Brookfield Renewable Corp Q2 FY2023 earnings call

Key Points

• Business performed well with 10% annual FFO per unit growth year-to-date.
• Commissioned approximately 1,500 megawatts of new capacity in 2023, on track for almost 5,000 megawatts, with nearly 18,000 megawatts expected in the next three years.
• Signed $1.3 billion of equity investment, raised $650 million equity, with over $4.5 billion of available liquidity.
• Acquired Duke Energy Renewables for ~$1 billion equity, adding a scale operating renewable platform that is 90% contracted.
• Repowering projects showed strong uplift, e.g., the Bishop Hill Wind Farm repowering expected to complete in 2024 and increase generation by ~15%.

North American hydro assets were impacted by a dryer-than-normal June but saw significant precipitation in July, with reservoirs in good shape. The wind and solar segment had solid performance, benefiting from inflation-linked long-duration contracts, though there was an adjustment to the regulated price of Spanish assets, which had a net positive overall impact.

Forward-Looking Statements

• Expect to deliver nearly 18,000 megawatts of new capacity in the next three years, with most projects derisked.
• After equity issuance, have over $4.5 billion of available liquidity, well-positioned to fund growth through normal course funding sources.
• Continue to focus on a self-funding model and selectively use equity for outsized, highly accretive growth opportunities.

Risks Discussed

• Market uncertainty affecting financing for some players, creating both buying and selling opportunities.
• Regulatory approvals needed for transactions like the Westinghouse deal, with a few outstanding but normal course.
• Supply chain issues, e.g., wind equipment shortages and transformer lead times impacting development.

Q: Thoughts on continued asset recycling plans and regions for better valuation terms?

A: Connor Teskey noted a buyer's market in some areas, with focus on wind and solar in Americas and Europe.

Q: Comments on Westinghouse UK regulator process?

A: Normal course, almost all 35+ regulatory approvals received, with a few outstanding but typical for such a transaction.

Q: Potential to optimize revenues in North American hydro portfolio and evolve away from hedge strategy?

A: Connor Teskey stated that corporate demand for green power is driving opportunities across asset classes, including hydro, with plans to contract hydros on medium/long-term basis.

Q: M&A intentions and openness to attractive deals?

A: Connor Teskey said would not wait for current transactions to close, open to attractive deals and remains opportunistic.

Q: How development pipeline overlays with expected increase in demand from technology companies?

A: Connor Teskey mentioned pulling projects forward in the pipeline due to strong demand, with demand broad-based globally.

Q: Building vs buying strategy?

A: Connor Teskey said development activities increasing but majority cash flows from operating assets, with development still a significant but not majority portion.

Q: Trade-offs between corporate vs government contracts?

A: Connor Teskey explained corporate demand is more resilient and enduring, with higher returns due to more involved process of building into corporate PPAs.

Q: Targets of the second transition fund?

A: Similar to first fund, focusing on clean energy renewables developers, power transformation, and other clean energy technologies like nuclear.

Q: Utilities separating assets and M&A opportunities?

A: Connor Teskey said looking at opportunities, focusing on best risk-adjusted returns and differentiated capabilities.