Brookfield Renewable Partners (BEP)

Transcription

1 Brookfield Renewable Partners (BEP) C O R P O R AT E P R O F I L E M AY 2018

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 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 and payout ratio, future commissioning of assets, the contracted nature of our portfolio, technology diversification, acquisition opportunities, financing and refinancing opportunities, future energy prices and demand for electricity, 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 Brookfield Renewable and Brookfield Renewable 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, believes, 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 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 following: changes to hydrology at our hydroelectric facilities, to wind conditions at our wind energy facilities, to irradiance at our solar facilities or to weather generally at any of our facilities; volatility in supply and demand in the energy markets; our inability to re-negotiate or replace expiring power purchase agreements on similar terms; increases in water rental costs (or similar fees) or changes to the regulation of water supply; advances in technology that impair or eliminate the competitive advantage of our projects; an increase in the amount of uncontracted generation in our portfolio; industry risks relating to the power markets in which we operate; the termination of, or a change to, the MRE hydrological balancing pool in Brazil; increased regulation of our operations; 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, including relating to wind turbines and solar panels; dam failures and the costs and potential liabilities associated with such failures; force majeure events; uninsurable losses; adverse changes in currency exchange rates and our inability to effectively manage foreign currency exposure; availability and access to interconnection facilities and transmission systems; health, safety, security and environmental risks; disputes, governmental and regulatory investigations and litigation; counterparties to our contracts not fulfilling their obligations; the time and expense of enforcing contracts against non-performing counter-parties and the uncertainty of success; our operations being affected by local communities; fraud, bribery, corruption, other illegal acts or inadequate or failed internal processes or systems; our reliance on computerized business systems, which could expose us to cyber-attacks; newly developed technologies in which we invest not performing as anticipated; labor disruptions and economically unfavorable 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 to our credit ratings; 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 or acquisitions; our inability to develop greenfield projects or find new sites suitable for the development of greenfield projects; delays, cost overruns and other problems associated with the construction and operation of generating facilities and risks associated with the arrangements we enter into with communities and joint venture partners; Brookfield Asset Management s election not to source acquisition opportunities for us and our lack of access to all renewable power acquisitions that Brookfield Asset Management identifies; we do not have control over all our operations or investments; foreign laws or regulation to which we become subject as a result of future acquisitions in new markets; changes to government policies that provide incentives for renewable energy; a decline in the value of our investments in securities, including publicly traded securities of other companies; we are not subject to the same disclosure requirements as a U.S. domestic issuer; the 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; our dependence on Brookfield Asset Management and Brookfield Asset Management s significant influence over us; the departure of some or all of Brookfield Asset Management s key professionals; changes in how Brookfield Asset Management elects to hold its ownership interests in Brookfield Renewable; and Brookfield Asset Management acting in a way that is not in the best interests of Brookfield Renewable or our unitholders. 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 subsequent date. 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 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ( Adjusted EBITDA ), Funds From Operations ( FFO ) and Funds From Operations per Unit ( FFO per Unit ), which are not generally accepted accounting measures under IFRS and therefore may differ from definitions of Adjusted EBITDA, Funds From Operations and Funds From Operations per Unit used by other entities. We believe that Adjusted EBITDA, Funds From Operations and Funds From Operations per Unit are useful supplemental measures that may assist investors in assessing the financial performance and the cash anticipated to be generated by our operating portfolio. Neither Adjusted EBITDA, Funds From Operations nor Funds From Operations per Unit should 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 Partners L.P. together with its subsidiary and operating entities unless the context reflects otherwise. All amounts are in U.S. dollars and presented on a consolidated basis unless otherwise specified. 2

3 Table of Contents Who We Are Portfolio Overview Growth Financial Profile Appendix Page 4 Page 10 Page 15 Page 24 Page 29

4 Who We Are 4

5 We are a multi-technology, globally diversified, owner and operator of renewable power assets 5

6 Leader in Renewable Generation One of the largest public pure-play renewable businesses globally 100 years of experience in power generation Full operating, development and power marketing capabilities Over 2,000 operating employees $40 billion TOTAL POWER ASSETS 16,300 MEGAWATTS OF CAPACITY 82% HYDROELECTRIC GENERATION 843 power generating facilities 24 markets in 14 countries Situated on 81 river systems 6

7 Simple Strategy Simple strategy with a proven track record of success through all cycles Acquire and develop high-quality renewable power assets and businesses below intrinsic value Finance our businesses on an investment grade basis Optimize cash flows by applying our operating expertise to enhance value 7

