Brookfield Renewable Energy Partners (BEP) Q3 2018 Earnings Conference Call Transcript

Brookfield Renewable Energy Partners (BEP 5.84%)
Q3 2018 Earnings Conference Call
Oct. 31, 2018 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the BEP Q3 2018 earnings call and webcast. [Operator instructions] Sachin Shah, chief executive officer, you may begin your conference.

Sachin Shah -- Chief Executive Officer

Thank you, operator. Good morning, everyone, and thank you for joining us for our third-quarter 2018 conference call. Before we begin, I'd like to remind you that a copy of our news release, investor supplement, and letter to shareholders can be found on our website. I also want to remind you that we may make forward-looking statements on this call.

These statements are subject to known and unknown risks, and our future results may differ materially. For more information, you are encouraged to review our regulatory filings available on SEDAR, EDGAR, and on our website. We continue to advance our long-term strategic priorities for the business. We have raised or expect to raise approximately $850 million in net proceeds by the end of the year, primarily by opportunistically recycling capital from mature or non-core assets.

These initiatives will increase our total liquidity to over $2.3 billion once completed. These asset sales are at values significantly higher than those reflected in our public unit price, demonstrating the unique attributes of our business relative to the broader industry. We reported 18% FFO growth and 18% adjusted FFO growth from our operations on a per-unit basis, reflecting both margin expansion and growth-related initiatives. Finally, we advanced approximately 130 megawatts of development wind and hydro at returns in the range of 20% supporting our investment activities.

Overall, our strategy remains the same. We look for investment opportunities in our core markets globally, where we can surface 12% to 15% returns on a per-unit basis using our operational expertise. We maintain strong access to public and private sources of debt and equity, an investment-grade balance sheet, and surface value through the monetization of mature assets. This strategy has served us well for almost 20 years and our business has been resilient through multiple investment cycles and the numerous investment trends that have permeated the renewable power sector over that time.

As a result, we have delivered a 15% total return on a per-unit basis to our unitholders since our inception in 1999. We continue to see a strong appetite for renewable assets across the globe. Our asset-recycling program demonstrates the significant value high-quality assets attract in the private markets. In particular, the recent sale of a minority interest in certain of our hydro assets in Canada was completed at a valuation in excess of 15 times EBITDA based on the contracted price of the portfolio, or well in excess of 20 times, using current spot energy and capacity prices.

This value reflects the perpetual nature of our hydro assets, combined with their unique ability to restore power and deliver energy and capacity during high-demand periods. Recently built contracted wind and solar assets in North America and Europe also regularly transact at mid-to high-single-digit returns. In contrast to hydro assets, however, these assets have largely fixed revenue streams that typically do not grow with inflation and a much shorter asset life. Accordingly, we would expect valuations to soften as interest rates rise.

As a result, we continue to be patient and look for situations that require operational, development, or recapitalization expertise. In the emerging markets, significant volatility driven by weak public equity market valuations, reductions in subsidies, particularly in China, where the government support for solar has decreased recently, and continued demand for electricity is driving a need for long-term capital. Investors with strong operating expertise, patient capital, and a long-term outlook should benefit in this environment. Finally, we are seeing the valuation of public stocks in the U.S.

diverge from U.S. private market valuations. We believe this is largely due to investors prioritizing near-term distribution growth over long-run asset, earnings, and balance sheet quality. This focus on near-term distributions combined with rising rates has led to significant stock price pressure across all renewable issuers, with the most likely long-term impact on those companies in the sector with weak balance sheets and shorter-duration assets.

We believe this public-private market dislocation will provide meaningful opportunities for value-focused investors who have strong balance sheets and significant access to capital. I'll now turn the call over to Wyatt to discuss our operating results and financial position.

Wyatt Hartley -- Chief Financial Officer

Thank you, Sachin, and good morning, everyone. We reported funds from operations of $105 million, or $0.33 per unit in the quarter. This represents a year-over-year increase of $14 million to FFO as the business continues to benefit from recent acquisitions, development project coming online and margin enhancement initiatives. Our hydroelectric segment contributed $104 million to FFO while generation was below long-term average levels in certain geographies this quarter.

