EX-99.3 4 exh_993.htm EXHIBIT 99.3  

Exhibit 99.3

 

 

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

Brookfield Renewable

Partners L.P.

 

 

 

 

 

 

 

 

 

 

 

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

 

 

This Management’s Discussion and Analysis for the three and nine months ended September 30, 2017 is provided as of November 1, 2017. Unless the context indicates or requires otherwise, the terms “Brookfield Renewable”, “we”, “us”, and “our” mean Brookfield Renewable Partners L.P. and its controlled entities. The ultimate parent of Brookfield Renewable is Brookfield Asset Management Inc. (“Brookfield Asset Management”). Brookfield Asset Management and its subsidiaries, other than Brookfield Renewable, are also individually and collectively referred to as “Brookfield” in this Management’s Discussion and Analysis.

Brookfield Renewable’s consolidated equity interests include the non-voting publicly traded limited partnership units (“LP Units”) held by public unitholders and Brookfield, redeemable/exchangeable partnership units held by Brookfield (“Redeemable/Exchangeable partnership units”), in Brookfield Renewable Energy L.P. (“BRELP”), a holding subsidiary of Brookfield Renewable, and general partnership interest (“GP interest”) in BRELP held by Brookfield. Holders of the GP interest, Redeemable/Exchangeable partnership units, and LP Units will be collectively referred to throughout as “Unitholders” or as “per Unit”. The LP Units and Redeemable/Exchangeable partnership units have the same economic attributes in all respects. See – “PART 8 - Presentation to Stakeholders and Performance Measurement”.

Brookfield Renewable’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), which require estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the amounts of revenue and expense during the reporting periods.

Certain comparative figures have been reclassified to conform to the current year’s presentation.

References to $, C$, €, R$, £ and COP are to United States (“U.S.”) dollars, Canadian dollars, Euros, Brazilian reais, British pounds sterling and Colombian pesos, respectively. Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars.

For a description on our operational and segmented information and the non-IFRS financial measures we use to explain our financial results, see – “PART 8 - Presentation to Stakeholders and Performance Measurement”. For a reconciliation of the non-IFRS financial measures to the most comparable IFRS financial measures, see – “PART 2 - Financial Performance Review” and “PART 5 – Proportionate Information”. This Management’s Discussion and Analysis contains forward looking information within the meaning of U.S. and Canadian securities laws. Refer to – “PART 9 - Cautionary Statements” for cautionary statements regarding forward-looking statements and the use of non-IFRS measures. Our Annual Report and additional information filed with the Securities Exchange Commission (“SEC”) and with securities regulators in Canada are available on our website (https://bep.brookfield.com), on the SEC’s website (www.sec.gov/edgar.shtml), or on SEDAR (www.sedar.com).  

Organization of the Management’s Discussion and Analysis

PART 1 – Q3 2017 Highlights

2

PART 5 - Proportionate Information

 

 

 

Generation and financial review by segments

28

PART 2 – Financial Performance Review

 

Long-term debt and credit facilities

34

Generation and financial review for the three months ended September 30, 2017

4

PART 6 - Selected Quarterly Information

 

Generation and financial review for the nine months ended September 30, 2017

10

Summary of historical quarterly results

35

Contract profile

17

PART 7 - Critical Estimates, Accounting Policies

 

 

 

and Internal Controls

36

PART 3 – Liquidity and Capital Resources

 

Subsequent events

38

Capitalization, available liquidity and long-term

19

 

 

borrowings

 

PART 8 - Presentation to Stakeholders and

 

Consolidated statements of cash flows

21

Performance Measurement

39

Shares and units outstanding

23

 

 

Dividends and distributions

24

PART 9 - Cautionary Statements

43

Contractual obligations

24

 

 

Off-statement of financial position arrangements

24

 

 

 

 

 

 

PART 4 – Additional Financial Information

 

 

 

Property, plant and equipment

25

 

 

Related party transactions

25

 

 

Equity

26

 

 

Statement Regarding Forward-Looking Statements and Use of Non-IFRS Measures

This Management's Discussion and Analysis contains  forward-looking information within the meaning of U.S. and Canadian securities laws. We may make such statements in this Management's Discussion and Analysis and in other filings with the U.S. Securities and Exchange Commission (“SEC”) and with securities regulators in Canada - see “PART 9 - Cautionary Statements”. We make use of non-IFRS measures in this Management's Discussion and Analysis - see “PART 9 - Cautionary Statements”. This Management's Discussion and Analysis, our Form 20-F and additional information filed with the SEC and with securities regulators in Canada are available on our website at https://bep.brookfield.com, on the SEC’s website at www.sec.gov or on SEDAR’s website at www.sedar.com.

  

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 1 

 

PART 1 – Q3 2017 HIGHLIGHTS

 

Three months ended Sep 30

Nine months ended Sep 30

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

 

2017

 

2016

Operational information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capacity (MW)

 

12,740

 

10,676

 

12,740

 

10,676

 

 

 

 

 

 

 

 

 

 

 

Total generation (GWh)

 

 

 

 

 

 

 

 

 

Long-term average generation

 

9,098

 

9,092

 

30,136

 

28,663

 

Actual generation

 

9,370

 

7,522

 

31,472

 

25,343

 

Average revenue ($ per MWh)

 

65

 

74

 

63

 

73

 

 

 

 

 

 

 

 

 

 

 

Proportionate generation (GWh)

 

 

 

 

 

 

 

 

 

Long-term average generation

 

5,053

 

5,068

 

17,221

 

16,623

 

Actual generation

 

5,198

 

4,395

 

18,078

 

15,488

 

Average revenue ($ per MWh)

 

70

 

74

 

67

 

71

 

 

 

 

 

 

 

 

 

 

 

Selected financial information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

608

$

580

$

1,968

$

1,881

Net (Loss) income

 

(32)

 

(19)

 

80

 

41

Adjusted EBITDA(1)

 

378

 

332

 

1,288

 

1,164

Funds From Operations(1)

 

91

 

73

 

438

 

365

Adjusted Funds From Operations(1)

 

74

 

56

 

387

 

315

Basic (loss) earnings per LP Unit

 

(0.14)

 

(0.12)

 

0.04

 

(0.07)

Funds From Operations per Unit(1)(2)

 

0.29

 

0.24

 

1.44

 

1.28

Distribution per LP Unit

 

0.47

 

0.45

 

1.40

 

1.34

(1)       Non-IFRS measures. See “PART 2 - Financial Performance Review”, “PART 5 - Proportionate Information”, “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

(2)       For the three and nine months ended September 30, 2017, weighted average LP Units, Redeemable/Exchangeable partnership units and GP interest totaled 311.8 million and 303.5 million, respectively (2016: 299.0 million and 285.2 million).

 

 

 

 

 

 

 

 

 

Sep 30

 

Dec 31

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

Liquidity and Capital Resources

 

 

 

 

 

 

 

 

 

 

 

Available liquidity

$

1,953

$

1,191

Debt to capitalization

 

37%

 

38%

Borrowings non-recourse to Brookfield Renewable

 

81%

 

78%

Floating rate debt exposure

 

15%

 

18%

Corporate borrowings

 

 

 

 

 

Average debt term to maturity

 

6.6 years

 

7.4 years

 

Average interest rate

 

4.5%

 

4.5%

Subsidiary borrowings

 

 

 

 

 

Average debt term to maturity

 

9.2 years

 

9 years

 

Average interest rate

 

6.1%

 

6.4%

Subsidiary borrowings on a proportionate basis

 

 

 

 

 

Average debt term to maturity

 

9.9 years

 

9.6 years

 

Average interest rate

 

6.0%

 

6.2%

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 2 

 

Operating Results

Hydroelectric and wind generation for the quarter of 9,102 GWh was above long-term average of 9,098 GWh. When combined with generation from our pumped storage, Co-gen and biomass facilities of 268 GWh, total generation of 9,370 GWh was ahead of the prior year of 7,522 GWh. Proportionate generation was 5,198 GWh versus the prior year of 4,395 GWh. The increase is driven by a return to long-term average generation at our hydroelectric facilities in North America and Colombia.

Revenues totaling $608 million represent an increase of $28 million over the same period of the prior year driven by a return to long-term average generation in North America and Colombia and strong merchant power pricing at our Brazilian assets.

Funds From Operations was $91 million ($0.29 per Unit) for the three months ended September 30, 2017 compared with $73 million ($0.24 per Unit) for the same period in 2016.

Net loss for the three months ended September 30, 2017 was $32 million ($0.14 per LP Unit) versus a net loss of $19 million ($0.12 per LP Unit) for the same period in 2016.

Growth and Development

Together with our institutional partners, we completed the following investments:

·          25% interest in a 2.1 GW pumped storage portfolio located in the United Kingdom (“First Hydro”). Brookfield Renewable retains an approximate 7% interest in the portfolio

·          100% interest in a recently commissioned 16 MW wind asset in Ireland (“Shantavny”) with annualized long-term average generation of 35 GWh. Brookfield Renewable retains an approximate 40% interest in the asset

Subsequent to the end of the quarter, along with our institutional partners, we closed the previously-announced acquisition of a 51% interest in TerraForm Power, Inc. (“TerraForm Power”), the owner of a large scale, diversified portfolio of solar and wind assets located predominantly in the U.S., for a total net investment of $656 million. Brookfield Renewable’s total net investment is $203 million, giving it an approximate 16% interest.

Equity transactions

We completed a LP Unit offering at a price of C$42.15 per LP Unit. Concurrently, Brookfield Asset Management purchased LP Units in a private placement. The aggregate gross proceeds received were C$550 million ($422 million).

Subsidiary Borrowings

We completed the refinancing of a 360 MW hydroelectric portfolio in New England with a $475 million green bond. The proceeds were used to repay existing debt and to fund future growth initiatives.

Subsequent to the end of the quarter, we completed the following:

·         €78 million ($92 million) financing associated with a 47 MW portfolio of wind farms in Ireland

·         Pricing of a $305 million refinancing associated with an 872 MW portfolio of hydroelectric facilities in New York which is scheduled to close in the fourth quarter of 2017

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 3 

 

PART 2 – FINANCIAL PERFORMANCE REVIEW

GENERATION AND FINANCIAL REVIEW FOR THE THREE MONTHS ENDED SEPTEMBER 30

The following chart reflects the actual and long-term average generation in GWh for the three months ended September 30:

 

 

 

 

 

 

 

Variance of Results

 

 

 

 

 

 

 

 

 

Actual vs.

 

Actual Generation

LTA Generation

Actual vs. LTA

Prior Year

GENERATION (GWh)

2017

2016

2017

2016

2017

2016

 

Hydroelectric

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

2,285

1,604

2,178

2,178

107

(574)

681

 

 

Canada

1,333

1,071

1,223

1,215

110

(144)

262

 

 

3,618

2,675

3,401

3,393

217

(718)

943

 

Colombia

3,653

2,554

3,571

3,571

82

(1,017)

1,099

 

Brazil

971

1,060

1,170

1,114

(199)

(54)

(89)

 

 

 

8,242

6,289

8,142

8,078

100

(1,789)

1,953

Wind

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

216

228

271

271

(55)

(43)

(12)

 

 

Canada

173

143

238

238

(65)

(95)

30

 

 

389

371

509

509

(120)

(138)

18

 

Europe

242

318

238

296

4

22

(76)

 

Brazil

229

200

209

209

20

(9)

29

 

 

 

860

889

956

1,014

(96)

(125)

(29)

Storage

85

129

-

-

85

129

(44)

Other

183

215

-

-

183

215

(32)

Total

9,370

7,522

9,098

9,092

272

(1,570)

1,848

Hydroelectric generation continued to be in line with the long-term average. Strong inflows in North America and Colombia, supplemented by our ability to draw on stored water, was marginally offset by drier conditions in Brazil.

Generation across our wind portfolio improved over the same period of the prior year. In North America, our wholly-owned Canadian assets performed ahead of prior year due to improved wind conditions. In Brazil, the portfolio continues to produce above long-term average generation. Our European portfolio benefitted from growth in the portfolio which was partially offset by lower wind conditions. The prior year included 82 GWh relating to the 137 MW wind portfolio in Ireland that was sold in the first quarter of 2017.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 4 

 

The following table reflects Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations, and provides reconciliation to net loss for the three months ended September 30:

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

Revenues

$

608

$

580

Other income

 

7

 

23

Share of cash earnings from equity-accounted investments

 

6

 

4

Direct operating costs

 

(243)

 

(275)

Adjusted EBITDA(1)

 

378

 

332

Management service costs

 

(21)

 

(16)

Interest expense – borrowings

 

(158)

 

(159)

Current income taxes

 

(15)

 

(8)

Distributions to preferred limited partners

 

(8)

 

(5)

Cash portion of non-controlling interests

 

 

 

 

 

Participating non-controlling interests - in operating subsidiaries

 

(78)

 

(65)

 

Preferred equity

 

(7)

 

(6)

Funds From Operations(1)

 

91

 

73

Adjusted sustaining capital expenditures(2)

 

(17)

 

(17)

Adjusted Funds From Operations(1)

 

74

 

56

Add: cash portion of non-controlling interests

 

85

 

71

Add: distributions to preferred limited partners

 

8

 

5

Add: adjusted sustaining capital expenditures

 

17

 

17

Depreciation

 

(202)

 

(210)

Unrealized financial instruments loss

 

(14)

 

(4)

Share of non-cash loss from equity-accounted investments

 

(2)

 

(3)

Deferred income tax recovery

 

4

 

43

Other

 

(2)

 

6

Net loss

$

(32)

$

(19)

 

 

 

 

 

 

 

 

 

 

 

 

Average FX rates to USD

C$

 

1.25

 

1.30

€

 

0.85

 

0.90

R$

 

3.16

 

3.25

£

 

0.76

 

0.76

COP

 

2,976

 

2,947

(1)       Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

(2)       Based on long-term sustaining capital expenditure plans.

