Q1 2022 Brookfield Renewable Partners LP and Brookfield Renewable Corp Earnings Call
Low cost energy.
Net zero emissions and energy security.
Put simply.
The wind and the Sun do not need to be imported and don't rely on substantial transportation infrastructure.
These underappreciated benefits will become increasingly more relevant as energy security becomes a higher priority.
This represents yet an additional tailwind to our business.
And together with accelerating de carbonization trends will continue to enhance the position of investors such as ourselves with capital operating capabilities and the development pipeline to accelerate the build out of renewables at scale.
We are seeing this trend actively play out within our own portfolio.
An example is our recently acquired German utility scale solar developer.
In February Germany's government announced an acceleration of the country's decarbonization targets <unk>.
Including increasing its target for solar to 200 gigawatts of capacity.
As a result, we have injected additional capital into growing that business and we are currently accelerating our business plan.
Including doubling the expected megawatts that will achieve ready to build status in the next two years.
With a very substantial global development pipeline, which now sits at 69000 megawatts, we expect to see several other opportunities to pull forward development and accelerate the deployment of capital at accretive returns throughout our portfolio.
Some recent highlights for our business include.
We generated funds from operations of $243 million or.
Or <unk> 38 per unit and.
An 18% increase on a normalized basis over the same period in 2021.
We secured contracts to deliver over 1400 gigawatt hours of clean energy annually, including 500 gigawatt hours to corporate off takers.
We continued to execute on our 15000 megawatts under construction in advanced stage development pipeline.
We closed or agreed to invest over $1 6 billion of capital across multiple transactions in regions, including our first investment in carbon capture solutions.
And finally, we are progressing on approximately $560 million of asset recycling activities.
Selling non core and mature assets.
All while maintaining our robust financial capacity with almost $4 billion of available liquidity no near term maturities no no material near term maturities and limited floating rate exposure.
Next.
We want to spend a few minutes on our outlook for the business in light of inflation and supply chain trends.
As central banks tightened monetary policy markets are increasingly focused on the potential for sustained inflation in the future.
We are very fortunate.
Regardless of whether inflation is either transitory or sustained we expect our business to perform well.
In fact, we see inflation as a tailwind for our operating assets given that approximately 70% of our contracts are indexed to inflation and have largely fixed cost structures.
Perhaps most notable in this market.
The cost of our primary inputs.
On wind and water remains unchanged to where it was a year ago, which is they still cost zero, which compares to an over 50% increase in energy input costs for most alternative electricity generation.
The compounding effect of inflating revenue streams should drive meaningful operating leverage across our business given that we have a relatively fixed cost and almost exclusively fixed rate debt.
Our 15000 megawatts of under construction in advanced stage development assets benefit from our focus on avoiding risk.
We virtually always lock in the cost of major components, when we sign a revenue contract.
As a result.
We believe we have matched our costs and revenues and locked in a large share of our target return.
And while some global supply chain disruptions continue to impact industry broadly.
We remain well positioned as our diversified pipeline means we have no singular exposure to any country more technology.
We have also secured inputs versus stance with all development projects, where we have signed the revenue contract and therefore have a delivery obligations.
Most importantly.
Our scale centralized procurement function.
And strong relationships with both suppliers and customers allows us to manage these issues set such that their net impact has not been material to our business.
Overall, we have no concerns that these supply chain challenges will slow the growth of our business.
In fact, it very likely could create opportunities for us as these challenges have reduced the supply of new projects as some developers will walk away or delay their projects.
Which when combined with the continued growth in demand for clean energy has increased the value of high quality ready to build projects that can meet customers' near term needs.
We are very fortunate to have many such projects in our pipeline and are seeing significant demand for their future generation in the form of higher PPA prices.
In addition.
Elevated and volatile global energy prices has one <unk>.
<unk> wind and solar is positioned as the cheapest form of bulk electricity production.
And two demonstrated the benefit of generation that is not subject to variable input costs.
As such we are confident that inflation or supply chain pressures will not drive a slowdown in the adoption of clean energy globally.
In fact, we're seeing the opposite we have seen a strong willingness from buyers of clean energy to accept higher prices as the benefits of decarbonization.
Energy security and price stability far outweigh the small increases in cost we are facing.
We see tremendous tailwind for both our sector.
As well as our business, specifically, which should lead to a strong year in 2022 for Brookfield renewable.
With that I'll turn the call over to Natalie to discuss to discuss our growth initiatives.
Thanks, Conor and good morning, everyone I'm pleased to be with you here today to talk about some of our recent growth initiatives and some of the exciting opportunities that we see for our business in the near term.
