Brookfield Renewable Energy Partners L.P.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 9.1 -- issuer is a real estate investment trust which holds all of its properties through limited partnership -- entity holds units in limited partnership which are exchangeable into and in all material respects the economic equivalent to the issuer's publicly traded units -- issuer may include entity's indirect interest in issuer when calculating market capitalization for the purposes of using the 25% market capitalization exemption for certain related party transactions.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 5.5(a), 5.7(a), 9.1.

December 15, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(THE "JURISDICTION")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BROOKFIELD RENEWABLE ENERGY

PARTNERS L.P. (THE "FILER")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") exempting the Filer, pursuant to section 9.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), from the requirements of section 5.4 of MI 61-101 (the "Formal Valuation Requirement") and the requirements of section 5.6 of MI 61-101 (the "Minority Approval Requirement") in each case relating to any related party transaction of the Filer entered into indirectly through Brookfield Renewable Energy L.P. ("BRELP") or any other subsidiary entity of BRELP, if that transaction would qualify for the transaction size exemptions set out in sections 5.5(a) and 5.7(a) of MI 61-101 if the indirect limited partnership interest of the Filer, which is held in the form of redeemable-exchangeable limited partnership units of BRELP, were included in the calculation of the Filer's market capitalization (collectively, the "Requested Relief").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Quebec.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and MI 61-101 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a Bermuda exempted limited partnership that was established on June 27, 2011.

2. BRELP is a Bermuda exempted limited partnership that was established on June 27, 2011.

3. The Filer is a reporting issuer in the Jurisdictions.

4. The Filer is, to the best of its knowledge, not in default of any requirement of Canadian securities laws.

5. The limited partnership units ("LP Units") of BREP are listed on the Toronto Stock Exchange under the symbol "BEP". The Filer also intends to apply to have the LP Units listed for trading on the New York Stock Exchange.

6. 2288509 Ontario Inc., a corporation incorporated under the laws of Ontario, acts as the general partner of the Filer. The general partner of the Filer holds a 0.01% general partnership interest in the Filer. The general partner of the Filer is a wholly-owned subsidiary of Brookfield Renewable Power Inc. ("BRPI"). Prior to the end of its first fiscal period, the Filer expects that a Bermuda company, also wholly-owned by BRPI, will become the general partner of the Filer.

7. The Filer has entered into a management agreement with certain affiliates of BRPI (collectively, the "Manager") to provide the Filer, BRELP and specified subsidiary entities of BRELP with management and other services.

8. The LP Units are non-voting limited partnership units and the Filer's general partner controls the Filer.

9. BREP Holding L.P. ("BRELP GP LP"), a Bermuda exempted limited partnership, acts as the general partner of BRELP. BRELP GP LP holds an approximate 1% general partnership interest in BRELP. 2288508 Ontario Inc., a corporation incorporated under the laws of Ontario, acts as the general partner of BRELP GP LP. The general partner of BRELP GP LP is a wholly-owned subsidiary of BRPI. Prior to the end of its first fiscal period, the Filer expects that a Bermuda company, also wholly-owned by BRPI, will become the general partner of BRELP GP LP. The general partner of BRELP GP LP is controlled by the Filer, through its general partner, pursuant to the Voting Agreement described below.

10. The Filer's sole asset is an approximate 50.1% limited partnership interest in BRELP, with the remaining limited partnership interest held by BRPI, directly or indirectly. The limited partnership units (the "Redeemable Partnership Units") held by BRPI are subject to a redemption-exchange mechanism pursuant to which the holders may acquire LP Units in exchange for their BRELP limited partnership units on a one for one basis. The Redeemable Partnership Units effectively represent an ownership in the Filer rather than BRELP.

11. At any time after two years from November 28, 2011, BRPI has the right to require BRELP to redeem all or a portion of the Redeemable Partnership Units for cash. It may exercise its right of redemption by delivering a notice of redemption to BRELP and the Filer. After presentation for redemption, BRPI will receive, subject to the Filer's rights described below, for each Redeemable Partnership Unit that is presented, cash in an amount equal to the market value of one LP Unit multiplied by the number of Redeemable Partnership Units to be redeemed (as determined by reference to the five day volume weighted average of the trading price of LP Units and subject to certain customary adjustments). Upon its receipt of the redemption notice, the Filer will have a right of first refusal entitling it, at its sole discretion, to elect to acquire all (but not less than all) of the Redeemable Partnership Units so presented to BRELP in exchange for LP Units, on a one for one basis (subject to certain customary adjustments). BRPI would hold an aggregate interest in the Filer equal to approximately 73% (including BRPI's general partnership interests) if it exercised its redemption right in full and the Filer exercised its right of first refusal and, provided BRPI exercised its redemption right in full, the Filer would have a 100% limited partnership interest in BRELP.

