What happened
Shares of Brookfield Renewable Corporation (BEPC -0.04%) plunged 36.8% in 2021, according to data provided by S&P Global Market Intelligence. Meanwhile, the economically equivalent publicly traded partnership, Brookfield Renewable Partners (BEP 0.39%), slumped 17%. Both significantly trailed the S&P 500, which rallied nearly 27% last year. That sell-off came even though the renewable energy giant delivered strong financial results and made excellent progress on its strategic growth strategy.
So what
On the one hand, Brookfield Renewable had an excellent year in 2021. It delivered record funds from operations (FFO) during the third quarter of $210 million, or 32% more than the prior year. Meanwhile, normalized FFO per share was up nearly 20% year over year through the third quarter. The company benefited from strong asset availability and recent acquisitions.
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Brookfield also made excellent progress on its strategic growth plan. Despite global supply chain issues, the company continued making headway on its 7-gigawatt (GW) construction pipeline. Meanwhile, it took advantage of increasing interest in renewable energy to add another 5 GW of projects to its overall development pipeline, pushing the total to 36 GW.
Brookfield also continued to find attractive outside investment opportunities. The company and its partners agreed to invest $2.4 billion across a range of transactions last year. These deals will help power growth in the coming year.
The company's success in 2021 increased its confidence in its long-term growth outlook. It continues to see the potential for up to 20% annual FFO per share growth through 2026, 8% of which it has already secured. Brookfield has several catalysts powering that forecast, including inflation-linked contracts, rising power prices, development projects, and M&A activity. That should support 5% to 9% annual growth in its 3.5%-yielding dividend.
Even with all this success, shares of Brookfield Renewable Corporation tumbled 36.8% last year while Brookfield Renewable Partners slumped 17%. The only explanation is that their valuations seemed to cool off after a blistering rally in 2020. Units of the partnership were up 45% in 2020. Meanwhile, shares of the corporation rallied more than 100% from their creation in late July. That significant divergence led their parent, Brookfield Asset Management (BN -0.28%), to sell some of its shares in the corporation in February to provide more liquidity to the market. This sale seemed to put a cap on Brookfield Renewable's rally as the market tried to absorb those new shares.
Now what
Brookfield Renewable had another strong year operationally and strategically in 2021. However, its share price declined as it cooled off from a huge rally in 2020 after its parent company supplied more shares to the market.
That sell-off looks like a buying opportunity. With its shares falling while FFO has risen, Brookfield Renewable now trades at around 20 times its FFO. That looks cheap for a company that could deliver 10%-plus annual FFO per share growth over the next several years.
