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

TD Resume Coverage

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Brookfield Renewable Partners L.P.

(BEP-N, BEP.UN-T) US$29.45 | C$38.81

Backstopping Liquidity Ahead of Incremental Growth Initiatives Event

We are resuming coverage of Brookfield Renewable following the completion of a $500 million bought deal equity offering and concurrent $150 million private placement with an affiliate of Brookfield Reinsurance. A portion of net proceeds will be utilized to fund the $2.7 billion acquisition (full enterprise value) of Duke Energy's utility-scale renewables business (25% equity interest for BEP at a cost of $265 million). That acquisition is expected to close by Q4/23.

Impact: SLIGHTLY POSITIVE

• Our initial assessment of the acquisition from Duke Energy: additive, not transformative; attractive valuation metrics. The overall enterprise value for the transaction is $2.7 billion, including $1.1 billion of equity. BEP's commitment equates to a 25% equity stake, with the remainder attributed to a Brookfield- sponsored infrastructure fund. Brookfield will acquire net U.S. renewable operating capacity of 3.9 GW (15% of current gross capacity), 500 MW of under- construction capacity, and a prospective development pipeline of 6.1 GW. We estimate a run-rate EV/EBITDA consideration of 9.0x (a discount to BEP's current 2024E EV/EBITDA of 14.9x). BEP has guided to 2024 FFO/unit accretion of at least 3%. We have increased our 2024 FFO/unit estimate by 2%.

• We believe that this financing indicates an accelerating prospective growth opportunity set, but are somewhat surprised that BEP is issuing equity given recent management commentary highlighting balance sheet strength. On a pro forma basis, adjusted for the financing and pending acquisitions, BEP's available liquidity is $2.9 billion. In our view, this is a robust position that we expect will be augmented by asset recycling and up-financing initiatives. With Brookfield-sponsored energy transition and infrastructure funds having raised substantial capital, we believe that opportunities for BEP to co-invest on large scale opportunities are expanding rapidly.

• Adjustments to our outlook are not enough for us to change our 12-month target price of US$41.00. We reiterate our ACTION LIST BUY rating.

  TD Investment Conclusion

  We reiterate our view that BEP deserves a wider valuation premium based on several factors: scale; broad investment opportunity set; ability to act on large/complex transactions; operating/procurement expertise; management depth; and a strong funding platform. BEP's premium has narrowed since early 2021.