We benefited from selling power stored in our reservoirs during high-priced periods.In the U.S., this active marketing of power allowed us to capture prices in the range of $60 per megawatt hour. While in Brazil, short-term power sales were at close to BRL 500 per megawatt hour, or approximately $165 per megawatt hour. In Colombia, we continue to execute on our business plan inside 12 new multiyear contracts at prices above the current spot prices. Our wind segment contributed $29 million to FFO, which is nearly double relative to the prior year as we benefited from recent acquisitions.

Although wind variability is the reality of our business, our global scale provides significant resource diversity benefit as overall generation was in line with plan. For example, weaker wind resources in U.S. and Ireland was largely offset by outperformance in Brazil. Our solar, storage, and other segments contributed $42 million of FFO, in line with expectations, reflecting stable resource and revenues tied to availability rather than generation.

We continue to advance our global development pipeline, a highlight was that we commissioned a 28-megawatt wind farm in Ireland this quarter. We also progressed an additional 19 megawatts of wind in Scotland, 49 megawatts of small hydro in Brazil, and a 63-megawatt expansion of a pump storage facility in the U.S. Together, these projects are expected to contribute $17 million to FFO on an annualized basis starting in the fourth quarter of 2018. We're also advancing an additional 176 megawatts of advanced stage development through permitting and contracting.

We continue to pursue a tuck-in asset strategy in Europe, closing the acquisition of 23-megawatt wind farm in Ireland subsequent to quarter-end. We expect to complete approximately $1 billion of asset sales and up financings by the end of the year, which would generate net proceeds of $850 million to BEP. As of the date of this report, we have executed on over $500 million of these initiatives. In total, this will increase our available liquidity to over $2.3 billion as we enhance our financial flexibility in the current investment environment.

During the quarter, we issued a CAD 300 million corporate green bond. The issue is priced at 4.25%, which is 100 basis points below the corresponding maturing debt. As a result, we now have no material maturities over the next five years, the weighted average term of our debt is over 10 years. We also generated liquidity from continued execution of our capital-recycling program, that would allow us to surface value from mature assets and redeploy capital into higher growth opportunities. Subsequent to the end of the quarter, we sold a 25% interest in a 413-megawatt portfolio of three Canadian hydroelectric assets.

We will retain management and operating responsibilities for the portfolio. We also intend to sell an additional 25% interest in these assets to another group of investors prior to the year-end. Additionally, we progressed the sale of our 178-megawatt wind and solar portfolio in South Africa. In order to facilitate the sale of the interest in our Canadian hydro portfolio, we have taken the opportunity to internalize our power marketing capabilities in North America, previously provided by BAM into Dutch operations consistent with our internalize power marketing capabilities in other parts of the world.

This internalization required amending certain existing agreements. Firstly, we aligned a PPA price received by BEP from BAM with the underlying third-party contracts associated with these assets. This will increase the price of proceeds Ontario portfolio by CAD 60 per megawatt hour. BEP has also been granted the option to extend the contract at its great late power system in 2029 to 2044 at a price of CAD 60 per megawatt hour.

BAM will also transfer the debt and all its other PPA's with the exception to those in New York. As all future energy marketing capabilities will be internalized, we are eliminating our energy market fees paid to BAM. In exchange, our current PPA price for BAM for our New York assets will be reduced by approximately $3 per megawatt hour, each year between 2021 and 2026. We continue to focus on executing our key priorities, including advancing, contracting and cost-saving initiatives and building other development pipeline. We also continued to assess acquisition opportunities, across our core technologies and geographies. In September, we held our annual Investor Day in New York, where we took the opportunity to update unitholders on the investment environment, the strength of our balance sheet and operate initiatives that we have undertaken at our recent acquisitions that demonstrate how our operating expertise can drive significant value.

We would like to thank those of you who are able to attend this event. As always, we remain focused on delivering our unitholders long-term total return 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. That concludes our formal remarks. Thank you for joining us this morning. We would be pleased to take your questions at this time. Operator?