8 Portfolio Highlights Diverse and High-Quality Asset Base Over 16,000 megawatts of hydro, wind, solar, distributed generation and storage capacity across four continents Contracted Cash Flows Over 90% of cash flows are contracted with credit-worthy counterparties primarily under longterm power purchase agreements Organic Levers to Grow Cash Flows Deep operating expertise supports ability to grow distributions by 5% to 9% per unit annually through internally generated cash flows Cash Flow Resiliency Through-the-Cycle Robust balance sheet and access to global capital markets ensures significant downside protection 8

9 Long Track-Record of Delivering Attractive, Risk-Adjusted Returns $9.5 Billion MARKET CAPITALIZATION BEP / BEP.UN NYSE / TSX DUAL LISTING ~6% DISTRIBUTION YIELD 5% to 9% DISTRIBUTION GROWTH Annual Distribution Price Performance $1.55 6% CAGR $1.66 $1.78 $1.87 $1.96 Annualized Total Return 1 yr 3 yr 5 yr BEP.UN (TSX) 8% 6% 12% BEP (NYSE) 11% 6% 7% $1.38 $1.45 S&P/TSX Composite 2% 4% 7% S&P % 11% 13% Source: Bloomberg, including reinvestment of dividends. At March 29, 2018 Our objective is to deliver long-term total returns of 12% 15% to unitholders annually 9

10 Portfolio Overview 10

11 Diversified Operating Portfolio with Stable Cash Flows Cash flows are supported by a strong contract profile and are well diversified by technology and geography Hydro Focused Growing Global Footprint Contracted Cash Flows 16% 2% 15% 5% 8% 20% 60% 82% 92% Hydro Wind Solar North America Colombia Brazil Europe & Asia Contracted Merchant Based on LTA generation, proportionate to BEP 11

12 Global Operations with Local Presence We have integrated operating platforms on four continents with local operating and power marketing expertise EUROPE 2,800 megawatts $3 Billion in total power assets NORTH AMERICA 8,300 megawatts $26 Billion in total power assets ASIA 530 megawatts $0.5 Billion in total power assets SOUTH AMERICA 4,700 megawatts $10.5 Billion in total power assets 12

13 Complementary Portfolio of High-Quality Assets We are a leader in renewable power with over 16,000 megawatts largely spread across five complementary technologies Hydro Wind Solar Distributed Generation Storage 7,900 megawatts Largest independently owned hydro portfolio globally 217 facilities on 81 river systems across North and South America 3,600 megawatts 77 wind farms across North America, South America, Europe and Asia 1,100 megawatts 50 utility-scale solar facilities across North America, South America, Europe and Asia 400 megawatts 489 facilities across North America One of the largest commercial and industrial distributed generation portfolios in the U.S. 2,700 megawatts 4 storage facilities including 3 pumped storage facilities and 1 battery facility in the U.S. and U.K. Note: Brookfield Renewable also has a niche, ~700 megawatt portfolio of biomass and co-generation facilities 13

14 Deep Operational Expertise Asset Integration Generation Management, Planning and Dispatch 2,000+ EXPERIENCED OPERATORS Regulatory Asset Integration Expertise Energy Marketing Expertise 140+ POWER MARKETING EXPERTS 4 REGIONAL CONTROL CENTERS National Asset System Integration Control Engineering and Development Health, Safety, Asset Security and Integration Environmental Stakeholder Asset Engagement Integration 14

15 Growth 15

16 Organic Cash Flow Growth BEP is focused on delivering 5% to 9% distribution growth annually on a per unit basis through cash flows generated from our existing business Growth target can be achieved from organic initiatives and fully funded by internally generated cash flow We do not rely on M&A to achieve cash flow growth targets This does not account for the embedded optionality of our 2.5 TWh merchant hydro portfolio in the United States where each $10/MWh increase in revenue translates to $25 million in incremental FFO Embedded Inflation Escalation Expected Margin Expansion Advanced Development Pipeline FFO per Unit Growth Potential (1% to 2%) (2% to 4%) (3% to 5%) (6% to 11%) 16

17 Inflation: $50 million FFO Contribution Over Five Years Our revenues are indexed to inflation providing for 1% 2% annual FFO growth Proportional Basis Brazil North America Colombia Annual Total Revenues 1 ($ million) $200 $1,000 $190 $1,390 % Indexed to inflation 100% 30% 100% Estimated long-term inflation 4.5% 2.0% 3.5% Expected annual revenue uplift ($ million) $9 $6 $6 $21 Expected FFO margin 60% 50% 35% 48% Expected annual FFO uplift ($ million) $5 $3 $2 $10 1) Normalized 2016 revenues 17

