Canadian Wealth Advisor Get a 3.7% yield from Brookfield Renewable Partners L.P.
A closer focus on solar assets accompanied by sales of wind assets suggests the firm has a better future ahead in terns of its long-term contracts and projects.
The company’s ability to raise investment-grade debt will help it turn those funds into increased cash flow over time.
Meanwhile the stock trades at 23.6 times the company’s 2022 cash flow forecast.
BROOKFIELD RENEWABLE PARTNERS L.P. (Toronto symbol BEP.UN; www.brookfieldrenewable.com) owns 229 hydroelectric generating stations, 104 wind farms, 87 solar-power facilities, and 5,583 distributed generation and energy storage sites.
In 2021, Brookfield sold some U.S. onshore wind assets for $733 million U.S. to NextEra Energy (New York symbol NEP). The sale reflects the company’s belief that solar assets have a better future than wind projects.
As part of that strategy, the partnership plans to invest $70 million U.S. in the 450 MW solar project of a prominent developer in India. When completed, the project will have a 25-year power agreement with an Indian utility.
The company has acquired clean power developer Urban Grid and its pipeline of high-quality, utility-scale solar and energy storage projects. These total 13 gigawatts of utility-scale solar power capacity and 7 gigawatts of energy storage capacity across 12 states.
The $650 million U.S. acquisition will triple Brookfield’s existing development pipeline in the U.S. to 31,000 megawatts. That makes it one of the largest U.S. renewable developers.
Founded in 2020, Richmond, Virginia-headquartered Urban Grid currently has 2 gigawatts of under-construction, or ready-to-build, solar projects, along with another 4 gigawatts of “de-risked advanced stage buildout opportunities.” The acquired company’s renewable projects cover key U.S. markets. They include some in the mid-Atlantic, the Midwest and Southeast.
With the March 2022 payment, Brookfield raised its quarterly distribution by 5.35%, to $0.32 U.S. a unit from $0.30375 U.S. The new annual rate of $1.28 U.S. yields a solid 3.7%. The partnership aims to raise the annual payment by 5% to 9% each year.
Brookfield Renewable cuts your risk by selling power from its plants under long-term contracts. This provides the company with stable cash flows.
For instance, it recently signed a 40-year power purchase agreement with Hydro Quebec for its 265-megawatt Lievre facilities.
The contract is at a significant premium to the prices the facility has historically achieved. That will generate an added $20 million U.S. in yearly revenue for Brookfield over the previous contract.
What’s more, given the duration of the contract and the top-notch credit quality of Hydro Quebec, Brookfield subsequently raised an additional $1.0 billion (Canadian) of 40-year investment grade debt. The company aims to channel that capital into its growth to generate an additional $100 million U.S. of annual cash flow.
Brookfield’s cash flow should total $1.48 U.S. a unit in 2022, and the stock trades at 23.6 times that forecast.
Brookfield Renewable’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Canadian Wealth Advisor: Brookfield Renewable Partner L.P. is a buy.