our operations

We invest in renewable assets directly, as well as with institutional partners, joint venture partners and through other arrangements. Our portfolio of assets has approximately 17,400 megawatts (“MW”) of capacity and annualized long-term average (“LTA”) generation of approximately 53,400 gigawatt hours (“GWh”), in addition to a development pipeline of approximately 8,000 MW, making us one of the largest pure-play public renewable companies in the world. We leverage our extensive operating experience to maintain and enhance the value of assets, grow cash flows on an annual basis and cultivate positive relations with local stakeholders. The table below outlines our consolidated portfolio as at March 31, 2019:

											Storage
			River				Capacity		LTA (1)		Capacity
				Systems	Facilities		(MW)		(GWh)		(GWh)
Hydroelectric
	North America
		United States		30		136		2,886		11,982		2,523
		Canada		19		33		1,361		5,177		1,261
				49		169		4,247		17,159		3,784
	Colombia			6		6		2,732		14,476		3,703
	Brazil			27		44		946		4,924		-
				82		219		7,925		36,559		7,487
Wind
	North America
		United States		-		26		1,983		6,934		-
		Canada		-		4		484		1,437		-
				-		30		2,467		8,371		-
	Europe			-		50		1,247		2,813		-
	Brazil			-		19		457		1,766		-
	Asia (2)			-		7		277		555		-
				-		106		4,448		13,505		-
Solar (2)				-		545		1,787		3,371		-
Storage (3)				2		4		2,698		-		5,220
Other (4)				-		6		580		-		-
				84		880		17,438		53,435		12,707

⁽¹⁾            LTA is calculated based on our portfolio as at March 31, 2019, reflecting all facilities on a consolidated and an annualized basis from the beginning of the year, regardless of the acquisition, disposition or commercial operation date. See “Part 8 – Presentation to Stakeholders and Performance Measurement” for an explanation on our methodology in computing LTA and why we do not consider LTA for our Storage and Other facilities.

⁽²⁾            Includes eleven solar facilities (210 MW) in South Africa, Thailand and Malaysia and one wind facility (27 MW) in South Africa that have been presented as Assets held for sale.

⁽³⁾            Includes pumped storage in North America (600 MW) and Europe (2,088 MW) and battery storage in North America (10 MW).

⁽⁴⁾            Includes four biomass facilities in Brazil (175 MW), one cogeneration plant in Colombia (300 MW), and one cogeneration plant in North America (105 MW).

The following table presents the annualized long-term average generation of our portfolio as at March 31, 2019 on a consolidated  and quarterly basis:

GENERATION (GWh) (1)			Q1	Q2	Q3	Q4	Total
Hydroelectric
	North America
		United States	3,404	3,474	2,178	2,926	11,982
		Canada	1,228	1,508	1,223	1,218	5,177
			4,632	4,982	3,401	4,144	17,159
	Colombia		3,508	3,509	3,571	3,888	14,476
	Brazil		1,215	1,228	1,241	1,240	4,924
			9,355	9,719	8,213	9,272	36,559
Wind
	North America
		United States	1,878	1,853	1,394	1,809	6,934
		Canada	400	345	273	419	1,437
			2,278	2,198	1,667	2,228	8,371
	Europe		894	623	533	763	2,813
	Brazil		439	441	443	443	1,766
	Asia (2)		131	148	135	141	555
			3,742	3,410	2,778	3,575	13,505
Solar (2)			680	1,025	1,031	635	3,371
Total			13,777	14,154	12,022	13,482	53,435

⁽¹⁾            LTA is calculated based on our portfolio as at March 31, 2019, reflecting all facilities on an annualized basis from the beginning of the year, regardless of the acquisition, disposition or commercial operation date. See “Part 8 – Presentation to Stakeholders and Performance Measurement” for an explanation on our methodology in computing LTA and why we do not consider LTA for our Storage and Other facilities.

⁽²⁾            Includes eleven solar facilities (388 GWh) in South Africa, Thailand and Malaysia and one wind facility (82 GWh) in South Africa that have been presented as Assets held for sale.

The following table presents the annualized long-term average generation of our portfolio as at March 31, 2019 on a proportionate  and quarterly basis:

⁽¹⁾            LTA is calculated based on our portfolio as at March 31, 2019, reflecting all facilities on an annualized basis from the beginning of the year, regardless of the acquisition, disposition or commercial operation date. See “Part 8 – Presentation to Stakeholders and Performance Measurement” for an explanation on our methodology in computing LTA and why we do not consider LTA for our Storage and Other facilities.

⁽²⁾            Includes eleven solar facilities (74 GWh) in South Africa, Thailand and Malaysia and one wind facility (16 GWh) in South Africa that have been presented as Assets held for sale.

Statement Regarding Forward-Looking Statements and Use of Non-IFRS Measures

This Interim Report contains   forward-looking information within the meaning of U.S. and Canadian securities laws. We may make such statements in this Interim Report and in other filings with the U.S. Securities and Exchange Commission (“SEC”) and with securities regulators in Canada - see “PART 9 – Cautionary Statements”. We make use of non-IFRS measures in this Interim Report - see “PART 9 – Cautionary Statements”. This Interim Report, our Form 20-F and additional information filed with the SEC and with securities regulators in Canada are available on our website at https://bep.brookfield.com , on the SEC’s website at www.sec.gov or on SEDAR’s website at www.sedar.com .

