Brookfield Renewable Partners L.P. Q1 FY2026 earnings call

• Strong start to the year with record financial results, FFO growth, and $2.2 billion deployed/committed into growth. - Brought online 1.8 gigawatts of new capacity and contracted 1.7 gigawatts of development projects. - Scaled capital recycling program with nearly $3 billion of proceeds. - Announced acquisition of Boralex, a leading global renewable platform. - Progressed with US government on Westinghouse large-scale nuclear reactors. - Strengthened balance sheet with almost $4 billion of financings and over $4.7 billion of available liquidity. - Exploring simplification of structure to a single listed corporate entity.

FFO was $375 million, up 19% year-over-year, and 15% on a per-unit basis, equating to 55 cents per unit. Hydroelectric segment generated $210 million of SFO, up almost 30% year over year. Wind and solar segments delivered a combined $245 million of FFO, up over 60% year-over-year. Distributed energy, storage, and sustainable solutions businesses contributed $58 million of FFO.

• Well positioned to deliver outsized earnings growth in the near term. - Expect to exceed 10% FFO per unit growth in the next couple of years driven by M&A, organic growth, and asset recycling. - Asset sale gains are upside, but organic development and M&A side have strong operating fundamentals.

• Disruption with outbreak of conflict in the Middle East could potentially impact, though business is largely contracted. - Execution risk in different regions and technologies such as permitting, interconnection, supply chain, and community pushback.

Q: And our first question comes from the line of Sean Stewart from TD Cowan. Your question, please. Thanks. Good morning, everyone. I want to start with asset recycling. You guys have a lot on the go there. The magnitudes accelerating, I guess, in tandem with an expanding organic pipeline as well. Can you give us updated perspective on the cadence and magnitude of overall asset recycling plans over the next year? And you referenced the CleanMax IRR, but broader perspective on returns you're crystallizing through those initiatives.

A: Good morning. Thanks for the question, Sean. Three things perhaps it's worth saying about capital recycling. First, the growth in our asset recycling activities is a very natural expansion of our business that is tied on a slightly lagged basis to the growth in our organic and development activities. And as we have been building more and more wind, solar and other assets in-house, we increasingly are looking to sell those down to lower cost of capital buyers, capture our development margin and redeploy that capital into accretive growth. And While it has been growing incrementally in recent years, we do expect it to grow on a similar trajectory going forward. And it's increasingly becoming a very normal course and part of our business. In terms of targets for size and scale and amount of capital recycling, we're going to continue to be entirely driven by the values we see in the market. And if we see opportunities to sell assets at values above where we think they will produce within our portfolio, we will sell them for cash and redeploy that cash. And therefore, we're not working to a consistent target. But perhaps to give you some direction or steer, at our investor day last year, we spoke about a nine to $10 billion deployment of equity into growth over a five-year period. And we would expect at least a third of that capital over a five-year period to come from asset recycling and perhaps more if we see strong values in the market. And this likely brings us to the last point where we do have a fairly robust capital recycling program ahead of us in 2026. And this is purely a result of the strong bids we are seeing for both platforms as well as stabilized assets in the current market. And therefore, I would say... On balance, the returns that we are generating through this capital recycling program, we are consistently seeing at the high end or maybe even above the high end of our target range.

Q: Second question is, With respect to the M&A opportunity set, the previous quarter's commentary was public equities offered a more compelling opportunity than private M&A opportunities, and that's consistent with the Boralex deal. Do you still see that gap in place? And post-Boralex, can you qualify your continued M&A appetite?

A: So we continue to see both. Undoubtedly, for all the same reasons we mentioned last quarter, we continue to see opportunities in the public market. You know, those opportunities didn't stop and end with Boralex. The opportunities in the public market continue to exist, and similar to last quarter, it is because some companies in the public market are more constrained for capital and therefore not able to capture the tremendous demand environment that we're currently operating in. We continue to see an environment where public companies with access to capital that they can use to capitalize on the really attractive demand environment are performing well, and companies that don't have the right access to capital are struggling in the public markets. And Therefore, we do continue to see opportunities in the public markets, but I would highlight we're seeing a pretty robust pipeline across both private and public for the remainder of the year.

Q: Yeah, thanks. Good morning, everyone. Clark, can you just clarify the comments you made about progress on the U.S. government with Westinghouse in terms of long-need items? Have those long-need items been, you know, actually signed right now and you're starting to get the support from the U.S. government at this point? If not, when does that come?