Revenues totaling $608 million represent an increase of $28 million over the same period of the prior year. Generation in line with the long-term average contributed $20 million to revenues. Stronger merchant power pricing in Brazil was partially offset by relatively lower realized power prices in North America and Colombia for a net contribution to revenues of $28 million. During the same period of the prior year, our hydroelectric and Co-gen assets in Ontario benefited from a settlement pertaining to the price escalator for power sold under power purchase agreements which contributed $20 million to revenues.

On a proportionate basis and excluding the contribution from the above settlement, the total average revenue per MWh decreased by $4 per MWh, primarily attributable to lower relative power prices realized in our Colombian portfolio.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 5 

 

Other Income totaling $7 million, represents a decrease of $16 million over the prior year where we benefitted from the gains on our marketable securities.

Direct operating costs totaling $243 million, represent a decrease of $32 million, primarily attributable to the reduction in power purchases in Colombia.

Management service costs totaling $21 million represent an increase of $5 million, attributable to the growth in our capitalization value from the increase in the market value of our LP Units and the issuances of LP Units and Preferred LP Units over the last twelve months.

Interest expense totaling $158 million represents a decrease of $1 million, as the lower interest expense due to lower amortizing debt balances was partially offset by the foreign exchange impact from the depreciation of the U.S. dollar.

Distributions to preferred limited partners totaling $8 million represent an increase of $3 million, resulting from the issuance of Preferred LP Units in the first quarter of 2017. 

The cash portion of non-controlling interests totaling $85 million represents an increase of $14 million, driven by increased earnings from our partially-owned assets in Colombia and our Brazilian wind portfolio.

Funds From Operations totaling $91 million represent an increase of $18 million, primarily driven by the return to long-term average across the portfolio.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 6 

 

SEGMENTED DISCLOSURES

Segmented information is prepared on the same basis that Brookfield Renewable’s chief operating decision maker (“CODM”) manages the business, evaluates financial results, and makes key operating decisions. See Note 5 - Segmented information in our unaudited interim consolidated financial statements.

HYDROELECTRIC

The following table reflects the results of our operations for the three months ended September 30:

(MILLIONS, EXCEPT AS NOTED)

2017

 

 

North America

 

 

 

 

 

 

United States

Canada

Total

Colombia

Brazil

Total

Generation (GWh) – LTA  

 

2,178

 

1,223

 

3,401

 

3,571

 

1,170

 

8,142

Generation (GWh) – actual  

 

2,285

 

1,333

 

3,618

 

3,653

 

971

 

8,242

Revenues

$

160

$

83

$

243

$

195

$

71

$

509

Adjusted EBITDA(1)

 

92

 

61

 

153

 

105

 

52

 

310

Funds From Operations(1)

$

37

$

45

$

82

$

13

$

37

$

132
                           

(MILLIONS, EXCEPT AS NOTED)

2016

 

 

North America

 

 

 

 

 

 

United States

Canada

Total

Colombia

Brazil

Total

Generation (GWh) – LTA  

 

2,178

 

1,215

 

3,393

 

3,571

 

1,114

 

8,078

Generation (GWh) – actual  

 

1,604

 

1,071

 

2,675

 

2,554

 

1,060

 

6,289

Revenues

$

142

$

63

$

205

$

206

$

60

$

471

Adjusted EBITDA(1)

 

66

 

45

 

111

 

90

 

45

 

246

Funds From Operations(1)

$

13

$

28

$

41

$

12

$

28

$

81
                           

(1)            Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 – Cautionary Statements”. 

North America

The portfolio generated 3,618 GWh which was above the long-term average of 3,401 GWh and an increase of 943 GWh as compared to the same period of the prior year. Generation across the portfolio returned to long-term average representing an improvement from the dry conditions experienced in the same period of the prior year.

Revenues totaling $243 million represent an increase of $38 million over the same period of the prior year. Higher volumes across the portfolio were partially offset by relatively lower realized pricing in the United States.

Funds From Operations totaling $82 million represent an increase of $41 million compared to the same period of the prior year, primarily driven by the increase in revenues and the deferral of certain direct operating costs to the fourth quarter of 2017.

Colombia

Improved hydrological conditions benefitted the portfolio resulting in generation of 3,653 GWh which was above the long-term average of 3,571 GWh and an increase of 1,099 GWh as compared to the same period of the prior year.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 7 

 

Revenues totaling $195 million represent a decrease of $11 million, over the same period of the prior year primarily attributable to relatively lower realized power prices being partially offset by higher generation.

Funds From Operations totaling $13 million represent an increase of $1 million compared to the same period of the prior year. The decrease in revenues was more than offset by the savings in direct operating costs due to lower fuel and power purchases.

Brazil

The portfolio generated 971 GWh which was below the long-term average of 1,170 GWh and a decrease of 89 GWh as compared to the same period of the prior year. Included in total generation is the 21 GWh contribution from the 25 MW facility commissioned in the first quarter of 2017.

We captured stronger merchant power pricing on our uncontracted energy which more than offset the lower generation and resulted in a net contribution of  $8 million to revenues.  

Funds From Operations totaling $37 million represent an increase of $9 million compared to the same period of the prior year, primarily due to the increase in revenues.

WIND

The following table reflects the results of our operations for the three months ended September 30:

(MILLIONS, EXCEPT AS NOTED)

2017

 

North America

 

 

 

 

 

United States

Canada

Total

Europe

Brazil

Total

Generation (GWh) – LTA

 

271

 

238

 

509

 

238

 

209

 

956

Generation (GWh) – actual

 

216

 

173

 

389

 

242

 

229

 

860

Revenues

$

25

$

15

$

40

$

22

$

24

$

86

Adjusted EBITDA(1)

 

17

 

11

 

28

 

11

 

22

 

61

Funds From Operations(1)

$

6

$

5

$

11

$

-

$

7

$

18

(MILLIONS, EXCEPT AS NOTED)

2016

 

North America

 

 

 

 

 

United States

Canada

Total

Europe

Brazil

Total

Generation (GWh) – LTA

 

271

 

238

 

509

 

296

 

209

 

1,014

Generation (GWh) – actual

 

228

 

143

 

371

 

318

 

200

 

889

Revenues

$

26

$

16

$

42

$

30

$

11

$

83

Adjusted EBITDA(1)

 

17

 

12

 

29

 

16

 

10

 

55

Funds From Operations(1)

$

6

$

5

$

11

$

4

$

3

$

18

(1)         Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.   

North America

Wind conditions were below long-term average across the portfolio due to lower wind resources, despite the high availability of our facilities. Over the same period of the prior year, generation at our Canadian facilities benefitted from stronger wind conditions. The portfolio generated 389 GWh which was below the long-term average of 509 GWh and an increase of 18 GWh as compared to the same period of the prior year. 

Revenues and Funds From Operations totaling $40 million and $11 million, respectively, were in line with the same period of the prior year.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 8 

 

Europe

Wind conditions in Ireland were weaker than in the same period of prior year, but ahead of the long-term average. Prior year generation included 82 GWh provided by the 137 MW wind portfolio in Ireland that was sold in the first quarter of 2017. During the quarter, we benefitted from the incremental contribution of 19 GWh derived from a full quarter’s generation from our facilities commissioned in 2016 and 2017.

Revenues totaling $22  million represent a decrease of $8 million, primarily due to the 137 MW wind facility sold during the first quarter of 2017 that contributed $11  million and $3 million in revenues and Funds From Operations, respectively.

Funds From Operations of $nil represent a decrease of $4 million.

Brazil

Stronger wind conditions across the portfolio resulted in generation remaining above long-term average and also higher than the same period of the prior year.

Revenues totaling $24 million represent an increase of $13 million, primarily attributable to stronger generation and higher realized power prices as our portfolio leveraged an auction mechanism in the Brazilian power market to secure more favorably priced contracts for the remainder of the current year.

Funds From Operations totaling $7 million represent an increase of $4 million, as the increase in revenues was partially offset by the cash earnings attributable to minority interests.

STORAGE AND OTHER

Following the investment in First Hydro and as we continue to build out our storage business, storage will be presented on a standalone basis as the revenue streams are derived primarily from ancillary services and not generation revenues. The Storage segment will now include our pumped storage facility in North America, previously included in the Hydroelectric segment. See “Part 8 – Presentation to Stakeholders and Performance Measurement – Performance Measurement”.

Our pumped storage and biomass facilities performed in line with the expectation and cumulatively contributed $6 million to Funds From Operations which is a $2 million increase over the same period of the prior year. Included in Funds From Operations is a full period’s contribution of our recently commissioned biomass facility which contributed $1 million.

During the same period of the prior year, our Co-gen assets in Ontario benefited from a settlement pertaining to the price escalator for power sold under power purchase agreements which contributed $18 million to revenues and Funds From Operations.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 9 

 

GENERATION AND FINANCIAL REVIEW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

The following chart reflects the actual and long-term average generation in GWh for the nine months ended September 30:

 

 

 

 

 

 

 

Variance of Results

 

 

 

 

 

 

 

 

 

Actual vs.

 

Actual Generation

LTA Generation

Actual vs. LTA

Prior Year

GENERATION (GWh)

2017

2016

2017

2016

2017

2016

 

Hydroelectric

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

9,258

7,523

9,057

8,707

201

(1,184)

1,735

 

 

Canada

4,570

4,149

3,959

3,956

611

193

421

 

 

13,828

11,672

13,016

12,663

812

(991)

2,156

 

Colombia

11,217

6,966

10,588

9,333

629

(2,367)

4,251

 

Brazil

3,089

3,168

3,468

3,455

(379)

(287)

(79)

 

 

 

28,134

21,806

27,072

25,451

1,062

(3,645)

6,328

Wind

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

670

732

894

894

(224)

(162)

(62)

 

 

Canada

766

649

854

854

(88)

(205)

117

 

 

1,436

1,381

1,748

1,748

(312)

(367)

55

 

Europe

914

1,067

925

1,073

(11)

(6)

(153)

 

Brazil

491

462

391

391

100

71

29

 

 

 

2,841

2,910

3,064

3,212

(223)

(302)

(69)

Storage

200

322

-

-

200

322

(122)

Other

297

305

-

-

297

305

(8)

Total

31,472

25,343

30,136

28,663

1,336

(3,320)

6,129

The hydroelectric portfolio continued to benefit from stronger hydrological conditions resulting in a return to long-term averages. In North America and Colombia, we have benefitted from hydrological conditions that are ahead of long-term averages. Lower volumes in Brazil are a result of drier conditions. The portfolio generated 28,134 GWh, with the growth in our portfolio contributing 1,744 GWh. 

The wind portfolio continued to perform in line with the prior year. In North America and Brazil, we benefitted from stronger wind conditions compared to the same period of the prior year. In Europe, the portfolio performed in line with long-term averages. The negative variance to the same period of the prior year was primarily driven by the sale of the 137 MW wind portfolio in the first quarter of 2017 that had contributed 180 GWh in the third quarter of 2016. The growth in our portfolio contributed 43 GWh.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 10 

 

The following table reflects Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations, and provides reconciliation to net income for the nine months ended September 30:

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

Revenues

$

1,968

$

1,881

Other income

 

25

 

55

Share of cash earnings from equity-accounted investments

 

11

 

8

Direct operating costs

 

(716)

 

(780)

Adjusted EBITDA(1)

 

1,288

 

1,164

Management service costs

 

(58)

 

(46)

Interest expense – borrowings

 

(477)

 

(447)

Current income taxes

 

(27)

 

(20)

Distributions to preferred limited partners

 

(21)

 

(11)

Cash portion of non-controlling interests

 

 

 

 

 

Participating non-controlling interests - in operating subsidiaries

 

(248)

 

(256)

 

Preferred equity

 

(19)

 

(19)

Funds From Operations(1)

 

438

 

365

Adjusted sustaining capital expenditures(2)

 

(51)

 

(50)

Adjusted Funds From Operations(1)

 

387

 

315

Add: cash portion of non-controlling interests

 

267

 

275

Add: distributions to preferred limited partners

 

21

 

11

Add: adjusted sustaining capital expenditures

 

51

 

50

Depreciation

 

(600)

 

(593)

Unrealized financial instruments loss

 

(40)

 

(6)

Share of non-cash loss from equity-accounted investments

 

(8)

 

(7)

Deferred income tax (expense) recovery

 

(17)

 

2

Other

 

19

 

(6)

Net income

$

80

$

41

 

 

 

 

Average FX rates to USD

C$

 

1.31

 

1.32

€

 

0.90

 

0.90

R$

 

3.17

 

3.55

£

 

0.78

 

0.72

COP

 

2,939

 

3,058
               

(1)       Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

(2)       Based on long-term sustaining capital expenditure plans.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 11 

 

Revenues totaling $1,968 million represent an increase of $87 million over the prior year.

