BRENF - Brookfield Renewable Partners: Units Are Fairly Valued But Floating Preferreds Offer 11%+ Yield

2024-06-19 10:10:56 ET

Summary

• Brookfield Renewable Partners has a high base effect limiting future growth. Company's units are fairly priced.
• Series 2 (BRF.PR.B:CA) preferreds offer an 11.1% yield and are likely to outperform the company's units over the next 2 years.
• Two more preferred shares of the company look like a good long-term investment. One of them is due for a reset on July 31, 2024.

Brookfield Renewable Partners: high base effect limits future growth

Brookfield Renewable Partners ( BEP.UN:CA ) ( BEP ) is a utility with approximately 32.1 GW of geographically diversified generation assets, with renewables representing around 97% of the total. The company’s business model relies on stable cash flows, as 90% of the revenues are contracted under Power Purchase Agreements with a weighted average remaining life of 13 years. The recent increase in inflation, which remains relatively high, had a limited impact on the company’s revenues, as approximately 70% of the contracted revenues are inflation-adjusted.

The company’s strategy is based on the growth of its international asset base and a significant increase in operating revenues. Over the last decade the company has achieved a 10% CAGR of its Funds From Operations (FFO)....

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