Brookfield Renewable Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Brookfield Renewable reported $421 million in funds from operations, up 13% year over year, while FFO per unit increased 11% to $0.62. The company commissioned 1.3 gigawatts of capacity and signed power purchase agreements covering 2.6 gigawatts.
• Major battery-storage expansion: The planned $3 billion acquisition of Aypa will roughly double Brookfield Renewable’s operating and under-construction battery capacity to about 6 gigawatts and expand its development pipeline to more than 80 gigawatts.
• Strong capital activity and corporate simplification: The company completed approximately $12 billion in financings and expects about $2.2 billion from asset sales. It also plans to combine BEP and BEPC into one publicly traded corporation, with investor votes expected in October and closing targeted by year-end.

Brookfield Renewable NYSE: BEPC reported record second-quarter funds from operations as the renewable power operator expanded its battery storage platform, advanced nuclear development efforts through Westinghouse and continued recycling capital from operating assets.

Funds from operations, or FFO, totaled $421 million in the second quarter, up 13% from a year earlier, while FFO per unit rose 11% to $0.62. For the trailing 12 months, FFO reached $1.444 billion, or $2.14 per unit, representing year-over-year growth of 14% and 11%, respectively.

Chief Executive Officer Connor Teskey said the company commissioned 1.3 gigawatts of capacity during the quarter and signed power purchase agreements for 2.6 gigawatts from its advanced development pipeline. Brookfield Renewable deployed or committed $5 billion toward growth investments, including its announced acquisition of battery storage company Aypa, with $760 million attributable to BEP.

Battery Storage Expansion

Chief Investment Officer Jay Vayna said Brookfield Renewable agreed to acquire Aypa, described as North America’s largest standalone battery storage platform, for $3 billion, or about $420 million net to BEP.

Aypa has approximately 3 gigawatts of highly contracted operating and under-construction assets, another 3.5 gigawatts of contracted projects and a development pipeline exceeding 20 gigawatts, Vayna said. The acquisition will double Brookfield Renewable’s operating and under-construction battery capacity to roughly 6 gigawatts and increase its development pipeline by more than 30% to over 80 gigawatts.

Vayna said Aypa, combined with Brookfield Renewable’s acquisition of Neoen at the end of 2024, establishes the company as a leading global battery storage platform. He said management sees opportunities to create value by accelerating development, optimizing capital structure and commercial strategy, and recycling assets over time.

During the question-and-answer session, Teskey called batteries the company’s fastest-growing technology and said Brookfield Renewable is pursuing storage investments alongside new wind and solar projects, on a standalone basis, and at existing wind and solar sites. He said the company has relationships with major domestic and international battery suppliers and is entering global framework agreements for battery equipment.

Teskey said battery levelized costs of energy have declined substantially over the past 24 months. While input costs can cause short-term variability, he said Brookfield Renewable expects long-term battery LCOEs to continue declining as supply chains expand and technology improves.

Nuclear Development and Operating Results

Teskey said Westinghouse, Brookfield Renewable’s nuclear technology business, is benefiting from demand for reactor life extensions, restarts and new-build programs. The U.S. Department of Energy issued a commitment for up to $17.5 billion of loan facilities to support procurement of long-lead equipment for up to 10 Westinghouse AP1000 reactors in the United States.

The financing program is expected to accelerate deployment timelines by up to three years by allowing long-lead items to be procured before final investment decisions, Teskey said. Brookfield Renewable is working with seven utility partners that have identified project sites and are progressing toward long-lead equipment orders.

Chief Financial Officer Patrick Taylor said the hydroelectric segment generated $336 million of FFO, supported by strong Canadian generation, continued performance in Colombia and increased ownership in Isagen. Realized gains from the sale of an additional 25% interest in a non-core Maine hydro portfolio offset weaker hydrology at U.S. operations.

Solar and wind operations generated $166 million of FFO, benefiting from projects commissioned over the past year and gains from asset sales. Distributed energy, storage and sustainable solutions contributed $84 million of FFO. Taylor said Westinghouse FFO rose more than 60% from the prior-year period, excluding a large new-reactor licensing fee recorded in the second quarter of the previous year.

Financing and Asset Recycling

Brookfield Renewable completed about $12 billion of financings during the quarter and ended the period with more than $5.1 billion of available liquidity, Taylor said.

The company refinanced its Safe Harbor hydro portfolio after signing a 20-year contract with Google last year. The financing secured approximately $1.2 billion of long-term capital and produced aggregate up-financing of $700 million, or $200 million net to BEP. Neoen also completed a €650 million bond issuance, while Brookfield Renewable issued C$200 million of preferred units after upsizing the offering in response to demand.

Capital recycling activity included agreed or completed asset sales expected to generate about $2.2 billion of proceeds, or $630 million net to BEP. The company agreed to sell a 570-megawatt European solar and wind portfolio, closed the sale of 2.1 gigawatts of assets to Northview Energy, and sold another 25% interest in its Maine hydro portfolio. It also agreed to sell solar assets and small non-core hydro assets in Colombia.

Responding to an analyst question, Taylor said gains reported in other income increasingly reflect assets developed by Brookfield Renewable as well as selected non-core asset disposals, though not all sale gains are reported in that line item.

Corporate Simplification Vote

Brookfield Renewable is pursuing a transaction to combine BEP and BEPC into a single publicly traded corporation, subject to required approvals. Taylor said the company expects the transaction to be tax-deferred for Canadian and U.S. investors and said it would improve trading liquidity, broaden investor access and eliminate partnership tax reporting forms for BEP unitholders.

There would be no changes to dividends, Brookfield’s ownership, management fees, preferred units or public debt, according to Taylor. He said required shareholder and unitholder votes are expected in October, with closing targeted by year-end if approvals are obtained. The transaction requires BEP unitholder approval, while BEPC shareholder approval is not a condition for the transaction to proceed.

About Brookfield Renewable (NYSE:BEPC)

Brookfield Renewable Corporation NYSE: BEPC is a leading global owner, operator and developer of renewable power assets. Through its preferred equity securities, BEPC provides investors with exposure to a diversified portfolio of hydropower, wind, solar and energy storage facilities that are underpinned by long-term contractual revenues. The company focuses on delivering clean energy to wholesale and retail markets across multiple jurisdictions, leveraging the experience and financial backing of its parent, Brookfield Asset Management.

The company's operations span North America, South America, Europe and Asia-Pacific, with more than 23,000 megawatts of operational capacity.

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