Relatively lower realized prices across the U.S. and Colombian hydroelectric portfolios were partially offset by the increase in generation across our portfolio and higher spot prices captured on our uncontracted generation in Brazil, resulting in a net impact to revenues of $20 million.

A full period’s contribution from the recent growth in our portfolio contributed an incremental $100 million to revenues. Included in the same period of the prior year, was $19 million in revenues relating to the Irish wind facility disposed during the first quarter of 2017.

The depreciation of the U.S. dollar increased revenues by $46 million but caused an offsetting impact to operating and borrowing costs for a net contribution to Funds From Operations of $9 million. Other income decreased primarily due to the $22 million gain realized on the settlement of foreign currency hedging contracts in the prior year.

During the same period of the prior year, our hydroelectric and Co-gen assets in Ontario benefitted from a settlement pertaining to the price escalator for power sold under power purchase agreements which contributed $20 million to revenues.

Direct operating costs totaling $716 million represent a decrease of $64 million. The decrease was primarily attributable to the reduction in power purchases in Colombia and the successful recovery of excess property taxes paid in the previous years at one of our Canadian hydroelectric facilities. Incremental direct operating costs of $39 million relate to a full period’s impact from the growth in our portfolio.

Management service costs totaling $58 million represent an increase of $12 million, primarily attributable to the growth in our capitalization value due to the increase in the market value of our LP Units and from the issuances of LP Units, Preferred LP Units and corporate medium-term notes over the last twelve months.

Interest expense totaling $477 million represents an increase of $30 million. The increase attributable to the growth in our portfolio is $23 million. The remaining increase is attributable to project level re-financings.

Distributions to preferred limited partners totaling $21 million represent an increase of $10 million, attributable to the Preferred LP units issued in the current year and in May 2016. 

The cash portion of non-controlling interests totaling $267 million represents a decrease of $8 million, primarily attributable to lower Funds from Operations at partially owned assets.

Funds From Operations was $438 million ($1.44 per Unit) for nine months ended September 30, 2017 compared with $365 million ($1.16 per Unit) for the same period of 2016.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 12 

 

SEGMENTED RESULTS

HYDROELECTRIC

The following table reflects the results of our hydroelectric operations for the nine months ended September 30:

(MILLIONS, EXCEPT AS NOTED)

2017

 

 

North America

 

 

 

 

 

 

United States

Canada

Total

Colombia

Brazil

Total

Generation (GWh) – LTA  

 

9,057

 

3,959

 

13,016

 

10,588

 

3,468

 

27,072

Generation (GWh) – actual  

 

9,258

 

4,570

 

13,828

 

11,217

 

3,089

 

28,134

Revenues

$

600

$

282

$

882

$

583

$

211

$

1,676

Adjusted EBITDA(1)

 

399

 

230

 

629

 

305

 

161

 

1,095

Funds From Operations(1)

$

206

$

180

$

386

$

38

$

115

$

539
                           

(MILLIONS, EXCEPT AS NOTED)

2016

 

 

North America

 

 

 

 

 

 

United States

Canada

Total

Colombia

Brazil

Total

Generation (GWh) – LTA  

 

8,707

 

3,956

 

12,663

 

9,333

 

3,455

 

25,451

Generation (GWh) – actual  

 

7,523

 

4,149

 

11,672

 

6,966

 

3,168

 

21,806

Revenues

$

559

$

248

$

807

$

601

$

158

$

1,566

Adjusted EBITDA(1)

 

349

 

216

 

565

 

272

 

116

 

953

Funds From Operations(1)

$

153

$

167

$

320

$

33

$

71

$

424
                           

(1)            Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

North America

The portfolio generated 13,828 GWh which was above the long-term average of 13,016 GWh and an increase of 2,156 GWh as compared to the same period of the prior year. Generation across the portfolio returned to long-term average due to improved hydrological conditions. Included in total generation is the incremental contribution of 399 GWh from a full period’s generation at our 296 MW portfolio in Pennsylvania acquired in the second quarter of 2016.

Revenues totaling $882 million represent an increase of $75 million over the same period of the prior year. Higher volumes were partially offset by relatively lower realized prices resulting in a net contribution of $57 million to revenues. Included in total revenues is the incremental contribution of $18 million from a growth in the portfolio.

In the prior year, included in Other income, we benefitted from $22 million in hedging gains resulting from our ongoing foreign currency hedging program.

Funds From Operations totaling $386 million represent an increase of $66 million, primarily attributable to the increase in revenues, deferral of certain direct operating costs to the fourth quarter of 2017, and the successful recovery of $8 million of excess property taxes, paid in the previous years, at one of our Canadian hydroelectric facilities.

Colombia

Our portfolio continues to see improved hydrological conditions resulting in generation of 11,217 GWh which was above the long-term average of 10,588 GWh and an increase of 4,251 GWh as compared to the same period of the prior year where we experienced drier conditions. The incremental generation associated with a full period’s contribution was 1,272 GWh.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 13 

 

Revenues totaling $583 million represent a decrease of $18 million over the same period of the prior year. Generated volumes in line with long-term average and a full period’s contribution from growth were offset by lower merchant power prices resulting in a net impact to revenues of $39 million.

The depreciation of the U.S. dollar, compared to the same period of the prior year, contributed $21 million to revenues but also affected operating costs, borrowing costs, current income taxes, and the cash portion of non-controlling interests for a $1 million net contribution to Funds From Operations.

Funds From Operations totaling $38 million represent an increase of $5 million, as the impact from lower realized pricing was entirely offset by savings in power and fuel purchases over the same period of the prior year.

Brazil

The portfolio generated 3,089 GWh which was below the long-term average of 3,468 GWh and a decrease of 79 GWh as compared to the same period of the prior year. Included in total generation is the 73 GWh contribution from the 25 MW facility commissioned in the first quarter of 2017.

Revenues totaling $211 million represent an increase of $53 million over the same period of the prior year. The portfolio captured relatively higher spot prices from our uncontracted generation which was partly offset by lower generation, resulting in a net contribution of $31 million to revenues. Included in total revenues is a $5 million contribution from the recently commissioned 25 MW facility.

The depreciation of the U.S. dollar contributed $17 million in revenues but also affected operating and borrowing costs for a net contribution of $6 million to Funds From Operations.

 

Funds From Operations totaling $115 million represent an increase of $44 million.

  

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 14 

 

WIND

The following table reflects the results of our wind operations for the nine months ended September 30:

(MILLIONS, EXCEPT AS NOTED)

2017

 

North America

 

 

 

 

 

United States

Canada

Total

Europe

Brazil

Total

Generation (GWh) – LTA

 

894

 

854

 

1,748

 

925

 

391

 

3,064

Generation (GWh) – actual

 

670

 

766

 

1,436

 

914

 

491

 

2,841

Revenues

$

73

$

70

$

143

$

80

$

44

$

267

Adjusted EBITDA(1)

 

49

 

57

 

106

 

48

 

40

 

194

Funds From Operations(1)

$

14

$

38

$

52

$

9

$

11

$

72

(MILLIONS, EXCEPT AS NOTED)

2016

 

North America

 

 

 

 

 

United States

Canada

Total

Europe

Brazil

Total

Generation (GWh) – LTA

 

894

 

854

 

1,748

 

1,073

 

391

 

3,212

Generation (GWh) – actual

 

732

 

649

 

1,381

 

1,067

 

462

 

2,910

Revenues

$

86

$

68

$

154

$

101

$

24

$

279

Adjusted EBITDA(1)

 

60

 

55

 

115

 

61

 

21

 

197

Funds From Operations(1)

$

20

$

35

$

55

$

15

$

4

$

74

(1)            Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”. 

North America

The portfolio generated 1,436 GWh, below the long-term average of 1,748 GWh and an increase of 55 GWh as compared to the same period of the prior year. Generation continues to be below long-term average, despite high availability of our facilities, primarily due to lower wind resources. Over the same period of the prior year, generation at our Canadian facilities improved due to stronger wind conditions.

Revenues totaling $143 million represent a decrease of $11 million. Our portfolio has been impacted by lower generation in the United States and in the same period of the prior year, we received $6 million in proceeds from a wake impact agreement with neighboring wind facilities in California.

Funds From Operations totaling $52 million represent a decrease of $3 million as the impact to Funds From Operations of lower revenues in the United States was mitigated by our proportionate interests in the portfolio.

Europe

The portfolio generated 914 GWh, consistent with the long-term average of 925 GWh and a decrease of 153 GWh as compared to the same period of the prior year. Included in total generation is the incremental contribution from a full quarter’s generation of 43 GWh from our facilities commissioned over the last twelve months. Generation in the same period of the prior year included 180 GWh relating to the 137 MW wind portfolio in Ireland that was sold in the first quarter of 2017.

Revenues totaling $80  million represent a decrease of $21 million. Lower generation and lower realized merchant prices on our uncontracted volumes impacted revenues by $6 million. The 137 MW wind facility sold during the first quarter of 2017 had contributed $19  million in revenues in the prior year. Included in total revenues is the incremental contribution of $4 million from the recently commissioned facilities.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 15 

 

Funds From Operations totaling $9  million represent a decrease of $6 million, primarily due to the decrease in revenues.

Brazil

The portfolio generated 491 GWh, which was above the long-term average of 391 GWh and also higher as compared to the same period of the prior year. 

Revenues totaling $44 million represent an increase of $20 million compared to the same period of the prior year, primarily attributable to the higher realized power prices as our portfolio leveraged an auction mechanism in the Brazilian power market to secure more favorably priced contracts for the year.

Funds From Operations totaling $11 million represent an increase of $7 million compared to the prior year, representing our proportionate share of the increase in revenues.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 16 

CONTRACT PROFILE

We operate the business on a largely contracted basis to provide a high degree of predictability in Funds From Operations. We maintain a long-term view that electricity prices and the demand for electricity from renewable sources will rise due to a growing level of acceptance around climate change, the legislated requirements in some areas to diversify away from fossil fuel based generation and because they are becoming increasingly cost competitive.

In Brazil and Colombia we also expect power prices will continue to be supported by the need to build new supply over the medium to long term to serve growing demand. In these markets contracting for power is the only current mechanism to buy and sell power, and therefore we would expect to capture rising prices as we re-contract our power over the medium term.

The following table sets out our contracts over the next five years for generation output in North America and Europe, assuming long-term average on a proportionate basis. The table excludes Brazil and Colombia, where we would expect the energy associated with maturing contracts to be re-contracted in the normal course given the construct of the respective power markets. In these countries we currently have a contracted profile of approximately 90% and 70%, respectively, of the long-term average and we would expect to maintain this going forward.

FOR THE YEAR ENDED DECEMBER 31

Balance of 2017

 

2018

 

2019

 

2020

 

2021

 

Generation (GWh)

 

 

 

 

 

 

 

 

 

 

 

Contracted(1)

 

 

 

 

 

 

 

 

 

 

 

 

Hydroelectric

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States(2)

 

1,826

 

6,963

 

6,920

 

6,306

 

6,098

 

 

 

 

Canada

 

1,192

 

5,051

 

5,051

 

3,584

 

3,091

 

 

 

 

 

 

3,018

 

12,014

 

11,971

 

9,890

 

9,189

 

 

Wind

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

96

 

511

 

511

 

511

 

511

 

 

 

 

Canada

 

343

 

1,197

 

1,197

 

1,197

 

1,197

 

 

 

 

 

439

 

1,708

 

1,708

 

1,708

 

1,708

 

 

 

Europe

 

134

 

458

 

458

 

404

 

398

 

 

 

 

 

 

573

 

2,166

 

2,166

 

2,112

 

2,106

 

Contracted on a proportionate basis

3,591

 

14,180

 

14,137

 

12,002

 

11,295

 

Uncontracted on a proportionate basis

240

 

1,535

 

1,578

 

3,713

 

4,420

 

Long-term average on a proportionate basis(3)

3,831

 

15,715

 

15,715

 

15,715

 

15,715

 

Non-controlling interests

1,418

 

5,766

 

5,766

 

5,766

 

5,766

 

Total long-term average

5,249

 

21,481

 

21,481

 

21,481

 

21,481

 

 

 

 

 

 

 

 

 

 

 

 

Contracted generation - as at September 30, 2017

% of total generation on a proportionate basis

94

%

90

%

90

%

76

%

72

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price per MWh - total generation on a

 

 

 

 

 

 

 

 

 

 

 

 

proportionate basis

$

71

$

75

$

76

$

80

$

82

 

(1)            Assets under construction are included when long-term average and pricing details are available and the commercial operation date is established in a definitive construction contract. In the years 2018-2021, on a proportionate basis, there is 38 GWh contributed from assets under construction that meet the aforementioned conditions.

