BEPC - Brookfield Renewable Reports Strong Third Quarter Results | Benzinga

All amounts in U.S. dollars unless otherwise indicated

BROOKFIELD, News, Nov. 03, 2023 (GLOBE NEWSWIRE) -- Brookfield Renewable Partners L.P. (TSX:BEP, NYSE:BEP) ("Brookfield Renewable Partners", "BEP") today reported financial results for the three and nine months ended September 30, 2023.

"We had another successful quarter, utilizing our disciplined approach to growth and execution to outperform our targets and deliver strong operating results. We recently closed our acquisitions of X-Elio and Deriva Energy (formerly Duke Energy Renewables) and advanced our acquisitions of Westinghouse Electric, which is expected to close shortly, and Origin Energy. By closing several previously announced acquisitions in the fourth quarter of 2023, we are adding significant incremental FFO and positioning ourselves to continue to deliver on our decade long track record of 10%+ FFO per unit annual growth," said Connor Teskey, CEO Brookfield Renewable. "The prospects for our business are as strong as ever. Our recent investments are performing well and we are seeing historical levels of demand for our product, and with access to capital becoming increasingly scarce for some market participants, we are seeing many opportunities to invest significant capital at very attractive risk-adjusted returns."

Brookfield Renewable reported FFO of $253 million in the quarter, or $1.29 per unit year-to-date, representing a 7% increase compared to the prior year. The results reflect strong operating activities as we benefit from our highly diversified operating platform, inflation indexed cash flows and development in-line with plan. After deducting non-cash depreciation and other expenses, our Net loss attributable to Unitholders for the three months ended September 30, 2023 was $64 million.

Key highlights:

• We were successful in our growth activities this quarter, signing transactions for $2.2 billion of equity investment ($450 million net to Brookfield Renewable) alongside our institutional partners, taking advantage of our access to scale capital and opportunities in the market;
• Continued to advance development activities commissioning approximately 2,200 megawatts of capacity year-to-date and are on track to deliver ~5,000 megawatts this year adding approximately $70 million of annual FFO;
• We expect to execute just short of $20 billion of non-recourse financing this year, generating over $800 million in upfinancing proceeds to Brookfield Renewable, while maintaining our strong investment grade credit rating and ended the quarter with $4.4 billion of available liquidity, providing significant flexibility to continue executing on our growth and development strategy;
• Advanced key commercial priorities this quarter including signing contracts to deliver an incremental 5,700 gigawatt hours per year of generation, including 4,100 gigawatt hours to corporate offtakers where we continue to see accelerating demand; and
• Continued to execute our asset recycling activities where we are seeing strong demand for de-risked assets, generating ~$1.4 billion of proceeds (~$600 million net to Brookfield Renewable) over the past 18-months, which on average represents almost three times our invested capital.
  

Our returns remain robust

The renewables sector traded down in the public markets on the back of higher interest rates and a perceived tightening of industry margins. Even though we are well positioned to benefit in this environment, and insulated from the challenges that are seemingly impacting others in our sector, we have not been immune to the lower market prices. And while we are never pleased when our share price is down, we are long-term focused investors and we believe the outlook for our business is better than ever. As we continue to deliver on our growth targets and execute on our strategic priorities, our share price should respond and better reflect the intrinsic value of the business.

Most importantly, we are not seeing a reduction in the return we are able to generate on our capital. In fact, quite the opposite, we are seeing plentiful opportunities to deploy capital at or above our target returns, as demand for clean power from corporations continues to accelerate. This opportunity is more pronounced in the current market where access to capital is becoming increasingly scarce for some market participants – creating a favorable environment for those such as ourselves, with the capital, capabilities, and pipeline of projects to deliver for our clients. Notably, there are particularly attractive opportunities to acquire high quality businesses with strong pipelines but lack the access to capital or scale operating capabilities to build out the projects.