Questions and Answers:

Operator

[Operator instructions] And your first question comes from the line of Rob Hope with Scotia Bank. Please go ahead.

Robert Hope -- Scotia Bank -- Analyst

Good morning, everyone. Maybe, if we could start off on the internalizing of the power marketing contract. The disclosure said that it was done on a value-neutral basis for BAM and BEP. I'm just wondering if you can provide some additional clarity on the put and takes on the cash flow, though, because it looks like you're getting some upfront cash flow but could potentially push off some longer-term cash flow there.

Sachin Shah -- Chief Executive Officer

Sure, it's Sachin here and I'll let Wyatt jump in as well, if necessary. I think first, a couple of things: one is, as we were contemplating selling an interest in the Canadian portfolio that we ultimately did, to do that, we needed to harmonize the underlying third-party contracts we have in Canada with the contracts that BEM ultimately had from BAM or BEP ultimately had with BAM. And so as a result, that simple harmonization meant that we're receiving all the benefits upfront, however, we just made the decision from a BAM perspective as sponsor to make sure that if we're going to reduce cash flows that BEP receives, we'd do it over time. And simply put, I think, that's just the benefit of having a good sponsor in BAM, who's always looking out for the long-term interest of the business and making sure that, if we're doing something positive like selling assets that create good valuation and bringing cash into the treasury, that we also consider the long-term implications and manage that through in a proper way.

Obviously, all of that was then reviewed by the independent members of our board, who had independent financial advice and legal advice, which is why we made a point of saying it was done on a value-neutral basis

Robert Hope -- Scotia Bank -- Analyst

And thank you for that. And then just moving over just to the amortization and kind of the increase in liquidity there. Is this being done just in advance of your expectation that you will see increasing opportunities, I guess in China and emerging markets as well some U.S. public entities or are you well down the path and have identified targets there?

Sachin Shah -- Chief Executive Officer

A little bit of both. I think what we're seeing right now is, we have a strong investment pipeline, first and foremost. And we can ever say whether those things materialize or not, it's always difficult to predict that, however, we do have a very, very strong investment pipeline and in large part, that's because there's a significant market volatility. Many of our public peers don't have a strong access to capital.

And so we think there might be a window here, where the competition decreases and then obviously, with rising rates, we just think having cash in light of investors eventually catching up and looking at that value in a more normalized way is just a really positive position to be in. So we just think we're going through a period right now, where you want to have significant financial resources and you don't want to lean on or put a hold into in particular the public markets where there's a lot of public volatility quality, and we feel like we've achieved that with completing $500 million of asset sales and bringing cash into the treasury. And then having another few hundred million that we're going to bring in by the end of the year.

Robert Hope -- Scotia Bank -- Analyst

All right. Appreciate the thoughts. Thank you.

Operator

And your next question comes from the line of Sean Steuart with TD Securities. Please go ahead.

Sean Steuart -- TD Securities -- Analyst

Thanks. Good morning. In like fashion of the commentary you had on the gap between public and private valuations for hydro, can you speak to your willingness to monetize more of your North American hydro? And if there is an appetite, should we envision it as selling down minority stakes of what you already have and retaining control of the assets? How do you think about that?

Sachin Shah -- Chief Executive Officer

I think it's a good question. I wouldn't suggest that we're only going to look at hydro. We obviously will be responsive to where market demand exists. I think what's going on right now though is that investors who understand hydro recognize the benefits.

The large benefit with hydro is obviously the life cycle of it. When you have a 100-year asset, you have a strong return on your investment. You don't have really any return of capital coming through on an annual or quarterly basis. And so you've got a preservation-of-capital strategy, you have cash flows that grow over time, and you have value that grows over time, and that's completely opposite to wind and solar, which need to be replaced every 25 to 35 years, depending on your view of the asset life.

So the bid in the market is very strong, And the bid comes from financial investors and strategics, who have owned and operated hydro before. so obviously, that's a really strong candidate for us to monetize partial interest, as you suggest. I think the reason we often entertain minority sales is because, given our reputation, most counter-parties actually want us to continue to operate the plants. We've a good, long history of operating these very efficiently at a low-cost basis and also optimizing the cash flows by selling power.