A: Hi, Mark. This is a very live discussion. and we hope to be in a position to announce some significant progress, not only in 2026, but in the near term. Since our announcement in Q4 of last year, we continue to see tremendous demand from nuclear, both around the world, but in particularly in the United States, from both the government as well as the utilities. And that demand is coming from, I would say, all stakeholders across the environment. It's coming from off-takers, it's coming from the utilities, it's coming from the government. We continue to make significant progress on establishing frameworks under which initial orders can be made. And we hope to make some announcements in that regard as soon as possible. Did that answer your question?

Q: Yeah, sorry, just my connection broke for a second there. Next question, I think there was a commentary earlier in the call, you said something about outsized ability to drive growth here in the near term. Is the expectation then that you can exceed the 10% FFO per unit growth in the next couple of years? And if so, primary drivers of that right now?

A: In the current environment, we do feel that we are well positioned to exceed our long-term target of 10%. This is driven by a number of things. Obviously, M&A in our business, the significant addition of new capacity that's coming online from organic growth. And then lastly, our ability to recycle assets at very attractive rates. values in the current environment. There could obviously be some timing variables on each of those things, but based on the underlying fundamentals of those three drivers, we feel that for both the short and short to medium term, we are well positioned to exceed that 10% per year target. And so just to follow up on that too, obviously asset sale gains would be a component of that, but if you put those aside, would you say the ability to drive FFO growth from the organic development and M&A side is charmer today? Ex-asset sell gains?

A: Yes, we would. We would absolutely say that the operating fundamentals of our business and the organic growth profile of our business is as strong as it's ever been. And the ability to generate gains on sale above and beyond that and to recycle that capital accretively into even further growth would be upside.

Q: Hey, good morning. Just on Northview Energy, how should we think about the cadence of future drop-downs and the potential mix of assets into this vehicle? And Should we think about this as more of a steady state annual funding lever or something that could scale more opportunistically depending on market conditions?

A: From BEPS perspective, it's important to recognize that we have the option but not the obligation to sell assets into Northview Energy. And the assets that fit that pool of capital are high-credit, contracted, long-duration wind and solar assets in North America at prices and go-forward returns, which are very consistent with what we have seen and expect to achieve in our asset sales to third parties outside of this vehicle. This is critical and we think immensely additive to our business because this structure helps us in de-risking our development and enabling us to fund further high margin growth. In terms of the drop downs and the cadence of them, we'll really make two comments. One, the additional capital for future drop downs, we expect that to be utilized, we would say, over a two to three, two to four year period. asset sales to third parties outside of Northview. At the end of the consumption of that initial allotment of capital, we will consider what to do next. And that is a discussion for the future. We could potentially expand this vehicle, create new vehicles. But for now, we are just focused on consuming that initial commitment, which we expect will take two to three or two to four years.

Q: Just on the prevailing hyperscaler agreements that we have in place, could you provide an update on how those agreements are progressing forward and what the potential pipeline looks and how conversations with such parties are evolving?

A: So, there's probably two things that characterize our activity with the hyperscalers. in the context of those agreements and more broadly. One is the demand, and we apologize for sounding like a broken record call after call, but demand continues to go up. It is higher today than it was last quarter. It's higher today than it was last year, and we expect it to be higher next year than it is today. The demands for energy, particularly from the hyperscalers, particularly in their core markets, continue to increase at paces we would say significantly above previous market expectations. The other thing we are seeing in terms of our activities with the hyperscalers within those frameworks is our activities continue to broaden and evolve. I'll give the example of the first framework agreement we did was with Microsoft, and it was really focused on wind and solar assets. We continue to contract more and more wind and solar assets with Microsoft under that arrangement. But last quarter, we also contracted some hydros under a long-term contract with them. And we're now, to meet their evolving demands, increasingly looking at including battery storage either with the projects that we're contracting with them or as part of the broader arrangement with them. So the two points we would make is, The demand and the activity continues to grow and accelerate, but it also continues to broaden, and we feel it's this second point where our scale and diversity continues to differentiate us in our ability to serve the largest corporate consumers of electricity.

Q: Good morning. I just wanted to ask about this single combined corporate structure. You guys have been trying to increase the liquidity of Pepsi for a while, so this seems sort of like a natural progression. But can you walk through what led you to evaluate this and what's on the table? Other than the tax-free part of this, could you talk about other things that need to be considered in trying to do this? And would this change how you view your distribution policy?

