DBRS Limited (DBRS Morningstar) confirmed its ratings on Brookfield Renewable Partners L.P. (BEP or the Company) and its subsidiaries Brookfield Renewable Partners ULC (BEP ULC), Brookfield Renewable Power Preferred Equity Inc. (BEP Equity), and Brookfield BRP Holdings (Canada) Inc. (BRPHC) as listed below. All trends are Stable. The Senior Unsecured Debentures and Notes issued by BEP ULC, the Class A Preference Shares issued by BEP Equity, and the Subordinated Notes issued by BRPHC are unconditionally and irrevocably guaranteed by BEP. The confirmations reflect BEP’s solid and stable business risk profile, strong modified consolidated credit metrics in 2021 and for the last 12 months ended March 31, 2022 (LTM 2022), and DBRS Morningstar's expectation that BEP's credit profile will remain stable over the medium term. BEP’s ratings consider (1) structural subordination of BEP’s debt to project-level debt, which is significantly mitigated by the diversification of cash flow, and (2) implicit support by Brookfield Asset Management Inc. (BAM; rated A (low) with a Stable trend by DBRS Morningstar), which indirectly owns 48% of BEP on a fully exchanged basis and provides BEP with a $400 million credit facility.
DBRS Morningstar notes that BEP's contracted generation percentage improved following the recontracting of the Lièvre facilities with Hydro-Québec for 40 years in December 2021. As of March 31, 2022, more than 90% of BEP's proportionate generation output for 2022 was sold under contract or hedges (88% for 2023). BEP's proportionate contracted portfolio is strong with an average remaining contract life of 14 years. The contracts are well diversified with more than 700 counterparties and strong with more than 77% of the contracts’ economic exposure being with power authorities, distribution companies, or BAM affiliates. BEP's contracted portfolio limits its exposure to commodity price risk over the medium term. DBRS Morningstar expects BEP to continue to manage its contractual portfolio on an ongoing basis and to reduce its uncontracted generation for 2024 and 2025 as circumstances allow.
DBRS Morningstar notes that BEP plans to grow its portfolio over the medium term across the distributed and utility-scale solar, wind, storage, hydro, and transition assets. DBRS Morningstar expects that this expansion will be primarily for contracted assets and that BEP will not begin constructing projects until a power purchase agreement is signed and it has received fixed-price engineering, procurement and construction and equipment supply agreements; this, along with BEP's development experience, should reduce project execution risk. DBRS Morningstar expects these growth projects will increase BEP's size and geographic, customer, and technology diversification profile. However, DBRS Morningstar expects that these assets as a whole will have modestly higher political risk and relatively weaker counterparties compared with BEP's existing portfolio. DBRS Morningstar expects that a significant portion of these new assets will be funded with nonrecourse financing and contributions from noncontrolling interest (NCI) partners, which will limit BEP's economic exposure to any specific growth project. DBRS Morningstar expects BEP to prudently fund its contributions to these growth assets through a combination of debt, upsizing projects with nonrecourse debt, and capital recycling initiatives.
DBRS Morningstar focuses on BEP’s key modified consolidated metrics to assess its financial profile because (1) substantial debt is at the project level, which is nonrecourse to BEP, and is self-financed, and (2) distributions to BEP from projects are net of cash distributions to NCI partners. DBRS Morningstar notes that BEP’s 2021 and LTM 2022 key credit metrics, both on a consolidated and modified consolidated basis, remain strong. BEP’s corporate liquidity remains strong with approximately $3.8 billion in cash, marketable securities, and available credit facilities as of March 31, 2022, and no material long-term corporate debt due until 2025.
DBRS Morningstar expects the Company to maintain its modified consolidated key credit metrics in line with the current ratings by prudently funding its growth. DBRS Morningstar does not expect a positive rating action in the near term; however, a significant deterioration in BEP's business risk profile or a deterioration in its financial metrics could potentially result in DBRS Morningstar taking a negative rating action.
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
All figures are in U.S. dollars unless otherwise noted.
The principal methodologies are Rating Companies in the Independent Power Producer Industry (May 18, 2022; https://www.dbrsmorningstar.com/research/396971), DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (October 21, 2021; https://www.dbrsmorningstar.com/research/386355), and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (April 4, 2022; https://www.dbrsmorningstar.com/research/394683), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at firstname.lastname@example.org.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
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