Brookfield Renewable Partners. Investor Meeting September 29, 2016

Transcription

1 Brookfield Renewable Partners Investor Meeting September 29, 2016

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 provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations, concerning the business and operations of BEP. 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 BEP s investment strategy, the quality of BEP s assets and the quality and resiliency of the cash flow they will generate, BEP s anticipated financial performance, future construction 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, energy policies, economic growth, growth potential of the renewable asset class, the future growth prospects and distribution profile of BEP and BEP s access to capital. In some cases, 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, targets, or variations of such words and phrases, or statements that certain actions, events or results may, could, would, should, 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 forwardlooking 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 following: we are not subject to the same disclosure requirements as a U.S. domestic issuer, the separation of economic interest from control; 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; 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; industry risks relating to the power markets in which we operate; increased regulation of our operations; our contracts, concessions and licenses expiring and not being renewed or replaced on similar terms; increases in the cost of operating our plants; our failure to comply with conditions in, or our inability to maintain, governmental permits; equipment failures; 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, governmental and regulatory investigations and litigation; our operations being affected by local communities; fraud, bribery, corruption, other illegal acts or inadequate or failed internal processes or systems designed to prevent such acts; 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 or our inability to effectively manage our foreign currency exposure; 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; we do not control all of our operations; our ability to issue equity or debt for future acquisitions and development projects 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; and risks related to changes in how BAM elects to hold its ownership interests in BEP. 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 September 29, 2016, 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 (also referred to in the presentation as FFO ), 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 this is a useful supplemental measure 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 BEP are to Brookfield Renewable 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 Table of Contents Overview 5 SACHIN SHAH, CHIEF EXECUTIVE OFFICER Power Markets Where Do We Go From Here? 15 STEPHANE LANDRY, SENIOR VICE PRESIDENT MARKET RESEARCH Growth Objectives 24 SACHIN SHAH, CHIEF EXECUTIVE OFFICER Colombia Investment 32 SACHIN SHAH, CHIEF EXECUTIVE OFFICER High Quality Cash Flows 40 NICK GOODMAN, CHIEF FINANCIAL OFFICER 3

4 What Are We Here to Talk About? Renewables is a high growth sector What should investors consider in their decision making? How do we think about value? All cash flows are not created equal! 4

5 Overview 5

6 Over $300 billion invested annually in renewables 6

7 Global Renewable Capacity Additions (GW)* Hydro Wind Solar Other Driven by climate change * Source: Bloomberg New Energy Finance 7

8 What should investors look for? 8

9 The highest quality assets with the highest quality cash flows 9

10 What is Quality? Long duration cash flow streams that are not reliant on subsidies Strong cash margins through cycles Proven technologies with minimal risk of obsolescence Long-term track record of delivering superior returns Significant growth potential 10

11 Who We Are BEP is a Global Leader in Renewable Power Generation $26 billion POWER ASSETS Located in 15 power markets across 7 countries 17 years TRACK RECORD As a publicly listed company 88% hydro PERPETUAL GENERATION Situated on 82 river systems with significant resource diversification 11

12 Global Scale with Local Expertise We have integrated operating platforms on three continents with local operating, development and power marketing capabilities Europe North America ~$17 billion AUM 5,901 MW 1,100 employees ~$1 billion AUM 587 MW 110 employees Colombia ~$5 billion AUM 3,032 MW 690 employees Brazil ~$3 billion AUM 1,142 MW 410 employees 12

13 We Continue to Deliver Long-Term Value Distribution Growth Price Performance $1.80 Annualized Total Return 1 1 yr 3 yr 5 yr 17 yr $1.78 $1.60 ~7% CAGR $1.66 BEP.UN (TSX) 13% 20% 17% 16% $1.55 BEP (NYSE) 13% 12% 11% N/A $1.40 $1.38 $1.45 S&P Global Clean Energy Index (1%) 3% (5%) N/A $1.20 $1.30 S&P 500 Utilities Index 20% 14% 12% 7% $ Alerian MLP Index (6%) (5%) 4% 12% 1 Source: Bloomberg, including reinvestment of dividends at August 31, Our objective remains to deliver long-term total returns of 12-15% to shareholders 13

14 BEP Delivers High Quality Cash Flow with Significant Upside Over 90% of cash flow generated by hydro assets 6,800 MW internalized development pipeline Inflation-linked contracted cash flows Strategic exposure to rising energy prices Targeting $500-$600 million of annual investment providing 12-15% total returns 14

15 Power Markets Where Do We Go From Here? 15

16 Why are power prices low? Will they ever increase? How should investors be positioned? 16

17 Capacity Factor Why Are Energy Prices Low? Delivered Electricity Cost Coal Hydro Nuclear Wholesale Market CCGT Wind Subsidy Market Solar Build Cost ($/MWh) 17