In this environment, our ongoing approach to M&A is particularly effective. We are leveraging our existing capabilities and development pipeline to capture the growing demand, while at the same time using our access to capital to add leading platforms in core markets around the world. These additions further enhance our capabilities and position us as the clean energy and decarbonization partner of choice for leading corporations. And by consistently enhancing our business, we expect to be even more well positioned to capture a greater portion of the market demand in the future. It is a powerful and virtuous cycle.

Over the last five years, the amount of clean energy procured annually by corporates has increased almost 10 times and, looking forward, we do not expect this trend to slow down. Access to energy is now the key constraint for a number of these businesses which acquire large amounts of power, including leading global technology companies, to execute their growth plans.

As one of the only scale multi-technology global clean energy businesses in the world with an almost 150,000 megawatt development pipeline, we are uniquely positioned to benefit. With our extensive energy marketing and operational capabilities, our ability to offer 24/7 clean power solutions from our technologically diversified fleet, and our ability to credibly deliver scale projects on time across all key global markets, we have become a go-to partner providing bespoke solutions to meet the needs of the largest procurers of clean energy globally.

As a result, we continue to see a very robust market to contract our capacity and have been successful in signing contracts at prices that appropriately compensate us for higher construction and financing costs. As an example, by leveraging our development pipeline, our existing hydro facilities, and our power marketing capabilities, we recently signed an agreement with one of the leading global tech companies to provide them with a total of 18 terawatt hours (equal to the annual electricity consumption of almost 2 million homes in the U.S.) over the next five years to serve their growing requirements in the U.S.

Our approach to development continues to be focused on delivering appropriate risk-adjusted returns and focusing on investment opportunities that we can de-risk quickly. We do not build on spec and reduce risk in our investments by simultaneously securing power purchase agreements, construction contracts and financing before committing significant capital. We limit construction risk by using a localized approach to construction and development and manage our investment spend by leveraging our central procurement capabilities. Lastly, we leverage our commercial teams to source the highest quality offtakes and focus on the most mature and lowest cost renewable power technologies (solar and onshore wind) in the highest growth regions to ensure our projects produce the most de-risked high quality cash flows. This approach has served us well for decades and allows us to deliver consistent performance in all market conditions.

We are also crystalizing and proving out our returns through our asset recycling initiatives. In the current environment, we continue to see strong demand for de-risked assets with long-term contracts and fixed rate financing in place. As an example, we recently agreed to the sale of a 150-megawatt solar facility in Europe that we commissioned earlier this year for proceeds of $100 million, representing almost three times our invested capital. This marks the continuation of a successful asset recycling program that in the last 18-months has generated ~$1.4 billion of proceeds (~$600 million net to Brookfield Renewable), which on average represents an almost three times multiple of our invested capital. Looking forward, we expect that our capital recycling program will continue to be a key component of our overall source of funds and a means of generating value above our underwriting targets for investors.

We are set to benefit from the closing of a number of highly accretive M&A transactions

We are making good progress closing our previously announced acquisitions. We recently closed the acquisition of 50% of X-Elio, our leading global solar developer, bringing our ownership interest in that business to 100%. We also closed the acquisition of Deriva Energy, one of the largest renewable platforms in the U.S. with 5,900 megawatts of operating and under construction wind, utility scale solar and storage assets, and a 6,100 megawatt development pipeline.

We continued to advance the regulatory approval process for our acquisition of Westinghouse Electric, and we expect to satisfy all conditions to closing this week with closing imminently thereafter. We have also progressed our acquisition of Origin Energy, receiving authorizations from the Australian Competition and Consumer Commission in October, and received a unanimous recommendation from Origin's board having increased our offer to the top end of their independent expert's valuation range providing a compelling opportunity for Origin's shareholders to realize the value of their investment. With the shareholder vote scheduled for late November, we are targeting to close the acquisition in early 2024.

We are also seeing an increasing number of opportunities to acquire scale portfolios and platforms, given the recent move in public market valuations, combined with the increasing need for capital across the sector. This environment plays to our strengths as we can invest at attractive risk-adjusted returns when others are pulling back.

