Brookfield Renewable Partners Lp · TSX:BEP.UN
Brookfield Renewable Partners Lp — Investor Day (September 2018)
71 slides from Brookfield Renewable Partners Lp's investor day presentation, Sep 26, 2018
Slide 1: Brookfield Renewable Partners Investor Day
Brookfield Renewable Partners I N V E S T O R D AY SEPTEMBER 26, 2018
Slide 2: Agenda
Agenda Overview 3 Sachin Shah, Chief Executive Officer Performance Case Studies 13 Ruth Kent, Chief Operating Officer Balance Sheet Review 34 Wyatt Hartley, Chief Financial Officer Bringing It All Together 53 Sachin Shah, Chief Executive Officer 2
Slide 3: Overview: Sachin Shah, Chief Executive Officer
Overview: Sachin Shah, Chief Executive Officer 3
Slide 4: We are a leading owner and operator of renewable power assets
We are a leading owner and operator of renewable power assets $43 billion 5 sectors 10 countries 15% ASSETS UNDER MULTI- GLOBALLY TOTAL RETURNS MANAGEMENT TECHNOLOGY DIVERSIFIED SINCE INCEPTION 4
Slide 5: Decades-long transformation from fossil fuels to renewables
The world is in the early stages of a decades-long transformation from fossil fuels to renewables 5
Slide 6: This global transformation is being led by…
This global transformation is being led by… Climate change Government policy and subsidies Historically low cost of capital Increased demand from financial investors for long-duration renewable assets 6
Slide 7: $1.5 trillion invested in renewables
In the last 5 years, $1.5 trillion has been invested in renewables… 17% HYDRO 1% 47% OTHER SOLAR 35% W IND Please refer to endnotes at the end of the presentation 7
Slide 8: Over 1 million megawatts of new renewable capacity added
…And over 1 million megawatts of new renewable capacity has been added to global grids 20% HYDRO 5% 42% SOLAR OTHER 33% W IND Please refer to endnotes at the end of the presentation 8
Slide 9: High valuations and low returns
This has all been done at high valuations and low returns IRR Operating Development Europe 4% – 7% 7% – 9% North America 6% – 8% 8% – 10% Asia 8% – 10% +12% Latin America +10% +12% Please refer to endnotes at the end of the presentation 9
Slide 10: So we have set out to do the following…
So we have set out to do the following… Look for unique hydro opportunities leveraging our scale Invest in wind and solar and build operating expertise Globalize the business Maintain our financial discipline and investment grade balance sheet 10
Slide 11: Targets: 12% to 15% long-term total returns
Our targets during this period and into the future have not changed: 12% to 15% long-term total returns 11
Slide 12: Proven, disciplined and repeatable strategy
We have a proven, disciplined and repeatable strategy to create value 1 2 3 Invest on a Operating Capital Value Basis Expertise Discipline 12
Slide 13: Performance Case Studies – Ruth Kent, Chief Operating Officer
Performance Case Studies – Ruth Kent, Chief Operating Officer
Slide 14: Marquee Transactions
Marquee Transactions 1 2 3 Bord Gáis Isagen TerraForm Companies 14
Slide 15: Bord Gáis
Slievecallan, Ireland 320 MW 340 MW 60 BORD GÁIS OPERATING CONSTRUCTION EXPERIENCED PORTFOLIO PIPELINE OPERATORS 15
Slide 16: Acquisition of Bord Gáis in 2014
Acquisition of Bord Gáis in 2014 Eurozone Financial Crisis Devaluation of the Euro Brookfield Complex government privatization STRENGTHS Renewables, retail & gas businesses Operating history: track record 16
Slide 17: Bord Gáis | Business Plan
Bord Gáis | Business Plan 1 Advance development pipeline 2 Expand revenue through power marketing 3 Pursue further growth opportunities in Europe 17
Slide 18: Bord Gáis | Organic Growth
Bord Gáis | Organic Growth 1 Advance development pipeline • Developed ~200 MW of wind farms from proprietary pipeline • Efficiently tucked-in ~55 MW of wind facilities through opportunistic acquisitions • Added 1,200 MW of new development opportunities 2 Source new revenue opportunities through powe
Slide 19: Bord Gáis | Enhanced the Revenue Profile
Bord Gáis | Enhanced the Revenue Profile 1 Advance development pipeline 2 Source new revenue opportunities through power marketing and direct contracting • Sold power and green attributes into the U.K.’s higher power price market securing an additional £12/MWh of revenue • Established a corporate cu
Slide 20: Bord Gáis | Expanded Our Presence in Europe
Bord Gáis | Expanded Our Presence in Europe 1 Advance development pipeline 2 Source new revenue opportunities through power marketing and direct contracting 3 Pursue further growth opportunities in Europe • Leveraged knowledge of European markets to expand into the U.K. and Iberia • Today we have 3,
