October 8, 2015 Brookfield Renewable Energy Partners

Transcription

1 October 8, 2015 Brookfield Renewable Energy Partners Investor Meeting 2015

2 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements and information, within the meaning of Canadian securities laws and forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, safe harbor of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations, concerning the business and operations of Brookfield Renewable. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements in this presentation include statements regarding the quality of Brookfield Renewable s assets and the resiliency of the cash flow they will generate, Brookfield Renewable s anticipated financial performance, future commissioning of assets, contracted portfolio, technology diversification, acquisition opportunities, expected completion of acquisitions, future energy prices and demand for electricity, economic recovery, achieving long-term average generation, project development and capital expenditure costs, diversification of shareholder base, energy policies, economic growth, growth potential of the renewable asset class, the future growth prospects and distribution profile of Brookfield Renewable and Brookfield Renewable s access to capital. Forward-looking statements can be identified by the use of words such as plans, expects, scheduled, estimates, intends, anticipates, believes, potentially, tends, continue, attempts, likely, primarily, approximately, endeavours, pursues, strives, seeks, or variations of such words and phrases, or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information in this presentation are based upon reasonable assumptions and expectations, we cannot assure you that such expectations will prove to have been correct. You should not place undue reliance on forward-looking statements and information as such statements and information involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: the potential for separation of economic interest from control within our organizational structure; the incurrence of debt at multiple levels within our organizational structure; being deemed an investment company under the U.S. Investment Company Act of 1940; the effectiveness of our internal controls over financial reporting; changes to hydrology at our hydroelectric stations, to wind conditions at our wind energy facilities or to crop supply or weather generally at any biomass cogeneration facility; counterparties to our contracts not fulfilling their obligations, and as our contracts expire, not being able to replace them with agreements on similar terms; increases in water rental costs (or similar fees) or changes to the regulation of water supply; volatility in supply and demand in the energy market; the increasing amount of uncontracted generation in our portfolio; general regulatory risks relating to the power markets in which we operate; increased regulation of our operations; our concessions and licenses not being renewed; increases in the cost of operating our plants; our failure to comply with conditions in, or our inability to maintain, governmental permits; equipment failure; dam failures and the costs of repairing such failures; force majeure events; uninsurable losses; adverse changes in currency exchange rates; availability and access to interconnection facilities and transmission systems; health, safety, security and environmental risks; disputes, government and regulatory investigations and litigation; our operations being affected by local communities; fraud, bribery, corruption, other illegal acts, inadequate or failed internal processes or systems, or from external events; our reliance on computerized business systems; advances in technology that impair or eliminate the competitive advantage of our projects; newly developed technologies in which we invest not performing as anticipated; labour disruptions and economically unfavourable collective bargaining agreements; our inability to finance our operations due to the status of the capital markets; operating and financial restrictions imposed on us by our loan, debt and security agreements; changes in our credit ratings; changes to government regulations that provide incentives for renewable energy; our inability to identify sufficient investment opportunities and complete transactions; the growth of our portfolio and our inability to realize the expected benefits of our transactions; our inability to develop existing sites or find new sites suitable for the development of greenfield projects; delays, cost overruns and other problems associated with the construction, development and operation of our generating facilities; arrangements we enter into with communities and joint venture partners; Brookfield Asset Management Inc. s ( BAM ) election not to source acquisition opportunities for us and our lack of access to all renewable power acquisitions that BAM identifies; our lack of control over our operations to the extent conducted through joint ventures, partnerships and consortium arrangements; our ability to issue equity or debt for future acquisitions and developments is dependent on capital markets; foreign laws or regulation to which we become subject as a result of future acquisitions in new markets; the departure of some or all of BAM s key professionals; our relationship with, and our dependence on, BAM and BAM s significant influence over us; risks related to changes in how BAM elects to hold its ownership interests in Brookfield Renewable and we are not subject to the same disclosure requirements as a U.S. domestic issuer. We caution that the foregoing list of important factors that may affect future results is not exhaustive. The forward-looking statements represent our views as of the date of this presentation and should not be relied upon as representing our views as of any date subsequent to October 8, 2015, the date of this presentation. While we anticipate that subsequent events and developments may cause our views to change, we disclaim any obligation to update the forward-looking statements, other than as required by applicable law. For further information on these known and unknown risks, please see Risk Factors included in our Form 20-F. CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES This presentation contains references to Funds From Operations, which is not a generally accepted accounting measure under IFRS and therefore may differ from definitions of Funds From Operations used by other entities. We believe that these are useful supplemental measures that may assist investors in assessing the financial performance and the cash anticipated to be generated by our operating portfolio. Funds From Operations should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. References to Brookfield Renewable are to Brookfield Renewable Energy Partners L.P. together with its subsidiary and operating entities unless the context reflects otherwise. All amounts are in U.S. dollars unless otherwise specified. 2