18 Re-contracting: $44 million FFO Contribution Over Five Years Limited downside risk to PPA maturities in North America plus exposure to rising power prices in Brazil and Colombia providing for 1% 2% annual FFO growth Annual Generation Current Contract Price ($/MWh) Current Market Price 1 ($/MWh) Expected FFO Impact ($ million) Quebec 1,470 GWh $55 $50 ($7) New England 1,000 GWh $39 $50 $11 Other 1,620 GWh $53 $50 ($5) North America re-contracting 4,090 GWh $51 $50 ($1) Brazil re-contracting 1,400 GWh $72 $86 $20 Colombia re-contracting 2,800 GWh $76 $85 $25 Total re-contracting 8,290 GWh $44 Note: shown on a proportional basis 1) All-in price 18

19 Cost Reduction: $50 Million FFO Contribution Over Five Years Targeted cost reduction of $2 per MWh would add $50 million to FFO over the next five years or 1% 2% annual FFO growth Economies of Scale Optimize Structuring Streamlining Processes Operational Efficiencies North America Brazil Colombia Europe Savings: $2.00 / MWh Savings: $2.00 / MWh Savings: $2.00 / MWh Savings: $2.00 / MWh $30 million $10 million $10 million $1 million Note: shown on a proportional basis 19

20 Proprietary Development Pipeline Development Stage Technology Region 10% 10% 35% 20% 25% 6,700 8,000 MW 1,300 10% 45% 45% Early Advanced Hydro Wind Distributed Generation Other North America LATAM Asia Europe Focused on advancing our development pipeline at premium returns 20

21 Construction and Advanced Projects We have 251 MW of construction and advanced stage assets expected to contribute over $40 million of annualized FFO once commissioned Project Region Technology Capacity (MW) Expected Commissioning Expected Annualized FFO ($ Million) Ballyhoura¹ Europe Wind 19 Q Silea Verde 4A Brazil Hydro 28 Q Slievecallan Europe Wind 28 Q Silea Verde 4 Brazil Hydro 19 Q Tralorg Europe Wind 19 Q Foz do Estrela Brazil Hydro 30 Q Bear Swamp North America Storage 63 Q Total 206 ~$25 M 1. Commissioned December 19, 2017 In addition to the assets listed above, we have 64 MW of advanced stage projects expected to contribute an additional $19 million to FFO annually 21

22 Our Investment Philosophy We leverage our global footprint to source accretive transactions on a value basis Decarbonization has created a large and growing investible universe for renewables We seek to enhance our footprint in existing markets while cautiously expanding into new technologies and geographies We employ a contrarian strategy, looking for capital scarcity to earn superior returns 22

23 Strong Track Record of Growth We target annual equity deployment of $600 - $700 million in high quality assets to deliver 12% to 15% annual returns Global network of investment professionals have a proactive outreach program to originate acquisition opportunities Expertise in executing large, multi-faceted transactions Leverage our deep operating expertise to diligence and underwrite assets Disciplined approach to allocating capital with focus on downside protection and preservation of capital Since 2012, we have developed and acquired over 12,100 MW, deploying more than $3 billion of BEP equity at accretive returns 23

24 Financial Profile 24

25 Robust Balance Sheet Significant Liquidity $1.7 billion committed corporate credit facility through % long-term target FFO payout ratio, significant free cash flows Diverse funding sources with access to public and private markets Staggered Debt Maturities Non-recourse financing approach provides significant protection to corporate lenders No material near-term maturities Project debt has an average remaining term of 10 years on a proportionate basis ~85% proportionate, fixed rate with minimal floating rate exposure funded in local currency $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $- Debt Maturity Ladder $billions, as at March 31, After Non-Recourse Maturities Recourse Maturities 25

26 Conservative Capitalization Investment grade credit ratings with S&P (BBB+) and DBRS (BBB high) 39% DEBT TO TOTAL CAPITALIZATION ~3.0X CONSOLIDATED EBITDA / INTEREST COVERAGE Consistently maintained conservative debt to capitalization ratio High quality cash flows and strong remittance characteristics underscore investment grade ratings Use of primarily non-recourse, fixed rate financings provides strong protection and credit stability ~7.0X REMITTED CASH FLOW / INTEREST COVERAGE 70% NON-RECOURSE DEBT 4.5% AVERAGE INTEREST RATE ON CORPORATE BORROWINGS $1.7bn AVAILABLE LIQUIDITY 26