  

 

Letter to Unitholders

 

 

We continue to advance our key priorities for the business. Our long-term objective remains focused on generating 12% to 15% total returns on a per-unit basis. Our approach over the last 20 years has consistently been to acquire high quality assets and businesses, surface value over time through operational improvements while maintaining a low risk profile underpinned by an investment grade balance sheet and strong access to capital. More recently, we have reached a scale where we can add asset sales as an alternative source of low cost funding which can be redeployed accretively into our acquisition and development program. The first quarter of 2019 was strong from an operational perspective and also highlights strong execution across all of our business drivers.

Of note, this quarter we:

·           Generated FFO per unit of $0.73, an 18% increase over the prior year;

·           Agreed to invest approximately $630 million of capital (~$160 million net to BEP) across two transactions (one in Canada and one in India) at returns commensurate with our long-term targets;

·           Commissioned a 19 megawatt hydroelectric facility in Brazil, and advanced an additional 134 megawatts of hydro, wind, storage and rooftop solar construction projects globally;

·           Raised over $400 million of proceeds through asset sale initiatives and the issuance of preferred units, and ended the quarter with $2.3 billion of available liquidity;

·           Reduced our FFO payout ratio on an annualized basis to below 90%.

Investments

In March 2019, we, together with our institutional partners, agreed to invest C$750 million (C$188 million net to BEP) in 7% convertible securities of TransAlta Corporation, the largest power producer in Alberta, Canada. The investment will occur in two tranches; C$350 million was funded at initial closing on May 1st, and C$400 million will be funded in October 2020. The convertible securities provide us with the option to convert into an interest in TransAlta’s 813 megawatt portfolio of high quality hydroelectric assets in Alberta between 2025 and 2028, based on a multiple of 13 times the average annual EBITDA over the three years prior to conversion. As part of the transaction, we also agreed to increase our ownership of TransAlta’s common shares from approximately 5% today to over 9%. The TransAlta investment was the culmination of a multi-year dialogue and establishes a strategic relationship with the company to help advance its growth strategy as it transitions to a low carbon energy future. 

In India, we have been assessing opportunities over the last number of years but have generally remained patient as valuations remain high. Today, we are seeing compelling opportunities driven by capital constraints in the renewable power sector. We are pleased to announce that in April we entered into an agreement to acquire two wind farms totaling 210 megawatts in India for $70 million ($18 million net to BEP), bringing our total portfolio in that country to 510 megawatts. These assets are high quality, recently constructed with a track record of operating performance, and are fully contracted under a long-term, 25 year power purchase agreement with a credit-worthy utility.

Operations

During the first quarter, we generated FFO of $227 million, up from $193 million in the prior year.

Our business continues to benefit from growing resource diversity, limited off-taker concentration risk, and the build-out of our development pipeline. During the quarter, overall generation exceeded the long-term average by 7%. As we have stated for many years, we do not manage the business based on under- or over-performance of generation relative to the long-term average and do not factor this into our planning. Instead, our focus remains on diversifying the business which, over the long term, mitigates exposure to resource volatility, regional or market disruptions, and potential credit events. For example, given the breadth of our business, the recent events with PG&E will have no impact on our business (less than 0.1% of exposure). Furthermore, our single largest non-government third-party customer represents only 3% of generation, providing strong downside protection and safeguarding our cash flows. 

During the first quarter, our hydroelectric segment contributed $218 million to FFO. In North America, generation was above the long-term average, and we ended the quarter with above-average reservoir levels in Canada and PJM where we have significant seasonal storage flexibility. Additionally, we saw strong results in South America, supported by high prices for our energy and ancillary products. 

We continue to make progress on contracting initiatives for our hydroelectric portfolio, signing 15 contracts in the quarter for a total of approximately 2,300 gigawatt-hours per year. Our focus in Colombia and Brazil has been to lengthen the term of our power purchase contracts, as power price volatility in these markets provides an opportunity to stabilize future revenues while locking in upside as our contracts are generally at or below market.

Our wind and solar businesses contributed $67 million to FFO during the quarter, a 43% increase relative to the prior year as we benefitted from acquisitions and contributions from recently commissioned projects. We continue to generate stable revenues from these assets as we benefit from the diversification of our fleet and highly contracted cash flows with long duration power purchase agreements. Our storage facilities and other operations, which are not reliant on power prices but rather sell services to the grid, contributed $7 million to FFO during the quarter. 

We commissioned a 19 megawatt hydroelectric facility in Brazil from our development pipeline during the quarter.  In addition, we continue to build out 134 megawatts of hydroelectric, wind, solar and storage projects that are currently under construction and are expected to contribute $13 million to FFO once commissioned. We are also advancing our global hydro, wind, solar and distributed generation development pipeline, including 636 megawatts of construction-ready and advanced stage projects through final permitting and securing a route-to-market. We are also assessing 220 megawatts of repowering projects in New York, California and Hawaii, all markets where renewables play a critical role in providing low cost, clean energy. 

Balance Sheet and Liquidity

Our balance sheet remains strong with $2.3 billion of available liquidity at quarter-end. We have no material debt maturities over the next four years and our overall debt duration is 10 years. We remain well protected from foreign exchange volatility due to our hedging program. Accordingly, an overall 10% move in the currencies of markets we operate in would have an overall 4% impact to our FFO.

