance by a successor trustee required by Section 5.11 shall not have been delivered to the Security Trustee within 60 days after the giving of such notice of resignation, the resigning trustee may apply to the Ontario Superior Court of Justice for an order for the appointment of a successor trustee with respect to the Guarantee.

 

  (c) The Security Trustee may be removed at any time by the Guarantors, except during an Event of Default.

 

  (d) If any time:

 

  (i) the Security Trustee shall fail to comply with Section 5.8(a); or

 

  (ii) the Security Trustee shall cease to be eligible under Section 5.9 and shall fail to resign after written request to do so by the Guarantors; or

 

  (iii) the Security Trustee shall be dissolved, shall become incapable of acting or shall become or be adjudged a bankrupt or insolvent or a receiver of the Security Trustee or of its property shall be appointed or any public officer shall take charge or control of the Security Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case the Guarantors by Board Resolutions may remove the Security Trustee.

 

  (e)

If the Security Trustee shall resign, be removed or become incapable of acting or if a vacancy shall occur in the office of the Security Trustee for any other reason, the Guarantors, by Board Resolutions, shall promptly appoint a successor trustee or trustees and shall comply with the applicable requirements of Section 5.11. If,

 

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  within one year after such resignation, removal or incapability or the occurrence of such vacancy, a successor trustee has not been successfully appointed in accordance with the terms hereof, a successor trustee shall be appointed by Act of the Holders representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares and Series 2 Shares and the successor Trustee so appointed by the Holders shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 5.11, become the successor trustee. If no successor trustee shall have been so appointed by the Guarantors or the Holders and such appointment accepted in the manner required by Section 5.11, the Security Trustee (at the Guarantors’ expense) or any Holder who is a bona fide Holder of the Series 1 Shares or Series 2 Shares may, on behalf of such Holder and all other Holders, apply to the Ontario Superior Court of Justice for any order for the appointment of a successor trustee.

 

  (f) The Guarantors shall give notice of each resignation and each removal of the Security Trustee and each appointment of a successor trustee to the Holders by mailing such notice to such Holders at their addresses as they shall appear on the list of Holders as provided by the Corporation to the Guarantors. If the Guarantors shall fail to give such notice within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be given at the expense of the Guarantors. Each notice shall include the name of the successor trustee and the address of its Corporate Trust Office.

 

5.11 Acceptance of Appointment by Successor Trustee

 

  (a) In case of the appointment hereunder of a successor trustee, each successor trustee so appointed shall execute, acknowledge and deliver to the Guarantors and to the retiring trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring trustee shall become effective and such successor trustee, without any further act, deed or conveyance (but subject to Section 5.11(b)), shall become vested with all the rights, powers, trusts and duties of the retiring trustee; but, on the request of the Guarantors or the successor trustee, such retiring trustee shall, upon payment of its fees and expenses then unpaid, execute, acknowledge and deliver an instrument transferring to such successor trustee all such rights, powers and trusts of the retiring trustee and shall duly assign, transfer and deliver to such successor trustee all property and money, if any, held by such retiring trustee hereunder.

 

  (b)

In case of the appointment hereunder of a successor trustee, the Guarantors, the retiring trustee and such successor trustee shall execute, acknowledge and deliver an indenture supplemental hereto in which each successor trustee shall accept such appointment and which shall (i) contain such provisions as shall be deemed necessary or desirable to transfer and confirm to, and to vest in, such successor trustee all the rights, powers, trusts and duties of the retiring trustee to which the appointment of such successor trustee relates, (ii) add to or change any of the provisions of this Guarantee to the extent necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being

 

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understood that nothing herein or in such supplemental indenture (except as specifically provided for therein) shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring trustee shall become effective to the extent provided therein, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring trustee with respect to the Guarantee to which the appointment of such successor trustee relates, and such retiring Trustee shall duly assign, transfer and deliver to each successor trustee all property and money held, if any, by such retiring trustee hereunder which the appointment of such successor trustee relates.

 

  (c) Upon request of any such successor trustee, the Guarantors shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all rights, power and trusts referred to in subsection (a) or (b) of this Section, as the case may be.

 

  (d) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article.

 

5.12 Merger, Consolidation, Amalgamation or Succession to Business

Any corporation into which the Security Trustee may be merged or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, consolidation or amalgamation to which the Security Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Security Trustee, shall be the successor of the Security Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or instrument or any further act on the part of any of the parties hereto.

 

5.13 Not Bound to Act

The Security Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Security Trustee, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. Further, should the Security Trustee, in its sole judgment, determine at any time that its acting under this Guarantee has resulted in its being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days written notice to the Guarantors, provided that (i) the Security Trustee’s written notice shall describe the circumstances of such non-compliance; and (ii) if such circumstances are rectified to the Security Trustee’s satisfaction, acting reasonably, within such 10 day period, then such resignation shall not be effective.

 

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5.14 Security Trustee’s Privacy Clause

The parties acknowledge that federal and/or provincial legislation that addresses the protection of individuals’ personal information (collectively, “ Privacy Laws ”) applies to obligations and activities under this Guarantee. Despite any other provision of this Guarantee, no party shall take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws. The Guarantors shall, prior to transferring or causing to be transferred personal information to the Security Trustee, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or shall have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws. The Security Trustee shall use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws. Specifically, the Security Trustee agrees: (i) to have a designated chief privacy officer; (ii) to maintain policies and procedures to protect personal information and to receive and respond to any privacy complaint or inquiry; (iii) to use personal information solely for the purposes of providing its services under or ancillary to this Guarantee and not to use it for any other purpose except with the consent of or direction from the Guarantors or the individual involved; (iv) not to sell or otherwise improperly disclose personal information to any third party; and (v) to employ administrative, physical and technological safeguards to reasonably secure and protect personal information against loss, theft, or unauthorized access, use or modification.

 

5.15 Compensation and Reimbursement

The Guarantors agree:

 

  (a) to pay to the Security Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

 

  (b) except as otherwise expressly provided herein, to reimburse the Security Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Security Trustee in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith.

The Security Trustee’s remuneration, shall be payable out of any funds coming into the possession of the Security Trustee in priority to any payment of the Series 1 Share Obligations. The said remuneration shall continue to be payable whether or not this Guarantee shall be in the course of administration by or under the direction of a court of competent jurisdiction. Any amount due under this Section and unpaid within 30 days after demand for such payment by the Security Trustee, shall bear interest at the then current rate of interest charged by the Security Trustee to its corporate customers. This Section 5.15 shall survive the removal or termination of the Security Trustee and the termination (including any partial termination with respect to a Guarantor) of this Guarantee.

 

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5.16 Third Party Interests

Each party to this Agreement (“Representing Party”) hereby represents to the Security Trustee that any account to be opened by, or interest to be held by, Security Trustee in connection with this Agreement, for or to the credit of such Representing Party, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case such Representing Party hereby agrees to complete, execute and deliver forthwith to Security Trustee a declaration, in Security Trustee’s prescribed form or in such other form as may be satisfactory to it, as to the particulars of such third party.

ARTICLE 6

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND GUARANTORS

 

6.1 List of Holders

The Corporation shall furnish or cause to be furnished to the Security Trustee at such times as the Security Trustee may request in writing, within five Business Days after the receipt by the Corporation of any such request, a list, in such form as the Security Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Corporation and is not identical to a previously supplied list of Holders or has not otherwise been received by the Security Trustee in its capacity as such. The Security Trustee may destroy any list of Holders previously given to it on receipt of a new list of Holders.

 

6.2 Access to list of Holders

A Holder may, upon payment to the Security Trustee of a reasonable fee, require the Security Trustee to furnish within 10 days after receiving the affidavit or statutory declaration referred to below, a list setting out (i) the name and address of every Holder of Series 1 Shares, (ii) the aggregate number of Series 1 Shares owned by each such Holder, and (iii) the aggregate number of the Series 1 Shares then outstanding, each as shown on the records of the Security Trustee on the day that the affidavit or statutory declaration is delivered to the Security Trustee. The affidavit or statutory declaration, as the case may be, shall contain (i) the name and address of the Holder, (ii) where the applicant is a corporation, its name and address for service, (iii) a statement that the list will not be used except in connection with an effort to influence the voting of the Holders of Series 1 Shares, or any other matter relating to the Guarantee, and (iv) such other undertaking as may be required by applicable law. Where the Holder is a corporation, the affidavit or statutory declaration shall be made by a director or officer of the corporation.

 

6.3 Communications to Holders

The rights of Holders to communicate with other Holders with respect to their rights under this Guarantee and the corresponding rights and privileges of the Security Trustee, shall be governed by applicable law.

Every Holder of Series 1 Shares, by receiving and holding the same, agrees with the Guarantors and the Security Trustee that none of the Guarantors nor the Security Trustee nor any agent of any of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the terms hereof or applicable law.

 

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ARTICLE 7

CONVEYANCE, TRANSFER OR LEASE

 

7.1 Conveyance, Transfer or Lease; Only on Certain Terms

A Guarantor shall not convey, distribute, transfer or lease all or substantially all of its properties, securities and assets to any Person or Persons (other than to a Person that is a Guarantor immediately prior to such conveyance, distribution, transfer or lease), unless:

 

  (a) the Person or Persons which acquire by conveyance, distribution or transfer, or which leases, all or substantially all of the properties, securities and assets of such Guarantor shall, unless such assumption shall occur by operation of law, expressly assume, by an indenture supplemental hereto, executed and delivered to the Security Trustee, in form satisfactory to the Security Trustee, acting reasonably, such Guarantor’s obligations hereunder for the Series 1 Share Obligations and the performance and observance of every covenant of this Guarantee on the part of such Guarantor to be performed or observed; and

 

  (b) such Guarantor or such Person shall have delivered to the Security Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such conveyance, distribution, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.

This Section shall only apply to conveyances, distributions, leases and transfers by a Guarantor as transferor or lessor.

 

7.2 Successor Person Substituted

Upon any conveyance, distribution, transfer or lease of all or substantially all of the properties, securities and assets of a Guarantor to any Person in accordance with Section 7.1, the successor Person to which such conveyance, distribution, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the applicable Guarantor under this Guarantee with the same effect as if such successor Person had been named as such Guarantor herein, and in the event of any such conveyance, distribution or transfer, the applicable Guarantor, except in the case of a lease, shall be discharged of all obligations and covenants under this Guarantee.

ARTICLE 8

SUPPLEMENTAL INDENTURES

 

8.1 Supplemental Indentures Without Consent of Holders

Without the consent of any Holders, the Guarantors, when authorized by or pursuant to a Board Resolution, and the Security Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Security Trustee, for any of the following purposes:

 

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  (a) to evidence the succession of another Person to a Guarantor and the assumption by any such successor of the covenants of the applicable Guarantor contained herein; or

 

  (b) to add to the covenants of the Guarantors or to surrender any right or power herein conferred upon the Guarantors, both of which in the opinion of the Security Trustee, relying upon an Opinion of Counsel, is for the benefit of the Holders of all of the Series 1 Shares and is not prejudicial to the rights of the Holders; or

 

  (c) to add any additional Events of Default; or

 

  (d) to secure or further secure the Series 1 Share Obligations; or

 

  (e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to this Guarantee and to add to or change any of the provisions of this Guarantee as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 5.11; or

 

  (f) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Guarantee, which in the opinion of the Security Trustee, relying upon an Opinion of Counsel, shall not adversely affect the interests of the Holders of Series 1 Shares in any material respect; or

 

  (g) to supplement any of the provisions of this Guarantee to such extent as shall be necessary to permit or facilitate the termination (including any partial termination with respect to a Guarantor) pursuant to Section 4.1; provided that in the opinion of the Security Trustee, relying upon an Opinion of Counsel, any such action shall not adversely affect the interests of the Holders of Series 1 Shares in any material respect.

 

8.2 Supplemental Indentures with Consent of Holders

With the consent of either (i) the Holders representing not less than a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares, by Act of such Holders delivered to the Guarantors and the Security Trustee, or (ii) if a meeting of the Holders is called for obtaining such consent, Holders representing not less than a majority of the aggregate Liquidation Amount of all Series 1 Shares represented at such meeting and voting in respect of such consent, the Guarantors, when authorized by or pursuant to Board Resolutions, and the Security Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Guarantee or of modifying in any manner the rights of the Holders under this Guarantee; provided, however, that no such supplemental indenture shall, without the consent of

 

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the Holders representing not less than 66  2 / 3 % of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares or, if a meeting of the Holders is called for obtaining such consent, Holders representing not less than 66  2 / 3 % of the aggregate Liquidation Amount of all Series 1 Shares represented at such meeting and voting in respect of such consent, as the case may be,

 

  (a) reduce the percentage of the aggregate Liquidation Amount of the outstanding Series 1 Shares required for any such supplemental indenture, for any waiver of compliance with certain provisions of this Guarantee or certain defaults applicable hereunder and their consequences provided for in this Guarantee, or reduce the requirements of Section 11.4 for quorum or voting with respect to the Guarantee, or

 

  (b) modify any of the provisions of this Section, except to increase any such percentage or to provide that certain other provisions of this Guarantee cannot be modified or waived without the consent of the Holder of each outstanding Series 1 Share.

 

8.3 Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Guarantee, the Security Trustee shall be entitled to receive, and shall be fully protected in acting and relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Guarantee. The Security Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Security Trustee’s own rights, duties or immunities under this Guarantee or otherwise.

 

8.4 Effect of Supplemental Indentures

Upon the execution of any supplemental indenture under this Article, this Guarantee shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Guarantee for all purposes.

 

8.5 Notice of Supplemental Guarantees

Promptly after the execution by the Guarantors and the Security Trustee of any supplemental indenture pursuant to the provisions of Section 8.2, the Guarantors shall give notice thereof to the Holders of each of the outstanding Series 1 Shares affected, in the manner provided for in Section 1.6, setting forth in general terms the substance of such supplemental indenture.

 

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ARTICLE 9

COVENANTS

 

9.1 Existence

Subject to Article 7, each Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and its rights and franchises and the rights and franchises of its subsidiaries; provided, however, that a Guarantor shall not be required to preserve any such right or franchise if the Guarantor shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor.

 

9.2 Security Trustee Not Required to Verify Liquidation Amount

The Guarantors will not require the Security Trustee to calculate or verify the Liquidation Amount. When requested by the Security Trustee, a Guarantor shall deliver to the Security Trustee an Officer’s Certificate specifying the Liquidation Amount.

 

9.3 Restriction on Distributions

Each Guarantor hereby covenants and agrees that if and for so long as either the board of directors of the Corporation has failed to declare, or the Corporation has failed to pay, dividends on the Series 1 Shares, in each case, in accordance with the share conditions attaching thereto, then such Guarantor shall not declare, pay or make any distributions or return of capital on its equity securities.

ARTICLE 10

PURCHASE OF SERIES 1 SHARES

 

10.1 Purchase of Series 1 Shares

Subject to applicable law, at any time when a Guarantor is not in default hereunder, such Guarantor may purchase Series 1 Shares at any price in the market (including purchases from or through an investment dealer or a firm holding membership on a recognized stock exchange) or by tender available to all Holders of Series 1 Shares or by private contract, in each case in accordance with the terms of the Series 1 Shares.

ARTICLE 11

MEETINGS OF HOLDERS OF SERIES 1 SHARES

 

11.1 Purposes for Which Meetings May Be Called

A meeting of the Holders of the Series 1 Shares may be called at any time and from time to time pursuant to the provisions of this Article for one or more of the following purposes:

 

  (a) to give any notice to the Guarantors or to the Security Trustee, to give any directions to the Security Trustee, or to take any other action authorized to be taken by the Holders of the Series 1 Shares pursuant to any of Sections 4.3 to 4.12;

 

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  (b) to remove the Security Trustee and appoint a successor Trustee with respect to the Guarantee pursuant to the provisions of Article 5;

 

  (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 8.2; or

 

  (d) to take any other action required or permitted to be taken by or on behalf of the Holders of any specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares under any other provision of this Guarantee or under applicable law.

 

11.2 Call, Notice and Place of Meetings

 

  (a) The Security Trustee may at any time request that the Corporation call, and upon receipt of such request the Corporation shall call or cause its transfer agent to call, a meeting of Holders of Series 1 Shares for any purpose specified in Section 11.1, to be held at such time and at such place in Toronto, Ontario, or in such other place as the Security Trustee shall determine. Notice of every meeting of Holders of Series 1 Shares, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided for in Section 1.6, not less than 21 nor more than 180 days prior to the date fixed for the meeting. In all cases, it is the Corporation who is to bear all costs associated with calling, giving notice of, and holding the meeting.

 

  (b) In case at any time the Guarantors, pursuant to Board Resolutions, or the Holders representing at least 10% of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares shall have requested the Security Trustee to request that the Corporation call a meeting of the Holders of Series 1 Shares for any purpose specified in Section 11.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Security Trustee shall not have so requested or the Corporation shall not have mailed or caused to be mailed notice of such meeting within 21 days after receipt of such request and any required indemnification or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Guarantors or the Holders of Series 1 Shares representing the aggregate Liquidation Amount in the amount above specified, as the case may be, may determine the time and the place in Toronto, Ontario, or in such other place as the Security Trustee may approve for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (a) of this Section.

 

11.3 Persons Entitled to Vote at Meetings

To be entitled to vote at any meeting of Holders of Series 1 Shares, a Person shall be (1) a Holder of one or more outstanding Series 1 Shares, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more outstanding Series 1

 

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Shares by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Series 1 Shares shall be the Persons entitled to vote at such meeting and their respective counsel, employees or any representatives of the Security Trustee and its counsel, and any representatives of the Guarantors and their counsel.

 

11.4 Quorum; Action

The Holders representing not less than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares shall constitute a quorum for a meeting of Holders of Series 1 Shares ; provided, however, that, if any action is to be taken at such meeting with respect to a consent or waiver which this Guarantee expressly provides may be given by the Holders of not less than a specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares, the Persons entitled to vote such specified percentage in aggregate amount of the outstanding Series 1 Shares shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Series 1 Shares, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 11.2(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened.

Subject to the foregoing, at the reconvening of any meeting adjourned for lack of a quorum, the Holders of Series 1 Shares entitled to vote at such meeting present in person or by proxy shall constitute a quorum for the taking of any action set forth in the notice of the original meeting.

Except as limited by the proviso to Section 8.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders representing not less than a majority of the aggregate Liquidation Amount of Series 1 Shares represented at such meeting in person or by proxy; provided, however, that, except as limited by the proviso to Section 8.2, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Guarantee expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of not less than such specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares.

Any resolution passed or decision taken at any meeting of Holders of Series 1 Shares duly held in accordance with this Section shall be binding on all the Holders of Series 1 Shares, whether or not present or represented at the meeting.

 

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Notwithstanding the foregoing provisions of this Section 11.4, if any action is to be taken at a meeting of Holders of Series 1 Shares with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Guarantee expressly provides may be made, given or taken by the Holders of a specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares affected thereby:

 

  (i) there shall be no minimum quorum requirement for such meeting; and

 

  (ii) the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares that vote in favour of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Guarantee.

 

11.5 Determination of Voting Rights; Conduct and Adjournment of Meetings

 

  (a) Notwithstanding any provisions of this Guarantee, the Security Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Series 1 Shares in regard to proof of the holding of Series 1 Shares and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as its shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Series 1 Shares shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4. Such regulations may provide that written instruments appointing proxies may be presumed valid and genuine without the proof specified in Section 1.4 or other proof.

 

  (b) The Security Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Guarantors or by Holders of Series 1 Shares as provided in Section 11.2(b), in which case the Guarantors or the Holders of Series 1 Shares calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares represented and voted at the meeting.

 

  (c) Any meeting of Holders of Series 1 Shares duly called pursuant to Section 11.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares represented and voted at the meeting; and the meeting may be held as so adjourned without further notice.

 

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11.6 Counting Votes and Recording Action of Meetings

The vote upon any resolution submitted to any meeting of Holders of Series 1 Shares shall be by written ballot(s) on which shall be subscribed the signatures of the Holders of Series 1 Shares or of their representatives by proxy and the number of outstanding Series 1 Shares held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the permanent secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Series 1 Shares shall be prepared by the permanent secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 11.2 and, if applicable, Section 11.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and permanent secretary of the meeting and one such copy shall be delivered to the Guarantors, and another to the Security Trustee to be preserved by the Security Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

[Remainder of Page Intentionally Left Blank]

 

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This Guarantee may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Guarantee.

IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Guarantee as of the date first written above.

 

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. by its general partner,

2288509 Ontario Inc.

By:

       “Jane Sheere”
 

 

 

Name: Jane Sheere

Title:   Authorized Signatory

 

BROOKFIELD RENEWABLE ENERGY L.P. by its general partner, BREP Holding L.P. by its general partner, 2288508 Ontario Inc.

By:

       “Jane Sheere”
 

 

 

Name: Jane Sheere

Title:   Authorized Signatory

 

BROOKFIELD BRP HOLDINGS (CANADA) INC.