27 Investment Recap Diverse and high-quality asset base underpinned by contracted cash flows Over 16,000 MW across five technologies and four continents Over 90% contracted cash flows Strong core business with embedded organic growth Deep operational expertise supports ability to grow distributions by 5% to 9% annually though organic levers alone Significant upside from acquisitions on a value basis Contrarian and disciplined approach to allocating capital Target 12% to 15% returns on investments Downside protection to ensure cash flow resiliency through-the-cycle Investment grade balance sheet since inception Primarily fixed rate, asset level debt with minimal floating rate exposure funded in local currency that is non-recourse to BEP Maintain significant liquidity and access to global capital markets Proven track record 16% annualized returns to unitholders since inception 27

28 Contacts Contact Title Sachin Shah Chief Executive Officer Wyatt Hartley Chief Financial Officer Avery Haw Vice President, Investor Relations Divya Biyani Manager, Investor Relations 28

29 Appendix 29

30 Highly Contracted Cash Flows Power is largely sold to investment grade counterparties under long-term, fixed price, inflation-linked contracts with an average proportionate term of 16 years We expect to re-contract expiring PPAs at levels equal to or higher than roll off prices Current all-in power prices exceed our underwriting targets, supporting embedded upside in our cash flows In Latin America and Asia, power prices will continue to be supported by the need to build new supply to serve growing demand Generation (GWh) Contracted Hydroelectric 9,055 12,226 9,890 9,189 7,836 Wind 2,307 3,135 3,040 2,998 2,980 Solar ,728 15,836 13,405 12,662 11,291 Uncontracted 972 1,403 3,834 4,577 5,948 LTA 12,700 17,239 17,239 17,239 17,239 % of generation 92% 92% 78% 73% 65% Amounts proportionate to BEP Note: The table above excludes Brazil and Colombia where we would expect the energy associated with maturing contracts to be re-contracted in the normal course given the construct of the respective power markets, and to maintain a contracted profile of approximately 90% and 70%, respectively 30

31 Hydroelectric Portfolio 7,900 megawatts of hydro across 217 facilities on 81 river systems across North America and South America Began investing hydro over 20 years ago Our operating platforms position us to create value: Centralized system control Ability to sell power in multiple markets Optimization of resource through storage and ability to sell during peak demand periods Key Attributes Miel, Colombia Highest value renewable asset class Perpetual High cash margins Zero fuel input cost Storage capacity and ability to produce power at all hours of the day Ability to sell multiple products (energy, capacity, ancillaries) Significant barriers to entry requiring deep operational and marketing expertise White Pine, United States 31

32 Wind Portfolio 3,600 megawatts of wind capacity across 77 facilities in North America, South America, Europe and Asia Developed our first wind farm in 2006, and have since built a high-quality, globally diversified wind business: Focused on areas with scarcity value Assets are located in high-value power markets Portfolio benefits from long-term, utility grade PPAs Tier 1 turbine equipment (GE, Siemens, Vestas, Energcon Key Attributes Ballymartin, Ireland High cash margins Zero fuel input cost Relatively low build cost and improving turbine efficiency Minimal ongoing capex requirements Simple to operate Outsourced O&M providers are available to financial buyers, supporting our capital recycling program Bahia, Brazil 32

33 Solar and Distributed Generation Portfolio 1,500 megawatts of solar spread across 539 facilities in North America, South America, Europe and Asia Portfolio is entirely contracted under long term PPAs with credit-worthy counterparties Diversified across utility-scale and distributed generation solar facilities Distributed generation focus on commercial and industrial sector, and is one of the largest such portfolios in the United States Key Attributes California High School DG Project, United States High cash margins Zero fuel input cost Diverse and scalable applications Rapidly declining costs Improved technological productivity Distributed generation has additional benefits: Highly fragmented market Consumers can directly access generation at point of consumption Gives us access to customers directly CAP, Chile 33

34 Storage Portfolio 2,700 megawatts of storage capacity across 4 facilities in the U.S. and U.K. Portfolio largely consists of three pumped storage facilities, and a small investment in a 10 MW battery in Hawaii 2,100 MW First Hydro portfolio represents 75% of the U.K. s pumped storage capacity and 50% of its hydro capacity Our 600 MW pumped storage facility in Massachusetts is one of only two of its kind in New England Key Attributes First Hydro, United Kingdom Revenues largely tied to essential ancillary services and provision of back-up power Value likely to increase over time with rising penetration of intermittent power sources Represents a stable source of cash flows which are not correlated with market prices Able to produce electricity at peak times, and replenish themselves during periods of lower pricing and demand Pumped storage assets act as the world s largest rechargeable batteries and represent the most cost-effective way to store large amounts of potential electrical energy Bear Swamp, United States 34

35 Corporate Structure Brookfield Asset Management (BAM) ~$43b Market Cap¹ (TSX, NYSE) 20% Management 68% 69% 60% 30% Brookfield Business Partners (BBU) Brookfield Property Partners (BPY) Brookfield Renewable Partners (BEP) 2 Brookfield Infrastructure Partners (BIP) 30%³ Private Fund 70%³ LPs⁴ Company A Company B Company C Company D 1) Based on closing price on the NYSE on December 29, ) BEP generally funds Brookfield s commitment to renewables transactions in Private Funds 3) Indicative figure only, and subject to transaction size, co-investment, and other considerations 4) Indicative third-party commitments 35

36 Governance SENIOR MANAGEMENT TEAM Sachin Shah Chief Executive Officer Wyatt Hartley Chief Financial Officer Brookfield Renewable has entered into a Master Services Agreement with Brookfield Asset Management Provides comprehensive suite of services to Brookfield Renewable Partners Base management fee of $20 million adjusted annually for inflation Equity enhancement fee equal to 1.25% of the increase in BEP s capitalization Incentive distributions based upon increases in distributions paid to unitholders over pre-defined thresholds (Master Limited Partnerships (MLP) structure) 15% participation by Brookfield in distributions over $0.375/unit per quarter 25% participation by Brookfield in distributions over $0.4225/unit per quarter Brookfield Renewable s general partner has a majority of independent directors Brookfield Renewable s governance is structured to provide significant alignment of interests between Brookfield Asset Management and unitholders 36

37 Favourable Structure Relative to MLPs Brookfield Renewable is a Bermuda-based publicly traded partnership that indirectly owns holding corporations in the U.S., Canada and other jurisdictions. Brookfield Renewable is not a U.S. MLP 1 Chart below shows a comparison of Brookfield Renewable versus an MLP¹ Brookfield Renewable MLP 2 Type of entity Publicly traded partnership Publicly traded partnership UBTI 3 No Yes ECI 4 No Yes U.S. tax slip issued K1 K1 Tax profile of distributions Benefits from return of capital Benefits from depreciation Payout ratio ~70% of FFO 80%-90% of distributable cash flow 5 Incentive distributions 25% maximum 50% maximum Brookfield Renewable has not and is not expected to generate UBTI and ECI 1) MLP is Master Limited Partnership 2) Not all MLP s are the same. This represents Brookfield s understanding of common features with these types of vehicles 3) UBTI is unrelated business taxable income 4) ECI is effectively connected income 5) Source: Management estimates based on Barclays Capital Master Limited Partnerships MLP Trader Weekly 37

38 Leader in Green Energy & Sustainability BEP is the largest member by market capitalization of the S&P/TSX Renewable Energy and Clean Technology Index. Since 2017, BEP has issued two green bonds through project-level financings for an aggregate value of US$780 million. Citing BEP's environmental stewardship, commitment to renewable power, and use of proceeds towards renewable power generation, the green bonds received E-1 Green Evaluation scores from S&P - the highest on its scale. BEP is committed to sustainable development principles that reduce the impact of our operations and help to manage the underlying water resources efficiently. Low Impact Hydropower Institute (LIHI) certification is a voluntary certification program designed to help identify and provide market incentives for hydropower operations that are minimizing their environmental impacts. BEP has received LIHI certification for 55 hydro facilities across the US, more than any other operator, making it the U.S. leader in low impact hydropower generation. The Environmental Choice Program is a comprehensive national program sponsored by Environment Canada. It certifies manufacturers and suppliers that produce products and services that are less harmful to the environment. These bear the EcoLogo registered trademark. 22 of our hydroelectric facilities in Ontario, Quebec, and British Columbia meet the strict standards of the Environmental Choice Program. The Brookfield Environmental Education Center was established in Guarani, Minas Gerais, Brazil, from a partnership between Brookfield Energia Renovável and the local community. The project aims to provide the entire population of the Pomba River Valley a place to develop environmental education projects. To make the project sustainable, the local community was trained to manage the Environmental Education Center and created a non-governmental organization to do it. 38