BEP Financial Analysis

Analysis Date: 2/3/2025

Business Model

Brookfield Renewable Partners operates a diversified portfolio of renewable power assets across various technologies and geographies. Revenue is generated primarily from the sale of electricity produced by these facilities under long-term contracts and in merchant markets.

Revenue Sources

• Hydroelectric Power Generation: Revenue from the sale of electricity generated by hydroelectric facilities.
• Wind Power Generation: Revenue from the sale of electricity generated by wind power facilities.
• Utility-Scale Solar Power Generation: Revenue from the sale of electricity generated by utility-scale solar power facilities.
• Distributed Energy and Storage: Revenue from distributed generation assets, battery storage, and pumped storage facilities.
• Sustainable Solutions: Revenue from investments in Westinghouse (nuclear services), renewable natural gas, carbon capture and storage, and material recycling.

Income Statement Analysis

• Revenues increased by 8.24% year-over-year, indicating positive business growth.
• Direct operating costs increased by 15.38%, outpacing revenue growth, which could pressure gross margins.
• Interest expense increased by 10.41%, potentially due to increased debt or higher interest rates.
• Share of earnings from equity-accounted investments shifted from a gain to a loss, which is a negative trend.
• Foreign exchange and financial instrument gain significantly increased, positively impacting net income, but this item can be volatile.
• Depreciation decreased slightly by 7.74% year-over-year.
• Other expenses significantly increased by 155.71%, negatively impacting net income.
• Current income tax recovery shifted from expense to recovery, which is a positive trend.
• Deferred income tax recovery decreased by 67.55% year-over-year.
• Net income decreased by 28.79% year-over-year despite revenue increase, mainly due to increase in operating costs and other expenses and shift in equity accounted investment.

Balance Sheet Analysis

• Cash and cash equivalents significantly increased by 174.76%, indicating a strong liquidity position.
• Trade receivables and other financial assets increased by 28.03%, suggesting growth in business activities.
• Property, plant, and equipment and Goodwill increased by 19.65%, reflecting investments in assets and potential acquisitions.
• Deferred income tax and other assets increased significantly by 164.54%.
• Corporate borrowings increased by 34.20% and Borrowings which have recourse only to assets they finance increased by 13.85%, indicating increased leverage, but at different levels.
• Accounts payable and other liabilities increased significantly by 67.41%.
• Total Liabilities increased by 25.70%, outpacing asset growth slightly, which needs further review.
• Limited partners' equity decreased significantly by 90.19%, while total equity increased by 21.68%. This significant change in limited partners' equity needs further investigation in filings for context - might be due to share structure changes or reclassifications within equity.
• Overall, the balance sheet shows asset growth funded by increased liabilities and changes within equity components. Strong cash position is a positive sign.

Capital Allocation

Brookfield Renewable announced over 5% increase in annual distribution, marking 14 consecutive years of at least 5% annual distribution growth. The company is actively deploying capital into growth initiatives, as evidenced by $12.5 billion deployed or committed in 2024, including investments in Neoen and other platforms. Asset recycling is a key strategy, generating $2.8 billion in proceeds in 2024 to fund future growth. The company maintains a strong balance sheet and liquidity to support growth and opportunistic investments. Share buybacks are also considered as a capital allocation option when share prices are dislocated from intrinsic value.

Management Commentary

2024 was another record year for our business. We delivered 10% FFO per unit growth.

The outlook for clean power is stronger than ever, with accelerating demand driven by corporate customers.

We are increasing our annual distribution to $1.492 per unit, an over 5% increase year-on-year.

Renewables sector has traded down in public markets on weaker sentiment.

Our shares have not been immune to lower public market prices across the sector.

Overall Sentiment: Positive. Management expresses confidence in the business's performance and future outlook, highlighting record results, strong growth prospects driven by increasing demand for clean energy, and a commitment to returning value to unitholders through distribution increases. While acknowledging current market sentiment affecting share prices, the overall tone is optimistic regarding the long-term fundamentals and the company's positioning.

Recommendation

Rating: Buy

Reason for Rating: Based on strong financial performance, robust growth outlook in the renewable energy sector, consistent distribution growth, and strategic capital allocation, a Buy recommendation is warranted.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/3/2025, 8:06:23 AM