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Renewable Energy MLP Achieves 'Clean Results from Strong Hydrology' in Q2/19
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The highlights of the quarterly update are presented in an iA Securities report.

In a July 31 research note, iA Securities analyst Jeremy Rosenfield reported that Brookfield Renewable Energy Partners L.P.'s (BEP.UN:TSX; BEP:NYSE) Q2/19 results were "roughly in line with estimates."

Rosenfield reviewed the quarter's numbers and the near-term outlook for the master limited partnership (MLP).

Strong output, including from hydroelectric assets in North America, which was about 7% higher than the long-term average, drove the quarterly results.

Consolidated EBITDA was $630 million, higher than iA Securities' forecast of $602 million and consensus' estimate of $598 million. Proportionate adjusted EBITDA was $400 million, between iA's $365 projection and consensus' $407 million forecast.

Q2/19 funds from operations came in at $0.74 per share, above both iA and consensus' estimates of $0.72 and $0.68 per share, respectively.

Another highlight of the quarterly update, Rosenfield pointed out, is that the development pipeline of MLP "continues to support organic growth," specifically an average annual 3–5% growth in funds from operations per share (FFO/share) and excluding mergers and acquisitions (M&A) activity. In the hopper are about 130 megawatts (MW) of under construction projects, another greater than 600 MW of construction-ready work and an additional roughly 220 MW of potential repowering jobs.

Supporting longer-term potential upside are the two recent investments, noted Rosenfield—Terraform Power's acquisition of a generation portfolio for about $720 million along with Brookfield and co-investors' acquisition of a 50% stake in X-Elio for about $500 million. These transactions could add about $30–40 million of incremental, annual run rate funds from operations beginning in 2020, "with upside from follow-on organic development."

Overall, increased cash flow resulting from organic growth and M&A should translate to a lower payout in the future, indicated Rosenfield. The MLP aims for average annual FFO/share growth of 6–11% and total yearly shareholder returns of 12–15%. Simultaneously, it "continues to drive its payout downward toward management's long-term sustainable 70% payout target (on FFO)."

Rosenfield concluded, "We continue to see Brookfield as a premium brand in the sector, supported by premium value hydro assets."

iA Securities maintained its Hold rating and its US$37 per share price target on Brookfield, whose stock is currently trading at around $36.07 per share.


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Disclosures from iA Securities, Brookfield Renewable Partners L.P., Research Update, July 31, 2019

Conflicts of Interest: The research analyst and or associates who prepared this report are compensated based upon (among other factors) the overall profitability of iA Securities, which may include the profitability of investment banking and related services. In the normal course of its business, iA Securities may provide financial advisory services for the issuers mentioned in this report. iA Securities may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis.

Analyst's Certification: Each iA Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst's personal views about the issuer and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analyst Trading: iA Securities permits analysts to own and trade in the securities and or the derivatives of the issuer under their research coverage, subject to the following restrictions. No trades can be executed in anticipation of coverage for a period of 30 days prior to the issuance of the report and 5 days after the dissemination of the report to our clients. For a change in recommendation, no trading is allowed for a period of 24 hours after the dissemination of such information to our clients. A transaction against an analyst's recommendation can only be executed for a reason unrelated to the outlook of the stock for the issuer and with the prior approval of the Director of Research and the Chief Compliance Officer.

Company Related Disclosures:
--In the past 12 months, Industrial Alliance Securities Inc. has managed or co-managed a public offering of securities for the issuer.
--Industrial Alliance Securities Inc. beneficially owned 1% or more of the common equity (including derivatives exercisable or convertible within 60 days) of the issuer as of the month end preceding this report.
--The analyst has visited the issuer’s operations. No payment or reimbursement was received from the issuer for the associated travel costs.

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