Our business continued to perform well in the third quarter as we advanced our key strategic priorities. Our priorities remain focused on deploying capital for value, improving our operations, and maintaining high levels of liquidity and a strong balance sheet. Our objective, as always, is to deliver total returns on a per-unit basis of 12% to 15% over the long-term.

Of note, this quarter we:

• Generated FFO of $133 million, a 27% increase over the prior year;
• Invested $100 million of BEP equity into TerraForm Power and the acquisition of a 200 megawatt wind farm in China;
• Sold two mature European wind portfolios for total combined proceeds of US$186 million ($74 million net to BEP), and crystallized an ~18% compounded annual return to BEP since acquisition; we have also now completed the sale of five of our six assets in South Africa for total proceeds of $135 million ($42 million net to BEP) returning almost two times our capital invested into the country;
• Completed a C$600 million green bond issuance – the largest corporate-level green bond ever issued in Canada – increasing the average term of our corporate debt to 10 years and reducing the average cost of our debt; and
• Maintain robust total available liquidity of $2.5 billion

Unit Split and Creation of an Exchange Corporation

We remain focused on continuing to broaden our investor base, facilitating increased demand, and enhancing trading liquidity for Brookfield Renewable. As our business continues to grow and globalize, we are seeing increased demand from prospective investors. As such, we are pleased to announce that we are creating a structure that will allow our investors additional optionality to invest in Brookfield Renewable through either the current Partnership (BEP LP) or through a newly-created, publicly-listed Canadian corporation (BEPC), both of which will provide investors access to the same globally diversified renewable power portfolio with a strong track record of growth. BEPC will be created via an effective stock split, and the class A shares should be economically equivalent to the existing LP units as it will pay identical dividends and distributions, and the BEPC class A shares will be exchangeable into the LP units at any time at the option of the holder. We believe this initiative should support the expansion of our investor base by attracting new investors that are currently unable or unwilling to invest in our LP structure due to tax reporting or other attributes, and will allow us to be eligible for certain indices or ETFs that the BEP LP units are not.

Update on Growth Initiatives

Subsequent to the quarter-end we invested an incremental $50 million into TerraForm Power as an investor in its recent $300 million equity issuance. Following this issuance, BEP’s proportionate interest in TerraForm Power is largely unchanged at approximately 30%. TerraForm Power recently closed its acquisition of a 322 megawatt distributed generation portfolio in the U.S., making it one of the largest owner and operators of distributed generation in the U.S. This capital, combined with its recent equity and debt financings, enables TerraForm Power to be well positioned for future growth with $1.2 billion of available liquidity.

During the quarter we, along with our institutional partners, acquired a 200 megawatt recently constructed, fully contracted wind farm in China for $100 million ($45 million net to BEP). We also continued to advance our distributed generation joint venture in the country, commissioning 8 megawatts of rooftop solar during the quarter and advancing an additional 12 megawatts that we expect to be on-line by the end of the year. We continue to remain disciplined on growth in China by looking for high value, low-risk investment opportunities.

We also advanced the build-out of development projects globally. We remain on-track to close our acquisition, with our institutional partners, of a 50% interest in X-Elio, a premier global solar developer, in the fourth quarter which will significantly enhance our solar development capabilities. We also progressed construction of 151 megawatts of capacity, 960 megawatts of advanced-stage projects globally, including 60 megawatts of wind repowering projects in the United States.

Operations

During the third quarter, we generated FFO of $133 million, up from $105 million during the same period the prior year.

In the third quarter, our hydroelectric segment generated FFO of $125 million, up 20% relative to the same quarter the prior year. While generation for the quarter was below the long-term average level, driven largely by drier conditions in the U.S. Northeast and Canada, generation so far this year has exceeded the long-term average by 5%. As we have stated for many years, we do not manage the business based on under-or over-performance of generation relative to the long-term average and do not factor this into our planning. Instead, we remain focused on diversifying the business from both a geographic and technology perspective, which mitigates exposure to resource volatility, and regional or market disruptions. Additionally, we continue to advance initiatives to extract additional value from our hydroelectric portfolio. For example, earlier this year we qualified our 820 megawatt Sogamoso hydro facility in Colombia, which has 12 months of reservoir capacity, to provide grid-stabilizing ancillary services which is expected to add an incremental $3 million to our FFO on an annualized basis.

Our wind and solar segments generated a combined $72 million of FFO, up 20% relative to the same period the prior year. We benefitted from contributions from our operating and growth initiatives, including 210 megawatts of wind acquired in India, 51 megawatts of wind capacity commissioned and acquired last year in Ireland, and significant cost savings realized from the implementation of TerraForm Power’s new long-term service agreement for its North American wind fleet.

Our storage and other segments generated $6 million of FFO during the quarter as our portfolio continues to provide critical grid-stabilizing ancillary services and back-up capacity to increasingly intermittent grids. For example, in mid-August the U.K. experienced a major electricity disconnection event that resulted in a blackout affecting more than 1.1 million customers. Between 60 seconds to 4 minutes after the disconnection event, our First Hydro portfolio, which represents 75% of the U.K.’s storage capacity and has very fast ramp-up capabilities, provided more than half of the power used to restart the grid. We were the critical link to re-starting the electricity grid in the U.K. on that day. We continue to work with all stakeholders to highlight the strategic importance of First Hydro in the U.K. and Bear Swamp in the U.S., and how the scale and speed of their response capabilities can be instrumental in managing the grid.

Balance Sheet and Liquidity

Our liquidity position remains robust, with $2.5 billion of total available liquidity. During the quarter, we continued to take advantage of the low interest environment to execute on $2.3 billion of financings and approximately $210 million of capital recycling initiatives, raising a total $320 million of incremental liquidity to BEP.

During the quarter, we issued a C$600 million, investment grade, corporate green bond offering, through which we completed the early refinancing our 2020 corporate maturity (C$450 million). This issuance represents the largest corporate green bond ever issued in Canada and our fifth green bond issuance to date for total outstanding green bonds of approximately $1.8 billion. This bond was issued in two tranches – 10 years and 30 years – which nearly doubled the average term of our corporate debt to over 10 years. We also reduced the average cost of our debt and completed a $100 million up-financing with no impact on interest expense.

We also advanced our capital recycling program, and subsequent to quarter-end, closed the sales of two mature European wind portfolios as private investors continue to view high-quality, contracted renewable power assets as a proxy to government bonds, but with a higher yield. The first sale was of our 68 megawatt wind portfolio in Northern Ireland which we developed between 2016 and 2018. The second sale was of our 123 megawatt wind portfolio in Portugal which we acquired in 2015 and subsequently de-risked by enhancing the capital structure and renegotiating the O&M contracts on better terms. Together, these sales generated proceeds of $186 million ($74 million net to BEP) and crystallized an 18% compounded annual return to BEP since acquisition.

Outlook

Looking ahead, we continue to focus on executing our key priorities including maintaining a robust balance sheet and access to diverse sources of capital, enhancing cash flows from our existing business and assessing acquisition opportunities. In September we held our annual Investor Day where we reiterated the key drivers of our business including the continued growth of the renewables investible universe, the application of our value-enhancing “toolkit” to de-risk acquisitions while maintaining strong returns, and the value of our stable financial profile in executing our growth strategy. We would like to thank those of you who were able to attend this event.

As always, we remain focused on delivering to our unitholders long-term total returns of 12% to 15% on a per unit basis. We thank you for your continued support and we look forward to updating you on our progress in that regard.

Sincerely,

Sachin Shah
Chief Executive Officer
November 11, 2019