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 highlights

• Robust Construction Pipeline: Over the course of 2021, the company saw unprecedented growth. It put almost 1,000 megawatts of additional capacity online and completed the year with about 15,000 megawatts of construction and advanced-stage projects. In 14 different nations, these projects range from distributed to utility-scale solar, wind, storage, hydro, and green hydrogen. Once finished, we anticipate that these initiatives will provide about USD 180 million in annual FFO to our firm. Furthermore, the company has a global development pipeline of around 62,000 megawatts.
  

• Elevated Funds from Operations: The company generated USD 934 million in funds from operations, a 16% increase over USD 807 million in pcp, as its assets continued to perform effectively, with strong levels of asset availability and new acquisitions, as well as higher realized prices across most markets due to inflation escalation, commercial contracting initiatives, and higher global power prices.

• Strong Balance Sheet and Liquidity: The group’s financial position continues to be strong as it holds liquidity of approximately USD 4.1 billion, also its investment grade balance sheet has no meaningful near-term maturities. As per its management the above liquidity is sufficient to cater to the near-term capital requirements of the firm.

• An income Play: The company has paid consistent dividends to its stockholders in recent years, underpinned by reliable cash flows. Notably, the firm declared a dividend of USD 0.32 per LP unit, payable on March 31, 2022, represents a 5% increase against the sequential quarter. Additionally, the stock carries a dividend yield of 3.124% on an annualized basis, which looks attractive considering the persisting interest rate scenario.

• Acquired Urban Grid: Recently, the company purchased Urban Grid in North America, a major utility-scale solar developer in the United States with a 20,000-megawatt development pipeline and a strong presence in the high-value PJM market. It has 2,000 megawatts of under construction or ready-to-build solar projects in its pipeline, as well as 4,000 megawatts of de-risked advanced stage buildout prospects.
  

Risks associated with investment 

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.

Financial overview of Q4 2021 (in millions of USD)

Source: Company Filing

• In Q4 2021, the company’s revenue increased to USD 1,091 million, against USD 952 million in the previous corresponding period. The higher revenue was mainly due to healthy production from all segments along with acquired facilities which contributed to revenue.
• The company witnessed higher direct operating cost at USD 375 million against USD 357 million while the management service cost deescalated to USD 64 million against USD 84 million in pcp.
• The company reported higher depreciation expenses, higher interest expense still it managed to transform its losses into a net profit of USD 33 million in Q4 2021 against a loss of USD 5 million in pcp.
  

Valuation Methodology (Illustrative) EV to EBITDA

Analysis by Kalkine Group 

Stock recommendation 

FY 2021 was another strong year for the company's business, as it achieved its highest-ever FFO of USD 934 million and continued to expand development activities, with over 15,000 megawatts of capacity under construction or in late-stage development, and a global development pipeline of 62,000 megawatts. Because of a robust building pipeline, the firm is well positioned to capitalize on growing demand. Furthermore, the business maintained its strong investment-grade balance sheet and completed the year with over USD 4 billion in accessible liquidity as well as access to large sovereign and institutional capital that it may invest alongside, offering enhanced flexibility for future expansion. Hence considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock of BEP.UN at the last traded price of CAD 52.22 on March 11, 2022.

One-Year Technical Price Chart (as on March 11, 2022). Source: REFINITIV, Analysis by Kalkine Group

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