By:

       “Patricia Bood”
 

 

 

Name: Patricia Bood

Title:   Authorized Signatory

 

BRP BERMUDA HOLDINGS I LIMITED

By:

       “Jane Sheere”
 

 

 

Name: Jane Sheere

Title:   Secretary

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

 


BROOKFIELD RENEWABLE POWER PREFERRED EQUITY INC.

By:

       “Patricia Bood”
 

 

 

Name: Patricia Bood

Title:   Secretary

 

COMPUTERSHARE TRUST COMPANY OF CANADA

By:

       “David Ha”
 

 

 

Name: David Ha

Title:   Corporate Trust Officer

By:

       “Ann Samuel”
 

 

 

Name: Ann Samuel

Title:   Associate Trust Officer

 

[A&R GUARANTEE INDENTURE FOR SERIES 1 SHARES]

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Exhibit 4.8

THIS AMENDED AND RESTATED GUARANTEE INDENTURE dated as of November 25, 2011;

AMONG:

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. , an exempted limited partnership formed under the laws of Bermuda,

(hereinafter referred to as “ BREP ”),

- and -

BROOKFIELD RENEWABLE ENERGY L.P. , an exempted limited partnership formed under the laws of Bermuda,

(hereinafter referred to as “ BRELP ”),

- and -

BROOKFIELD BRP HOLDINGS (CANADA) INC. , a corporation incorporated under the laws of the Province of Ontario,

(hereinafter referred to as “ CanHoldco ”),

- and -

BRP BERMUDA HOLDINGS I LIMITED , a corporation formed under the laws of Bermuda,

(hereinafter referred to as “ Bermuda Holdco ” and collectively with BREP, BRELP and CanHoldco, the “ Guarantors ”),

- and -

BROOKFIELD RENEWABLE POWER PREFERRED EQUITY INC. , a corporation incorporated under the federal laws of Canada,

(hereinafter referred to as the “ Corporation ”),

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA , a trust company organized and existing under the laws of Canada,

(hereinafter referred to as the “ Security Trustee ”).


WHEREAS Brookfield Renewable Power Fund (the “ Fund ”), the Corporation and the Security Trustee entered into a guarantee indenture (the “ Original Indenture ”) dated as of March 3, 2010 pursuant to which the Fund agreed to guarantee in favour of the Holders (as defined below) the payment of the Series 2 Share Obligations (as defined below), pursuant to the terms of the Series 2 Shares (as defined below) in the manner provided for therein;

AND WHEREAS pursuant to a plan of arrangement under the Business Corporations Act (Ontario) (the “ Plan of Arrangement ”), the Fund has been wound up into a wholly-owned subsidiary of CanHoldco, and all of the assets of the Fund are now indirectly held by CanHoldco;

AND WHEREAS CanHoldco and the Corporation are subsidiaries of BREP and BRELP;

AND WHEREAS the Holders have approved the Plan of Arrangement, including the amendments to the Original Indenture that are reflected in this amended and restated guarantee indenture (the “ Guarantee ”);

AND WHEREAS pursuant to the terms of this Guarantee the Guarantors have agreed to guarantee in favour of the Holders the payment of the Series 2 Share Obligations, pursuant to the terms of the Series 2 Shares;

AND WHEREAS as at the date hereof, the Corporation has authorized for issuance up to 10,000,000 Series 1 Shares (as defined below);

AND WHEREAS the Series 1 Shares are, on certain terms and conditions, convertible to Series 2 Shares and the Series 2 Shares are, on certain terms and conditions, convertible to Series 1 Shares;

AND WHEREAS all necessary acts and proceedings have been done and taken and all necessary resolutions have been passed to authorize the execution and delivery of this Guarantee and to make the same legal, valid and binding upon the Guarantors;

AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Guarantors and not by the Security Trustee;

NOW THEREFORE THIS GUARANTEE WITNESSES that for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties), the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 

1.1 Definitions

For all purposes of this Guarantee, except as otherwise expressly provided or unless the context otherwise requires:

 

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  (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

 

  (b) the words “ herein ”, “ hereof ” and “ hereunder ” and other words of similar import refer to this Guarantee as a whole and not to any particular Article, Section or other subdivision; and

 

  (c) all references to “ the Guarantee ” or “ this Guarantee ” are to this Guarantee as modified, supplemented or amended from time to time.

The following terms shall have the following meanings:

Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by such Person, or is under common Control of a third Person;

Authorized Investments ” has the meaning given to such term in Section 5.7;

Bermuda Holdco ” means BRP Bermuda Holdings I Limited;

Board Resolution ” means, with respect to a Guarantor, a copy of a resolution duly passed by the board of directors (or the equivalent) of the Governing Body of such Guarantor, to be in full force and effect on the applicable date, and delivered to the Security Trustee;

BRELP ” means Brookfield Renewable Energy L.P.;

BREP ” means Brookfield Renewable Energy Partners L.P.;

Business Day ” means a day other than a Saturday, a Sunday or any other day that is a statutory or civic holiday in the place where the Corporation has its head office;

CanHoldco ” means Brookfield BRP Holdings (Canada) Inc.

CBCA ” means the Canada Business Corporations Act ;

Class A Preference Shares ” means class A preference shares, of which the Corporation is authorized to issue an unlimited number pursuant to its articles of incorporation;

Control ” means the control by one Person of another Person in accordance with the following: a Person (“ A ”) controls another Person (“ B ”) where A has the power to determine the management and policies of B by contract or status (for example the status of A being the general partner of B) or by virtue of beneficial ownership of or control over a majority of the voting interests in B; and, for certainty and without limitation, if A owns or has control over shares to which are attached more than 50% of the votes permitted to be cast in the election of directors to the board of directors (or the equivalent) of the Governing Body of B or A is the general partner of B, a limited partnership, then in each case A Controls B for this purpose, and the term “ Controlled ” has the corresponding meaning;

 

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Corporate Trust Office ” means the office of the Security Trustee, at which at any particular time its corporate trust business shall be principally administered, which office on the date of execution of this Guarantee is located at 2001 University Street, Montréal, Québec, H3A 2A6;

Corporation ” means Brookfield Renewable Power Preferred Equity Inc. and its successors and assigns;

Event of Default ” has the meaning given to such term in Section 4.2;

Governing Body ” means (i) with respect to a corporation or limited company, such corporation or limited company, (ii) with respect to a limited liability company, a manager or managing partner of such limited liability company, (iii) with respect to a limited partnership, a general partner of such limited partnership (or if any such general partner is itself a partnership, such general partner’s general partner), (iv) with respect to a general partnership, the managing partner (or if there is no managing partner, each partner) and (v) with respect to any other Person, the Person that has the power to determine the management and policies of such Person by status, and in the case of each of (i) through (v) includes any Person to whom such Person has delegated any power or authority;

Guaranteed Obligations ” has the meaning given to such term in Section 3.4;

Guarantors ” means, collectively, BREP, BRELP, CanHoldco and Bermuda Holdco and their respective successors and assigns; and “ Guarantor ” means any of them;

Guarantor Order ” or “ Guarantor Request ” means, with respect to a Guarantor, a written request or order signed in the name of such Guarantor by any officer or director (or the equivalent) of the Governing Body of such Guarantor and delivered to the Security Trustee;

Holders ” means the registered holders of the Series 2 Shares from time to time, provided that, in determining whether the Holders of the requisite percentage of the aggregate Liquidation Amount of outstanding Series 2 Shares have given any request, notice, consent or waiver hereunder, “Holders” shall not include the Guarantors or any Affiliate of the Guarantors;

Liquidation Amount ” means an amount equal to $25.00 per Series 1 Share or Series 2 Share plus an amount equal to all declared and unpaid dividends up to, but excluding, the date fixed for payment or distribution;

Officer’s Certificate ” means, with respect to a Guarantor, a certificate signed by any officer or director (or the equivalent) of the Governing Body of such Guarantor and delivered to the Security Trustee;

Opinion of Counsel ” means a written opinion of counsel, who may be counsel for a Guarantor, including an employee of a Guarantor, a Governing Body of a Guarantor or the Corporation, and who shall be acceptable to the Security Trustee;

Person ” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof;

 

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Preference Share Obligation ” means either a Series 1 Share Obligation or a Series 2 Share Obligation;

Responsible Officer ”, when used with respect to the Security Trustee, means any President, Chief Executive Officer, Chief Financial Officer, Controller, Senior Vice President, Vice President, Treasurer, Secretary, General Manager, Branch Manager, Director, Broker Products, Regional Manager, Service Delivery, Manager, Client Services, Manager, Corporate Actions, Manager, Corporate Administration, Manager, Corporate Trust, Manager, Employee Plans, Manager, MBS, Manager, Oil Royalties, Manager, Stock Transfer, Manager, Stock Transfer & Client Services, Manager, Stock Transfer/Operations, Professional, Client Services, Professional, Corporate Actions, Associate Trust Officer, Corporate Trust Officer, Professional, Employee Plans, Professional, MBS, Professional, Service Delivery, Professional, Stock Transfer of the Security Trustee and any other officer of the Security Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject;

Security Trustee ” means Computershare Trust Company of Canada;

Senior Indebtedness ” shall mean, in respect of any Guarantor, the principal of and the interest and premium (or any other amounts payable thereunder), if any, on:

 

  (i) all indebtedness (including any indebtedness to trade creditors), liabilities and obligations of such Guarantor (other than the Series 2 Share Obligations and the Guaranteed Obligations), whether outstanding on the date of this Guarantee or thereafter created, incurred, assumed or guaranteed; and

 

  (ii) all renewals, extensions, restructurings, refinancings and refundings of any such indebtedness, liabilities or obligations;

except only for any such indebtedness, liabilities or obligations that are, pursuant to the terms of the instrument creating or evidencing such indebtedness, liabilities or obligations, expressly pari passu with or subordinate in right of payment to the Series 2 Share Obligations;

Series 1 Redemption Price ” means $25.00 per Series 1 Share redeemed;

Series 1 Share Obligations ” means all financial liabilities and obligations of the Corporation to the Holders in respect of the Series 1 Shares including or in respect of (i) any declared and unpaid dividends on the Series 1 Shares, (ii) the Series 1 Redemption Price and all declared and unpaid dividends up to, but excluding, the date fixed for redemption with respect to Series 1 Shares called for redemption, and (iii) the Liquidation Amount payable on the Series 1 Shares upon a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, without regard to the amount of assets of the Corporation available for distribution;

Series 1 Shares ” means the Class A Preference Shares, Series 1 of the Corporation;

Series 2 Redemption Price ” means the following per Series 2 Share redeemed: (i) $25.00 in the case of redemptions on April 30, 2020 and on April 30 every five years thereafter (each a

 

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Series 2 Share Conversion Date ”); or (ii) $25.50 in the case of redemptions on any date which is not a Series 2 Conversion Date on or after April 30, 2015;

Series 2 Share Obligations ” means all financial liabilities and obligations of the Corporation to the Holders in respect of the Series 2 Shares including or in respect of (i) any declared and unpaid dividends on the Series 2 Shares, (ii) the Series 2 Redemption Price and all declared and unpaid dividends up to, but excluding, the date fixed for redemption with respect to Series 2 Shares called for redemption, and (iii) the Liquidation Amount payable on the Series 2 Shares upon a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, without regard to the amount of assets of the Corporation available for distribution; and

Series 2 Shares ” means the Class A Preference Shares, Series 2 of the Corporation.

 

1.2 Compliance Certificates and Opinions

Upon any application or request by a Guarantor to the Security Trustee to take any action under any provision of this Guarantee, such Guarantor shall furnish to the Security Trustee an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Guarantee (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Guarantee relating to such particular application or request, no additional certificate or opinion need be furnished.

In addition to the foregoing, every certificate or opinion with respect to compliance with a covenant or condition provided for in this Guarantee (other than as otherwise specified herein) shall include:

 

  (a) a statement that each individual signing such certificate or opinion has read and understood such covenant or condition and the definitions herein relating thereto;

 

  (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

  (c) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

  (d) a statement as to whether, in the opinion of each such individual, such covenant or condition has been complied with.

 

1.3 Form of Documents Delivered to Security Trustee

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or

 

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covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Governing Body of a Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Governing Body of a Guarantor stating that the information with respect to such factual matters is in the possession of such Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Guarantee, they may, but need not, be consolidated and form one instrument.

 

1.4 Acts of Holders

 

  (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Guarantee to be given or taken by one or more Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed by them in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Security Trustee and, where it is hereby expressly required, to the Guarantors and/or the Corporation. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “ Act ” of the Holders signing such instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Series 2 Share, shall be sufficient for any purpose of this Guarantee and conclusive in favour of the Security Trustee, the Guarantors and the Corporation, if made in the manner provided in this Section.

 

  (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Security Trustee deems sufficient.

 

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  (c) If a Guarantor shall solicit from the Holders of Series 2 Shares any request, demand, authorization, direction, notice, consent, waiver or other Act, such Guarantor may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but such Guarantor shall have no obligation to do so. Such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite percentage of outstanding Series 2 Shares have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Series 2 Shares shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Guarantee not later than eleven months after the record date.

 

1.5 Notices, Etc. to Security Trustee and Guarantors

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Guarantee to be made upon, given or furnished to, or filed with,

 

  (a)

the Security Trustee by any Holder, any Guarantor or the Corporation shall be sufficient for every purpose hereunder if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to the Security Trustee at 100 University Ave, 8 th Floor, Toronto ON M5J 2Y1 Attention: Manager, Corporate Trust, Facsimile No. 416-981-9777; or

 

  (b) BREP by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to BREP addressed to it at c/o Appleby Corporate Services, Canon’s Court, 22 Victoria Street, P. O. Box HM 1179, Hamilton HM EX, Bermuda or at any other address previously furnished in writing to the Security Trustee by BREP, Attention: Secretary, Facsimile No. 441-298-3304; or

 

  (c)

BRELP by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage

 

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  prepaid) or sent by facsimile to BRELP addressed to it at c/o Appleby Corporate Services, Canon’s Court, 22 Victoria Street, P. O. Box HM 1179, Hamilton HM EX, Bermuda or at any other address previously furnished in writing to the Security Trustee by BRELP, Attention: Secretary, Facsimile No. 441-298-3304; or

 

  (d) CanHoldco by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to CanHoldco addressed to it at 480 de la Cité Blvd., Gatineau, Québec, J8T 8R3, or at any other address previously furnished in writing to the Security Trustee by CanHoldco, Attention: Corporate Secretary, Facsimile No. (416) 363-2856; or

 

  (e) Bermuda Holdco by any Holder, the Security Trustee, any other Guarantor or the Corporation shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to Bermuda Holdco addressed to it at c/o Appleby Corporate Services, Canon’s Court, 22 Victoria Street, P. O. Box HM 1179, Hamilton HM EX, Bermuda or at any other address previously furnished in writing to the Security Trustee by Bermuda Holdco, Attention: Secretary, Facsimile No. 441-298-3304; or

 

  (f) the Corporation by any Holder, the Security Trustee or any Guarantor shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered, mailed (first-class postage prepaid) or sent by facsimile to the Corporation addressed to it at 480 de la Cité Blvd., Gatineau, Québec, J8T 8R3, or at any other address previously furnished in writing to the Security Trustee by the Corporation, Attention: Corporate Secretary, Facsimile No. (416) 363-2856.

Any delivery made or facsimile sent on a day other than a Business Day, or after 3:00 p.m. (Toronto time) on a Business Day, shall be deemed to be received on the next following Business Day. Anything mailed shall not be deemed to have been given until it is actually received. A Guarantor or the Corporation may from time to time notify the Security Trustee of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Guarantor or the Corporation for all purposes of this Guarantee.

 

1.6 Notice to Holders; Waiver

Where this Guarantee provides for notice of any event to the Holders of Series 2 Shares by the Guarantors or the Security Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at the Holder’s address as it appears in the list of Holders as provided by the Corporation, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice or in any other manner from time to time permitted by

 

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applicable laws, including, without limitation, internet-based or other electronic communications. In any case where notice to the Holders of Series 2 Shares is given by mail, neither the accidental failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Series 2 Shares, but upon such failure to mail or such defect in any notice so mailed being discovered, the notice (as corrected to address any defects) shall be mailed forthwith to such Holder. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.

Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Guarantee shall be in the English language.

Where this Guarantee provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Security Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

1.7 Effect of Headings and Table of Contents

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

1.8 Successors and Assigns

All covenants and agreements in this Guarantee by the Guarantors shall bind their respective successors and assigns, whether so expressed or not.

 

1.9 Severability Clause

In case any provision in this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

1.10 Governing Law

This Guarantee shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

 

1.11 No Recourse Against Certain Persons

A director (or the equivalent for a Guarantor that is not a corporation), officer, employee or securityholder, as such, of a Guarantor or the Governing Body of a Guarantor shall not have any liability for any obligations of such Guarantor under this Guarantee or for any claim based on, in respect of or by reason of such obligations or its creation. Each of the parties hereto acknowledges that BREP and BRELP are limited partnerships and that there is no recourse to the limited partners of BREP or BRELP.

 

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1.12 Multiple Originals

The parties may sign any number of copies of this Guarantee. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Guarantee.

 

1.13 Language

Les parties aux présentes ont exigé que la présente convention ainsi que tous les documents et avis qui s’y rattachent et/ou qui en decouleront soient rediges et exécutés en langue anglaise. The parties hereto have required that this Guarantee and all documents and notices related thereto be drafted and executed in English.

ARTICLE 2

GUARANTEE

 

2.1 Guarantee

The Guarantors irrevocably and unconditionally, jointly and severally, guarantee in favour of the Holders the due and punctual payment of the Series 2 Share Obligations, regardless of any defense (except for the defense of payment by the Corporation), right of set-off or counterclaim which a Guarantor may have or assert. Each Guarantor’s obligation to pay Series 2 Share Obligations may be satisfied by (i) direct payment to the Holders or (ii) payment to the Holders through the facilities of the Security Trustee. A Guarantor shall give prompt written notice to the Security Trustee in the event it makes a direct payment to the Holders hereunder.

 

2.2 Waiver of Notice

Each Guarantor hereby waives notice of acceptance of this Guarantee.

 

2.3 Guarantee Absolute

Each Guarantor guarantees that the Series 2 Share Obligations will be paid strictly in accordance with the terms of the Series 2 Shares and this Guarantee within the time required by Section 2.1, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any such terms or the rights of the Holders with respect thereto. The liability of each Guarantor under this Guarantee shall be absolute and unconditional irrespective of:

 

  (a) any sale, transfer or assignment by any Holder of any Series 2 Shares or any right, title, benefit or interest of such Holder therein or thereto;

 

  (b) any amendment or change in or to, or any waiver of, any of the terms of the Series 2 Shares;

 

  (c) any change in the name, objects, constitution, capacity, capital or the constating documents of a Guarantor;

 

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  (d) any change in the name, objects, constitution, capacity, capital or the constating documents of the Corporation;

 

  (e) any partial payment by the Corporation, or any release or waiver, by operation of law or otherwise, of the performance or observance by the Corporation of any express or implied agreement, covenant, term or condition relating to the Series 2 Shares to be performed or observed by the Corporation;

 

  (f) the extension of time for the payment by the Corporation of all or any portion of the Series 2 Share Obligations or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Series 2 Shares;

 

  (g) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Series 2 Shares, or any action on the part of the Corporation granting indulgence or extension of any kind;

 

  (h) subject to Section 4.1(b), the recovery of any judgment against the Corporation, any voluntary or involuntary liquidation, dissolution, sale of any collateral, winding up, merger or amalgamation of the Corporation or a Guarantor, any sale or other disposition of all or substantially all of the assets of the Corporation, or any judicial or extrajudicial receivership, insolvency, bankruptcy, assignment for the benefit of, or proposal to, creditors, reorganization, moratorium, arrangement, composition with creditors, or readjustment of debt of, or other proceedings affecting the Corporation, a Guarantor or any of the assets of the Corporation or a Guarantor;

 

  (i) any circumstance, act or omission that would prevent subrogation operating in favour of a Guarantor;

 

  (j) any invalidity of, or defect or deficiency in, the Series 2 Shares or this Guarantee;

 

  (k) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

 

  (l) any other circumstance, act or omission that might otherwise constitute a defence available to, or a discharge of, the Corporation in respect of any of the Series 2 Share Obligations, or a Guarantor in respect of any of the Series 2 Share Obligations (other than, and to the extent of, the payment or satisfaction thereof);

it being the intent of the Guarantors that their obligations in respect of the Series 2 Share Obligations shall be absolute and unconditional under all circumstances and shall not be discharged except by payment in full of the Series 2 Share Obligations. The Holders shall not be bound or obliged to exhaust their recourse against the Corporation or any other Persons or to take any other action before being entitled to demand payment from the Guarantors hereunder.

There shall be no obligation of the Holders to give notice to, or obtain the consent of, any or all of the Guarantors with respect to the happening of any of the foregoing.

