Brookfield Renewable Partners is one of the best-of-breed renewable businesses with regards to its quality assets, operating scale, and geographic diversification.
The business has about $28 billion of power assets across 260 facilities. It has an aggregate capacity of 10,700 megawatts across 15 markets in seven countries, including the United States, Canada, Colombia, and Brazil.
The company is focused on its hydroelectric generation, which makes up 88% of its portfolio. It’s complemented by 11% of wind generation. Brookfield Renewable Partners has 90% of contracted cash flows, which improves the safety of its dividend.
How Brookfield Renewable Partners came to be
Although Brookfield Renewable Partners was formed in September 2011, its operating history actually goes back much further. The partnership was formed to combine the power-generating assets owned by Brookfield Renewable Power Inc., a wholly owned subsidiary of Brookfield Asset Management and the Brookfield Renewable Power Fund.
Before the transaction, Brookfield Renewable Power managed the Brookfield Renewable Power Fund for nearly 12 years, delivering total annual unitholder returns of more than 15% in the process.
At the time, management expected the transaction to improve the safety and amount of the distribution and provide greater growth potential for unitholders.
Fast forward to now
Management has delivered. The five-year annualized total returns with dividends reinvested (ended June 30) were 17%. Since 2011 Brookfield Renewable Partners’s distribution per unit has increased at a compound annual growth rate of 6.5%.
In other words, investors who had a position in Brookfield Renewable Partners in 2011 would have seen their income from their investment grow nearly 37%.
Brookfield Asset Management continues to be the general partner and manager of Brookfield Renewable Partners with a significant stake of 61% in the partnership. As well, management continues to use Brookfield Renewable Partners as the entity to grow its renewable energy business around the globe.
Brookfield Renewable Partners is an investment-grade company with an S&P credit rating of BBB. Furthermore, it aims to outperform the average market return of 10% with targeted annualized total returns of 12-15% for its unitholders.
Investing in the company on dips will push your expected returns closer to 15%. The company has dipped more than 4% from its high, but no matter if the units go up or down; unitholders can rely on its sustainable 6% yield as the company expects to grow its distribution per unit by 5-9% per year.
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Fool contributor Kay Ng owns shares of Brookfield Renewable Energy Partners. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.