Brookfield Renewable Q3 2024 Earnings Report

Brookfield Renewable EPS Results

• Actual EPS: -$0.32
• Consensus EPS: -$0.28
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: -$0.14

Brookfield Renewable Revenue Results

• Actual Revenue: $1.47 billion
• Expected Revenue: $1.37 billion
• Beat/Miss: Beat by +$104.76 million
• YoY Revenue Growth: N/A

Brookfield Renewable Announcement Details

• Quarter: Q3 2024
• Date: 11/8/2024
• Time: Before Market Opens
• Conference Call Date: Friday, November 8, 2024
• Conference Call Time: 8:30AM ET

Brookfield Renewable (NYSE:BEPC) (NYSE: BEPC) is a renewable power and sustainable infrastructure company associated with Brookfield Renewable Partners L.P. The company owns and operates a diversified portfolio of renewable energy assets, including hydroelectric, wind, solar and distributed energy facilities, as well as energy storage and other sustainable solutions.

Its operations span North and South America, Europe and the Asia-Pacific region. Brookfield Renewable generates electricity for utilities, businesses and other customers through long-term power purchase agreements and other commercial arrangements. In addition to operating existing facilities, the company develops and acquires renewable power and energy transition assets.

Brookfield Renewable Corporation was created in 2020 to provide corporate access to an economic interest in Brookfield Renewable Partners. The business is part of Brookfield Asset Management’s broader renewable power platform. Connor Teskey serves as chief executive officer of Brookfield Renewable.

Brookfield Renewable Q3 2024 Earnings Call Transcript

Key Takeaways

• Record funds from operations: Delivered Q3 record FFO of $278 million ($0.42/unit), up 11% year-over-year, and reiterated a 10%+ FFO per unit growth target for 2024.
• Robust asset recycling: Generated approximately $2.3 billion in proceeds year-to-date with 2.5× invested capital returns and >20% IRRs, while deploying over $11 billion of equity into growth, including the pending NaoeN acquisition.
• Diversified development pipeline: Boasts a 200 GW renewable power project pipeline—about 90% in the top 10 global data center markets—complemented by Westinghouse Nuclear’s SMR and utility-scale capabilities.
• First offshore wind investment: Agreed to acquire a 12% stake in a 3.5 GW UK operating portfolio for $2.3 billion, backed by long-term government-linked contracts and fixed O&M, transmission, and lease costs.
• Policy resilience: Emphasis on low-cost mature technologies and corporate offtake agreements insulates the company from potential U.S. subsidy or regulatory changes following the elections.

Presentation

[Operator]

Thank you for standing by and welcome to the Brookfield Renewable's Third Quarter 2024 Results Conference Call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Connor Teske, Chief Executive Officer. Please go ahead, sir.

[Connor Teske, CEO at Brookfield Renewable]

Thank you, operator. Good morning, everyone, and thank you for joining us for our third quarter 2024 conference call. Before we begin, we would like to remind you that a copy of our news release, investor supplement, and letter to unitholders can be found on our website. We also want to remind you that we may make forward-looking statements on this call. These statements are subject to known and unknown risks, and our future results may differ materially. For more information, you are encouraged to review our regulatory filings available on SEDAR, EDGAR, and on our website. On today's call, we will provide a review of our third quarter performance and how we are able to both successfully monetize assets at great returns in the current environment, and as well as find opportunities to deploy significant capital into growth at good value.

[Connor Teske, CEO at Brookfield Renewable]

Then Ignacio Gomez from our investment team will speak to some of our successful asset monetizations announced this past quarter and lastly, Wyatt will conclude the call by discussing our operating results and financial position. Following our remarks, we look forward to taking your questions. We had a successful quarter with the business performing well. We delivered record funds from operations for the third quarter, benefiting from asset development, recent acquisitions and strong all in pricing. On the back of our strong results year to date and our outlook for the remainder of the year, we continue to expect to achieve our 10% + FFO per unit growth target for 2024.

[Connor Teske, CEO at Brookfield Renewable]

We have continued to diversify our business across the most attractive power markets globally while concentrating on the lowest cost mature technologies which today represent the most promising and viable solutions to meet accelerating electricity demand growth from digitalization and electrification. The outlook for our business continues to improve driven by increasing demand for clean power. As the robust investment by the large global technology players in data centers and semiconductor chips is now extending to energy capacity. Power is increasingly the bottleneck to enable data center and AI development and we are seeing these businesses ramp up their efforts to lock in supply to ensure that they can achieve their own growth targets. This accelerating increase in demand for new power is being driven by corporate off-takers and requires a significant build-out of renewable generation.

