Income trust generates power and income

Brookfield Renewable Partners LP is a renewable power generating company. Its portfolio of renewable electric power generating facilities is spread across North America, Latin America and Europe.

Income_TrustsBrookfield Renewable Partners L.P. (TSX—BEP.UN) has gotten off to a solid start in fiscal 2017. Its Funds from Operations (FFO) per unit in the first quarter were US$0.55, a penny shy of analysts’ consensus estimate of $0.56. The shortfall was largely due to lower-than-expected contributions from its Colombia hydro operations which realized lower power prices compared to the year before.

Brookfield Renewable Partners 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 10,000 megawatts (MW) of installed capacity.

For the three months ended March 31, 2017, Brookfield Renewable’s FFO was US$166 million, or $0.55 a unit, compared to $187 million, or $0.68 a unit, in the same period of 2016. In the prior period, the partnership benefitted from $22 million in hedging gains caused by its ongoing foreign currency hedging program.

Quarterly distribution increased

During the quarter, Brookfield raised its quarterly distribution 5.1 per cent to US$0.4675. It has targeted an annual average increase of five to nine per cent.

Brookfield continues to pursue growth through acquisitions and project developments. During the first quarter, for instance, the partnership, together with its institutional partners, agreed to acquire the SunEdison interests in the TerraForm companies which own about 3,600 MW of mostly contracted renewable assets.

TerraForm Power has 2,983 megawatts of electricity generating capacity, primarily wind and solar operations in the US, Europe and Canada. TerraForm Global owns or has contracts to acquire a total of 952 MW of wind and solar generation capacity in Brazil, India, China and other countries outside North America.

Brookfield Renewable units trade at a high but still reasonable 15.6 times the C$2.67 a unit in FFO that Brookfield will likely earn in 2017. The annual distribution of US$1.87 a unit yields 5.8 per cent. Buy for long-term income.

Brookfield Renewable is 61 per cent owned by Brookfield Asset Management, a leading global alternative asset manager with approximately US$250 billion of assets under management. 

This is an edited version of an article that was originally published for subscribers in the July 2017/Second Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.

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