(2)            Includes generation of 297 GWh for 2017, 657 GWh for 2018 and 614 GWh for 2019 secured under financial contracts.

(3)            Long-term average on a proportionate basis includes wholly-owned assets and our share of assets we manage.

Our North American portfolio has a weighted-average remaining contract duration of 21 years (on a proportionate basis). Over the next five years, three contracts at our hydroelectric facilities are expiring, including one in 2020 with annual long-term average of 1,467 GWh (on a proportionate basis) and two in 2021 with aggregate annual generation of 850 GWh (on a proportionate basis). We expect on average to

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 17    

 

recontract expiring contracts at levels equal to or greater than the rates of the expiring contracts. The majority of the expiring contracts are in line with current merchant prices.

In our Brazilian and Colombian portfolios, we have a weighted-average remaining duration on our contracts of 8 years and 2 years (on a proportionate basis), respectively. We continue to focus on securing long-term contracts while maintaining a certain percentage of uncontracted generation so as to mitigate hydrology risk.

In our European wind portfolio, we have a weighted-average remaining duration of 9 years (on a proportionate basis).

The majority of Brookfield Renewable’s long-term power purchase agreements within our North American and European businesses are with investment-grade rated or creditworthy counterparties. The overall composition of our contracted generation on a proportionate basis under power purchase agreements is comprised of Brookfield (46%), public power authorities (19%), distribution companies (18%) and industrial users (17%).

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 18    

 

PART 3 - liquidity and capital Resources

Capitalization

A key element of our financing strategy is to raise the majority of our debt in the form of asset-specific, non-recourse borrowings at our subsidiaries on an investment-grade basis.

The following table summarizes the total capitalization and debt to total capitalization using book values:

 

 

Sep 30

Dec 31

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

Credit facilities(1)

$

259

$

673

Corporate borrowings(2)

 

1,678

 

1,556

Subsidiary borrowings(3)

 

8,059

 

7,953

Long-term indebtedness

 

9,996

 

10,182

Deferred income tax liabilities, net of deferred income tax assets

 

3,744

 

3,652

Equity

 

12,987

 

12,672

Total capitalization

$

26,727

$

26,506

Debt to total capitalization

 

37%

 

38%

(1)       Comprised of $188 million borrowed under unsecured corporate credit facilities guaranteed by Brookfield Renewable and $71 million borrowed under a subscription credit facility made available to a Brookfield sponsored private fund.

(2)       Amounts are unsecured and guaranteed by Brookfield Renewable.

(3)       Asset-specific, non-recourse borrowings secured against the assets of certain Brookfield Renewable subsidiaries.

Credit facility draws have decreased by $414 million to $259 million since December 31, 2016. The decrease is primarily attributable to the repayments provided by the net proceeds received from the Preferred LP Unit and LP Unit issuances in 2017. 

The strengthening of the Canadian dollar, against the U.S. dollar during the nine months ended September 30, 2017, resulted in an increase in corporate borrowings of $122 million from December 31, 2016.  

Available liquidity

The following table summarizes the available liquidity:

 

 

As of the date

Sep 30

Dec 31

(MILLIONS)

of report(1)

2017(2)

2016

Consolidated cash and cash equivalents  

$

143

$

143

$

223

Less: cash and cash equivalents attributable to

 

 

 

 

 

 

 

participating non-controlling interests in operating subsidiaries

(65)

 

(65)

 

(135)

Brookfield Renewable's share of cash and cash equivalents

 

78

 

78

 

88

Available-for-sale securities

 

114

 

172

 

136

Credit facilities

 

 

 

 

 

 

 

Authorized credit facilities

 

2,090

 

2,090

 

1,890

 

Draws on credit facilities

 

(433)

 

(188)

 

(673)

 

Issued letters of credit

 

(199)

 

(199)

 

(250)

Available portion of credit facilities

 

1,458

 

1,703

 

967

Available liquidity

$

1,650

$

1,953

$

1,191

(1)         Reflects completion of TerraForm Power acquisition that occurred subsequent to the quarter end and the repayment of $71 million borrowed under a subscription credit facility made available to a Brookfield sponsored private fund.  

(2)         Draws were comprised of $188 million borrowed under unsecured corporate credit facilities guaranteed by Brookfield Renewable. Excludes $71 million borrowed under the subscription credit facility.  

  

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 19    

 

We operate with sufficient liquidity to enable us to fund growth initiatives, capital expenditures, distributions, withstand sudden adverse changes in economic circumstances or short-term fluctuations in generation, and to finance the business on an investment-grade basis. Principal sources of liquidity are cash flows from operations, our credit facilities, up-financings on subsidiary borrowings and proceeds from the issuance of various securities through public markets.

Credit facilities and subsidiary borrowings

During the nine months ended September 30, 2017 we completed the following financing activities:

·          Extended the maturity by one year to June 2022 for $1.6 billion in corporate credit facilities

·          Increased the unsecured revolving credit facility provided by Brookfield Asset Management from $200 million to $400 million 

·          Refinanced $65 million associated with a 44 MW hydroelectric portfolio in New England

·         Financed $60 million associated with a 417 MW hydroelectricity facility in Pennsylvania

·          Refinanced C$55 million ($43 million) associated with a 17 MW hydroelectric portfolio in Quebec

·          Refinanced $11 million associated with a 11 MW wind asset in Arizona

·          Refinanced $350 million of debt associated with a 360 MW hydroelectric portfolio in New England, with the issuance of a $475 million, 15-year interest only green bond and a 4-year $25 million letter of credit facility

Subsequent to the end of the quarter, we completed the following:

·         €78 million ($92 million) financing associated with a 47 MW portfolio of wind farms in Ireland

·         Pricing of a $305 million refinancing associated with an 872 MW portfolio of hydroelectric facilities in New York which is scheduled to close in the fourth quarter of 2017

The following table summarizes our undiscounted principal repayments as at September 30, 2017:

(MILLIONS)

Balance of 2017

2018

2019

2020

2021

Thereafter

Total

Principal repayments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

credit facilities

 

 71 

 

 160 

 

 - 

 

 361 

 

 188 

 

 1,163 

$

 1,943 

 

Subsidiary borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hydro

 

 390 

 

 202 

 

 369 

 

 1,016 

 

 828 

 

 3,666 

 

 6,471 

 

 

Wind

 

 62 

 

 102 

 

 107 

 

 114 

 

 115 

 

 1,114 

 

 1,614 

 

 

Other

 

 1 

 

 3 

 

 2 

 

 2 

 

 2 

 

 31 

 

 41 

 

 

 

 

 

 524 

 

 467 

 

 478 

 

 1,493 

 

 1,133 

 

 5,974 

 

 10,069 

 

Equity-accounted investments

 2 

 

 6 

 

 5 

 

 6 

 

 6 

 

 411 

 

 436 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 10,505 

Subsidiary borrowings maturing in 2017 are expected to be refinanced or repaid at or in advance of maturity. We expect to source, consistent with our financing strategy, long-term, fixed rate, interest only debt that would increase the average term and reduce the average interest rate of our project debt portfolio. The 2017 repayments include $305 million associated with operating assets within our New York hydroelectric portfolio with the remainder being normal course amortization.

Following the quarter end, we priced the refinancing of the $305 million loan secured against our New York hydroelectric portfolio. The loan will close concurrent with the maturity of the existing debt in December 2017. As a result of this, the refinancing of our material 2017 maturities are now substantially complete. We were able to source debt throughout 2017 in a manner consistent with our financing

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 20    

 

strategy, long-term, fixed rate, interest only debt that increased the average term and reduced the average long term interest rate of our project debt portfolio.

We remain focused on refinancing near-term facilities on acceptable terms and maintaining a manageable maturity ladder. We do not anticipate material issues in addressing our borrowings through 2021 on acceptable terms and will do so opportunistically based on the prevailing interest rate environment.  

The overall maturity profile and average interest rates associated with our borrowings and credit facilities are as follows:

 

 

 Average term (years)

Average interest rate (%)

 

 

Sep 30

 

Dec 31

 

Sep 30

 

Dec 31

 

 

2017

 

2016

 

2017

 

2016

Corporate borrowings

 

6.6

 

7.4

4.5

 

4.5

Credit facilities  

 

4.8

 

4.5

2.5

 

1.9

Subsidiary borrowings

 

9.2

 

9.0

6.1

 

6.4

CONSOLIDATED STATEMENTS OF CASH FLOWS

The following table summarizes the key items on the unaudited interim consolidated statements of cash flows:

 

 

Three months ended Sep 30

Nine months ended Sep 30

(MILLIONS)

2017

2016

2017

 

2016

Cash flow provided by (used in):

 

 

 

 

 

 

 

 

Operating activities

$

204

$

170

$

746

$

534

Financing activities

 

138

 

(83)

 

(402)

 

2,661

Investing activities

 

(379)

 

(67)

 

(430)

 

(3,052)

Foreign exchange gain on cash

 

6

 

2

 

6

 

26

(Decrease) increase in cash and cash equivalents

$

(31)

$

22

$

(80)

$

169

Cash and cash equivalents as at September 30, 2017 totaled $143 million, representing a decrease of $80 million since December 31, 2016.

Operating Activities

Cash flows provided by operating activities totaling $204 million for the third quarter of 2017 represent a year-over-year increase of $34 million, primarily attributable to increase in Funds From Operations and change in working capital balances.

Cash flows provided by operating activities totaling $746 million for the nine months ended September 30, 2017 represent a year-over-year increase of $212 million, primarily attributable to change in working capital balances and increase in Funds From Operations.

Financing Activities

Cash flows provided by financing activities totaled $138 million for the third quarter of 2017. The issuance of LP units resulted in net proceeds of $411 million. Long-term debt – borrowings totaled $500 million and long-term debt – repayments totaled $709 million. The net repayments of $209 million were primarily related to the use of net proceeds from the LP Unit issuance applied against our credit facilities and up-financing proceeds from our $475 million green bond associated with a 360 MW hydroelectric portfolio in

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 21    

 

New England. The capital provided by participating non-controlling interests – in operating subsidiaries of $232 million related primarily to the investment in First Hydro and acquisition of Shantavny.

For the three months ended September 30, distributions paid to unitholders of Brookfield Renewable or BRELP were $151 million (2016: $136 million). The distributions paid to preferred shareholders, preferred limited partners’ unitholders and participating non-controlling interests - in operating subsidiaries totaled $145 million (2016: $42 million).

Cash flows used in financing activities totaled $402 million for the nine months ended September 30, 2017. The issuance of LP units and Preferred LP units resulted in a total net proceeds of $598 million. Long-term debt – borrowings totaled $799 million and long-term debt – repayments totaled $1,171 million. The net repayments of $372 million were primarily related to the use of net proceeds from the LP Unit and Preferred LP Unit issuances applied against our credit facilities. The capital provided by participating non-controlling interests – in operating subsidiaries of $281 million relate primarily to the investment in First Hydro and acquisition of Shantavny.

For the nine months ended September 30, 2017, distributions paid to unitholders of Brookfield Renewable or BRELP were $440 million (2016: $386 million). We increased our distributions to $1.87 per LP Unit, an increase of 9 cents per LP Unit which took effect in the first quarter of 2017. The distributions paid to preferred shareholders, preferred limited partners’ unitholders and participating non-controlling interests - in operating subsidiaries totaled $428 million (2016: $100 million).

Investing Activities

Cash flows used in investing activities for the third quarter of 2017 totaled $379 million. Our investment in First Hydro and acquisition of Shantavny totaled $280 million. Our investments in the development of power generating assets and sustainable capital expenditures were $67 million and $39 million, respectively. Net proceeds from available-for-sale securities amounted to $9 million.

Cash flows used in investing activities for the nine months ended September 30, 2017 totaled $430 million. Our investment in First Hydro and acquisition of Shantavny totaled $280 million. Our investments in the development of power generating assets and sustaining capital expenditures were $156 million and $90 million, respectively. Our investment in available-for-sale securities amounted to $30 million. Net proceeds from the sale of the 137 MW wind facilities in Ireland were $150 million. 