[Connor Teske, CEO at Brookfield Renewable]

Given its position as the most cost competitive source of bulk power in most markets, irrespective of incentive schemes, our scale and geographical and technologically diversified business is uniquely positioned to meet this insatiable demand in all political environments. To reinforce this point, because our business is focused on markets which are seeing the greatest amount of corporate demand and is focused on the technologies that are the most cost effective electricity solutions, we are largely insulated from any potential regulatory or subsidy changes and we do not expect the recent election results to change our business model or growth outlook. This past quarter saw several agreements announced by global technology players to restart or enable the development of nuclear capacity. These agreements are a powerful indication not only of the magnitude of demand for clean electricity over the coming years, but of the types of solutions that are needed.

[Connor Teske, CEO at Brookfield Renewable]

The technology leaders require reliable, low cost 24/7 scale power solutions and they are increasingly looking to a small number of partners who they trust to deliver what they need, where they need it and when they need it. This environment is very constructive for the development platforms we have acquired in recent years and we are well positioned to continue as one of the partners of choice to these companies. We are differentiated with our diverse 200,000 MW renewable power project development pipeline, approximately 90% of which is located in the top 10 data center markets globally. Added to that with our Westinghouse nuclear business which has design and engineering capabilities to deliver micro, small, modular and utility-scale nuclear solutions, we are in an enviable position globally.

[Connor Teske, CEO at Brookfield Renewable]

As outlined at our investor day at the end of September, this year will be our largest for both asset recycling and investment into growth. To date we have generated approximately $2.3 billion of proceeds from asset monetizations, resulting in returns of 2.5x our invested capital and IRRs on these investments of greater than 20%, well in excess of our corporate targets. Given other ongoing sales processes, the bids we are seeing in the market and our pipeline of assets that will be ready for sale in the coming quarters, we expect to deliver incremental strong monetizations in the future. During the same year to date time frame, we have committed and deployed over $11 billion of equity into growth, including our proposed acquisition of Neoen, which remains on track to close on our expected timelines.

[Connor Teske, CEO at Brookfield Renewable]

As we continue to progress through the regulatory approvals and anticipated undertakings which are all well advanced, we recognize that some may question how a market can be attractive for deployment and monetization at the same time. While every transaction has its own dynamics and there will be exceptions to any broad-based generalizations, we see a simple bifurcation in the current market. High quality de-risked and cash generative assets are seeing very strong bids, while large businesses with ongoing capital needs for development and construction are seeing a scarcity of capital to fund their growth pipelines. This creates a tremendous opportunity for those equipped to deploy capital at attractive value entry points to acquire growing businesses or fund existing operations.

[Connor Teske, CEO at Brookfield Renewable]

This constructive environment also allows us to monetize more mature assets and recycle the proceeds back into accretive new investments under an attractive and high returning self funding model. We feel this market is particularly attractive for a number of the renewable development platforms we have acquired in recent years. Last week we announced a new partnership with Ørsted, a global leader in offshore wind, making our first direct investment into this technology. We have always taken a thoughtful approach to investing in technologies that are new to our platform. For example, almost a decade ago we were consciously not a first mover into solar because we believe that much of the initial capital invested in the space was subject to return drivers outside of our control, notably the pace of technological improvement and cost declines, the ramp up of supply chain and the assumed trajectory of growth.

[Connor Teske, CEO at Brookfield Renewable]

While some players got these initial bets right and others wrong, we waited until we felt the sector was more appropriately de-risked. Once the sector matured, we moved with conviction, securing attractive value entry points, often capitalizing on situations of capital scarcity where some of those earlier investments didn't go as planned. Despite our cautious initial approach to the asset class, we have since found no shortage of opportunities and today are one of the largest solar developers in the world, if not the largest. We have taken a similar approach to investing in offshore wind. We view offshore wind as a mature, fast-growing and scalable renewable technology with critical attributes for certain markets, such as providing a differentiated energy load profile, high capacity factors and limited onshore land requirements.

[Connor Teske, CEO at Brookfield Renewable]

However, up until recently, many of the opportunities we looked at faced long lead times between capital outlays for development and project commissioning. These challenges deterred us from investing over the past several years, especially given the other opportunities we were seeing in the market. Today we are seeing more opportunities to invest in projects that are operating or where the cash flows are more significantly de-risked at attractive risk-adjusted returns. We agreed to partner with Ørsted, a global leader in offshore wind, to acquire a 12% interest in a portfolio of 3,500 MWs of operating capacity in the U.K. for an enterprise value of $2.3 billion.

[Connor Teske, CEO at Brookfield Renewable]

The portfolio is one secured by long-term government-backed inflation-linked Contracts for Difference. Two has approximately 90% of operating costs fixed through long-term O&M transmission and lease contracts, and three comes with no development or construction risk. We are thrilled to partner with Ørsted, a global leader in offshore wind who will continue to own a 38% interest and operate the portfolio which we expect to generate returns in line with our targets. With that, we will now turn it over to Ignacio to discuss our recent asset monetizations.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

