Brookfield Renewable Partners Should Reward Investors Through Acquisitions

Brookfield Renewable is a globally diversified operator and owner of renewable energy platforms. Its portfolio consists of approximately 19,300 MW of capacity and 5,288 generating facilities in North America, South America, Europe, and Asia. It is a global leader in hydroelectric power. The company engages in acquiring, building, financing assets, and actively managing them, and also in distributed generation, and storage.

Hydroelectric assets comprise 74% of its portfolio in 27 markets across 17 countries. Other assets include global wind (20% of the portfolio), solar (6%). The company’s segments are Hydroelectric, wind, solar, storage and other, and corporate. North America (62%) is its largest market by long-term average generation, followed by Latin America & Asia (34%) and Europe (4%).

Investment Data

Revenue Growth & Market Exposure

As one of the premier renewable energy companies, Brookfield Renewable has amassed renewable assets worth $50 billion in the last two decades. The company produces and delivers clean, renewable energy to a customer base comprising primarily of over 600 public power authorities and utilities around the world under long-term power purchase agreements. The creditworthiness of its customers further adds to cash flow visibility. The company’s revenue is highly diversified and stable. 

Brookfield Renewable recently announced a merger with its subsidiary, TerraForm Power. This merger will simplify its structure, diversify its holdings, and strengthen its foothold in North America and Europe. Brookfield Renewable continues to make good progress on its M&A and development pipeline, which is on track to deliver opportunities worth $700-800 million of net equity in 2020. The company also continues to invest in the diversification of its fleet. Its diversified operating platforms on four continents and across five technologies also grants it a local operating and marketing expertise.

Brookfield Renewable’s cost reduction initiatives have resulted in higher margins, while its commercial and re-contracting initiatives have led to higher realized prices. The company continued its various construction and commissioning activities and signed new contracts for delivery, during the quarter. Brookfield Renewable Partners is backed by Brookfield Asset Management which is a leading global alternative asset management company having a large global presence in over 30 countries and a good history of generating strong cash flow.

Dividends

Brookfield Renewable has a 20-year track record of delivering stable and growing dividends. The company has compounded its payout at more than 6% annually, over the last decade. It last raised its dividend by 5.3% and offers an attractive dividend yield of 4.5% currently. Brookfield Renewable’s investment objective is to deliver long-term annualized total returns of 12%–15% on a per-unit basis, including annual distribution increases of 5–9%. It targets a payout ratio of 70% of FFO over the long-term

Creditworthy counterparties and long-term PPAs with a weighted-average remaining contract tenure of 14 years, ensure stable and secure cash flows. The portfolio is largely contracted, with 95% of the total generation contracted in 2020. Brookfield Renewable is, therefore, not susceptible to any short-term price declines. The company’s development pipeline includes 1,333 MW of advanced-stage projects which once commissioned, are expected to contribute over $46 million in FFO on an annualized basis. It ended the quarter with over $3 billion of total available liquidity and no significant maturities over the next five years. 

Brookfield Renewable stands a good chance to benefit from a growing demand for renewable energy as climate change concerns loom over the world. Wind and solar have become the most economic sources of bulk power with prices now being competitive with conventional sources of power. Brookfield is looking forward to growing its regional platforms as well as achieve scale in Asia. It is targeting future growth from initiatives like building a leading distributed generation platform and enhancing its development capabilities across technologies. A strong investment-grade balance sheet and high levels of liquidity should support future dividend distribution.

Competition

Brookfield Renewable is one of the largest public pure-play renewable businesses globally. TransAlta Renewables, Algonquin Power & Utilities Corp, Northland Power are Brookfield Renewable Partners’ strong competitors. TransAlta Renewables is one of the largest generators of wind power in Canada while Algonquin Power & Utilities is a diversified generation, transmission and distribution utility based in North America, and Northland Power is another power producer operating clean and green power infrastructure assets in Canada, Europe, and a few other geographies. 

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:AQNAQNAlgonquin Power & Utilitties CorpUtilitiesUtilities - Renewable0.7418.4810.8718.6424.790.990.04504.500.840540.620.131778Tollbooth - UnregulatedNONOYESNOCanada1
TSE:BEP.UNBEP.UNBrookfield Renewable Partners L.P.UtilitiesUtilities - Renewable0.4857.5810.370.0024.79-0.360.05055.051.000042.170.079846Tollbooth - UnregulatedNONONONOCanada1
TSE:NPINPINorthland Power Inc.UtilitiesUtilities - Renewable0.4836.707.1219.2024.791.910.03273.270.6283121.200.043335Tollbooth - UnregulatedNONONONOCanada1
TSE:RNWRNWTransAlta Renewables Inc.UtilitiesUtilities - Renewable0.5115.604.1538.8924.790.400.06026.022.3490120.940.082334Tollbooth - UnregulatedNONOYESNOCanada1
TSE:INEINEInnergex Renewable Energy IncUtilitiesUtilities - Renewable0.4122.994.010.0024.79-0.520.03133.131.000040.720.031346Tollbooth - UnregulatedNONOYESNOCanada1
TSE:BLXBLXBoralex Inc.UtilitiesUtilities - Renewable0.3934.943.370.0024.79-0.320.01891.891.000040.660.067754Tollbooth - UnregulatedNONOYESNOCanada1

Bottom Line 

Brookfield Renewable ranks amongst the largest renewable independent power producers in North America. It has a strong core business with a proven track record and is in a good position to leverage its knowledge and customer relationships to develop new platforms and capabilities. The company is known for its operational excellence and financial strength which positions it well for future growth opportunities. Given its growing generation portfolio, high-quality customer base, and contracted cash flows, the company should continue its dividend growth streak in the future.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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