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 22    

 

SHARES AND UNITS OUTSTANDING

Shares and units outstanding are as follows:

 

 

 

Sep 30, 2017

Dec 31, 2016

Class A Preference Shares

 

 

 

Balance, beginning of year

31,035,967

33,921,463

 

Preference Shares exchanged for Preferred LP Units

 - 

(2,885,496)

Balance, end of period/year

31,035,967

31,035,967

Class A Preferred LP Units

 

 

 

Balance, beginning of year

17,885,496

7,000,000

 

Issuance of Preferred LP Units

10,000,000

8,000,000

 

Preference Shares exchanged for Preferred LP Units

 - 

2,885,496

Balance, end of period/year

27,885,496

17,885,496

 

 

 

 

 

GP interest

2,651,506

2,651,506

 

 

 

 

 

Redeemable/Exchangeable partnership units

129,658,623

129,658,623

 

 

 

 

 

LP Units

 

 

 

Balance, beginning of year

166,839,324

143,188,170

 

Issuance of LP Units

13,247,000

23,352,208

 

Distribution reinvestment plan

229,553

298,946

Balance, end of period/year

180,315,877

166,839,324

 

 

 

 

 

Total LP Units on a fully-exchanged basis(1)

309,974,500

296,497,947

(1)            The fully-exchanged amounts assume the exchange of Redeemable/ Exchangeable partnership units for LP Units.

  

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 23    

 

DIVIDENDS AND DISTRIBUTIONS

Dividends and distributions declared and paid are as follows:

 

 

Declared

 

Paid

 

Declared

 

Paid

 

 

 

Three months ended Sep 30

Nine months ended Sep 30

(MILLIONS)

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

Class A Preference Shares

$

7

$

6

$

7

$

6

$

19

$

19

$

19

$

19

Class A Preferred LP Units

$

8

$

5

$

8

$

4

$

21

$

11

$

19

$

8

Participating non-controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests - in operating subsidiaries

$

130

$

32

$

130

$

32

$

390

$

73

$

390

$

73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GP interest and Incentive distributions

$

9

$

6

$

9

$

6

$

26

$

18

$

25

$

17

Redeemable/Exchangeable partnership units

$

60

$

58

$

61

$

58

$

183

$

175

$

182

$

173

LP Units

$

86

$

74

$

81

$

72

$

243

$

206

$

233

$

196

Contractual obligations

Please see Note 17 – Commitments, contingencies and guarantees in the unaudited interim consolidated financial statements, for further details on the following:

·          Commitments  –  Water, land, and dams usage agreements, and agreements and conditions on committed acquisitions of operating portfolios and development projects

·          Contingencies  –  Legal proceedings, arbitrations and actions arising in the normal course of business, and providing for letters of credit

·         Guarantees  – Nature of all the indemnification undertakings

Off-STATEMENT OF FINANCIAL POSITION Arrangements

Brookfield Renewable has no off-statement of financial position financing arrangements.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 24    

 

PART 4 - ADDITIONAL FINANCIAL INFORMATION 

SUMMARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

The following table provides a summary of the key line items on the unaudited interim consolidated statements of financial position:

 

 

 

Sep 30

 

Dec 31

(MILLIONS)

2017

2016

Current assets

$

804

$

907

Property, plant and equipment, at fair value

 

25,346

 

25,257

Goodwill

 

916

 

896

Total assets

 

28,025

 

27,737

 

 

 

 

 

 

Long-term debt and credit facilities

 

9,996

 

10,182

Deferred income tax liabilities

 

3,911

 

3,802

Total liabilities

 

15,038

 

15,065

Total equity

 

12,987

 

12,672

Total liabilities and equity

 

28,025

 

27,737

Our balance sheet remains strong and reflects the stable nature of the business and the integration of recent growth. 

property, plant and equipment

The fair value of property, plant and equipment totaled $25.3 billion as at September 30, 2017 consistent with December 31, 2016. During the nine months ended September 30, 2017, amounts capitalized related to the development and construction of power generating assets totaled $241 million and acquisition of Shantavny totaled $37 million. The 137 MW wind portfolio disposed in the first quarter of this year had a fair value of $338 million. The signing of a definitive construction agreement for a wind development project in Ireland allowed us to determine the project’s fair value. Accordingly, work in progress associated with this project was revalued resulting in an increase in fair value of $11 million. The depreciation of the U.S. dollar increased the fair value of property, plant and equipment by $748 million. We also recognized depreciation expense of $600 million which is significantly higher than what we are required to reinvest in the business as sustaining capital expenditures. 

See Note 11 – Property, plant and equipment, at fair value in our December 31, 2016 audited consolidated financial statements for information on the fair value revaluation assumptions used and sensitivity analysis.

Related Party Transactions

Brookfield Renewable’s related party transactions are in the normal course of business, and are recorded at the exchange amount. Brookfield Renewable’s related party transactions are primarily with Brookfield.

Brookfield Renewable sells electricity to Brookfield through long-term power purchase agreements to provide contracted cash flow and reduce Brookfield Renewable’s exposure to electricity prices in deregulated power markets. Brookfield Renewable also benefits from a wind levelization agreement with Brookfield which reduces the exposure to the fluctuation of wind generation at certain facilities and thus improves the stability of its cash flow.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 25    

 

In addition to these agreements, Brookfield Renewable and Brookfield have executed other agreements that are described in Note 26 - Related Party Transactions in our December 31, 2016 audited consolidated financial statements.

Brookfield Renewable has also entered into a number of voting agreements with Brookfield whereby Brookfield, as managing member of entities related to Brookfield Americas Infrastructure Fund, Brookfield Infrastructure Fund II and Brookfield Infrastructure Fund III, in which Brookfield Renewable holds investments in power generating operations with institutional partners, agreed to provide to Brookfield Renewable the authority to direct the election of the Boards of Directors of such entities.

Brookfield Renewable has entered into agreements with Brookfield Americas Infrastructure Fund, Brookfield Infrastructure Fund II, Brookfield Infrastructure Fund III and Brookfield Infrastructure Debt Fund (“Private Funds”), in which they provide Brookfield Renewable with access to short-term financing using the Private Funds’ credit facilities.

During the period, the committed unsecured revolving credit facility provided by Brookfield Asset Management was increased to $400 million. Brookfield Asset Management had placed funds on deposit with Brookfield Renewable in the amount of $140 million during the first quarter of the current year, which was repaid prior to the end of the first quarter. The interest expense on the draws from the credit facility and the deposit totaled $1 million.   

In 2011, on formation of Brookfield Renewable, Brookfield Asset Management transferred certain development projects to Brookfield Renewable for no upfront consideration but is entitled to receive variable consideration on commercial operation or sale of these projects. An amount of $8 million has been paid relating to the commissioning of a 25 MW hydroelectric facility in Brazil.

The following table reflects the related party agreements and transactions on the unaudited interim consolidated statements of (loss) income:

 

 

Three months ended Sep 30

Nine months ended Sep 30

(MILLIONS)

 

2017

 

2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

 

Power purchase and revenue agreements

$

132

$

95

$

458

$

414

 

Wind levelization agreement

 

3

 

1

 

6

 

6

 

 

$

135

$

96

$

464

$

420

Direct operating costs

 

 

 

 

 

 

 

 

 

Energy purchases

$

(1)

$

(2)

$

(6)

$

(3)

 

Energy marketing fee

 

(6)

 

(6)

 

(18)

 

(17)

 

Insurance services

 

(4)

 

(5)

 

(14)

 

(15)

 

 

$

(11)

$

(13)

$

(38)

$

(35)

Management service costs

$

(21)

$

(16)

$

(58)

$

(46)

 

EQUITY

General partnership interest in a holding subsidiary held by Brookfield

Brookfield, as the owner of the 1% GP interest in BRELP, is entitled to regular distributions plus an incentive distribution based on the amount by which quarterly LP Unit distributions exceed specified target levels. To the extent that LP Unit distributions exceed $0.375 per LP Unit per quarter, the incentive is 15% of distributions above this threshold. To the extent that LP Unit distributions exceed $0.4225 per LP Unit per quarter, the incentive distribution is equal to 25% of distributions above this threshold.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 26    

 

Incentive distributions of $7 million and $22 million, respectively were accrued during the three and nine months ended September 30, 2017 (2016: $4 million and $14 million).

Preferred limited partners’ equity

On February 14, 2017, Brookfield Renewable issued 10,000,000 Class A, Series 11 Preferred Limited Partnership Units (the “Series 11 Preferred LP Units”) at a price of C$25 per unit for gross proceeds of C$250 million ($190 million). The holders of the Series 11 Preferred Units are entitled to receive a cumulative quarterly fixed distribution yielding 5.0% for the initial period ending April 30, 2022. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.82%, and (ii) 5.00%.

The holders of Series 11 Preferred Units will have the right, at their option, to reclassify their Series 11 Preferred Units into Class A Preferred LP Units, Series 12 (the “Series 12 Preferred Units”), subject to certain conditions on April 30, 2022 and on April 30 every five years thereafter. The holders of Series 12 Preferred Units will be entitled to receive floating rate cumulative preferential cash distributions equal to the sum of the 90-day Canadian Treasury Bill Rate plus 3.82%.

The Preferred LP Units do not have a fixed maturity date and are not redeemable at the option of the holders. As at September 30, 2017, none of the Class A Preferred LP Units have been redeemed by Brookfield Renewable.

Limited partners’ equity

On July 6, 2017, Brookfield Renewable completed the issuance of 8,304,000 non-voting LP Units on a bought deal basis at a price of C$42.15 per LP Unit for gross proceeds of C$350 million ($271 million). Concurrently, Brookfield Asset Management purchased 4,943,000 LP Units at the offering price (net of underwriting commission). The aggregate gross proceeds of the offering and the concurrent private placement was C$550 million ($422 million). Brookfield Renewable incurred C$15 million ($11 million) in related transaction costs inclusive of fees paid to underwriters.

Brookfield Asset Management owns, directly and indirectly 185,727,567 LP Units and Redeemable/Exchangeable partnership units, representing approximately 60% of Brookfield Renewable on a fully-exchanged basis and the remaining approximate 40% is held by public investors.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 27    

 

PART 5 - PROPORTIONATE INFORMATION 

GENERATION AND FINANCIAL REVIEW BY SEGMENTS

The following table reflects the actual and long-term average generation for the three months ended September 30 on a proportionate basis:

 

 

 

 

 

 

 

Variance of Results

 

 

 

 

 

 

 

 

 

Actual vs.

 

Actual Generation

LTA Generation

Actual vs. LTA

Prior Year

GENERATION (GWh)

2017

2016

2017

2016

2017

2016

 

Hydroelectric

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

1,594

1,157

1,468

1,475

126

(318)

437

 

 

Canada

1,306

1,036

1,186

1,181

120

(145)

270

 

 

2,900

2,193

2,654

2,656

246

(463)

707

 

Colombia

881

644

861

900

20

(256)

237

 

Brazil

802

882

978

930

(176)

(48)

(80)

 

 

 

4,583

3,719

4,493

4,486

90

(767)

864

Wind

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

112

118

140

140

(28)

(22)

(6)

 

 

Canada

173

143

238

238

(65)

(95)

30

 

 

285

261

378

378

(93)

(117)

24

 

Europe

96

126

95

117

1

9

(30)

 

Brazil

95

83

87

87

8

(4)

12

 

 

 

476

470

560

582

(84)

(112)

6

Storage

42

65

-

-

42

65

(23)

Other

97

141

-

-

97

141

(44)

Total

5,198

4,395

5,053

5,068

145

(673)

803

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017         

Page 28    

 

The following table reflects Adjusted EBITDA, Funds From Operations and provides reconciliation to net income (loss) for the three months ended September 30:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controll-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ing interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and

 

 

 

 

 

Attributable to Unitholders

 preferred 

 

 

 

 

 

 

 

Hydroelectric

 

Wind

Storage

Other

Corporate

 

Total

limited

 

2017

 

2016

 

 

 

North

 

 

 

 

 

North

 

 

 

 

 

 

 

 

 

partners'

 

($ MILLIONS)

America

Colombia

Brazil

 

America

Europe

Brazil

 

 

 

 

equity(1)

 

 

Revenues

 

201

 

47

 

59

 

 

30

 

9

 

10

 

-

 

6

 

-

 

362

 

246

 

608

 

580

Other income

 

1

 

-

 

4

 

 

-

 

-

 

-

 

-

 

-

 

-

 

5

 

2

 

7

 

23

Share of cash earnings from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 equity-accounted investments

 

-

 

-

 

1

 

 

-

 

1

 

-

 

3

 

-

 

-

 

5

 

1

 

6

 

4

Direct operating costs

 

(74)

 

(22)

 

(22)

 

 

(9)

 

(6)

 

(1)

 

-

 

(3)

 

(6)

 

(143)

 

(100)

 

(243)

 

(275)

Adjusted EBITDA(2)

 

128

 

25

 

42

 

 

21

 

4

 

9

 

3

 

3

 

(6)

 