De carbonization has been firmly established as a priority and global leaders and climate change while climate change has been a focus topics of government for years, the pace at which corporates are making commitments to lower emissions to net zero are now accelerating at a rapid pace.
Achieving net zero emissions will require a massive amount of capital. It's estimated that over 150 trillion dollars will need to be invested through 2050 to drive the decarbonization of energy systems.
Approximately $5 trillion every year.
And Brookfield is rising to meet this capital need and importantly, this exciting investment opportunity with the raising of approximately $15 billion for Brookfield first flagship global transition fund, which is now in the final stages of closing.
Brookfield renewable will be the largest investor in that fund, meaning we will benefit from having scale capital to invest alongside us.
In increasingly volatile volatile capital markets becomes ever more valuable.
We believe the success of the fundraise demonstrates that in order to be a successful investor in decarbonization. It is essential to have both deep operating expertise, particularly in power markets and renewable energy.
Both of which we have proven track record.
The reason this expertise is so important is because about three quarters of global carbon emissions can be traced back directly or indirectly to power generation and the energy sector.
Every business uses energy. Therefore, if you can help decarbonize the production of energy and electricity you can also enable the decarbonization of every industry in the world.
And if renewables are the first step to decarbonization.
We think our platform puts us in a leader position leadership position.
We have a track record of evolving our strategy to add new clean energy generation types and other energy transition solution, when we see opportunities to invest in scale at the appropriate risk adjusted returns.
We are driving decarbonization across a growing opportunity set and we are currently seeing more opportunities to deploy capital at our target returns.
Today I want to highlight just a couple of these themes.
The first of course is building and acquiring clean energy at scale. This quarter, we made significant progress towards advancing our commercial contracting initiatives and are close to finalizing agreements with numerous multinationals to decarbonize their businesses in Asia throughout development and build out of over <unk>.
3000 megawatts of wind solar and storage capacity that will be backed by long term fixed price contracts.
We also announced our plans to submit a joint bids with FSC to build two 750 megawatt offshore wind projects in the upcoming Dutch tender process.
The second large growth opportunity is to use our knowledge of clean energy and our operating capabilities to provide energy transition and decarbonization solution to businesses around the world that need help reaching their own decarbonization goals.
Many industries will require both clean energy to lower their carbon footprints and capital to decarbonize their way of doing business.
The power sector is a great example.
Utilities require significant capital to enable them to shift from thermal to renewable and we are well positioned to help.
Finally, we are seeing opportunities for investments in businesses that provide services to support the transition to net zero.
This quarter, we entered into a new decarbonization asset class with an investment in a leading north American modular carbon capture solutions provider.
Given the trillions of dollars required to decarbonize hard to abate industrial sectors over the coming decades, we see significant potential to grow our carbon capture footprint over time, and we believe we're well positioned to do so given our strong expertise and de carbonization and our experience working as an operating partner.
<unk> and capital provider to our global network of like minded customers.
Our investment will provide an attractive entry point into carbon capture solutions with a strong partner, a proven and cost effective product and a sizable pipeline.
We have committed funding of up to 300 million Canadian dollars for projects meeting pre agreed return thresholds and have already begun funding the buildout of our first project.
The structure of the investment provides us with strong downside protection in the securities are convertible into common equity of the company at our option at any time.
If a 100% of our commitment has invested which we expect given the escalating carbon price in the proposed investment tax credit for carbon capture in Canada. Then upon conversion, we will own a majority of the common equity of the business.
Looking forward with Decarbonization and energy security firmly established as a priority of global leaders. We are focused on the continued build out of renewables and the increasing demand for other decarbonization solutions, including carbon capture and storage green hydrogen and other energy service.
<unk>.
With that I'll turn it over to white to discuss our operating results and our financial position.
Thank you Natalie.
We generated <unk> of $243 million.
Or <unk> 38 per unit during the quarter as our operations benefited from strong asset availability.
Higher power prices and recent acquisitions.
On a normalized basis, our per unit results were up 18% year over year.
Our cash flows are highly resilient.
Our diversified portfolio limb.
Limited concentration risk with Counterparties.
And a long term contract profile.
And while generation for the quarter was in line with long term average stronger generation in our lower value market.
And weaker performance in our higher value markets translated to lower than expected <unk>.
This dynamic is already normalizing and while we expect this variability from time to time, we also expect to benefit from offsetting positive periods in the future.
Further we are continuously diversifying the business, which increasingly mitigates exposure to any single resource market or counterparty and our variability becomes less and less every year.
Next looking at our balance sheet and liquidity.
Our financial position remains strong with almost $4 billion of total available liquidity, providing significant flexibility to fund growth.
We have continued to accelerate our financing activities extending the term of our debt and locking in attractive interest rates.
As a result, our balance sheet is in great shape with an average debt duration across our portfolio of 13 years.