So more often than not, we actually get inbound requests for buying partial interest with us continuing on as operator. And I think that's a theme you will see over the next number of years, as we rotate capital around the portfolio.

Sean Steuart -- TD Securities -- Analyst

Great. Thanks for that detail. One administrative question for Wyatt. Your table in the disclosures shows pro forma liquidity increasing by about $650 million to $2.3 billion.

You guys referenced net proceeds of $850 million via the asset sales and up-financing activity. Can you reconcile those two numbers? What am I missing there?

Wyatt Hartley -- Chief Financial Officer

Yes, there was about $200 million of up-financing that are in our liquidity at the quarter-end, and so the $650 million of incremental pro forma is for the overall asset sales.

Sean Steuart -- TD Securities -- Analyst

OK. Got it. That's all I have for now. Thanks, guys.

Wyatt Hartley -- Chief Financial Officer

Thanks, Sean.

Operator

And your next question comes from the line of Andrew Kuske with Crédit Suisse. Please go ahead.

Andrew Kuske -- Credit Suisse -- Analyst

Thank you. Good morning. I think the first question is for Wyatt. And this is just on your contract profile on Slide 15 in the supplemental and if we look on a sequential basis, sequential quarter, that is Q2 versus Q3, a bit of a lift across the board in average megawatt hour pricing in all the years except 2020.

What's driving those numbers? Is it just improved power markets? Inflation? If you could just give us a bit of a breakdown, I'd appreciate it.

Wyatt Hartley -- Chief Financial Officer

Sorry, Andrew. Just to clarify, you're saying why it's sequentially kind of through '19, 2021, '22, why are we -- why is the average contract price increasing?

Andrew Kuske -- Credit Suisse -- Analyst

Yes, you're basically getting a lift across the board, is it in pricing?

Wyatt Hartley -- Chief Financial Officer

Yes, so that comes broadly from inflation, in taxation of contracts, especially with the new contracts that we signed for our Ontario fleet, they escalate a 3%, so that's an incremental benefit. Also, we do have some lower-price PPAs that are formally over that period, and so it's a mix of those two things that's driving that growth over time.

Andrew Kuske -- Credit Suisse -- Analyst

OK, that's helpful. And then just with amortization of the hydro. How far can you push that model? And is it something that we've seen another on another Brookfield company being Brookfield Property Partners, where we have seen a 90% interest in certain buildings being sold to third parties. But Brookfield still manages the building, would you push the model that far?

Sachin Shah -- Chief Executive Officer

Andrew, the simple answer is yes. We would push the model that far. I think, obviously, this is a really valuable source of capital that we have on our balance sheet, and if we're in the business of generating 12%, 15% returns. If we have assets where we've done all the work, we've put in contracts, we have optimized the capital structure, and we have protected the assets for good investment over the years, that the market would value at a higher multiple and a lower overall return.

We should sell those, that's the right thing to do. And we would absolutely consider pushing that all the way up to a very, very high level of sale with a small interest in the continuing role in the operations, if that's what people benefit. We're opportunistic as you know, and so we never hold ourselves to any particular threshold that we don't think is reasonable.

Andrew Kuske -- Credit Suisse -- Analyst

And then maybe just as a follow-up, given that kind of dynamics and the delta, and what you've sold assets for versus where the stock is trading. To what degree would you push the share buybacks?

Wyatt Hartley -- Chief Financial Officer

Yes, it's a great question I think we have our normal course issue or bid in place and obviously, as I said in the earlier comment, where we are starting to hold onto our cash, harvest it and look for opportunities, that would be one of the opportunities that we are looking at. No different than looking at investment decisions around assets, businesses or various portfolios. Buying back our stock is just another investment and it's another capital allocation to cap at our disposal. So as we see public market valuations need to deteriorate, it's obviously something that's on our radar and we would consider as part of the overall strategy of generating the appropriate return for our shareholders.

Andrew Kuske -- Credit Suisse -- Analyst

OK. That's great. Thank you.

Operator

Your next question comes from the line of Mark Jarvi with CIBC capital markets. Please go ahead.

