Brookfield Renewable Partners Non Voting Units BEP

RBC

[retiredcf]

February 4, 2022

Sector Perform

NYSE: BEP; USD 31.93; TSX: BEP.UN

Price Target USD 39.00

Brookfield Renewable Partners L.P.

First Glance: Q4/21 results in line with expectations; 5% distribution increase

Our view: We expect the Q4/21 results and updates will have a modestly positive impact on the shares/unit of BEP, as the company delivered in- line results and raised distributions by 5% as expected. Management is executing well, agreeing to deploy $1.1 billion of capital (net to BEP) in the past year, capturing higher power prices in new contracts, and growing their development pipeline.

First impression:

Q4/21 results were in line with expectations; 5% distribution increase.

Brookfield Renewable's Q4/21 FFO/unit was $0.33, which was largely in line with our estimate of $0.32 and consensus of $0.33. The slight variance to our estimate was mainly due to below average generation, offset by lower management fees and cash taxes. The company's overall proportionate generation for the quarter was 8% below the long-term average (LTA). On a segmented basis, hydrology was 9% below LTA, wind was 10% below LTA, and solar was 7% below LTA. The company also increased the quarterly distribution by 5% to $0.32/unit (in line with our estimate).

Signs attractive 40-year PPA for the Lievre hydro portfolio. As previously announced, BEP entered into a 40-year fixed price escalating electricity purchase agreement with Hydro-Quebec for the output of the Lievre hydro portfolio in Quebec, which has 263 MW of generation capacity. The contract represents a premium to the prices the facility historically achieved, generating an additional $20 million of revenue. The company concurrently raised an additional C$1 billion of 40-year investment grade debt on the facility at attractive rates and plans to deploy this capital into growth to generate over $100 million of annual FFO, net to BEP.

Update on growth initiatives. Since the company's last update, BEP has agreed to invest approximately $2 billion ($500 million net to BEP) of capital across various transactions at the target returns of 12-15%. For the past year, BEP agreed to invest a total of $1.1 billion. Some of the acquisitions and arrangements include Urban Grid (a leading utility-scale developer in the U.S. with a 20 GW development pipeline), a German uitility-scale solar developer with a 1.7 GW pipeline, an option to fund and own up to 800 MW of UK battery energy storage projects, a distributed generation portfolio in Europe and South America, and over 300 MW of wind asset in Asia.

Conference call: today at 9:00 AM (ET), dial-in is 1-866-688-9430 (2575137). On the call, we expect investors to focus on the development pipeline and potential M&A opportunities.