Recently we agreed to acquire Banks Renewables for ~$600 million (~$120 million net to Brookfield Renewable), a leading independent UK renewables developer with ~260 megawatts of onshore wind assets, ~800 megawatts of near-term development and another 3,000 megawatts of later stage projects. We expect the Banks transaction to close prior to year-end. We also agreed to partner with Axis Energy, a leading renewable developer in India with whom we have successfully developed 1,800 megawatts of capacity with over the past two years, creating a new development platform with 1,200 megawatts of advanced stage capacity and another ~5,000 megawatts of projects in the development phase. Under the agreement, we are targeting to invest up to $850 million (up to $170 million net to Brookfield Renewable) over the next 3 years to develop approximately 2,500 megawatts of wind and solar capacity.

In total, over the coming months we expect to have closed transactions totaling $9.2 billion ($1.5 billion net to Brookfield Renewable) of capital that will be immediately accretive adding ~$200 million in expected incremental annual FFO and continuing to grow the value of the business, positioning ourselves to continue to deliver on our decade long track record of 10%+ FFO per unit annual growth.

In light of public market conditions and our strong conviction in the intrinsic value of our business and growth trajectory, we have also started to allocate capital to repurchase shares. Starting this quarter, we repurchased almost 1.5 million units under our normal course issuer bid. Looking forward, we will continue to allocate capital based on where we are seeing the best risk-adjusted returns and remain confident that we will continue to create meaningful value for our investors.

Operating Results

We generated FFO of $253 million, or $0.38 per unit in the third quarter, bringing our year-to-date FFO per unit to $1.29, a 7% increase compared to the prior year. Our business continues to deliver strong results, benefiting from our highly diversified operating platform, inflation indexed cash flows and strong all-in pricing.

Our business is backed by high-quality cash flows, in large part from our perpetual hydro portfolio which generates dispatchable, clean, baseload power that has become increasingly valuable in today's environment. We are also well positioned to benefit from the increased demand for reliable, carbon-free generation with significant capacity available for re-contracting over the next five years in a very positive environment for prices of electricity. We expect to be able to execute new contracts which will contribute additional FFO and allow us to up-finance many of the assets due to their low levels of debt.

Our hydroelectric segment delivered FFO of $129 million. Our hydro assets globally continue to exhibit strong cash flow resiliency given our increasingly diversified asset base, inflation-linked power purchase agreements, and ability to capture strong power prices.

Our wind and solar segments generated a combined $145 million of FFO. We continue to benefit from contributions from acquisitions and the diversification of our fleet, which is underpinned by long duration power purchase agreements that provide stable revenues. Our distributed energy and sustainable solutions segment generated $39 million of FFO, benefiting from both acquisitions and organic growth across the portfolio.

Our renewable power development pipeline stands at almost 150,000 megawatts, nearly one and half times larger than it was at this time last year. We also continue to be successful starting development on projects earlier than had been planned and scaling our development to meet growing demand for clean power. We have approximately 5,000 megawatts on track for commissioning this year, and ~7,000 and ~8,000 megawatts on track for delivery in 2024 and 2025, respectively. Much of the capital for these projects is already invested, and we will see the returns on that capital when the projects begin producing cash upon commissioning. We expect newly commissioned capacity this year to contribute approximately $70 million in additional FFO annually and commissioned capacity in the following two years to contribute a combined $180 million in additional FFO annually.

Balance Sheet & Liquidity

Our financial position remains excellent, and our available liquidity is robust, providing significant flexibility to fund our growth. We are resilient to rising global interest rates, with ~90% of our borrowings being project level non-recourse debt, with an average remaining term of over 10 years, no material near-term maturities in the next five years, and only 3% exposure to floating rate debt.

Despite market volatility, we continue to have access to deep and varied pools of capital, differentiating our business. We finished the quarter with $4.4 billion of available liquidity, giving us significant optionality during periods of capital scarcity. So far this year, we have secured over $10 billion of non-recourse financing across the business and expect to raise an additional $8 billion in non-recourse financing by year-end, generating over $800 million in total upfinancing proceeds to Brookfield Renewable for the year.