No material near term maturities.
And minimal exposure to floating rate debt.
We also continue to sell assets to drive value and fund growth.
During the quarter, we signed an agreement to sell a small hydro portfolio in Brazil, returning three times, our capital over our 10 year hold period.
And met all conditions to close the sale of a number of assets developed by our global solar developer in Mexico.
This will generate approximately $240 million, which more than doubles, our invested capital over our two year hold period.
Finally, I want to spend a few minutes on our hydro's and the expected benefits, we see from power prices.
Hydro power continues to enhance its status as the premier renewable technology due to its perpetual in nature.
Grid stabilizing capabilities and dispatch ability.
Growing demand for carbon free Baseload generation, and an increasingly constructive pricing environment as more intermittent renewables are added to the grid.
Supporting our ability to contract these assets on a long term basis at attractive all in prices with built in inflation and escalation.
Further the grid stabilizing the services and storage qualities embedded in large hydro's are increasingly valuable in today's market.
And while our results this quarter benefited from higher all end market prices.
The impact was limited given we were largely contracted going into the year.
However throughout this year, we will have increasing amounts of hydro capacity across our fleet, which will come available to benefit from these dynamics.
Further over the next five years the ability to contract almost 5500 gigawatt hours of generation in North America should meaningfully add to our bottom line.
Resetting this generation to forward market prices today would contribute approximately $120 million of incremental <unk>.
While creating incremental financing capacity, which will likely represent a highly accretive funding source for our growth.
On behalf of the board and management, we thank all our unit holders and shareholders for the ongoing support.
That concludes our formal remarks for today's call.
Thank you for joining us this morning, and with that I'll pass it back to our operator for questions.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And your first question comes from the line of Nelson <unk> with RBC capital markets.
Great. Thanks, Dan and good morning, everyone.
Mike I just had a few questions on your development pipeline. So thanks for providing all the extra granularity on the development pipeline and kind of outlining the commissioning schedule.
For the next few years up one thing I noticed is that there is.
Very little hydro in onshore wind being developed in 2023 and <unk> 24.
I guess big picture is that trend is the trend of solar just getting bigger.
Becoming a larger part of your pipeline will that continue.
Yeah.
Thanks Nelson Great question.
We'll perhaps answer that in two different ways the first rigs.
Regarding hydro.
There is less hydro development going on around the world relative to wind and solar that is a noticeable trend and one that we expect to continue going forward.
Well that does mean, we're going to have less hydro development in our pipeline. It's also one of the reasons why we're so confident in the increasing value of our existing hydro's, which are.
Every day increasingly scarce assets and their ability to provide dispatch both base load clean energy to grid.
When you then look at wind and solar.
We see tremendous growth for both probably a little bit more growth for solar in our pipeline today than wind, but we remain agnostic between the two technologies and the current bias towards solar is simply where we've seen better value entry points to build out our own pipeline.
We could see a trend back to wind in the future, we remain diversified and happy to pursue either technology.
Okay, and then just on the pipeline I think there is roughly nine gigawatts that youre expecting to commission through 2024.
You did mentioned that.
You're managing through the inflation costs and supply chain issues. So.
That non gigawatts is that.
You like very comfortable with that number with potential upside or have you baked in something like does that include some contingencies due to any.
Supply issues, because I know in the U S. There is obviously some uncertainty on U S solar panel imports and then.
I think people are still waiting for the bite and administration to put through some.
Renewable tax credits.
PTC so.
What's your view on on the nine Gigawatts.
Certainly so I'll take your words very confident with upside.
Maybe two points on that first of all the nine gigawatts that we disclose in our pipeline. That's what already exists today and is either under construction or under contract to be built out our business is continuing to grow so as we execute our business plan continued to do in house development.
<unk> to acquire new assets, we would expect those numbers to go up over time.
The other point, we would make just around your comments in the U S is we have a very diversified platform.
Our ability to pursue operating assets versus development assets, our ability to pursue different technologies.
Different geographies. So while there are some minimal disruptions in certain markets around the world, we see a clear path to managing through that and don't expect it to change our growth profile whatsoever.
Okay, Great and then just one last question.
In terms of the 235 megawatt wind acquisition in Asia can you give a bit more color on that acquisition is in India or another location.
And then also can you give a bit of background on timing on the rest of that 700 megawatt portfolio in Asia.
Yes, certainly in that that wind acquisition is in China, but I'll make a comment about what we are seeing in both Asia and China, which is.
The ability to continue to do repeat business with the same counterparties, we havent done transactions within the past.
If you look over the last several quarters, we've been pretty consistent and pretty regular and doing small low risk very attractive deals in both the India and Chinese markets and increasingly what those are doing repeat business with the same counterparty.