 

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2.4 Continuing Guarantee

This Guarantee shall apply to and secure any ultimate balance due or remaining due to the Holders in respect of the Series 2 Share Obligations and shall be binding as an absolute and continuing obligation of each Guarantor. This Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Series 2 Share Obligations must or may be rescinded, is declared or may become voidable, or must or may otherwise be returned by the Holders for any reason, including the insolvency, bankruptcy, dissolution or reorganization of the Corporation or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Corporation or any substantial part of its property, all as though such payment had not been made. If at any time the Corporation is precluded from making payment when due in respect of any Series 2 Share Obligations by reason of the provisions of the CBCA or otherwise, such amounts shall nonetheless be deemed to be due and payable by the Corporation to the Holders for all purposes of this Guarantee and the Series 2 Share Obligations shall be immediately due and payable to the Holders. This is a guarantee of payment, and not merely a deficiency or collection guarantee.

 

2.5 Rights of Holders

Each Guarantor expressly acknowledges that: (i) this Guarantee will be deposited with the Security Trustee to be held for the benefit of the Holders; and (ii) the Security Trustee has the right to enforce this Guarantee on behalf of the Holders.

 

2.6 Guarantee of Payment

If the Corporation shall fail to pay any of the Series 2 Share Obligations when due, the Guarantors shall, jointly and severally, pay to the Holders the Series 2 Share Obligations immediately after demand made in writing by one or more Holders or the Security Trustee, but in any event within 15 days of any failure by the Corporation to pay the Series 2 Share Obligations when due, without any evidence that the Holders or the Security Trustee have demanded that the Corporation or the Guarantors pay any of the Series 2 Share Obligations or that the Corporation has failed to do so.

 

2.7 Subrogation

The Guarantors shall have no right of subrogation in respect of any payment made to the Holders hereunder until such time as the Series 2 Share Obligations have been fully satisfied. In the case of the liquidation, dissolution, winding-up or bankruptcy of the Corporation (whether voluntary or involuntary), or if the Corporation makes an arrangement or compromise or proposal with its creditors, the Holders shall have the right to rank for their full claim and to receive all dividends or other payments in respect thereof until their claims have been paid in full, and the Guarantors shall continue to be liable, jointly and severally, to the Holders for any balance which may be owing to the Holders by the Corporation. The Series 2 Share Obligations shall not, however, be released, discharged, limited or affected by the failure or omission of the Holders to prove the whole or part of any claim against the Corporation. If any amount is paid to a Guarantor on account of any subrogation arising hereunder at any time when the Series 2 Share Obligations have not been fully satisfied, such amount shall be held in trust by such Guarantor for the benefit of the Holders and shall forthwith be paid to the Holders to be credited and applied against the Series 2 Share Obligations.

 

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2.8 Independent Obligations

Each Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Corporation with respect to the Series 2 Shares and that such Guarantor shall be liable to make payment of the Series 2 Share Obligations pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (l), inclusive, of Section 2.3 and regardless of whether the Holders make a demand upon such Guarantor. Each Guarantor will pay the Series 2 Share Obligations without regard to any equities between it and the Corporation or any defence or right of set-off, compensation, abatement, combination of accounts or cross-claim that it or the Corporation or the other Guarantors may have.

 

2.9 Guarantors to Investigate Financial Condition of the Corporation

Each Guarantor acknowledges that it has fully informed itself about the financial condition of the Corporation. Each Guarantor assumes full responsibility for keeping fully informed of the financial condition of the Corporation and all other circumstances affecting the Corporation’s ability to pay the Series 2 Share Obligations.

ARTICLE 3

SUBORDINATION OF OBLIGATIONS TO SENIOR INDEBTEDNESS

 

3.1 Applicability of Article

The obligations of each Guarantor hereunder shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth in the following sections of this Article 3, to the prior payment in full of all Senior Indebtedness of such Guarantor, and the Security Trustee and each Holder of Series 2 Shares as a condition to and by acceptance of the benefits conferred hereby agrees to and shall be bound by the provisions of this Article 3.

 

3.2 Order of Payment

Upon any distribution of the assets of a Guarantor on any dissolution, winding up, liquidation or reorganization of such Guarantor (whether in bankruptcy, insolvency or receivership proceedings, or upon an “assignment for the benefit of creditors” or any other marshalling of the assets and liabilities of such Guarantor, or otherwise):

 

  (a) all Senior Indebtedness of such Guarantor shall first be paid in full, or provision made for such payment, before any payment is made on account of the Series 2 Share Obligations; and

 

  (b)

any payment or distribution of assets of such Guarantor, whether in cash, property or securities, to which the Holders of the Series 2 Shares or the Security Trustee on behalf of such Holders would be entitled except for the provisions of this Article 3, shall be paid or delivered by the trustee in bankruptcy, receiver,

 

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  assignee for the benefit of creditors, or other liquidating agent making such payment or distribution, directly to the holders of Senior Indebtedness of such Guarantor or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness may have been issued, to the extent necessary to pay all Senior Indebtedness of such Guarantor in full after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Senior Indebtedness.

 

3.3 Subrogation to Rights of Holders of Senior Indebtedness

Subject to the payment in full of all Senior Indebtedness of a Guarantor, the Holders of the Series 2 Shares shall be subrogated to the rights of the holders of Senior Indebtedness of such Guarantor to receive payments or distributions of assets of such Guarantor (to the extent of the application thereto of such payments or other assets which would have been received by the Holders of the Series 2 Shares but for the provisions hereof) until the Series 2 Share Obligations shall be paid in full, and no such payments or distributions to the Holders of the Series 2 Shares of cash, property or securities, which otherwise would be payable or distributable to the holders of such Senior Indebtedness, shall, as between such Guarantor, its creditors (other than the holders of Senior Indebtedness), and the Holders of Series 2 Shares, be deemed to be a payment by such Guarantor to the holders of such Senior Indebtedness or on account of such Senior Indebtedness, it being understood that the provisions of this Article 3 are and are intended solely for the purpose of defining the relative rights of the Holders of the Series 2 Shares, on the one hand, and the holders of Senior Indebtedness of such Guarantor, on the other hand.

 

3.4 Pari Passu Ranking

Notwithstanding anything herein contained to the contrary, the obligations of each Guarantor hereunder rank on a pro rata and pari passu basis with the obligations of such Guarantor under the Series 1 Share Obligations and with any other obligations of such Guarantor in respect of similar guarantees that may be provided by such Guarantor in respect of other series of Class A Preference Shares of the Corporation (collectively, the “ Guaranteed Obligations ”).

 

3.5 Obligation to Pay Not Impaired

Nothing contained in this Article 3 or elsewhere in this Guarantee or in the Series 2 Shares is intended to or shall impair, as between a Guarantor, its creditors (other than the holders of Senior Indebtedness), and the Holders of the Series 2 Shares, the obligation of such Guarantor, which is absolute and unconditional, to pay to the Holders of the Series 2 Shares the Series 2 Share Obligations in accordance herewith, as and when the same shall become due and payable in accordance with this Guarantee, or affect the relative rights of the Holders of the Series 2 Shares and creditors of such Guarantor other than the holders of the Senior Indebtedness; nor shall anything herein or therein prevent the Security Trustee or the Holder of any Series 2 Share from exercising all remedies otherwise permitted by applicable law upon default under this Guarantee, subject to the rights, if any, under this Article 3 of the holders of Senior Indebtedness in respect of cash, property or securities of such Guarantor that are received upon the exercise of any such remedy.

 

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3.6 No Payment if Senior Indebtedness in Default

Upon the maturity of any Senior Indebtedness of a Guarantor by lapse of time, acceleration, demand or otherwise, then, except as provided in Section 3.7, all principal of and interest on all such matured Senior Indebtedness shall first be paid in full, or shall first have been duly provided for, before any payment by such Guarantor is made on account of the Series 2 Share Obligations.

In case of default with respect to any Senior Indebtedness of a Guarantor permitting the holders thereof to accelerate the maturity thereof, unless and until such default shall have been cured or waived or shall have ceased to exist, no payment (by purchase of the Series 2 Shares or otherwise) shall be made by such Guarantor with respect to the Series 2 Share Obligations, and neither the Security Trustee nor the Holders of Series 2 Shares shall be entitled to demand, institute proceedings for the collection of, or receive any payment or benefit from such Guarantor (including without limitation by set-off, combination of accounts or otherwise in any manner whatsoever) on account of the Series 2 Share Obligations after the happening of such a default (except as provided in Section 3.8), and unless and until such default shall have been cured or waived or shall have ceased to exist, such payments received from such Guarantor shall be held in trust for the benefit of, and, if and when the Senior Indebtedness of such Guarantor shall have become due and payable, shall be paid over to, the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing an amount of such Senior Indebtedness remaining unpaid, until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness.

The fact that any payment hereunder is prohibited by this Section 3.6 shall not prevent the failure to make such payment from being an Event of Default hereunder.

 

3.7 Payment on Series 2 Shares Permitted

Nothing contained in this Article 3 or elsewhere in this Guarantee, or in any of the Series 2 Shares, shall affect the obligation of a Guarantor to make, or prevent such Guarantor from making, at any time except during the pendency of any dissolution, winding up or liquidation of such Guarantor or reorganization proceedings specified in Section 3.2 affecting the affairs of such Guarantor, any payment on account of the Series 2 Share Obligations, except that such Guarantor shall not make any such payment other than as contemplated by this Article 3, if it is in default in payment of any of its Senior Indebtedness. The fact that any such payment is prohibited by this Section 3.7 shall not prevent the failure to make such payment from being an Event of Default hereunder. Nothing contained in this Article 3 or elsewhere in this Guarantee, or in any of the Series 2 Shares, shall prevent the application by the Security Trustee of any moneys deposited with the Security Trustee hereunder for the purpose so deposited, to the payment of or on account of the Series 2 Share Obligations unless and until the Security Trustee shall have received written notice from a Guarantor or from the holder of Senior Indebtedness or from the representative of any such holder of default with respect to any Senior Indebtedness permitting the holders thereof to accelerate the maturity thereof.

 

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3.8 Confirmation of Subordination

As a condition to the benefits conferred hereby on each Holder of Series 2 Shares, each such Holder by acceptance thereof authorizes and directs the Security Trustee, on the Holder’s behalf, to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 3, and appoints the Security Trustee as the Holder’s attorney-in-fact for any and all such purposes. Upon request of a Guarantor, and upon being furnished with an Officer’s Certificate stating that one or more named persons are holders of Senior Indebtedness of such Guarantor, or the representative or representatives of such holders, or the trustee or trustees under which any instrument evidencing such Senior Indebtedness may have been issued, and specifying the amount and nature of such Senior Indebtedness, the Security Trustee shall enter into a written agreement or agreements with such Guarantor and the person or persons named in such Officer’s Certificate providing that such person or persons are entitled to all the rights and benefits of this Article 3 as the holder or holders, representative or representatives, or trustee or trustees of such Senior Indebtedness specified in such Officer’s Certificate and in such agreement. Such agreement shall be conclusive evidence that the indebtedness specified therein is Senior Indebtedness, however, nothing herein shall impair the rights of any holder of Senior Indebtedness who has not entered into such an agreement.

 

3.9 Security Trustee May Hold Senior Indebtedness

The Security Trustee is entitled to all the rights set forth in this Article 3 with respect to any Senior Indebtedness at the time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Guarantee deprives the Security Trustee of any of its rights as such holder.

 

3.10 Rights of Holders of Senior Indebtedness Not Impaired

No right of any present or future holder of any Senior Indebtedness to enforce the subordination herein will at any time or in any way be prejudiced or impaired by any act or failure to act on the part of a Guarantor or by any non-compliance by a Guarantor with the terms, provisions and covenants of this Guarantee, regardless of any knowledge thereof which any such holder may have or be otherwise charged with.

 

3.11 Altering Senior Indebtedness

A holder of Senior Indebtedness has the right to extend, renew, modify or amend the terms of such Senior Indebtedness or any security therefor and to release, sell or exchange such security and otherwise to deal freely with a Guarantor or any other Person, all without notice to or consent of the Holders of the Series 2 Shares or the Security Trustee and without affecting the subordination herein, the liabilities and obligations of the parties to this Guarantee or the Holders of the Series 2 Shares or the Security Trustee.

 

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3.12 Additional Indebtedness

This Guarantee does not restrict any of the Guarantors from incurring any indebtedness for borrowed money or otherwise or mortgaging, pledging or charging its properties to secure any indebtedness.

ARTICLE 4

TERMINATION AND REMEDIES

 

4.1 Termination of Guarantee

 

  (a) This Guarantee shall terminate upon the occurrence of the following events:

 

  (i) either

 

  (A) all of the outstanding Series 1 Shares and Series 2 Shares shall have been purchased and cancelled; or

 

  (B) all of the Series 1 Shares and Series 2 Shares shall have been redeemed,

and, in each case, all amounts payable on the Series 2 Shares, including all accrued and unpaid dividends, shall have been paid in full by the Corporation and/or the Guarantors, as the case may be; and

 

  (ii) all other sums payable by the Corporation in respect of the Series 2 Share Obligations have been paid; and

the Guarantors shall confirm to the Security Trustee in writing the occurrence of either event under Section 4.1(a)(i).

 

  (b) All of the rights, obligations and liabilities of a Guarantor pursuant to this Guarantee shall terminate upon the conveyance, distribution, transfer or lease (including pursuant to a reorganization, consolidation, liquidation, dissolution, sale of any collateral, winding up, merger, amalgamation, arrangement or otherwise) of all or substantially all of such Guarantor’s properties, securities and assets to a Person that is a Guarantor immediately prior to such conveyance, distribution, transfer or lease.

 

  (c) Upon termination (including any partial termination with respect to a Guarantor) of this Guarantee the Security Trustee shall, upon request of a Guarantor, provide to such Guarantor written documentation acknowledging the termination (or partial termination with respect to a Guarantor) of this Guarantee. Notwithstanding the termination (including any partial termination with respect to a Guarantor) of this Guarantee, the obligations of each Guarantor to the Security Trustee under Section 5.3 shall survive.

 

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4.2 Suits for Enforcement by the Security Trustee

In the event that the Guarantors fail to pay the Series 2 Share Obligations as required (an “ Event of Default ”) pursuant to the terms of this Guarantee, the Holders may institute judicial proceedings for the collection of the moneys so due and unpaid, may prosecute such proceedings to judgment or final decree and may enforce the same against the Corporation and/or the Guarantors and may collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Guarantors.

If an Event of Default occurs and is continuing, the Security Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders, upon being indemnified and funded to its satisfaction by the Holders, by such appropriate judicial proceedings as the Security Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Guarantee or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

4.3 Security Trustee May File Proofs of Claim

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to a Guarantor or the property of a Guarantor, the Security Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise,

 

  (a) to file and prove a claim for any Series 2 Share Obligation then due and payable and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Security Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Security Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and

 

  (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Security Trustee.

Nothing herein contained shall be deemed to authorize the Security Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Series 2 Shares or the rights of any Holder thereof or to authorize the Security Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

4.4 Security Trustee May Enforce Claims Without Possession of Series 2 Shares

All rights of action and claims under this Guarantee may be prosecuted and enforced by the Security Trustee without the possession of any of the Series 2 Shares in any proceeding relating thereto, and any such proceeding instituted by the Security Trustee shall be

 

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brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Security Trustee, its agents and counsel, be for the rateable benefit of the Holders of the Series 2 Shares in respect of which such judgment has been recovered.

 

4.5 Application of Money Collected

Any money collected by the Security Trustee pursuant to this Article shall be applied in the following order:

FIRST , To the payment of all amounts due to the Security Trustee including, without limitation, the reasonable compensation, expenses, disbursements and advances of the Security Trustee in or about the execution of its trust, or otherwise in relation hereto, with interest thereon as herein provided;

SECOND , To the payment of all amounts due to the Holders of the Series 2 Shares in respect of the costs, charges, expenses and advances incurred in connection with enforcing their rights hereunder;

THIRD , To the payment of any Preference Share Obligation then due and unpaid on a pro rata basis; and

FOURTH , The balance, if any, to the Person or Persons entitled thereto.

 

4.6 Limitation on Suits

No Holder of any outstanding Series 2 Shares shall have any right to institute any proceeding, judicial or otherwise, with respect to this Guarantee, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

 

  (a) such Holder has previously given written notice to the Security Trustee of a continuing Event of Default with respect to this Guarantee;

 

  (b) the Holders representing not less than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares affected by such Event of Default (determined as one class), shall have made written request to the Security Trustee to institute proceedings in respect of such Event of Default in its own name as Security Trustee hereunder;

 

  (c) such Holder or Holders have provided to the Security Trustee reasonable funding, if requested by the Security Trustee, and reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

 

  (d) the Security Trustee for 15 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

 

  (e) no direction inconsistent with such written request has been given to the Security Trustee during such 15-day period by the Holders representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares affected by such Event of Default (determined as one class);

 

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it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Guarantee to affect, disturb or prejudice the rights of any other Holders of the outstanding Series 2 Shares, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Guarantee, except in the manner herein provided and for the equal and rateable benefit of all Holders of the outstanding Series 2 Shares.

 

4.7 Restoration of Rights and Remedies

If the Security Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Security Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Guarantors, the Security Trustee and the Holders of Series 2 Shares shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Security Trustee and the Holders shall continue as though no such proceeding had been instituted.

 

4.8 Rights and Remedies Cumulative

No right or remedy herein conferred upon or reserved to the Security Trustee or to the Holders of Series 2 Shares is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

 

4.9 Delay or Omission Not Waiver

No delay or omission of the Security Trustee or of any Holder of any Series 2 Shares to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Security Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Security Trustee or by the Holders, as the case may be.

 

4.10 Control by Holders

The Holders representing not less than a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares affected by an Event of Default (determined as one class) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Security Trustee, or exercising any trust or power conferred on the Security Trustee, with respect to this Guarantee, provided that in each case:

 

  (a) such direction shall not be in conflict with any rule of law or with this Guarantee;

 

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  (b) the Security Trustee may take any other action deemed proper by the Security Trustee which is not inconsistent with such direction; and

 

  (c) the Security Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders of outstanding Series 2 Shares not consenting to any such direction.

 

4.11 Waiver of Stay or Extension Laws

Each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Guarantee; and each Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Security Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

4.12 Undertaking for Costs

All parties to this Guarantee agree, and each Holder of any Series 2 Shares by acceptance thereof and by acceptance of the benefits hereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Guarantee, or in any suit against the Security Trustee for any action taken, suffered or omitted by it as Security Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable lawyers’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (i) any suit instituted by a Guarantor, (ii) any suit instituted by the Security Trustee, (iii) any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares, or (iv) any suit instituted by any Holder for the enforcement of the payment of the Series 2 Share Obligations.

ARTICLE 5

THE SECURITY TRUSTEE

 

5.1 Certain Duties and Responsibilities

 

  (a) The Security Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Security Trustee.

 

  (b) The Security Trustee, in exercising its powers and discharging its duties prescribed or conferred by this Guarantee, shall

(i) act honestly and in good faith with a view to the best interests of the Holders of the Series 2 Shares, and

 

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  (ii) exercise that degree of care, diligence and skill a reasonably prudent trustee, appointed in respect of a guarantee indenture would exercise in comparable circumstances.

 

  (c) In the absence of bad faith on its part, the Security Trustee, in the exercise of its rights and duties hereunder, may conclusively act and rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions or other evidence furnished to the Security Trustee and conforming to the requirements of this Guarantee. The Security Trustee shall not be liable for or by reason of any statements of fact or recitals in this Guarantee or be required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Guarantors (or by their agents). The Security Trustee shall not in any way be responsible for the consequence of any breach on the part of a Guarantor (or by its agents) of any of the Guarantor’s covenants herein.

 

  (d) No provision of this Guarantee shall be construed to relieve the Security Trustee from the duties imposed on it in Section 5.1(b) or from liability for its own gross negligence or its own wilful misconduct, except that:

 

  (i) this Section 5.1(d) shall not be construed to limit the effect of Section 5.1(a) and (b);

 

  (ii) the Security Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Security Trustee was grossly negligent in ascertaining the pertinent facts;

 

  (iii) the Security Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an appropriate direction of the Holders pursuant to Section 4.10 relating to the time, method and place of conducting any proceeding for any remedy available to the Security Trustee, or exercising any trust or power conferred upon the Security Trustee, under this Guarantee; and

 

  (iv) no provision of this Guarantee shall require the Security Trustee to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers except as herein expressly provided.

 

  (e) Whether or not herein expressly so provided, every provision of this Guarantee relating to the conduct or affecting the liability of or affording protection to the Security Trustee shall be subject to the provisions of this Section.