18 The Impact Has Been Devastating For Most Nuclear Losing money for the first time ever, raising concern for system operators Coal Largest carbon emitter in the sector Retiring due to environmental capex and lack of profitability CCGT Delivering very low returns and highly leveraged Future prospects are decreasing due to marginal price setter status Wind/Solar Reliant on subsidies/targeted procurement to produce mediocre returns Delivers less energy relative to cost 18

19 Hydro Keeps Generating Cash Flow Through the Bottom Still providing 60-70% cash margins Hydro Zero variable cost producer with highest relative generation capacity Carbon free with storage capabilities Technology has not changed significantly in 100 years 19

20 Early Signs That Change Is Coming Subsidies continue to be at risk Direct contracting is circumventing broken markets Pressure on climate initiatives is growing Our hydro portfolio is well positioned to benefit from these changing dynamics 20

21 Where Would You Rather Be Invested? ~40 Years ~25 Years ~25 Years ~60 Years Perpetual Least Desirable COAL CCGT WIND/ SOLAR NUCLEAR HYDRO Most Desirable Carbon producing Non-carbon producing 21

22 Where Have We Been Investing? Hydro in the U.S. Northeast Exposed to coal retirement and stringent renewable standards We have been buying assets at the bottom of the price cycle Hydro in Latin America Tremendously undersupplied markets Scarcity of capital We have acquired assets in these markets at a deep discount to replacement cost This provides investors with strong downside protection and significant upside 22

23 Review of Our Other Core Markets Brazil Worst of political crisis is over Economy has likely bottomed Cost of new plants is rising Colombia Sound policy environment Economy has robust growth potential Sustained power demand growth Europe Low economic growth and prices Carbon reduction driving policy Utilities are broken 23

24 Growth Objectives 24

25 Growth Strategy 1. Use our global scale and investment capabilities to move capital where it is scarce 2. Invest $500 - $600 million per year to acquire assets that require operational expertise and deliver outsized returns 3. Focus on the highest quality hydro assets 4. Deliver ~200 MW per year of our proprietary development pipeline 5. Cautiously expand into new technologies and geographies Embed the business with long-term cash flow streams with upside 25

26 Our Global Scale North America UK, Europe, Middle East Asia Fully Integrated Platforms Monitoring South America Australia BEP Operations BAM Office 26

27 We See Value Differently Current Market Dynamic Brookfield Approach North America Merchant Hydro Europe Contracted Wind & Solar Capital Markets BEP Restructurings Australasia Development Arbitrage Latin America 27

28 A Unique Mix of Investment and Operational Capabilities Merchant Hydro Invested ~$2 billion into U.S. hydro assets buying at the cyclical bottom Development Arbitrage Developed 1,200 MW of our 1,600 MW portfolio at +15% returns Capital Markets / Restructuring Identified a disconnect between public/private asset valuations and accumulated 25% exposure to TerraForm Power on a value basis Invested $600 million into Brazil in 2015 in the midst of recession Moving Capital Freely Invested $900 million into Ireland in 2014 at the peak of the Eurozone crisis Invested over $3 billion into Colombia in early 2016 when currency had dropped ~45% 28

29 Surely There is No More Hydro Left to Buy? 70% of US hydro plants are in the hands of the private sector presenting a $35 billion investment opportunity in the US alone (not including what we already own!) Private U.S. Hydro Ownership Global Hydro Opportunity Remains Large ~$35 billion* $340 billion* Private Utility Non-Utility Industrial Cooperative Unaddressed Opportunity Current Outreach Nearly 75% of plant owners own only one facility supporting our tuck-in strategy * Brookfield estimates based on publicly available capacity data and $2 million/mwh valuation assumption 29

30 Development Pipeline Development Stage Technology Region 10% 15% 5,550 6,800 MW 1,250 40% 35% 75% 25% Early Advanced Hydro Wind Solar North America LATAM Europe Focused on growing and advancing our development pipeline as a source of future growth at outsized returns 30

31 Power prices are at historical lows Interest rates are zero Our competition is chasing yield Operating expertise sets us apart Our transaction pipeline has never been stronger Allows Us To Avoid the Herd! 31

32 Colombia Investment 32

33 Why We Like Colombia 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 33

34 Investment Recap Brookfield led consortium has acquired a 99.6% stake in Isagen, a high quality, strategic Colombian hydroelectric portfolio 3,032 MW portfolio of irreplaceable hydro assets providing critical supply ~$5 billion enterprise value transaction Acquired initial 57.6% stake from Government and increased ownership to 99.6% via two mandatory tender offers Attractive entry point into undersupplied market with growing demand 34

35 Portfolio of Exceptional Hydro Facilities 6 assets totalling 2.7 GW of recently-built, well maintained and modernized large-scale hydro assets 100+ years Perpetual Franchise High quality assets with low annual capital requirements $10 billion Replacement Value Opportunity to acquire assets at 50% discount to replacement cost 3 rd Largest National Generator Providing critical infrastructure within Colombia 35