A: Christine, I'll take the second one, maybe just so it doesn't get missed on your previous question. We would not expect any change to the corporate structure to adjust our dividend policy. I'll just make sure we didn't gloss over that point. IN TERMS OF WHAT WE ARE SEEING IN TERMS OF OPPORTUNITY AND DYNAMICS AROUND DIFFERENT TYPES OF PROJECTS AND DIFFERENT TYPES OF DEVELOPMENT, THERE'S PROBABLY TWO THINGS WORTH NOTING ACROSS OUR BUSINESS. ONE, MAYBE THREE, I APOLOGIZE. ONE IS THIS IS PICK YOUR TAGLINE, ANY AND ALL AND ALL OF THE ABOVE TYPE SOLUTIONS. THE DEMAND FOR ENERGY, is going to require all types of sources. We are seeing the greatest growth in renewables because they are quick to deploy and they are cheap, but we are going to see demand across all types of energy in terms of additions to meet the demand forecast going forward. The second thing that's worth noting is undoubtedly the fastest growing technology across Brookfield Renewable today is batteries and energy storage. We are seeing that within all of our existing development platforms. We are increasingly looking at standalone energy storage opportunities, and the rationale for this is very simple. They remove grid congestion. They don't add to it, so they solve that problem, and they are very quick to deploy. Further, this has been, this opportunity has been driven by the fact that capex for batteries and energy storage has come down 65 to 70% over the last 24 months, making these investments very economic and financially attractive. The third point, and this is probably the most insightful in terms of hitting your question head on. we are seeing a dramatic increase in interest and growth in behind the meter solutions. The reality is the demand trajectory ahead of us is greater than the pace at which grids can expand. And therefore, we are going to see significant expansion of electricity demand on grids, but we're increasingly seeing demand for behind-the-meter solutions. It's important to recognize that while behind-the-meter solutions are perhaps growing faster on a relative basis, they are coming off a very, very low base, and the vast majority of demand growth is still going to go through grids the way it has in the past, but we are seeing increasing demand for behind-the-meter solutions.

Q: Great, thanks. Connor, you previously talked about how battery storage is a pretty big opportunity. When you look at your current solar and wind portfolio, is it economic to add batteries to existing sites? And I know many of those assets are contracted, so are you seeing offtakers willing to pay that extra amount to firm up their power?

A: Absolutely, in no uncertain terms, yes. The value proposition for batteries in today's market is very compelling for offtakers in terms of giving them a load profile that better matches their 24-7 demand curve. And we're seeing it, therefore, alongside existing projects in new developments and on a standalone basis.

Q: Switching gears a bit. So in South America, I know the environment isn't great for renewable development and interest rates are really high. and you're not that active on the development front. But on the M&A side, you recently increased your stake in Isagen. Can you just talk about whether there are M&A opportunities you're seeing in South America?

A: Certainly. In South America, we will share when we can do so. at compelling risk-adjusted return. Our more modest activity in South America, I would say, over the last two or three years outside of the EVN transaction, I would say is simply episodic. A lot of it was driven by very high hydrology and rapid build-out in Brazil. that pushed prices down and made new build in that country a little less compelling for a period of time. We're seeing demand recover. We're seeing hydrology normalize and not market strengthen again. We continue to do significant growth in Colombia, but we do it within the Isahin platform, so it doesn't show up as a new discrete M&A transaction. And then we've continued to do smaller transactions in other countries in the region, whether it be Chile, Central America. So it is a compelling market. It is one where the value of... It continues to be a market we focus on and will continue to be a portion of our business going forward, albeit smaller than our core markets in North America and Western Europe.

Q: Hey, thanks so much. Just two quick ones if I could squeeze in. One's a follow-up from Christine's question earlier. Is there just a timeline of when you hope to have a decision made on the corporate consolidation? Is it a quarter or by year-end? And then I have a follow-up on nuclear.

A: Hi, Anthony. It's Patrick. We have just begun our assessment, and so we can't really give any indicative timeline at this moment or really add much more at this time. And then on the nuclear, you talk about the success and the momentum going on with the AP-1000 and the U.S. government. I'm just curious, where do you see the bottleneck right now before we get an announcement? Is it on the utility side? Is it on the government side, regulatory side? What's the bottleneck before we get an announcement?

A: Perhaps this is putting a positive spin on this, but... I wouldn't almost look at it as a bottleneck. The potential for new-build nuclear reactors in the United States is an immense step change to what has been done over the past 10 or 20 years. We are talking about additions that exceed 10 times, announcing in one shot additions that exceed 10 times what has been done over the last 15 years. And therefore, this simply requires obtaining alignment from all the stakeholders for that scale of a build-out. That includes the government, that includes the nuclear-eligible utility operators, that includes the off-takes, and that includes the financing parties. We candidly would suggest that the momentum and the traction that has been made over the last six or nine months is incredibly significant and reflective of the demand for growth in the asset class. Because what we're looking to do in the course of, you know, six or 12 months far exceeds what's been done in the last 10 to 15 years. So I wouldn't say it's a bottleneck. It's just getting alignment from all the appropriate groups. And at this point, The interest and support for getting this done is pretty overwhelming.