During the quarter we raised $400 million through asset sales and the issuance of preferred units. We completed the sale an additional 25% interest in a portfolio of Canadian hydroelectric assets. We also advanced the sales of our non-core portfolios in South Africa, Thailand and Malaysia that, once closed, will generate an additional $90 million of total liquidity to BEP. 

Outlook

Brookfield Renewable Partners L.P.                                                                   Interim Report                                                                                        March 31, 2019                          

Page 3  

Looking ahead, we have set up our business such that we are well positioned to deliver strong results during all points in the economic cycle. Should this protracted bull market continue into the foreseeable future, we will continue to execute on the same strategy that we have pursued over the last several years: search for pockets of capital scarcity and multifaceted transactions in order to deliver on our return targets, finance the business on an investment grade basis, and leverage our operating expertise to enhance value through operating levers. Should markets weaken, we believe our strong balance sheet, liquidity and robust asset sales program will reduce the need to issue equity to fund growth. Accordingly, we believe we are one of the few companies in the sector with a strategy and the financial flexibility to benefit during periods of both market strength and weakness.

As always, we remain focused on delivering to our unitholders long-term total returns of 12% to 15% on a per unit basis. We thank you for your continued support and we look forward to updating you on our progress in that regard.

Sincerely,

Sachin Shah

Chief Executive Officer

May 2, 2019

  

Brookfield Renewable Partners L.P.                                                                   Interim Report                                                                                        March 31, 2019                          

Page 4  

Our Competitive Strengths

Brookfield Renewable Partners L.P. ("Brookfield Renewable") is a globally diversified, multi-technology, owner and operator of renewable power assets.

Our business model is to utilize our global reach to acquire and develop high quality renewable power assets below intrinsic value, finance them on a long-term, low-risk and investment grade basis through a conservative financing strategy and then optimize cash flows by applying our operating expertise to enhance value.

One of the largest, public pure play renewable businesses globally.   Brookfield Renewable has a 20 year track record as a publicly-traded operator and investor in the renewable power sector. Today we have a large, multi-technology and globally diversified portfolio of pure-play renewable assets that are supported by over 2,500 experienced operators. Brookfield Renewable invests in renewable assets directly, as well as with institutional partners, joint venture partners and in other arrangements. Our portfolio consists of approximately 17,400 MW of installed capacity largely across four continents, a development pipeline of approximately 8,000 MW, and annualized long-term average generation on a proportionate basis of approximately 26,000 GWh.

The following charts illustrate annualized long-term average generation on a proportionate basis:

Diverse and high quality assets with hydroelectric focus.   Brookfield Renewable has a complementary portfolio of hydroelectric, wind, solar and storage facilities. Our portfolio includes utility-scale facilities, back-up storage power, and distributed power generation. Hydroelectric power comprises the significant majority of our portfolio, and is the highest value renewable asset class as one of the longest life, lowest-cost and most environmentally-preferred forms of power generation. Hydroelectric plants have high cash margins, storage capacity with the capability to produce power at all hours of the day, and the ability to sell multiple products in the market including energy, capacity and ancillaries. Our wind and solar facilities provide exposure to two of the fastest growing renewable power sectors, with high cash margins, zero fuel input cost, and diverse and scalable applications including distributed generation. Our storage facilities provide the markets in which they are located with critical services to the grid and dispatchable generation. With our scale, diversity and the quality of our assets, we are competitively positioned relative to other power generators, providing significant scarcity value to our investors.  

Stable, diversified and high quality cash flows with attractive long-term value for LP Unitholders.   We intend to maintain a highly stable, predictable cash flow profile sourced from a diversified portfolio of low operating cost, long-life hydroelectric, wind and solar assets that sell electricity under long-term, fixed

price contracts with creditworthy counterparties. Approximately 90% of our 2019 proportionate generation output is contracted to public power authorities, load-serving utilities, industrial users or to affiliates of Brookfield Asset Management. Our power purchase agreements have a weighted-average remaining duration of 14 years, on a proportionate basis, providing long-term cash flow visibility.

Strong financial profile and conservative financing strategy. Brookfield Renewable maintains a robust balance sheet, strong investment grade rating, and access to global capital markets to ensure cash flow resiliency through the cycle. Our approach to financing is to raise the majority of our debt in the form of asset-specific, non-recourse borrowings at our subsidiaries on an investment grade basis with no financial maintenance covenants. Approximately 95% of our debt is either investment grade rated or sized to investment grade. Our corporate debt to total capitalization is 15% and 80% of our proportionate borrowings are non-recourse. Corporate borrowings and proportionate non-recourse borrowings have weighted-average terms of approximately seven and ten years, respectively, with no material maturities over the next four years. Approximately 85% of our financings are fixed rate, and only 7% of our debt in North America and Europe is exposed to changes in interest rates, on a proportionate basis. Our available liquidity as at March 31, 2019 is approximately $2.3 billion of cash and cash equivalents, investments in marketable securities and the available portion of credit facilities.

Best-in class operating expertise.   Brookfield Renewable has over 2,500 experienced operators and over 140 power marketing experts that are located across the globe to help optimize the performance and maximize the returns of all our assets. Our expertise in operating and managing power generation facilities span over 100 years and include full operating, development and power marketing capabilities.