What I would say as we look forward.
We are developing increasingly strong relationships with those partners and as their pipelines go grow they are increasingly coming to us as a buyer of those assets because we execute quickly we execute on time, we provide certainty of closing and we would expect to do more repeat business with those high quality.
<unk> Counterparties in terms of the timeline of the next 700 megawatts definitely within the next two years.
Okay. Thanks, Thanks for the color Conor I'll leave it there.
Thank you.
And our next question comes from the line of Sean Stewart with TD Securities.
Pardon me, Sean please check your mute button.
Sorry about that.
Good morning, everyone.
Why it's at the end of your comments you touched on potential upside from.
Re contracting.
And I guess I have a few specific questions on what the length of these corporate PPA contracts looks like I spoke specifically for hydro can you comment a little bit on how thats evolving.
Is the pricing environment is increasingly in your favor.
Yeah look John so what we'd say is what we've always viewed with our hydro's in the merchant exposure. We have in North America, specifically is that we've always focused on securing contracts.
Even to manage that merchant position and thats done either through short duration contracts or through financial hedges, but really protecting us from from spot price movements, but.
But we haven't contracted on a longer term duration, because we just werent seen in.
Appropriate value.
To give away that long term option on our hydro and so what we're seeing now in this environment the environment that both Fanara described around the challenges that are occurring with the grid given the intermittency of renewables and the base load dispatch from a nature of hydro's is that we're seeing.
Interest for our hydro is on a longer term basis now you would have remembered in the last quarter. We did a 40 year contract with hydro, Quebec on one of our hydro's.
That's not to say that all contracts will be 40 years, but definitely with with.
The increase in interest.
Would expect that over time that we are contracting that hydro position on a longer term duration. It could be 10 years 15 whatever.
But definitely on a longer term duration and again what that does is not only locks in a price that is very attractive for us, but it just enhances the finance ability of our hydro assets with that contract and it generates very attractive.
Proceeds.
Very low cost that we can then use to.
Fund our growth so again as a reminder, offset that contract we signed last quarter, we raised an additional $1 billion Canadian while maintaining a triple b positive rating to execute that financing. So that's the dynamic we're seeing where it's definitely an interest for longer duration contracts and it has the associated financing benefit.
And Sean it's Conor I might jump in just to supplement what Wyatt said there.
Maybe it's helpful for us to provide a little bit more granularity on those short term contracts and why we see the upside.
Even when we have merchant exposure and really the primary place we have merchant exposure within our portfolio as our U S. Hydro's, even we only have that merchant exposure. We typically lock in these short term contracts of either six nine or 12 months largely just to help with the settlement.
The sales of those electricity.
Volume.
So when power prices began to increase dramatically in call. It the mid to latter half of 2021, we had already locked in most of the pricing for our hydro for the first quarter of 2022, but as we move throughout 2022, we are now going to.
Get the benefit of those increased power prices.
In a fashion that is increasingly going to hit our financials throughout the year in a back end loaded way and Thats why.
We one of the reasons, we see strong tailwind for our business throughout this year.
That's that's useful context, thanks for that.
Follow up question.
For Contador Natalie.
You gave great detail on the key advantage entropy deal.
First step into carbon capture.
Can you speak to the long term investment potential for that technology.
Versus other energy transition options like green hydrogen that youre pursuing as well how do you benchmark the opportunity set for carbon capture versus some of the other options that might be available.
Certainly so Stuart perhaps all are Sean sorry, I'll go first and then Natalie if there's anything you'd like to add please jump in.
From a Brookfield renewable standpoint, we're looking at all of them.
Green hydrogen I would say.
Energy services companies that facilitate decarbonization and carbon capture.
Carbon capture we think is one economic and too rapidly growing in many of our core markets, particularly in Canada, and the United States. So it's absolutely a asset class that while we made our first step into it this past quarter, we do expect to grow and grow very rapidly in <unk>.
A significant player in that market going forward.
Well there is.
<unk> have room to run in Canada, We do also expect to expand our platform in the United States as well.
In terms of do we like carbon capture better or worse than some of the other de carbonization technologies I would say that we're going to approach those the exact same way we approach wind solar hydro, we're going to be agnostic across them, we're going to look across regions across asset class.
As to where we see the best risk adjusted returns and allocate our capital to those there is no concerted effort to over concentrated in one technology versus another.
Yeah, Conor maybe just.
The benefit of the global platform that we have means that we can actually focus on let's say, we're seeing more carbon capture opportunities in the U S. First because they have established well known storage reservoir, we have the ability to kind of move by geography, where we're seeing those best risk adjusted returns.
Yes, I agree absolutely pursuing us.
