Brookfield Renewable Partners L.P.

Brookfield Renewable Partners L.P. (TSX: BEP.UN) is a renewable power generating company which holds a portfolio of renewable power generating facilities within North America, Latin America, and Europe.               

Key Updates:

• Impressive YTD performance: For 9MFY21, the company reported its actual generation of 42,044 GWh, higher than 39,535 GWh in pcp. Moreover, the company reported higher realized prices across most the markets it operates, supported by price hike on account of inflation, commercial contracting initiatives, coupled with higher global power prices. Notably, revenue stood higher at USD 3,005 million in 9MFY21, higher than USD 2,858 million in pcp.

• Issuance of USD 260 Million Green Perpetual Subordinated Notes: Recently, the company issued USD 260 million of fixed rate green perpetual subordinated notes, at a coupon rate of coupon of 4.875%per annum. The above is expected to support the company’s overall liquidity position.
  

• Impressive dividend yield: The stock of BEP.Un carries an impressive dividend yield of ~3.377% on an annualized basis, which looks impressive considering the persisting interest rate scenario. Moreover, the company reported a higher dividend distribution of USD 642 million in 9MFY21, as compared to USD 567 million in pcp.

Q3FY21 Financial Highlights:

• Un declared its quarterly results, wherein the group posted revenue of USD 966 million, improved from USD 876 million in the previous corresponding period (pcp). During the quarter, actual generation stood at 13,533 GWh, as compared to 12,007 GWh in pcp.
• The group witnessed a marginally higher direct operating cost (USD 292 million v/s USD 281 million in Q3FY20), coupled with higher interest expense and higher management service costs.
• Net loss widened to USD 154 million, from a net loss of USD 119 million in Q3FY20.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: Higher input costs would likely dampen the company’s profitability and cash flows in the coming quarters. Moreover, the group has reported a consistent surge in the debt component, which is likely to take a toll on the overall financial flexibility of the group.

Valuation Methodology (Illustrative): Price to CF based

Stock Recommendation:

The group operates within the renewable energy segment and has a presence across the globe with a diversified portfolio of pure-play renewable assets that are supported by more than 3,000 established operators. Notably, the company operates across all the major segments like Hydroelectric, Solar, Energy transition and Wind. In the recent past, the sector (renewable) saw a constant increase in demand due to lower carbon emission norms targeted by developed nations. We expect the momentum to continue in the coming days, and the company is highly poised to take advantage of the growing demand. We have valued the stock using the Price to Cash Flow based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like TransAlta Renewables Inc, Boralex Inc etc. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of BEP.UN at the last traded price of CAD 44.80 on December 20, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on December 20, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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