Mark Jarvi -- CIBC -- Analyst

Good morning everyone. Just want to go on a comment about that option for extending the contract at Great Lakes power. Maybe you can provide more colors in terms of is there any concessions that you have to make on pricing before 2029? Do you exercise that option or is it just you could extend the contract beyond 2029?

Sachin Shah -- Chief Executive Officer

It's a simple option to extend, and it's really meant to protect that in the event that markets are weak during that period, then it gives that effectively the ability to ensure that its cash flows are stable post the 2029 period. It sets a bit of a floor price. So obviously, our view would be the power prices would be higher than that at this stage overall, but that just gives that a little bit of insurance.

Mark Jarvi -- CIBC -- Analyst

OK. And then in terms of just the net impact on the corporate costs by terminating the marketing agreement, so you'll absorb some of those marketing costs directly. So I'm just wondering it should be sort of neutral from a cost profile?

Wyatt Hartley -- Chief Financial Officer

Yes, it's largely neutral, I think over time as we've created more efficiency in the business, what you get now is that those efficiencies will actually fall to BEP's bottom line. So before, it was really just a simple fee that BEP was paying BAM, and I think what we have now is the opportunity to look at the business, make sure it's being run efficiently. And to the extent that we can drive cost savings, those cost savings run through BEP's bottom line, and that's great upside for BEP shareholders.

Mark Jarvi -- CIBC -- Analyst

OK. That's helpful. and just on the U.S., the New York hydros and the step down in the pricing over time. Can you just walk us through in terms of how other revenue streams like capacity, payments, ancillary revenues work with that in terms of what you would expect for realized pricing for those assets as the contract with BAM steps down?

Wyatt Hartley -- Chief Financial Officer

Sure. So first of all, just to remind you, the contract with BAM has historically had with BEP, in particularly with the New York contract, it's an all in price contract for all energy capacity and any other green attribute that we sell whether that's an ancillary service or a rack that we might get. So it's all in price that BAM pays BEP and effectively then takes on the exposure from a market perspective. And I would say, today, generally, what we're seeing in the U.S.

Northeast between energy racks capacity and some other ancillary products that we sell, typically, like stabilization services, we are generating in the mid-50s. And so, I think, what you'll see is as that contract steps down, by the time it gets to its end of the step-down, it will largely be in line with the current market price.

Mark Jarvi -- CIBC -- Analyst

OK. That's helpful. Those are my questions for now. Thanks, guys.

Wyatt Hartley -- Chief Financial Officer

Thanks.

Operator

Your next question comes from the line of Ben Pham from BMO. Please go ahead.

Benjamin Pham -- BMO Capital Markets -- Analyst

Thanks. I wanted to dig into the multiple of 15 versus 20 that you highlighted on the Canadian hydro sale. Is the 20 times, that's -- is that what you're getting today, and then the 15 is uplift on the pricing? Is the difference between the two? I wasn't sure on which...

Wyatt Hartley -- Chief Financial Officer

No. No, Ben. So just simply put, the assets we sold, three assets in Canada are all contracted and have long-term PPAs attached to them. So simply just using the contract price and coming up with the EBITDA, using that contract price and looking at the enterprise value based on the sales price.

The transaction was completed at north of 15 times. So that's just the simple math. What I was trying to articulate though is that if you come -- if you then replace that contracted price with current market -- merchant power prices, merchant energy, capacity and ancillary, the implied EV to EBITDA multiple would be in excess of 20 times. And that's relevant because when you see merchant hydro trade today, it's generally trading at 20 to 20 plus times.

So it all kind of triangulates with where the market is today, the market generally, today is in that range where hydro trade is at 20 times on a merchant basis. And then obviously, if there are contracts in place, both contracts then drive a different trading multiple. But you can see that where our hydros are trading, it's largely in line with the high end of the market, and I think that speaks to the fact that they are just high-quality assets, and in particular, they have storage capability, and that's really, really meaningful to buyers in the current market.

Benjamin Pham -- BMO Capital Markets -- Analyst

OK. So the 20 times is what you're seeing in the private market versus your stocks probably at 12 or so and then 15 daily, they're actually 20.

