NYSE:BEP - Post Discussion
Post by
retiredcf on Sep 30, 2022 8:56am
RBC
Their upside scenario target is US$55.00. GLTA
September 29, 2022
Brookfield Renewable Partners L.P.
Investor Day: Decarbonization tailwinds stronger than ever
Our view: As we expected, management highlighted the significant global decarbonization opportunities and delivered a consistent message on growth. In addition, given that the company has already reached its target capital deployment for 2022, we are not surprised that management increased their target average annual equity deployment to $1.2-1.4 billion (up from a target of $1.0-1.2 billion and $0.8-$1.0 billion at the 2021 and 2020 Investor Days, respectively). We continue to view BEP as a core holding in the renewable energy space.
Key points:
Global decarbonization opportunities better than ever. Management sees strong tailwinds in the sector due to 1) accelerated global decarbonization trends and net zero targets; 2) renewables positioned as the lowest cost form of bulk electricity in all major markets; 3) growing electricity demand from electrification; and 4) the increased emphasis on energy independence. As a result, management raised its target average annual capital deployment to $1.2-1.4 billion (up from $1.0-1.2 billion previously). We note that the company has deployed ~$2 billion over the last 12 months and management believes that the elevated investment pace is sustainable.
Reiterating financial targets. As expected, management largely reiterated their guidance of 10%+ FFO/unit annual growth over the next five years, consisting of 7-12% (up from 6-11%, due to a higher impact from inflation escalation) organic growth and up to 9% from M&A, supporting annual distribution growth of 5-9% (unchanged). We continue to expect distribution increases at the lower end of the range to redeploy more capital to growth and reduce the payout ratio.
Development activities ramping up. Management indicated that organic growth has hit an inflection point over the last 12 months, with the company bringing over 2,000 MW of new generation capacity online, delivering over $40 million in run-rate FFO. Management indicated that they have been able to achieve high-teen development returns. We note that the majority of the company's acquisitions this year were focused on acquiring development platforms, but we believe the market volatility could lead to more M&A opportunities for operating assets.
Reiterating the self funding model. BEP currently has a BBB+ credit rating and $4 billion of available liquidity (+$20 billion of scale partner capital). Management plans to fund the ~$6-7 billion of equity deployment over the next five years without the need to issue common equity. The company will use a combination of asset sales, preferred units, corporate and asset- level debt, and retained cash flows. The company has ~5,500 GWh available for recontracting over the next five years, which could provide a significant refinancing/liquidity opportunity.
Sector Perform
NYSE: BEP; USD 30.94; TSX: BEP.UN Price Target USD 43.00
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