36 Sogamoso Sogomoso (840 MW, largest reservoir in Colombia) 36

37 Deeply Undersupplied Market 1. ~50 million people served by an installed energy capacity of 16,000 megawatts % long-term annual GDP and power demand growth (~450 MW/year of new capacity required) 3. Ability to freely contract with regulated utilities and large consumers Annual Domestic Electricity Demand (GW)* 16 Forecast Average Demand Peak Demand * Source: XM Compañía Expertos en Mercados S.A. E.S.P., Brookfield 37

38 Attractive Entry Point Colombia Cost of New Entry ($USD/MWh)* COP/USD Historical Exchange Rate $120 $100 $115 $110 $ ,500 $80 $90 $85 2,000 $75 $60 $40 Underwritten Energy Price Range 2,500 $20 3,000 $0 CCGT Coal Hydro Isagen Average Cost Low High 3,500 * Source: Brookfield 38

39 Business Plan Brookfield s business plan focuses on unlocking value by targeting key value levers within the platform to drive ~20% nominal returns Operational Optimization Greenfield Development Power Marketing Capital Structure 39

40 High Quality Cash Flows 40

41 Not all cash flows are created equal 41

42 Return On vs. Return Of Capital Hydro Wind/Solar 2% 98% 65% 35% Return On Capital Return Of Capital Return On Capital Return Of Capital Assumes: Perpetual life for hydro assets with minimal annual maintenance capex and one refurbishment every ~40 years Straight line depreciation based on a useful life of 25 years for wind/solar assets with a terminal value equal to ~15% of construction cost 42

43 We Provide the Highest Quality Cash Flows BEP Distributions Technology Quality 12% 5% 95% 85% 15% 88% Return on Capital Return of Capital Hydro Wind Investment Grade Non-Investment Grade Assumes: Perpetual life for hydro assets in North America and Colombia 40/30 year life for authorisation/concession based hydro assets in Brazil respectively with a recovery of undepreciated replacement cost at expiry Straight line depreciation based on a useful life of 25 years for wind assets with a terminal value equal to ~15% of construction cost 43

44 Why Is This Important? When building a long-term business to support growing distributions into perpetuity, return on capital provides investor protection Sustainable Distribution Distributions are supported by current cash flow from perpetual assets Equity Base Grows Over Time No requirement to replace a depreciating asset base Pursue Accretive Transactions Allows for a disciplined approach to capital deployment on our own terms to enhance value 44

45 Combined with Our Stable Financial Profile BEP maintains a robust balance sheet and stable cash flow profile with a focus on downside protection Stable and Growing Margins High cash margins with a stable cost base Inflation-linked revenue provides growing margins Highly Contracted Cash Flows 90% of proportionate revenue under contract 16 year average contract term Conservative Capital Structure Primarily interest only, non-recourse debt 90% fixed rate, average duration of 8 years Investment grade credit ratings with S&P and DBRS 45

46 And Significant Liquidity BEP has proven access to capital markets but we focus on funding growth in the most accretive manner for shareholders Debt & Preferred Equity C$500 million MTN issuance in Q Issued C$375 million of preferred equity over the past year Maintained investment grade ratings Capital Recycling California wind farm sale in 2015 realizing ~25% IRR Raised $450 million of capital from upfinancing project level debt at investment grade metrics Common Equity Two equity issuances since BEP was formed in 2011 Issued C$860 million in Q

47 Creates a Compelling Investment Proposition 95% return on capital Exposure to rising power prices Investment grade balance sheet Positioned to benefit from climate change policy Sustainable distribution with 5% to 9% annual growth Internal development pipeline Proven M&A track record BEP should trade at a premium to its peers 47

48 Peer Trading Yields Global Utilities YieldCos 4.3% 4.4% 5.6% 5.9% Canadian Independent Power Producers * Average yield based on market prices at August. 31,

49 The Discount Grows if You Consider the Real Yield Current Yield* Assumed Return on Capital Dividend Return YieldCos 5.6% X 65% = 3.6% 200 bps Brookfield Renewable 5.9% X 95% = 5.6% BEP provides the highest quality distribution over the long-term * Average yield based on market prices at August. 31,

50 Yield Sensitivity Yield Value Potential Return Current 5.9% $ bps 4.9% $ 36 20% 150 bps 4.4% $ 40 33% 50

51 Our Shares Trade at a Discount to Intrinsic Value (EV / EBITDA Multiples) Low High North American Hydro 16.0x 18.0x LATAM Hydro 11.0x 13.0x Wind 11.0x 13.0x BEP Average 15.0x 17.0x NAV / Share $ $42.00 Implied Yield 5.2% 4.2% Potential Return ~15% ~40% This excludes the value of our development pipeline which could add $2.00 to $

52 Putting All the Pieces Together We have the highest quality, lowest risk assets in the sector We are singularly focused on delivering 12%-15% total returns per share We have the longest track record in the sector We trade at a ~$5-$10 discount compared to intrinsic value Our investable universe is unmatched 52