Desjardins Desjardins Securities analyst Brent Stadler thinks Brookfield Renewable Partners LP’s US$1.05-billion deal of Duke Energy Renewables is a “solid” acquisition, adding “U.S. scale for a reasonable 9.09.5 times; while the portfolio has a relatively higher weighting to Texas, curtailments and basis risk have been considered.”
“We expect the IRA to be a tailwind for the platform, which should accelerate growth, and also expect additional upside from synergies and repowerings,” he said in a note released Friday. “Recent pressure on BEP units could be partially due to the equity raise, which surprised investors somewhat, and macro headwinds.”
Mr. Stadler expects the deal, announced on June 12, to be immediately accretive to funds from operations.
“BEP expects the acquisition to be at least 3-per-cent accretive to FFO; we model closer to 4 per cent as we assume a majority of the excess proceeds reduces future interest expense,” he said. “We estimate that DER should generate EBITDA of US$300-million (US$60-million net to BEP) in 2024, implying a transaction multiple of 9.09.5 times EV/EBITDA — solid for a U.S. renewables platform that should benefit from the IRA.
“BEP continues to rapidly deploy capital and expects to achieve double-digit FFO/unit growth over the next five years. It also expects to remain active on its US$1.5-billion capital recycling initiative and is well-positioned to exceed its five-year capital deployment target of US$67-billion - which BEP believes it can achieve without additional equity.”
Reiterating a “hold” rating, Mr. Stadler raised his target by $1 to $47. The average is $46.13.
“We believe BEP continues to be well-positioned to capitalize on an ever-growing total addressable market and should remain a dominant industry player,” he concluded. “It offers a high-quality, diversified asset portfolio and provides stable, long-term cash flows/distributions. While we like its assets, management and growth strategy, we maintain our Hold rating at this time.”