CIBC 2EQUITY RESEARCH
May 8, 2022 Earnings Update
BROOKFIELD RENEWABLE PARTNERS LP
Surfacing Value From The Expanded Development Pipeline &
Current Assets, While Also Uncovering New Opportunities
Our Conclusion
BEP continues to manage all levers at its disposal to surface value, while
also sourcing new avenues of growth. Further, the development pipeline
remains strong and should support a growing cash flow profile and growth
targets. We make modest forecast revisions for existing assets and now
include more asset additions from the development pipeline. Our DCF-based
price target is maintained at $41; BEP remains Outperformer rated.
Key Points
Development Pipeline Remains Robust. With a diversified 9GW of
contracted capacity expected to be commissioned through 2024 and 7GW
added to the development pipeline in Q1/22, BEP remains in a strong
position to hit its $1.0B-$1.2B annual equity deployment target. Inflationary/
supply chain headwinds may persist in the short term (some projects may
see some return erosion, particularly in the U.S. given solar tariff impacts/
uncertainty) but overall BEP is managing well. The ability to adjust its global
procurement capabilities and work with customers to adjust timelines and/or
pass-through costs, plus its global growth pipeline, means it’s less impacted
from the current U.S. solar market uncertainty. Further, starting with higher
target returns affords the company a little more margin of safety, while
market disruptions have often presented opportunistic M&A opportunities.
Continuing To Evolve. Stepping into new technological markets should
allow BEP to not only remain competitive as the renewables/energy transition
market evolves, but also open up new avenues of growth. Recent
announcements/investments like Entropy (CCS) and the Dutch offshore wind
bid show BEP’s ability to expand and leverage its financial and contracting
capabilities. We expect BEP will evolve into other energy transition
technologies as the economics become more attractive. We still believe there
are likely opportunities to help the power generator transition; while it
remains to be seen if BEP (and partners) can resurrect a bid/ privatization of
AGL Energy, we suspect it will find other similar opportunities in coming
years.
Funding Update. BEP remains well funded with $3.8B of liquidity at the end
of Q1/22 and has no major maturities in the near term. Asset recycling
should also continue as valuations remain attractive (small Brazil hydro
facility sold for 3x return on capital, X’Elio sell-downs remain key initiative).
While public market valuations have been volatile, private market
activity/valuations are still healthy (thus far), which supports more sell-downs.
Overall, BEP is well positioned and can minimize dilutive equity.
Estimates & Valuation. Our updated estimates reflect minor forecast and
assumption changes. Our long-term forecast is largely unchanged. Our DCF-
based price target remains at $41.