Brookfield Renewable (NYSE:BEPC) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.

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The full earnings call is available at https://edge.media-server.com/mmc/p/oghnzkv5/

Summary

Brookfield Renewable delivered record financial results with FFO of $375 million, up 19% year-over-year, supported by strong performances in hydroelectric and wind/solar segments.

The company raised nearly $4 billion in financings in Q1 to strengthen its balance sheet and completed significant asset recycling initiatives, including the sale of non-core hydro assets.

Brookfield Renewable is exploring a single combined corporate structure to enhance liquidity and index inclusion, with potential updates expected later in the year.

The company launched Northview Energy, a private renewable vehicle, and expects strong demand from institutional partners for high-quality infrastructure assets.

Management is optimistic about exceeding the long-term FFO growth target of 10% per year, driven by M&A, organic growth, and capital recycling.

Full Transcript

OPERATOR

Simplification of our structure to a single listed corporate entity. Thanks Jay and good morning to everyone on the call. We delivered record financial results this quarter, generating FFO of $375 million or $0.55 per unit, up 19% or 15% per unit year over year. In the last 12 months we delivered $1.394 billion of FFO or $2.08 per unit, up 13% or 12% on a per unit basis compared to the prior year period. Our results reflect the strength of our diversified global platform and the continued execution of our strategy. Our hydroelectric segment generated $210 million of FFO up almost 30% year over year, supported by strong generation across our Canadian and Colombian fleets and a realized gain on the sale of our 25% interest in a non core hydro portfolio in the U.S. all of which offset weaker hydrology at our U.S. operations. Our wind and solar segments delivered a combined $245 million of FFO up over 60% year over year, benefiting from contributions from development, acquisitions and accretive capital recycling across several of our platforms. Lastly, our distributed energy storage and sustainable solutions businesses contributed $58 million of FFO, reflecting strong development activity and continued growth at Westinghouse driven by new reactor design and engineering work and organic growth within its core fuel and maintenance services business. Turning to our balance sheet, we continue to strengthen our financial position, completing almost $4 billion of financings across the platform in the first three months of the year alone, extending maturities and optimizing our capital structure while ending the quarter with over $4.7 billion of available liquidity. The quarter was highlighted by the issuance of $500 million Canadian of 30 year notes, priced at the tightest spread we have ever achieved. With this issuance, we now have an average maturity on our corporate level debt of approximately 14 years, representing the longest average corporate maturity in our history. Put simply, during a period of significant growth and value creation, our business has the most durable and stable capital structure in its history. In addition to recent successful financings, we are also progressing recontracting initiatives on a scale portfolio of Hydro assets in Ontario during the quarter, which once signed will support significant up financings that we plan to execute over the course of the year, providing additional capital to deploy into growth. We also had a very strong start to the year from a capital recycling perspective, closing or agreeing to sell assets expected to generate approximately $2.8 billion or $820 million net to BEP. Recently we agreed to sell our remaining 50% interest in a portfolio of non core US hydro assets crystallizing significant value we created under our ownership. We also completed the IPO of CleanMax in India, selling approximately half of our interest. With the IPO we have returned all of our original invested capital while continuing to maintain exposure to the platform's long term growth trajectory and generated a 25% IRR to date. We also closed a previously announced sale of a portfolio of operating solar assets in the US from our Duriva platform. Our asset recycling in the quarter was also highlighted by the creation of a new private renewable vehicle focused on operating renewable assets in North America, Northview Energy, which is a partnership BEPween bci, Norges Bank Investment Management and a Brookfield Fund. The creation of Northview Energy is in response to the strong demand we are seeing from our institutional partners for high quality de risk infrastructure like assets with long term contracted and durable cash flows. We seeded the vehicle through the sale of 22 operating onshore wind and utility scale solar assets generating total proceeds of $1.3 billion or $315 million net to BEP. Beyond the initial seed assets sold into the platform, the arrangement with BCI and Norges also established a framework to sell additionally new developed assets from our pipeline into the vehicle with a framework to acquire assets generating up to an additional $1.5 billion of incremental gross proceeds over time. While Northview is the first vehicle of its kind we have launched, we continue to progress similar initiatives of meaningful scale across our global platform. During the quarter we also launched our at the market equity issuance program for BEPC which we paired with the buying of BEP LP units under our normal course issuer bid. In the first quarter we issued 2.8 million BEPC shares which with proceeds from the issuance used to repurchase the same number of BEP units Resulting in approximately $27 million of realized cash gains. Lastly, as our business and the broader market continues to evolve, we remain focused on ensuring that our structure is aligned with the best interests of our shareholders. We are currently exploring whether a single combined corporate structure would BEPter serve our investors going forward with the goal to determine if on a tax free basis we can create a single corporate security to enhance liquidity, increase index inclusion and create value for our investors. We expect to have more details to provide later in the year as we begin our work and look forward to updating you on our progress. In closing, we remain focused on delivering 12 to 15% long term total returns for our investors supported by our strong operating platform, disciplined capital Allocation and our growing capital recycling program. On behalf of the board and management, we thank all our unitholders and shareholders for their ongoing support. We are excited about Brookfield Renewable's future and look forward to sharing further updates on our progress over the course of the year. That concludes our formal remarks for today's call. Thank you for joining us this morning. And with that, I'll pass it back to our operator for questions. Certainly. And our first question comes from the line of Shawn Stewart from TD Cowan. Your question please.