Slide 21: Isagen
Sogamoso, Colombia 3,000 MW 3rd 3,800 MW ISAGEN OPERATING LARGEST GENERATOR DEVELOPMENT PORTFOLIO IN COLOMBIA PIPELINE 21
Slide 22: Acquisition of Isagen in 2016
Acquisition of Isagen in 2016 Government privatization Commodity slowdown and COP devaluation BROOKFIELD Brookfield $5 billion EV transaction STRENGTHS STRENGTHS Hydro operating and development expertise Failed auction process 22
Slide 23: Isagen | Business Plan
Isagen | Business Plan 1 Extend the term of our PPAs 2 Reduce costs and improve margins 3 Pursue select development opportunities 23
Slide 24: Isagen | Contracting
Isagen | Contracting 1 Extend the term of our PPAs • Acquired a business with 1 to 2 year contract durations two years ago • We have since increased contract terms such that 15% of our contracts have 5 to 10 years of duration today 2 Reduce costs and improve margins 3 Pursue select development oppor
Slide 25: Isagen | Cost Reduction Strategy
Isagen | Cost Reduction Strategy 1 Extend the term of our PPAs 2 Reduce costs and improve margins • Improved processes and reduced reliance on external contractors • Realized ~$75 million in operating and interest savings to date 3 Pursue select development opportunities 25
Slide 26: Isagen | Development
Isagen | Development 1 Extend the term of our PPAs 2 Reduce costs and improve margins 3 Pursue select development opportunities • Wind and solar represent a significant growth opportunity • We acquired a 3,800 MW development pipeline and are advancing over 300 MW of wind projects 26
Slide 27: TerraForm Companies
Alamosa, United States TERRAFORM 3,600 MW 10 countries 3 sectors OPERATING GLOBAL MULTI- COMPANIES PORTFOLIO REACH TECHNOLOGY 27
Slide 28: Acquisition of TerraForm Power and TerraForm Global in 2017
Acquisition of TerraForm Power and TerraForm Global in 2017 Large scale bankruptcy of SunEdison Complex stakeholder group Brookfield Ability to create a tailored solution STRENGTHS Global operating capabilities Immediate financial stabilization 28
Slide 29: TerraForm Power and Global | Business Plan
TerraForm Power and Global | Business Plan 1 Stabilize the business post-SunEdison bankruptcy 2 Reduce costs while enhancing operational focus 3 Ready businesses for growth in core regions and rationalize portfolio 29
Slide 30: TerraForm | Business Stabilization
TerraForm Power and Global | Business Stabilization 1 Stabilize business post SunEdison bankruptcy • Moved all employees into Brookfield offices in New York, Rio de Janeiro, Mumbai and Shanghai • Inserted local Brookfield senior executives • Re-established relations with regulators and stakeholders
Slide 31: TerraForm | Cost Savings Initiatives
TerraForm Power and Global | Cost Savings Initiatives 1 Stabilize business post SunEdison bankruptcy 2 Reduce cost structure through operational focus • Implemented a long-term service agreement for TerraForm Power’s North American wind portfolio securing cost savings of $20 million • Rationalized h
Slide 32: TerraForm | Focus on Core Markets
TerraForm Power and Global | Focus on Core Markets 1 Stabilize business post SunEdison bankruptcy 2 Reduce cost structure through operational focus 3 Focus businesses on core regions and rationalize portfolio • Inserted growth teams in India and China • TerraForm Power secured a 1,028 MW wind and so
Slide 33: Looking Ahead…
Looking Ahead… Our priorities over the next five years: Deliver $60 million Continue to secure Build out our through cost long-term PPAs to development pipeline saving initiatives support growing at premium returns cash flows 33
Slide 34: Balance Sheet Review: Wyatt Hartley, Chief Financial Officer
Balance Sheet Review: Wyatt Hartley, Chief Financial Officer 34
Slide 35: Polling question: measure of distribution sustainability
PO L L I N G Q U ESTI O N # 1 What is the primary measure you look at to assess the sustainability of distributions? a) Visibility of growth b) Payout ratio c) Balance sheet strength d) Quality of cash flows 35
Slide 36: Our Priorities
Our Priorities 1 2 3 Embed business Maintain a Manage risk for with operating best-in-class the long-term levers that drive balance sheet cash flow growth 36
Slide 37: High visibility into cash flow growth over next five years
We have a high degree of visibility into our cash flow growth over the next five years 37
Slide 38: Growing cash flows through operational levers
