Brookfield Renewable Partners L.P. (TSX: BEP.UN; NYSE: BEP) (“Brookfield Renewable Partners”, “BEP”, or together with Brookfield Renewable Corporation, “Brookfield Renewable”) reported financial results for the three and nine months ended September 30, 2020.
“We had a strong quarter, as we executed on a broad range of transactions that highlight the unique strengths and differentiated value of our business,” said Connor Teskey, CEO of Brookfield Renewable. “Our strategy going forward is unchanged. We remain focused on growing our business, while continuing to deliver on our target of 12-15% long-term returns to equity holders, by leveraging our scale and operational expertise to help governments and businesses around the world transition to a greener future.”
Brookfield Renewable reported FFO of $157 million ($0.38 per unit) for the three months ended September 30, 2020, a 12% increase from prior year, and $206 million ($0.50 per unit) on a normalized basis, a 28% increase from the prior year. After deducting non-cash depreciation, our net loss attributable to unitholders for the three months ended September 30, 2020 was $162 million or $0.44 per LP unit.
- We agreed on transactions to invest ~$900 million (~$250 million net to BEP) of equity;
- We completed the special distribution of Brookfield Renewable Corporation which has led to increased demand and enhanced liquidity for our securities; and
- Our liquidity remains robust at $3.3 billion and our balance sheet remains in excellent shape – with no material debt maturities over the next five years and, so far this year, we generated $900 million of proceeds ($326 million net to BEP) from asset recycling initiatives.
Update on Growth Initiatives
Recently we executed on a broad range of transactions that highlight the unique strengths and differentiated value of our business. Our largest transaction was completing the merger of TerraForm Power on an all-stock basis. The transaction was immediately cash accretive, expands our wind and solar business in North America and Europe and further enhances our position as one of the largest, publicly traded pure-play renewable power businesses globally.
We also closed the acquisition of a 1,200 MW shovel-ready solar development project in Brazil , one of the largest solar projects globally. The project is over 75% contracted under long-term agreement and we intend to leverage our local power marketing expertise to contract the remaining generation and use our global scale to drive down equipment procurement and operating costs to deliver value over time.
This week, we announced our intention to launch an offer to privatize Polenergia, a scale renewable business in Europe , in partnership with the current majority shareholder. The investment represents an opportunity to invest in an attractive onshore wind platform and provides an attractive entry into the offshore wind sector in Europe through a 3,000-megawatt development pipeline, which we expect to construct over the next 5 to 7 years in partnership with an experienced offshore wind developer.
And we acquired a portfolio of loans from one of the largest non-bank financial companies in India for approximately $200 million . The investment, which is secured by approximately 2,500-megawatts of operating assets, is expected to earn returns in excess of 15%, and further expands our presence in the region.
Finally, we funded the final C$400 million tranche of the C$750 million convertible securities we agreed to invest in TransAlta Corporation at the beginning of 2019. The convertible securities provide us with the option to convert into an interest in TransAlta’s 813 megawatt portfolio of high-quality hydroelectric facilities in Alberta between 2025 and 2028 based on a multiple of 13 times the average annual EBITDA for the three years prior to conversion. The investment, which was the culmination of a multi-year dialogue, enhances our strategic relationship with the company to help advance its goal of transitioning to a low carbon energy future.
Results from Operations
During the third quarter, we generated FFO of $157 million or $0.38 per unit, a 12% increase from prior year as the business benefited from strong asset availability and contributions from organic growth and recent acquisitions. On a normalized basis, our results are up 28%.
During the quarter, our hydroelectric segment delivered FFO of $113 million . While generation for the quarter was below the long-term average level, driven by drier conditions across our fleet, year-to-date generation has been roughly in line with long term average. As we have consistently emphasized, we do not manage the business on under or overperformance of generation relative to the long-term average in any given period. Instead, we remain focused on diversifying the business from both a geographic and technology perspective, which mitigates short-term exposure to resource volatility, and regional or market disruptions.
Across our hydroelectric portfolio, we continue to focus on securing contracts that value the uniqueness of our fleet as a generator of dispatchable carbon free electricity and ancillary services. Subsequent to quarter-end, we agreed to supply 100% renewable energy to one of the first planned industrial-scale green hydrogen production plants in North America and over 90% of JPMorgan’s real estate operations in New York . These transactions demonstrate our ability to address diverse customer needs for renewable supply across both wholesale and retail energy markets. Additionally, in South America we signed 25 contracts in the quarter with high-quality, creditworthy counterparties for a total of almost 2,000 gigawatt-hours per year, substantially contracting our recently acquired development assets in the region.
Our wind and solar segments continue to generate stable revenues and benefit from the diversification of our fleet and highly contracted cash flows with long duration power purchase agreements. During the quarter, these segments generated a combined $126 million of FFO, representing a 70% increase over the prior year, as we benefited from contributions from acquisitions, including our increased ownership in TerraForm Power, and 33 megawatts of solar projects commissioned during the quarter.
Finally, we continued to advance our global development activities, including progressing almost 2,700 megawatts of construction diversified across distributed- and utility-scale solar, wind, storage, and hydro in 8 different countries. We are also progressing approximately 1,110 megawatts of advanced-stage projects through final permitting and contracting. In total, we expect these projects to contribute approximately $116 million in FFO on a run-rate basis.
Balance Sheet and Liquidity
Our financial position continues to be in excellent shape. We have approximately $3.3 billion of total available liquidity, and our investment grade balance sheet has no material maturities over the next five years and approximately 90% of our financings are non-recourse to BEP.
During the quarter, we continued to take advantage of the low interest environment and executed on $900 million of investment grade financings, including a C$425 million , 30-year corporate green bond issuance, which brings our total green financings to date to over $4 billion and extends our average corporate debt duration to 14 years.
We continued to execute on our capital recycling program of monetizing mature, de-risked assets. During the quarter, we closed the sale of the final project in our South African portfolio. Since acquiring these assets as part of a broader global transaction in 2017, we have returned almost $200 million of capital ( ~$60 million net to BEP) representing over 2.5 times our investment. Following the quarter, we also executed the sale of a 40% equity interest in an 852-megawatt portfolio in the U.S. and 47 megawatts of operating wind assets in Ireland for total proceeds of over $400 million ( $233 million net to BEP).