Shawn Stewart (Equity Analyst)

Thanks. Good morning everyone. I want to start with asset recycling. You guys have a lot on the go there. The magnitudes accelerating, I guess, in tandem with an expanding organic pipeline as well. Can you give us updated perspective on the cadence and magnitude of overall asset recycling plans over the next year? And you referenced the CleanMax IRR, but broader perspective on returns. You're crystallizing through those initiatives.

Connor Teske

Good morning. Thanks for the question. Shawn. Three things, perhaps it's worth saying about capital recycling. First, the growth in our asset recycling activities is a very natural expansion of our business that is tied on a slightly lagged basis to the growth in our organic and development activities. And as we have been building more and more wind, solar and other assets in-house, we increasingly are looking to sell those down to lower cost of capital buyers and capture our development margin and redeploy that capital into accretive growth. And while it has been growing incrementally in recent years, we do expect it to grow on a similar trajectory going forward. And it's increasingly becoming a very normal course and part of our business in terms of targets for size and scale and amount of capital recycling. We're going to continue to be entirely driven by the values we see in the market. And if we see opportunities to sell assets at values above where we think they will produce within our portfolio, we will sell them for cash and redeploy that cash. And therefore we're not working to a consistent target. But perhaps to give you some direction or steer, at our investor day last year we spoke about a 9 to $10 billion deployment of equity into growth over a five year period. And we would expect at least a third of that capital over a five year period to come from asset recycling and perhaps more if we see strong values in the market. And this likely brings us to the last point where we do have a fairly robust capital recycling program ahead of us in 2026. And this is purely a result of the strong bids we are seeing for both platforms as well as stabilized assets in the current market. And therefore, I would say on balance, the Returns that we are generating through this capital recycling program we are consistently seeing at the high end, or maybe even above the high end of our target range.

Shawn Stewart (Equity Analyst)

Thanks for that, Connor. Second question is, with respect to the M and A opportunity set, the previous quarter's commentary was public equities offered a more compelling opportunity than private MA opportunities. And that's consistent with the Boralex deal. Do you still see that gap in place? And post Boralex, can you qualify your continued M and A appetite?

Connor Teske

So we continue to see both. Undoubtedly. For all the same reasons we mentioned last quarter, we continue to see opportunities in the public market. Those opportunities didn't stop and end with Boralex. The opportunities in the public market continue to exist. And similar to last quarter, it is because some companies in the public market are more constrained for capital and therefore not able to capture the tremendous demand environment that we're currently operating in. We continue to see an environment where public companies with access to capital that they can use to capitalize on the really attractive demand environment are performing well and companies that don't have the right access to capital are struggling in the public markets. And therefore we do continue to see opportunities in the public markets. But I would highlight we're seeing a pretty robust pipeline across both private and public for the remainder of the year.

