Brookfield Renewable Partners LP Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nelson Ng - RBC Capital Markets - Analyst : So Connor and Hannah, you mentioned that you have limited exposure to cost inflation and tariffs. But in the US, can you just talk about the permitting situation? Like are you still seeing some delays in the receipt of federal permits? And I guess given the strong demand for power in the US, like, are you able to start construction on a number of projects to meet demand? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Absolutely right. We see the impact of the tariff announcement as not material to our business. Given what Hannah said, the way that we've procured equipment already for our existing projects and our global procurement programs, our ability to have a multitude of solutions to provide equipment to projects in the future. In terms of permitting, as a reminder to everyone on the call, within the executives orders in the United States, those were largely focused on offshore wind and federal permits for onshore wind on federal lands, of which we have very little if no exposure to either. We have no offshore wind exposure and only a de minimis number of our projects are exposed to federal lands. However, even some projects on private lands do require federal permits. You can think about these as FAA permits, endangered species permits that are regulated at the federal level. This does mark a very modest portion of our portfolio. US wind is less than 10%. We would put it in the mid-single-digit portion of our development pipeline. And yes, that process is still slower than it was prior to the executive orders, but we are hopeful to see that resolved in the near term. And it's -- given its relative size, it's not going to have a meaningful impact on our business or our growth plans either way.

Question: Nelson Ng - RBC Capital Markets - Analyst : Just one last question before I turn it over. So I noticed that the Asia Pacific development pipeline has really grown in the past year. Is that mainly due to the Neoen acquisition? And I presume a lot of that growth has taken place in China, India, Australia, but can you just talk about how each country is developing from your perspective? And is it mostly solar and batteries? Or is there a material amount of wind as well? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Sure. So the biggest driver of that change is definitely Neoen. Neoen is a French headquartered company prior to our privatization, it was listed on the French Stock Exchange. But interestingly, the biggest component of that business is in Australia. Neoen's Australia operation make it the largest renewable power player in the country of Australia. So that is the biggest driver of the significant increase that you are referencing. In terms of what Neoen focuses on in Australia, it actually is a lot of wind and a lot of batteries. And that is because similar to other markets around the world that have a very high degree of solar penetration, there is a premium on those asset classes that offer a differentiated load profile to solar. So while it is diversified across solar, wind and batteries, I would say that the focus of Neoen in Australia is largely on wind and batteries because that's certainly where the greatest value is for a developer. The other thing I would just highlight as a point of context is our business in India is performing very well, not only in terms of the existing operations and how they're performing. This was illustrated by our very successful sale of some of our mature assets in recent months. But the growth we're seeing within some of our Indian platforms, whether it be Evren, whether it be CleanMax has been very strong, and that's also adding to some of the pipeline growth in Asia Pac that you're referencing.

Question: Sean Steuart - TD Securities - Analyst : First question, of the 29.8 gigawatts of advanced stage capacity development activity you have in North America, I would imagine most of that is US solar. Can you give us a rough percentage there? And of that, what percentage of the solar you're planning to build in the US is the equipment already secure costs are locked in? And I appreciate all the commentary around mitigation you guys have given your scale and diversity, but can you give me some perspective on that front? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Yeah, sure. So I'll let Patrick crunch some percentages really quickly here while we're talking, so we can answer that breakdown question for you. But in terms of our solar pipeline in the United States in terms of what is in an advanced stage, we should leave no doubt here. The absolute vast majority of it has already secured its equipment and has done so under a construct where we're not exposed to the recent tariff announcements. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 1:00PM, BEP_u.TO - Q1 2025 Brookfield Renewable Partners LP Earnings Call Because of our approach of not locking in revenue contracts until we can also lock in CapEx and that consistent approach about how we derisk development across our platform, not only in the United States, in terms of what's in our advanced stage pipeline, the vast majority of it is fully secured from an equipment perspective. And that percentage you're looking for of solar US, it's about 60%.