Thanks for the detail everyone I'll pass it on.
Thank you and our next question comes from the line of Rupert <unk> with National Bank.
Hey, good morning, everyone.
Quick follow up on the carbon capture you give more color on maybe what Brookfield brings to the table to this market.
It would give you a.
Competitive advantage.
Might see investing in renewables.
Certainly and we.
We'd go back to fundamentals.
What needs to be done on the carbon capture side is very similar to what needs to be done on the renewable side.
One capital needs to be provided to any development construction and operating capabilities.
And three perhaps the one that's most important that we bring to the equation here is the ability to work with corporate counterparties to structure long term contracts around these carbon off takes that are both financeable and economic.
The reason why we are so drawn to an asset class like carbon capture is not only is it a great proven de carbonization technology, but the investment profile is very similar.
Build an asset and once constructed it is a long term highly visible highly stable.
Stream of cash flow is very similar to our wind and solar plants around the world.
Great and do you see this as a potential customer for green power as well when you look at offtake contracts.
Carbon capture facilities.
Absolutely one of the things that we're trying to do across our portfolio is enhance our relationship with customers and this goes exactly to what Natalie said in her remarks. The first step in almost every corporate Decarbonization plan is let's address our scope two emissions, let's procure green.
<unk> power at one reduces our electricity costs, but two reduces the emissions within our business from the consumption of electricity.
But from there we want to be able to offer other forms of decarbonization solutions that could be energy efficiency solutions or for businesses that are hard to abate and those assets are going to produce emissions. We can now often carbon capture as well to help those businesses reach their own decarbonization.
And while we've always had green power and we've increasingly added other decarbonization solutions. This last quarter Ccs, we do expect to add others other different technologies and solutions going forward as well.
Alright, thanks for calling in for <unk>.
Question here, if I may get a very similar answer but.
Talking about the Dutch offshore wind tender you highlighted it's going to be a subsidy free call and you may not want to give some competitive information here, but what would be your strategy for bidding there what can make your.
Good successful.
Certainly.
First of all maybe it's helpful just to highlight a dynamic.
And that we're seeing in offshore that we're really excited about.
For many years, the largest offshore markets around the world have grown very rapidly due to their use of feed in tariffs.
<unk> bid in an auction based on a feed in tariff price.
And the person who is essentially willing to bid the lowest return when that auction and that Hasnt really served us well at Brookfield renewable because we don't like to compete on cost of capital.
One thing that we are really excited about.
We're seeing more and more of the largest offshore wind markets around the world pursue subsidy free auction.
This is great because we feel one it plays to our strengths, where our corporate contracting and our operating and construction capability has become a key differentiating factor, but two we think it helps support the whole industry because the winners in those auctions are going to be the premier global operators.
Not necessary not necessarily low.
Low.
Cost of capital financial bidder.
So when it comes to the specific auction in the Netherlands, we're thrilled to be partnered with FSC a best in class global.
Offshore wind builder and operator, we think it's we bring very complementary skill sets, where both leading operators of renewables, both operating and development and construction.
<unk> has one of the largest offshore wind pipelines, they bring great knowledge about marine biodiversity, how to construct without disrupting the environment, we bring best in class corporate contracting we think those things together make us a very powerful partnership.
So if the selection isn't going to be done on price.
What can you offer that takes your bid to the total.
We've been highest Natalie here, Robert we've been working very closely with FSC and expect to be able to reveal a little bit more of the post bid submission.
When when those have gone in.
But it goes back to a corner side, we've got the commercial contracts, which are going to be partnering with a lot of locals in particular and really working to focus on the innovation that we can bring based on the track record that both Brookfield renewable and SFC brings to the table on the ecological and the nickel system integration front.
Okay, great. Thanks for the color I'll get back in the queue.
Thank you and our next question comes from the line of Mark Jarvi CIBC capital markets.
Just coming.
Coming back to the hydro re contracting obviously talked about upward movement in power prices, but how do you balance that off against also maybe more volatility which could.
Allow me to capture higher realized pricing.
Are you seeing structural contracts the wounds results some of that upside or where how do you think that tradeoff in terms of locking in higher price, but maybe sacrificing some off peak pricing you might be out there.
Thanks, Mark that's exactly the decision we go through.
We can't we can leave our assets merchant and play for the upside or we can lock in long term prices that.
Through long term contracts that.
Become immediately financeable and allow us to raise significant amounts of capital and we make those decisions on an asset by asset basis on a daily and weekly decision and really what we try and do is not go too far in either direction, we always layer into our hedges and layer into our contracting such that we don't Miss.
Too much to the downside and don't Miss too much to the upside we arent trying to price for.
Priced for perfection, we are looking to do something that provides a very attractive return for our business over the long term without being either too far one way or the other.