Wyatt Hartley -- Chief Financial Officer

Yes. And I think it's relevant because if you look at 80% of our asset base and cash flows are hydros, which do have this trading multiple, they get attached to them in the private market and yet, the point we were trying to make in our written commentary is that today, investors tend to be overly focused on just the dividend and don't distinguish between balance sheet quality, asset quality, and long-term earnings quality. And that's an important distinction, which would mean that if that continues, then for us, the private markets tend to be a really excellent way to surface value and continue to grow the business.

Benjamin Pham -- BMO Capital Markets -- Analyst

OK. Thanks for clarifying that. And can you perhaps -- it's just -- for me, it's been a while since big 11 restructuring. So BAM buys about 30% of your power today.

Not sure you have this at your fingertips, but can you high level, just walk through what those assets are right now? I mean, obviously, picking hydros in there. And then just talk about just maybe the contract duration that's left on all those buckets?

Sachin Shah -- Chief Executive Officer

Sure. So the only contract that's left is the New York assets. Everything else has been pushed down with the contracts either eliminated or just completely harmonized to the third-party back-to-back agreements. So really from 2011, where we had PPAs between BEP and BAM, for assets in Canada, assets in New York, assets that we had in Massachusetts or sorry, in New England, more broadly, all of that has been eliminated with this restructuring.

And really, we have the singular contract that's left between BEP and BAM in relation to its New York portfolio.

Benjamin Pham -- BMO Capital Markets -- Analyst

OK. Great. And then lastly, the -- can you also remind us, how you guys are calculating long-term averages in the portfolio? Is that -- are you refreshing it every quarter, you doing every five years?

Wyatt Hartley -- Chief Financial Officer

It's neither. It's typically done -- generally, it's done every year. And it's largely driven around our financings because we borrow at the project level with investment-grade debt, often the financing covenants and parameters require us to refresh our LTA estimates using a third-party independent engineer. So all of our LTA is validated by IE's or independent engineers, and it's, obviously, the whole portfolio rotates over, and so most of the assets are looked at every year.

And typically what the independent engineers are looking at is a 30-year or 50-year history, and in some instances where the data exist, we're going back 70 years. And I think the important thing is obviously -- if you look at from when we started 20 years ago, we are about bang-on LTA. If you look at, through that history and in fact, even when you look at BEP from when BEP was formed in 2011, we're about bang-on LTA. But naturally, we get it -- when you're down, investors get nervous and when you're up, people sort of exclude it from their analysis because it's seen as one-time.

So we understand the question, and we understand why people look at it. But what we get ourselves comfortable with is our own operating history over the last 20 years and then the independent engineers' assessments for every one of our asset portfolio, which then supports the financings, which then validate our long-term averages.

Benjamin Pham -- BMO Capital Markets -- Analyst

All right. That's great. I got the data point. It's actually on the historical trend.

Wyatt Hartley -- Chief Financial Officer

Yes.

Operator

Your next question comes from the line of Rupert Merer from National Bank. Please go ahead.

Rupert Merer -- National Bank -- Analyst

Hi. Good morning, everyone. Can you talk a little bit about Brazil? We've had an election recently and of course, some changes in the exchange rate over the last six months. How do you see that market for investment today? And are there any assets sales coming out of privatizations that could be of interest to you?

Sachin Shah -- Chief Executive Officer

Great question. I think, obviously, with Bolsonaro winning and the currency trading more positively in the last really couple of weeks, off of people's expectation that he would win, that's net-net positive to our existing assets in the marketplace and I think, generally, net positive for investment flows in the country. Look, our view is that he is going to stick to what he said during his campaigns, which is more privatizations, attracting more foreign direct investment.

He does have a pro-business stance and obviously, we get it, he said some certain things that -- it's in the world today, you see more and more political leaders saying things of that nature. But we think in general, he will continue his pro-business mandate. He will be able to accomplish a lot of what he said because obviously, having gone through the deep recession and the corruption scandal in Brazil, there's significant political will and will at the people level to move forward and drive economic growth as a key mandate for the success of that country, which we believe is where what he's positioning himself around. As far as asset sales go, I think you will see more asset sales in the country in particular, in the power sector as the country needed the capital.