 

5.2 Certain Rights of Security Trustee

Subject to the provisions of Section 5.1:

 

  (a)

the Security Trustee may rely absolutely and shall be protected in acting or refraining from acting upon any resolution, Officer’s Certificate or other

 

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  certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties, not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth or accuracy of any information therein contained;

 

  (b) any order, request or direction of a Guarantor mentioned herein shall be sufficiently evidenced by a Guarantor Request or Guarantor Order and any resolution shall be sufficiently evidenced by a Board Resolution;

 

  (c) whenever in the administration of this Guarantee the Security Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Security Trustee (unless other evidence be herein specifically prescribed) may act and rely upon an Officer’s Certificate (i) as evidence of the truth of any statements of fact, and (ii) to the effect that any particular dealing or transaction or step or thing is, in the opinion of the officers so certifying, expedient, as evidence that it is expedient; provided that the Security Trustee may in its sole discretion, acting reasonably, require from any Guarantor or otherwise further evidence or information before acting or relying on such certificate;

 

  (d) the Security Trustee may employ or retain such agents, counsel and other assistants as it may reasonably require for the proper determination and discharge of its duties hereunder and shall be entitled to receive reasonable remuneration for all services performed by it and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and shall not be responsible for any misconduct on the part of any of them, any such costs and expenses which shall immediately become and form part of the Security Trustee’s fees hereunder;

 

  (e) the Security Trustee may, in relation to this Guarantee, act and rely on the opinion or advice of or on information obtained from any counsel, notary, valuer, surveyor, engineer, broker, auctioneer, accountant or other expert, whether retained by the Security Trustee or by any Guarantor or otherwise;

 

  (f) the Security Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in reliance thereon;

 

  (g)

the Security Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any of the Holders pursuant to this Guarantee, unless such Holders shall have furnished to the Security Trustee reasonable funding and a reasonable indemnity, satisfactory to the Security Trustee, to protect and hold harmless the Security Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction and/or damage it may suffer by reason thereof as a

 

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  condition to the commencement or continuation of such act, action or proceeding. The Security Trustee may, before commencing or at any time during the continuance of any such act, action or proceeding require the Holders at whose instance it is acting, to deposit with the Security Trustee the share certificates held by them respecting the Series 2 Shares for which such share certificates the Security Trustee shall issue receipts;

 

  (h) the Security Trustee shall not be required to take notice of any default under this Guarantee, other than payment of any moneys required by any provision of this Guarantee to be paid to it, unless and until notified in writing of such default, which notice shall clearly set out the nature of the default desired to be brought to the attention of the Security Trustee;

 

  (i) prior to the occurrence of an Event of Default under this Guarantee and after the curing of any such Event of Default which may have occurred, the Security Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document or any investigation of the books and records of any Guarantor (but the Security Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Security Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of a Guarantor, personally or by agent or attorney), unless requested to do so by the Act of the Holders representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares; provided, however, that the Security Trustee may require reasonable indemnity against the costs, expenses or liabilities likely to be incurred by it in the making of such investigation; and

 

  (j) the Security Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Security Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Any solicitors employed or consulted by the Security Trustee as counsel may, but need not be solicitors for a Guarantor.

 

5.3 Protection of Security Trustee

By way of supplement to the provisions of any law for the time being relating to trustees, it is expressly declared and agreed as follows:

 

  (a) the recitals contained herein, shall be taken as the statements of the Guarantors, and the Security Trustee shall not be liable for or assume any responsibility for their correctness;

 

  (b) the Security Trustee makes no representations as to, and shall not be liable for, the validity or sufficiency of this Guarantee;

 

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  (c) nothing herein contained shall impose any obligation on the Security Trustee to see or to require evidence of registration or filing (or renewals thereof) of this Guarantee or any instrument ancillary or supplemental hereto;

 

  (d) the Security Trustee shall not be bound to give any notice of the execution hereof;

 

  (e) the Security Trustee shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of a Guarantor of any of the covenants herein contained or of any act of the agents or servants of a Guarantor; and

 

  (f) the Guarantors shall indemnify the Security Trustee (including its directors, officers, employees, representatives and agents) for, and hold it harmless against, any claim, demand, suit, loss, liability or expense (including any and all reasonable legal and adviser fees and disbursements) incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnity will survive the termination (including any partial termination with respect to a Guarantor) or discharge of this Guarantee and the resignation or removal of the Security Trustee.

 

5.4 Security Trustee Not Required to Give Security

The Security Trustee shall not be required to give security for the execution of the trusts or its conduct or administration hereunder.

 

5.5 No Person Dealing with Security Trustee Need Enquire

No person dealing with the Security Trustee shall be concerned to enquire whether the powers that the Security Trustee is purporting to exercise have become exercisable, or whether any money remains due upon the Series 2 Shares or to see to the application of any money paid to the Security Trustee.

 

5.6 May Hold Series 2 Shares

Subject to applicable law, the Security Trustee or any other agent of a Guarantor, in its individual or in any other capacity, may become the owner or pledgee of the Series 2 Shares and, subject to Section 5.8, may otherwise deal with the Guarantors with the same rights it would have if it were not the Security Trustee, and without being liable to account for any profit made thereby.

 

5.7 Moneys Held in Trust

Upon receipt of a direction from the Guarantors (acting jointly), the Security Trustee shall invest funds held by the Security Trustee in Authorized Investments in its name in accordance with such direction. Any direction from the Guarantors to the Security Trustee shall

 

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be in writing and shall be provided to the Security Trustee no later than 9:00 a.m. on the day on which the investment is to be made. Any such direction received by the Security Trustee after 9:00 a.m. ET or received on a non-Business Day, shall be deemed to have been given prior to 9:00 a.m. ET the next Business Day. Any direction from the Guarantors (acting jointly) for the release of the funds must be received prior to 11:00 a.m. ET on the day on which the release of funds is to be made. Any such direction for the release of funds received after 11:00 a.m. ET or on a non-Business Day, will be handled on a commercially reasonable efforts basis and may result in funds being released on the next Business Day. For the purposes of this section, “Authorized Investments” means short term interest bearing or discount debt obligations issued or guaranteed by the Government of Canada or a Province or a Canadian chartered bank (which may include an Affiliate or related party of the Security Trustee) provided that such obligation is rated at least R1 (middle) by DBRS Limited or an equivalent rating service.

In the event that the Security Trustee does not receive a direction or only a partial direction, the Security Trustee may hold cash balances constituting part or all of the funds and may, but need not, invest same in its deposit department, the deposit department of one of its Affiliates, or the deposit department of a Canadian chartered bank; but the Security Trustee, its Affiliates or a Canadian chartered bank shall not be liable to account for any profit to any parties to this Guarantee or to any other person or entity other than at a rate, if any, established from time to time by the Security Trustee, its Affiliates or a Canadian chartered bank. For the purpose of this Section, “Affiliate” means affiliated companies within the meaning of the CBCA, and includes Computershare Investor Services Inc. and each of their affiliates within the meaning of the Business Corporations Act (Ontario).

 

5.8 Conflict of Interest

 

  (a) The Security Trustee represents to the Guarantors that at the time of the execution and delivery hereof no material conflict of interest exists in respect of the Security Trustee’s role as a fiduciary hereunder and agrees that in the event of a material conflict of interest arising hereafter it will, within 90 days after becoming aware that a material conflict of interest exists, either eliminate the same or resign its trust hereunder.

 

  (b) If, notwithstanding Section 5.8(a), the Security Trustee has a material conflict of interest, the validity and enforceability of this Guarantee shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest.

 

  (c) If the Security Trustee contravenes Section 5.8(a), the Holders representing not less than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares and Series 2 Shares affected thereby may apply to the Ontario Superior Court of Justice for an order that the Security Trustee be replaced, and such court may make an order on such terms as it thinks fit.

 

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5.9 Corporate Trustee Required; Eligibility

There shall at all times be a trustee hereunder which shall be a corporation resident or authorized to carry on the business of a trust company in Canada. None of the Guarantors nor any Affiliate of a Guarantor shall serve as trustee. If at any time the Security Trustee shall cease to be eligible in accordance with the provisions of this Section, the Security Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article.

 

5.10 Resignation and Removal; Appointment of Successor

 

  (a) Notwithstanding any other provisions hereof, no resignation or removal of the Security Trustee and no appointment of a successor trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor trustee in accordance with the applicable requirements of Section 5.11.

 

  (b) The Security Trustee may resign its trust and be discharged from all further duties and liabilities hereunder at any time with respect to the Guarantee by giving to the Guarantors two months’ notice in writing or such shorter notice as the Guarantors may accept as sufficient. If the instrument of acceptance by a successor trustee required by Section 5.11 shall not have been delivered to the Security Trustee within 60 days after the giving of such notice of resignation, the resigning trustee may apply to the Ontario Superior Court of Justice for an order for the appointment of a successor trustee with respect to the Guarantee.

 

  (c) The Security Trustee may be removed at any time by the Guarantors, except during an Event of Default.

 

  (d) If any time:

 

  (i) the Security Trustee shall fail to comply with Section 5.8(a); or

 

  (ii) the Security Trustee shall cease to be eligible under Section 5.9 and shall fail to resign after written request to do so by the Guarantors; or

 

  (iii) the Security Trustee shall be dissolved, shall become incapable of acting or shall become or be adjudged a bankrupt or insolvent or a receiver of the Security Trustee or of its property shall be appointed or any public officer shall take charge or control of the Security Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case the Guarantors by Board Resolutions may remove the Security Trustee.

 

  (e)

If the Security Trustee shall resign, be removed or become incapable of acting or if a vacancy shall occur in the office of the Security Trustee for any other reason, the Guarantors, by Board Resolutions, shall promptly appoint a successor trustee or trustees and shall comply with the applicable requirements of Section 5.11. If,

 

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  within one year after such resignation, removal or incapability or the occurrence of such vacancy, a successor trustee has not been successfully appointed in accordance with the terms hereof, a successor trustee shall be appointed by Act of the Holders representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 1 Shares and Series 2 Shares and the successor Trustee so appointed by the Holders shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 5.11, become the successor trustee. If no successor trustee shall have been so appointed by the Guarantors or the Holders and such appointment accepted in the manner required by Section 5.11, the Security Trustee (at the Guarantors’ expense) or any Holder who is a bona fide Holder of the Series 1 Shares or Series 2 Shares may, on behalf of such Holder and all other Holders, apply to the Ontario Superior Court of Justice for any order for the appointment of a successor trustee.

 

  (f) The Guarantors shall give notice of each resignation and each removal of the Security Trustee and each appointment of a successor trustee to the Holders by mailing such notice to such Holders at their addresses as they shall appear on the list of Holders as provided by the Corporation to the Guarantors. If the Guarantors shall fail to give such notice within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be given at the expense of the Guarantors. Each notice shall include the name of the successor trustee and the address of its Corporate Trust Office.

 

5.11 Acceptance of Appointment by Successor Trustee

 

  (a) In case of the appointment hereunder of a successor trustee, each successor trustee so appointed shall execute, acknowledge and deliver to the Guarantors and to the retiring trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring trustee shall become effective and such successor trustee, without any further act, deed or conveyance (but subject to Section 5.11(b)), shall become vested with all the rights, powers, trusts and duties of the retiring trustee; but, on the request of the Guarantors or the successor trustee, such retiring trustee shall, upon payment of its fees and expenses then unpaid, execute, acknowledge and deliver an instrument transferring to such successor trustee all such rights, powers and trusts of the retiring trustee and shall duly assign, transfer and deliver to such successor trustee all property and money, if any, held by such retiring trustee hereunder.

 

  (b)

In case of the appointment hereunder of a successor trustee, the Guarantors, the retiring trustee and such successor trustee shall execute, acknowledge and deliver an indenture supplemental hereto in which each successor trustee shall accept such appointment and which shall (i) contain such provisions as shall be deemed necessary or desirable to transfer and confirm to, and to vest in, such successor trustee all the rights, powers, trusts and duties of the retiring trustee to which the appointment of such successor trustee relates, (ii) add to or change any of the provisions of this Guarantee to the extent necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being

 

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  understood that nothing herein or in such supplemental indenture (except as specifically provided for therein) shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring trustee shall become effective to the extent provided therein, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring trustee with respect to the Guarantee to which the appointment of such successor trustee relates, and such retiring Trustee shall duly assign, transfer and deliver to each successor trustee all property and money held, if any, by such retiring trustee hereunder which the appointment of such successor trustee relates.

 

  (c) Upon request of any such successor trustee, the Guarantors shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all rights, power and trusts referred to in subsection (a) or (b) of this Section, as the case may be.

 

  (d) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article.

 

5.12 Merger, Consolidation, Amalgamation or Succession to Business

Any corporation into which the Security Trustee may be merged or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, consolidation or amalgamation to which the Security Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Security Trustee, shall be the successor of the Security Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or instrument or any further act on the part of any of the parties hereto.

 

5.13 Not Bound to Act

The Security Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Security Trustee, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. Further, should the Security Trustee, in its sole judgment, determine at any time that its acting under this Guarantee has resulted in its being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days written notice to the Guarantors, provided that (i) the Security Trustee’s written notice shall describe the circumstances of such non-compliance; and (ii) if such circumstances are rectified to the Security Trustee’s satisfaction, acting reasonably, within such 10 day period, then such resignation shall not be effective.

 

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5.14 Security Trustee’s Privacy Clause

The parties acknowledge that federal and/or provincial legislation that addresses the protection of individuals’ personal information (collectively, “ Privacy Laws ”) applies to obligations and activities under this Guarantee. Despite any other provision of this Guarantee, no party shall take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws. The Guarantors shall, prior to transferring or causing to be transferred personal information to the Security Trustee, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or shall have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws. The Security Trustee shall use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws. Specifically, the Security Trustee agrees: (i) to have a designated chief privacy officer; (ii) to maintain policies and procedures to protect personal information and to receive and respond to any privacy complaint or inquiry; (iii) to use personal information solely for the purposes of providing its services under or ancillary to this Guarantee and not to use it for any other purpose except with the consent of or direction from the Guarantors or the individual involved; (iv) not to sell or otherwise improperly disclose personal information to any third party; and (v) to employ administrative, physical and technological safeguards to reasonably secure and protect personal information against loss, theft, or unauthorized access, use or modification.

 

5.15 Compensation and Reimbursement

The Guarantors agree:

 

  (a) to pay to the Security Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

 

  (b) except as otherwise expressly provided herein, to reimburse the Security Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Security Trustee in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith.

The Security Trustee’s remuneration, shall be payable out of any funds coming into the possession of the Security Trustee in priority to any payment of the Series 2 Share Obligations. The said remuneration shall continue to be payable whether or not this Guarantee shall be in the course of administration by or under the direction of a court of competent jurisdiction. Any amount due under this Section and unpaid within 30 days after demand for such payment by the Security Trustee, shall bear interest at the then current rate of interest charged by the Security Trustee to its corporate customers. This Section 5.15 shall survive the removal or termination of the Security Trustee and the termination (including any partial termination with respect to a Guarantor) of this Guarantee.

 

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5.16 Third Party Interests

Each party to this Agreement (“Representing Party”) hereby represents to the Security Trustee that any account to be opened by, or interest to be held by, Security Trustee in connection with this Agreement, for or to the credit of such Representing Party, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case such Representing Party hereby agrees to complete, execute and deliver forthwith to Security Trustee a declaration, in Security Trustee’s prescribed form or in such other form as may be satisfactory to it, as to the particulars of such third party.

ARTICLE 6

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND GUARANTORS

 

6.1 List of Holders

The Corporation shall furnish or cause to be furnished to the Security Trustee at such times as the Security Trustee may request in writing, within five Business Days after the receipt by the Corporation of any such request, a list, in such form as the Security Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Corporation and is not identical to a previously supplied list of Holders or has not otherwise been received by the Security Trustee in its capacity as such. The Security Trustee may destroy any list of Holders previously given to it on receipt of a new list of Holders.

 

6.2 Access to list of Holders

A Holder may, upon payment to the Security Trustee of a reasonable fee, require the Security Trustee to furnish within 10 days after receiving the affidavit or statutory declaration referred to below, a list setting out (i) the name and address of every Holder of Series 2 Shares, (ii) the aggregate number of Series 2 Shares owned by each such Holder, and (iii) the aggregate number of the Series 2 Shares then outstanding, each as shown on the records of the Security Trustee on the day that the affidavit or statutory declaration is delivered to the Security Trustee. The affidavit or statutory declaration, as the case may be, shall contain (i) the name and address of the Holder, (ii) where the applicant is a corporation, its name and address for service, (iii) a statement that the list will not be used except in connection with an effort to influence the voting of the Holders of Series 2 Shares, or any other matter relating to the Guarantee, and (iv) such other undertaking as may be required by applicable law. Where the Holder is a corporation, the affidavit or statutory declaration shall be made by a director or officer of the corporation.

 

6.3 Communications to Holders

The rights of Holders to communicate with other Holders with respect to their rights under this Guarantee and the corresponding rights and privileges of the Security Trustee, shall be governed by applicable law.

Every Holder of Series 2 Shares, by receiving and holding the same, agrees with the Guarantors and the Security Trustee that none of the Guarantors nor the Security Trustee nor any agent of any of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the terms hereof or applicable law.

 

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ARTICLE 7

CONVEYANCE, TRANSFER OR LEASE

 

7.1 Conveyance, Transfer or Lease; Only on Certain Terms

A Guarantor shall not convey, distribute, transfer or lease all or substantially all of its properties, securities and assets to any Person or Persons (other than to a Person that is a Guarantor immediately prior to such conveyance, distribution, transfer or lease), unless:

 

  (a) the Person or Persons which acquire by conveyance, distribution or transfer, or which leases, all or substantially all of the properties, securities and assets of such Guarantor shall, unless such assumption shall occur by operation of law, expressly assume, by an indenture supplemental hereto, executed and delivered to the Security Trustee, in form satisfactory to the Security Trustee, acting reasonably, such Guarantor’s obligations hereunder for the Series 2 Share Obligations and the performance and observance of every covenant of this Guarantee on the part of such Guarantor to be performed or observed; and

 

  (b) such Guarantor or such Person shall have delivered to the Security Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such conveyance, distribution, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.

This Section shall only apply to conveyances, distributions, leases and transfers by a Guarantor as transferor or lessor.

 

7.2 Successor Person Substituted

Upon any conveyance, distribution, transfer or lease of all or substantially all of the properties, securities and assets of a Guarantor to any Person in accordance with Section 7.1, the successor Person to which such conveyance, distribution, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the applicable Guarantor under this Guarantee with the same effect as if such successor Person had been named as such Guarantor herein, and in the event of any such conveyance, distribution or transfer, the applicable Guarantor, except in the case of a lease, shall be discharged of all obligations and covenants under this Guarantee.

ARTICLE 8

SUPPLEMENTAL INDENTURES

 

8.1 Supplemental Indentures Without Consent of Holders

Without the consent of any Holders, the Guarantors, when authorized by or pursuant to a Board Resolution, and the Security Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Security Trustee, for any of the following purposes:

 

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  (a) to evidence the succession of another Person to a Guarantor and the assumption by any such successor of the covenants of the applicable Guarantor contained herein; or

 

  (b) to add to the covenants of the Guarantors or to surrender any right or power herein conferred upon the Guarantors, both of which in the opinion of the Security Trustee, relying upon an Opinion of Counsel, is for the benefit of the Holders of all of the Series 2 Shares and is not prejudicial to the rights of the Holders; or

 

  (c) to add any additional Events of Default; or

 

  (d) to secure or further secure the Series 2 Share Obligations; or

 

  (e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to this Guarantee and to add to or change any of the provisions of this Guarantee as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 5.11; or

 

  (f) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Guarantee, which in the opinion of the Security Trustee, relying upon an Opinion of Counsel, shall not adversely affect the interests of the Holders of Series 2 Shares in any material respect; or

 

  (g) to supplement any of the provisions of this Guarantee to such extent as shall be necessary to permit or facilitate the termination (including any partial termination with respect to a Guarantor) pursuant to Section 4.1; provided that in the opinion of the Security Trustee, relying upon an Opinion of Counsel, any such action shall not adversely affect the interests of the Holders of Series 2 Shares in any material respect.

 

8.2 Supplemental Indentures with Consent of Holders

With the consent of either (i) the Holders representing not less than a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares, by Act of such Holders delivered to the Guarantors and the Security Trustee, or (ii) if a meeting of the Holders is called for obtaining such consent, Holders representing not less than a majority of the aggregate Liquidation Amount of all Series 2 Shares represented at such meeting and voting in respect of such consent, the Guarantors, when authorized by or pursuant to Board Resolutions, and the Security Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Guarantee or of modifying in any manner the rights of the Holders under this Guarantee; provided, however, that no such supplemental indenture shall, without the consent of

 

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the Holders representing not less than 66  2 / 3 % of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares or, if a meeting of the Holders is called for obtaining such consent, Holders representing not less than 66  2 / 3 % of the aggregate Liquidation Amount of all Series 2 Shares represented at such meeting and voting in respect of such consent, as the case may be,

 

  (a) reduce the percentage of the aggregate Liquidation Amount of the outstanding Series 2 Shares required for any such supplemental indenture, for any waiver of compliance with certain provisions of this Guarantee or certain defaults applicable hereunder and their consequences provided for in this Guarantee, or reduce the requirements of Section 11.4 for quorum or voting with respect to the Guarantee, or

 

  (b) modify any of the provisions of this Section, except to increase any such percentage or to provide that certain other provisions of this Guarantee cannot be modified or waived without the consent of the Holder of each outstanding Series 2 Share.