Question: Robert Hope - Scotiabank - Analyst : In the prepared remarks, you noted that there's an increased demand to recontract your hydro capacity from a variety of buyers. Can you speak to the strategy of how you want to recontract these assets? Could you wait until there's a cluster of contracted assets and then group them together? Could you see a period of time where you'd be happy to have them a little bit more merchant in advance of a longer-term contract? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition It's a great question, and I'll try and answer it, but also perhaps provide some background context. There's a few exciting things happening for us within our hydro portfolio. As Patrick mentioned, we've got a number of hydro contract -- hydro facilities coming off contract in the next few years. And if we were very simply just to contract those hydros at current market rates, that's a very significant step-up relative to the contracts that are coming to maturity. That's obviously a very positive EBITDA bump for our business. But really where it becomes incredibly accretive is if you lock in a long-term contract at a higher rate, it immediately creates a very low-cost up financing opportunity for our business and provides a very large injection of capital at attractive rates, let's say, give or take, 5% that we can turn around and deploy into new growth and new M&A at 15%. And that is really the incredible value lever that we think is sometimes underappreciated in our business. This isn't just an increase in earnings. It's an increase in earnings that creates an up financing opportunity that allows us to fund our growth at an exceptionally accretive way. In terms of what we're seeing from hydro contracting, it's not just a more robust price environment. In the current market where demand for energy is very high and offtakers are really taking an any and all approach to finding power to support their growth, interest in our hydros has increased very dramatically in recent years. Some of the largest corporate buyers of -- corporate offtakers of power, three or four years ago, they were intensely focused on only wind and solar. What I would say has changed in our business is now those same corporate buyers are very interested in looking at long-term contracts from our hydros, and that's creating incremental demand. So in terms of how we turn that into execution, it's really no different to what we do elsewhere in our portfolio. We will look to contract those as efficiently and as expeditiously as possible because it pulls forward that really, really attractive up financing opportunity, which is an incredible value lever for our business. But in terms of will we group hydros together or do them individually? That's very much on a case-by-case basis, and we'll be flexible based on what we're seeing from the market.

Question: Mark Jarvi - CIBC Capital Markets - Analyst : So Connor, you talked about how well you think you're insulated and can manage some of the tariff risk, but someone ultimately has to bear that cost. So how do you feel like the entire ecosystem can manage this where the vulnerabilities and buyers of power to fully absorb the inflationary pressures? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Thanks, Mark. And you're absolutely right. And I do think there's there needs to be a situation where money can still be made, of course. And a lot of this does center around the tariff announcements and in particular, in the United States. And there's two points we would make here. The first is there have been a lot of headlines about the tariffs and a lot of very large percentages get thrown around. But it's important to ground yourself in the fundamentals. When you look at building a renewables project in the United States, approximately 50% of the cost of that project is EPC, the majority of which is domestic labor that wasn't subject to a tariff. Maybe a third to 40% is equipment and CapEx, only a portion of which is subject to tariffs and then the rest is other. And therefore, when you look at the potential for these tariff costs to pass through, it's not the triple digits that people suggest in terms of cost increases. We view it as something much more marginable and much more manageable, something in the very low double digits, maybe in the teens range. And that will obviously depend differently on different projects and different technologies in different regions. But that is a very manageable increase in CapEx that can be pushed through into the market to the end customer in form of offtake and renewables will still be the cheapest form of bulk electricity. So even with that cost increase, we are well inside the other forms of electricity production. And that's what gives us confidence that there will still be very, very strong demand, no impact on demand and no impact on developer margins. The other way that we manage our portfolio is often to put the tariff risk back on the equipment supplier. And the important thing to highlight here is, again, focusing on the US market. The US market has been one of the fastest-growing, highest margin and most profitable markets for REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 1:00PM, BEP_u.TO - Q1 2025 Brookfield Renewable Partners LP Earnings Call equipment suppliers in recent memory. And therefore, in that component of, call it, the value creation chain, there is certainly some cushion to absorb slightly higher costs as well.