Well positioned for cash flow growth. We are focused on driving cash flow growth from existing operations, fully funded by internally generated cash flow, including inflation escalations in our contracts, margin expansion through revenue growth and cost reduction initiatives, and building out our approximately 8,000 MW proprietary development pipeline at premium returns. While we do not rely on acquisitions to achieve our growth targets, our business has upside from mergers and acquisitions on an opportunistic basis. We employ a contrarian strategy, and our global scale and multi-technology capabilities allow us to rotate capital where it is scarce in order to earn strong risk-adjusted returns. We take a disciplined approach to allocating capital into development and acquisitions with a focus on downside protection and preservation of capital. Since 2013, we have deployed $3.3 billion in equity as we have invested in, acquired, or commissioned 50 hydroelectric facilities totaling approximately 4,200 MW, 103 wind facilities totaling approximately 3,900 MW, 545 solar facilities totaling approximately 1,800 MW, four biomass facilities totaling 175 MW, two hydroelectric pumped storage facilities and one battery storage asset totaling 2,098 MW and one 300 MW cogeneration plant. Our ability to develop and acquire assets is strengthened by our established operating and project development teams across the globe, strategic relationship with Brookfield Asset Management, and our liquidity and capitalization profile. We have, in the past, and may continue in the future to pursue the acquisition or development of assets through arrangements with institutional investors in Brookfield Asset Management sponsored or co-sponsored partnerships.

Attractive distribution profile.   We pursue a strategy which we expect will provide for highly stable, predictable cash flows sourced from predominantly long-life hydroelectric assets ensuring a sustainable distribution yield. We target a long-term distribution growth rate in a range of 5% to 9% annually.

Management’s Discussion and Analysis for the three months ended March 31, 2019

This Management’s Discussion and Analysis for the three months ended March 31, 2019 is provided as of May 2, 2019. Unless the context indicates or requires otherwise, the terms “Brookfield Renewable”, “we”, “us”, and “our” mean Brookfield Renewable Partners L.P. and its controlled entities. The ultimate parent of Brookfield Renewable is Brookfield Asset Management Inc. (“Brookfield Asset Management”). Brookfield Asset Management and its subsidiaries, other than Brookfield Renewable, are also individually and collectively referred to as “Brookfield” in this Management’s Discussion and Analysis.

Brookfield Renewable’s consolidated equity interests include the non-voting publicly traded limited partnership units (“LP Units”) held by public unitholders and Brookfield, redeemable/exchangeable partnership units held by Brookfield (“Redeemable/Exchangeable partnership units”), in Brookfield Renewable Energy L.P. (“BRELP”) a holding subsidiary of Brookfield Renewable, and general partnership interest (“GP interest”) in BRELP held by Brookfield. Holders of the GP interest, Redeemable/Exchangeable partnership units, and LP Units will be collectively referred to throughout as “Unitholders”, “Units”, or as “per Unit”, unless the context indicates or requires otherwise. The LP Units and Redeemable/Exchangeable partnership units have the same economic attributes in all respects. See – “PART 8 – Presentation to Stakeholders and Performance Measurement”. Brookfield Renewable’s non-controlling interests include preferred equity consisting of Class A Preference Shares of Brookfield Renewable Power Preferred Equity Inc. (“Class A Preference Shares”). Brookfield Renewable Partners L.P. has also issued capital of preferred limited partnership units (“Preferred Units”).

Brookfield Renewable’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), which require estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the amounts of revenue and expense during the reporting periods.

Certain comparative figures have been reclassified to conform to the current year’s presentation.

References to $, C$, €, R$, and COP are to United States (“U.S.”) dollars, Canadian dollars, Euros, Brazilian reais and Colombian pesos, respectively. Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars.

For a description on our operational and segmented information and for the non-IFRS financial measures we use to explain our financial results see “PART 8 – Presentation to Stakeholders and Performance Measurement”. For a reconciliation of the non-IFRS financial measures to the most comparable IFRS financial measures, see “PART 4 – Financial Performance Review on Proportionate Information – Reconciliation of non-IFRS measures”. This Management’s Discussion and Analysis contains forward looking information within the meaning of U.S. and Canadian securities laws. Refer to – “PART 9 – Cautionary Statements” for cautionary statements regarding forward-looking statements and the use of non-IFRS measures. Our Annual Report and additional information filed with the Securities Exchange Commission (“SEC”) and with securities regulators in Canada are available on our website ( https://bep.brookfield.com ), on the SEC’s website ( www.sec.gov/edgar.shtml ), or on SEDAR ( www.sedar.com ).  