And I think the more important part for us in the power side is just that we think that competition in the power sector may be a little bit -- may continue to be muted and that might play to our strength. So we look at Brazil as a really positive market to invest in. We've been looking at investments over the last four years through all of this, but there's been a very, very strong bid in particular from the Asian investors in the country, and we think as many of them take a pause to digest the things that they have bought, this may open a unique window for investors like ourselves, where we could secure good transactions. And obviously, we have a large development pipeline there that we continue to build out as well.

Rupert Merer -- National Bank -- Analyst

OK. Great. Thanks for the color. And then quickly on Ireland, you made a talk in there that's a market where we typically think of as having quite high valuations.

Can you talk about how that asset made sense for you?

Sachin Shah -- Chief Executive Officer

Sure. With Ireland, the real benefit we have is because we have such a large development pipeline and developers on the ground, often you get a small developer who needs capital very quickly and doesn't have the time to run an option, doesn't have a time to run a process, and we've seen this in North America over the years, too. That's when you get your greatest little tuck-in acquisitions. It's not a huge amount of capital but you can buy things at values that work from your return perspective that you would have never otherwise be able to do, if they went to market.

And it's simply because the relationships that we build along the way, and because people will understand that if you need speed and certainty of execution then, we just have a good track record in that regard. So I would say this was simply a function of assets that the seller needed to monetize very quickly, and we were able to fill that hole.

Rupert Merer -- National Bank -- Analyst

OK. Great. Thanks very much.

Operator

Your next question comes from the line of Nelson with RBC Capital Markets. Please go ahead.

Nelson Ng -- RBC Capital Markets -- Analyst

Great. Thanks. Just first of all, just a quick clarification on the Irish tuck-in. So was that done through TerraForm Power or directly through Brookfield Renewable?

Sachin Shah -- Chief Executive Officer

It was done through Brookfield Renewable. It was sourced -- it was sourced in advance of us acquiring TerraForm and so, it's just -- it was not part of the new framework that we have with TerraForm.

Nelson Ng -- RBC Capital Markets -- Analyst

OK. And then in terms of the Brookfield Renewable's share of investment of $20 million, compared to the FFO of $1 million, is that $1 million like net of assumed financing costs?

Sachin Shah -- Chief Executive Officer

Yes, that's net of financing cost and that is our share. It will be about 40% of the project, and so the $1 million is our share net of financing.

Nelson Ng -- RBC Capital Markets -- Analyst

Got it. And just on the hydro asset sale, are all three of those assets in Ontario or is there something in Quebec as well?

Sachin Shah -- Chief Executive Officer

Not, it's Ontario and DC. Nothing back.

Nelson Ng -- RBC Capital Markets -- Analyst

OK. And then in terms of the $650 million of proceeds, is that cash tax in any way or do you have enough tax losses to offset any potential profits?

Sachin Shah -- Chief Executive Officer

Yes, we would have substantial NOLs in the business, so this would be -- these proceeds would be after-tax proceeds because of our shelter that we have.

Nelson Ng -- RBC Capital Markets -- Analyst

OK. And then just last one, one last one. In terms of the wind and solar in South Africa, could you give some more color on timing? Are you expecting to divest it this -- by the end of this year or could that drift into 2019?

Sachin Shah -- Chief Executive Officer

We have a signed agreement. We expect to close by the end of the year. obviously, we need approvals that are out of our control, but its all tracking loan and we think we can get it completed by the end of the year.

Nelson Ng -- RBC Capital Markets -- Analyst

OK. Thanks. Those are my questions.

Operator

Your next question comes from the line of Jeremy Rosenfield from Industry Alliance. Please go ahead.

Jeremy Rosenfield -- Industry Alliance -- Analyst

Yes, thanks. Good morning. Just a couple of clean up questions. First on the asset sale, and I apologize if you covered it earlier.

I'm trying to bridge from EBITDA to FFO. Was there any specific project level debt within the Canadian hydro portfolio?