12. The Redeemable Partnership Units are, in all material respects, economically equivalent to the LP Units.

13. The Filer and BRPI entered into a voting agreement (the "Voting Agreement") pursuant to which BRPI agreed that any voting rights with respect to the general partner of BRELP GP LP, BRELP GP LP and BRELP will be voted in accordance with the direction of the Filer with respect to (A) the election of directors of the general partner of BRELP GP LP and (B) 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 BRELP or (v) any commitment or agreement to do any of the foregoing. As a result, the Filer will consolidate BRELP (and all of BRELP's assets) in its financial statements.

14. It is anticipated that the Filer may enter into transactions with certain related parties, including its general partner, BRELP GP LP and its general partner, the Manager and BRPI and its affiliates other than the Filer and its related entities (collectively, "Brookfield") either directly, or indirectly through BRELP and its direct and indirect wholly-owned subsidiaries.

15. If Part 5 of MI 61-101 applies to a related party transaction by an issuer and the transaction is not otherwise exempt:

(a) the issuer must obtain a formal valuation of the transaction in a form satisfying the requirements of MI 61-101 by an independent valuator; and

(b) the issuer must obtain approval of the transaction by disinterested holders of the affected securities of the issuer (together, requirements (a) and (b) are referred to as the "Minority Protections").

16. A related party transaction that is subject to MI 61-101 may be exempt from the Minority Protections if at the time the transaction is agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction, exceeds 25% of the issuer's market capitalization (the "Transaction Size Exemption").

17. The Filer may not be entitled to rely on the Transaction Size Exemption available under the Legislation because the definition of "market capitalization" in the Legislation does not contemplate securities of another entity that are exchangeable into equity securities of the issuer.

18. The Redeemable Partnership Units represent part of the equity value of the Filer and provide the holders of the Redeemable Partnership Units with economic rights which are, as nearly as possible except for tax implications, equivalent to the LP Units. Taken together, the effect of BRPI's redemption right and the Filer's right of first refusal is that Brookfield will receive LP Units, or the value of such units, at the election of the Filer. Moreover, the economic interests that underlie the Redeemable Partnership Units are identical to those underlying the LP units; namely, the assets and operations held directly or indirectly by the Filer's related entities.

19. If the Redeemable Partnership Units are not included in the market capitalization of the Filer, the equity value of the Filer will be understated by the value of BRPI's limited partnership interest in BRELP (approximately $3.3 billion or 48.9%). As a result, related party transactions by the Filer that are entered into directly or indirectly through BRELP may be subject to the Minority Protections in circumstances where the fair market value of the transactions are effectively less than 25% of the fully diluted market capitalization of the Filer.

20. Section 1.4 of MI 61-101 treats an operating entity of an "income trust", as such term is defined in National Policy 41-201 Income Trusts and Other Indirect Offerings (NP 41-201), on a consolidated basis with its parent trust entity for the purpose of determining which entities are related parties of the issuer and what transactions MI 61-101 should apply to. Section 1.2 of NP 41-201 provides that references to an "income trust" refer to a trust or other entity (including corporate and non-corporate entities) that issues securities which provide for participation by the holder in net cash flows generated by an underlying business owned by the trust or other entity. Accordingly, it is consistent that securities of the operating entity, such as the Redeemable Partnership Units, be treated on a consolidated basis for the purposes of determining the market value of the Filer under MI 61-101.

21. The inclusion of the Redeemable Partnership Units when determining the Filer's market capitalization is consistent with the logic of including unlisted equity securities of the issuer which are convertible into listed securities of the issuer in determining an issuer's market capitalization in that both are securities that are considered part of the equity value of the issuer whose value is measured on the basis of the listed securities into which they are convertible or exchangeable.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:

1. the transaction would qualify for the Transaction Size Exemption contained in the Legislation if the Redeemable Partnership Units were considered an outstanding class of equity securities of the Filer that were convertible into LP Units;

2. there be no material change to the terms of the Redeemable Partnership Units, including the exchange rights associated therewith, as described above; and

3. any annual information form or equivalent of the Filer that is required to be filed in accordance with applicable securities laws contain the following disclosure, with any immaterial modifications as the context may require:

"Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("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 Energy Partners L.P. ("BREP") 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 BREP's market capitalization, if the indirect equity interest in BREP, which is held in the form of redeemable-exchangeable limited partnership units of Brookfield Renewable Energy L.P. ("BRELP"), is included in the calculation of BREP'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 BREP held in the form of exchangeable limited partnership units of BRELP."

"Naizam Kanji"
Deputy Director, Corporate Finance
Ontario Securities Commission