Organization of the Management’s Discussion and Analysis

PART 1 – Q1 2019 Highlights	8	PART 5 – Liquidity and Capital Resources
		Capitalization and available liquidity	25
PART 2 – Financial Performance Review on		Borrowings	26
Consolidated Information	11	Consolidated statements of cash flows	27
		Shares and units outstanding	29
PART 3 – Additional Consolidated Financial		Dividends and distributions	30
Information		Contractual obligations	30
Property, plant and equipment	12	Off-statement of financial position arrangements	30
Related party transactions	12
Equity	13	PART 6 - Selected Quarterly Information
		Summary of historical quarterly results	31
PART 4 – Financial Performance Review on
Proportionate Information		PART 7 - Critical Estimates, Accounting
Proportionate Results for the three months		Policies and Internal Controls	32
ended March 31	15
Reconciliation of non-IFRS measures	20	PART 8 - Presentation to Stakeholders and	35
Contract profile	23	Performance Measurement
		PART 9 - Cautionary Statements	38

Brookfield Renewable Partners L.P.                                                                   Interim Report                                                                                        March 31, 2019                          

Page 7 2      

PART 1 –  Q1 2019 HIGHLIGHTS

THREE MONTHS ENDED MARCH 31
(MILLIONS, EXCEPT AS NOTED)		2019		2018
Operational information
Capacity (MW)		17,438		16,308
Total generation (GWh)
Long-term average generation		13,761		12,852
Actual generation		14,125		12,880
Proportionate generation (GWh)
Long-term average generation		6,776		6,351
Actual generation		7,246		6,694
Average revenue ($ per MWh)		76		75
Selected financial information (1)
Net income attributable to Unitholders	$	43	$	8
Basic income per LP Unit		0.14		0.03
Consolidated Adjusted EBITDA (2)		652		582
Proportionate Adjusted EBITDA (2)		395		351
Funds From Operations (2)		227		193
Funds From Operations per Unit (1)(2)		0.73		0.62
Distribution per LP Unit		0.515		0.49

⁽¹⁾          For the three months ended March 31, 2019, weighted average LP Units, Redeemable/Exchangeable partnership units and GP interest totaled 311.1 million (2018: 312.7 million).

⁽²⁾          Non-IFRS measures. For reconciliations to the most directly comparable IFRS measure, see “PART 4 – Financial Performance Review on Proportionate Information - Reconciliation of Non-IFRS Measures” and “PART 9 – Cautionary Statements”.

		Mar 31		Dec 31
(MILLIONS, EXCEPT AS NOTED)		2019		2018
Liquidity and Capital Resources
Available liquidity	$	2,311	$	1,974
Debt to capitalization - Corporate		15%		15%
Debt to capitalization - Consolidated		32%		32%
Borrowings non-recourse to Brookfield Renewable on a proportionate basis		80%		75%
Floating rate debt exposure on a proportionate basis (1)		7%		7%
Corporate borrowings
Average debt term to maturity		6 years		7 years
Average interest rate		4.4%		4.4%
Subsidiary borrowings on a proportionate basis (2)
Average debt term to maturity	10 years		10 years
Average interest rate		5.4%		5.4%

⁽¹⁾          Excludes 5% floating rate debt exposure of certain foreign regions outside of North America and Europe due to the high cost of hedging associated with those regions.

⁽²⁾          Includes non-recourse borrowings put in place after March 31, 2019.

Operations

Funds From Operations increased 18% to $227 million or $0.73 on a per Unit basis, supported by contributions from acquisitions and recently commissioned facilities and the advancement of organic growth initiatives.

·           Relatively higher realized prices on the back of our commercial and re-contracting initiatives

·           Higher margins due to the benefit from our cost-reduction initiatives in the United States and Colombia

·           Marginally higher same-store generation versus the prior year as both periods benefitted from above average generation (7% and 5% above LTA, respectively)

Distributions of $0.515 per LP Unit in the first quarter of 2019 represents an increase of 5% over the prior period.

Net income attributable to Unitholders increased $35 million compared to the prior period due primarily to the above noted increase in Funds From Operations. Basic net income of $0.14 per LP Unit increased from $0.03 per LP Unit in the prior period primarily due to the increases mentioned above.

Continued to focus on extending our contract profile.

·           In Colombia, we contracted ~1,118 GWh/year, including individual contracts with up to ten years in duration

·           In Brazil, we contracted ~404 GWh/year with high quality counterparties, including a contract to become the exclusive power supplier to one of Brazil’s largest telecommunications company

Liquidity and Capital Resources

Continued to maintain a strong balance sheet.

·           Available liquidity of approximately $2.3 billion at March 31, 2019 and a well-laddered debt maturity profile with no material debt maturities in the next four years and average project debt duration of ten years

Accessed diverse sources of capital during the quarter to generate over $400 million of liquidity.

·           Issued C$175 million of Preferred Units at a coupon rate of 5.75%

·           Executed on the sale of an additional 25% interest in a portfolio of select Canadian hydroelectric assets

Growth and Development

In March 2019, we agreed to invest C$750 million in 7% convertible securities of TransAlta Corporation (“TransAlta”). The investment will occur in two tranches; C$350 million was funded at initial closing on May 1, 2019, and C$400 million will be funded in October 2020. The convertible securities provide us with the option to convert into an up to 49% interest in TransAlta’s 813 megawatt hydroelectric portfolio in Alberta, Canada between 2025 and 2028, based on a multiple of 13 times the average annual EBITDA over the three years prior to conversion. We also agreed, subject to certain terms and conditions, to increase our ownership of TransAlta common shares to 9%. This investment will be made with our institutional partners, with Brookfield Renewable expected to hold a 25% interest.

Subsequent to quarter-end, we entered into an agreement to acquire two wind farms in India totalling 210 MW for $70 million, subject to customary closing conditions. This investment will be made with our institutional partners, with Brookfield Renewable expected to hold a 25% interest.

Continued to progress our development pipeline.

