Business context and reporting period
Brookfield Renewable Partners L.P. filed this annual report on Form 20-F for the fiscal year ended December 31, 2021; it is not a standalone quarterly filing, though it includes fourth-quarter results. Financial statements are audited and prepared under IFRS, in U.S. dollars. The partnership operates a global renewable-power platform with 21,049 MW of capacity and an approximately 62,000 MW development pipeline at year-end.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $4.096 billion | $3.810 billion |
| Net loss attributable to unitholders | $368 million; $0.69 loss per LP unit | $304 million; $0.61 loss per LP unit |
| Proportionate Adjusted EBITDA | $1.876 billion | $1.614 billion |
| Funds From Operations (FFO) | $934 million; $1.45 per unit | $807 million; $1.32 per unit |
| Operating cash flow | $734 million | $1.296 billion |
| Capital expenditures | $1.967 billion | $447 million |
| Consolidated borrowings | $21.529 billion | $18.082 billion |
| Available liquidity | $4.069 billion | $3.270 billion |
Revenue rose about 8%; proportionate FFO increased 16%. Actual generation was 56,629 GWh, below the 58,913 GWh long-term average, while proportionate generation was 27,150 GWh versus a 29,852 GWh long-term average. FFO and Adjusted EBITDA are non-IFRS measures and should not be treated as substitutes for IFRS results or cash available for distribution.
Year-end assets were $55.867 billion, including $49.432 billion of property, plant and equipment measured at fair value. Corporate borrowings were $2.149 billion and non-recourse borrowings were $19.380 billion. About 90% of borrowings were non-recourse; management reported 13-year average terms for corporate and proportionate non-recourse borrowings. Market-value debt-to-capitalization was 8% for corporate debt and 33% consolidated. The filing reports $764 million of consolidated cash and cash equivalents; available liquidity also includes marketable securities and undrawn facilities.
Material changes versus the prior period
- Revenue increased $286 million, reflecting acquired and commissioned assets, higher realized prices and currency effects, partly offset by lower same-store generation.
- FFO rose from $807 million to $934 million, supported by growth, contracting and higher power prices; lower same-store hydro generation was a partial offset.
- Net loss attributable to unitholders widened from $304 million to $368 million. Consolidated net loss was $66 million versus $45 million, with higher depreciation, management-service costs and income-tax expense among the factors.
- Operating cash flow fell to $734 million, principally reflecting a $716 million working-capital outflow, compared with a $155 million outflow in 2020.
- Borrowings increased, while available liquidity rose to $4.069 billion. A $4.573 billion revaluation gain on property, plant and equipment was recorded in other comprehensive income.
Outlook, management commentary, risks and unusual items
Management targets long-term annual distribution growth of 5%–9% and a payout ratio near 70% of FFO. The 2021 annualized LP-unit distribution was $1.22; in February 2022, the partnership announced an increase to $1.28. Management cited approximately 90% of 2022 proportionate generation as contracted, with a 15-year weighted-average remaining contract duration. Contracted generation is forecast to decline from 90% in 2022 to 75% in 2026.
2021 growth included 952 MW of projects reaching commercial operation and acquisitions including an 845 MW Oregon wind portfolio and a U.S. distributed-generation business. The partnership also sold wind portfolios in Ireland, Scotland and the United States as part of capital recycling. Post-year-end transactions included the acquisition of Urban Grid, a U.S. solar and storage development platform with a 20 GW pipeline, and a German solar development platform.
- Weather and resource variability, power-price volatility, contract renewals, counterparty credit, transmission access, permits and concessions, construction execution, supply chains, foreign exchange, interest rates, leverage and refinancing are significant business risks.
- The Texas winter storm caused $80 million of consolidated power-purchase costs, partly offset by $52 million of revenue; the reported net consolidated impact was a $28 million loss, with Brookfield Renewable’s share described as not material.
- A TerraForm Power legacy dispute was settled in 2021 for approximately $50 million less than the court ruling, including accrued interest. Recovery proceedings remain uncertain.
- Management’s valuation of generation assets depends on material assumptions, including future power prices, generation, discount rates and terminal values. The auditors identified asset revaluation and the two major 2021 acquisitions as critical audit matters.
- Brookfield provides management services and exerts substantial influence. Management-service costs were $288 million in 2021, and incentive distributions were $80 million. The filing describes potential conflicts, limited unitholder voting rights and the absence of a general unitholder right to terminate the management agreement.
- Internal controls were reported effective and received an unqualified audit opinion, but the assessment excluded the acquired Oregon wind and U.S. distributed-generation portfolios, which together represented approximately 5% of assets, 4% of net assets and 5% of revenue.
Important facts for investors to verify
- Reconcile IFRS losses and operating cash flow with management’s non-IFRS FFO measures, including working-capital movements and the effects of non-controlling interests.
- Review generation relative to long-term averages, especially hydro conditions, and the expected effect of contracted-generation roll-off and renewals.
- Assess debt maturities, covenant restrictions, refinancing needs and the composition and accessibility of reported available liquidity.
- Evaluate the assumptions underlying the $4.573 billion asset revaluation and the acquisition valuations, including sensitivities to power prices and discount rates.
- Confirm the status, funding and commercial-operation milestones of announced acquisitions and development projects, and any related capital-recycling proceeds.
- Review distribution coverage and the sustainability of the 5%–9% growth target, given FFO variability, preferred obligations, incentive distributions and management fees.
- Consider Brookfield-related governance, fees, allocation of investment opportunities, and the implications of the partnership’s tax and unit structure for the investor’s jurisdiction.