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: The corporation had remarkable growth in 2021 and continued to accelerate the development activities, executing on its 15,000-megawatt under-construction and advanced-stage pipeline, further expanding the development pipeline to 69,000 megawatts. These projects span from distributed to utility-scale solar, wind, storage, hydro, and green hydrogen in different countries. The company believes that these efforts will generate about USD 150 million in annual FFO once completed.
  

• Steady Funds from Operations: The company generated USD 243 million funds from operations, over USD 242 million in pcp. However, its cash flow increased by 13.5% sequentially as its assets continued to perform effectively, with high levels of asset availability and new acquisitions. The group also realized higher prices across most markets due to inflation, commercial contracting initiatives and higher global power prices.

• Strong Balance Sheet and Liquidity: The group's financial position remains robust, with roughly USD 3.8 billion in cash and no significant near-term maturities on its investment grade balance sheet. According to the management, the above liquidity is sufficient to meet the firm's near-term capital requirements.
  

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 Q1 2022 (Expressed in mn of USD)

Source: Company Filing 

• In Q1 2022, the company’s revenue increased to USD 1,136 million, against USD 1,020 million in the previous corresponding period. The higher revenue was mainly due to healthy production from all segments along with higher realized price.
• The company witnessed lower direct operating cost at USD 350 million against USD 391 million while the interest expenses and depreciation cost stood at higher levels.
• The company reported lower net loss attributable to unitholders at USD 78 million, compared to USD 133 million in pcp.

Valuation Methodology (Illustrative) EV to Sales

*1USD=1.29CAD

Analysis by Kalkine Group

Stock recommendation

The company’s business performed well in the quarter as it delivered solid financial results and executed on several key strategic initiatives, including entering a new decarbonization asset class with an investment in carbon capture solutions.

Additionaly, it  is well positioned to capitalise on rising demand, owing to a solid construction pipeline. Furthermore, the company maintained its excellent investment-grade balance sheet and ended the quarter with over USD 3.8 billion in accessible liquidity, as well as access to big sovereign and institutional capital that it may invest alongside, providing improved flexibility for future growth.

Hence considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock of BEP.UN at the last traded price of CAD 44.35 on May 09, 2022. Moreover, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on May 09, 2022). Source: REFINITIV, Analysis by Kalkine Group

Note: The reference data in this report has been partly sourced from REFINITIV

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