An alternative energy investment for growth and income

Brookfield Renewable Energy Partners L.P. is an open-ended income trust that operates one of the world’s largest publicly traded, pure-play renewable power platforms. Its portfolio consists of hydroelectric and wind facilities in North America, Latin America and Europe and totals more than 7,000 megawatts of installed capacity, generating enough renewable energy to power four million homes. Brookfield Renewable is Bermuda-based and is 65 per cent owned by Toronto-based global alternative investment management company Brookfield Asset Management.

Brookfield Renewable Energy Partners’ (TSX─BEP.UN; NYSE─BEP) operations have performed well this year, with the exception of short-term hydrology, or water movements. All other aspects of its business have met or exceeded expectations. Nonetheless, its funds from operations, or FFO, have been hurt by negative hydrological conditions. Lower seasonal inflows in North America, combined with low water levels in Brazil, contributed to hydrological conditions that were below expectations.

Brookfield Renewable Energy Partners operates one of the world’s largest publicly-traded pure-play renewable power investments. Diversified across 75 river systems and 14 power markets in North America, Latin America and Europe, its portfolio is primarily hydroelectric and totals more than 7,000 megawatts of installed capacity. It owns and manages 209 hydroelectric generating stations, 38 wind facilities, two natural-gas fired plants and three biomass facilities.

Hydro power generation declined

For the six months ended June 30, 2015, Brookfield’s FFO were US$299 million, or $1.09 a unit, compared with $383 million, or $1.44 a unit, in the same period of 2014.

Generation for the latest period totaled 12,223 gigawatt hours, or GWh, below the long-term average of 13,715 GWh, and a decrease of 103 GWh compared to the prior period.

The hydroelectric portfolio generated 9,877 GWh, below the long-term average of 11,204 GWh and a decrease of 611 GWh from the prior period. The variance was attributed to lower inflows across most of the portfolio.

Wind power generation rose from last year

Brookfield’s wind portfolio, however, performed well, thanks to strong performances in Brazil and Europe. Though the portfolio’s generation of 2,039 GWh was below the long-term average of 2,299 GWh, it was still up 342 GWh from last year.

The strength in Brookfield’s wind portfolio demonstrates the benefits of its increasingly diversified portfolio. Nearly 17 per cent of its generation came from wind in the first half of the year, up from 14 per cent in the same period last year.

Meanwhile, Brookfield ended the second quarter with water reservoirs at planned levels. At that time management thought it was well positioned to capture premium summer pricing, so we’ll see how that has played out when the company reports its third-quarter results this month.

Brookfield trades at a high but still reasonable 15.8 times the C$2.30 a unit it will probably earn in 2015. Its current annual distribution of C$2.19 a share yields an attractive 6.1 per cent.

Brookfield Renewable Energy is a buy for growth and income.

 

Money Reporter, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

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