Great Lakes Hydro Income Fund
TSX : GLH.UN

December 15, 2008 16:35 ET

Great Lakes Hydro Income Fund Announces Strategic Acquisitions and $75 Million Bought-Deal Offering

Fund to Acquire 189 MW Prince Wind facility and 50% interest in 45 MW Pingston Hydro joint venture

GATINEAU, QUEBEC--(Marketwire - Dec. 15, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Great Lakes Hydro Income Fund (the "Fund") (TSX:GLH.UN) today announced its intention to acquire indirectly from Brookfield Renewable Power Inc. ("BRPI") a 49.9% interest in the following:

i. the 189 MW Prince Wind farm in Ontario; and

ii. a 50% joint venture interest in the 45 MW Pingston Hydro station in British Columbia.

Consideration for the proposed acquisitions is $130 million, of which 49.9% will be financed through the issuance of Fund units to the public under a bought-deal financing, as well as a subscription by BRPI, on the closing of the acquisitions, of $65 million of shares exchangeable into Fund units on a one-for-one basis (the "Exchangeable Shares") at a price equivalent to the pricing of the bought-deal financing. Following closing of the proposed acquisition, BRPI will own a 50.01% interest in the Fund on a fully exchanged basis. Definitive agreements for the proposed acquisitions by the Fund are expected to be entered into on or about January 6, 2009 and the entering into of such definitive agreements are subject to satisfactory due diligence, the closing of the bought deal financing and the receipt of a written fairness opinion from the Fund's independent financial advisor, as described below. Closing of the acquisitions is expected to occur in the first quarter of 2009.

Investment Highlights of the Projects:

- Enterprise value of approximately $462 million with existing project debt in place at each project

- High-quality, long-life renewable power assets with stable and predictable cash flows

- Long-term power purchase agreements with strong government counterparties

- Assets generate an average of $42 million in EBITDA and $13 million of distributable cash flow annually

- Favourable tax attributes including capital cost allowance and other expenses in excess of $240 million

- Increased resource and geographic diversification

"Prince Wind and Pingston Hydro are an excellent strategic fit within our existing portfolio and complement our strategy of owning high-quality, Canadian contracted renewable power assets," said Richard Legault, President and Chief Executive Officer. "We know and understand these assets and their operating characteristics very well. Moreover, the addition of our first wind farm brings resource diversification, while Pingston Hydro expands our footprint in western Canada and adds geographical and seasonal diversification."

While these acquisitions are immediately accretive to distributable cash flow by approximately three cents per unit, the Fund intends to retain near-term excess cash flow to offset the impact of the Fund's taxability beginning in 2011. As a result, the Fund's payout ratio and liquidity in the near-term will be enhanced and the current annual distribution of $1.25 per unit is expected to be sustainable after 2011.

The Fund will continue to seek opportunities for accretive growth in the renewable power sector.

About Prince Wind

Prince Wind, one of Canada's largest wind farms, is located northwest of Sault Ste. Marie, Ontario, has an installed capacity of 189 MW and commenced operation in November 2006. Since commissioning, Prince Wind has achieved overall availability averaging 97%.

All power produced by Prince Wind is sold to the Ontario Power Authority ("OPA") under two power purchase agreements ("PPAs") expiring in 2026 and 2028, respectively. The PPAs, which are take-or-pay arrangements, have prices which are adjusted annually at 15% of the Canadian Consumer Price Index ("CPI"). The OPA is rated AA (low) by Dominion Bond Rating Service ("DBRS") and "AA" by Standard & Poor's ("S&P"). Prince Wind also receives an additional $10 per megawatt-hour from the Canadian Federal EcoEnergy Program, which expires March 31, 2017.

Prince Wind is expected to produce average annual generation of approximately 506 GWh, and to mitigate potential fluctuations in revenue due to the wind resource, upon closing of the proposed acquisition, BRPI and Great Lakes Power Trust ("GLPT"), a wholly-owned subsidiary of the Fund, will enter into a Wind Levelization Agreement. Under the Wind Levelization Agreement, BRP and GLPT will, for a period of 10 years from closing of the proposed acquisitions, make annual compensating payments to each other depending on variances in wind generation based on a base level of 506 GWh annually.

Prince Wind is party to a maintenance, operations and management agreement with an affiliate of BRPI, whereby all management services are provided for an initial term of 20 years, and is automatically renewed for successive one year periods, up to 20 years.

About Pingston Hydro

Pingston Hydro is run-of-the-river hydroelectric generating station located near the town of Revelstoke, in south central British Columbia. Pingston Hydro is owned and operated as a joint venture between BRPI and Canadian Hydro Developers Inc. ("Canadian Hydro"), with each party having a 50% interest in the joint venture.

Pingston Hydro was originally commissioned as a 30 MW facility in May 2003, and a 15 MW expansion was added in April 2004 to capture an increased proportion of the high water flows in the spring and summer. On average, approximately 178 GWh of electricity is produced annually, and all power produced is sold under a electricity purchase agreement ("EPA") to British Columbia Hydro and Power Authority ("BC Hydro"), expiring in 2023. Under the EPA, the price payable will be increased or decreased by a percentage equal to 50% of the increase or decrease in the CPI during the preceding 12 months. BC Hydro is rated AA (high) with a stable trend by DBRS and "AAA" by S&P. Since commissioning of the expansion unit, Pingston Hydro has averaged approximately 186 GWh of annual generation.