3 Agenda Overview Growth Engine and Strategy European Platform Financial Profile Takeaways Sachin Shah Sachin Shah Ralf Rank Nick Goodman Sachin Shah 3

4 Overview Sachin Shah, CEO 4

5 Brookfield Renewable Energy Partners $20B POWER ASSETS 7,400 MEGAWATTS OF CAPACITY 80% HYDROELECTRIC GENERATION 252 power generating facilities 14 markets in 7 countries Situated on 75 river systems 5

6 Our business is hydro focused, diversified and stable HYDRO- FOCUSED GLOBAL FOOTPRINT PREDICTABLE CASH FLOWS 18% 20% 5% 8% 80% 50% 92% 25% Hydro Wind Other United States Canada Brazil Europe Contracted Uncontracted 6

7 BREP BREP has grown significantly over the past four years delivering an attractive total return to shareholders 13% CAGR 6% CAGR 12% Total Return 4,500 MW 7,400 MW $1.30 per share $1.66 per share $20.67 $ INSTALLED CAPACITY DISTRIBUTIONS SHARE PRICE Amounts calculated from January 1, 2011 September 30,

8 Growth Engine and Strategy Sachin Shah, CEO 8

9 Our Goals Employ a value-oriented approach to acquire high quality renewable assets when they are out of favour Establish global operating scale and surface embedded upside across our portfolio Deliver 12-15% total returns on a per share basis, offering investors the premier renewable platform in the world 9

10 Our Strategy Deploy $500 - $600 million of BREP equity per year using our integrated operating platforms Maintain hydroelectric focus Surface value from operational improvements and capital recycling Develop owned projects at premium returns Secure tuck-in opportunities in hydro, wind and solar to leverage our scale Expand into new markets that meet our investment criteria 10

11 Value Investors with a Contrarian View We have transformed the business since launching BREP four years ago Invested $2b into U.S. merchant hydro at cyclical bottom, post financial crisis Slowed M&A in Brazil pending more attractive entry point today! Focused on a development strategy for wind rather than chasing low cost of capital valuations Avoided solar as incentives were too rich, but are now building internal expertise Entered Europe during period of distress Now focused on building global scale and surfacing value within the portfolio 11

12 Total Equity Deployed Since 2011 Invested $4.4 billion of equity alongside institutional partners across our core markets $4.4b $1.0b $0.8b $0.8b $0.7b $1.3b $1.4b $2.6b $0.2b 12

13 Total Equity Deployed Since 2011 Invested $4.4 billion of equity alongside institutional partners into multiple technologies $4.4b $1.7b $0.8b $0.7b $1.3b $1.4b $2.6b $0.2b 13

14 We continue to own and operate high quality assets HIGHEST VALUE RENEWABLES Longest life, lowest cost, carbon-free generation SIGNIFICANT BARRIERS TO ENTRY Requires deep operational knowledge and marketing expertise CONSISTENTLY HIGH MARGINS Profitable across the cycle and market conditions 14

15 with strong downside protection MERCHANT ASSETS ACQUIRED AT BOTTOM OF CYCLE 2 TWh of merchant power underwritten in a $40-50/MWh price environment Assets acquired at 50% of replacement cost REVENUE ~90% CONTRACTED 17-year average contract term with inflationlinked escalation Global diversification INVESTMENT GRADE BALANCE SHEET $1 billion of available liquidity BBB S&P 15

16 and significant upside RISING POWER PRICES > 3,000 MW DEVELOPMENT PIPELINE LARGE INVESTABLE UNIVERSE Ability to capitalize on market price volatility Leverage platforms to arbitrage development $300 billion invested in renewables annually Source: Bloomberg New Energy Finance ~150,000MW at ~$2 million per MW 16