229

 

149

 

378

 

332

Management service costs

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

(21)

 

(21)

 

-

 

(21)

 

(16)

Interest expense - borrowings

 

(46)

 

(10)

 

(2)

 

 

(10)

 

(3)

 

(2)

 

-

 

-

 

(23)

 

(96)

 

(62)

 

(158)

 

(159)

Current income taxes

 

-

 

(2)

 

(3)

 

 

-

 

(1)

 

-

 

-

 

-

 

-

 

(6)

 

(9)

 

(15)

 

(8)

Distributions to preferred limited partners

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

(8)

 

(8)

 

-

 

(8)

 

(5)

Cash portion of non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Participating non-controlling interests -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in operating subsidiaries

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(78)

 

(78)

 

(65)

 

Preferred equity

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

(7)

 

(7)

 

-

 

(7)

 

(6)

Funds From Operations(2)

 

82

 

13

 

37

 

 

11

 

-

 

7

 

3

 

3

 

(65)

 

91

 

-

 

91

 

73

Depreciation

 

(54)

 

(8)

 

(35)

 

 

(21)

 

(5)

 

(2)

 

-

 

(5)

 

-

 

(130)

 

(72)

 

(202)

 

(210)

Unrealized financial instrument loss

 

-

 

(2)

 

-

 

 

-

 

(9)

 

-

 

-

 

-

 

1

 

(10)

 

(4)

 

(14)

 

(4)

Share of non-cash loss from equity-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accounted investments

 

-

 

-

 

(1)

 

 

-

 

-

 

-

 

(1)

 

-

 

-

 

(2)

 

-

 

(2)

 

(3)

Deferred income tax recovery

 

13

 

(3)

 

1

 

 

(10)

 

2

 

-

 

-

 

-

 

7

 

10

 

(6)

 

4

 

43

Other

 

(6)

 

1

 

(1)

 

 

(1)

 

11

 

1

 

-

 

2

 

(9)

 

(2)

 

-

 

(2)

 

6

Cash portion of participating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 non-controlling interests

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

78

 

78

 

65

Preferred equity

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

7

 

7

 

6

Distributions to preferred limited partners

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

8

 

8

 

5

Net loss

 

35

 

1

 

1

 

 

(21)

 

(1)

 

6

 

2

 

-

 

(66)

 

(43)

 

11

 

(32)

 

(19)

(1)         Attributable to participating non-controlling interests, preferred equity and preferred limited partners’ equity.

(2)         Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 29 

 

The following table reconciles net loss attributable to Limited partners’ equity and loss per LP Unit, the most directly comparable IFRS measures, to Funds From Operations, and Funds From Operations per Unit, both non-IFRS financial metrics for the three months ended September 30:

 

 

 

 

 

 

 

 

Per unit

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

 

2017

 

2016

Net loss attributable to:

 

 

 

 

 

 

 

 

 

Limited partners' equity

$

(24)

$

(18)

$

(0.14)

$

(0.12)

 

General partnership interest in a holding

 

 

 

 

 

 

 

 

 

 

subsidiary held by Brookfield

 

(1)

 

-

 

-

 

-

 

Participating non-controlling interests - in a holding

 

 

 

 

 

 

 

 

 

 

subsidiary - Redeemable/Exchangeable units

 

 

 

 

 

 

 

 

 

 

held by Brookfield

 

(18)

 

(15)

 

-

 

-

Net loss attributable to Unitholders

$

(43)

$

(33)

$

(0.14)

$

(0.12)

Depreciation

 

130

 

137

 

0.42

 

0.46

Unrealized financial instruments loss

 

10

 

5

 

0.03

 

0.02

Share of non-cash loss from equity-accounted investments

 

2

 

3

 

0.01

 

0.01

Deferred income tax recovery

 

(10)

 

(35)

 

(0.03)

 

(0.12)

Other

 

2

 

(4)

 

-

 

(0.01)

Funds From Operations(1)

$

91

$

73

$

0.29

$

0.24

Weighted average Units outstanding(2)

 

 

 

 

 

311.83

 

298.98

(1)         Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

(2)         Includes GP interest, Redeemable/Exchangeable partnership units, and LP Units.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 30 

 

GENERATION AND FINANCIAL REVIEW BY SEGMENTS

The following table reflects the actual and long-term average generation for the nine months ended September 30 on a proportionate basis:

 

 

 

 

 

 

 

Variance of Results

 

 

 

 

 

 

 

 

 

Actual vs.

 

Actual Generation

LTA Generation

Actual vs. LTA

Prior Year

GENERATION (GWh)

2017

2016

2017

2016

2017

2016

 

Hydroelectric

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

6,383

5,324

6,055

5,976

328

(652)

1,059

 

 

Canada

4,483

4,047

3,861

3,859

622

188

436

 

 

10,866

9,371

9,916

9,835

950

(464)

1,495

 

Colombia

2,705

1,495

2,553

2,005

152

(510)

1,210

 

Brazil

2,559

2,627

2,896

2,870

(337)

(243)

(68)

 

 

 

16,130

13,493

15,365

14,710

765

(1,217)

2,637

Wind

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

351

368

472

472

(121)

(104)

(17)

 

 

Canada

766

649

854

854

(88)

(205)

117

 

 

1,117

1,017

1,326

1,326

(209)

(309)

100

 

Europe

362

422

367

424

(5)

(2)

(60)

 

Brazil

204

192

163

163

41

29

12

 

 

 

1,683

1,631

1,856

1,913

(173)

(282)

52

Storage

100

161

-

-

100

161

(61)

Other

165

203

-

-

165

203

(38)

Total

18,078

15,488

17,221

16,623

857

(1,135)

2,590

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 31 

 

The following table reflects Adjusted EBITDA, Funds From Operations and provides reconciliation to net income (loss) for the nine months ended September 30:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controll-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ing interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and

 

 

 

 

 

Attributable to Unitholders

preferred

 

 

 

 

 

 

 

Hydroelectric

 

Wind

Storage

Other

Corporate

 

Total

limited

 

2017

 

2016

 

 

 

North

 

 

 

 

 

North

 

 

 

 

 

 

 

 

 

partners'

 

($ MILLIONS)

America

Colombia

Brazil

 

America

Europe

Brazil

 

 

 

 

equity(1)

 

 

Revenues

 

725

 

140

 

175

 

 

109

 

33

 

19

 

-

 

13

 

-

 

1,214

 

754

 

1,968

 

1,881

Other income

 

1

 

2

 

10

 

 

-

 

-

 

-

 

-

 

-

 

1

 

14

 

11

 

25

 

55

Share of cash earnings from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 equity-accounted investments

 

1

 

-

 

3

 

 

-

 

1

 

-

 

5

 

-

 

-

 

10

 

1

 

11

 

8

Direct operating costs

 

(207)

 

(69)

 

(53)

 

 

(26)

 

(15)

 

(3)

 

-

 

(11)

 

(17)

 

(401)

 

(315)

 

(716)

 

(780)

Adjusted EBITDA(2)

 

520

 

73

 

135

 

 

83

 

19

 

16

 

5

 

2

 

(16)

 

837

 

451

 

1,288

 

1,164

Management service costs

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

(58)

 

(58)

 

-

 

(58)

 

(46)

Interest expense - borrowings

 

(135)

 

(32)

 

(12)

 

 

(31)

 

(9)

 

(5)

 

-

 

-

 

(66)

 

(290)

 

(187)

 

(477)

 

(447)

Current income taxes

 

1

 

(3)

 

(8)

 

 

-

 

(1)

 

-

 

-

 

-

 

-

 

(11)

 

(16)

 

(27)

 

(20)

Distributions to preferred limited partners

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

(21)

 

(21)

 

-

 

(21)

 

(11)

Cash portion of non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Participating non-controlling interests -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in operating subsidiaries

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(248)

 

(248)

 

(256)

 

Preferred equity

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

(19)

 

(19)

 

-

 

(19)

 

(19)

Funds From Operations(2)

 

386

 

38

 

115

 

 

52

 

9

 

11

 

5

 

2

 

(180)

 

438

 

-

 

438

 

365

Depreciation

 

(163)

 

(24)

 

(104)

 

 

(62)

 

(15)

 

(6)

 

-

 

(13)

 

-

 

(387)

 

(213)

 

(600)

 

(593)

Unrealized financial instrument loss

 

(1)

 

(3)

 

-

 

 

-

 

(17)

 

-

 

-

 

-

 

(11)

 

(32)

 

(8)

 

(40)

 

(6)

Share of non-cash loss from equity-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accounted investments

 

(1)

 

-

 

(3)

 

 

-

 

-

 

-

 

(4)

 

-

 

-

 

(8)

 

-

 

(8)

 

(7)

Deferred income tax (expense) recovery

 

(5)

 

(9)

 

3

 

 

13

 

5

 

-

 

-

 

-

 

(1)

 

6

 

(23)

 

(17)

 

2

Other

 

(13)

 

11

 

(7)

 

 

1

 

8

 

2

 

-

 

4

 

(12)

 

(6)

 

25

 

19

 

(6)

Cash portion of participating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 non-controlling interests

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

248

 

248

 

256

Preferred equity

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

19

 

19

 

19

Distributions to preferred limited partners

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

21

 

21

 

11

Net income

 

203

 

13

 

4

 

 

4

 

(10)

 

7

 

1

 

(7)

 

(204)

 

11

 

69

 

80

 

41

(1)         Attributable to participating non-controlling interests, preferred equity and preferred limited partners’ equity.

(2)         Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 32 

 

The following table reconciles net income (loss) attributable to Limited partners’ equity and earnings (loss) per LP Unit, the most directly comparable IFRS measures, to Funds From Operations, and Funds From Operations per Unit, both non-IFRS financial metrics for the nine months ended September 30:

 

 

 

 

 

 

 

 

Per unit

(MILLIONS, EXCEPT AS NOTED)

 

2017

 

2016

 

2017

 

2016

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

 

Limited partners' equity

$

6

$

(10)

$

0.04

$

(0.07)

 

General partnership interest in a holding

 

 

 

 

 

 

 

 

 

Participating non-controlling interests - in a holding

 

 

 

 

 

 

 

 

 

 

subsidiary - Redeemable/Exchangeable units

 

 

 

 

 

 

 

 

 

 

held by Brookfield

 

5

 

(8)

 

-

 

-

Net income (loss) attributable to Unitholders

$

11

$

(18)

$

0.04

$

(0.07)

Depreciation

 

387

 

387

 

1.28

 

1.36

Unrealized financial instruments loss

 

32

 

8

 

0.11

 

0.03

Share of non-cash loss from equity-accounted investments

 

8

 

7

 

0.03

 

0.02

Deferred income tax recovery

 

(6)

 

(27)

 

(0.02)

 

(0.09)

Other

 

6

 

8

 

-

 

0.03

Funds From Operations(1)

$

438

$

365

$

1.44

$

1.28

Weighted average Units outstanding(2)

 

 

 

 

 

303.46

 

285.19

(1)         Non-IFRS measures. See “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

(2)         Includes GP interest, Redeemable/Exchangeable partnership units, and LP Units.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 33 

 

LONG-TERM DEBT AND CREDIT FACILITIES

The composition of debt obligations, overall maturity profile, and average interest rates associated with our borrowings and credit facilities on a proportionate basis is presented in the following table:

 

 

 

Sep 30, 2017

Dec 31, 2016

 

 

 

Weighted-average

 

 

Weighted-average

 

 

 

 

 

Interest

Term

 

 

Interest

Term

 

 

(MILLIONS EXCEPT AS NOTED)

rate (%)

(years)

 

rate (%)

(years)

 

Corporate borrowings

4.5

6.6

$

1,684

4.5

7.4

$

1,562

Credit facilities

2.5

4.8

 

259

1.9

4.5

 

673

Subsidiary borrowings

 

 

 

 

 

 

 

 

 

Hydroelectric

6.2

9.2

 

3,748

6.6

8.6

 

3,607

 

Wind

4.9

12.3

 

998

4.8

12.8

 

1,030

 

Other

8.4

18.1

 

17

8.9

18.8

 

17

 

 

 

6.0

9.9

 

4,763

6.2

9.6

 

4,654

Total debt

 

 

$

6,706

 

 

$

6,889

Unamortized financing fees, net of

 

 

 

 

 

 

 

 

 

unamortized premiums(1)

 

 

 

(45)

 

 

 

(45)

Brookfield Renewable's share

 

 

 

6,661

 

 

 

6,844

Non-controlling interests

 

 

 

3,335

 

 

 

3,338

As per IFRS Statements

 

 

$

9,996

 

 

$

10,182

(1)            Unamortized premiums and unamortized financing fees are amortized to interest expense over the terms of the borrowing.