Okay.
And obviously, we've seen volumes move higher just in terms of the asset sales and the marketing transactions Youre seeing out there whether it's higher hurdle rates for the rest of your radio for back leverage have you seen anything change in terms of the dynamics of asset transactions in the hospital.
No.
Perhaps two comments we would make.
Sure.
We would say public markets are.
Quite volatile right now.
Share prices in the renewable sector are moving up and down what we have seen in private markets is a very consistent continued strong bid.
For renewables and decarbonization assets the volatility in the public markets certainly hasn't flowed through to the private markets yet and that's helpful for us both in terms of asset monetization, but it also helps that there is a stable pipeline of growth opportunities that we can review is.
Well.
The other comment that.
We think it's probably important to make when it comes to interest rates is well underlying interest rates have moved up significantly.
Significantly over the last six months.
What we have not seen any lack of depth in the financing market, yes underlying rates have moved up so interest rates on mass are slightly higher but the depths of the financing market hasn't been reduced at all four for our renewable power and decarbonization assets.
Would you say that credit spreads are coming a little bit that allows you to not have pass through.
Sort of a lot of movement in base rates.
Yes, no Mark I would say, it's a bit of the opposite where because of just the uncertainty around rates, especially if you go out the curve.
Spreads have.
Widen out a bit but again its all.
Limited so there is still a meaningful depth, there and even with the incremental increase in base rates and the widening of spreads we still are at a level where it is historically low.
We're coming off a period, where it was.
Very historically low so it's still a very attractive market irrespective of kind of a bit of widening of the spreads and an increase in underlying base rates.
Okay last question Theres been lots of commentary from some other companies in the market.
Things.
The path of the pass through of higher cost into higher PPA prices, particularly in the U S market. How would you say other regions. You guys are operating we are seeing those pass through in terms of the PPA price increases.
Are they on par with what we've seen and heard on the U S market are there other regions, where you're seeing bigger increases on the auto prices.
It's a great question. It certainly is a global trend and not to be redundant, but we'll make the same comment as before the price increases that we are seeing are very modest relative to the benefits.
<unk>.
Decarbonization energy security and having stable power prices in an environment, where global energy prices are very very volatile directionally, we're seeing slightly higher ppas in all markets.
But what I would say is markets are relatively efficient they are taking into account the dynamics of that market. So in a market such as the U S where perhaps.
Solar panel supply chain disruptions and the recent investigations are creating some uncertainty you might see a slightly higher increase in the PPA price versus a market that doesn't have those specific regional dynamics directionally, it's happening everywhere, but there is some slight variation depending on the dynamics in a given.
<unk>.
Got it thanks for the time table.
Thank you.
Thank you. Your next question comes from the line of Mark Strouse with JP Morgan.
Yes. Good morning, Thank you very much for taking our questions.
Most of them have been answered.
I did want to come back to the the solar anti sort curious in the U S.
I mean, the impression that you think that Youre right.
Sure first of all is that right in the second of all is that because the project the new projects that Youre working on you already have panels in country or is that just based on the types of suppliers that youre using.
At.
Let me try and answer that the phone cut out a little bit there mark but I believe the question was about our situation and managing the current investigation and the impact on the U S and I would say, it's really driven by three.
Three things.
The first is the point you made that we typically at the time, we lock into a revenue contract and therefore create a delivery obligation at the same time, we lock in procurement of panels. So when we look at our development pipeline in the U S. We have already secured on.
On land the vast majority of panels to support that build out over the next few years.
The second point I would make is.
Our global procurement capability.
I recognize we comment on this probably every quarter, but in this environment that capability is becoming increasingly valuable not only do we have great relationships with the largest suppliers. We also have relationships with a huge number of suppliers and therefore in situations like.
This where the market is throwing call it curve balls that makes some some suppliers more advantageous or less advantageous we are able to reallocate our procurement to get panels and meet our customers' needs.
And then the last thing I wouldn't.
Underestimate is the relationship we have with our customers.
We are often one of the largest providers of clean energy to our corporate off takes these are long standing relationships and our customers are very understanding of what's happening in the market and.
We can we can have a conversation with those counterparties and work together to get them one the green power that they contracted at the price they want it and two theyre not trying to put us in a tough position either because we're going to do business together for a long time and that might mean.
We bring one project forward in another project back that might mean, we take some puts and takes in different positions within our portfolio, but I would say that our ability to work with our customers that we have very long term relationships with that's helping a lot in this environment as well.
Okay got it thank you Tony.
Thank you and our next question comes from the line of David Quezada with Raymond James.
Thanks, Good morning, everyone, maybe just just coming back to the carbon capture opportunity I'm just curious if.
