Brookfield Renewable (BEPC) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated FFO of $253 million or$1.29 per unit year-to-date, representing a 7% increase compared to last year, and continues to target over 10% FFO per unit growth for the year [92] - The financial position remains strong with expectations to execute nearly $20 billion of nonrecourse financing this year, generating over$800 million in up-financing proceeds, while maintaining a strong investment-grade credit rating [78] Business Line Data and Key Metrics Changes - The company closed the acquisition of the remaining 50% interest in X-ELIO, bringing total ownership to 100% [15] - The acquisition of Deriva Energy, which includes almost 6,000 megawatts of operating and construction assets, is expected to generate strong contracted cash flows with a 13-year weighted average remaining contract life [16] - The company agreed to invest approximately $2.2 billion of equity capital, including the acquisition of Banks Renewables, which has approximately 260 megawatts of onshore wind assets and a significant development pipeline [24] Market Data and Key Metrics Changes - There is a strong and growing demand for clean energy, with corporations procuring nearly 10 times more clean energy annually over the past five years [5] - The company expects to deliver 5 gigawatts of new capacity this year and approximately 15 gigawatts over the next two years, contributing about$270 million of additional FFO annually [6] Company Strategy and Development Direction - The company is focused on acquiring businesses with strong development pipelines that lack access to capital or scale operating capabilities, creating a virtuous cycle of capturing demand and enhancing capabilities [11] - The strategy includes a disciplined approach to development, ensuring power purchase agreements and financing are secured before committing significant capital [12] - The company aims to deliver 12% to 15% long-term total returns for investors while remaining disciplined in capital allocation [79] Management's Comments on Operating Environment and Future Outlook - Management noted that the renewable sector has faced challenges due to higher interest rates and tightening industry margins, but the company remains well-positioned to benefit from these conditions [19] - There is an abundance of opportunities to invest at or above target returns, driven by accelerating demand for clean power and fewer players with access to capital [20] - The company is optimistic about the future, particularly in the nuclear sector, which is expected to grow due to increasing demand for clean, dispatchable baseload power [41][44] Other Important Information - The company has started to allocate capital to repurchase shares, having repurchased almost 1.5 million units under its normal course issuer bid [31] - The company expects to close transactions totaling over $9 billion, adding approximately$200 million in incremental annual FFO [76] Q&A Session All Questions and Answers Question: How do you see nuclear fitting into your future plans? - Management expressed a favorable view of nuclear power, highlighting its role in providing clean, dispatchable baseload power, which is increasingly valuable [44][45] Question: Are you seeing any M&A opportunities in the hydro space? - Management noted that while there is less hydro being built globally, they continue to monitor opportunities and have been buyers of hydro assets in recent years [48] Question: How do you think about access to capital moving forward? - Management indicated strong liquidity, with approximately $4.5 billion available, allowing for the pursuit of large and attractive opportunities [86] Question: Can you comment on the direction of prices in the asset recycling market? - Management noted robust demand for small to medium-sized derisked assets, with a strong bid for those assets in the current market [52]