DBRS Confirms Ratings of Brookfield Renewable Energy Partners L.P. and Subsidiaries

DBRS Limited (DBRS) has confirmed the Issuer Rating and the rating on the Senior Unsecured Debentures and Notes of Brookfield Renewable Energy Partners L.P. (BREP or the Company) at BBB (high), and the Class A Preference Shares at Pfd-3 (high), all with Stable trends. The rating actions reflect DBRS’s expectation that BREP will continue to prudently finance its growth initiatives to maintain its deconsolidated key credit metrics in line with the current rating. BREP’s ratings reflect its geographic and resource diversification, and highly contracted portfolio with investment-grade counterparties, while also factoring in the inherent renewable resource risk.

BREP has continued to further diversify and grow its portfolio predominantly through significant acquisitions, including Safe Harbor in the Northeast United States and the Bord Gáis wind portfolio in Ireland in 2014, and the acquisition of a 488-megawatt (MW) renewable portfolio in Brazil (expected to close in March 2015; the Energisa Acquisition). The further increase in geographic and resource diversification reduces the exposure to regional hydrology and wind variability, and operational challenges at specific facilities. Although BREP has increased the proportion of wind generation in its portfolio and is expected to acquire its first biomass facility through the Energisa Acquisition, hydro (approximately 85% of generation) is expected to remain as the Company’s core focus and is generally viewed as having a relatively lower risk profile. BREP’s business risk profile is also supported by its highly contracted portfolio with a weighted-average remaining duration of 18 years, reducing the exposure to power price risk. However, acquisitions in recent years, particularly hydro assets in the Northeast United States, have increased the merchant exposure. The proportion of merchant generation is expected to increase in 2017 as existing contracts mature. DBRS expects BREP to secure long-term contracts for these assets over time; however, should contracted output fall below 80%, BREP’s business risk profile could be negatively affected.

BREP’s financial risk profile is based on its deconsolidated credit metrics that have remained reasonable for the current rating, as supported by its prudent financing strategy of predominantly funding growth initiatives with a mix of non-recourse project-level debt, equity and capital from institutional partners. In 2014, BREP’s deconsolidated debt-to-capital was within the 20% threshold, supported by a CAD 325 million equity offering and the closing of non-recourse project-level debt associated with the acquired assets. Other deconsolidated key credit metrics remained relatively stable and supportive of the rating, as modestly lower corporate debt and interest levels were offset by a slight decrease in deconsolidated EBITDA and cash flow. Earnings and cash flow were affected by below long-term average hydrology and wind conditions on a portfolio-wide basis. Going forward, DBRS expects the Company to maintain its deconsolidated key credit metrics in line with the current rating by prudently financing its growth strategy, including the closing of the Energisa Acquisition.

Notes:
Rating applies to unsecured debentures and notes issued by Brookfield Renewable Energy Partners ULC and preference shares issued by Brookfield Renewable Power Preferred Equity Inc., which are guaranteed by their parent, Brookfield Renewable Energy Partners L.P.

All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Companies in the Independent Power Producer Industry, Rating Holding Companies and Their Subsidiaries, Preferred Share and Hybrid Criteria for Corporate Issuers and DBRS Criteria: Guarantees and Other Forms of Explicit Support, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.