 

8.3 Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Guarantee, the Security Trustee shall be entitled to receive, and shall be fully protected in acting and relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Guarantee. The Security Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Security Trustee’s own rights, duties or immunities under this Guarantee or otherwise.

 

8.4 Effect of Supplemental Indentures

Upon the execution of any supplemental indenture under this Article, this Guarantee shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Guarantee for all purposes.

 

8.5 Notice of Supplemental Guarantees

Promptly after the execution by the Guarantors and the Security Trustee of any supplemental indenture pursuant to the provisions of Section 8.2, the Guarantors shall give notice thereof to the Holders of each of the outstanding Series 2 Shares affected, in the manner provided for in Section 1.6, setting forth in general terms the substance of such supplemental indenture.

 

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ARTICLE 9

COVENANTS

 

9.1 Existence

Subject to Article 7, each Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and its rights and franchises and the rights and franchises of its subsidiaries; provided, however, that a Guarantor shall not be required to preserve any such right or franchise if the Guarantor shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor.

 

9.2 Security Trustee Not Required to Verify Liquidation Amount

The Guarantors will not require the Security Trustee to calculate or verify the Liquidation Amount. When requested by the Security Trustee, a Guarantor shall deliver to the Security Trustee an Officer’s Certificate specifying the Liquidation Amount.

 

9.3 Restriction on Distributions

Each Guarantor hereby covenants and agrees that if and for so long as either the board of directors of the Corporation has failed to declare, or the Corporation has failed to pay, dividends on the Series 2 Shares, in each case, in accordance with the share conditions attaching thereto, then such Guarantor shall not declare, pay or make any distributions or return of capital on its equity securities.

ARTICLE 10

PURCHASE OF SERIES 2 SHARES

 

10.1 Purchase of Series 2 Shares

Subject to applicable law, at any time when a Guarantor is not in default hereunder, such Guarantor may purchase Series 2 Shares at any price in the market (including purchases from or through an investment dealer or a firm holding membership on a recognized stock exchange) or by tender available to all Holders of Series 2 Shares or by private contract, in each case in accordance with the terms of the Series 2 Shares.

ARTICLE 11

MEETINGS OF HOLDERS OF SERIES 2 SHARES

 

11.1 Purposes for Which Meetings May Be Called

A meeting of the Holders of the Series 2 Shares may be called at any time and from time to time pursuant to the provisions of this Article for one or more of the following purposes:

 

  (a) to give any notice to the Guarantors or to the Security Trustee, to give any directions to the Security Trustee, or to take any other action authorized to be taken by the Holders of the Series 2 Shares pursuant to any of Sections 4.3 to 4.12;

 

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  (b) to remove the Security Trustee and appoint a successor Trustee with respect to the Guarantee pursuant to the provisions of Article 5;

 

  (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 8.2; or

 

  (d) to take any other action required or permitted to be taken by or on behalf of the Holders of any specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares under any other provision of this Guarantee or under applicable law.

 

11.2 Call, Notice and Place of Meetings

 

  (a) The Security Trustee may at any time request that the Corporation call, and upon receipt of such request the Corporation shall call or cause its transfer agent to call, a meeting of Holders of Series 2 Shares for any purpose specified in Section 11.1, to be held at such time and at such place in Toronto, Ontario, or in such other place as the Security Trustee shall determine. Notice of every meeting of Holders of Series 2 Shares, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided for in Section 1.6, not less than 21 nor more than 180 days prior to the date fixed for the meeting. In all cases, it is the Corporation who is to bear all costs associated with calling, giving notice of, and holding the meeting.

 

  (b) In case at any time the Guarantors, pursuant to Board Resolutions, or the Holders representing at least 10% of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares shall have requested the Security Trustee to request that the Corporation call a meeting of the Holders of Series 2 Shares for any purpose specified in Section 11.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Security Trustee shall not have so requested or the Corporation shall not have mailed or caused to be mailed notice of such meeting within 21 days after receipt of such request and any required indemnification or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Guarantors or the Holders of Series 2 Shares representing the aggregate Liquidation Amount in the amount above specified, as the case may be, may determine the time and the place in Toronto, Ontario, or in such other place as the Security Trustee may approve for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (a) of this Section.

 

11.3 Persons Entitled to Vote at Meetings

To be entitled to vote at any meeting of Holders of Series 2 Shares, a Person shall be (1) a Holder of one or more outstanding Series 2 Shares, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more outstanding Series 2

 

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Shares by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Series 2 Shares shall be the Persons entitled to vote at such meeting and their respective counsel, employees or any representatives of the Security Trustee and its counsel, and any representatives of the Guarantors and their counsel.

 

11.4 Quorum; Action

The Holders representing not less than 25% of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares shall constitute a quorum for a meeting of Holders of Series 2 Shares ; provided, however, that, if any action is to be taken at such meeting with respect to a consent or waiver which this Guarantee expressly provides may be given by the Holders of not less than a specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares, the Persons entitled to vote such specified percentage in aggregate amount of the outstanding Series 2 Shares shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Series 2 Shares, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 11.2(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened.

Subject to the foregoing, at the reconvening of any meeting adjourned for lack of a quorum, the Holders of Series 2 Shares entitled to vote at such meeting present in person or by proxy shall constitute a quorum for the taking of any action set forth in the notice of the original meeting.

Except as limited by the proviso to Section 8.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders representing not less than a majority of the aggregate Liquidation Amount of Series 2 Shares represented at such meeting in person or by proxy; provided, however, that, except as limited by the proviso to Section 8.2, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Guarantee expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of not less than such specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares.

Any resolution passed or decision taken at any meeting of Holders of Series 2 Shares duly held in accordance with this Section shall be binding on all the Holders of Series 2 Shares, whether or not present or represented at the meeting.

 

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Notwithstanding the foregoing provisions of this Section 11.4, if any action is to be taken at a meeting of Holders of Series 2 Shares with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Guarantee expressly provides may be made, given or taken by the Holders of a specified percentage of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares affected thereby:

 

  (i) there shall be no minimum quorum requirement for such meeting; and

 

  (ii) the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares that vote in favour of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Guarantee.

 

11.5 Determination of Voting Rights; Conduct and Adjournment of Meetings

 

  (a) Notwithstanding any provisions of this Guarantee, the Security Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Series 2 Shares in regard to proof of the holding of Series 2 Shares and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as its shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Series 2 Shares shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4. Such regulations may provide that written instruments appointing proxies may be presumed valid and genuine without the proof specified in Section 1.4 or other proof.

 

  (b) The Security Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Guarantors or by Holders of Series 2 Shares as provided in Section 11.2(b), in which case the Guarantors or the Holders of Series 2 Shares calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares represented and voted at the meeting.

 

  (c) Any meeting of Holders of Series 2 Shares duly called pursuant to Section 11.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote representing a majority of the aggregate Liquidation Amount of all of the then outstanding Series 2 Shares represented and voted at the meeting; and the meeting may be held as so adjourned without further notice.

 

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11.6 Counting Votes and Recording Action of Meetings

The vote upon any resolution submitted to any meeting of Holders of Series 2 Shares shall be by written ballot(s) on which shall be subscribed the signatures of the Holders of Series 2 Shares or of their representatives by proxy and the number of outstanding Series 2 Shares held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the permanent secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Series 2 Shares shall be prepared by the permanent secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 11.2 and, if applicable, Section 11.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and permanent secretary of the meeting and one such copy shall be delivered to the Guarantors, and another to the Security Trustee to be preserved by the Security Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

[Remainder of Page Intentionally Left Blank]

 

[A&R GUARANTEE INDENTURE FOR SERIES 2 SHARES]

- 40 -


This Guarantee may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Guarantee.

IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Guarantee as of the date first written above.

 

BROOKFIELD RENEWABLE ENERGY
PARTNERS L.P.
by its general partner,

2288509 Ontario Inc.

By:

  /s/ “Jane Sheere”
 

Name: Jane Sheere

Title:  Authorized Signatory

 

BROOKFIELD RENEWABLE ENERGY L.P. by
its general partner, BREP Holding L.P. by its general
partner, 2288508 Ontario Inc.

By:

  /s/ “Jane Sheere”
 

Name: Jane Sheere

Title:  Authorized Signatory

 

BROOKFIELD BRP HOLDINGS (CANADA)
INC.

By:

  /s/ “Patricia Bood”
 

Name: Patricia Bood

Title:  Authorized Signatory

 

BRP BERMUDA HOLDINGS I LIMITED

By:

  /s/ “Jane Sheere”
 

Name: Jane Sheere

Title:  Secretary

 

[A&R GUARANTEE INDENTURE FOR SERIES 2 SHARES]

 


BROOKFIELD RENEWABLE POWER

PREFERRED EQUITY INC.

By:

  /s/ “Patricia Bood”
 

Name: Patricia Bood

Title:  Secretary

 

COMPUTERSHARE TRUST COMPANY OF CANADA

By:

  /s/ “David Ha”
 

Name: David Ha

Title:  Corporate Trust Officer

By:

  /s/ “Ann Samuel”
 

Name: Ann Samuel

Title:  Associate Trust Officer

 

[A&R GUARANTEE INDENTURE FOR SERIES 2 SHARES]

- 42 -

Exhibit 4.9

GUARANTEE

THIS GUARANTEE is made as of the 23 rd day of November, 2011,

 

BY:

 

BROOKFIELD RENEWABLE ENERGY L.P., an exempted partnership formed under the laws of Bermuda

 

(the “ Guarantor ”)

 

 

- and -

 

 

BNY TRUST COMPANY OF CANADA , a trust company existing under the laws of Canada

 

(the “ Trustee ”)

RECITALS:

 

A. The Borrower (as defined below), The Bank of New York Mellon and the Trustee have entered into an amended and restated trust indenture dated as of the date hereof (as amended, extended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), providing for the issuance of Debentures as therein described.

 

B. The Borrower is a subsidiary of the Guarantor.

 

C. The Guarantor will, directly or indirectly, benefit from the assumption by the Borrower of the obligations of Brookfield Renewable Power Inc. under the Indenture and the issuance of Debentures thereunder from time to time and, accordingly, desires to execute this Guarantee.

NOW THEREFORE in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby covenants and agrees with the Trustee as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

In this Agreement, all capitalized terms used and not defined in this Agreement will have the meanings given to such terms in the Indenture. In addition, the following terms will have the following meanings:

1.1.1 “Additional Guarantor” means a “Guarantor” as that term is defined in the Indenture, other than the Guarantor under this Agreement;

1.1.2 “this Agreement” , “this Guarantee”, “herein” , “hereof” , “hereby” , “hereunder” and any similar expressions refer to this Guarantee as it may be supplemented, amended or restated from time to time, and not to any particular Article, section or other portion hereof;

 

[GUARANTEE_BRELP & BNY CANADA]


1.1.3 “Borrower” means BRP Finance ULC a corporation incorporated under the laws of Alberta, and its successors;

1.1.4 “Event of Default” means the occurrence of any of the following:

 

  (a) any Event of Default under the Indenture;

 

  (b) failure on the part of the Guarantor to perform or comply with Section 5.6 of this Agreement;

 

  (c) failure on the part of the Guarantor to perform any other covenant or agreement of the Guarantor under this Agreement for the benefit of the Debentureholders, which failure continues for 60 days after written notice thereof is given to the Guarantor by the Trustee or Holders of at least 25% in aggregate principal amount of outstanding Debentures; or

 

  (d) failure on the part of the Guarantor to make payment of any amounts payable by it under this Agreement;

1.1.5 “Guaranteed Obligations” means the principal of, premium, if any, and interest on all Debentures issued by the Borrower under the Indenture from time to time when and as the same shall become due and payable, whether at maturity, upon redemption, acceleration or otherwise, and all other obligations and liabilities owing by the Borrower to the Trustee under the Indenture, whether present or future, absolute or contingent, liquidated or unliquidated, as principal or as surety, alone or with others, of whatsoever nature or kind, in any currency, under or in respect of the Indenture;

1.1.6 “Guarantor Counsel” means legal counsel retained by the Guarantor;

1.1.7 “Officers’ Certificate” means a certificate of the general partner of the Guarantor signed by any two officers of the general partner of the Guarantor in their capacities as officers and not in their personal capacities; and

1.1.8 “Proceedings” means any receivership, insolvency, proposal, bankruptcy, compromise, arrangement, winding-up, dissolution or other similar judicial proceedings.

 

1.2 Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

 

[GUARANTEE_BRELP & BNY CANADA]

- 2 -


1.3 References to Articles and Sections

Whenever in this Agreement a particular Article, section or other portion thereof is referred to, such reference pertains to the Article, section or portion thereof contained herein unless otherwise indicated.

 

1.4 Currency

All amounts in this Agreement are stated and shall be paid in Canadian currency.

 

1.5 Gender and Number

In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing gender include all genders or the neuter, and words importing the neuter include all genders.

 

1.6 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect.

 

1.7 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement.

 

1.8 Governing Law, Attornment

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and the Guarantor hereby irrevocably attorns to the jurisdiction of the courts of Ontario.

ARTICLE 2

GUARANTEE

 

2.1 Guarantee

The Guarantor unconditionally guarantees the due payment of all Guaranteed Obligations.

 

2.2 Continuing Guarantee

The guarantee herein shall be a continuing guarantee of the payment of all the Guaranteed Obligations and shall apply to and secure any ultimate balance thereof due or remaining unpaid. The guarantee herein shall not be considered as wholly or partially satisfied by the intermediate payment or satisfaction at any time of all or any part of the Guaranteed Obligations.

 

[GUARANTEE_BRELP & BNY CANADA]

- 3 -


ARTICLE 3

ENFORCEMENT OF GUARANTEE

 

3.1 Demand

Upon the occurrence of an Event of Default, the Guarantor shall, on demand by the Trustee, forthwith pay to the Trustee all Guaranteed Obligations for which such demand was made.

 

3.2 Right to Immediate Payment or Performance

The Trustee shall not be bound to make any demand on or to seek or exhaust its recourse against the Borrower or any other Person before being entitled to demand payment from the Guarantor and enforce its rights under this Agreement, and the Guarantor hereby renounces all benefits of discussion and division.

 

3.3 Trustee’s Statement

The statement in writing of the Trustee as to the amount payable hereunder shall be binding upon the Guarantor and conclusive against it in the absence of manifest error.

ARTICLE 4

PROTECTION OF TRUSTEE

 

4.1 Liability Absolute

The liability of the Guarantor hereunder shall be absolute and unconditional and shall not be discharged, diminished or in any way affected by:

4.1.1 any amalgamation, merger, consolidation or reorganization of the Borrower, the Guarantor or the Trustee, or any continuation of the Borrower, the Guarantor or the Trustee from the statute under which it now or hereafter exists to another statute, whether under the laws of the same jurisdiction or another jurisdiction;

4.1.2 any change in the name, business, objects, capital structure, ownership, constating documents, by-laws or resolutions of the Borrower, the Guarantor or the Trustee, including without limitation any transaction (whether by way of transfer, sale or otherwise) whereby all or any part of the undertaking, property and assets of the Borrower, the Guarantor or the Trustee becomes the property of any other Person;

4.1.3 any Proceedings of or affecting the Borrower, the Guarantor, the Trustee or any other Person, and any court orders made or action taken by the Borrower, the Guarantor, the Trustee or any other Person under or in connection with those Proceedings, whether or not those Proceedings or orders or that action results in any of the matters described in Section 4.2 occurring with or without the consent of the Trustee;

 

[GUARANTEE_BRELP & BNY CANADA]

- 4 -


4.1.4 any defence, counterclaim or right of set-off available to the Borrower; and

4.1.5 any other circumstance which might otherwise constitute in whole or in part a defence available to, or a discharge of, the Guarantor, the Borrower or any other Person in respect of the Guaranteed Obligations or the liability of the Guarantor.

 

4.2 Dealings by Trustee

The Trustee may from time to time in its absolute discretion, without discharging, diminishing or in any way affecting the liability of the Guarantor hereunder:

4.2.1 enforce or take action under or abstain from enforcing or taking action under the Indenture, any other guarantee or any other agreement;

4.2.2 renew all or any part of the Guaranteed Obligations or grant extensions of time or any other indulgences to the Borrower or to any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.3 accept or make any compositions or arrangements with or release, discharge or otherwise deal with or abstain from dealing with the Borrower or any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.4 in whole or in part prove or abstain from proving a claim of the Trustee in any Proceedings of or affecting the Borrower or any other Person; and

4.2.5 agree with the Borrower, any other guarantor or any other Person to do anything described in Sections 4.2.1 to 4.2.4,

whether or not any of the matters described above occur alone or in connection with one or more other such matters.

ARTICLE 5

COVENANTS OF THE GUARANTOR

 

5.1 Limitations on Indebtedness

The Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Funded Indebtedness unless, after giving effect thereto, the Funded Indebtedness of BREP, calculated on a consolidated basis, would not exceed 75% of Total Consolidated Capitalization.

 

5.2 Limitation on Liens

The Guarantor will not create or permit to exist any lien on any present or future assets of the Guarantor to secure any borrowed money, or permit any of its Subsidiaries to create or permit to exist any lien on any present or future assets of such Subsidiary to secure any borrowed money, unless at the same time the Guaranteed Obligations are secured equally and ratably with such borrowed money, provided that this shall not apply to liens existing on the date

 

[GUARANTEE_BRELP & BNY CANADA]

- 5 -


hereof or Permitted Encumbrances. Upon being advised by the Guarantor in writing in an Officers’ Certificate that security has been provided for the Guaranteed Obligations on an equal and ratable basis in connection with the grant to a third party of security for borrowed money and subsequently that such security to the third party has been released, the Trustee will forthwith release the security granted for the Guaranteed Obligations.

 

5.3 Limitation on Sale and Leaseback Transactions

The Guarantor will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction unless:

 

  (a) the Sale and Leaseback Transaction is entered into prior to, concurrently with, or within 180 days after the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operations of the relevant property, and the Guarantor or such Subsidiary applies within 60 days after the sale an amount equal to the net proceeds of the sale (i) to the repayment of Indebtedness which is pari passu to the Guaranteed Obligations, (ii) to the redemption of the Debentures, or (iii) to the reinvestment in its core business or the core business of the Borrower, an Additional Guarantor and/or any Subsidiary of the Borrower or any Additional Guarantor; or

 

  (b) the Guarantor or the Subsidiary could otherwise grant a security interest on the property as a Permitted Encumbrance.

 

5.4 Limitation on Distributions

The Guarantor may not, and may not permit any of its Subsidiaries, to suffer to exist any encumbrance or restriction on the ability of any Subsidiary of the Guarantor: (i) to pay, directly or indirectly, dividends permitted by applicable law or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Guarantor or any other such Subsidiary; (ii) to make loans or advances to the Guarantor or any other such Subsidiary; or (iii) to transfer any or all of its property or assets to the Guarantor or any other such Subsidiary.

Notwithstanding the foregoing, the Guarantor or any such Subsidiary may suffer to exist any such encumbrance or restriction (a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an agreement relating to any Indebtedness incurred by any such Subsidiary prior to the date on which such Subsidiary was acquired by the Guarantor and outstanding on such date and not incurred in anticipation of becoming a Subsidiary of the Guarantor; (c) pursuant to an agreement relating to any Limited Recourse Indebtedness of the Guarantor or any such Subsidiary; or (d) pursuant to an agreement effecting a renewal, refunding or extension of Indebtedness incurred pursuant to an agreement referred to in clauses (a) through (c) of this paragraph, provided however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the board of directors of the general partner of the Guarantor.

 

[GUARANTEE_BRELP & BNY CANADA]

- 6 -


5.5 Limitations on Debt and Preferred Stock of Subsidiaries

The Guarantor will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Indebtedness or issue any Preferred Stock except: (a) Inter-Company Indebtedness of such Subsidiary; (b) Preferred Stock issued to any one or more of the Guarantor, an Additional Guarantor or any Subsidiary of the Guarantor or an Additional Guarantor; (c) Limited Recourse Indebtedness of such Subsidiary; (d) Net Swap Exposure of such Subsidiary; (e) Capital Lease Obligations of such Subsidiary; (f) purchase money obligations of such Subsidiary; and/or (g) any other Indebtedness or Preferred Stock of such Subsidiary (in addition to the Indebtedness and Preferred Stock referred to in paragraphs (a) to (f)) if, after giving effect to such other Indebtedness or Preferred Stock, the aggregate consolidated amount of all Indebtedness and Preferred Stock of BREP that does not constitute Inter-Company Indebtedness, Preferred Stock issued to the Borrower, a Guarantor, an Additional Guarantor or any of their Subsidiaries, Limited Recourse Indebtedness, Net Swap Exposure, Capital Lease Obligations or purchase money obligations, would not exceed 5% of the Net Worth. For the purposes of this covenant, the assignment by the Guarantor to a third party of Inter-Company Indebtedness owing by a Subsidiary will be considered to be incurrence of Indebtedness by that Subsidiary.