17 What Differentiates Us? OPERATING EXPERTISE PROPRIETARY TRANSACTIONS ACCESS TO CAPITAL 2.0 TWh merchant generation 70% deals directly originated $1b available liquidity ~3,400 MW development pipeline $4.4b total equity deployed BAM strong sponsorship 17

18 Our model is simple Operational and power marketing expertise Internal development capabilities Multi-technology platforms Local relationships and transaction origination Local funding sources Operations drive cash flow growth 18

19 Our model is proven Region Capacity Added (MW) Equity Deployed Merchant Exposure Development Pipeline Tuck-in Restructuring North America 743 $ 0.7b Y - - Brazil 25 $ 0.1b North America 525 $ 0.7b - Brazil 29 $ 0.1b North America 532 $ 0.6b Brazil Europe 326 $ 0.7b - - North America 292 $ 0.6b Brazil 484 $ 0.6b - Europe 259 $ 0.3b - Total 3,215 MW $ 4.4 billion Our execution is driven by our operational expertise 19

20 Case Study: Bear Swamp Financing Asset Type: Pumped Storage Investment Date: 2004 Size: 600 MW Equity Investment: $99 million Value Creation Acquired assets with our 50% joint partner during period of low power prices for $99 million Entered 15-year contract with LIPA, creating a predictable, fixed-price cash flow stream Integral asset to New England grid, providing capacity and ancillary services in addition to energy Secured capacity revenues in most recent auctions Raised $400 million of debt finance for 10 years while maintaining an investment grade rating 20

21 Case Study: Coram Asset Sale Asset Type: Wind Investment Date: 2009 Size: 102 MW Equity Investment: $90 million Value Creation Acquired in 2009 as an early-stage development project Secured interconnection, PPA, financing, and completed construction Optimized operations and leveraged our wind expertise to maximize value Asset was sold in July 2015 through a competitive process attracting bidders globally generating a ~30% IRR 21

22 Our model is repeatable. BRAZIL EUROPE BRAZIL NEW MARKET EUROPE CANADA USA NORTH AMERICA LATAM NORTH AMERICA Our business is highly scalable 22

23 Our model creates value for investors Highest Quality Irreplaceable Hydro Portfolio Acquired at lowest point in cycle Trades at a premium multiple over time Strong Downside Protection Significant Organic Upside Potential Transparent and growing cash flows with Leverage to rising prices and owned development pipeline 5 9% distribution growth 12 15% total return per share Large Investible Universe Global origination and M&A capabilities Unique franchise that cannot be replicated 23

24 European Platform Ralf Rank, Managing Partner, Europe 24

25 Well established criteria for entering a new market Stable government, rule of law and respect for capital Competitive, transparent power markets Entry point with good long-term fundamental value Ability to build meaningful scale over time Established local capital markets 25

26 The European Renewable Power Opportunity Unique opportunity to build an integrated platform for value Significant share of the global economy Large investible universe Total Renewables in our Key Markets Hydro Solar Wind Other 400 TW Commitment to climate change 290 TW Historically low price environment 195 TW North America Latin America Europe 26 Source: Bloomberg New Energy Finance

27 Case Study: Entry into Ireland 326 MW / 300 MW Operating / Development Portfolio $950 million Enterprise Value 75 People Experienced Team Investment Highlights Acquired operating assets, pipeline and experienced team Strongest wind resources in Europe ~90% of revenues under stable floor tariff with market upside Competitive gas-fired market Executing development pipeline Significant potential for capital recycling 27

28 Building a Platform to Drive Performance Operations Greenfield Development Health, safety and business integration capabilities Leverage low-risk O&M contracts but drive performance Build out development pipeline Secure future growth with early stage projects for value Power Marketing Finance Recontract below-market PPA where permitted Sell merchant power into higher value markets Implementing non-recourse, local lender funding strategy Scale platform and business systems 28

29 Follow-on Investments PORTUGAL SCOTLAND 123 MW Operating Wind Portfolio Investment Highlights High quality assets, good operating history Stable long-term cash flows Acquired for value in a proprietary transaction Portugal economy continuing to improve Asset base for further expansion in Iberia 1,200 MW Development Pipeline Investment Highlights Acquired UK development pipeline and experienced development team Attractive sites located in supply constrained UK power market Lowest cost source of new build renewables Secured local team expanding operating capability 29