·           Commissioned a 19 MW hydroelectric facility in Brazil that is expected to contribute annualized Funds From Operations net to Brookfield Renewable of $2 million

·           Continued to advance the construction of 134 MW of hydroelectric, wind, pumped storage and rooftop solar development projects. These projects are expected to be commissioned between 2019 and 2021 and to generate annualized Funds From Operations net to Brookfield Renewable of $13 million

·           Progressed our construction-ready and advanced stage pipeline

PART 2 –  FINANCIAL PERFORMANCE REVIEW ON CONSOLIDATED INFORMATION

The following table reflects key financial data for the three months ended March 31:

(MILLIONS, EXCEPT AS NOTED)		2019		2018
Revenues	$	825	$	793
Other income		8		9
Direct operating costs		(254)		(256)
Management service costs		(21)		(21)
Interest expense – borrowings		(173)		(180)
Share of earnings from equity-accounted investments		32		-
Depreciation		(200)		(213)
Current income tax expense		(24)		(7)
Deferred income tax expense		(20)		(9)
Net income attributable to Unitholders	$	43	$	8
	Average FX rates to USD
C$		1.33		1.26
€		0.88		0.81
R$		3.77		3.24
COP		3,137		2,859

Variance Analysis For The Three Months Ended March 31, 2019

Revenues totaling $825 million for the three months ended March 31, 2019 represent an increase of $32 million over the prior year. We realized higher average pricing on the back of our commercial and re-contracting initiatives and higher market prices on our uncontracted volume in Colombia where we benefitted from our strategy to store water in 2018 in anticipation of higher prices during the dry season, which in total contributed $48 million to revenues. Generation on a same-store basis was 593 GWh above the prior year, primarily due to strong hydrology conditions in the United States, which contributed $18 million to revenues. The impact of recently acquired assets in Europe and recently commissioned facilities in Brazil contributed $7 million of revenues relative to the prior period.

The strengthening of the U.S. dollar relative to the prior period, primarily against the Brazilian reais, reduced revenues by approximately $41 million, which was partially offset by a favorable foreign exchange impact on our operating and depreciation expense for the quarter.

Direct operating costs totaling $254 million represent a decrease of $2 million over the prior year driven by cost-savings realized in the quarter across our United States and Colombia hydroelectric businesses and the above noted impact of foreign exchange, partially offset by the impact of inflation.

Share of earnings from equity-accounted investments totaling $32 million represent an increase of $32 million over the prior year driven by the growth in the portfolio from our increased investment in TerraForm Power.

Management service costs totaling $21 million were consistent with the prior period.

Current income tax expense of $24 million represents an increase of $17 million as a result of higher taxable income relative to the prior period, particularly in Colombia, due to the strong performance of the business.

Net income attributable to Unitholders was $43 million compared to net income attributable to Unitholders of $8 million for the three months ended March 31, 2018.

PART 3 - ADDITIONAL consolidated FINANCIAL INFORMATION

SUMMARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

The following table provides a summary of the key line items on the unaudited interim consolidated statements of financial position:

		Mar 31		Dec 31
(MILLIONS)	2019		2018
Assets held for sale	$	915	$	920
Current assets		2,006		1,961
Equity-accounted investments		1,601		1,569
Property, plant and equipment		29,252		29,025
Total assets		34,481		34,103
Liabilities directly associated with assets held for sale		525		533
Corporate borrowings		1,668		2,334
Non-recourse borrowings		8,425		8,384
Deferred income tax liabilities		4,219		4,140
Total liabilities and equity		34,481		34,103

Property, plant and equipment

Property, plant and equipment totaled $29.3 billion as at March 31, 2019 compared to $29.0 billion as at December 31, 2018. The $227 million increase was primarily attributable to the adoption of the IFRS 16 Leases standard on January 1, 2019 which resulted in the recognition of a $145 million right-of-use asset presented as part of Property, plant and equipment and the strengthening of the Canadian dollar and Colombian peso relative to the United States dollar. The above noted increases were partially offset by the depreciation expense associated with Property, plant and equipment for the period.

Related Party Transactions

Brookfield Renewable’s related party transactions are in the normal course of business and are recorded at the exchange amount. Brookfield Renewable’s related party transactions are primarily with Brookfield.

Brookfield Renewable sells electricity to Brookfield through long-term power purchase agreements, or provides fixed price guarantees to provide contracted cash flow and reduce Brookfield Renewable’s exposure to electricity prices in deregulated power markets. Brookfield Renewable also benefitted during the period from a wind levelization agreement with Brookfield which reduced the exposure to the fluctuation of wind generation at certain facilities and thus improves the stability of its cash flow. The wind levelization agreement expired in February 2019.

In addition to these agreements, Brookfield Renewable and Brookfield have executed other agreements that are described in Note 27 – Related Party Transactions in our 2018 annual audited consolidated financial statements.

Brookfield Renewable has also entered into a number of voting agreements with Brookfield whereby Brookfield, as managing member of entities related to Brookfield Americas Infrastructure Fund, Brookfield Infrastructure Fund II and Brookfield Infrastructure Fund III, in which Brookfield Renewable holds investments in power generating operations with institutional partners, agreed to provide to Brookfield Renewable the authority to direct the election of the Boards of Directors of such entities.

Brookfield Renewable has entered into agreements with Brookfield Americas Infrastructure Fund, Brookfield Infrastructure Fund II, Brookfield Infrastructure Fund III and Brookfield Infrastructure Debt Fund

(“Private Funds”), in which they provide Brookfield Renewable with access to short-term financing using the Private Funds’ credit facilities.