Thank you Connor and good morning everyone. As Connor noted, this will be our most successful year for asset recycling ever as we have already generated record proceeds year to date and continue to see robust demand for high quality cash generative operating platforms and in particular those with embedded growth opportunities and capabilities. While we underwrite our investments on a hold-to-maturity basis to deliver our target 12%-15% returns, we can often enhance these returns by monetizing mature assets to buyers with a lower cost of capital who value the long life de-risked infrastructure. Like cash flows of renewable power projects, asset recycling also represents a highly accretive way to fund our business and contributes to our sustainable self funding model.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

Important to successful asset monetizations is the strength of our balance sheet, which enables us to be patient and sell assets when markets are constructive. Throughout 2024, we have seen a very robust bid for high-quality assets and platforms, and against this market demand, we have been successfully recycling capital from our existing asset base at returns significantly above our targets. While every investment is different, in each case these results were driven by acquiring for value, improving the assets through the execution of our business plan, and monetizing opportunistically. In September, we reached an agreement to sell Saeta, which we acquired in 2018 through the take-private during a period of market uncertainty that created an attractive value entry point. The portfolio consisted of high-quality contracted assets where we saw an opportunity to add value leveraging our scale and operating capabilities.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

Following the acquisition which we executed on a bilateral basis, we implemented our business plan divesting non-core assets and bringing over best practices from our experience operating renewable assets globally to enhance operations and reduce costs. We also optimized the capital structure and established a development function to focus on growth. With the in-house development team that we built and supplemented by our access to capital, we're able to grow the business and develop a very attractive pipeline of projects.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

The development team remains in place and we continue to carry out Saeta's strategic growth plan going forward. With the new owners, we agreed to sell the company, excluding the contracted 350 MW of concentrated solar power assets which we continue to own and operate, to a leading global renewable energy company as part of their strategic entry into the Iberian region for an equity value of $730 million. With the sale, we generate total proceeds of over 3x our invested capital over a six-year hold period, crystallizing strong returns for our shareholders. In 2017, we acquired a 25% interest in First Hydro, the leading U.K. hydro business, providing approximately 75% of the pumped storage capacity and 45% of the hydro capacity. In the market, we recognize an opportunity to use our decades of experience in owning and operating hydro assets to implement several value generative initiatives.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

Upon acquisition, we helped execute and de-risk an asset refurbishment program that extended the life of the pumped storage facilities by over 40 years. We optimized the capital structure by refinancing the long-term debt at the business and enhanced the commercial strategy. We recognized the favorable market dynamics and increasing importance of energy storage and scalable dispatchable clean power which led us to an increase in revenues and record earnings under our ownership. In September we reached an agreement to sell our interest in First Hydro for $350 million, generating over 3.5x our invested capital since acquisition, and are delivering the buyer a highly strategic asset that will continue to provide critical grid services for decades to come.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

During the quarter we also agreed to sell a 50% interest in our Shepherds Flat wind portfolio where we executed one of the largest wind repowering projects globally, increasing generation by approximately 25% and extending the asset's useful life by approximately 10 years. We completed this repowering project on time and on budget during the pandemic when the sector was being impacted by supply chain challenges, a testament to our procurement and development teams. On closing, we will generate almost 2x our invested capital on the portion sold for $415 million while still retaining a 50% interest and operating the asset where we are completing other value enhancing initiatives and finally today we're one of the leading renewable energy operators and developers in India, having primarily built a regional presence since entering the market in 2017 off the back of the broader Brookfield business in the country.

[Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition at Brookfield Renewable]

This week we signed an agreement to complete our first full cycle investment in the country by selling a 1,600 MW portfolio of operating and under construction wind and solar assets to a large renewable player. At our target returns, we expect to close the transaction in parts in the first quarter of 2025 and 2026. Subject to customary closing conditions, we were able to add value to this portfolio through the optimization of the capital structure, operational and working capital improvements, and through organic development. With that, I will pass it on to Wyatt to discuss our operating results and financial position.

[Wyatt Hartley, CFO at Brookfield Renewable]

Thanks, Ignacio, and good morning, everyone. Our operating business had a strong quarter delivering record Funds From Operations generating $278 million in the quarter or $0.42 per unit, up 11% year over year. With an increasingly diversified portfolio of operating assets, limited off-taker concentration risk and a strong contract profile, our cash flows are highly resilient. These results and our outlook for the remainder of the year have us positioned well to deliver on 10% + FFO per unit growth. Our hydroelectric segment benefited during the quarter from solid generation and we continue to see strong demand for these assets. This quarter we successfully executed two contracts with U.S. utilities at an average price of almost $90 per MWh for an average duration of almost 15 years.

[Wyatt Hartley, CFO at Brookfield Renewable]

The favorable contracts will result in a significant uplift in revenue per year and are expected to result in up up-financing proceeds of up to $500 million, which when redeployed at our target returns, is expected to generate meaningful incremental annual FFO for the business. With an additional 6,000 GWh of generation available for recontracting over the next five years and an increasingly constructive pricing environment for our hydro portfolio, we have significant capacity across our fleet to execute on similar contracts that we expect to contribute additional FFO and generate a highly accretive funding source for our growth. Our Wind, Solar, Distributed Energy and Sustainable Solutions segments generated record results benefiting from our acquisitions and development activities as well as continued tailwinds at our nuclear services business. Westinghouse.

