Brookfield Renewable Partners Non Voting Units T.BEP.PR.R

TD Raise Target

[retiredcf]

By USD 5.00. GLTA

Brookfield Renewable Partners L.P.

(BEP-N, BEP.UN-T) US$39.25 | C$50.77

No Q2 Surprises; Organic Pipeline Growth Continues Event

Brookfield Renewable Partners L.P. (BEP) reported Q2/22 results on August 5 before the market opened. FFO/unit of $0.46 was slightly below our estimate of $0.48 and was close to the consensus forecast of $0.47. Proportionate adjusted EBITDA of $547 million was between our forecast of $542 million and the consensus forecast of $553 million.

Impact: NEUTRAL

• Q2/22 FFO was relatively close to expectations. Most of the gap between our estimate and actual results is attributed to higher-than-expected interest expense, which management attributed to refinancing initiatives in Colombia and Brazil (considered non-recurring). Q2/22 proportionate generation was 2% below LTA guidance but slightly better than we expected.

• BEP's development pipeline totals 75 GW (up 9% q/q). This includes 17 GW of capacity either in construction or in advanced development. Projects due for COD by the end of 2024 are expected to contribute net annual FFO of $154 million ($0.24/unit, or 16% of the LTM figure). While M&A is the most material growth lever for BEP, the company continues to grow its organic growth platform at the margin.

• BEP's balance sheet is well-funded, providing flexibility to fund growth organically. BEP ended Q2/22 with available liquidity of almost $3.9 billion. This total is augmented by co-investment from Brookfield's Global Transition Fund (recently closed $15 billion of capital) and from ongoing asset recycling initiative, long a feature of BEP's funding plan.

• We reiterate our BUY recommendation and are raising our target to $46.00 (previously $41.00). Our increased target price is driven by expanded target multiples in our NAV (reflecting ongoing momentum for renewable power growth) and additions to BEP's construction pipeline since its Q1/22 release.

  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. BEP's unit price has improved 20% since mid-June as investors have acknowledged the company's defensive attributes. We remain positive on BEP's mid-term prospects as growth continues.