Question: Mark Jarvi - CIBC Capital Markets - Analyst : And another question is you mentioned about potentially positive impact on availability of equipment and input costs outside the US. Can you quantify that? Do you think that lasts for a while? Do you think that gets arbitraged out in the market from the developer side? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition So first of all, apologies. Patrick and I clearly have a faulty line. We'll get it sorted for next quarter. But this is actually the point I think we were trying to make right before we dropped there. One of the big benefits of our business where we're unique versus our peers is our globally diversified platform. And what tariffs do is they make acquiring goods from one region of the world from another region of the world more expensive, but that product needs to go somewhere. And therefore, while it might make the cost of goods expensive -- more expensive in one region around the world, it equally has an offsetting impact of making cost of goods less expensive in another area around the world. I'll give a very readily available example in the current market due to some of the tariffs that were announced just four or five weeks ago, solar panel costs and equipment costs in India are probably at historic lows. And that is because previously, a lot of that equipment produced in India was exported to the US, but now it's more expensive to do so. So it makes more sense to keep a certain amount of that equipment in country, and we're certainly seeing the benefit of that for our Indian development pipeline. To address your question, it would be naive and ignorant to suggest that tariffs don't create some inefficiency in the system. The global nature of our business is not a full offset, but I would say it is a very, very material offset.

Question: Christine Cho - Barclays Capital, Inc. - Analyst : So I appreciate your comments around all the tariff stuff and locking in your equipment costs. But can you just go into some detail on how contracts with your EPC, your suppliers and PPAs work for the renewable projects, I understand it's going to be different on a project-by-project basis. But high level, it sounds like you have clauses to pass through some change orders you might get on the EPC side or suppliers through higher PPA prices. But is it like within a certain range, it's just easily passed, but if it falls outside that range, there needs to be a more in-depth negotiation? And if so, could this delay the timing of your projects? Also, it sounds like a lot of the contract may have embedded in tariffs tied to raw materials like steel or aluminum. But I sort of got the impression that country-specific tariffs, such as the ones brought on by the reciprocal tariffs aren't as explicit in the contract. So can you talk about how that works? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Christine, welcome to the call, and thank you for the question. I'll start and then I'll hand to Hannah. She is our internal expert on this and is best positioned to speak to the details of how we're seeing this play out in contracts. But from a high level, there's really two different ways that we protect our business. One is we don't commit to projects unless we can lock in the revenue, the financing and the CapEx purchase on a fully wrapped de-risked basis all at once. And at which point, we are no longer exposed to changes in the tariffs or changes in the cost of that CapEx, and that project is largely de-risked beyond the construction execution, which we are very happy to take. That is one way. In which case, the tariff risk under that scenario is really left with the supplier. The other way we can derisk our business is kind of de-risking it using the customer. And in that situation, if under the CapEx arrangement, we absorb the tariff risk with the equipment supplier. What we will look to do is put a PPA adjuster in the offtake agreement such that if tariffs come into play and our cost of construction increases, there is an offsetting REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 1:00PM, BEP_u.TO - Q1 2025 Brookfield Renewable Partners LP Earnings Call increase in the PPA that preserves our development margins and our returns on the project. So that's it from a high level, but perhaps I'll hand to Hannah to speak through some of the specifics.

Question: Christine Cho - Barclays Capital, Inc. - Analyst : And then just my follow-up question. On the PPA side, you've mentioned for both tariffs and in the event of an ITC removal or step down that you have adjusters in PPAs to keep the developed margin full. Again, I know it's going to be different on a project-by-project basis, but can you just sort of give us like a ballpark percentage of how much cushion the PPA prices can go up before the offtakers maybe start to push back or some way to think about that? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Yes, sure. So it should -- most of the adjusters that we've been seeing and we've been executing on more recently have been around tariffs and probably perhaps to a lesser extent, tax credits. Maybe just to speak about tax credits and the impact on our business. To date, there's been no changes to the tax credit regime in the United States. And as mentioned a few times in the prepared remarks, the thing that is really shining through about our business right now is our very large installed cash-generative, high-quality inflation-linked operating base that really is not subject to any change in those tax credits going forward. And then you get to the point where I think your question was going, which is the most important thing for our business and the ability to continue growing and continue to preserve our development margins is that the very robust fundamental demand for power right now. As long as there is a supply-demand mismatch where there are more offtakers looking for power than there are ready-to-build projects, we remain quite confident that we will be able to push any direct or indirect increase in construction CapEx through to the end customer. That could be both in the form of a tariff or in the form of a reduction of a tax credit. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 1:00PM, BEP_u.TO - Q1 2025 Brookfield Renewable Partners LP Earnings Call And in terms of how much cushion do we have, I would say more than enough. And this is where I'll tie it back to something Hannah said on a previous question. Renewables are not only the cheapest form of bulk electricity production today by a very significant margin. They're getting cheaper than the alternatives on an ongoing basis. So that cushion that we have to push costs through to the end customer or to the suppliers and still be the cheapest form of bulk electricity production is widening year after year, quarter after quarter. And therefore, in any reasonable outcome, we expect that we'll be able to push things through and not see change in our demand or change in our developer returns.