Distribution Declaration

The next quarterly distribution in the amount of $0.3375 per LP unit, is payable on December 29, 2023 to unitholders of record as at the close of business on November 30, 2023. In conjunction with the Partnership's distribution declaration, the Board of Directors of BEPC has declared an equivalent quarterly dividend of $0.3375 per share, also payable on December 29, 2023 to shareholders of record as at the close of business on November 30, 2023. Brookfield Renewable targets a sustainable distribution with increases targeted on average at 5% to 9% annually.

The quarterly dividends on BEP's preferred shares and preferred LP units have also been declared.

Distribution Currency Option

The quarterly distributions payable on the BEP units and BEPC shares are declared in U.S. dollars. Unitholders who are residents in the United States will receive payment in U.S. dollars and unitholders who are residents in Canada will receive the Canadian dollar equivalent unless they request otherwise. The Canadian dollar equivalent of the quarterly distribution will be based on the Bank of Canada daily average exchange rate on the record date or, if the record date falls on a weekend or holiday, on the Bank of Canada daily average exchange rate of the preceding business day.

Registered unitholders who are residents in Canada who wish to receive a U.S. dollar distribution and registered unitholders who are residents in the United States wishing to receive the Canadian dollar distribution equivalent should contact Brookfield Renewable's transfer agent, Computershare Trust Company of Canada, in writing at 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1 or by phone at 1-800-564-6253. Beneficial unitholders (i.e., those holding their units in street name with their brokerage) should contact the broker with whom their units are held.

Distribution Reinvestment Plan

Brookfield Renewable Partners maintains a Distribution Reinvestment Plan ("DRIP") which allows holders of BEP units who are residents in Canada to acquire additional LP units by reinvesting all or a portion of their cash distributions without paying commissions. Information on the DRIP, including details on how to enroll, is available on our website at www.bep.brookfield.com/stock-and-distribution/distributions/drip.

Additional information on Brookfield Renewable's distributions and preferred share dividends can be found on our website at www.bep.brookfield.com.

Brookfield Renewable

Brookfield Renewable operates one of the world's largest publicly traded, pure-play renewable power platforms. Our portfolio consists of hydroelectric, wind, utility-scale solar and storage facilities in North America, South America, Europe and Asia, and totals approximately 31,500 megawatts of installed capacity and a development pipeline of approximately 143,400 megawatts of renewable power assets, 14 million metric tonnes per annum ("MMTPA") of carbon capture and storage, 2 million tons of recycled material and 4 million metric million British thermal units of renewable natural gas production annually. Investors can access its portfolio either through Brookfield Renewable Partners L.P. (NYSE:BEP, TSX:BEP), a Bermuda-based limited partnership, or Brookfield Renewable Corporation ((NYSE, TSX:BEPC), a Canadian corporation. Further information is available at https://bep.brookfield.com. Important information may be disseminated exclusively via the website; investors should consult the site to access this information.

Brookfield Renewable is the flagship listed renewable power company of Brookfield Asset Management, a leading global alternative asset manager with approximately $850 billion of assets under management.

Please note that Brookfield Renewable's previous audited annual and unaudited quarterly reports filed with the U.S. Securities and Exchange Commission ("SEC") and securities regulators in Canada, are available on our website at https://bep.brookfield.com, on SEC's website at www.sec.gov and on SEDAR's website at www.sedar.com. Hard copies of the annual and quarterly reports can be obtained free of charge upon request.

Quarterly Earnings Call Details

Investors, analysts and other interested parties can access Brookfield Renewable's Third Quarter 2023 Results as well as the Letter to Unitholders and Supplemental Information on Brookfield Renewable's website at https://bep.brookfield.com.

The conference call can be accessed via webcast on November 3, 2023 at 8:30 a.m. Eastern Time at https://edge.media-server.com/mmc/p/8qxc5kd9

.

PROPORTIONATE RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30

The following chart reflects the generation and summary financial figures on a proportionate basis for the three months ended September 30:

Full story available on Benzinga.com