Brookfield Renewable Partners (NYSE:BEP) is one of the largest renewable companies in the world, that we've discussed before as a strong renewable energy holding. The company is working to acquire Neoen for $6.1 billion euros, a massive acquisition that will add GW of projects. That, combined with the company's existing assets, will support long-term shareholder returns.

Brookfield Renewable Partners 1Q 2024

Brookfield Renewable Partners earned almost $1.5 billion in revenue for the quarter, annualized at almost $6 billion, or $6.6 billion counting Neoen.

The company has continued to generate strong FFO of almost $1.2 billion annualized, an 8% YoY increase. The company has 33.6 GW with 20.3 TWh of generation, and 22.5 TWh in long-term average generation. The company's proportional actual generation was almost 8.5 TWh, with 2.2 TWh of generation to be added from Neoen.

Brookfield Renewable Partners has substantial liquidity of $4.4 billion, and the company's debt has fixed term debt with a 12-year term and a very manageable 5.4% interest rate. The company has continued to sign deals such as its deal with Microsoft to deliver a massive 10.5 GWh of new renewable energy capacity in the U.S. and Europe from 2026-2030.

This immense ability is based on the company's size. The company and Neoen both had a strong quarter, which will help support future shareholder returns.

Combined Corporation Assets

The combined corporation will have massive assets, with a combined 38.6 GW of total operating capacity. The vast majority is in major and reliable markets such as North America and Europe.

The assets are more than $100 billion across thousands of facilities in a variety of markets. The two companies together have many GW of assets, and Neoen has almost 3 GW in assets under construction, along with more than 15 GW advanced stage projects. Brookfield Renewable Partners also has 157 GW of potential development assets.

That's an idea of valuation. The $6 billion paid for Neoen gets a company with ~10% of the revenue and ~10% of the development pipeline. Brookfield Renewable Partners is worth $20 billion, highlighting the earnings potential of Brookfield Renewable Partners.

Decarbonization and Costs

Decarbonization is a major problem and the world is slowly moving towards that.

Renewables are officially the cheapest form of power. That, combined with the environmental benefits, means that millions of tonnes of CO2 can be removed. The company's current operating assets can remove ~100% of the emissions of France's electricity production, and the company's development assets can do the same for Mexico.

Given that renewable energy needs expertise and scale at bringing forward, with $10s of billions spent on projects, Brookfield Renewable Partners is the company that has that expertise. Which is why it's the chosen partner for major and wealthy corporations such as Microsoft that are looking to turn towards renewables.

Shareholder Return Potential

Brookfield Renewable Partners has the ability to drive substantial shareholder returns going forward.

Over the past 25 years since inception, the company has increased its dividend by 6% annualized. That's at the lower end of its long-term growth rate target of 5-9%, although it was impacted by a major market downturn in 2008. The company has a more than 5.5% dividend yield, with ~80% of its FFO per unit being paid out.

That saves the company ~$70 million / quarter it can utilize for other shareholder returns. The company has managed to grow FFO at 11% annualized, but dilution has resulted in 8% FFO per unit growth. The company needs to maintain growth here to increase its shareholder returns. The company's shareholder returns + growth in it, can result in strong long-term shareholder returns.

Thesis Risk

The largest risk to our thesis is the excitement among renewables, which means that Brookfield Renewable Partners trades at a lower valuation. Distributions are just over 5.5%, which combined with growth, moves the company towards a double-digit yield, but it's still a fairly low yield for a dividend play. That could hurt long-term returns.

Conclusion

Brookfield Renewable Partners is an incredibly strong renewable energy company. The company operates gigawatts of production producing TWh of annual electricity. At the same time, the company is utilizing an acquisition to further its growth, while showing its strength as the partner of choice for companies like Microsoft building a major renewable operation.

The company currently has a 5.5% dividend yield and a long history of increasing that dividend. The company's historic average dividend increase rate is 6% and its goal is to continue increasing it at the 5-9% range. That combination will enable reliable long-term shareholder returns. Let us know your thoughts in the comments below.

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