We had an excellent start to the year with strong financial performance resulting in low-teens annual FFO per unit growth. These results represent the progression to higher run-rate earnings as our investments in new generation and commercial initiatives come online. We were also successful in our growth activities, signing transactions for almost $8 billion of equity investment alongside our institutional partners while also commissioning 700 megawatts of capacity through our development program.

During the quarter, together with our institutional partners, we announced a landmark transaction to acquire Origin’s Energy Markets business, Australia’s largest integrated power generator and energy retailer. The acquisition and planned decarbonization of the business should provide excellent financial returns and showcase the type of investment that is necessary to meet global net zero targets. We are uniquely capable of executing such large scale power transformations, leveraging our development and operating expertise, knowledge of power markets, and access to capital to generate attractive returns for our investors.

Over the last few months we all witnessed significant market and interest rate volatility on the back of persistent inflationary pressures, and stress across the banking system. Yet, our business continues to be resilient. Our generation portfolio is currently 90% contracted and has a weighted average remaining contract duration of 14 years. Approximately 70% of our revenues are linked to inflation and 97% of our debt has fixed interest rates. We operate essential, low-cost infrastructure with gross margins of over 70%. Taken together, we are confident that our business will continue to perform across all economic cycles.

Our financial position also remains strong, with almost $4 billion of available liquidity. We have always prioritized financing our business on an investment grade basis with a focus on long duration, matched currency, and fixed rate debt. As a result, we do not have meaningful exposure to interest rate variability or any material debt maturities over the next three years. We have also avoided funding our investments with substantial amounts of non-investment grade or holding company debt structures. So, while overall market liquidity may be challenged, lender appetite for high grade issuers, especially for those supporting renewables or decarbonization initiatives, remains robust as demonstrated by our recently completed issuance of C$400 million of 10-year medium term notes, which was three times oversubscribed.

Additional highlights for the quarter:

• Generated FFO of $275 million, or $0.43 per unit, a 13% increase over the same period last year. The results reflect robust hydro generation across our portfolio, strong realized power pricing and asset availability, and contributions from growth;
• Advanced key commercial priorities including signing contracts to deliver an incremental 2,500 gigawatt hours per year of generation with current and new customers while further diversifying future revenues for our business;
• Continued to advance development activities, commissioning approximately 700 megawatts of capacity in the quarter and are on track to commission approximately 5,000 megawatts of capacity in 2023, which we expect to contribute an additional $70 million of FFO net to Brookfield Renewable. We also progressed the other approximately 19,000 megawatts of projects in our advanced stage pipeline, maintaining our targeted commissioning dates; and
• Completed or are advancing asset recycling initiatives which in aggregate will contribute approximately $4 billion of proceeds (~$1.5 billion net to Brookfield Renewable) when completed.

Growth Initiatives

To date this year we have committed to invest almost $8 billion (over $1 billion net to Brookfield Renewable) across multiple transactions. This included investments in power technologies and regions where we have deep operating and development expertise, leveraging our access to capital to acquire businesses and projects that offer compelling risk adjusted returns. Together with prior transactions, these investments position us well to achieve, and likely outperform, our $6-7 billion capital deployment target over the next five years.

The investment environment for renewables and decarbonization assets remains highly compelling. Demand for clean energy from corporates, an increasing focus on energy security, and government supported electrification and decarbonization targets continue to be key trends accelerating investment.

Through our acquisition of Origin’s Energy Markets business, in which we expect to invest up to $750 million for Brookfield Renewable, we have added a strategic platform in Australia. We intend to leverage our deep development expertise to invest a further A$20 billion enabling us to build 14,000 megawatts of new renewable generation and storage facilities. This investment in clean replacement generation capacity will enable the responsible retirement of one of Australia’s largest coal-fire power generation plants and make a material difference to achieving the country’s net zero goals. This investment meets all of our target criteria of large-scale, material decarbonization impact, and attractive risk-adjusted returns.

Brookfield’s success in attracting co-investor capital has been critical in allowing us to further diversify our business and take on larger-scale investments with less competition. As an example, in our recently announced investment in Westinghouse, we have received exceptional interest from our institutional partners, validating our investment thesis and the high-quality nature of the business. Due to the significant interest, we expect Brookfield Renewable’s investment in the business to be approximately $450 million.

