The lower market prices in Spain were in part caused by lower demand resulting from the economic slowdown caused by COVID-19 pandemic. We expect this decline in market prices in Spain to be mitigated through the price bands adjustment mechanism defined under the Spanish regulated revenue framework, whereby any shortfalls in the actual power price compared to the forecasted power price outside of the price band are recouped in future periods through an increase in the capacity payments that our assets receive. The lower wind generation in North America was mainly due to lower resource especially in our Central & Northeast regions as production guarantees in our GE O&M contracts largely offset availability that was below expectation.
Liquidity Update
Despite the challenges COVID-19 posed to the capital markets during the first quarter, we were able to continue executing our plan to extend debt maturities and reduce financing costs. In March, we completed $246 million in project-level refinancing of one of our North American wind farms at a rate of 3.28%, which we expect to achieve interest savings of ~$2.5 million per annum. The senior secured notes are fully amortizing with a final maturity in June 2037. At the end of the first quarter, our total corporate liquidity was $1.2 billion, inclusive of our $500 million sponsor line credit agreement with Brookfield Asset Management (“Brookfield”).
Outlook
When Brookfield became our sponsor in 2017, Terraform Power owned 2,600 MW of wind and solar assets, primarily in the United States. Since its assets had been largely neglected during its former sponsor’s distress and bankruptcy, a major aspect of our business plan was to enhance the value of Terraform Power’s existing asset base and invest in organic growth opportunities within its portfolio. Over the past three years, we have made significant progress executing this plan. Through reductions in costs of approximately $30 million, signing of O&M agreements that include robust production guarantees at Long Term Average (“LTA”) generation levels and progressing two important repowering projects, we have significantly increased the cashflow generating capacity of Terraform Power and enhanced shareholder value.
In order to grow the business, our mandate, relative to other Brookfield-sponsored entities, was to acquire operating wind and solar power assets in North America and Western Europe. In a little over two years, we invested $1.2 billion of equity to expand into Western Europe and an additional $440 million of equity to further grow our European business and build-out our distributed generation business in the United States. Not only did these transactions increase the scale of our business to ~4,200 MW, but we expect them to meet or exceed our return on equity target of 9% to 11%.
However, since we have harvested most of the low hanging fruit within its existing asset base, Terraform Power is entering a new stage of its growth cycle in which it will have to deploy significantly more capital to achieve its distribution growth target of 5% to 8% per year. Furthermore, as a result of a substantial increase in institutional capital seeking investments in operating wind and solar assets in developed markets, the ability to achieve its target returns has become challenging.
