Brookfield Renewable Energy Partners – Brookfield Renewable Partners (NYSE:BEP) has a market cap of over $11 billion and a dividend yield of nearly 5%. The company has an impressive array of renewable assets. As we’ll see in this article, Brookfield Renewable Partners has an opportunity to use its assets to generate large and growing dividends.
Brookfield Renewable Partners had 26.1 TWh of proportional power generation, up ~8% year over year and supported by similar increases in the company’s long-term average growth. The company has been able to do this at near-constant actual production and capacity, with a few percent growth in average revenue per MWh.
Financially, the company posted 6% year-over-year growth, or $807 million in FFO. The company is focused on cost reduction initiatives and improving its overall profile.
Financially, the company has improved its average liquidity. It improved the average duration of its debt to maturity and the duration of corporate loans, while significantly lowering its average interest rate. This, combined with the company’s reduced debt, helps improve its overall financial condition and long-term shareholder returns.
Brookfield Renewable Partners has $57 billion in assets with 3,000 employees and ~19,000 megawatts of capacity. The company has 5,324 power generation assets and most of its impressive assets are located in North America. Globally, its assets are located in stable jurisdictions with reliable power purchase agreements.
The Company’s largest source of wealth is hydroelectric power development in North America. Hydropower is also his greatest asset worldwide. The company then has significant wind assets, followed by significant hydroelectric assets. The combination of these assets demonstrates that the Company has an abundance of sales opportunities and upside potential in its renewable assets.
Given the company’s impressive asset base, the company also has a long history of consistent returns that look set to continue.
Brookfield Renewable Partners has a relatively low yield of just under 5%, but it has a long-term goal of growing to 5% to 9%. That’s big because it means the company’s returns are doubling on average about every 10 to 12 years (it’s doubled about twice in the last 21 years since inception).
That’s tremendous growth, if you buy today at a 5% direct return, you’ll have a 20% return on costs 25 years from now. This startup growth makes the company a valuable asset to invest in for long-term growth sooner rather than later. We see this quality, along with the tremendous market opportunity the company is investing in and the current low interest rates, as something that will generate significant returns.
Brookfield Renewable Partners achieved commercial operations during the year with assets of 458 MW and generated $8 million in annual FFO. The Company also has a relatively large plant capacity under construction of 2789 MW which is expected to generate US$61 million in annual FFO. These projects will be online in the next few years.
The Company also has several other projects in the final stages of approval that should generate $48 million in new FFO upon completion. Given the company’s 2020 FFO of $807 million, these projects combined have the potential to increase the company’s FFO by more than 12% annually.
Brookfield Renewable Partners’ risk resides in the company’s current valuation and relative interest rate. Trading at a yield of nearly 5% is a historically low yield for the company. That’s after the correction the company has had so far, but there’s a chance that the correction will bring yields back to historic levels. It could hurt shareholders in the short term.
Brookfield Renewable Partners has an impressive portfolio of assets in a fast-growing sector. The company has invested in tens of billions of dollars in assets and uses large and well-allocated project-level debt to balance its portfolio. Going forward, the company has many additional opportunities to continue investing and growing.
Brookfield Renewable Partners has committed to increasing its dividend by 5% to 9% annually. That means the company expects to double its dividend roughly every 12 years. It will help the company generate impressive long-term returns from today’s investment and make the company a valuable investment opportunity.
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Brookfield Renewable Partners L.P. operates one of the world’s largest publicly traded renewable energy platforms. (BEP) consists of approximately 21,000 MW of capacity and nearly 6,000 generation assets in North America, South America, Europe and Asia. The price of shares in the Hamilton, Bermuda-based company is up 25.3% over the past nine months to close yesterday’s trading session at $37.82. And its funds from operations (FFO) grew 11.5% year over year to $242 million for the first quarter ended March 31, 2021.
However, BEP’s revenue for the quarter was $1.02 billion, compared to $1.05 billion for the prior quarter. Net loss was $55 million for the quarter compared to net income of $89 million a year ago.
BEP has agreed to sell certain assets as part of a capital recovery strategy. Its units are down 7.5% over the past three months and 6.1% over the last month.
With growing concerns about climate change, governments and businesses around the world are increasingly focusing on using renewable energy to accelerate carbon emissions. The US, EU, Canada and Japan have announced plans to cut emissions by around half by 2030, while the UK has announced plans to cut emissions by almost 80% by 2035. In fact, U.S. renewable energy consumption will increase for the fifth year in a row in 2020. And according to a report by DownToEarth, global energy investment is projected to grow 10% year over year in 2021 to about $1.9 trillion.
With a dominant market position in the field of renewable energies, BEP should benefit from the industry’s tailwind. However, it faces stiff competition from other renewable energy players such as NextEra Energy Partners, LP (NEP), Atlantica Sustainable Infrastructure plc (AY), and Renewable Energy Group, Inc. (REGI).
In April, BEP agreed to sell its remaining 360 megawatts of operational assets and development pipelines in Ireland and approximately 270 megawatts of its completed wind assets in Scotland. The company also signed an agreement to sell 390 megawatts of wind assets, primarily in California. These measures are part of the capital recovery strategy. It sells mature, de-risked or non-core assets with the goal of using the net proceeds to fund growth opportunities and expand its pipeline. However, asset sales are shrinking the company’s portfolio and meanwhile making its prospects uncertain.
In terms of forward EV/S, the BEP is 12.69x, 183.3% above the industry average of 4.48x. Its 28.11x forward P/CF is 229.5% above the 8.53x industry average. The stock’s forward P/E and EV/EBITDA of 4.55x and 27.60x, respectively, are also above the industry averages of 2.46x and 11.40x.
BEP has an overall rating of D, which is equivalent to Sell in our POWR rating system.
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