Question: Benjamin Pham - BMO Capital Markets - Analyst : Maybe a couple of questions on the Nailen acquisition. I'm just curious what your near-term integration priorities are -- how do you think the development backlog evolves over the next couple of years? And is there any mature assets or are the mature assets that you might be able to accelerate and sell in that portfolio? Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition Great question. Thanks, Ben. And you're essentially right on all three accounts. But our business plan on Neoen is pretty -- despite the size of the business down the fairway and what you would expect to see with us across other businesses that we acquire. First thing we want to do is we want to provide capital to that business to accelerate its development activities. One thing we felt in our due diligence of the company is it had one of the most attractive, most derisked and highest value development pipelines we've seen in the industry. But as a public company, it lacked access to capital to build it out as fast as they could. And we want to take the regulators off that business, give the management team access to capital to accelerate that growth. And we're going to look to double the pace of development from about 1 gigawatt a year to 2 gigawatts a year within that company. That's point one. Point two, I would say, is we want to bring Neoen into our broader platform where it will get some of the benefits of our scale. That can be helping them with more efficient capital structures, leveraging our financing capabilities, more efficient procurement of equipment, leveraging Hannah and her team and also integrating them into some of our broad-based key accounts with corporate offtakes like the Microsoft framework agreement. So that would be bucket number two. And then the third bucket is one of the unbelievable things about Neoen is it comes with 8 gigawatts of either operating or under construction assets. These are recently built contracted high-quality assets in very attractive markets around the world. And immediately, it is already underway. We will look to begin to sell some of those derisked assets to lower cost of capital buyers and use the proceeds from those sales to reinvest into accretive development and/or pay distributions up to Brookfield Renewables. So despite the size of the business, I would say it's actually a very similar playbook to what we've executed with our other developers around the world in the past, whether it be X-ELIO or OnPath or other investments we've made in recent years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 1:00PM, BEP_u.TO - Q1 2025 Brookfield Renewable Partners LP Earnings Call

Question: Benjamin Pham - BMO Capital Markets - Analyst : Okay. And maybe just one quick one, more detailed on the segments, Sustainable Solutions, with EBITDA down year-over-year. Can you provide context on what's driving that? And that Westinghouse underwriting projections, are you more or less tracking that still? Patrick Taylor - Brookfield Renewable Partners LP - Chief Financial Officer, Managing Partner of Renewable Power & Transition I'll start on the year-over-year on the sustainable solutions side, and then Connor can maybe touch on Westinghouse and what we're seeing there. So last year, we had an item with respect to our investment within an Indian business, where we were successful in realizing on a premium within one of our sustainable solution financial assets that we have in that business in India. And that was what was in the last year's figures. Connor Teskey - Brookfield Renewable Partners LP - President, Brookfield Asset Management; CEO, Renewable Power & Transition And then in terms of Westinghouse, I'm sure as everyone can imagine on this call, we're thrilled with our exposure to Westinghouse. The tailwinds for nuclear get stronger day by day, just one, given the electricity demands around the world and nuclear's ability to provide clean dispatchable baseload power at scale. The added benefit that should not go unrecognized is in all the headlines, nuclear is a key focus of the new US administration. And as the leading technology globally in the space, but of US origin, Westinghouse is certainly the beneficiary of that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 1:00PM, BEP_u.TO - Q1 2025 Brookfield Renewable Partners LP Earnings Call In terms -- the one thing I would highlight is the tremendous demand and growth we are seeing in terms of nuclear isn't actually even showing up in Westinghouse's financials yet. The financials are performing well. I would say they're absolutely tracking to underwriting. But the thing that's exciting for us is the orders that are coming in are certainly above what we initially expected, and that creates a very positive outlook for financials in future periods. That will take a few years to play out, but it gives us incredible confidence for the foundation and outlook for that business.