Shawn Stewart (Equity Analyst)

That's great. Okay, thanks very much, Connor. That's all I have for now.

OPERATOR

Thank you. And our next question comes from the line of Mark Jarvie from cibc. Your question, please.

Mark Jarvie (Equity Analyst)

Yeah, thanks. Good morning, everyone. Connor, can you just clarify the comments you made about progress on the US Government with Westinghouse in terms of long lead items? Have those long lead items actually sign right now? And you're starting to get the support from the US Government at this point? If not, when does that come?

Connor Teske

Hi, Mark. This is a very live discussion and we hope to be in a position to announce some significant progress not only in 2026, but in the near term since our announcement in Q4 of last year. We continue to see tremendous demand from nuclear both around the world, but in particularly in the United States, from both the government as well as the utilities. And that demand is coming from, I would say, all stakeholders across the environment. It's coming from off takers, it's coming from the utilities, it's coming from the government. We continue to make significant progress on establishing frameworks under which initial orders can be made, and we hope to make some announcements in that regard soon.

Mark Jarvie (Equity Analyst)

Did that answer your question? Yeah, sorry, just my connection broke for a second there. Next question. Just I think there was commentary earlier in the call. You said something about outside's ability to drive growth here in the near term. Is the expectation then that you can exceed the 10% FFO per unit growth in the next couple of years and if so, primary drivers of that. Right now.

Connor Teske

In the current environment, we do feel that we are well positioned to exceed our long term target. This is driven by a number of things. Obviously MA in our business. The significant addition of new capacity that's coming online from organic growth, and then lastly our ability to recycle assets at very attractive values in the current environment. There could obviously be some timing variables on each of those things. But based on the underlying fundamentals of those three drivers, we feel that for both the short and short to medium term, we are well positioned to exceed that 10% per year target.

Mark Jarvie (Equity Analyst)

And so just to follow up on that, often asset sale gains would be a component. But if you put those aside, would you say the ability to drive FFO growth from the organic development and M and A side is stronger today ex asset sale gains?

Connor Teske

Yes, we would. We would absolutely say that the operating fundamentals of our business and the organic growth profile of our business is as strong as it's ever been. And the ability to generate gains on sale above and beyond that and to recycle that capital accretively into even further growth would be upside down.

Mark Jarvie (Equity Analyst)

Okay, thanks.

OPERATOR

Thank you. And our next question comes from the line of Bulti Seydou from National bank of Canada.

Bulti Seydou (Equity Analyst)

Your question please. Hey, good morning. Just on Northview Energy, how should we think about the. How should we think about the cadence of future drop downs and the potential mix of assets into this vehicle? And should we think about this as more of a steady state annual funding lever or something that could scale more opportunistically depending on market conditions?

Connor Teske

Thank you. From bep's perspective, it's important to recognize that we have the option but not the obligation to sell assets into Northview Energy. And the assets that fit that pool of capital are high credit contracted long duration wind and solar assets in North America prices and go forward returns which are very consistent with what we have seen and expect to achieve in our asset sales to third parties outside of this vehicle. This is critical and we think immensely additive to our business because this structure helps us in de risking our development and enabling us to fund further high margin growth. In terms of the dropdowns and the cadence of them, we'll really make two comments. One, the additional capital for future drop downs. We expect that to be utilized, we would say, over a 2 to 3, 2 to 4 year period among asset sales to third parties outside of Northview. At the end of the consumption of that initial allotment of capital, we will consider what to do next. And that is a discussion for the future. We could potentially expand this vehicle, create new vehicles, but for now we are just focused on consuming that initial commitment, which we expect will take two to three or two to four years.

Bulti Seydou (Equity Analyst)

Very good. Thanks, Connor. And just one more for me. Just on the prevailing hyperscaler agreements that we have in place, could you provide an update on how those agreements are progressing forward and what the potential pipeline looks and how conversations with such parties are evolving?

