Brookfield Renewable Partners L.P. (BEP-N, BEP.UN-T) US$28.01 | C$37.55 Capital Recycling Accelerating; Growth Outlook Robust
Event Brookfield Renewable Partners L.P. (BEP) reported Q4/22 results on February 3 before the market opened. Q4/22 FFO/unit of $0.35 was between our estimate of $0.34 and the consensus forecast of $0.36. Proportionate adjusted EBITDA of $461 million was in line with our forecast of $463 million, but was below the consensus forecast of $499 million. Impact: NEUTRAL ■ Q4/22 FFO was near expectations. We trimmed our Q4/22 generation expectations in advance of the release, given data pointing to relatively dry conditions earlier in the quarter across eastern North America. Q4/22 proportionate generation was 11% below LTA guidance. ■ BEP's development pipeline (confirmed plus prospective projects) has grown to 110 GW (up 8% q/q). This includes 19 GW of capacity either in construction or in advanced development. Projects scheduled for COD by the end of 2025 are expected to contribute net annual FFO of $176 million ($0.27/ unit, or 18% of the LTM figure). The company's pipeline has been considerably augmented in the last year by developer acquisitions (Scout, Standard Solar, and Urban Grid). Although M&A is expected to remain BEP's primary growth driver, its opportunity set of organic development initiatives continues to expand. ■ We view BEP as well-funded, augmenting liquidity via asset recycling to crystalize investment returns. The company has initiated divestiture initiatives, which could generate ~$4 billion of total proceeds ($1.5 billion net to BEP) once closed. BEP ended Q4/22 with available liquidity of $3.7 billion. ■ We reiterate our ACTION LIST BUY recommendation and $41.00 target price. Updates to our estimates reflect reconciliation of the Q4/22 results and BEP's updated development pipeline. TD Investment Conclusion We believe that BEP deserves a valuation premium based on several factors: scale; broad investment opportunity set; ability to act on large/complex transactions; operating/procurement expertise; management depth; and a strong funding platform. BEP's unit price has declined 27% since mid-September 2022, lagging most peers.