Brookfield Renewable Partners (BEP) recently put the wraps on an excellent 2017 by posting strong fourth-quarter results. Funds from operations (FFO), which is a proxy for cash flow, rocketed 165% to $143 million and was up 155% on a per-unit basis to $0.46. That pushed its full-year results to $581 million, or $1.90 per unit, up 39% and 31%, respectively. That strong growth enabled the company to generate a more than 25% total return for investors last year after factoring in its lucrative distribution.
The company expects its strong growth to continue this year, which is why it announced a 5% increase in its payout, pushing the yield up to nearly 6%.
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Diving into the results
Brookfield Renewable Partners reported solid earnings growth across the board:
Data source: Brookfield Renewable Partners. Chart by author. In millions of dollars.
As that chart shows, the biggest contributor during the quarter was the hydropower business. That's mainly due to the strength of the company's North American assets, which generated more than double the FFO of the year-ago period thanks to continued strong power generation that was 7% above average last year. In addition to that, the company produced solid results in Brazil, where it captured higher electric prices, and Colombia, which also delivered above average power generation.
Brookfield's wind assets generated higher earnings in the quarter even though power production was below normal levels due to less windy conditions across North America. The company more than offset that by adding wind farms to its portfolio after acquiring stakes in both TerraForm Power (TERP) and TerraForm Global in transactions secured by its parent Brookfield Asset Management (BN 0.40%).
The TerraForm deals helped boost FFO in the company's solar, storage, and other segment during the quarter. That said, because they both closed late in the quarter, the company won't enjoy the full impact until 2018. In addition to the incremental income from TerraForm, Brookfield benefited from a recent acquisition of a pumped storage portfolio in the UK.
Image source: Getty Images.
A look at what's ahead
Overall, Brookfield invested $625 million on acquisitions and new developments in 2017. Those deals not only boosted the bottom line last year but will help it generate increasing FFO in 2018. While the TerrForm deals and pumped storage acquisition moved the needle the furthest, Brookfield also commissioned 75 megawatts (MW) of new renewable power facilities last year that should provide some incremental income in 2018. Meanwhile, it has another 248 MW of capacity either under construction or in advanced stages of development.
Brookfield noted that its investment in TerraForm Power would pay further dividends in 2018 after that company agreed to buy a wind and solar-power platform in Spain for $1.2 billion. That deal will boost TerraForm's cash flow by 24% in the near term. Not only will Brookfield Renewable benefit from the increased profitability on its existing stake, but the company could make a follow-on investment to boost its investment in TerraForm in support of that transaction. In fact, the parent company of both entities, Brookfield Asset Management, has agreed to backstop a $400 million equity offering that TerraForm intends on completing to help finance the deal, which is likely how Brookfield Renewable Partners would participate.
With all that growth coming down the pipeline, Brookfield Renewable said that it would increase its distribution 5% for 2018. Further, the company still believes it can generate enough internal growth to continue raising the payout at a 5% to 9% annual rate for the next several years.
A great income stock for the long-haul
Brookfield Renewable Partners delivered fantastic results last year thanks in part to several acquisitions. Those deals not only enhanced its existing portfolio but provided it with platforms to power future growth. That leaves the company as confident as ever in its ability to continue paying a growing income stream to investors, making it one of the top alternative energy stocks to consider buying for the long term.