If the pace of scale of investments there is it all dependent uncertainty on policy or carbon pricing in Canada would be at the contract for differences structure, they've discussed or something like that.
Thanks, David.
Part of the reason why we see an opportunity for carbon capture in Canada and similarly in the U. S is there are fairly defined benefit regimes. Obviously, there is a legislated and increasing <unk>.
Carbon price in Canada that really provides the economic certainty and to the investment we made in.
<unk>.
Nice upside to the entropy deal is is we signed that.
<unk> days or weeks before Canada announced an investment tax credit for carbon capture.
That is something we thought might happen, but we haven't baked in our underwriting. So it's nice that that investment is off to a great start and because of that upside. We do think we will likely deploy.
The remainder of our convert on an accelerated basis and see more economic projects that we can fund through entropy in the future.
In the U S. You've got a different form of support through 45, <unk> tax credits and other support regimes and Thats, what gives us confidence in that market as well what I would say is when we're making these investments we are looking at the current support regimes that are long term in nature, but we certainly arent making perspective.
That's that are predicated on uncertain or.
At.
Uncertain or expected changes to legislation in the future we invest based on what is certain today and if there's upside from there that's great.
That's great color. Thank you and then maybe just one more for me just given the.
Your leader leadership position with.
Corporate buyers of renewable power I'm, just curious if you can comment on.
How maybe those contract terms might differ now from say a year ago.
You said that PPA prices have certainly gone higher Im curious if theres any other maybe more beneficial contract terms.
You were able to negotiate in the current environment.
I would maybe highlight three things that we're seeing.
One obviously PPA prices are a little bit higher because costs are a bit higher in electricity prices are a bit higher to a trend that is not dissimilar to previous quarters. There are simply more of them.
The spectrum and scale of corporate Procurer of Green energy continues to expand on a quarter by quarter basis and three.
There continues to be in.
<unk> and an evolution in the knowledge both on the provider and the procure side of Green power that allows for unique contracts that meet both counterparties needs.
Increasingly we're not just seeing payers produced vanilla ppas, we're seeing the opportunities to provide more value add services like $24 seven green power matching wind and solar with Baseload hydro our storage those are premium products that more and more customers are looking for but on the same side.
Customers that have very significant.
Green power requirements in the near term are also adjusting their approach as well, sometimes putting things like adjustment factors based on panel prices in those ppas. So the market is very efficient and increasingly constructive to meet the objectives of both producers and.
Procurer of Green power.
That's great color. Thanks, very much that's it for me.
Thank you and our next question comes from the line of Andrew <unk> with Credit Suisse.
Thanks. Good morning, I think the question is for Conor and if you could just give us.
Maybe a high level overview on how you think about perhaps roll with Sam's infrastructure funds and now the energy transition fund and what that means for your business mix over a longer period of time.
Great question.
And it's very simple.
For years.
Our primary <unk>.
Vehicle for deployment with deploying renewables through Brookfield renewable component of Brookfield Global infrastructure Fund.
And today, we also have the new Brookfield Global transition fund.
The answer Andrew is we will deploy through both we will continue to be the key Brookfield LP to the renewable component of the Brookfield infrastructure fund deploying capital in the same way and the same asset classes into the same risk profile as that fund has done for decades.
That remains completely unchanged and then now in addition, we also have be GTS. The Brookfield Global transition fund that focuses on the development and build out.
<unk>.
Renewable and clean energy generation and the investment in de Carbonization asset classes services and solutions. So the key is we're still investing in best the way we have in the past for the last decade, and now incrementally we are all still investing through <unk> and our combined commitments to those funds are.
Or are perfectly in line with Beth.
At target deployment.
Okay. That's helpful and then maybe not to get too far ahead of ourselves but.
We've seen other areas of the group would have had.
The product longer term product Super core core plus kind of product do.
Do you see an opportunity to take some of the pipeline. This is Scott.
<unk> 9000 megawatts pipeline potential right now.
Maybe accelerating the development of that and having that cater to a longer duration more yield oriented product, but maybe isn't appropriate completely appropriate for Beth.
But it presents an opportunity side of developer.
Developer of those assets.
So I would comment not on that specific to Bam, but just more generally we think that are almost 70 gigawatt development pipeline gives us lots of optionality.
And we're going to increasingly do different things with that pipeline to monetize it for the highest and best value that might be building out assets and holding them ourselves that might be building out assets and selling down a minority to another investor that might be a build and flip model that might also be selling some assets.
That's at ready to build once we've de risked them from a development perspective.
I would say given the rapid growth of our pipeline and our our increased development capabilities across asset classes and across regions, we're going to pursue all of those things, but it's probably going to be different but always with the objective of monetizing those 70000 megawatts in whichever way it gets us.