Growing cash flows through operational levers Embedded Expected Advanced FFO per Unit Inflation Margin Development Growth Escalation Expansion Pipeline Potential (1% to 2%) (2% to 4%) (3% to 5%) (6% to 11%) Please refer to endnotes at the end of the presentation 38
Slide 39: Embedded Inflation Escalation
Embedded Inflation Escalation Embedded Expected Advanced FFO per Unit Inflation Margin Development Growth Escalation Expansion Pipeline Potential (1% to 2%) (2% to 4%) (3% to 5%) (6% to 11%) Inflation indexation in our contracts providing $50 million of FFO growth 39
Slide 40: Expected Margin Expansion
Expected Margin Expansion Embedded Expected Advanced FFO per Unit Inflation Margin Development Growth Escalation Expansion Pipeline Potential (1% to 2%) (2% to 4%) (3% to 5%) (6% to 11%) Up to $125 million of FFO growth from expected margin expansion: • Execute on cost reduction programs across our
Slide 41: Advanced Development Pipeline
Advanced Development Pipeline Embedded Expected Advanced FFO per Unit Inflation Margin Development Growth Escalation Expansion Pipeline Potential (1% to 2%) (2% to 4%) (3% to 5%) (6% to 11%) Aim to develop 1,000 MW generating $125 million of FFO through targeted build out of our extensive global dev
Slide 42: Proven track record of delivering strong FFO per unit growth
Proven track record of delivering strong FFO per unit growth FFO per Unit Growth¹ ~$3.30 ~$2.40 8.5% CAGR $1.61 7% CAGR 2012 2018 PF 2022 Please refer to endnotes at the end of the presentation 42
Slide 43: Sustainable distributions over the long term
Which translates into sustainable distributions over the long term… …Given our visibility over cash flow growth and the minimal annual investment required to maintain cash flows ($millions) 2018 PF 2022 PF FFO1 750 1,039 Sustaining Capex (72) (78) Return of Capital2 (38) (52) Adjusted FFO 641 909 FF
Slide 44: Our balance sheet is in great shape
Our balance sheet is in great shape 44
Slide 45: Conservative capitalization strategy
We maintain a conservative capitalization strategy BBB+ Highest rating in the sector INVESTMENT GRADE BALANCE SHEET >10 YEARS No material maturities with refinancing risk AVERAGE PROJECT DEBT TERM TO MATURITY over the next 5 years ~75% Structured on an investment grade basis NON-RECOURSE, with attra
Slide 46: Access to significant liquidity
We have access to significant liquidity $0.3bn CASH & MARKETABLE SECURITIES $1.7bn AVAILABLE LIQUIDITY $1.4bn CREDIT FACILITIES We have secured corporate credit facilities with 20 high quality lenders totaling $2.1 billion with 5 year terms 46
Slide 47: Multiple funding levers provide access to deep pool of capital
Our multiple funding levers provide access to a deep pool of capital 1 2 3 Raised ~$3 billion in Advanced our capital Have access to corporate debt and equity recycling program, ~$5 billion of partner capital markets since announcing $315 million capital to invest 2015 of initiatives in last alongsi
Slide 48: We have high quality cash flows
We have high quality cash flows 48
Slide 49: Cash flows underpinned by a largely perpetual asset base
Cash flows underpinned by a largely perpetual asset base Hydro facilities are designed, constructed and maintained to operate over a perpetual life with minimal annual re-investment ~80% 75+ years 95% FFO FROM AVERAGE REMAINING RETURN ON HYDRO ASSET LIFE CAPITAL IN FFO 49
Slide 50: Actively manage exposure to financial risks
We actively manage our exposure to financial risks Interest FFO Rates ~90% debt is financed on a fixed rate basis with no meaningful 100bps near-term maturities <2% FX Volatility Fully hedged on developed 10% market currencies <5% 50
Slide 51: Risk-reward that is aligned
Risk-reward that is aligned Peers BEP 8% to 10% IRR 12% to 15% IRR Investment Grade Non-amortizing debt backed by perpetual hydro assets Converts, tax equity and other deferral structures 51
Slide 52: The lowest risk distribution in our sector
We offer the lowest risk distribution in our sector Visibility on 6% to 11% per unit FFO growth through operational levers Improving payout ratio Investment grade balance sheet Cash flows supported by a largely perpetual asset base 52
Slide 53: Bringing It All Together – Sachin Shah, Chief Executive Officer
Bringing It All Together – Sachin Shah, Chief Executive Officer 53
Slide 54: Invested over $3 billion of BEP equity since 2013
We have invested over $3 billion of BEP equity since 2013… 2013: NORTH AMERICA 5,200MW 5,900 MW TOTAL CAPACITY BRAZIL 700MW 54
Slide 55: A global business with a diverse technology base