[Wyatt Hartley, CFO at Brookfield Renewable]

Our balance sheet continues to strengthen as we ended the quarter with $4.6 billion of available liquidity and our funding model is working well. As Ignacio noted, we were successful in executing on our asset recycling initiatives this quarter, generating record proceeds so far this year, and have a positive outlook to continue to rotate capital and generate strong returns going forward. In addition, we expect to execute a total of $30 billion in financing this year, generating $700 million in total up-financings, positioning us well to fund our growth activities going forward. In closing, we remain focused on delivering 12%-15% long-term total return for our investors by prudently deploying capital and executing on our operating initiatives. On behalf of the Board and management, we thank all of our unitholders and shareholders for the ongoing support.

[Wyatt Hartley, CFO at Brookfield Renewable]

We are excited about Brookfield Renewable's future and look forward to updating you on our progress throughout the remainder of the year. That concludes our formal remarks for today's call. Thank you for joining us this morning, and with that, I'll pass it back to our operator for questions.

[Operator]

Certainly. And our first question for today comes from the line of Sean Steuart from TD Securities. Your question, please.

[Sean Steuart, MD Equity Research at TD Securities]

Thanks.

[Sean Steuart, MD Equity Research at TD Securities]

Good morning, everyone. I want to start with the U.S. It's a big part of your advanced organic pipeline. And Connor, you referenced comfort that growth. It will remain a growth focus for Brookfield Renewable. I'm wondering though, if you can give us more detailed thoughts on the U.S. return profile and growth potential if tax credits are changed or repealed in the event that the Republicans take the House and Trump can advance that agenda.

[Connor Teske, CEO at Brookfield Renewable]

Great.

[Connor Teske, CEO at Brookfield Renewable]

Good morning, Sean. Certainly, no doubt, a big topic this week. Maybe let's come at this two different ways. We'll come at it from the macro and then we'll come at it from the perspective of our business. In particular, from the macro perspective, we would suggest that the government support and regulatory processes and procedures that most commonly touch our business generally have very strong bipartisan support. And yes, while a new government may tweak or make changes to that, our expectation is it would not be material. However, what's probably more important from the macro side is two things. One, anytime a new administration comes in, and this one we expect to be no different. We expect to see a period of tremendous fiscal support to drive industry and manufacturing and data centers and in the United States. And all those things are going to need incremental power.

[Connor Teske, CEO at Brookfield Renewable]

And that's going to be very beneficial for renewables. That's going to be beneficial for gas. That's going to be beneficial for nuclear. Further, a Republican administration with a focus on domestic growth should no doubt provide longer term tailwinds that will increase power demand, which again, renewables at the lowest cost, provider of that power, should be well positioned to benefit from that incremental demand. Now maybe then switching gears to talk about our business. For years now, we've been growing and diversifying our business. We're proud that we have one of, if not the most globally diversified renewables business across both geographies and technologies. But in particular, for years we've been positioning our business to rely on corporate demand and low cost energy production, not government subsidy, to ensure that in periods of regulatory uncertainty, our business will continue to perform.

[Connor Teske, CEO at Brookfield Renewable]

Today our business is highly focused in both the lowest cost technologies and the regions that are seeing the greatest growth in electricity demand, which ensures that we are largely insulated from any potential regulatory or subsidy changes, and therefore, we don't expect the recent election results to change our business model, our growth outlook, or the return profile we will seek to achieve when deploying capital into growth. Maybe just to finish by putting it bluntly, we are the low cost producer of a critical commodity that the world, particularly the United States, is going to need more of, and therefore we feel that our position is very strong, particularly as we move forward and see more growth in the United States.

[Sean Steuart, MD Equity Research at TD Securities]

That's great detail.

[Sean Steuart, MD Equity Research at TD Securities]

Thanks for that.

[Sean Steuart, MD Equity Research at TD Securities]

Second question relates to offshore wind. It looks like the Ørsted transaction is, I would say, more of a focused financing deal with a fixed horizon for you guys, more so that as opposed to a strategic push into the asset

[Sean Steuart, MD Equity Research at TD Securities]

Class, can you speak to larger growth

[Sean Steuart, MD Equity Research at TD Securities]

aspirations and offshore wind? Having referenced the risk profile now, fitting into parameters that work for you guys.

[Connor Teske, CEO at Brookfield Renewable]

For sure. Maybe just to put some context on the Ørsted transaction, first and foremost, we are thrilled to be partnered with Ørsted, who are the global leader in offshore wind, and we are thrilled to be partnered with the global leader in perhaps what is one of their highest quality, largest and most established offshore wind platforms around the world, and the quality of the assets and the quality of the partner here is really what attracted us to the investment. In terms of the broader asset class, we're very bullish on offshore wind. We think it is a large, fast growing asset class.

