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Brookfield Renewable Partners L.P.
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== '''<u>Ownership</u>''' <ref>https://simplywall.st/stocks/ca/utilities/tsx-bep.un/brookfield-renewable-partners-shares/ownership</ref> == {| class="wikitable" |'''Shareholder''' |'''Stake''' |- |'''Brookfield Renewable Power Inc.''' |52.37% |- |'''Brookfield Renewable Corporation''' |9.20% |- |'''Brookfield Corporation''' |2.71% |- |'''1832 Asset Management L.P.''' |1.91% |- |'''Fidelity International''' |1.60% |- |'''BMO Asset Management Corp.''' |1.37% |- |'''Principal Global Investors, LLC''' |1.30% |- |'''RBC Global Asset Management Inc.''' |0.91% |- |'''RBC Dominion Securities Inc.''' |0.87% |- | |'''72.24%''' |} The top 10 stakeholders in Brookfield Renewable Partners make up 72.2% of the entire ownership. Other notable investors include Scotiabank (0.48%) and Morgan Stanley (0.39%). === '''<u>Financials</u>''' === The table below shows the reported revenue of the previous 5 years for Brookfield Renewable Partners, other financial information required in the calculation of EBIT is also shown. All units are given in USD millions. {| class="wikitable" |+Historical Financials<ref name=":1">Brookfield Renewable Partners Annual Report 2022 - https://bep.brookfield.com/sites/bep-brookfield-ir/files/brookfield/bep/reports-and-filings/regulatory-filings/annual-reports/2022/bep-2022-annual-report.pdf</ref> ! '''Units ($m)''' !'''2018''' !'''2019''' !'''2020''' !'''2021''' !'''2022''' |- | '''Total Revenue''' | 3,784.00 | 3,962.00 | 3,755.00 | 4,071.00 | 4,565.00 |- | '''Cost of sales''' | - 457.00 | - 502.00 | - 540.00 | - 591.00 | - 605.00 |- | '''Selling, general and admin expenses''' | - 910.00 | - 896.00 | - 969.00 | - 1,062.00 | - 1,007.00 |- | '''Other Operating Expenses''' | - 153.00 | - 203.00 | - 334.00 | - 89.00 | - 108.00 |- | '''Depreciation''' | 1,151.00 | 1,271.00 | 1,367.00 | 1,501.00 | 1,583.00 |- | '''EBIT''' | ''' 1,113.00''' | ''' 1,090.00''' | ''' 545.00''' | ''' 828.00''' | ''' 1,262.00''' |- | '''CapEx''' | - 235.00 | - 195.00 | - 447.00 | - 1,967.00 | - 2,190.00 |- | '''Current Assets''' | 1,961.00 | 2,020.00 | 1,742.00 | 2,861.00 | 4,183.00 |- | '''Cash''' | 173.00 | 352.00 | 431.00 | 764.00 | 730.00 |- | '''Current Liabilities''' | 1,689.00 | 2,423.00 | 2,761.00 | 3,222.00 | 4,943.00 |- |'''NCWC''' | 99.00 | - 755.00 | - 1,450.00 | - 1,125.00 | - 1,490.00 |- | '''NCWC (inc/dec)''' |\ | 854.00 | 695.00 | - 325.00 | 365.00 |} Revenue has been increasing at 4.1% per annum since 2018, however, the business has not made a profit since 2018. [[File:Historical Revenue .png]] === Revenue Breakdown by Segment === The table below outlines the revenue generated by the renewable power portfolio of Brookfield Renewable Partners. {| class="wikitable" |+Revenue by location and segment<ref name=":0" /> ! '''Units ($m)''' ! colspan="2" | '''Hydroelectric''' ! colspan="2" | '''Wind''' |- ! !'''2022''' !'''2021''' !'''2022''' !'''2021''' |- | '''North America''' | 964.00 | 876.00 | 332.00 | 370.00 |- | '''Brazil''' | 197.00 | 169.00 | 31.00 | 29.00 |- | '''Columbia''' | 273.00 | 224.00 | - | - |- | '''Europe''' | - | - | 