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Brookfield Renewable Earnings: Strong Hydro Generation To Begin the Year

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We maintain our $32 (CAD 43) fair value estimate for Brookfield Renewable Partners BEP.UN and $33 (CAD 44) for Brookfield Renewable Corp. following first-quarter results. We view shares as fairly valued at current levels.

Brookfield Renewable reported funds from operations up 13% year on year in the first quarter. The results were boosted by above-average generation within the company’s North American hydro portfolio, which saw generation 10% above the long-term average. That said, we place little emphasis on quarterly variations within its hydro portfolio as we expect these to even out over time.

Brookfield Renewable has been active on the acquisition front to begin the year. The company has committed over $1 billion year-to-date in investments, headlined by its acquisition of Australian-based Origin’s Energy Markets business (up to $750 million investment). The Origin acquisition highlights Brookfield’s strategy under its latest Energy Transition funds whereby the company seeks to “go where the emissions are.” Over the coming years, the company plans to build 14 gigawatts of new renewables to decarbonize Origin’s existing fleet. We view this strategy as savvy and indicative of Brookfield’s contrarian approach.

Given recent large acquisitions, such as Origin and Westinghouse (in 2022), Brookfield Renewable is likely to outpace its $6 billion-$7 billion targeted equity investment over the next five years. Asset recycling remains a core part of the funding plan, with the company focused on selling de-risked wind and solar assets. The company’s investment-grade balance sheet should ensure continued access to capital despite recent volatile capital markets. In addition to traditional funding sources, we see the potential for a strategic privatization (akin to the 2020 acquisition of TerraForm Power).

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Castelli

Equity Analyst
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Brett Castelli is an equity analyst, energy and utilities, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. His coverage focuses on clean energy companies across renewables and emerging technologies.

Before joining Morningstar in 2021, Castelli spent more than eight years in various analyst roles for TortoiseEcofin, a boutique asset manager. His coverage focused on North America and included companies within traditional energy, electric utilities, and renewables. Additionally, he assisted with the firm's environmental, social, and governance efforts and played an important role in integrating ESG into the investment process. Castelli spent a year at the firm's London office following an acquisition.

Castelli holds a bachelor's degree in finance from the University of Missouri's Trulaske College of Business. He also holds the Chartered Financial Analyst® designation.

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