With the announcement Friday that Threshold Power Trust has filed a preliminary prospectus in connection with a proposed initial public offering, energy-focused Cross Border Income Trusts (CBITs) continue to diversify from the oil & gas sector that saw the origin of this investment vehicle.
Threshold Power was established to seek returns for its unit holders through direct or indirect investments in operating renewable energy projects in the U.S.
Representing Threshold is Bennett Jones LLP which has worked on every successful energy-focused CBIT to date, demonstrating their dominance in the CBIT market.
"This is the latest example that the benefits derived from a CBIT can be attained from a variety of assets", says Chris Gauthier, a Co-Head of Bennett Jones's M&A/Capital Markets group, who acted for Crius Energy and is acting for Threshold Power. "These CBIT structures are very similar to many of the cross border REITs that have recently come to market", he adds.
A CBIT is a Canadian yield investment product that derives its distributable cash from non-Canadian business assets - usually American. Investors anywhere may participate. After the Canadian government's rules ended the tax benefits from income trusts with Canadian assets, investors started looking for a new vehicle that could provide healthy returns as well as the tax advantages they had lost.
Eagle Energy Trust responded by launching the first CBIT in late 2010 with a $169 million IPO. Eagle was quickly followed by Parallel Energy Trust with its $393 million IPO in April of 2011. Argent Energy Trust closed a $244 million IPO in August 2012, which was one of the largest TSX IPO last year. Crius Energy Trust closed a $100 million IPO in November 2012. Bennett Jones lawyers acted for the issuer on all of these CBITs and is representing Threshold Power Trust in its proposed IPO.