Sachin Shah -- Chief Executive Officer

Yes. Those assets are financed in investment grade. And so the proceeds that we're talking about are all net of that debt and are effectively that share of the equity value

Jeremy Rosenfield -- Industry Alliance -- Analyst

OK. And in terms of the reporting of the transfer of ownership, and do you -- are you -- do you have to deconsolidate from a reporting perspective or do you retain sort of consolidation of the assets?

Sachin Shah -- Chief Executive Officer

No. We will maintain operating control of those assets so we will continue to consolidate them.

Jeremy Rosenfield -- Industry Alliance -- Analyst

OK. And then just to follow-up on Rupert's question on Brazil. Can you remind us just from a strategic perspective, is there a maximum threshold or a maximum amount that you want to actually be invested in Brazil when thinking about portfolio diversification across different jurisdictions? And I know I think it's about 15% of FFO in Brazil right now but what's the sort of threshold that you be comfortable with? And how much more room do you think you have investing in that jurisdiction?

Sachin Shah -- Chief Executive Officer

And so I would say that we generally think we'll invest 25% to 30% of our capital in markets that are outside of North America and Western Europe. And that is a basket of countries that includes Brazil, India, China and obviously, Columbia. And so we don't put a hard cap on any one country, but that being said, we think that as we've moved out into the world, and to more countries outside of those regions, it just gives us more flexibility to move our capital among the emerging market regions, where we see the best value but the overall allocation to emerged markets hasn't changed. So generally, I'd say 25%-ish is a good overall target, we put that out in our investor day.

And in that will be the various countries that I just laid out as far as -- and Brazil being obviously an important one.

Jeremy Rosenfield -- Industry Alliance -- Analyst

OK. Good. Thank you. That's it for me.

Operator

Your next question comes from the line of Frederic Bastien with Raymond James. Please go ahead.

Frederic Bastien -- Raymond James -- Analyst

Hi, thanks. Back on the asset sales, you own many hydro facilities in Canada. What made you decide to sell the Great Lake, Carmichael and Coccous facilities in particular?

Sachin Shah -- Chief Executive Officer

That's a great question, Frederick. I just think today, those were very easy to sell in light of the fact that people didn't have to come up with merchant view of power in the near term. And so we were trying to do something that was highly efficient, quick and something that we could probably market. So It was just a very marketable portfolio in light of that certainty of cash flow coming in.

And in a market, where -- there is investor volatility today, it was something that we just felt at ease of execution. So there's nothing more to it than really that.

Frederic Bastien -- Raymond James -- Analyst

OK. Thanks. the other one for me. Can you speak to the other $0.5 billion of assets sales on which you have yet to execute?

Sachin Shah -- Chief Executive Officer

Yes. So we intend to -- the bulk of that is really around -- we intend to sell around 25% of that same portfolio to one of our funds, which we intend to do this quarter, in the fourth quarter, really off the back of this sale that we just made. So I would say, the vast majority of the remaining assets sale is that and then we have a few other smaller assets that we're selling, and that we're pretty advanced on but they would be small in the overall numbers.

Frederic Bastien -- Raymond James -- Analyst

Got it. Thanks for that.

Operator

And there are no further questions in the queue. I turn the call back over to the presenters.

Sachin Shah -- Chief Executive Officer

OK. Well, thank you, everyone. We appreciate the questions and the interest as always. We look forward to talking to you in February at our year-end conference call.

Thank you.

Operator

[Operator signoff]

Duration: 43 minutes

Call Participants:

Sachin Shah -- Chief Executive Officer

Wyatt Hartley -- Chief Financial Officer

Robert Hope -- Scotia Bank -- Analyst

Sean Steuart -- TD Securities -- Analyst

Andrew Kuske -- Credit Suisse -- Analyst

Mark Jarvi -- CIBC -- Analyst

Benjamin Pham -- BMO Capital Markets -- Analyst

Rupert Merer -- National Bank -- Analyst

Nelson Ng -- RBC Capital Markets -- Analyst

Jeremy Rosenfield -- Industry Alliance -- Analyst

Frederic Bastien -- Raymond James -- Analyst

More BEP analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.