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

DBRS Limited (DBRS) confirmed the Issuer Rating of Brookfield Renewable Partners L.P. (BEP) as well as the Senior Unsecured Debentures and Notes (the Senior Notes) rating of Brookfield Renewable Partners ULC at BBB (high). DBRS also confirmed BEP’s Class A Preferred Limited Partnership Units rating and Brookfield Renewable Power Preferred Equity Inc.’s Class A Preference Shares (the Preferred Shares) rating at Pfd-3 (high). All trends are Stable. The Senior Notes and Preferred Shares are unconditionally and irrevocably guaranteed by BEP.

BEP’s credit profile has remained unchanged following the agreement between BEP and its institutional partners (collectively, Brookfield) to invest CAD 750 million in exchangeable securities with TransAlta Corporation (TransAlta; rated BBB (low) with a Stable trend by DBRS) in April 2019. The investment allows Brookfield, at its option, to convert up to a 49% interest in TransAlta’s hydro assets (approximately 813 megawatts located in Alberta). Since DBRS’s last rating review in May 2018, BEP’s business risk profile has improved modestly as a result of an increase in size and diversification through an increase in the ownership of TerraForm Power to 30% from 16% and the completion of projects under development in 2018. Long-term contractual arrangements (i.e., power purchase agreements) remain strong with an average remaining life of l4 years. Approximately 88% of expected generation output in 2019 and 2020 is under contract, significantly mitigating BEP’s exposure to commodity price risk. DBRS expects BEP to continue to manage its contractual portfolio on an ongoing basis and to reduce the uncontracted portion in 2021 and 2022 as circumstances allow.

BEP’s financial profile improved in 2018 and remained strong in Q1 2019. BEP’s key credit metrics, both on a consolidated and deconsolidated basis, improved from 2017, largely supported by stronger cash flow from portfolio growth, higher generation, higher average prices and lower deconsolidated debt. In assessing BEP’s financial profile, DBRS focuses on BEP’s key deconsolidated metrics because (1) there is substantial debt at the project level, which is non-recourse to BEP, and (2) distributions to BEP from projects is net of cash distributions to non-controlling interest partners. In this regard, BEP’s cash flow-to-deconsolidated debt and cash flow-to-interest coverage ratios improved significantly in 2018 and improved further in Q1 2019 supported by a modest reduction in corporate debt and stronger cash flow available to BEP. These ratios provide BEP with financing flexibility over the medium term. BEP’s corporate liquidity remains strong with approximately $1.9 billion in cash and available credit facilities as of March 31, 2019. BEP’s current ratings factor in the (1) structural subordination of BEP’s debt to project-level debt, which is significantly mitigated by the diversification of cash flow, and (2) implicit support by Brookfield Asset Management Inc. (rated A (low) with a Stable trend by DBRS), which indirectly owns 60% of BEP on a fully exchanged basis and provides BEP with a $400 million credit facility.

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

The principal methodologies are Rating Companies in the Independent Power Producer Industry (May 2019), DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries (November 2018), DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (November 2018) and DBRS Criteria: Guarantees and Other Forms of Support (January 2019), which can be found on dbrs.com under Methodologies & Criteria.

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 under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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