134.00 | 125.00 |- | '''Asia''' | - | - | 41.00 | 32.00 |- | '''Total''' | ''' 1,434.00''' | ''' 1,269.00''' | ''' 538.00''' | ''' 556.00''' |} Total Solar revenue for 2022 - $374 million, and $348 million for 2021. Total DE&SS revenue for 2022 - $290 million, and $242 million for 2021. A breakdown by location is not possible. Hydroelectric revenue increased by 13% compared to 2021, wind declined by 3.2%, but solar and DE&SS increased by 7.5% and 19.8% respectively. [[File:Revenue by segment .png]] === Forecasts === The following table shows the forecast financials for the next 10 years, and the calculation of free cash flow, which will be used in the DCF valuation of the company. {| class="wikitable" |+Forecast Financials ! '''Units ($m)''' !'''2023''' !'''2024''' !'''2025''' !'''2026''' !'''2027''' !'''2028''' !'''2029''' !'''2030''' !'''2031''' !'''2032''' |- | '''Total Revenue''' | 4,608.35 | 4,792.07 | 4,975.78 | 5,159.49 | 5,343.21 | 5,526.92 | 5,710.64 | 5,894.35 | 6,078.06 | 6,261.78 |- | '''Cost of sales''' | - 624.11 | - 662.89 | - 702.73 | - 743.64 | - 785.61 | - 828.65 | - 872.76 | - 917.93 | - 964.16 | - 1,011.47 |- | '''Selling, general and admin expenses''' | - 993.52 | - 1,009.17 | - 1,022.98 | - 1,034.95 | - 1,045.09 | - 1,053.38 | - 1,059.85 | - 1,064.47 | - 1,067.26 | - 1,068.21 |- | '''Other Operating Expenses''' | - 208.43 | - 216.73 | - 225.04 | - 233.35 | - 241.66 | - 249.97 | - 258.28 | - 266.59 | - 274.90 | - 283.21 |- | '''Depreciation''' | 1,633.06 | 1,734.58 | 1,838.89 | 1,946.00 | 2,055.90 | 2,168.59 | 2,284.08 | 2,402.35 | 2,523.42 | 2,647.28 |- | '''EBIT''' | ''' 1,149.24''' | ''' 1,168.70''' | ''' 1,186.14''' | ''' 1,201.55''' | ''' 1,214.95''' | ''' 1,226.32''' | ''' 1,235.68''' | ''' 1,243.01''' | ''' 1,248.32''' | ''' 1,251.62''' |- | '''CapEx''' | - 1,099.80 | - 1,143.65 | - 1,187.49 | - 1,231.34 | - 1,275.18 | - 1,319.03 | - 1,362.87 | - 1,406.71 | - 1,450.56 | - 1,494.40 |- | '''Current Assets''' | 4,390.84 | 4,967.86 | 5,544.88 | 6,121.90 | 6,698.91 | 7,275.93 | 7,852.95 | 8,429.97 | 9,006.99 | 9,584.01 |- | '''Cash''' | 1,046.50 | 1,150.44 | 1,388.07 | 1,492.01 | 1,729.64 | 1,833.57 | 2,071.20 | 2,175.14 | 2,412.77 | 2,516.71 |- | '''Current Liabilities''' | 5,388.16 | 6,143.79 | 6,899.42 | 7,655.05 | 8,410.68 | 9,166.31 | 9,921.94 | 10,677.57 | 11,433.20 | 12,188.83 |- |'''NCWC''' | - 2,043.82 | - 2,326.37 | - 2,742.61 | - 3,025.16 | - 3,441.40 | - 3,723.95 | - 4,140.19 | - 4,422.74 | - 4,838.98 | - 5,121.53 |- | '''NCWC (inc/dec)''' | 553.82 | 282.55 | 416.24 | 282.55 | 416.24 | 282.55 | 416.24 | 282.55 | 416.24 | 282.55 |- | '''FCF''' | ''' 1,994.97''' | ''' 1,796.75''' | ''' 2,004.69''' | ''' 1,946.44''' | ''' 2,156.77''' | ''' 2,100.91''' | ''' 2,313.63''' | ''' 2,260.17''' | ''' 2,475.28''' | ''' 2,424.21''' |} [[File:FCF Growth.png]] The table below shows the assumptions used to calculate the forecasts in the table above, in the case of revenue, current assets, cash and current liabilities, the built in forecast function in excel was used to provide more accurate values. {| class="wikitable" |+Assumptions ! !'''2018''' !'''2019''' !'''2020''' !'''2021''' !'''2022''' !'''2023''' !'''2024''' !'''2025''' !'''2026''' !'''2027''' !'''2028''' !'''2029''' !'''2030''' !'''2031''' !'''2032''' |- | '''Cost