Brookfield Asset Management has provided a $400 million committed unsecured revolving credit facility maturing in December 201 9 and the interest rate applicable on the draws is LIBOR plus up to 2%. During the first quarter of 2019 there were no draws on the committed unsecured revolving credit facility provided by Brookfield Asset Management. Brookfield Asset Management placed funds on deposit with Brookfield Renewable during the first quarter of 2019 in the amount of $600 million, of which $245 million was repaid. The interest expense on the deposit for the three months ended March 31, 2019 totaled $3 million (2018: $3 million). Subsequent to March 31, 2019, Brookfield Renewable repaid the outstanding $355 million funds on deposit from Brookfield Asset Management.  

The following table reflects the related party agreements and transactions in the unaudited interim consolidated statements of income for the three months ended March 31:

(MILLIONS)		2019		2018
Revenues
Power purchase and revenue agreements	$	159	$	140
Wind levelization agreement		1		1
	$	160	$	141
Direct operating costs
Energy purchases	$	(3)	$	(2)
Energy marketing fee		(6)		(6)
Insurance services (1)		(7)		(6)
	$	(16)	$	(14)
Interest expense - borrowings	$	(3)	$	(2)
Management service costs	$	(21)	$	(21)

⁽¹⁾             Insurance services are paid to a subsidiary of Brookfield Asset Management that contracts external insurance providers on behalf of Brookfield Renewable. The fees paid to the subsidiary of Brookfield Asset Management for the three months ended March 31, 2019 were less than $1 million (2018: less than $1 million)

EQUITY

General partnership interest in a holding subsidiary held by Brookfield

Brookfield, as the owner of the 1% GP interest in BRELP, is entitled to regular distributions plus an incentive distribution based on the amount by which quarterly LP Unit distributions exceed specified target levels. To the extent that LP Unit distributions exceed $0.375 per LP Unit per quarter, the incentive is 15% of distributions above this threshold. To the extent that LP Unit distributions exceed $0.4225 per LP Unit per quarter, the incentive distribution is equal to 25% of distributions above this threshold. Incentive distributions of $13 million were declared during the three months ended March 31, 2019 (2018: $11 million).

Preferred limited partners’ equity

In March 2019, Brookfield Renewable issued 7,000,000 Class A Preferred Limited Partnership Units, Series 15 (the “Series 15 Preferred Units”) at a price of C$25 per unit for gross proceeds of C$175 million ($131 million). The holders of the Series 15 Preferred Units are entitled to receive a cumulative quarterly fixed distribution yielding 5.75% for the initial period ending April 30, 2024. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of: (i) the five-year Government of Canada bond yield plus 3.94%, and (ii) 5.75%.

The holders of the Series 15 Preferred Units will have the right, at their option, to reclassify their Series 15 Preferred Units into Class A Preferred Limited Partnership Units, Series 16 (the “Series 16 Preferred Units”), subject to certain conditions, on April 30, 2024 and on April 30 every five years thereafter. The holders of the Series 16 Preferred Units will be entitled to receive floating rate cumulative preferential cash distributions equal to the three month Government of Canada Treasury Bill Rate plus 3.94%.

The preferred limited partners’ equity units do not have a fixed maturity date and are not redeemable at the option of the holders. As at March 31, 2019, none of the preferred limited partners’ equity units have been redeemed by Brookfield Renewable.

Limited partners’ equity

Brookfield Asset Management owns, directly and indirectly 185,727,567 LP Units and Redeemable/Exchangeable partnership units, representing approximately 60% of Brookfield Renewable on a fully-exchanged basis and the remaining approximately 40% is held by public investors.

During the three months ended March 31, 2019, Brookfield Renewable issued 50,499 LP Units (2018: 84,629 LP Units) under the distribution reinvestment plan at a total cost of $2 million (2018: $3 million).

In December 2018, Brookfield Renewable renewed its normal course issuer bid in connection with its LP Units. Under this normal course issuer bid Brookfield Renewable is permitted to repurchase up to 8.9 million LP Units, representing approximately 5% of the issued and outstanding LP Units, for capital management purposes. The bid will expire on December 30, 2019, or earlier should Brookfield Renewable complete its repurchases prior to such date. Unitholders may receive a copy of the notice, free of charge, by contacting Brookfield Renewable. During the three months ended March 31, 2019, Brookfield Renewable had repurchased and cancelled 20,000 LP Units (2018: 8,700 LP units) at a total cost of $1 million (2018: less than $1 million) .

  

 

PART 4 – FINANCIAL PERFORMANCE REVIEW ON PROPORTIONATE INFORMATION

SEGMENTED DISCLOSURES

Segmented information is prepared on the same basis that Brookfield Renewable’s Chief Executive Officer and Chief Financial Officer (collectively, the chief operating decision maker or “CODM”) manages the business, evaluates financial results, and makes key operating decisions. See “Part 8 – Presentation to Stakeholders and Performance Measurement” for information on segments and an explanation on the calculation and relevance of proportionate information.