The greatest value.
Okay. Thank you that's very helpful.
Thank you next question comes from the line of <unk> <unk> with IAA capital markets.
Good morning, just wanted to go back to the SFC partnership, but I think you know.
The tenders have a focus on innovation, so I understand more details about what that means will come out in due time, but just wondering if you can talk about the.
The partnership with SSE is it limited just to the upcoming tenders in the Netherlands, where do you think you can expand it to other markets and other projects.
Certainly so we have a tremendous respect for <unk> and I would say, we're thrilled with how the collaboration on this partnership has gone.
Sure.
We increasingly throughout our business work with partners on large scale projects and if there are other opportunities to work with <unk>, we would be thrilled to do so right now our focus is on the Dutch auction will get our bid in in May and see how the results play out later this year, but.
There are best in class organization, and if there are opportunities to work with them more in the future we'd be thrilled to do that.
Okay.
And then just had a question about.
Your organic growth here seems to be really accelerating you're already.
Halfway through your full year deployment of <unk> and <unk>.
The commissioning schedule. It seems like you might be able to even achieve three gigawatts a year going forward the new capacity additions.
I guess when you think about that and then your double by 2030 target.
<unk> announced today.
When you factor in some asset sales. It seems like you can achieve that targeted just with organic growth alone. So I guess, a long winded way of asking is that really the plan and where does M&A fit into the picture.
Certainly so.
When we look at our plan to do.
Double the.
The size of our business in the next 10 years, there is absolutely upside to that and maybe one comment I would make just as a parallel to your question.
For the last several quarters, maybe even the last couple of years, we've been very focused on development, because that's where we've seen the best risk adjusted returns.
In the current environment, which is the <unk>.
First.
Volatile market, we've had in a little while here.
We should remind everyone that we absolutely have the flexibility to buy operating assets as well and the current environment may create an opportunity for us to do that and we will simply continue to allocate our capital to where we see the best risk adjusted returns.
We're never going to do entirely operating are entirely development, but we could see our proportion between the two change over time.
But I think maybe in summary, yes, there is absolutely upside to that number of doubling the size of our portfolio.
Okay got it thank you.
Thank you next question comes from the line of William <unk> with UBS.
Great. Thank you and good morning, everybody.
Just going back to Mark's question from earlier.
<unk> CBD you recently significantly expanded your solar development pipeline in the U S with the urban grid acquisition.
I'm, just curious I understand that.
On maybe the contracts that <unk> been working on over time.
You have hedged out.
Ponant.
Sourcing risk, but just curious specifically on the acquired urban grid.
Projects are there what are you seeing there.
Any any challenges.
Specifically within that portfolio related to ADC BT. Thank you.
Great question and.
This is a this is an important dynamic to may be.
Dive a little bit deeper into.
When we bought urban grid.
Which we which we acquired in February .
One of the.
Unique things about urban grid and why we felt we were able to buy it for such an incredible value is.
Urban grid was very good at the early stage components of development procuring land permits and grid connection what we brought to that transaction is power marketing corporate contracting construction and financing capabilities. The key about that business as well it had ready to build assets <unk>.
Majority of them Werent contracted we were going to contract them once we became owners.
To drill down into your question.
Is the <unk>.
Timeline of that build out may be slightly delayed.
Due to.
On a slightly slower pace of procuring panels, perhaps potentially but that is greatly greatly greatly outweighed by the fact that we underwrote that business, assuming PPA prices from Q3, and Q4 of last year, and we're seeing PPA prices.
For the projects that we do have panels for now being secured anywhere between $30 $40, 50% higher than underwriting so while some of those projects that werent contracted we might delay a little bit until there is easier access to panels, but thats being far outweighed by the increased PPA price we're seeing.
<unk> on the ready to build projects that do have panels, because those are very scarce assets in the U S market today.
Yes that makes sense.
I guess, just dovetailing off of that a bit.
Does this industry disruption that we're seeing maybe create an opportunity for brookfield to step in and.
Potentially acquire additional pipelines.
Tract evaluations.
It may and there we are very fortunate.
With our global procurement, our relationships with customers our size our scale our balance sheet.
There may be some other market participants that had been caught off side by some of these disruptions and if that creates an opportunity for us to invest or partner with those counterparties, we absolutely would consider it.
Got it I appreciate the time.
Thank you.
Thank you and I'm showing no further questions. So with that I'll turn the call back over to CEO Conor <unk> for any closing remarks.
Great well, we'd like to thank everyone for joining us on today's call and their continued support of Brookfield renewable we look forward to updating you at the end of next quarter with our Q2 results. Thank you and have a good day.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Okay.
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Yes.
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