of sales % of revenue''' |12.1% |12.7% |14.4% |14.5% |13.3% |13.5% |13.8% |14.1% |14.4% |14.7% |15.0% |15.3% |15.6% |15.9% |16.2% |- | '''SG&A % of revenue''' |24.0% |22.6% |25.8% |26.1% |22.1% |21.6% |21.1% |20.6% |20.1% |19.6% |19.1% |18.6% |18.1% |17.6% |17.1% |- | '''Other expenses % of revenue''' |4.0% |5.1% |8.9% |2.2% |2.4% |4.5% |4.5% |4.5% |4.5% |4.5% |4.5% |4.5% |4.5% |4.5% |4.5% |- | '''Depreciation % of revenue''' |30.4% |32.1% |36.4% |36.9% |34.7% |35.4% |36.2% |37.0% |37.7% |38.5% |39.2% |40.0% |40.8% |41.5% |42.3% |- | '''CapEx % of revenue''' |6.2% |4.9% |11.9% |48.3% |48.0% |23.9% |23.9% |23.9% |23.9% |23.9% |23.9% |23.9% |23.9% |23.9% |23.9% |} The graphs below show the forecast models for revenue, current assets, cash and current liabilities. [[File:Revenue Forecast.png|Revenue Forecasts based on historical revenues.]] [[File:Current Assets Forecast.png|Assets Forecast.]] [[File:Cash Forecast.png|Cash Forecast.]] [[File:Current Liabilities Forecast.png|Current Liabilities Forecast.]] === DCF and WACC === The following table shows the WACC calculation: {| class="wikitable" |+WACC | '''Risk Free Rate of Return''' |3.8%<ref>https://markets.ft.com/data/bonds/tearsheet/summary?s=US10YT</ref> |- | '''Beta''' |0.74<ref>https://markets.ft.com/data/equities/tearsheet/summary?s=BEP.UN:TOR</ref> |- | '''Market Rate of Return''' |9.8%<ref>https://www.officialdata.org/us/stocks/s-p-500/1900</ref> |- | '''Cost of Equity''' |'''8.3%''' |- | '''Credit Spread''' |2.00%<ref>S&P Global</ref> |- | '''Cost of Debt''' |'''4.6%''' |- |'''Shares Outstanding''' |288.78<ref>https://markets.ft.com/data/equities/tearsheet/summary?s=BEP:NYQ</ref> |- |'''Share Price''' |29.96<ref>Share Price as of 14/07/2023 - https://markets.ft.com/data/equities/tearsheet/summary?s=BEP:NYQ</ref> |- | '''Equity''' | '''8,651.85''' |- |'''Long Term Debt''' |22,797.00<ref>https://markets.ft.com/data/equities/tearsheet/financials?s=BEP:NYQ&subView=BalanceSheet&periodType=q</ref> |- | '''Debt''' | '''830.99''' |- | '''E/D+E''' |91.2% |- | '''D/D+E''' |8.8% |- | '''WACC''' |'''7.9%''' |} The following table shows a 10 year DCF valuation for Brookfield Renewable Partners. The effective tax rate used for the WACC calculation above and in the DCF valuation below was set at 21%. The terminal growth rate was set at 3.3%, equivalent to the annualised US GDP growth rate. {| class="wikitable" |+DCF Calculation ! '''Units ($m)''' !'''2023''' !'''2024''' !'''2025''' !'''2026''' !'''2027''' !'''2028''' !'''2029''' !'''2030''' !'''2031''' !'''2032''' |- | '''FCF''' | '''1,994.97''' | '''1,796.75''' | '''2,004.69''' | '''1,946.44''' | '''2,156.77''' | '''2,100.91''' | '''2,313.63''' | '''2,260.17''' | '''2,475.28''' | '''2,424.21''' |- |'''Discount Factor''' |0.965507934 |0.895146668 |0.82991297 |0.769433169 |0.713360826 |0.661374748 |0.613177148 |0.568491943 |0.527063166 |0.488653506 |- |'''Present Value of FCF''' | '''1,926.16''' | '''1,608.35''' | '''1,663.72''' | '''1,497.65''' | '''1,538.56''' | '''1,389.49''' | '''1,418.67''' | '''1,284.89''' | '''1,304.63''' | '''1,184.60''' |} {| class="wikitable" |+DCF Calculation |'''Growth