PROPORTIONATE RESULTS FOR THE THREE MONTHS ENDED March 31

The following chart reflects the generation and summary financial figures on a proportionate  basis for the three months ended March 31:

	(GWh)				(MILLIONS)
	Actual Generation		LTA Generation		Revenues				Adjusted EBITDA				Funds From Operations				Net Income (Loss)
	2019	2018	2019	2018		2019		2018		2019		2018		2019		2018		2019		2018
Hydroelectric
North America	3,849	3,765	3,300	3,439	$	262	$	261	$	195	$	191	$	152	$	146	$	67	$	67
Brazil	1,090	1,038	980	957		65		69		49		51		40		41		17		1
Colombia	765	768	844	844		62		53		38		31		26		21		20		12
	5,704	5,571	5,124	5,240		389		383		282		273		218		208		104		80
Wind
North America	850	645	960	697		63		54		48		41		29		26		4		(6)
Europe	274	165	308	155		28		17		20		11		17		8		11		(1)
Brazil	106	103	151	118		7		8		5		5		2		3		(3)		(1)
Asia	39	32	38	34		2		2		1		1		1		-		(1)		(1)
	1,269	945	1,457	1,004		100		81		74		58		49		37		11		(9)
Solar	199	115	195	107		38		18		32		16		18		10		9		(2)
Storage & Other	74	63	-	-		24		17		11		9		7		5		-		(12)
Corporate	-	-	-	-		-		-		(4)		(5)		(65)		(67)		(81)		(49)
Total	7,246	6,694	6,776	6,351	$	551	$	499	$	395	$	351	$	227	$	193	$	43	$	8

HYDROELECTRIC OPERATIONS ON PROPORTIONATE BASIS

The following table presents our proportionate results for hydroelectric operations for the three months ended March 31:

(MILLIONS, EXCEPT AS NOTED)	2019		2018
Generation (GWh) – LTA		5,124		5,240
Generation (GWh) – actual		5,704		5,571
Revenue	$	389	$	383
Other income		2		2
Direct operating costs		(109)		(112)
Adjusted EBITDA		282		273
Interest expense		(55)		(61)
Current income taxes		(9)		(4)
Funds From Operations	$	218	$	208
Depreciation		(82)		(100)
Deferred taxes and other		(32)		(28)
Net income	$	104	$	80

The following table presents our proportionate results by geography for hydroelectric operations for the three months ended March 31:

			Average
	Actual		revenue				Adjusted				Funds From				Net Income
	Generation (GWh)		per MWh				EBITDA				Operations				(Loss)
(MILLIONS, EXCEPT AS NOTED)	2019	2018	2019		2018		2019		2018		2019		2018		2019		2018
North America
United States	2,613	2,343	$	69	$	70	$	126	$	113	$	98	$	85	$	39	$	33
Canada	1,236	1,422		67		68		69		78		54		61		28		34
	3,849	3,765		68		69		195		191		152		146		67		67
Brazil	1,090	1,038		59		66		49		51		40		41		17		1
Colombia	765	768		81		69		38		31		26		21		20		12
Total	5,704	5,571	$	68	$	69	$	282	$	273	$	218	$	208	$	104	$	80

 

North America

Funds From Operations at our North American business were $152 million versus $146 million in the prior year due to marginally higher generation as both periods benefitted from above average generation (17% and 9% above long-term average, respectively). Average revenue per MWh was down marginally from prior year as the benefit of inflation indexation of our contracts was offset by weaker market prices across the U.S. Northeast due to unseasonably warm weather. Funds From Operations and generation were also impacted by the partial sale of certain of our Canadian assets – $7 million and 164 GWh, respectively. We also benefitted from our cost-reduction initiatives.

Net income attributable to Unitholders was in line with the prior year.

Brazil

Funds From Operations at our Brazilian business were $40 million versus $41 million in the prior year. On a local currency basis, Funds From Operations increased by 14% due to higher realized prices driven by higher contracted pricing as a result of inflation indexation of our contracts and favorable market pricing on our uncontracted volumes and the contribution from our recently commissioned facilities. These benefits were offset by the weakening of the Brazilian reais versus the U.S. dollar.

Net income attributable to Unitholders increased by $16 million over the prior year as the above noted decrease in Funds From Operations was more than offset by lower depreciation expense due to an increase in the estimated useful lives of our assets.

Colombia

Funds From Operations at our Colombian business were $26 million versus $21 million in the prior year due to our cost-reduction initiatives and a 17% increase in average revenue per MWh as a result of inflation indexation, re-contracting initiatives and favorable market prices realized on our uncontracted volumes – where we benefitted from our strategy to store water in 2018 in anticipation of the dry season in early 2019.

Net income attributable to Unitholders increased by $8 million over the prior year due primarily to the above noted increase in Funds From Operations.

WIND OPERATIONS ON PROPORTIONATE BASIS

The following table presents our proportionate results for wind operations for the three months ended March 31:

(MILLIONS, EXCEPT AS NOTED)	2019		2018
Generation (GWh) – LTA		1,457		1,004
Generation (GWh) – actual		1,269		945
Revenue	$	100	$	81
Other income		2		1
Direct operating costs		(28)		(24)
Adjusted EBITDA		74		58
Interest expense		(24)		(20)
Current income taxes		(1)		(1)
Funds From Operations	$	49	$	37
Depreciation		(55)		(39)
Deferred taxes and other		17		(7)
Net (loss) income	$	11	$	(9)

The following table presents our proportionate results by geography for wind operations for the three months ended March 31: