Brookfield Renewable Partnership (TSX: BEP.UN, NYSE: BEP) is one of the world’s largest publicly-traded renewable power companies. It operates in 30 countries where it owns hydro, solar, and wind generating facilities. It was spun off in 2011 from its parent Brookfield Asset Management, which owns 61%.
Performance: Results can be choppy, but the five-year trend is broadly higher. The units are currently trading near the top of their 52-week range. The units are up 13.4% year to date and 2.57% in the past 52 weeks, as of the time of writing.
Why is it green? Brookfield is a global leader in hydroelectric power. Some 76% of its portfolio is hydro with wind (20%) and solar (4%) providing the remaining energy. Solar is the renewable energy gold standard because, once built, their plants are long lasting and have minimal environmental impact.
Recent developments: In 2018, Brookfield scored well on most important measures. For the year ended Dec. 31, revenue rose 13.6% to $2.98 billion and net income swung to a profit of $42 million, from a loss of $56 million in the previous year. Funds from operations (cash flow, plus depreciation) rose 16% to $676 million. New plants and higher power generation were behind the gains.
Outlook: Brookfield sells 87% of its power under long-term contracts, which locks in prices, thus allowing it to generate stable cash flow. The company pays out about 90% of that cash to investors.
It has spent more than $3 billion since 2012 on acquisitions. In 2018, it increased its stake to 30% in wind and solar company TerraForm. It operates mainly in Brazil, India, and China, although it produces wind energy in Ontario.
In 2019 Brookfield will continue to develop two hydro facilities in Brazil, two European wind farms, and an energy storage facility in the U.S.
Like most utilities, Brookfield borrows to build its plants. It has $11.7 billion in long term debt, which makes it interest rate sensitive. Rising rates hurt the unit price in 2018, but signals by the Federal Reserve that more increases are on hold has lifted the stock since Christmas.
The company is guarding against rising rates by extending the average maturity of its debt to 10 years. There are no material debt maturities until 2023.
Dividend: The US$2.06 dividend yields a high 6.6% and has been increased in each of the last five years. It was raised again by 5.1% with the March payment.
The 2018 annual report notes that in every year since it was formed in 1999, (the year it was recommended in The Income Investor at $16.62 a share) it has delivered a 15% annual, compounded rate of return to unit holders.
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This article appeared in the March 18, 2019 issue of the Internet Wealth Builder.