The following table summarizes our undiscounted principal repayments on a proportionate basis as at September 30, 2017:

(MILLIONS)

Balance of 2017

2018

2019

2020

2021

Thereafter

Total

Principal repayments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

credit facilities

$

 71 

 

 160 

 

 - 

 

 361 

 

 188 

 

 1,163 

$

 1,943 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hydro

 

 354 

 

 105 

 

 146 

 

 488 

 

 238 

 

 2,417 

 

 3,748 

 

 

Wind

 

 39 

 

 62 

 

 65 

 

 68 

 

 69 

 

 695 

 

 998 

 

 

Other

 

 - 

 

 1 

 

 1 

 

 1 

 

 1 

 

 13 

 

 17 

 

 

 

 

 

 464 

 

 328 

 

 212 

 

 918 

 

 496 

 

 4,288 

 

 6,706 

 

Equity-accounted investments

 1 

 

 3 

 

 3 

 

 3 

 

 3 

 

 224 

 

 237 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 6,943 

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 34 

 

PART 6 - SELECTED QUARTERLY INFORMATION

SUMMARY OF HISTORICAL QUARTERLY RESULTS

The following is a summary of unaudited quarterly financial information for the last eight consecutive quarters on a consolidated basis:

 

 

 

 

2017

2016

2015

(MILLIONS, EXCEPT AS NOTED)

 

Q3

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

Q1

 

Q4

Total Generation (GWh) - LTA

9,098

10,674

10,364

10,319

9,092

10,728

8,843

6,067

Total Generation (GWh) - actual

9,370

11,618

10,484

8,728

7,522

8,792

9,029

6,117

Proportionate Generation (GWh) - LTA

5,053

6,279

5,889

5,739

5,068

6,214

5,341

4,609

Proportionate Generation (GWh) - actual

5,198

6,719

6,161

4,734

4,395

5,197

5,896

4,553

Revenues

$

608

$

683

$

677

$

571

$

580

$

627

$

674

$

392

Net (loss) income

 

(32)

 

85

 

27

 

(1)

 

(19)

 

(19)

 

79

 

(10)

Adjusted EBITDA(1)

 

378

 

457

 

453

 

323

 

332

 

377

 

455

 

258

Funds From Operations(1)

 

91

 

181

 

166

 

54

 

73

 

105

 

187

 

88

Basic (loss) earnings per LP Unit

 

(0.14)

 

0.13

 

0.05

 

(0.16)

 

(0.12)

 

(0.11)

 

0.16

 

(0.09)

Funds From Operations per Unit(1)

 

0.29

 

0.61

 

0.55

 

0.18

 

0.24

 

0.37

 

0.68

 

0.32

Distribution per LP Unit

0.468

0.468

0.468

0.445

0.445

0.445

0.445

0.415

(1)            Non-IFRS measures. See “PART 2 – Financial Performance Review”, “PART 5 – Proportionate Information”, “PART 8 - Presentation to Stakeholders and Performance Measurement” and “PART 9 - Cautionary Statements”.

  

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

Page 35 

 

PART 7 - CRITICAL ESTIMATES, ACCOUNTING POLICIES AND INTERNAL CONTROLS

Critical ESTIMATES AND CRITICAL JUDGMENTS in applying accounting policies

The unaudited interim consolidated financial statements are prepared in accordance with IAS 34, which require the use of estimates and judgments in reporting assets, liabilities, revenues, expenses and contingencies. In the judgment of management, none of the estimates outlined in Note 1 – Basis of preparation and significant accounting policies in our December 31, 2016 audited consolidated financial statements are considered critical accounting estimates as defined in NI 51-102 with the exception of the estimates related to the valuation of property, plant and equipment and the related deferred income tax liabilities. These assumptions include estimates of future electricity prices, discount rates, expected long-term average generation, inflation rates, terminal year and operating and capital costs, the amount, the timing and the income tax rates of future income tax provisions. Estimates also include determination of accruals, purchase price allocations, useful lives, asset valuations, asset impairment testing, deferred tax liabilities, decommissioning retirement obligations and those relevant to the defined benefit pension and non-pension benefit plans. Estimates are based on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances.

In making estimates, management relies on external information and observable conditions where possible, supplemented by internal analysis, as required. These estimates have been applied in a manner consistent with that in the prior year and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology or assumptions utilized in this report. These estimates are impacted by, among other things, future power prices, movements in interest rates, foreign exchange and other factors, some of which are highly uncertain, as described in the “Risk Factors” section in our 2016 Annual Report. The interrelated nature of these factors prevents us from quantifying the overall impact of these movements on Brookfield Renewable’s financial statements in a meaningful way. These sources of estimation uncertainty relate in varying degrees to substantially all asset and liability account balances. Actual results could differ from those estimates.

Future changes in accounting policies

(i)       Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments (“IFRS 9”) which reflects all phases of the financial instruments project and replaces IAS 39, Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. This standard establishes principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. The new standard makes several improvements to IAS 39; mostly notably adopting a principle based approach to hedge accounting. While this does not change the type of hedging relationships or the requirement to measure ineffectiveness, it simplifies the application of hedge accounting and should allow for better alignment of risk management strategies with accounting presentation. Other changes include replacing the multiple financial asset impairment models in IAS 39 with a single model based on expected credit losses on all financial assets, and replacing the existing complex classifications structure with a business model approach based on the intent and nature of the cash flows.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. The adoption of IFRS 9 is a significant initiative for Brookfield Renewable. To date, Management has finalized the transition plan, has completed the initial exercise to identify potential areas

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of impact, and has catalogued and reviewed the existing hedging strategies. Management has also begun the process of updating hedge documentation and completed a review of current risk management policies and internal controls to align with the requirements for hedge accounting in the new standard. Next steps involve completing the classification of existing financial instruments and the suitability of existing IT systems as well as assessing new disclosure requirements. We are progressing as planned for the implementation of the standard. No material adjustments required upon adoption have been noted to date, however further technical analysis and quantitative assessments are required to conclude on the overall impact.

(ii)      Revenue recognition

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) was issued by IASB on May 28, 2014. IFRS 15 outlines a single comprehensive model to account for revenue arising from contracts with customers and will replace the majority of existing IFRS requirements on revenue recognition including IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. The core principle of the standard is to recognize revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The standard has prescribed a five-step model to apply the principles. The standard also specifies how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract as well as requiring more informative and relevant disclosures. IFRS 15 applies to nearly all contracts with customers, unless covered by another standard, such as leases, financial instruments and insurance contracts. In April 2016, the IASB issued amendments to IFRS 15, which provided additional guidance on the identification of performance obligations, on assessing principal versus agent considerations and on licensing revenue. The amendments also provide additional transition relief upon initial adoption of IFRS 15 and have the same effective date as the IFRS 15 standard.

IFRS 15 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The adoption of IFRS 15 is a significant initiative for Brookfield Renewable. To date, Management has participated in strategic planning sessions with Brookfield Asset Management and developed an adoption plan. Management has also identified major revenue streams to be assessed, and is currently completing the process of accumulating, identifying and inventorying detailed information on major contracts that may be impacted by the changes at the transition date. Next steps involve completing the remaining analysis, testing controls around the implementation, assessing any potential impact to IT systems and internal controls, and reviewing the additional disclosure required by the standard. We are progressing as planned for the implementation of the standard. Management currently anticipates adopting the standard using the modified retrospective approach. This method results in a cumulative catch-up adjustment to equity as of January 1, 2018 as if the standard had always been in effect. Based on the review completed to date which includes a majority of revenue under contract, management has not identified any material differences, however further technical analysis and quantitative assessments are required to conclude on the overall impact. Management continues to evaluate the overall impact of IFRS 15 on the consolidated financial statements.

(iii)     Leases

IFRS 16, Leases  (“IFRS 16”) was issued by the IASB on January 13, 2016. IFRS 16 brings most leases onto the statement of financial position for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting remains largely unchanged and the distinction between operating and finance leases is retained. Under IFRS 16 a lessee recognizes a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly, and the liability accrues interest. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the

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lease. Lessees are permitted to make an accounting policy election, by class of underlying asset, to apply a method like IAS 17’s operating lease accounting and not recognize lease assets and lease liabilities for leases with a lease term of 12 months or less, and on a lease-by-lease basis, to apply a method similar to current operating lease accounting to leases for which the underlying asset is of low value. IFRS 16 supersedes IAS 17, Leases and related interpretations. A lessee will apply IFRS 16 to its leases either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying IFRS 16 being recognized at the date of initial application. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. Management continues to evaluate the impact of IFRS 16 on the consolidated financial statements but it is not expected to have a material retrospective effect.

Internal Control over Financial Reporting

No changes were made in our internal control over financial reporting during the nine months ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequent eventS

On October 5, 2017, Brookfield Renewable completed financing associated with a 47 MW portfolio of wind farms in Ireland by securing €78 million ($92 million) of long-term debt, €6 million ($8 million) working capital facility and €4 million ($4 million) debt reserve facility. The long-term debt matures in 2032 and bears interest at EURIBOR plus a margin of 1.5%.

On October 16, 2017, along with its institutional partners, Brookfield Renewable closed the previously announced acquisition of a 51% interest in TerraForm Power for a total net investment of $656 million. TerraForm Power is a large scale diversified portfolio of solar and wind assets located predominately in the U.S. Brookfield Renewable retains an approximate 16% economic interest in TerraForm Power for a total net investment of $203 million.

On October 17, 2017, Brookfield Renewable completed the pricing of a $305 million refinancing, at an all-in interest rate of 4.29% and term of 13-years, associated with an 872 MW portfolio of hydroelectric facilities in New York which is scheduled to close in the fourth quarter of 2017.

  

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

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PART 8 - PRESENTATION TO STAKEHOLDERS AND PERFORMANCE Measurement

PRESENTATION TO PUBLIC STAKEHOLDERS

Equity

Brookfield Renewable’s consolidated equity interests include the non-voting LP Units held by public unitholders and Brookfield, Redeemable/Exchangeable limited partnership units in BRELP, a holding subsidiary of Brookfield Renewable, held by Brookfield, and GP interest in BRELP held by Brookfield. The LP Units and the Redeemable/Exchangeable partnership units have the same economic attributes in all respects, except that the Redeemable/Exchangeable partnership units provide Brookfield the right to request that their units be redeemed for cash consideration. In the event that Brookfield exercises this right, Brookfield Renewable has the right, at its sole discretion, to satisfy the redemption request with LP Units, rather than cash, on a one-for-one basis. Brookfield, as holder of Redeemable/Exchangeable partnership units, participates in earnings and distributions on a per unit basis equivalent to the per unit participation of the LP Units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with LP Units, the Redeemable/Exchangeable partnership units are classified under equity, and not as a liability. 

Given the exchange feature referenced above, we are presenting LP Units, Redeemable/Exchangeable partnership units, and the GP interest as separate components of consolidated equity. This presentation does not impact the total income (loss), per unit or share information, or total consolidated equity.

As at the date of this report, Brookfield owns an approximate 60% LP Unit interest, on a fully-exchanged basis, and all general partnership interests in Brookfield Renewable, representing a 0.01% interest, while the remaining approximately 40% is held by the public.

Actual and Long-term Average Generation

For assets acquired or reaching commercial operation during the period, reported generation is calculated from the acquisition or commercial operation date and is not annualized. As it relates to Colombia only, generation includes both hydroelectric and Co-gen facilities. “Other” includes generation from North America Co-gen and Brazil biomass.

We compare actual generation levels against the long-term average to highlight the impact of an important factor that affects the variability of our business results. In the short-term, we recognize that hydrology and wind conditions will vary from one period to the next; over time however, we expect our facilities will continue to produce in line with their long-term averages, which have proven to be reliable indicators of performance.

Our risk of a generation shortfall in Brazil continues to be minimized by participation in a hydrological balancing pool administered by the government of Brazil. This program mitigates hydrology risk by assuring that all participants receive, at any particular point in time, an assured energy amount, irrespective of the actual volume of energy generated. The program reallocates energy, transferring surplus energy from those who generated an excess to those who generate less than their assured energy, up to the total generation within the pool. Periodically, low precipitation across the entire country’s system could result in a temporary reduction of generation available for sale. During these periods, we expect that a higher proportion of thermal generation would be needed to balance supply and demand in the country potentially leading to higher overall spot market prices.  

Generation from our North American pumped storage and co-generation facilities is highly dependent on market price conditions rather than the generating capacity of the facilities. Our European pumped storage generates on a dispatchable basis when required by our contracts for ancillary services.

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Generation from our biomass facilities is dependent on the amount of sugar cane harvested in a given year. For these reasons, we do not consider a long-term average for these facilities.

Voting Agreements with Affiliates

Brookfield Renewable has entered into voting agreements with Brookfield, whereby Brookfield Renewable gained control of the entities that own certain United States, Brazil and Europe renewable power generating operations. Brookfield Renewable has also entered into a voting agreement with its consortium partners in respect of the Colombian operations. The voting agreements provide Brookfield Renewable the authority to direct the election of the Boards of Directors of the relevant entities, among other things, and therefore provide Brookfield Renewable with control. Accordingly, Brookfield Renewable consolidates the accounts of these entities.