[Connor Teske, CEO at Brookfield Renewable]

It's critical in many markets around the world and it needs significant amounts of capital and perhaps some of the headwinds in the asset class over the last two or three years position us as a capital provider who can support some businesses that maybe have less access to capital today than they have in the past. We will review opportunities in offshore wind the same way we review opportunities in any asset classes, judging the risk and return. But what I would say is we see far more attractive opportunities in that asset class today than probably at any point in the last five or six years. And therefore we hope there will be more to come.

[Sean Steuart, MD Equity Research at TD Securities]

Thanks for that, Connor. That's all I have for now.

[Operator]

Thank you. And our next question comes from the line of Robert Hope from Scotiabank. Your question, please.

[Robert Hope, Senior Equity Research Analyst at Scotiabank]

Good morning, everyone. I want to circle back on the U.S. and maybe dive a little bit deeper into your comments about being the low cost producer. We understand that the tax benefits often do pass through to customers, but can you maybe dive in a little deeper on what asset classes could be more impacted by changes to tax policy there and could that shift more towards wind versus solar or which asset class do you think has the best cost outlook regardless of subsidies?

[Connor Teske, CEO at Brookfield Renewable]

Thanks, Rob. In terms of which asset classes are most susceptible to change, we would purely be speculating at this point. Obviously the Republican administration has made some comments about certain asset classes. What we would say in general, however, and how we view the business is if you are focused in asset classes like onshore wind and solar, which are not the cheapest cost of electricity production from renewables, but the cheapest cost of electricity production, bar none. Today, if those asset classes benefit from tax credits or subsidies, all that allows us to do is simply offer a cheaper PPA to the end customer. In the event that any of those tax subsidies are rolled back or reduced, we will simply flow the lack of those subsidies through a higher PPA price to preserve our returns, our project returns.

[Connor Teske, CEO at Brookfield Renewable]

The key point there is because onshore wind and solar are so much cheaper than the alternatives, there is room to do that and still be the cheapest form of bulk electricity production. That is why we feel the vast, vast majority of our business, where we do almost entirely all of our renewable power development in the United States is so insulated from any changes. Clearly the sectors that potentially could be more exposed are higher cost sectors, sectors that are reliant on government subsidy or government support to either make them economic or to support their go forward growth. There are a few of those sectors. We are just fortunate that it's never been part of our business focus to invest in those, and that's why we're relatively calm about any change in government today.

[Robert Hope, Senior Equity Research Analyst at Scotiabank]

Appreciate that color and then maybe pivoting over to the Infinium investment. And more broadly, how are you looking at, we'll call it non-renewable power investments, the potential to be a little bit more on the bleeding edge. And I guess overall with such a large renewable backlog, how do these kind of investments fit in the framework?

[Connor Teske, CEO at Brookfield Renewable]

Sure, our business today is almost entirely renewables, and that continues to be the bulk of our growth today and our expected growth going forward. What we would say, however, is while we've dramatically enhanced the growth of our renewables business over the last several years, we've been selective in investing initially into a number of asset classes that we think will be critical to clean energy grids of the future, and the most notable ones there that we've invested in are nuclear, batteries, and biofuels. When it comes to assessing any investment into new asset classes, I would say our approach is pretty robust. We have the luxury of investing billions, if not tens of billions, of dollars into renewables growth each year.

[Connor Teske, CEO at Brookfield Renewable]

That gives us a very strong benchmark or threshold against which to adjust the risk adjusted returns of any other asset class or any other investment we make. And if we're investing in something that has either slightly higher construction or development risk, slightly higher revenue construct risk, is a less mature technology with a less mature supply chain. We of course need to be significantly rewarded for taking on those exposures relative to what we could achieve by just investing further in wind and solar. Take the example of Infinium here. Infinium sustainable aviation fuel is a new asset class for us. But really what we're investing here is the build out of a facility that is not the first of its kind. It's a proven technology. Similar facilities have been built out before.

[Connor Teske, CEO at Brookfield Renewable]

But exactly similar to our wind and solar business, we are building a facility that is backed by long-term take-or-pay contracts with high-quality corporate offtakers. And we saw a lot of similarities to producing this sustainable aviation fuel similar to how we do green power. And that's what gets us excited and gives us comfort about an investment like Infinium.

[Robert Hope, Senior Equity Research Analyst at Scotiabank]

Great. Thank you for the color.

[Operator]

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

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Great, thanks.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Hey Connor, you've talked a lot about the U.S. sector and I have one more question for you in terms of the U.S. elections. So obviously with the elections outcome we saw a big drop in share prices of many companies, even companies that don't have any U.S. exposure. Do you generally see more opportunities to deploy capital now with publicly listed names or even in projects where sponsors may be pulling out? Do you have a shopping list of companies or projects that are potentially significantly undervalued now?

