Brookfield Renewable Partners (NYSE:BEP) has been actively wheeling and dealing over the past year to bolster both its renewable energy portfolio as well as its balance sheet. Those initiatives paid off during the third quarter as the company delivered significant cash flow growth even though it produced less electricity overall. That success keeps it on track with its plan to continue growing its 4.6%-yielding dividend at a healthy pace for the next several years.

A closer look at Brookfield Renewable Partners' third-quarter results

Metric

Q3 2019

Q3 2018

Change (Decline)

Actual generation

5,821 GWh

5,956 GWh

(2.3%)

Funds from operations (FFO)

$133 million

$105 million

26.7%

FFO per unit

$0.43

$0.33

30.3%

Data source: Brookfield Renewable Partners. GWh=gigawatt hours.

Brookfield Renewable Partners' cash flow grew sharply, thanks to the strength of its hydroelectric and wind businesses:

Brookfield Renewable Partners' earnings by segment in the third quarter of 2018 and 2019.

Data source: Brookfield Renewable Partners. 

Brookfield's hydroelectric operations grew their cash flow by 20% year over year, even though they produced less electricity due to drier conditions in the U.S. Northeast and Canada during the period. The company offset that issue by generating stronger results in its South American businesses as it benefited from its initiatives to boost the profitability of its operations in Brazil and Colombia.

The company's wind business increased its cash flow by 24% compared with the prior-year period. It benefited from recent growth initiatives, including the acquisition of 210 megawatts (MW) of wind capacity in India and the completion of a 51 MW wind farm in Ireland. Meanwhile, Brookfield's investment in TerraForm Power (NASDAQ:TERP) also continued to pay dividends as that company's wind fleet grew its cash flow thanks to the implementation of a new long-term service agreement that has helped reduce costs.

The results within Brookfield's solar, storage, and other segment were flat year over year. But cash flow from its solar business rose 16% due in large part to growth at TerraForm. Meanwhile, earnings from storage and other were down 45.5% as a result of a 33% decline in actual generation during the period.

Several wind turbines in a field with a bright sun in the background.

Image source: Getty Images.

What's ahead for Brookfield Renewable Partners

Brookfield advanced several strategic initiatives during the third quarter to help power future results. It invested another $50 million into TerraForm Power to help its sibling pay for the acquisition of a large-scale solar portfolio. That transaction enabled Brookfield Renewable to maintain a 30% interest in TerraForm so that it can continue benefiting from its growth.

The company also invested about $45 million to acquire a stake in a 200 MW wind farm in China. That deal further bolsters its presence in that country by aiding its joint venture to build out a rooftop solar platform. That entity finished 8 MW of projects during the quarter and expected to bring another 12 MW on line by year-end.

In addition, it's still on track to close a joint venture with private equity giant KKR to co-own solar project developer X-Elio. That transaction should close during the fourth quarter and boost growth in the solar sector over the next several years.

Meanwhile, the company continues to cash in on its mature assets to help finance its expansion-related initiatives. It sold two European wind portfolios during the quarter, generating $74 million in cash while locking in an 18% compound annual return on those operations. And it continued selling off its noncore South African assets. It has now sold five of its six operations in that country, bringing in $42 million, which is almost two times what it has invested. With those sales, the company has $2.5 billion of available liquidity, giving it plenty of firepower to continue making deals.

All powered up for continued success

Brookfield Renewable's third-quarter results show that its strategic plan continues to pay dividends. The company fully expects its success to continue as it recently updated its five-year outlook, aiming to grow its cash flow at a more than 10% annual rate through 2024. That should easily support its target to increase its high-yielding payout by 5% to 9% per year, which is why it remains a top choice for investors who are seeking an income stream powered by renewable energy.