DBRS Morningstar Confirms Rating on Brookfield Renewable Partners L.P. at BBB (high) With a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed its ratings on Brookfield Renewable Partners L.P. (BEP or the Company) and its subsidiaries Brookfield Renewable Partners ULC (BEP ULC), Brookfield Renewable Power Preferred Equity Inc. (BEP Equity), and Brookfield BRP Holdings (Canada) Inc (BRPHC). The Senior Unsecured Debentures and Notes issued by BEP ULC, the Class A Preference Shares issued by BEP Equity, and the Subordinated Notes issued by BRPHC are unconditionally and irrevocably guaranteed by BEP. The confirmations reflect BEP’s solid and stable business risk profile and strong nonconsolidated credit metrics in 2020 and for the past 12 months ended March 31, 2021 (LTM 2021) and DBRS Morningstar's expectation that BEP's credit profile will remain stable over the medium term. BEP’s ratings consider (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 (BAM; rated A (low) with a Stable trend by DBRS Morningstar), which indirectly owns 48% of BEP on a fully exchanged basis and provides BEP with a $400 million credit facility.

DBRS Morningstar notes that the Coronavirus Disease (COVID-19) pandemic and its impact on economic activity resulted in merchant electricity prices decreasing in 2020. BEP was not materially affected by this because of its diversified portfolio of contracted assets. BEP's contracted portfolio remains strong with an average remaining contract life of 14 years. The contracts are well diversified with more than 600 counterparties and strong with more than 80% of contract counterparties being power authorities, distribution companies, or BAM affiliates. As of March 31, 2021, more than 85% of 2021 generation was sold under PPAs or hedges (81% for 2022). This contracted portfolio limits BEP's exposure to commodity price risk over the medium term. DBRS Morningstar expects BEP to continue to manage its contractual portfolio on an ongoing basis and to reduce its uncontracted generation for 2023 and 2024 as circumstances allow.

DBRS Morningstar notes that BEP's size and diversification improved in 2020 following BEP’s merger with TerraForma Power, Inc. (TERP) in July 2020 which improved modified consolidated financial metrics as the transaction was completed on an all-share basis without incurring incremental corporate debt. BEP's size and diversification is expected to further improve in 2021 following BEP's acquisition of Exelon Generation's U.S. distributed generation assets with 600 sites consisting of 360 megawatts (MW) operating and under construction assets and 700 MW under development; the Shepherds Flat 845 MW fully contracted wind facility in Oregon; and the completion of other renewable generation that are currently under construction.

DBRS Morningstar focuses on BEP’s key modified consolidated metrics to assess its financial profile because (1) substantial debt is at the project level, which is nonrecourse to BEP, and are self-financed and (2) distributions to BEP from projects are net of cash distributions to noncontrolling interest partners. DBRS Morningstar notes that BEP’s 2020 and LTM key credit metrics, both on a consolidated and modified consolidated basis remain strong. For 2020 and LTM, modified consolidated cash flow-to-debt was 34%. BEP’s corporate liquidity remained strong with approximately $3.4 billion in cash, marketable securities and available credit facilities as of March 31, 2021, and no material long-term corporate debt due until 2025. Going forward DBRS Morningstar expects the Company to maintain its key modified consolidated credit metrics in line with the current rating by prudently funding its growth.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating Companies in the Independent Power Producer Industry (May 10, 2021; https://www.dbrsmorningstar.com/research/378166), DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (November 2, 2020; https://www.dbrsmorningstar.com/research/369165), and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 14, 2021; https://www.dbrsmorningstar.com/research/372344), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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 [email protected].

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

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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