[Connor Teske, CEO at Brookfield Renewable]

Perhaps the way to answer that question is very simply. Our investment pipeline remains incredibly robust and for years now our ability to deploy scale capital has been predicated on one, our ability to do large scale transfer transactions, two, our operating capabilities, particularly around power marketing and three, our access to capital. And perhaps tying that back to your question, the variability and volatility in share prices following the election results. All that will do is reduce access to capital for those that are reliant on the public markets. And I wouldn't say that's a new trend for us, but simply plays into a trend we've been seeing for a while. And as a result, we're very encouraged about the investment pipeline we have today.

[Connor Teske, CEO at Brookfield Renewable]

As mentioned at our investor day a couple months ago, we continue to expect to deploy increasing amounts of capital into growth in the future. That's very simply as a result of the demand we continue to see for our product and how our business model is well positioned to execute on that. I really think it's just the volatility in the stock market after results just plays to that theme of less access to capital for some market participants.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Great color. And switching gears a bit on the hydro side in terms of the $90 per MWh. And you mentioned that I think it's contracted to U.S. utilities.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Going forward.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

When you recontract additional facilities in the.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

U.S. do you expect, or are you?

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Seeing more direct demand from, let's say, big tech or data centers, or do you expect recontractings to continue to be with U.S. utilities?

[Connor Teske, CEO at Brookfield Renewable]

It's a great question. The point we would highlight here is power demand is going up very, very significantly. Whether we sell that directly to an end customer or we sell it to a utility who then passes it to an end customer, or we sell it to an end customer but through a virtual PPA that uses the electricity grid. All of this is driven by the same theme, that there is more end customer demand, and that shows up in our prices and the demand for our power, particularly the clean, dispatchable, baseload power that can come from hydro or nuclear that comes through in the contract, whether it's a direct, a virtual PPA or through a utility. Given what we're seeing in the market, I say we're going to see a mix of all those things.

[Connor Teske, CEO at Brookfield Renewable]

But the important takeaway from our perspective is regardless of how that power gets to the end consumer, the overwhelming things is the increase in demand, the increase in volume, and how that is driving a higher price in the contracts we are seeing.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Great.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

Thanks, Connor.

[Nelson Ng, VP Equity Research Analyst at RBC Capital Markets]

I'll leave there.

[Operator]

Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Rupert Merer from National Bank. Your question, please.

[Rupert Merer, MD and Senior Equity Research Analyst at National Bank]

Hi, good morning, everyone. Connor, you highlight the bifurcation and valuation between mature assets, more core, complex development assets. We're also seeing some weakness in the stock market and the volatility that you discussed. And we do seem to be seeing a wave of privatization. So I was wondering if you could quantify the difference in return expectations that you see with this bifurcation between mature and immature and between public valuations and private valuations.

[Connor Teske, CEO at Brookfield Renewable]

It's a great question. It's obviously going to differ by market, by asset class, by size of transaction, but we'll try and be as constructive as we can, and we'll share a couple data points with you within some of our development platforms, and we have a number of scale development platforms in core markets around the world. Probably the easiest place to see the difference between development returns and the market price for contracted operating assets is when you look at the development margin within an individual developer. I would say in general, our best developers around the world are seeing developer margins north of 400 or 450 basis points, and we have some developers around the world that are consistently delivering developers development margins in the 500 to 600 basis point range, depending on which asset class and which geography that might be.

[Connor Teske, CEO at Brookfield Renewable]

That might mean you're developing at, call it 13%-15%, hold to maturity returns and selling down at 8%-10%. Or in other markets that might mean you're developing at 15%-17% and selling down at 10% or 11%. So I would. That's probably the delta we're seeing in our most high performing and most attractive markets.

[Rupert Merer, MD and Senior Equity Research Analyst at National Bank]

Great.

[Rupert Merer, MD and Senior Equity Research Analyst at National Bank]

Thank you for the color. Wyatt, you've highlighted the contracts you signed recently, some attractive prices, $90 MWh, I think you suggested. If we look at the growth in demand in the U.S. for power, for data centers, it does seem like there's more demand than supply today. Supply is going to have a hard time keeping up. How price sensitive do you think the market is? How high can power prices go before your buyers you think will hit the pause button?

[Wyatt Hartley, CFO at Brookfield Renewable]

Yeah, look Rupert, what I would say is I think from our perspective, we thought that showing the 90 or sharing the $90 per MWh number was very constructive in the sense that there have been a number of transactions recently around the nuclear space that were also in and around those numbers. Not all of it was fully publicly disclosed, but I think the market is settled around it being around those numbers. And I think from our perspective, what we really want to highlight is that for a dispatchable or baseload clean generation, the demand for our product is as strong as ever.

[Wyatt Hartley, CFO at Brookfield Renewable]

And.

[Wyatt Hartley, CFO at Brookfield Renewable]

You can see it across multiple different markets with multiple different buyers. And that is obviously a very constructive thing in terms of how high the price can go. Look, we don't have a crystal ball that's any better than anyone else. But I think from our perspective, we are seeing, especially for the hydros, but on a broader basis for all of our assets, that there is a very constructive market out there and that's what we're capitalizing on.