With Brookfield’s first transition fund nearly fully committed, we are preparing to participate in the second Fund. Based on the positive feedback received to date, we are optimistic that the second fund will both broaden the number of institutional partnerships as well as provide a larger pool of capital to invest alongside. While beneficial in all instances, our continued and increasing access to meaningful partner capital is particularly advantageous in the current environment and positions us to execute scale transactions at very attractive risk-adjusted returns.

As an example of this, during the quarter, with our institutional partners we agreed to acquire the 50% of X-Elio that we currently do not own for $900 million ($75 million net to Brookfield Renewable). We acquired a scarce platform which we know well and remains well-positioned to continue to deliver returns within or above our target range. Based on our acquisition price for the remaining 50%, which we expect will deliver mid-to-high teen returns, our initial investment has generated an IRR of almost 30% and over two times invested capital in our three years of ownership.

X-Elio is a fully integrated global solar development platform with 1,200 megawatts of operating and in construction assets, 1,500 megawatts of late-stage development projects, and an additional approximately 12,000 megawatt development pipeline with at least land and/or grid connection secured. Since our initial investment in 2019, we have evolved X-Elio into a self-funding business, progressing over $1 billion from asset sales, which is more than double the invested capital in those projects. Proceeds from these sales has been used to return almost half of our initial invested capital, while at the same time re-invest into accretive future development, as demonstrated by X-Elio increasing its development pipeline by 9,000 megawatts over the same time period.

We also made significant progress in growing our business in India, which includes approximately 15,000 megawatts of capacity. We entered the Indian market in 2017, and have been growing steadily, only investing in high quality assets and platforms at attractive risk-adjusted returns. In March, we signed an agreement with Avaada, a leading renewable platform in India with operating and development assets, to provide a structured U.S. dollar financing in the form of convertible securities of up to $1 billion ($200 million net to Brookfield Renewable). The investment, which will be drawn down over time subject to pre-agreed risk-adjusted returns criteria, will be used to grow Avaada’s renewables portfolio as well as investing in solar panel and green ammonia production. We also agreed to invest up to $360 million ($72 million net to Brookfield Renewable) to acquire a 55% stake in CleanMax, a leading C&I renewable platform based in India with 4,500 megawatts of operating and development pipeline. 

Operating Results

We generated FFO of $275 million, or $0.43 per unit, a 13% increase on a per unit basis over the same period last year. Our business continues to perform well, and we are seeing the benefits of the increasing diversification of our business, growth, and our commercial initiatives.

During the quarter, our hydroelectric segment delivered FFO of $219 million. Our hydro assets continue to exhibit strong cash flow resiliency given the diversified asset base and the ability to capture higher power prices both through inflation linked power purchase agreements and a robust energy price environment. Across our fleet, reservoirs are generally at or above long-term averages, positioning the portfolio well for the remainder of the year.

Our wind and solar segment generated a combined $119 million of FFO. We continue to benefit from contributions from acquisitions and the diversification of our fleet, which are underpinned by long duration power purchase agreements that provide stable revenues. Over the last 12 months, we added approximately 4,500 megawatts of installed capacity in our wind and solar operating fleet through acquisitions and organic development initiatives.

Our distributed energy and sustainable solutions segment generated $43 million of FFO, as we continue to grow our portfolio through acquisitions and organic development to meet growing demand from commercial and industrial customers looking to decarbonize.

Our renewable power development pipeline is now 126,000 megawatts with approximately 5,000 megawatts of new capacity on track for commissioning this year. Once completed this will add approximately $70 million of incremental FFO to Brookfield Renewable. We have another approximately 19,000 megawatts in our advanced stage development pipeline that has been materially de-risked and together with our sustainable solutions pipeline is expected to contribute approximately $235 million of incremental run-rate FFO once commissioned.

Our Financial Position Remains Strong

Our balance sheet is in an excellent position and our available liquidity remains robust at almost $4 billion, providing significant flexibility to fund growth. We remain protected from higher interest rates, with 90% of our borrowings being project level non-recourse debt, with an average remaining term of 12 years, and only 3% exposure to floating rate debt.

We are also advancing non-recourse financing initiatives and our asset recycling programs which will generate additional capital to fund our growth. Despite persistent inflation and higher interest rates, we continue to see strong demand for renewable energy assets globally and we are seeing strong interest across our capital recycling processes.