Rate''' |'''3.3%''' |- |'''Terminal Value''' |'''54,662.74''' |- |'''Present Value of Terminal Value''' |'''26,711.14''' |- |'''Enterprise Value''' |'''41,527.85''' |- |'''Equity Value''' |'''17,210.85''' |- |'''Implied Share Price''' |'''$ 59.60''' |} The valuation shows that as of 14/07/2023, Brookfield Renewable Partners is undervalued. There is a potential upside of 99% over 10 years, equivalent to an annual share price rise of 9.9% from the end of 2023. The sensitivity analysis below shows how share price varies in different growth rate environments, and for different WACC values. {| class="wikitable" |+Sensitivity Analysis ! '''$ 59.60''' ! ! colspan="8" |'''WACC''' |- ! ! !'''6.0%''' !'''6.5%''' !'''7.0%''' !'''7.5%''' !'''8.0%''' !'''8.5%''' !'''9.0%''' !'''9.5%''' |- ! rowspan="7" |'''Growth Rate''' !'''2.0%''' |$ 94.76 |$ 75.06 |$ 59.31 |$ 46.42 |$ 35.68 |$ 26.60 |$ 18.82 |$ 12.08 |- !'''2.5%''' |$ 113.07 |$ 88.75 |$ 69.83 |$ 54.70 |$ 42.32 |$ 32.00 |$ 23.27 |$ 15.79 |- !'''3.0%''' |$ 137.48 |$ 106.34 |$ 82.98 |$ 64.81 |$ 50.27 |$ 38.38 |$ 28.46 |$ 20.07 |- !'''3.5%''' |$ 171.66 |$ 129.80 |$ 99.89 |$ 77.45 |$ 60.00 |$ 46.03 |$ 34.59 |$ 25.06 |- !'''4.0%''' |$ 222.92 |$ 162.64 |$ 122.44 |$ 93.71 |$ 72.15 |$ 55.38 |$ 41.95 |$ 30.96 |- !'''4.5%''' |$ 308.36 |$ 211.90 |$ 154.00 |$ 115.38 |$ 87.78 |$ 67.07 |$ 50.95 |$ 38.04 |- !'''5.0%''' |$ 479.25 |$ 294.01 |$ 201.35 |$ 145.73 |$ 108.62 |$ 82.10 |$ 62.19 |$ 46.69 |} === Relative Valuation === Brookfield Renewable Partners was compared to some of it's competitors in the renewable energy market. As the company made a loss in 2022, some multiples, such as the price to earnings ratio and earnings per share, are negative. This makes it difficult to accurately compare to competitors. The calculations are based off of a five year average. {| class="wikitable" |+Relative Valuation Table<ref>All financial data was taken from the financial times stock price pages.</ref> !'''Stock''' !'''Price to Earnings Ratio''' !'''Return on Equity''' !'''Earnings Per Share''' !'''Dividend Yield''' !'''Annual Dividend''' !'''Return on Assets''' !'''Dividend Growth''' |- |'''BRP''' | -50.30 | -3.03% | -0.60 |3.53% | 1.26 |0.46% |0.52% |- |'''General Electric''' | 208.20 |21.22% | 0.53 |1.56% | 0.32 |4.42% | -47.04% |- |'''Iberdrola SA''' | 16.00 |9.67% | 0.72 |0.02% |N/A |3.66% |N/A |- |'''NextEra Energy''' | 36.30 |16.97% | 2.10 |2.02% | 1.70 |3.69% |11.59% |- |'''Vestas Wind Systems''' | -16.30 | -22.98% | -1.73 |0.09% |N/A | -3.96% |N/A |- |'''Canadian Solar Inc.''' | 11.20 |16.27% | 3.44 |N/A |N/A |4.13% |N/A |- |'''Enel Green Power''' | 14.40 |10.51% | 0.43 |5.57% | 0.44 |2.19% |11.04% |} [[File:Dividend.png|thumb|836x836px|center]] [[File:Dividend Growth.png|thumb|844x844px|center]] [[File:EPS.png|thumb|841x841px|center]] The relative valuation shows that Brookfield Renewable Partners pays out the second highest dividend amongst it's competitors, behind only General Electric. Brookfield Renewable is also top 3 for dividend growth, with General Electric having seen massive declines in dividend pay-out, meaning that Brookfield Renewable is a stock with good income prospects.
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