[Rupert Merer, MD and Senior Equity Research Analyst at National Bank]

Great. I'll leave it there. Thanks. Some color.

[Operator]

Thank you. And our next question comes from the line of Mark Jarvi from CIBC. Your question please.

[Mark Jarvi, MD and Senior Equity Research Analyst at CIBC]

Yeah, good morning everyone. Maybe just going back to the U.S. election impacts and given there's some uncertainty, what do you think happens on M&A in the U.S. market and paying those valuations on development pipeline? Is there a chance that any of your ongoing asset sales in the U.S. take a pause? What do you think you have to see for clarity before the market opens up again?

[Connor Teske, CEO at Brookfield Renewable]

Hi Mark, if they are, we don't expect it to be material. Sorry to be redundant, but going back to that bifurcation that we're seeing in the market, the things that we are selling are heavily contracted, de-risked, high-quality, cash-generative operating. These things are pretty embedded cash flow streams at this point that aren't reliant on government subsidy or support programs. So yes, I think everyone's probably going to digest the news of this week, but we don't expect it to have a material impact on the types of assets that we are selling in the current market where there could be opportunity. It really, really ties back.

[Connor Teske, CEO at Brookfield Renewable]

To the.

[Connor Teske, CEO at Brookfield Renewable]

Question that was asked previously is: does the uncertainty of a new administration and some of the positions they might take in the future reduce access to capital for those that are reliant on it, particularly in the public markets, and that could actually lead to an increase in activity for us on the investment side. But we don't really foresee any material change in what's going to happen on our asset sales side.

[Mark Jarvi, MD and Senior Equity Research Analyst at CIBC]

Okay. And just coming back to the U.S. Hydro assets, some buyers, large tech buyers really focused on additionality. Microsoft deals kind of carried that way. Are you seeing any other change in tone around other large tech buyers in terms of additionality constraints or do you think they are willing to step in line to contract their U.S. hydro to pay that premium?

[Connor Teske, CEO at Brookfield Renewable]

It's a great question and there's no perfect answer to this. The real key is the broader market needs more power, and yes, certain buyers are more asked to acquire power from new build, but the broader market just needs as much generation, particularly low cost generation as it can get, so it doesn't matter if it's new build or existing power, there is still very significant demand. What we would say is given the scale of demand that we are seeing and particularly how it is accelerating going forward, different institutions, and this extends beyond simply the technology companies, different institutions are taking differing views on how much additionality is required.

[Connor Teske, CEO at Brookfield Renewable]

Is it a completely new build, wind and solar, or is investing hundreds of millions of dollars to enhance the capacity extend the life of a hydro, does that meet the additionality requirements to meet their needs to sign a long term corporate contract? So I would say, it's not a one size fits all scenario, but the broader demand is impacting both operating assets and new build assets the same.

[Mark Jarvi, MD and Senior Equity Research Analyst at CIBC]

Okay, and as last question just again, on the U.S. market view on nuclear and just the Westinghouse business, would you say the election outcome is neutral, positive to be determined at this point? Any initial perspective on that business?

[Connor Teske, CEO at Brookfield Renewable]

Yeah, it's a pretty hard positive in our minds. Obviously this administration has expressed support for nuclear and maybe it's worth just taking a minute to explain Westinghouse's business and how it can benefit as nuclear grows going forward. Westinghouse really has two components of its business model. It is the largest technology, product and service supplier to the nuclear power generation fleet globally and in particular the United States. So any growth or activity within the nuclear sector, Westinghouse will benefit. Whether it's from services, capacity upgrades, life extensions, fuel supply, any growth or activity in the existing fleet is possible, positive for Westinghouse. But then in addition to that, Westinghouse has not only the leading large scale nuclear reactor around the world, the AP1000, what might not be appreciated is Westinghouse also has the leading SMR small modular reactor technology.

[Connor Teske, CEO at Brookfield Renewable]

What's unique about Westinghouse's SMR technology is almost every other, if not every other SMR technology around the world is a first of its kind. First of its kind go through certain struggles in permitting, in design, in construction, et cetera. Westinghouse's SMR technology is the AP300. It is very simply the downsized AP1000. It is the same design, that same technology, the same fuel. Therefore, as not only the large scale reactor market grows as well as the SMR reactor grows, Westinghouse is exceedingly well positioned to be a leading and major participant in any new reactor growth in the United States or more broadly around the world. How are we viewing Westinghouse? It's not only going to benefit from the growth in nuclear in its core services business, but also in terms of new reactors.

[Connor Teske, CEO at Brookfield Renewable]

And then the additional benefit for us is we are uniquely positioned as the only renewable power player globally that can offer nuclear solutions that can complement our wind and solar offering to our customers. And we feel that's a very, very enviable position to be in today, particularly with the largest corporate clients like the large tech companies.

[Mark Jarvi, MD and Senior Equity Research Analyst at CIBC]

Okay, thanks for the time today.