 

5.6 Limitations Concerning Merger, Consolidations and Certain Asset Sales

So long as any Debentures are outstanding, the Guarantor will not enter into any transaction, directly or indirectly through a Subsidiary of the Guarantor, whereby all or substantially all of the undertaking, property and assets of the Guarantor would become the property of any other Person (any such Person being herein referred to as a “Successor”), whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, provided that nothing contained in this Indenture will prevent any such transaction if:

 

  (a) the Successor shall have executed, prior to or contemporaneously with the consummation of any such transaction, an assumption of the obligations of the Guarantor under this Agreement, including the due and punctual payment of all amounts payable hereunder, and such other instruments as in the opinion of the Guarantor’s Counsel are necessary or advisable to evidence the agreement of the Successor to observe and perform all the covenants and obligations of the Guarantor under this Indenture;

 

  (b) no condition or event shall exist as to the Guarantor or the Successor, either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto or immediately after compliance by the Successor with the provisions of this Section 5.6, which constitutes or would constitute, after the giving of notice or lapse of time, or both, an Event of Default; and

 

  (c) the Guarantor shall have delivered to the Trustee an Opinion of the Guarantor Counsel and an Officers’ Certificate stating that the conditions precedent in this Section 5.6 have been satisfied,

 

[GUARANTEE_BRELP & BNY CANADA]

- 7 -


provided, however, the provisions of this Section 5.6 shall not be applicable to any transaction between or among any one or more of the Borrower, the Guarantor, an Additional Guarantor and/or any Subsidiary of any of them.

Whenever the conditions of this Section 5.6 have been duly observed and performed, (i) the Person who was a party to this Agreement as Guarantor immediately prior to the transaction described in Section 5.6 shall be released and discharged from all liability under this Agreement, (ii) references to the Guarantor under this Agreement will thereafter refer to the Successor which has complied with the provisions of this Section 5.6, and (iii) the Trustee will execute and deliver any documents which it may be advised are necessary, desirable or advisable for effecting or evidencing such release and discharge.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

 

6.1 Representations and Warranties

The Guarantor represents and warrants to the Trustee as follows:

6.1.1 it is duly created and existing under the laws of its jurisdiction of formation and has the power and capacity to own its properties and assets and to carry on its business as presently carried on by it;

6.1.2 it has the power and capacity to enter into this Agreement and to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it;

6.1.3 it has taken all necessary corporate and, if applicable, partnership action to authorize the execution, delivery and performance of this Agreement;

6.1.4 the entering into of this Agreement and the performance by the Guarantor of its obligations hereunder does not and will not contravene, breach or result in any default under the constating documents of the Guarantor or under any material mortgage, lease, agreement or other legally binding instrument, license, permit or law to which the Guarantor is a party or by which the Guarantor or any of its properties or assets may be bound and will not result in or permit the acceleration of the maturity of any indebtedness, liability or obligation of the Guarantor under any material mortgage, lease, agreement or other legally binding instrument of or affecting the Guarantor; and

6.1.5 no authorization, consent or approval of, of filing with or notice to, any Person or governmental body is required in connection with the execution, delivery or performance of this Agreement by the Guarantor.

 

[GUARANTEE_BRELP & BNY CANADA]

- 8 -


ARTICLE 7

DEFAULT

 

7.1 Judgment Against the Guarantor

In case of any judicial or other proceedings to enforce the rights of the Debentureholders, judgment may be rendered against the Guarantor in favour of the Debentureholders or in favour of the Trustee, as trustee for the Debentureholders, for any amount which may remain due in respect of the Debentures and the interest thereon.

 

7.2 Immunity of Shareholders, Directors and Officers

The Trustee and the Holders by their acceptance of the Debentures hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, director, officer or partner of the Guarantor or of any successor thereof for the payment of the principal of or premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Guarantor herein or in the Debentures contained.

 

7.3 Recourse

Notwithstanding anything contained in this Guarantee or the Indenture to the contrary, the obligations of the Guarantor hereunder will be performed, satisfied and paid only out of, and enforced only against, and recourse will only be had against, the assets of the Guarantor. This Agreement and the obligations of the Guarantor hereunder will not be personally binding upon, and resort will not be had to, nor will recourse or satisfaction be sought from the private property of any of the limited partners of the Guarantor.

ARTICLE 8

MISCELLANEOUS

 

8.1 Incorporation by Reference

The provisions of Articles 11 (Meetings of Debentureholders), 12 (Notices), 13 (Concerning the Trustee) and 14 (Supplemental Indentures) of the Trust Indenture shall apply mutatis mutandis to this Guarantee.

 

8.2 Payment of Costs and Expenses

The Guarantor shall pay to the Trustee on demand all costs and expenses of the Trustee, its officers, employees and agents and any receiver or receiver-manager appointed by it or by a court in connection with this Agreement, including, without limitation, in connection with:

8.2.1 any actual or proposed amendment or modification hereof or any waiver hereunder and all instruments supplemental or ancillary thereto;

 

[GUARANTEE_BRELP & BNY CANADA]

- 9 -


8.2.2 obtaining advice as to the Trustee’s rights and responsibilities under this Agreement; and

8.2.3 the defence, establishment, protection or enforcement of any of the rights or remedies of the Trustee under this Agreement including, without limitation, all costs and expenses of establishing the validity and enforceability of, or of collection of amounts owing under, this Agreement;

and further including, without limitation, all of the reasonable fees, expenses and disbursements of the Trustee’s lawyers, on a substantial indemnity basis, incurred in connection therewith and all sales or value-added taxes payable by the Trustee (whether refundable or not) on all such costs and expenses.

 

8.3 No Waiver

No delay on the part of the Trustee in the exercise of any right, power or remedy hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Trustee of any right, power or remedy shall preclude other or further exercise thereof or the exercise of any other right, power or remedy. No action of the Trustee permitted hereunder shall in any way impair or affect its rights, powers or remedies under this Agreement.

 

8.4 Successors and Assigns

This Agreement shall be binding upon the Guarantor and its successors and enure to the benefit of the Trustee and its successors and assigns.

8.5 Copy Received

The Guarantor acknowledges receipt of a copy of this Agreement.

 

[GUARANTEE_BRELP & BNY CANADA]

- 10 -


IN WITNESS WHEREOF the Guarantor has executed this Agreement as of the date first above written.

 

BROOKFIELD RENEWABLE ENERGY L.P.,

by its general partner, BREP HOLDING L.P.,

by its general partner, 2288508 ONTARIO INC.

by:       “Jane Sheere”        
  Name: Jane Sheere
  Title: Secretary

 

[GUARANTEE_BRELP & BNY CANADA]

 

Exhibit 4.10

GUARANTEE

THIS GUARANTEE is made as of the 23 rd day of November, 2011,

 

BY:   

BROOKFIELD RENEWABLE ENERGY PARTNERS

L.P., an exempted partnership formed under the laws of

Bermuda

  

 

(the “ Guarantor ”)

  

 

- and -

  

 

BNY TRUST COMPANY OF CANADA , a trust
company existing under the laws of Canada

  

 

(the “ Trustee ”)

RECITALS:

 

A. The Borrower (as defined below), The Bank of New York Mellon and the Trustee have entered into an amended and restated trust indenture dated as of the date hereof (as amended, extended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), providing for the issuance of Debentures as therein described.

 

B. The Borrower is a subsidiary of the Guarantor.

 

C. The Guarantor will, directly or indirectly, benefit from the assumption by the Borrower of the obligations of Brookfield Renewable Power Inc. under the Indenture and the issuance of Debentures thereunder from time to time and, accordingly, desires to execute this Guarantee.

NOW THEREFORE in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby covenants and agrees with the Trustee as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

In this Agreement, all capitalized terms used and not defined in this Agreement will have the meanings given to such terms in the Indenture. In addition, the following terms will have the following meanings:

1.1.1 “Additional Guarantor” means a “Guarantor” as that term is defined in the Indenture, other than the Guarantor under this Agreement;

1.1.2 “this Agreement” , “this Guarantee”, “herein” , “hereof” , “hereby” , “hereunder” and any similar expressions refer to this Guarantee as it may be supplemented, amended or restated from time to time, and not to any particular Article, section or other portion hereof;

 

[GUARANTEE_BREP & BNY CANADA]


1.1.3 “Borrower” means BRP Finance ULC a corporation incorporated under the laws of Alberta, and its successors;

1.1.4 “Event of Default” means the occurrence of any of the following:

 

  (a) any Event of Default under the Indenture;

 

  (b) failure on the part of the Guarantor to perform or comply with Section 5.6 of this Agreement;

 

  (c) failure on the part of the Guarantor to perform any other covenant or agreement of the Guarantor under this Agreement for the benefit of the Debentureholders, which failure continues for 60 days after written notice thereof is given to the Guarantor by the Trustee or Holders of at least 25% in aggregate principal amount of outstanding Debentures; or

 

  (d) failure on the part of the Guarantor to make payment of any amounts payable by it under this Agreement;

1.1.5 “Guaranteed Obligations” means the principal of, premium, if any, and interest on all Debentures issued by the Borrower under the Indenture from time to time when and as the same shall become due and payable, whether at maturity, upon redemption, acceleration or otherwise, and all other obligations and liabilities owing by the Borrower to the Trustee under the Indenture, whether present or future, absolute or contingent, liquidated or unliquidated, as principal or as surety, alone or with others, of whatsoever nature or kind, in any currency, under or in respect of the Indenture;

1.1.6 “Guarantor Counsel” means legal counsel retained by the Guarantor;

1.1.7 “Officers’ Certificate” means a certificate of the general partner of the Guarantor signed by any two officers of the general partner of the Guarantor in their capacities as officers and not in their personal capacities; and

1.1.8 “Proceedings” means any receivership, insolvency, proposal, bankruptcy, compromise, arrangement, winding-up, dissolution or other similar judicial proceedings.

 

1.2 Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

 

[GUARANTEE_BREP & BNY CANADA]

- 2 -


1.3 References to Articles and Sections

Whenever in this Agreement a particular Article, section or other portion thereof is referred to, such reference pertains to the Article, section or portion thereof contained herein unless otherwise indicated.

 

1.4 Currency

All amounts in this Agreement are stated and shall be paid in Canadian currency.

 

1.5 Gender and Number

In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing gender include all genders or the neuter, and words importing the neuter include all genders.

 

1.6 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect.

 

1.7 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement.

 

1.8 Governing Law, Attornment

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and the Guarantor hereby irrevocably attorns to the jurisdiction of the courts of Ontario.

ARTICLE 2

GUARANTEE

 

2.1 Guarantee

The Guarantor unconditionally guarantees the due payment of all Guaranteed Obligations.

 

2.2 Continuing Guarantee

The guarantee herein shall be a continuing guarantee of the payment of all the Guaranteed Obligations and shall apply to and secure any ultimate balance thereof due or remaining unpaid. The guarantee herein shall not be considered as wholly or partially satisfied by the intermediate payment or satisfaction at any time of all or any part of the Guaranteed Obligations.

 

[GUARANTEE_BREP & BNY CANADA]

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ARTICLE 3

ENFORCEMENT OF GUARANTEE

 

3.1 Demand

Upon the occurrence of an Event of Default, the Guarantor shall, on demand by the Trustee, forthwith pay to the Trustee all Guaranteed Obligations for which such demand was made.

 

3.2 Right to Immediate Payment or Performance

The Trustee shall not be bound to make any demand on or to seek or exhaust its recourse against the Borrower or any other Person before being entitled to demand payment from the Guarantor and enforce its rights under this Agreement, and the Guarantor hereby renounces all benefits of discussion and division.

 

3.3 Trustee’s Statement

The statement in writing of the Trustee as to the amount payable hereunder shall be binding upon the Guarantor and conclusive against it in the absence of manifest error.

ARTICLE 4

PROTECTION OF TRUSTEE

 

4.1 Liability Absolute

The liability of the Guarantor hereunder shall be absolute and unconditional and shall not be discharged, diminished or in any way affected by:

4.1.1 any amalgamation, merger, consolidation or reorganization of the Borrower, the Guarantor or the Trustee, or any continuation of the Borrower, the Guarantor or the Trustee from the statute under which it now or hereafter exists to another statute, whether under the laws of the same jurisdiction or another jurisdiction;

4.1.2 any change in the name, business, objects, capital structure, ownership, constating documents, by-laws or resolutions of the Borrower, the Guarantor or the Trustee, including without limitation any transaction (whether by way of transfer, sale or otherwise) whereby all or any part of the undertaking, property and assets of the Borrower, the Guarantor or the Trustee becomes the property of any other Person;

4.1.3 any Proceedings of or affecting the Borrower, the Guarantor, the Trustee or any other Person, and any court orders made or action taken by the Borrower, the Guarantor, the Trustee or any other Person under or in connection with those Proceedings, whether or not those Proceedings or orders or that action results in any of the matters described in Section 4.2 occurring with or without the consent of the Trustee;

 

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4.1.4 any defence, counterclaim or right of set-off available to the Borrower; and

4.1.5 any other circumstance which might otherwise constitute in whole or in part a defence available to, or a discharge of, the Guarantor, the Borrower or any other Person in respect of the Guaranteed Obligations or the liability of the Guarantor.

 

4.2 Dealings by Trustee

The Trustee may from time to time in its absolute discretion, without discharging, diminishing or in any way affecting the liability of the Guarantor hereunder:

4.2.1 enforce or take action under or abstain from enforcing or taking action under the Indenture, any other guarantee or any other agreement;

4.2.2 renew all or any part of the Guaranteed Obligations or grant extensions of time or any other indulgences to the Borrower or to any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.3 accept or make any compositions or arrangements with or release, discharge or otherwise deal with or abstain from dealing with the Borrower or any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.4 in whole or in part prove or abstain from proving a claim of the Trustee in any Proceedings of or affecting the Borrower or any other Person; and

4.2.5 agree with the Borrower, any other guarantor or any other Person to do anything described in Sections 4.2.1 to 4.2.4,

whether or not any of the matters described above occur alone or in connection with one or more other such matters.

ARTICLE 5

COVENANTS OF THE GUARANTOR

 

5.1 Limitations on Indebtedness

The Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Funded Indebtedness unless, after giving effect thereto, the Funded Indebtedness of the Guarantor, calculated on a consolidated basis, would not exceed 75% of Total Consolidated Capitalization.

 

5.2 Limitation on Liens

The Guarantor will not create or permit to exist any lien on any present or future assets of the Guarantor to secure any borrowed money, or permit any of its Subsidiaries to create or permit to exist any lien on any present or future assets of such Subsidiary to secure any borrowed money, unless at the same time the Guaranteed Obligations are secured equally and ratably with such borrowed money, provided that this shall not apply to liens existing on the date

 

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hereof or Permitted Encumbrances. Upon being advised by the Guarantor in writing in an Officers’ Certificate that security has been provided for the Guaranteed Obligations on an equal and ratable basis in connection with the grant to a third party of security for borrowed money and subsequently that such security to the third party has been released, the Trustee will forthwith release the security granted for the Guaranteed Obligations.

 

5.3 Limitation on Sale and Leaseback Transactions

The Guarantor will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction unless:

 

  (a) the Sale and Leaseback Transaction is entered into prior to, concurrently with, or within 180 days after the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operations of the relevant property, and the Guarantor or such Subsidiary applies within 60 days after the sale an amount equal to the net proceeds of the sale (i) to the repayment of Indebtedness which is pari passu to the Guaranteed Obligations, (ii) to the redemption of the Debentures, or (iii) to the reinvestment in its core business or the core business of the Borrower, an Additional Guarantor and/or any Subsidiary of the Borrower or any Additional Guarantor; or

 

  (b) the Guarantor or the Subsidiary could otherwise grant a security interest on the property as a Permitted Encumbrance.

 

5.4 Limitation on Distributions

The Guarantor may not, and may not permit any of its Subsidiaries, to suffer to exist any encumbrance or restriction on the ability of any Subsidiary of the Guarantor: (i) to pay, directly or indirectly, dividends permitted by applicable law or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Guarantor or any other such Subsidiary; (ii) to make loans or advances to the Guarantor or any other such Subsidiary; or (iii) to transfer any or all of its property or assets to the Guarantor or any other such Subsidiary.

Notwithstanding the foregoing, the Guarantor or any such Subsidiary may suffer to exist any such encumbrance or restriction (a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an agreement relating to any Indebtedness incurred by any such Subsidiary prior to the date on which such Subsidiary was acquired by the Guarantor and outstanding on such date and not incurred in anticipation of becoming a Subsidiary of the Guarantor; (c) pursuant to an agreement relating to any Limited Recourse Indebtedness of the Guarantor or any such Subsidiary; or (d) pursuant to an agreement effecting a renewal, refunding or extension of Indebtedness incurred pursuant to an agreement referred to in clauses (a) through (c) of this paragraph, provided however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the board of directors of the general partner of the Guarantor.

 

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5.5 Limitations on Debt and Preferred Stock of Subsidiaries

The Guarantor will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Indebtedness or issue any Preferred Stock except: (a) Inter-Company Indebtedness of such Subsidiary; (b) Preferred Stock issued to any one or more of the Guarantor, an Additional Guarantor or any Subsidiary of the Guarantor or an Additional Guarantor; (c) Limited Recourse Indebtedness of such Subsidiary; (d) Net Swap Exposure of such Subsidiary; (e) Capital Lease Obligations of such Subsidiary; (f) purchase money obligations of such Subsidiary; and/or (g) any other Indebtedness or Preferred Stock of such Subsidiary (in addition to the Indebtedness and Preferred Stock referred to in paragraphs (a) to (f)) if, after giving effect to such other Indebtedness or Preferred Stock, the aggregate consolidated amount of all Indebtedness and Preferred Stock of the Guarantor that does not constitute Inter-Company Indebtedness, Preferred Stock issued to the Borrower, a Guarantor, an Additional Guarantor or any of their Subsidiaries, Limited Recourse Indebtedness, Net Swap Exposure, Capital Lease Obligations or purchase money obligations, would not exceed 5% of the Net Worth. For the purposes of this covenant, the assignment by the Guarantor to a third party of Inter-Company Indebtedness owing by a Subsidiary will be considered to be incurrence of Indebtedness by that Subsidiary.

 

5.6 Limitations Concerning Merger, Consolidations and Certain Asset Sales

So long as any Debentures are outstanding, the Guarantor will not enter into any transaction, directly or indirectly through a Subsidiary of the Guarantor, whereby all or substantially all of the undertaking, property and assets of the Guarantor would become the property of any other Person (any such Person being herein referred to as a “ Successor ”), whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, provided that nothing contained in this Indenture will prevent any such transaction if:

 

  (a) the Successor shall have executed, prior to or contemporaneously with the consummation of any such transaction, an assumption of the obligations of the Guarantor under this Agreement, including the due and punctual payment of all amounts payable hereunder, and such other instruments as in the opinion of the Guarantor’s Counsel are necessary or advisable to evidence the agreement of the Successor to observe and perform all the covenants and obligations of the Guarantor under this Indenture;

 

  (b) no condition or event shall exist as to the Guarantor or the Successor, either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto or immediately after compliance by the Successor with the provisions of this Section 5.6, which constitutes or would constitute, after the giving of notice or lapse of time, or both, an Event of Default; and

 

  (c) the Guarantor shall have delivered to the Trustee an Opinion of the Guarantor Counsel and an Officers’ Certificate stating that the conditions precedent in this Section 5.6 have been satisfied,

 

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provided, however, the provisions of this Section 5.6 shall not be applicable to any transaction between or among any one or more of the Borrower, the Guarantor, an Additional Guarantor and/or any Subsidiary of any of them.

Whenever the conditions of this Section 5.6 have been duly observed and performed, (i) the Person who was a party to this Agreement as Guarantor immediately prior to the transaction described in Section 5.6 shall be released and discharged from all liability under this Agreement, (ii) references to the Guarantor under this Agreement will thereafter refer to the Successor which has complied with the provisions of this Section 5.6, and (iii) the Trustee will execute and deliver any documents which it may be advised are necessary, desirable or advisable for effecting or evidencing such release and discharge.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

 

6.1 Representations and Warranties

The Guarantor represents and warrants to the Trustee as follows:

6.1.1 it is duly created and existing under the laws of its jurisdiction of formation and has the power and capacity to own its properties and assets and to carry on its business as presently carried on by it;

6.1.2 it has the power and capacity to enter into this Agreement and to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it;

6.1.3 it has taken all necessary corporate and, if applicable, partnership action to authorize the execution, delivery and performance of this Agreement;

6.1.4 the entering into of this Agreement and the performance by the Guarantor of its obligations hereunder does not and will not contravene, breach or result in any default under the constating documents of the Guarantor or under any material mortgage, lease, agreement or other legally binding instrument, license, permit or law to which the Guarantor is a party or by which the Guarantor or any of its properties or assets may be bound and will not result in or permit the acceleration of the maturity of any indebtedness, liability or obligation of the Guarantor under any material mortgage, lease, agreement or other legally binding instrument of or affecting the Guarantor; and

6.1.5 no authorization, consent or approval of, of filing with or notice to, any Person or governmental body is required in connection with the execution, delivery or performance of this Agreement by the Guarantor.

 

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ARTICLE 7

DEFAULT

 

7.1 Judgment Against the Guarantor

In case of any judicial or other proceedings to enforce the rights of the Debentureholders, judgment may be rendered against the Guarantor in favour of the Debentureholders or in favour of the Trustee, as trustee for the Debentureholders, for any amount which may remain due in respect of the Debentures and the interest thereon.

 

7.2 Immunity of Shareholders, Directors and Officers

The Trustee and the Holders by their acceptance of the Debentures hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, director, officer or partner of the Guarantor or of any successor thereof for the payment of the principal of or premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Guarantor herein or in the Debentures contained.

 

7.3 Recourse

Notwithstanding anything contained in this Guarantee or the Indenture to the contrary, the obligations of the Guarantor hereunder will be performed, satisfied and paid only out of, and enforced only against, and recourse will only be had against, the assets of the Guarantor. This Agreement and the obligations of the Guarantor hereunder will not be personally binding upon, and resort will not be had to, nor will recourse or satisfaction be sought from the private property of any of the limited partners of the Guarantor.

ARTICLE 8

MISCELLANEOUS

 

8.1 Incorporation by Reference

The provisions of Articles 11 (Meetings of Debentureholders), 12 (Notices), 13 (Concerning the Trustee) and 14 (Supplemental Indentures) of the Trust Indenture shall apply mutatis mutandis to this Guarantee.

 

8.2 Payment of Costs and Expenses

The Guarantor shall pay to the Trustee on demand all costs and expenses of the Trustee, its officers, employees and agents and any receiver or receiver-manager appointed by it or by a court in connection with this Agreement, including, without limitation, in connection with:

8.2.1 any actual or proposed amendment or modification hereof or any waiver hereunder and all instruments supplemental or ancillary thereto;

 

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8.2.2 obtaining advice as to the Trustee’s rights and responsibilities under this Agreement; and

8.2.3 the defence, establishment, protection or enforcement of any of the rights or remedies of the Trustee under this Agreement including, without limitation, all costs and expenses of establishing the validity and enforceability of, or of collection of amounts owing under, this Agreement;

and further including, without limitation, all of the reasonable fees, expenses and disbursements of the Trustee’s lawyers, on a substantial indemnity basis, incurred in connection therewith and all sales or value-added taxes payable by the Trustee (whether refundable or not) on all such costs and expenses.

 

8.3 No Waiver

No delay on the part of the Trustee in the exercise of any right, power or remedy hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Trustee of any right, power or remedy shall preclude other or further exercise thereof or the exercise of any other right, power or remedy. No action of the Trustee permitted hereunder shall in any way impair or affect its rights, powers or remedies under this Agreement.

 

8.4 Successors and Assigns

This Agreement shall be binding upon the Guarantor and its successors and enure to the benefit of the Trustee and its successors and assigns.

 

8.5 Copy Received

The Guarantor acknowledges receipt of a copy of this Agreement.

 

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IN WITNESS WHEREOF the Guarantor has executed this Agreement as of the date first above written.

 

BROOKFIELD RENEWABLE ENERGY

PARTNERS L.P. , by its general partner, 2288509

ONTARIO INC.

by:       “Jane Sheere”        
 

Name: Jane Sheere

Title: Secretary

 

[GUARANTEE_BREP & BNY CANADA]

 

Exhibit 4.11

GUARANTEE

THIS GUARANTEE is made as of the 23 rd day of November, 2011,

 

BY:    BRP BERMUDA HOLDINGS I LIMITED , a corporation incorporated under the laws of Bermuda
   (the “ Guarantor ”)
   - and -
   BNY TRUST COMPANY OF CANADA , a trust company existing under the laws of Canada
   (the “ Trustee ”)

RECITALS:

 

A. The Borrower (as defined below), The Bank of New York Mellon and the Trustee have entered into an amended and restated trust indenture dated as of the date hereof (as amended, extended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), providing for the issuance of Debentures as therein described.

 

B. The Borrower is an affiliate of the Guarantor.

 

C. The Guarantor will, directly or indirectly, benefit from the assumption by the Borrower of the obligations of Brookfield Renewable Power Inc. under the Indenture and the issuance of Debentures thereunder from time to time and, accordingly, desires to execute this Guarantee.

NOW THEREFORE in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby covenants and agrees with the Trustee as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

In this Agreement, all capitalized terms used and not defined in this Agreement will have the meanings given to such terms in the Indenture. In addition, the following terms will have the following meanings:

1.1.1 “Additional Guarantor” means a “Guarantor” as that term is defined in the Indenture, other than the Guarantor under this Agreement;

1.1.2 “this Agreement” , “this Guarantee”, “herein” , “hereof” , “hereby” , “hereunder” and any similar expressions refer to this Guarantee as it may be supplemented, amended or restated from time to time, and not to any particular Article, section or other portion hereof;

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

 


1.1.3 “Borrower” means BRP Finance ULC a corporation incorporated under the laws of Alberta, and its successors;

1.1.4 “Event of Default” means the occurrence of any of the following:

 

  (a) any Event of Default under the Indenture;

 

  (b) failure on the part of the Guarantor to perform or comply with Section 5.6 of this Agreement;

 

  (c) failure on the part of the Guarantor to perform any other covenant or agreement of the Guarantor under this Agreement for the benefit of the Debentureholders, which failure continues for 60 days after written notice thereof is given to the Guarantor by the Trustee or Holders of at least 25% in aggregate principal amount of outstanding Debentures; or

 

  (d) failure on the part of the Guarantor to make payment of any amounts payable by it under this Agreement;

1.1.5 “Guaranteed Obligations” means the principal of, premium, if any, and interest on all Debentures issued by the Borrower under the Indenture from time to time when and as the same shall become due and payable, whether at maturity, upon redemption, acceleration or otherwise, and all other obligations and liabilities owing by the Borrower to the Trustee under the Indenture, whether present or future, absolute or contingent, liquidated or unliquidated, as principal or as surety, alone or with others, of whatsoever nature or kind, in any currency, under or in respect of the Indenture;

1.1.6 “Guarantor Counsel” means legal counsel retained by the Guarantor;

1.1.7 “Officers’ Certificate” means a certificate of the Guarantor signed by any two officers of the Guarantor in their capacities as officers and not in their personal capacities; and

1.1.8 “Proceedings” means any receivership, insolvency, proposal, bankruptcy, compromise, arrangement, winding-up, dissolution or other similar judicial proceedings.

 

1.2 Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

 

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1.3 References to Articles and Sections

Whenever in this Agreement a particular Article, section or other portion thereof is referred to, such reference pertains to the Article, section or portion thereof contained herein unless otherwise indicated.

 

1.4 Currency

All amounts in this Agreement are stated and shall be paid in Canadian currency.

 

1.5 Gender and Number

In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing gender include all genders or the neuter, and words importing the neuter include all genders.

 

1.6 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect.

 

1.7 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement.

 

1.8 Governing Law, Attornment

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and the Guarantor hereby irrevocably attorns to the jurisdiction of the courts of Ontario.

ARTICLE 2

GUARANTEE

 

2.1 Guarantee

The Guarantor unconditionally guarantees the due payment of all Guaranteed Obligations.

 

2.2 Continuing Guarantee

The guarantee herein shall be a continuing guarantee of the payment of all the Guaranteed Obligations and shall apply to and secure any ultimate balance thereof due or remaining unpaid. The guarantee herein shall not be considered as wholly or partially satisfied by the intermediate payment or satisfaction at any time of all or any part of the Guaranteed Obligations.

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

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ARTICLE 3

ENFORCEMENT OF GUARANTEE

 

3.1 Demand

Upon the occurrence of an Event of Default, the Guarantor shall, on demand by the Trustee, forthwith pay to the Trustee all Guaranteed Obligations for which such demand was made.

 

3.2 Right to Immediate Payment or Performance

The Trustee shall not be bound to make any demand on or to seek or exhaust its recourse against the Borrower or any other Person before being entitled to demand payment from the Guarantor and enforce its rights under this Agreement, and the Guarantor hereby renounces all benefits of discussion and division.

 

3.3 Trustee’s Statement

The statement in writing of the Trustee as to the amount payable hereunder shall be binding upon the Guarantor and conclusive against it in the absence of manifest error.

ARTICLE 4

PROTECTION OF TRUSTEE

 

4.1 Liability Absolute

The liability of the Guarantor hereunder shall be absolute and unconditional and shall not be discharged, diminished or in any way affected by:

4.1.1 any amalgamation, merger, consolidation or reorganization of the Borrower, the Guarantor or the Trustee, or any continuation of the Borrower, the Guarantor or the Trustee from the statute under which it now or hereafter exists to another statute, whether under the laws of the same jurisdiction or another jurisdiction;

4.1.2 any change in the name, business, objects, capital structure, ownership, constating documents, by-laws or resolutions of the Borrower, the Guarantor or the Trustee, including without limitation any transaction (whether by way of transfer, sale or otherwise) whereby all or any part of the undertaking, property and assets of the Borrower, the Guarantor or the Trustee becomes the property of any other Person;

4.1.3 any Proceedings of or affecting the Borrower, the Guarantor, the Trustee or any other Person, and any court orders made or action taken by the Borrower, the Guarantor, the Trustee or any other Person under or in connection with those Proceedings, whether or not those Proceedings or orders or that action results in any of the matters described in Section 4.2 occurring with or without the consent of the Trustee;

 

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4.1.4 any defence, counterclaim or right of set-off available to the Borrower; and

4.1.5 any other circumstance which might otherwise constitute in whole or in part a defence available to, or a discharge of, the Guarantor, the Borrower or any other Person in respect of the Guaranteed Obligations or the liability of the Guarantor.

 

4.2 Dealings by Trustee

The Trustee may from time to time in its absolute discretion, without discharging, diminishing or in any way affecting the liability of the Guarantor hereunder:

4.2.1 enforce or take action under or abstain from enforcing or taking action under the Indenture, any other guarantee or any other agreement;

4.2.2 renew all or any part of the Guaranteed Obligations or grant extensions of time or any other indulgences to the Borrower or to any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.3 accept or make any compositions or arrangements with or release, discharge or otherwise deal with or abstain from dealing with the Borrower or any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.4 in whole or in part prove or abstain from proving a claim of the Trustee in any Proceedings of or affecting the Borrower or any other Person; and

4.2.5 agree with the Borrower, any other guarantor or any other Person to do anything described in Sections 4.2.1 to 4.2.4,

whether or not any of the matters described above occur alone or in connection with one or more other such matters.

ARTICLE 5

COVENANTS OF THE GUARANTOR

 

5.1 Limitations on Indebtedness

The Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Funded Indebtedness unless, after giving effect thereto, the Funded Indebtedness of BREP, calculated on a consolidated basis, would not exceed 75% of Total Consolidated Capitalization.

 

5.2 Limitation on Liens

The Guarantor will not create or permit to exist any lien on any present or future assets of the Guarantor to secure any borrowed money, or permit any of its Subsidiaries to create or permit to exist any lien on any present or future assets of such Subsidiary to secure any borrowed money, unless at the same time the Guaranteed Obligations are secured equally and ratably with such borrowed money, provided that this shall not apply to liens existing on the date

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

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hereof or Permitted Encumbrances. Upon being advised by the Guarantor in writing in an Officers’ Certificate that security has been provided for the Guaranteed Obligations on an equal and ratable basis in connection with the grant to a third party of security for borrowed money and subsequently that such security to the third party has been released, the Trustee will forthwith release the security granted for the Guaranteed Obligations.

 

5.3 Limitation on Sale and Leaseback Transactions

The Guarantor will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction unless:

 

  (a) the Sale and Leaseback Transaction is entered into prior to, concurrently with, or within 180 days after the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operations of the relevant property, and the Guarantor or such Subsidiary applies within 60 days after the sale an amount equal to the net proceeds of the sale (i) to the repayment of Indebtedness which is pari passu to the Guaranteed Obligations, (ii) to the redemption of the Debentures, or (iii) to the reinvestment in its core business or the core business of the Borrower, an Additional Guarantor and/or any Subsidiary of the Borrower or any Additional Guarantor; or

 

  (b) the Guarantor or the Subsidiary could otherwise grant a security interest on the property as a Permitted Encumbrance.

 

5.4 Limitation on Distributions

The Guarantor may not, and may not permit any of its Subsidiaries, to suffer to exist any encumbrance or restriction on the ability of any Subsidiary of the Guarantor: (i) to pay, directly or indirectly, dividends permitted by applicable law or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Guarantor or any other such Subsidiary; (ii) to make loans or advances to the Guarantor or any other such Subsidiary; or (iii) to transfer any or all of its property or assets to the Guarantor or any other such Subsidiary.

Notwithstanding the foregoing, the Guarantor or any such Subsidiary may suffer to exist any such encumbrance or restriction (a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an agreement relating to any Indebtedness incurred by any such Subsidiary prior to the date on which such Subsidiary was acquired by the Guarantor and outstanding on such date and not incurred in anticipation of becoming a Subsidiary of the Guarantor; (c) pursuant to an agreement relating to any Limited Recourse Indebtedness of the Guarantor or any such Subsidiary; or (d) pursuant to an agreement effecting a renewal, refunding or extension of Indebtedness incurred pursuant to an agreement referred to in clauses (a) through (c) of this paragraph, provided however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the board of directors of the Guarantor.

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

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5.5 Limitations on Debt and Preferred Stock of Subsidiaries

The Guarantor will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Indebtedness or issue any Preferred Stock except: (a) Inter-Company Indebtedness of such Subsidiary; (b) Preferred Stock issued to any one or more of the Guarantor, an Additional Guarantor or any Subsidiary of the Guarantor or an Additional Guarantor; (c) Limited Recourse Indebtedness of such Subsidiary; (d) Net Swap Exposure of such Subsidiary; (e) Capital Lease Obligations of such Subsidiary; (f) purchase money obligations of such Subsidiary; and/or (g) any other Indebtedness or Preferred Stock of such Subsidiary (in addition to the Indebtedness and Preferred Stock referred to in paragraphs (a) to (f)) if, after giving effect to such other Indebtedness or Preferred Stock, the aggregate consolidated amount of all Indebtedness and Preferred Stock of BREP that does not constitute Inter-Company Indebtedness, Preferred Stock issued to the Borrower, a Guarantor, an Additional Guarantor or any of their Subsidiaries, Limited Recourse Indebtedness, Net Swap Exposure, Capital Lease Obligations or purchase money obligations, would not exceed 5% of the Net Worth. For the purposes of this covenant, the assignment by the Guarantor to a third party of Inter-Company Indebtedness owing by a Subsidiary will be considered to be incurrence of Indebtedness by that Subsidiary.

 

5.6 Limitations Concerning Merger, Consolidations and Certain Asset Sales

So long as any Debentures are outstanding, the Guarantor will not enter into any transaction, directly or indirectly through a Subsidiary of the Guarantor, whereby all or substantially all of the undertaking, property and assets of the Guarantor would become the property of any other Person (any such Person being herein referred to as a “Successor”), whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, provided that nothing contained in this Indenture will prevent any such transaction if:

 

  (a) the Successor shall have executed, prior to or contemporaneously with the consummation of any such transaction, an assumption of the obligations of the Guarantor under this Agreement, including the due and punctual payment of all amounts payable hereunder, and such other instruments as in the opinion of the Guarantor’s Counsel are necessary or advisable to evidence the agreement of the Successor to observe and perform all the covenants and obligations of the Guarantor under this Indenture;

 

  (b) no condition or event shall exist as to the Guarantor or the Successor, either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto or immediately after compliance by the Successor with the provisions of this Section 5.6, which constitutes or would constitute, after the giving of notice or lapse of time, or both, an Event of Default; and

 

  (c) the Guarantor shall have delivered to the Trustee an Opinion of the Guarantor Counsel and an Officers’ Certificate stating that the conditions precedent in this Section 5.6 have been satisfied,

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

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provided, however, the provisions of this Section 5.6 shall not be applicable to any transaction between or among any one or more of the Borrower, the Guarantor, an Additional Guarantor and/or any Subsidiary of any of them.

Whenever the conditions of this Section 5.6 have been duly observed and performed, (i) the Person who was a party to this Agreement as Guarantor immediately prior to the transaction described in Section 5.6 shall be released and discharged from all liability under this Agreement, (ii) references to the Guarantor under this Agreement will thereafter refer to the Successor which has complied with the provisions of this Section 5.6, and (iii) the Trustee will execute and deliver any documents which it may be advised are necessary, desirable or advisable for effecting or evidencing such release and discharge.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

 

6.1 Representations and Warranties

The Guarantor represents and warrants to the Trustee as follows:

6.1.1 it is duly created and existing under the laws of its jurisdiction of formation and has the power and capacity to own its properties and assets and to carry on its business as presently carried on by it;

6.1.2 it has the power and capacity to enter into this Agreement and to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it;

6.1.3 it has taken all necessary corporate and, if applicable, partnership action to authorize the execution, delivery and performance of this Agreement;

6.1.4 there is no unanimous shareholder agreement which restricts, in whole or in part, the powers of the directors of the Guarantor to manage or supervise the business and affairs of the Guarantor;

6.1.5 the entering into of this Agreement and the performance by the Guarantor of its obligations hereunder does not and will not contravene, breach or result in any default under the constating documents of the Guarantor or under any material mortgage, lease, agreement or other legally binding instrument, license, permit or law to which the Guarantor is a party or by which the Guarantor or any of its properties or assets may be bound and will not result in or permit the acceleration of the maturity of any indebtedness, liability or obligation of the Guarantor under any material mortgage, lease, agreement or other legally binding instrument of or affecting the Guarantor; and

6.1.6 no authorization, consent or approval of, of filing with or notice to, any Person or governmental body is required in connection with the execution, delivery or performance of this Agreement by the Guarantor.

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

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ARTICLE 7

DEFAULT

 

7.1 Judgment Against the Guarantor

In case of any judicial or other proceedings to enforce the rights of the Debentureholders, judgment may be rendered against the Guarantor in favour of the Debentureholders or in favour of the Trustee, as trustee for the Debentureholders, for any amount which may remain due in respect of the Debentures and the interest thereon.

 

7.2 Immunity of Shareholders, Directors and Officers

The Trustee and the Holders by their acceptance of the Debentures hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, director, officer or partner of the Guarantor or of any successor thereof for the payment of the principal of or premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Guarantor herein or in the Debentures contained.

 

7.3 Recourse

Notwithstanding anything contained in this Guarantee or the Indenture to the contrary, the obligations of the Guarantor hereunder will be performed, satisfied and paid only out of, and enforced only against, and recourse will only be had against, the assets of the Guarantor.

ARTICLE 8

MISCELLANEOUS

 

8.1 Incorporation by Reference

The provisions of Articles 11 (Meetings of Debentureholders), 12 (Notices), 13 (Concerning the Trustee) and 14 (Supplemental Indentures) of the Trust Indenture shall apply mutatis mutandis to this Guarantee.

 

8.2 Payment of Costs and Expenses

The Guarantor shall pay to the Trustee on demand all costs and expenses of the Trustee, its officers, employees and agents and any receiver or receiver-manager appointed by it or by a court in connection with this Agreement, including, without limitation, in connection with:

8.2.1 any actual or proposed amendment or modification hereof or any waiver hereunder and all instruments supplemental or ancillary thereto;

8.2.2 obtaining advice as to the Trustee’s rights and responsibilities under this Agreement; and

 

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8.2.3 the defence, establishment, protection or enforcement of any of the rights or remedies of the Trustee under this Agreement including, without limitation, all costs and expenses of establishing the validity and enforceability of, or of collection of amounts owing under, this Agreement;

and further including, without limitation, all of the reasonable fees, expenses and disbursements of the Trustee’s lawyers, on a substantial indemnity basis, incurred in connection therewith and all sales or value-added taxes payable by the Trustee (whether refundable or not) on all such costs and expenses.

 

8.3 No Waiver

No delay on the part of the Trustee in the exercise of any right, power or remedy hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Trustee of any right, power or remedy shall preclude other or further exercise thereof or the exercise of any other right, power or remedy. No action of the Trustee permitted hereunder shall in any way impair or affect its rights, powers or remedies under this Agreement.

 

8.4 Successors and Assigns

This Agreement shall be binding upon the Guarantor and its successors and enure to the benefit of the Trustee and its successors and assigns.

 

8.5 Copy Received

The Guarantor acknowledges receipt of a copy of this Agreement.

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

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IN WITNESS WHEREOF the Guarantor has executed this Agreement as of the date first above written.