Pingston Hydro is subject to an operations and maintenance agreement between Canadian Hydro, a subsidiary of the Fund, and Brookfield Energy Marketing Inc. ("BEMI") (the "O&M Agreement"). The O&M Agreement is to remain in force for the life of Pingston Hydro. BEMI, through a management and power marketing agreement, is responsible for, among other things, managing and administering the revenues of Pingston Hydro, selling the power generated, and administering and carrying out the terms of certain material contracts relating to Pingston Hydro.

Equity Offering

In connection with the proposed acquisitions, the Fund has entered into an agreement with a syndicate of underwriters co-led by CIBC World Markets Inc. and RBC Capital Markets.

The underwriters have agreed to purchase, on a bought-deal basis, 4,690,000 Fund units issued from treasury at a price of $16.00 per unit, for gross proceeds of $75 million. Concurrent with the offering, BRPI will subscribe for, on a private placement basis, approximately $10 million of Fund units at the issue price. Prior to any exercise of the over-allotment option, the gross proceeds from the bought deal and the concurrent private placement will be approximately $85 million. Following the closing of the acquisitions, on a fully-exchanged basis, BRPI will maintain its 50.01% interest in the Fund and the Fund will indirectly own more than 99% of Prince Wind and 50% of Pingston Hydro.

The Fund has granted the underwriters an over-allotment option to purchase up to an additional 703,500 Fund units from treasury, at the same offering price, for up to 30 days from closing of the offering. If exercised, BRPI will subscribe for, on a private placement basis, additional Trust Units in the Fund such that on closing of the acquisitions and the issuance of exchangeable shares, it will retain its 50.01% interest in the Fund on a fully-exchanged basis.

The offering is expected to close on or about January 6, 2009 and is subject to certain conditions including the receipt of customary regulatory and stock exchange approvals. Net proceeds from the offering will be used to fund the proposed acquisitions and for general corporate purposes.

Acquisition Approval

In considering the proposed acquisitions, the Board of Trustees of the Fund formed a special committee of trustees who are independent of BRP (the "Independent Committee") to review the transaction and to determine whether it is in the best interests of the Fund. To assist in its evaluation of the proposed transaction, the Independent Committee retained Blair Franklin Capital Partners Inc., an independent and qualified financial advisor, to provide a fairness opinion with respect to the proposed transactions, and independent legal counsel. The entering into of definitive agreements for the proposed acquisitions are subject to the financial advisor providing a written opinion that the consideration being paid is fair from a financial point of view to the unitholders of the Fund, other than BRP and also subject to satisfactory due diligence, the negotiation of the terms and conditions of the definitive agreements and the closing of the bought deal financing.

In connection with the proposed acquisitions, S&P and DBRS have re-affirmed the Fund's stability ratings of SR-2 (stable) and STA-2 (high), respectively.

The closing of the acquisitions are subject to customary closing conditions and the receipt of all necessary regulatory approvals, which are expected to be received prior to February 28, 2009.

This news release shall not constitute an offer of securities for sale in the United States. The units of the Fund offered will not be and have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold into the United States absent registration or an exemption from registration. There shall not be any public offering of the units of the Fund in the United States.

About Great Lakes Hydro Income Fund

Great Lakes Hydro Income Fund (www.greatlakeshydro.com) is a premier Canadian income fund. We are the largest power income fund in North America with 1,021 megawatts of power generating capacity and an average annual production of 3,912 gigawatt hours.

Great Lakes Hydro Income Fund produces electricity exclusively from environmentally friendly renewable resources. The Fund owns, operates and manages 26 high quality hydroelectric generating stations located on eight river systems in four distinct geographic regions across North America: Quebec, Ontario, British Columbia and New England.

Brookfield Renewable Power, which comprises all the power operations of Brookfield Asset Management, owns 50.01% of the Fund's outstanding units.

Great Lakes Hydro Income Fund units are listed for trading on the Toronto Stock Exchange under the symbol GLH.UN.

Forward Looking Information

Certain information regarding the Fund contained herein may constitute forward-looking statements. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. The words "will" and "expected" which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters identify forward-looking statements. Forward looking statements in this press release include statements regarding the closing of the offering and the proposed acquisition, their impact on the business, operations, financial condition and tax position of the Fund and the intention of the Fund to seek further acquisitions. Although the Fund believes that the Fund's anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, it can give no assurance that such expectations will prove to have been correct. The reader 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 the actual results, performance or achievements of the Fund 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: the risk that the definitive agreements for the acquisition are not entered into or that the acquisition does not close, other risks associated with the acquisition and achieving the anticipated benefits, economic and financial conditions, the behaviour of financial markets including fluctuations in interest and exchange rates, risks of equipment failure and other risks and factors detailed from time to time in the company's Annual Information Form filed with the securities regulators in Canada under the heading "Risk Factors". We caution that the foregoing list of important factors that may affect future results is not exhaustive. Except as required by law, the Fund undertakes no obligation to publicly update or revise any forward looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

Unitholder enquiries should be directed to Zev Korman, Director, Investor Relations and Communications at (416) 359-1955 or unitholderenquiries@greatlakeshydro.com.

Web Site: www.greatlakeshydro.com


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