…To create a global business with a diverse technology base Today: NORTH AMERICA EUROPE 8,300MW 3,700MW 17,400 MW TOTAL CAPACITY SOUTH AMERICA ASIA PACIFIC 4,800MW 530MW 55
Slide 56: Done on a value basis
And we have done it on a value basis Returns Capital Deployed Year (BEP Share) Underwriting Current Bord Gáis 2014 $280 million 13%+ 18%+ Isagen 2016 $670 million 13%+ 18%+ TerraForm Companies 2017 $875 million 15%+ 20%+ 56
Slide 57: Delivering targeted annualized returns to unitholders
Allowing us to deliver our targeted annualized returns to unitholders Total Return 15% CAGR 2004 2011 2018 2001 2002 2003 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 BEP S&P Please refer to endnotes at the end of the presentation 57
Slide 58: The future is brighter than the past
The future is brighter than the past Smoky Mountain, United States
Slide 59: Solar and wind still less than 10% of global power supply
Solar and wind still account for less than 10% of global power supply 17% HYDRO 74% 9% NUCLEAR & FOSSIL FUELS SOLAR & W IND Please refer to endnotes at the end of the presentation 59
Slide 60: Polling question: investment to replace non-renewable capacity
PO L L I N G Q U ESTI O N # 2 How much investment is estimated to be required to replace existing, non-renewable capacity globally? a) Less than $1 trillion b) $1 trillion - $5 trillion c) $5 trillion - $10 trillion d) Over $10 trillion 60
Slide 61: The investment opportunity in our core markets is large
The investment opportunity in our core markets is large Incremental Renewable Additions and Investment Size gigawatts 10,000 $11 trillion 9,000 8,000 7,000 6,000 $5 5,000 trillion 4,000 3,000 $850 billion 2,000 1,000 0 Today 30% Renewables 50% Renewables 100% Renewables Current Renewables Capacity I
Slide 62: Proven track record of capital deployment by geography
Proven track record of capital deployment Since 2013, we have developed or acquired 12,500 MW of capacity, deploying $3.3 billion of BEP capital across geographies… $1.0 Thousands $billions $0.5 $0.0 2013 2014 2015 2016 2017 2018 Europe North America Latin America Asia 62
Slide 63: Proven track record of capital deployment by technology
Proven track record of capital deployment Since 2013, we have developed or acquired 12,500 MW of capacity, deploying $3.3 billion of BEP capital across technologies… $1.0 Thousands $billions $0.5 $0.0 2013 2014 2015 2016 2017 2018 Hydro Wind Solar Storage/Other 63
Slide 64: Repeatable and flexible growth strategy
Repeatable and flexible growth strategy Competition BEP Develop Capital STRATEGY Deployment Drop Down vs TARGET Megawatts 12% to 15% returns Deploy $700 million of BEP equity annually into M&A and development 64
Slide 65: Expand in our core markets over next 5 years
In the next 5 years, we aim to expand in our core markets… NORTH AMERICA EUROPE SOUTH AMERICA ASIA PACIFIC 65
Slide 66: Our global business targets strong returns
Our global business targets strong returns Target Capital Target Allocation (%) IRR (%) Developed Markets ~60% 10% to 12% Emerging Markets ~25% 15% to 19% Development ~15% 17% to 20% TOTAL 12% to 15% 66
Slide 67: Key Takeaways…
Key Takeaways… STRATEGY GLOBAL SCALE Proven and repeatable strategy combining Global scale across 4 continents affords a value investment approach with us significant flexibility in moving capital operating expertise and capital discipline across the world MULTI-TECHNOLOGY TRACK RECORD Multi-technol
Slide 68: Brookfield
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Slide 69: Endnotes
Endnotes Page 7 Sources: Bloomberg New Energy Finance, Brookfield estimates Page 8 Sources: Bloomberg New Energy Finance, Brookfield estimates Page 9 1) Source: Brookfield estimates. Page 38 1) Funds From Operations per Unit is a non-IFRS measure used by investors to analyze net earnings from operat
Slide 70: Endnotes Continued
Endnotes Continued Page 58 1) Source: Bloomberg; USD return including re-investment of dividends as at 19 September 2018 Page 60 Source: Bloomberg New Energy Finance Page 62 1) Core markets include Canada, U.S., Brazil, Colombia, U.K., Republic of Ireland, Portugal, India, China, Australia 2) Curren
Slide 71: Important Cautionary Notes
Important Cautionary Notes All amounts are in U.S. dollars unless otherwise specified. conditions at our wind energy facilities, to irradiance at our looking statements represent our views as of the date of this Unless otherwise indicated, the statistical and financial solar facilities or to weather
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