Connor Teske

So there's probably two things that characterize our activity with the hyperscalers in the context of those agreements and more broadly. One is the demand. And we apologize for sounding like a broken record, call after call. The demand continues to go up. It is higher today than it was last quarter. It's higher today than it was last year, and we expect it to be higher next year than it is today. The demand for energy, particularly from the hyperscalers, particularly in their core markets, continue to increase at paces we would say, significantly above previous market expectations. The other thing we are seeing in terms of our activities with the hyperscalers within those frameworks is our activities continue to broaden and evolve. I will give the example of the first framework agreement we did was with Microsoft and it was really focused on wind and solar assets. We continue to contract more and more wind and solar assets with Microsoft under that arrangement. But last quarter we also contracted some hydros under a long term contract with them. And we're now to meet their evolving demands. Increasingly looking at including battery storage, either with the projects that we're contracting with them or as part of the broader arrangement with them. So the two points we would make is the demand and the activity continues to grow and accelerate, but it also continues to broaden and we feel it's the second point where our scale and diversity continues to differentiate us in our ability to serve the largest corporate consumers of electricity.

Bulti Seydou (Equity Analyst)

Thank you.

OPERATOR

Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Christine Cho from Barclays. Your question please.

Christine Cho (Equity Analyst)

Good morning. I just wanted to ask about this single combined corporate structure. You guys have been trying to increase the liquidity of BEPC for a while. So this seems sort of like a natural progression. But can you walk through what led you to evaluate this and what's on the table other than the tax free part of this. Could you talk about other things that need to be considered in trying to do this and would this change how you view your distribution policy?

Patrick

Hi Christine, it's Patrick. There isn't much more than we can say other than what we have already said sort of in our opening remarks as well as in our press release. But what I will say is our focus in beginning our work is really looking at can we achieve a simplified structure while achieving a rollover on a tax free basis for our investors and also try to capture some of the potential benefits around broader index inclusion, enhanced trading liquidity that we are observing amongst corporate securities relative to partnerships and then lastly just focusing on can this broadly create value for the entire investor base. But we can't really say much more than what we've already said in our opening remarks.

Christine Cho (Equity Analyst)

Christine okay, appreciate that. And then are there any regions or technologies where execution risk has increased a little more than you would have thought, especially with the current administration, the surge in demand for power from hyperscalers, just general pushback from communities that we're seeing. Whether it's on like permitting, interconnection, supply chain that we should be more mindful of.

Connor Teske

Christine, I'll take the second one maybe just so it doesn't get missed on your previous question. We would not expect any change to the corporate structure to adjust our dividend policy. I'll just make sure we didn't gloss over that point. In terms of what we are seeing in terms of opportunity and dynamics around different types of projects and different types of development. There's probably two things worth noting across our business, maybe three.

Connor Teske

I apologize. One is this is pick your tagline any and all and all of the above type solutions. The demand for energy is going to require all types of sources. We are seeing the greatest growth in renewables because they are quick to deploy and they are cheap. But we are going to see demand across all types of energy in terms of additions to meet the demand forecast going forward. The second thing that is worth noting is undoubtedly the fastest growing technology across Brookfield renewable today is batteries and energy storage. We are seeing that within all of our existing development platforms. We are increasingly looking at standalone energy storage opportunities and the rationale for this is very simple. They remove grid congestion, they don't add to it. So they solve that problem and they are very quick to deploy further.

Connor Teske

This opportunity has been driven by the fact that capex for batteries and energy storage has come down 65% to 70% over the last 24 months, making these investments very economic and financially attractive. The third point, and this is probably the most insightful in terms of hitting your question head on, we are seeing a dramatic increase in interest and growth in behind the meter solutions. The reality is the demand trajectory ahead of us is greater than the pace at which grids can expand, and therefore we are going to see significant expansion of electricity demand on grids. But we're increasingly seeing demand for behind the meter solutions. It's important to recognize that while behind the meter solutions are perhaps growing faster on a relative basis, they are coming off a very, very low base. And the vast majority of demand growth is still going to go through grids the way it has in the past. But we are seeing increasing demand for behind the meter solutions.