 

BRP BERMUDA HOLDINGS I LIMITED
by:        “Jane Sheere”
  Name: Jane Sheere
  Title:   Secretary

 

[GUARANTEE_BERMUDA HOLDCO & BNY CANADA]

 

Exhibit 4.12

GUARANTEE

THIS GUARANTEE is made as of the 23 rd day of November, 2011,

 

BY:   

BROOKFIELD BRP HOLDINGS (CANADA) INC., a

corporation incorporated under the laws of the Province of Ontario

   (the “ Guarantor ”)
   - and -
   BNY TRUST COMPANY OF CANADA , a trust company existing under the laws of Canada
   (the “ Trustee ”)

RECITALS:

 

A. The Borrower (as defined below), The Bank of New York Mellon and the Trustee have entered into an amended and restated trust indenture dated as of the date hereof (as amended, extended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), providing for the issuance of Debentures as therein described.

 

B. The Borrower is a subsidiary of the Guarantor.

 

C. The Guarantor will, directly or indirectly, benefit from the assumption by the Borrower of the obligations of Brookfield Renewable Power Inc. under the Indenture and the issuance of Debentures thereunder from time to time and, accordingly, desires to execute this Guarantee.

NOW THEREFORE in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby covenants and agrees with the Trustee as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

In this Agreement, all capitalized terms used and not defined in this Agreement will have the meanings given to such terms in the Indenture. In addition, the following terms will have the following meanings:

1.1.1 “Additional Guarantor” means a “Guarantor” as that term is defined in the Indenture, other than the Guarantor under this Agreement;

1.1.2 “this Agreement” , “this Guarantee”, “herein” , “hereof” , “hereby” , “hereunder” and any similar expressions refer to this Guarantee as it may be supplemented, amended or restated from time to time, and not to any particular Article, section or other portion hereof;

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

 


1.1.3 “Borrower” means BRP Finance ULC a corporation incorporated under the laws of Alberta, and its successors;

1.1.4 “Event of Default” means the occurrence of any of the following:

 

  (a) any Event of Default under the Indenture;

 

  (b) failure on the part of the Guarantor to perform or comply with Section 5.6 of this Agreement;

 

  (c) failure on the part of the Guarantor to perform any other covenant or agreement of the Guarantor under this Agreement for the benefit of the Debentureholders, which failure continues for 60 days after written notice thereof is given to the Guarantor by the Trustee or Holders of at least 25% in aggregate principal amount of outstanding Debentures; or

 

  (d) failure on the part of the Guarantor to make payment of any amounts payable by it under this Agreement;

1.1.5 “Guaranteed Obligations” means the principal of, premium, if any, and interest on all Debentures issued by the Borrower under the Indenture from time to time when and as the same shall become due and payable, whether at maturity, upon redemption, acceleration or otherwise, and all other obligations and liabilities owing by the Borrower to the Trustee under the Indenture, whether present or future, absolute or contingent, liquidated or unliquidated, as principal or as surety, alone or with others, of whatsoever nature or kind, in any currency, under or in respect of the Indenture;

1.1.6 “Guarantor Counsel” means legal counsel retained by the Guarantor;

1.1.7 “Officers’ Certificate” means a certificate of the Guarantor signed by any two officers of the Guarantor in their capacities as officers and not in their personal capacities; and

1.1.8 “Proceedings” means any receivership, insolvency, proposal, bankruptcy, compromise, arrangement, winding-up, dissolution or other similar judicial proceedings.

 

1.2 Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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1.3 References to Articles and Sections

Whenever in this Agreement a particular Article, section or other portion thereof is referred to, such reference pertains to the Article, section or portion thereof contained herein unless otherwise indicated.

 

1.4 Currency

All amounts in this Agreement are stated and shall be paid in Canadian currency.

 

1.5 Gender and Number

In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing gender include all genders or the neuter, and words importing the neuter include all genders.

 

1.6 Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect.

 

1.7 Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement.

 

1.8 Governing Law, Attornment

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and the Guarantor hereby irrevocably attorns to the jurisdiction of the courts of Ontario.

ARTICLE 2

GUARANTEE

 

2.1 Guarantee

The Guarantor unconditionally guarantees the due payment of all Guaranteed Obligations.

 

2.2 Continuing Guarantee

The guarantee herein shall be a continuing guarantee of the payment of all the Guaranteed Obligations and shall apply to and secure any ultimate balance thereof due or remaining unpaid. The guarantee herein shall not be considered as wholly or partially satisfied by the intermediate payment or satisfaction at any time of all or any part of the Guaranteed Obligations.

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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ARTICLE 3

ENFORCEMENT OF GUARANTEE

 

3.1 Demand

Upon the occurrence of an Event of Default, the Guarantor shall, on demand by the Trustee, forthwith pay to the Trustee all Guaranteed Obligations for which such demand was made.

 

3.2 Right to Immediate Payment or Performance

The Trustee shall not be bound to make any demand on or to seek or exhaust its recourse against the Borrower or any other Person before being entitled to demand payment from the Guarantor and enforce its rights under this Agreement, and the Guarantor hereby renounces all benefits of discussion and division.

 

3.3 Trustee’s Statement

The statement in writing of the Trustee as to the amount payable hereunder shall be binding upon the Guarantor and conclusive against it in the absence of manifest error.

ARTICLE 4

PROTECTION OF TRUSTEE

 

4.1 Liability Absolute

The liability of the Guarantor hereunder shall be absolute and unconditional and shall not be discharged, diminished or in any way affected by:

4.1.1 any amalgamation, merger, consolidation or reorganization of the Borrower, the Guarantor or the Trustee, or any continuation of the Borrower, the Guarantor or the Trustee from the statute under which it now or hereafter exists to another statute, whether under the laws of the same jurisdiction or another jurisdiction;

4.1.2 any change in the name, business, objects, capital structure, ownership, constating documents, by-laws or resolutions of the Borrower, the Guarantor or the Trustee, including without limitation any transaction (whether by way of transfer, sale or otherwise) whereby all or any part of the undertaking, property and assets of the Borrower, the Guarantor or the Trustee becomes the property of any other Person;

4.1.3 any Proceedings of or affecting the Borrower, the Guarantor, the Trustee or any other Person, and any court orders made or action taken by the Borrower, the Guarantor, the Trustee or any other Person under or in connection with those Proceedings, whether or not those Proceedings or orders or that action results in any of the matters described in Section 4.2 occurring with or without the consent of the Trustee;

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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4.1.4 any defence, counterclaim or right of set-off available to the Borrower; and

4.1.5 any other circumstance which might otherwise constitute in whole or in part a defence available to, or a discharge of, the Guarantor, the Borrower or any other Person in respect of the Guaranteed Obligations or the liability of the Guarantor.

 

4.2 Dealings by Trustee

The Trustee may from time to time in its absolute discretion, without discharging, diminishing or in any way affecting the liability of the Guarantor hereunder:

4.2.1 enforce or take action under or abstain from enforcing or taking action under the Indenture, any other guarantee or any other agreement;

4.2.2 renew all or any part of the Guaranteed Obligations or grant extensions of time or any other indulgences to the Borrower or to any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.3 accept or make any compositions or arrangements with or release, discharge or otherwise deal with or abstain from dealing with the Borrower or any other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations;

4.2.4 in whole or in part prove or abstain from proving a claim of the Trustee in any Proceedings of or affecting the Borrower or any other Person; and

4.2.5 agree with the Borrower, any other guarantor or any other Person to do anything described in Sections 4.2.1 to 4.2.4,

whether or not any of the matters described above occur alone or in connection with one or more other such matters.

ARTICLE 5

COVENANTS OF THE GUARANTOR

 

5.1 Limitations on Indebtedness

The Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Funded Indebtedness unless, after giving effect thereto, the Funded Indebtedness of BREP, calculated on a consolidated basis, would not exceed 75% of Total Consolidated Capitalization.

 

5.2 Limitation on Liens

The Guarantor will not create or permit to exist any lien on any present or future assets of the Guarantor to secure any borrowed money, or permit any of its Subsidiaries to create or permit to exist any lien on any present or future assets of such Subsidiary to secure any borrowed money, unless at the same time the Guaranteed Obligations are secured equally and ratably with such borrowed money, provided that this shall not apply to liens existing on the date

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

- 5 -


hereof or Permitted Encumbrances. Upon being advised by the Guarantor in writing in an Officers’ Certificate that security has been provided for the Guaranteed Obligations on an equal and ratable basis in connection with the grant to a third party of security for borrowed money and subsequently that such security to the third party has been released, the Trustee will forthwith release the security granted for the Guaranteed Obligations.

 

5.3 Limitation on Sale and Leaseback Transactions

The Guarantor will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction unless:

 

  (a) the Sale and Leaseback Transaction is entered into prior to, concurrently with, or within 180 days after the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operations of the relevant property, and the Guarantor or such Subsidiary applies within 60 days after the sale an amount equal to the net proceeds of the sale (i) to the repayment of Indebtedness which is pari passu to the Guaranteed Obligations, (ii) to the redemption of the Debentures, or (iii) to the reinvestment in its core business or the core business of the Borrower, an Additional Guarantor and/or any Subsidiary of the Borrower or any Additional Guarantor; or

 

  (b) the Guarantor or the Subsidiary could otherwise grant a security interest on the property as a Permitted Encumbrance.

 

5.4 Limitation on Distributions

The Guarantor may not, and may not permit any of its Subsidiaries, to suffer to exist any encumbrance or restriction on the ability of any Subsidiary of the Guarantor: (i) to pay, directly or indirectly, dividends permitted by applicable law or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Guarantor or any other such Subsidiary; (ii) to make loans or advances to the Guarantor or any other such Subsidiary; or (iii) to transfer any or all of its property or assets to the Guarantor or any other such Subsidiary.

Notwithstanding the foregoing, the Guarantor or any such Subsidiary may suffer to exist any such encumbrance or restriction (a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an agreement relating to any Indebtedness incurred by any such Subsidiary prior to the date on which such Subsidiary was acquired by the Guarantor and outstanding on such date and not incurred in anticipation of becoming a Subsidiary of the Guarantor; (c) pursuant to an agreement relating to any Limited Recourse Indebtedness of the Guarantor or any such Subsidiary; or (d) pursuant to an agreement effecting a renewal, refunding or extension of Indebtedness incurred pursuant to an agreement referred to in clauses (a) through (c) of this paragraph, provided however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the board of directors of the Guarantor.

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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5.5 Limitations on Debt and Preferred Stock of Subsidiaries

The Guarantor will not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume or otherwise become liable for or in respect of any Indebtedness or issue any Preferred Stock except: (a) Inter-Company Indebtedness of such Subsidiary; (b) Preferred Stock issued to any one or more of the Guarantor, an Additional Guarantor or any Subsidiary of the Guarantor or an Additional Guarantor; (c) Limited Recourse Indebtedness of such Subsidiary; (d) Net Swap Exposure of such Subsidiary; (e) Capital Lease Obligations of such Subsidiary; (f) purchase money obligations of such Subsidiary; and/or (g) any other Indebtedness or Preferred Stock of such Subsidiary (in addition to the Indebtedness and Preferred Stock referred to in paragraphs (a) to (f)) if, after giving effect to such other Indebtedness or Preferred Stock, the aggregate consolidated amount of all Indebtedness and Preferred Stock of BREP that does not constitute Inter-Company Indebtedness, Preferred Stock issued to the Borrower, a Guarantor, an Additional Guarantor or any of their Subsidiaries, Limited Recourse Indebtedness, Net Swap Exposure, Capital Lease Obligations or purchase money obligations, would not exceed 5% of the Net Worth. For the purposes of this covenant, the assignment by the Guarantor to a third party of Inter-Company Indebtedness owing by a Subsidiary will be considered to be incurrence of Indebtedness by that Subsidiary.

 

5.6 Limitations Concerning Merger, Consolidations and Certain Asset Sales

So long as any Debentures are outstanding, the Guarantor will not enter into any transaction, directly or indirectly through a Subsidiary of the Guarantor, whereby all or substantially all of the undertaking, property and assets of the Guarantor would become the property of any other Person (any such Person being herein referred to as a “Successor”), whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, provided that nothing contained in this Indenture will prevent any such transaction if:

 

  (a) the Successor shall have executed, prior to or contemporaneously with the consummation of any such transaction, an assumption of the obligations of the Guarantor under this Agreement, including the due and punctual payment of all amounts payable hereunder, and such other instruments as in the opinion of the Guarantor’s Counsel are necessary or advisable to evidence the agreement of the Successor to observe and perform all the covenants and obligations of the Guarantor under this Indenture;

 

  (b) no condition or event shall exist as to the Guarantor or the Successor, either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto or immediately after compliance by the Successor with the provisions of this Section 5.6, which constitutes or would constitute, after the giving of notice or lapse of time, or both, an Event of Default; and

 

  (c) the Guarantor shall have delivered to the Trustee an Opinion of the Guarantor Counsel and an Officers’ Certificate stating that the conditions precedent in this Section 5.6 have been satisfied,

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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provided, however, the provisions of this Section 5.6 shall not be applicable to any transaction between or among any one or more of the Borrower, the Guarantor, an Additional Guarantor and/or any Subsidiary of any of them.

Whenever the conditions of this Section 5.6 have been duly observed and performed, (i) the Person who was a party to this Agreement as Guarantor immediately prior to the transaction described in Section 5.6 shall be released and discharged from all liability under this Agreement, (ii) references to the Guarantor under this Agreement will thereafter refer to the Successor which has complied with the provisions of this Section 5.6, and (iii) the Trustee will execute and deliver any documents which it may be advised are necessary, desirable or advisable for effecting or evidencing such release and discharge.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties

The Guarantor represents and warrants to the Trustee as follows:

6.1.1 it is duly created and existing under the laws of its jurisdiction of formation and has the power and capacity to own its properties and assets and to carry on its business as presently carried on by it;

6.1.2 it has the power and capacity to enter into this Agreement and to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it;

6.1.3 it has taken all necessary corporate and, if applicable, partnership action to authorize the execution, delivery and performance of this Agreement;

6.1.4 there is no unanimous shareholder agreement which restricts, in whole or in part, the powers of the directors of the Guarantor to manage or supervise the business and affairs of the Guarantor;

6.1.5 the entering into of this Agreement and the performance by the Guarantor of its obligations hereunder does not and will not contravene, breach or result in any default under the constating documents of the Guarantor or under any material mortgage, lease, agreement or other legally binding instrument, license, permit or law to which the Guarantor is a party or by which the Guarantor or any of its properties or assets may be bound and will not result in or permit the acceleration of the maturity of any indebtedness, liability or obligation of the Guarantor under any material mortgage, lease, agreement or other legally binding instrument of or affecting the Guarantor; and

6.1.6 no authorization, consent or approval of, of filing with or notice to, any Person or governmental body is required in connection with the execution, delivery or performance of this Agreement by the Guarantor.

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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ARTICLE 7

DEFAULT

 

7.1 Judgment Against the Guarantor

In case of any judicial or other proceedings to enforce the rights of the Debentureholders, judgment may be rendered against the Guarantor in favour of the Debentureholders or in favour of the Trustee, as trustee for the Debentureholders, for any amount which may remain due in respect of the Debentures and the interest thereon.

 

7.2 Immunity of Shareholders, Directors and Officers

The Trustee and the Holders by their acceptance of the Debentures hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, director, officer or partner of the Guarantor or of any successor thereof for the payment of the principal of or premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Guarantor herein or in the Debentures contained.

 

7.3 Recourse

Notwithstanding anything contained in this Guarantee or the Indenture to the contrary, the obligations of the Guarantor hereunder will be performed, satisfied and paid only out of, and enforced only against, and recourse will only be had against, the assets of the Guarantor.

ARTICLE 8

MISCELLANEOUS

 

8.1 Incorporation by Reference

The provisions of Articles 11 (Meetings of Debentureholders), 12 (Notices), 13 (Concerning the Trustee) and 14 (Supplemental Indentures) of the Trust Indenture shall apply mutatis mutandis to this Guarantee.

 

8.2 Payment of Costs and Expenses

The Guarantor shall pay to the Trustee on demand all costs and expenses of the Trustee, its officers, employees and agents and any receiver or receiver-manager appointed by it or by a court in connection with this Agreement, including, without limitation, in connection with:

8.2.1 any actual or proposed amendment or modification hereof or any waiver hereunder and all instruments supplemental or ancillary thereto;

8.2.2 obtaining advice as to the Trustee’s rights and responsibilities under this Agreement; and

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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8.2.3 the defence, establishment, protection or enforcement of any of the rights or remedies of the Trustee under this Agreement including, without limitation, all costs and expenses of establishing the validity and enforceability of, or of collection of amounts owing under, this Agreement;

and further including, without limitation, all of the reasonable fees, expenses and disbursements of the Trustee’s lawyers, on a substantial indemnity basis, incurred in connection therewith and all sales or value-added taxes payable by the Trustee (whether refundable or not) on all such costs and expenses.

 

8.3 No Waiver

No delay on the part of the Trustee in the exercise of any right, power or remedy hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Trustee of any right, power or remedy shall preclude other or further exercise thereof or the exercise of any other right, power or remedy. No action of the Trustee permitted hereunder shall in any way impair or affect its rights, powers or remedies under this Agreement.

 

8.4 Successors and Assigns

This Agreement shall be binding upon the Guarantor and its successors and enure to the benefit of the Trustee and its successors and assigns.

 

8.5 Copy Received

The Guarantor acknowledges receipt of a copy of this Agreement.

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

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IN WITNESS WHEREOF the Guarantor has executed this Agreement as of the date first above written.

 

BROOKFIELD BRP HOLDINGS (CANADA) INC.
by:        “Patricia Bood”
  Name: Patricia Bood
 

Title: Secretary, Senior Vice President of Legal

          Services and General Counsel

 

[GUARANTEE_CANHOLDCO & BNY CANADA]

 

Exhibit 4.13

BROOKFIELD RENEWABLE ENERGY L.P.

FIRST AMENDMENT TO AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

T HIS AMENDMENT (the “ Amendment ”) to the Amended and Restated Limited Partnership Agreement dated as of November 20, 2011 (the “ Agreement ”) of Brookfield Renewable Energy L.P. (the “ Partnership ”) is made as of the 4 th day of May 2012, by the undersigned. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.

W HEREAS , pursuant to Section 17.1 of the Agreement, subject to compliance with the requirements of the Limited Partnership Act and the Exempted Partnerships Act, the General Partner (pursuant to its power of attorney from the Limited Partners), without the approval of any Limited Partner, may amend any provision of the Agreement to reflect certain changes, as provided for in Section 17.1.13, including a change that, as determined by the General Partner in its sole discretion, does not adversely affect the Limited Partners as a whole (including any particular class of Partnership Interests as compared to other classes of Partnership Interests) in any material respect;

A ND WHEREAS , the board of directors of the General Partner, on behalf of the Partnership, resolved on May 4 th , 2012 to permit the deletion of requirements in the Agreement relating to the publication and audit of financial statements of the Partnership;

A ND WHEREAS , the General Partner desires to amend the Agreement as set out herein;

N OW THEREFORE ,

 

1. Amendment

Section 11.4 of the Agreement and all subsections therein are hereby amended by being deleted in their entirety.

 

2. This amendment shall be effective upon the date first written above.

 

3. Except as modified herein, all terms and conditions of the Agreement shall remain in full force and effect.


I N WITNESS WHEREOF , the General Partner has executed this Amendment as of the date first above written.

 

BROOKFIELD RENEWABLE

ENERGY L.P., by its general partner

BREP Holding L.P., by its general

partner BRP Bermuda GP Limited

By:        “Gregory E. A. Morrison”
  Name: Gregory E. A. Morrison
  Title:   President

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

We consent to the use in this Registration Statement of Brookfield Renewable Energy Partners L.P. on Amendment No. 1 to the Form 20-F of our report dated April 27, 2012 relating to the consolidated financial statements of Brookfield Renewable Energy Partners L.P. as at December 31, 2010 and for the years ended December 31, 2010 and December 31, 2009, appearing in this Registration Statement.

We also consent to the reference to us under the heading “Statement By Experts” in this Registration Statement.

/s/ Deloitte & Touche LLP

Independent Registered Chartered Accountants

Licensed Public Accountants

Toronto, Canada

June 28, 2012

Exhibit 15.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Statement by Experts” and to the use of our report dated April 27, 2012, in the Registration Statement Amendment No. 1 (Form 20-F) of Brookfield Renewable Energy Partners L.P. dated June 28, 2012.

/s/ Ernst & Young LLP

Toronto, Canada

June 28, 2012

Exhibit 16.1

June 28, 2012

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C.

20549-7561 USA

Dear Sirs/Madams:

We have read Item 16F of Brookfield Renewable Energy Partners L.P.’s Amendment No. 1 to the Form 20-F dated June 28, 2012, and have the following comments:

 

1. We agree with the statements made in paragraphs one, two and four in the section “Change in Registrant’s Certifying Accountant”.

 

2. We have no basis on which to agree or disagree with other statements of the registrant contained therein.

Yours very truly,

/s/ Deloitte & Touche LLP

Independent Registered Chartered Accountants

Licensed Public Accountants