[Operator]

Thank you. And our next question comes from the line of William Grippin from UBS, your question please.

[William Grippin, VP and Equity Research Analyst at UBS]

Thanks very much. Good morning. Sorry to do this, but just coming back to the policy point here. Obviously there's been a lot of hand wringing on what happens to the ITC. A lot of people forget it's been around since 1978 in some form and has been extended under multiple administrations since that time, both Republican and Democratic. So I generally agree with you. I think any risk of change there.

[William Grippin, VP and Equity Research Analyst at UBS]

Is very, very low.

[William Grippin, VP and Equity Research Analyst at UBS]

But more to the point, I think based on our conversations over the last few days, it seems like a lot of investors have actually forgotten about the IRS guidelines around safe harboring, which potentially enable developers to lock in the current ITC level through 2029. Just want to give you an opportunity to talk about maybe what you're doing on that front and help maybe assuage some of these concerns about the impacts of potential policy changes.

[Connor Teske, CEO at Brookfield Renewable]

Yeah, certainly it's a good point, and I think the point we would reiterate most specifically is two things. One, we would highlight your point that many of these support programs have been along a lot longer than just the previous administration. They date back far before that and importantly have very strong bipartisan support. It's very well known that many Republican states were actually the largest beneficiaries of IRA. So while we wouldn't rule out some changes to those tax credits and things like that, if they are going to get changed, our view is we don't expect it to be meaningful, and even if it is, as discussed previously, our business is well insulated.

[Connor Teske, CEO at Brookfield Renewable]

Maybe just piggybacking on your second point, I might come at it from a slightly different perspective, which is the scale of our business both globally and in the United States really puts us in a favorable position that we are extremely well positioned to handle any changes, whatever they might be. We have globally diversified supply chains. We have one of, if not the largest renewables business in the United States that can take advantage of any of the policies and procedures like the ones you mentioned. We're always across those different initiatives to derisk our broader business. It doesn't end solely at tax credits. It goes to things like supply chain and procurement as well.

[Connor Teske, CEO at Brookfield Renewable]

Regardless of what changes come, we think our business will be well positioned and we really struggle to see a situation where we don't continue to grow and accelerate our growth in the United States.

[William Grippin, VP and Equity Research Analyst at UBS]

Great.

[William Grippin, VP and Equity Research Analyst at UBS]

Thanks very much, and just last small one here, but could you talk to some of the year on year drivers you're expecting to contribute to what appears to be accelerating 4th quarter FFO per share growth implied by the guidance.

[Connor Teske, CEO at Brookfield Renewable]

Yeah, sure. Perhaps I'll start and then Wyatt, please jump in. I would say two, three things and Wyatt, if I'm missing any of the big ones, let me know. One is we've obviously deployed an incredibly significant amount of capital into growth, both M&A and development over the last 12 months. That is just increasingly run rating through our numbers, particularly the deployment since Q4 last year and, and maybe even some of the transactions we'll get done in Q4 that will begin to contribute this year will be the biggest driver, there's no question. Secondly, a number of our businesses are performing very well. In particular some of the largest, most cash generative businesses, our hydros in Colombia, Westinghouse, they continue to provide great tailwinds to our underlying earnings. The third point I would make is we have announced some asset recycling this year.

[Connor Teske, CEO at Brookfield Renewable]

There are going to be some gains on sale that will contribute in the fourth quarter that will provide an additional kind of modest uplift versus the two more significant drivers of growth. The first two things I mentioned, Wyatt, I don't know, am I missing anything?

[Wyatt Hartley, CFO at Brookfield Renewable]

You captured the big drivers. The only thing I would add is just, and this is very routine across our business, but we are continuing to capture stronger prices both in terms of the inflation indexation that is built into our contracts, but then to the point we've referenced a number of times around the hydros just incrementally capturing more value in those and so those, that is also expected to benefit in the fourth quarter.

[William Grippin, VP and Equity Research Analyst at UBS]

Got it.

[William Grippin, VP and Equity Research Analyst at UBS]

Thanks very much. That's all for me.

[Operator]

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

[Connor Teske, CEO at Brookfield Renewable]

Thank you everyone for dialing into our earnings call. We appreciate the ongoing interest and support of our business and we look forward to updating you with our Q4 and year end results early in the new year. Thank you and have a great day.

[Operator]

Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Participants

Executives

• Ignacio Paz-Ares, Managing Partner and Head of European Renewable Power and Transition
• Connor Teske, CEO
• Wyatt Hartley, CFO

Analysts

• Sean Steuart, MD Equity Research at TD Securities
• Robert Hope, Senior Equity Research Analyst at Scotiabank
• Mark Jarvi, MD and Senior Equity Research Analyst at CIBC
• Rupert Merer, MD and Senior Equity Research Analyst at National Bank
• William Grippin, VP and Equity Research Analyst at UBS
• Nelson Ng, VP Equity Research Analyst at RBC Capital Markets