Brookfield Renewable Partners Non Voting Units BEP

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Brookfield Renewable Partners L.P.

(BEP-N, BEP.UN-T) US$35.04 | C$45.10

Organic Growth Platform Continues to Evolve; Upgrading to BUY Event

Brookfield Renewable Partners L.P. (BEP) reported Q1/22 results on May 6 before the market opened. Q1/22 FFO/unit of $0.38 was above our estimate of $0.36 and was close to the consensus forecast of $0.39. Proportionate adjusted EBITDA of $499 million exceeded our forecast of $474 million, and was close to the consensus forecast of $493 million.

Impact: NEUTRAL

• Q1/22 proportionate generation matched LTA guidance and was better than our muted estimate. Strong generation was weighted towards assets with lower contract prices (a drag on FFO). Proportionate EBITDA and FFO benefited from asset sales gains - a facet of BEP's business model that is difficult to forecast.

• BEP's development pipeline now totals 69 GW (up 11% q/q). This includes approximately 9 GW (gross) projects either in construction or ready-to-build. Management noted maximizing value from this pipeline could include a combination of strategies: developing and holding; constructing and then selling a minority interest; or building and divesting the de-risked project.

• BEP remains active on M&A despite recent sector volatility, and ended Q1/22 with available liquidity of $3.8 billion. Although public markets for renewables remain volatile, management noted that private markets continue to show a consistent, strong bid for the asset class. This gives BEP both asset monetization options and a stable pipeline of transactions to evaluate.

• BEP's share price has declined 13% since we lowered our rating to Hold in early April, compared with an average 8% decline for Canadian Renewable IPPs. We believe that BEP is well-positioned to navigate near-term sector headwinds, and benefit from long-term tailwinds for clean power and global decarbonization. Following the recent valuation contraction, we are upgrading our rating to BUY from Hold.

  TD Investment Conclusion

  We believe that BEP deserves a valuation premium based on several factors: scale; broad investment opportunity-set; consistent value-accretive track record; ability to act on large/complex transactions; operating/procurement expertise; management depth; and a strong funding platform. Given the recent share price correction and related valuation contraction, we are upgrading our rating to BUY from Hold.