For entities previously controlled by Brookfield Asset Management, the voting agreements entered into do not represent business combinations in accordance with IFRS 3, as all combining businesses are ultimately controlled by Brookfield Asset Management both before and after the transactions were completed. Brookfield Renewable accounts for these transactions involving entities under common control in a manner similar to a pooling of interest, which requires the presentation of pre-voting agreement financial information as if the transactions had always been in place. Refer to Note 1(o)(ii) –  Critical judgments in applying accounting policies - Common control transactions  in our December 31, 2016 audited consolidated financial statements for our policy on accounting for transactions under common control.

Performance Measurement  

Our operations are segmented by technology (hydroelectric, wind, storage and other, which includes Co-gen and biomass) with hydroelectric and wind further segmented by geography (North America, Colombia, Brazil and Europe), as that is how the CODM review our results, manage operations and allocate resources. The Colombia segment aggregates the financial results of its hydroelectric and Co-gen facilities. Following the investment in First Hydro and as we continue to build out our storage business, the CODM has commenced the review of this segment on a standalone basis as the revenue streams are derived primarily from ancillary services and not generation revenues. Accordingly, to reflect the way in which the CODM now reviews the business, with effect from third quarter of 2017, a “Storage” segment has been added that includes a pumped storage portfolio in the United Kingdom and a pumped storage facility in North America, that was previously included in the hydroelectric segment. We report our results in accordance with these segments and will present prior period segmented information in a consistent manner. See Note 5 – Segmented information in our unaudited interim consolidated financial statements.

One of our primary business objectives is to generate stable and growing cash flows while minimizing risk for the benefit of all stakeholders. We monitor our performance in this regard through four key metrics — i) Net Income (Loss), ii) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), iii) Funds From Operations, and iv) Adjusted Funds From Operations.

It is important to highlight that Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies and have limitations as analytical tools. We provide additional information below on how we determine Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations. We also provide reconciliations to net income (loss). See “PART 2 - Financial Performance Review” and “PART 5 – Proportionate Information”.

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Proportionate Information

Information on a proportionate basis reflects our share from facilities in which we own less than 100%. Accordingly, it includes wholly-owned assets, and our share of assets we manage. Proportionate information provides a net to Brookfield Renewable perspective that management considers important when performing internal analyses and making strategic and operating decisions. Management also believes that providing proportionate information helps investors understand the impacts of decisions made by management and financial results allocable to Brookfield Renewable’s LP Unitholders. Moreover, tables reconciling IFRS data with data presented on a proportionate consolidation basis have been disclosed.

Segmented net income (loss) which is disclosed in “PART 5 – Proportionate Information” is not a measure CODM uses to review the results of business and allocate resources.

  

Net Income (Loss)

Net income (loss) is calculated in accordance with IFRS.

Net income (loss) is an important measure of profitability, in particular because it has a standardized meaning under IFRS. The presentation of net income (loss) on an IFRS basis for our business will often lead to the recognition of a loss or a year-over-year decrease in income even though the underlying cash flows generated by the assets are supported by strong margins and stable, long-term power purchase agreements. The primary reason for this is that accounting rules require us to recognize a significantly higher level of depreciation for our assets than we are required to reinvest in the business as sustaining capital expenditures.

Adjusted EBITDA

EBITDA is a non-IFRS measure used by investors to analyze the operating performance of companies. 

Brookfield Renewable uses Adjusted EBITDA to assess the performance of its operations before the effects of interest expense, income taxes, depreciation, management service costs, non-controlling interests, unrealized gain or loss on financial instruments, non-cash gain or loss from equity-accounted investments, distributions to preferred limited partners and other typical non-recurring items. Brookfield Renewable adjusts for these factors as they may be non-cash, unusual in nature and/or are not factors used by management for evaluating operating performance.

Brookfield Renewable believes that presentation of this measure will enhance an investor’s understanding of the performance of the business.

Funds From Operations and Funds From Operations per Unit

Funds From Operations is a non-IFRS measure used by investors to analyze net earnings from operations without the effects of certain volatile items that generally have no current financial impact or items not directly related to the performance of the business.

Brookfield Renewable uses Funds From Operations to assess the performance of the business before the effects of deferred income taxes, depreciation, non-cash portion of non-controlling interests, unrealized gain or loss on financial instruments, non-cash gain or loss from equity-accounted investments and other typical non-recurring items as these are not reflective of the performance of the underlying business. In our audited consolidated financial statements we use the revaluation approach in accordance with IAS 16, Property, Plant and Equipment, whereby depreciation is determined based on a revalued amount, thereby reducing comparability with our peers who do not report under IFRS as issued by the IASB or who do not employ the revaluation approach to measuring property, plant and equipment.

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We add back deferred income taxes on the basis that we do not believe this item reflects the present value of the actual tax obligations that we expect to incur over our long-term investment horizon.

Brookfield Renewable believes that analysis and presentation of Funds From Operations on this basis will enhance an investor’s understanding of the performance of the business. Funds From Operations per Unit is not a substitute measure of performance for earnings per share and does not represent amounts available for distribution to LP Unitholders.

Adjusted Funds From Operations

Adjusted Funds From Operations is a non-IFRS measure used by investors to analyze net earnings from operations without the effects of certain volatile items that generally have no current financial impact or items not directly related to the performance of the business but also adjusted for sustaining capital expenditures.

Brookfield Renewable uses Adjusted Funds From Operations to also assess performance of the business and defines it as Funds From Operations less Brookfield Renewable’s proportionate share of adjusted sustaining capital expenditures (based on long-term sustaining capital expenditure plans) which are recurring in nature and used to maintain the reliability and efficiency of our power generating assets over our long-term investment horizon.

Neither Funds From Operations nor Adjusted Funds From Operations are intended to be representative of cash provided by operating activities or results of operations determined in accordance with IFRS. Furthermore, these measures are not used by the CODM to assess Brookfield Renewable’s liquidity.

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

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PART 9 - CAUTIONARY STATEMENTS

cautionary statement regarding forward-looking statements

This Management's Discussion and Analysis contains forward-looking statements and information, within the meaning of Canadian 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, concerning the business and operations of Brookfield Renewable. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements in this Management's Discussion and Analysis 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 and payout ratio, future commissioning of assets, contracted nature of our portfolio, technology diversification, acquisition opportunities, expected completion of acquisitions, financing and refinancing opportunities, future energy prices and demand for electricity, 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 and Brookfield Renewable’s access to capital. In some cases, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “believes”, “potentially”, “tends”, “continue”, “attempts”, “likely”, “primarily”, “approximately”, “endeavours”, “pursues”, “strives”, “seeks”, “targets”, “believes”, or variations of such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information in this Management's Discussion and Analysis are based upon reasonable assumptions and expectations, we cannot assure you that such expectations will prove to have been correct. You should not place undue reliance on forward-looking statements and information as such statements and information involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

 

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to, the following: we are not subject to the same disclosure requirements as a U.S. domestic issuer; the separation of economic interest from control or the incurrence of debt at multiple levels within our organizational structure; being deemed an “investment company” under the U.S. Investment Company Act of 1940; the effectiveness of our internal controls over financial reporting; changes to hydrology at our hydroelectric stations, to wind conditions at our wind energy facilities or to crop supply or weather generally at any biomass cogeneration facility; counterparties to our contracts not fulfilling their obligations; increases in water rental costs (or similar fees) or changes to the regulation of water supply; volatility in supply and demand in the energy market; the increasing amount of uncontracted generation in our portfolio; industry risks relating to the power markets in which we operate; increased regulation of our operations and in the markets in which we operate; contracts, concessions and licenses expiring and not being renewed or replaced on similar terms; increases in the cost of operating our plants; our failure to comply with conditions in, or our inability to maintain, governmental permits; equipment failures; dam failures and the costs of repairing such failures; force majeure events; uninsurable losses; adverse changes in currency exchange rates; availability and access to interconnection facilities and transmission systems; health, safety, security and environmental risks; disputes, governmental and regulatory investigations and litigation; our operations being affected by local communities; fraud, bribery, corruption, other illegal acts or inadequate or failed internal processes or systems; our reliance on computerized business systems; advances in technology that impair or eliminate the competitive advantage of our projects; newly developed technologies in which we invest not performing as anticipated; labour disruptions and economically unfavourable collective bargaining agreements; our inability to finance our operations due to the status of the capital markets; our inability to effectively manage our foreign currency exposure; operating and financial restrictions imposed

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

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on us by our loan, debt and security agreements; changes in our credit ratings; changes to government regulations that provide incentives for renewable energy; 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; our inability to develop existing sites or find new sites suitable for the development of greenfield projects; delays, cost overruns and other problems associated with the construction, development and operation of our generating facilities; the arrangements we enter into with communities and joint venture partners; Brookfield Asset Management’s election not to source acquisition opportunities for us and our lack of access to all renewable power acquisitions that Brookfield Asset Management identifies; our lack of control over all our operations; our ability to issue equity or debt for future acquisitions and developments is dependent on capital markets; foreign laws or regulation to which we become subject as a result of future acquisitions in new markets; the departure of some or all of Brookfield Asset Management’s key professionals; our relationship with, and our dependence on, Brookfield Asset Management and Brookfield Asset Management’s significant influence over us; and risks related to changes in how Brookfield Asset Management elects to hold its ownership interests in the Partnership.

 

We caution that 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 Management's Discussion and Analysis 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. For further information on these known and unknown risks, please see “Risk Factors” included in our Form 20-F.

cautionary statement regarding use of non-ifrs measures

This Management's Discussion and Analysis contains references to Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations and Funds From Operations per Unit which are not generally accepted accounting measures under IFRS and therefore may differ from definitions of Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations and Funds From Operations per Unit used by other entities. In particular, our definition of Funds From Operations and Adjusted Funds From Operations may differ from the definition of funds from operations used by other organizations, as well as the definition of funds from operations used by the Real Property Association of Canada and the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), in part because the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. We believe that Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations and Funds From Operations 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. Neither Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations nor Funds From Operations 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.  

A reconciliation of Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations to net (loss) income is presented in our Management’s Discussion and Analysis. We have also provided a reconciliation of Adjusted EBITDA and Funds From Operations to net (loss) income in Note 5 - Segmented information in the unaudited interim consolidated financial statements.    

  

 

Brookfield Renewable Partners L.P.                                    Management’s Discussion and Analysis                                            September 30, 2017          

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GENERAL INFORMATION  

 

 

 

Corporate Office

73 Front Street

Fifth Floor

Hamilton, HM12

Bermuda

Tel:  (441) 294-3304

Fax: (441) 516-1988

https://bep.brookfield.com

 

Officers of Brookfield Renewable Partners L.P.’s Service Provider, BRP Energy Group L.P.

 

Richard Legault

Group Chairman

 

Harry Goldgut

Group Chairman

 

Sachin Shah

Chief Executive Officer

 

Nicholas Goodman

Chief Financial Officer

 

Transfer Agent & Registrar

Computershare Trust Company of Canada

100 University Avenue

9th floor

Toronto, Ontario, M5J 2Y1

Tel  Toll Free: (800) 564-6253

Fax Toll Free: (888) 453-0330

www.computershare.com

 

 

Directors of the General Partner of

Brookfield Renewable Partners L.P.

Jeffrey Blidner

Eleazar de Carvalho Filho

John Van Egmond

David Mann

Lou Maroun

Patricia Zuccotti

Lars Josefsson

 

Exchange Listing

NYSE: BEP (LP Units)

TSX:    BEP.UN (LP Units)

TSX:    BEP.PR.E (Preferred LP Units – Series 5)

TSX:    BEP.PR.G (Preferred LP Units – Series 7)

TSX:    BEP.PR.I (Preferred LP Units – Series 9)

TSX:    BEP.PR.K (Preferred LP Units – Series 11)

TSX:    BRF.PR.A (Preferred shares – Series 1)

TSX:    BRF.PR.B (Preferred shares – Series 2)

TSX:    BRF.PR.C (Preferred shares – Series 3)

TSX:    BRF.PR.E (Preferred shares – Series 5)

TSX:    BRF.PR.F (Preferred shares – Series 6)

 

Investor Information

Visit Brookfield Renewable online at
https://bep.brookfield.com  for more information. The 2016 Annual Report and Form 20-F are also available online. For detailed and up-to-date news and information, please visit the News Release section.

 

Additional financial information is filed electronically with various securities regulators in United States and Canada through EDGAR at www.sec.gov and through SEDAR at www.sedar.com.

 

Shareholder enquiries should be directed to the Investor Relations Department at (416) 359-1955 or
enquiries@brookfieldrenewable.com   

 

 

 

 

 

 

                                           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BROOKFIELD RENEWABLE PARTNERS L.P.  

bep.brookfield.com

 

NYSE: BEP

TSX: BEP.UN