OPERATOR

Thank you. And our next question comes from the line of Nelson Ng from RBC Capital Markets. Your question please.

Nelson Ng (Equity Analyst)

Great, thanks. Connor, you previously talked about how battery storage is a pretty big opportunity. When you look at your current solar and wind portfolio, is it economic to add batteries to existing sites? And I know many of those assets are contracted. So are you seeing off takers willing to pay that extra amount to firm up their power?

Connor Teske

Absolutely. In no uncertain terms, yes. The value proposition for batteries in today's market is very compelling for off takers in terms of giving them a load profile that better matches their 247 demand curve. And we're seeing it therefore alongside existing projects, in new developments and on a standalone basis.

Nelson Ng (Equity Analyst)

Okay. And then switching gears a bit. So in South America, I know the environment isn't great for renewable development and interest rates are really high and you're not that active on the development front. But on the MA side, you recently increased your stake in Ecigen, but can you just talk about whether there are MA opportunities you're seeing in South America?

Connor Teske

Certainly in South America we will when we can do so at compelling risk adjusted return. Our more modest activity in South America, I would say over the last two or three years, outside of the Ethan transaction, I would say is simply episodic. A lot of it was driven by very high hydrology and rapid build out in Brazil that pushed prices down and made new build in that country a little less compelling for a period of time. We're seeing demand recover, we're seeing hydrology normalize and not market strengthen again. We continue to do significant growth in Colombia, but we do it within the E. Sahin platform so it doesn't show up as a new discrete MA transaction. And then we've continued to do smaller transactions in other countries in the region, whether it be Chile, Central America. So it is a compelling market. It is one where the value of. It continues to be a market we focus on and will be continue to be a portion of our business going forward, albeit smaller than our core markets in North America and Western Europe.

Nelson Ng (Equity Analyst)

Great. Thanks, Connor. I'll leave it there.

OPERATOR

Thank you. And our next question comes from the line of Anthony Crodell from Mizell, your question please.

Anthony Crodell (Equity Analyst)

Hey, thanks so much. Just two quick ones if I could squeeze in. One's a follow up from Christine's question earlier. Is there just a timeline of when you hope to have a decision made on the corporate consolidation? Is it a quarter or by year end? And then I have a follow up on nuclear.

Patrick

Hi Anthony, it's Patrick. We have just begun assessment and so we can't really give any indicative timeline at this moment or really add much more at this time.

Anthony Crodell (Equity Analyst)

Great. And then on the nuclear, you talk about the success and the momentum going on with the AP1000 and the US government. I'm just curious, where do you see the bottleneck right now before we get an announcement? Is it on the utilities side, is it on the government side, regulatory side? What's the bottleneck before we get an announcement?

Connor Teske

Perhaps this is putting a positive spin on this, but I wouldn't almost look at it as a bottleneck. The potential for new build nuclear reactors in the United States is an immense step change to what has been done over the past 10 or 20 years. We are talking about additions that exceed 10 times, announcing in one shot additions that exceed 10 times what has been done over the last 15 years. And therefore this simply requires obtaining alignment from all the stakeholders for that scale of a build out. That includes the government, that includes the nuclear eligible utility operators, that includes the offtakes, and that includes the financing parties. We candidly would suggest that the momentum and the traction that has been made over the last six or nine months is incredibly significant and reflective of the demand for growth in the asset class. Because what we're looking to do in the course of, you know, six or 12 months far exceeds what's been done in the last 10 to 15 years. So I wouldn't say it's a bottleneck. It's just getting alignment from all the appropriate groups. And at this point the interest and support for getting this done is pretty overwhelming. Great.

Anthony Crodell (Equity Analyst)

Thanks so much for taking my questions.

OPERATOR

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Connor Teske for any further remarks.

Connor Teske

Thank you everyone for joining our earnings call this quarter. We deeply appreciate your continued support and interest in Brookfield Renewable, and we look forward to updating you following our Q2 results. Thank you and have a great day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.