30 The European Platform Today $1 billion POWER ASSETS 600 MW OPERATING CAPACITY 1,400 MW DEVELOPMENT PIPELINE 22 wind farms in 3 countries ~100 employees 140 MW in advanced development 30

31 Our European experience can be replicated 1 Identify new markets that meet our investment criteria 2 Establish presence focused on operational excellence 3 Build out scale and optionality 4 Expand through tuck-in M&A and development 31

32 Financial Profile Nick Goodman, CFO 32

33 Strong capitalization provides stable platform for growth SOLID FOUNDATION & ROBUST BALANCE SHEET STRONG ORGANIC GROWTH PROSPECTS GLOBAL M&A CAPABILITIES $1 billion of available liquidity and access to private fund capital 1,000 MW of late stage projects expected to be built by network of BAM investment professionals around the world BBB 2 investment grade credit ratings 2.0 TWh of merchant generation with exposure to rising prices 3 Platforms with operating expertise and local relationships 33

34 Value Creation Through the Cycle Acquire and develop assets on a value basis Surface value Integrate assets into operations Leverage operations to grow cash flows 34

35 We have multiple levers to surface value Value Assumption Low High BREP intrinsic value Current prices, 14x EBITDA multiple $ $34.00 Leverage to rising prices $40 - $50/MWh price uplift $ $5.00 Late stage development pipeline 200 MW MW per year $ $3.25 Early stage development pipeline $50k/MW - $125k/MW $ $1.00 Value tied to organic growth $ $43.25 M&A growth engine $500 - $600 million per year invested accretively There is ~50% to 60% embedded upside potential to our share price without considering M&A 35

36 Robust cash flows underpinned by contracted revenue and conservative capital structure 80% hydro assets with growing margins Perpetual assets with a stable cost base Strong capital preservation and downside protection Highly contracted cash flows ~90% of proportionate revenue under long-term contract Inflation-linked contracts providing for margin expansion 17-year average contract term Conservative capital structure Primarily non-recourse, investment grade debt 90% fixed rate, average duration of 10 years Weighted average interest rate of 5.5% 36

37 Value Tied to Rising Power Prices Low High Current Price Assumption A $40/MWh $50/MWh BREP Long-Term Price View B $80/MWh $100/MWh FFO Upside ( B - A ) X 2 million MWh $80 million $100 million Multiple 12.0x 14.0x Equity value ($mm) 960 1,400 Shares outstanding Estimated value per share $ 3.50 $

38 Late Stage Development Pipeline 1,000 MW of projects that can be built by 2020 We expect to build 200 MW to 250 MW per year on average over the next 5 years BREP has built ~600 MW since 2011 We have expanded our pipeline over multiple markets Majority of projects are owned directly by BREP today Low High Development 750 MW 1,000 MW Development equity (mm) $ 700 $ 900 Return on equity 17% 17% FFO Equity value (1) 1,440 1,800 Development equity (700) (900) Estimated value Per share (2) $ 2.75 $ 3.25 (1) Assumes projects are funded with internally generated cash based on track record (2) Assumes 275 million shares outstanding 38

39 Early stage pipeline provides future growth DEVELOPMENT STAGE TECHNOLOGY (Advanced Stage) REGION (Advanced Stage) 5% 2,375 MW 1,000 MW 70% 25% 25% 25% 50% Advanced Early Hydro Wind Solar North America LATAM Europe 39

40 Underlying Value of a BREP Share $3.25 $1.00 $43.25 $5.00 $0.50 $40.75 $2.75 $34.00 $3.50 The embedded upside in the business supports the target of delivering 12% to 15% returns to shareholders 40

41 This does not consider the value of M&A 3 continental platforms with track record of proprietary transactions Global BAM network to help originate deals Significant capital with large private fund commitments We have deployed $4 billion of equity since 2011 We are looking at new growth markets 41

42 Key Takeaways We have a stable business with significant embedded cash flow growth that is not reflected in our current share price Our distributions are sustainable and can grow at 5% 9% annually Our global investable universe is substantial and so is our reach We expect to generate 12% 15% total returns on a per share basis over the long-term 42

43 October 8, 2015 Q & A