So far this year, we have generated over $300 million (almost $200 million net to Brookfield Renewable) of proceeds from our asset recycling program, returning more than double our invested capital. We are also advancing numerous capital recycling opportunities across our fleet that together with year-to-date activities could generate up to $4 billion (~$1.5 billion net to Brookfield Renewable) of proceeds when closed and provide significant incremental liquidity in the coming quarter.

Outlook

We remain focused on our goal of delivering 12-15% long-term total returns for investors and believe our access to broad capital sources, disciplined investment process and operational capabilities provide us with a structural advantage to achieve our targets.

On behalf of the Board and management of Brookfield Renewable, we thank all our unitholders and shareholders for their ongoing support.

Sincerely,

Connor Teskey
Chief Executive Officer
May 5, 2023

Cautionary Statement Regarding Forward-looking Statements

This letter to unitholders contains forward-looking statements and information within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations. The words “will”, “intend”, “should”, “could”, “target”, “growth”, “expect”, “believe”, “plan”, derivatives thereof and other expressions which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters identify the above mentioned and other forward-looking statements. Forward-looking statements in this letter to unitholders include statements regarding the quality of Brookfield Renewable’s assets and the resiliency of the cash flow they will generate, Brookfield Renewable’s anticipated financial performance, future commissioning of assets, contracted portfolio, technology diversification, acquisition opportunities, expected completion of acquisitions and dispositions, future energy prices and demand for electricity, , global decarbonization targets and related government incentives, economic recovery, achieving long-term average generation, project development and capital expenditure costs, energy policies, economic growth, growth potential of the renewable asset class, the future growth prospects and distribution profile of Brookfield Renewable, Brookfield Renewable’s access to capital and future dividends and distributions made to holders of LP units and the exchangeable shares of Brookfield Renewable Corporation. Although Brookfield Renewable believes that these forward-looking statements and information are based upon reasonable assumptions and expectations, you should not place undue reliance on them, or any other forward-looking statements or information in this letter to unitholders. The future performance and prospects of Brookfield Renewable are subject to a number of known and unknown risks and uncertainties.

The foregoing list of important factors that may affect future results is not exhaustive. The forward-looking statements represent our views as of the date of this letter to unitholders and should not be relied upon as representing our views as of any subsequent date. While we anticipate that subsequent events and developments may cause our views to change, we disclaim any obligation to update the forward-looking statements, other than as required by applicable law.

Factors that could cause actual results of Brookfield Renewable to differ materially from those contemplated or implied by the statements in this letter to unitholders include (without limitation) general economic conditions and risks relating to the economy, including unfavorable changes in interest rates, foreign exchange rates, inflation and volatility in the financial markets; changes to resource availability, as a result of climate change or otherwise, at any of our facilities; supply, demand, volatility and marketing in the energy markets; our inability to re-negotiate or replace expiring power purchase agreements on similar terms; an increase in the amount of uncontracted generation in our portfolio or adverse changes to the hydrological balancing pool administered by the government of Brazil (“MRE”); availability and access to interconnection facilities and transmission systems; our ability to comply with, secure, replace or renew concessions, licenses, permits and other governmental approvals needed for our operating and development projects; our real property rights for our facilities being adversely affected by the rights of lienholders and leaseholders that are superior to those granted to us; increases in the cost of operating our existing facilities and of developing new projects; equipment failures and procurement challenges; dam failures and the costs and potential liabilities associated with such failures; uninsurable losses and higher insurance premiums; changes in regulatory, political, economic and social conditions in the jurisdictions in which we operate; force majeure events; adverse changes in currency exchange rates and our inability to effectively manage foreign currency exposure; health, safety, security and environmental risks; energy marketing risks; the termination of, or a change to, the MRE balancing pool in Brazil; involvement in litigation and other disputes, and governmental and regulatory investigations; counterparties to our contracts not fulfilling their obligations; the time and expense of enforcing contracts against non-performing counterparties and the uncertainty of success; foreign laws or regulation to which we become subject as a result of future acquisitions in new markets; our operations being affected by local communities; our reliance on computerized business systems, which could expose us to cyber-attacks; newly developed technologies in which we invest not performing as anticipated; advances in technology that impair or eliminate the competitive advantage of our projects; increases in water rental costs (or similar fees) or changes to the regulation of water supply; labor disruptions and economically unfavorable collective bargaining agreements; fraud, bribery, corruption, other illegal acts or inadequate or failed internal processes or systems; the COVID-19 pandemic, as well as the direct and indirect impacts that a pandemic may have, or any other pandemic; our inability to finance our operations and fund growth due to the status of the capital markets or our ability to complete capital recycling initiatives; operating and financial restrictions imposed on us by our loan, debt and security agreements; changes to our credit ratings; the incurrence of debt at multiple levels within our organizational structure; adverse changes in currency exchange rates and our inability to effectively manage foreign currency exposure through our hedging strategy or otherwise; our inability to identify sufficient investment opportunities and complete transactions; the growth of our portfolio and our inability to realize the expected benefits of our transactions or acquisitions; changes to our current business, including through future sustainable solutions investments; our inability to develop the projects in our development pipeline; delays, cost overruns and other problems associated with the construction and operation of generating facilities and risks associated with the arrangements we enter into with communities and joint venture partners; Brookfield’s election not to source acquisition opportunities for us and our lack of access to all renewable power acquisitions that Brookfield identifies, including by reason of conflicts of interest; we do not have control over all of our operations or investments, including certain investments made through joint ventures, partnerships, consortiums or structured arrangements; political instability or changes in government policy negatively impacting our business or assets; some of our acquisitions may be of distressed companies, which may subject us to increased risks; a decline in the value of our investments in securities, including publicly traded securities of other companies; we are not subject to the same disclosure requirements as a U.S. domestic issuer; the separation of economic interest from control within our organizational structure; future sales and issuances of LP Units, preferred limited partnership units in the capital of Brookfield Renewable or securities exchangeable for LP Units, including BEPC exchangeable shares, or the perception of such sales or issuances, could depress the trading price of the LP Units or BEPC exchangeable shares; our dependence on Brookfield and Brookfield’s significant influence over us; the departure of some or all of Brookfield’s key professionals; our lack of independent means of generating revenue; changes in how Brookfield elects to hold its ownership interests in Brookfield Renewable; Brookfield acting in a way that is not in our best interests or our shareholders or our unitholders; being deemed an “investment company” under the Investment Company Act; the effectiveness of our internal controls over financial reporting; failure of our systems technology; any changes in the market price of the LP Units and BEPC exchangeable shares; and the redemption of BEPC exchangeable shares by us at any time or upon notice from the holders of the BEPC class B shares. For further information on these known and unknown risks, please see “Risk Factors” included in the Form 20-F of BEP and in the Form 20-F of BEPC and other risks and factors that are described therein.

The foregoing list of important factors that may affect future results is not exhaustive. The forward-looking statements represent our views as of the date of this letter to unitholders and should not be relied upon as representing our views as of any subsequent date. While we anticipate that subsequent events and developments may cause our views to change, we disclaim any obligation to update the forward-looking statements, other than as required by applicable law.

No securities regulatory authority has either approved or disapproved of the contents of this letter to unitholders. This letter to unitholders is for information purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Cautionary Statement Regarding Use of Non-IFRS Measures

This letter to unitholders contains references to FFO, FFO per Unit, , which are not generally accepted accounting measures under IFRS and therefore may differ from definitions of Adjusted FFO and FFO per Unit, used by other entities. We believe that FFO and FFO per Unit are useful supplemental measures that may assist investors in assessing the financial performance and the cash anticipated to be generated by our operating portfolio. None of FFO and FFO per Unit should be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. For a reconciliation of FFO and FFO per Unit to the most directly comparable IFRS measure, please see “Reconciliation of Non-IFRS Measures – Three Months Ended March 31” included elsewhere herein and “Financial Performance Review on Proportionate Information - Reconciliation of Non-IFRS Measures” included in our unaudited Q1 2023 interim report.

References to Brookfield Renewable are to Brookfield Renewable Partners L.P. together with its subsidiary and operating entities unless the context reflects otherwise.

Endnotes

1. Any references to capital refer to Brookfield's cash deployed, excluding any debt financing.
2. Available liquidity refers to "Part 5 - Liquidity and Capital Resources" in the Management Discussion and Analysis in the Q1 2023 Interim Report.