Q4 2024 Brookfield Renewable Corp Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Brookfield Renewable Partners fourth quarter 2024 results conference call and webcast.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded.
I would now like to hand the conference over.
Speaker Change: to your speaker today, Connor Teske, Chief Executive Officer. Please go ahead.
Bye. Bye.
Thank you.
Speaker Change: Thank you, Operator, and good morning, everyone, and thank you for joining us for our fourth quarter 2024 conference call.
Speaker Change: Before we begin, we would like to remind you that a copy of our news release, investor supplement, and letter to unit holders can be found on our website. We also want to remind you that we may make forward-looking statements on this call. These statements are subject to known and unknown risks, and our future results may differ materially.
Speaker Change: For more information, you are encouraged to review our regulatory filings available on CDAR, EDGAR, and on our website.
Speaker Change: Before starting, we would like to welcome Patrick Taylor, our newly appointed CFO, to the call. We are thrilled to have Patrick on the team as we continue to add depth and talent to our leadership group.
Speaker Change: On today's call, we will provide a review of our 2024 performance and then Wyatt will discuss our growth outlook in the U.S. and globally.
Speaker Change: And then, lastly, Patrick will conclude the call by discussing our operating results, recent asset recycling activities, and our financial position.
Speaker Change: Following our prepared remarks, we look forward to taking your questions.
Now, before going through our 2024 results,
We wanted to comment briefly on the current environment.
Speaker Change: Following several decades of modest electricity demand growth, we are experiencing a dramatic shift in demand driven by the AI revolution, one of, if not the most, significant advancement in technology in our lifetime.
Speaker Change: This is driving a significant step change in demand for our product, supporting our continued and accelerating growth.
Speaker Change: And while the renewable sector has traded down in the public markets on weaker sentiments stemming from the new U.S. administration's announced executive orders and potential policy changes for renewables,
Speaker Change: The simple fact is that the fundamentals for energy have never been better.
Speaker Change: The low-cost renewable technologies that we have built our business on are the cheapest form of electricity production and are seeing greater demand than ever before.
Speaker Change: As a result, we believe that low-cost renewables, which are readily available to deploy, will play a leading role in the requirements for any and all increases in generation capacity that we are already seeing unfold.
Speaker Change: Our focus on the lowest cost, most mature renewables technologies that have the greatest demand from corporate customers and are not reliant on government subsidy has positioned us well to benefit in the current environment.
Speaker Change: We have no exposure to the sectors of the market which are seeing the greatest headwinds and we feel we are best positioned across the industry to capture the accelerating corporate demand.
Speaker Change: with our extensive 200,000 megawatt development pipeline which is highly concentrated in the top data center markets globally.
Speaker Change: Executing our business plan will create significant value in our company, and as market sentiment passes, we expect to see that translate into the price of our shares.
Speaker Change: The current market dislocation is also presenting significant investment opportunities for us.
Speaker Change: Our strong liquidity and robust funding model, combined with lower public share prices across the sector and increased uncertainty for private market investors, could also create the opportunity to acquire assets for value and further grow our business.
Turning now to our results.
2024 was another record year for our business.
Speaker Change: We delivered our strongest operating and financial results ever and positioned the business for significant further growth and value creation in the future.
Speaker Change: We delivered 10% FFO per unit growth year-on-year as we benefited from our inflation linked and contracted cash flows, contributions from acquisitions,
Speaker Change: and the execution of various organic growth and value creation initiatives across our business.
Speaker Change: including the sale of derisked operating assets and platforms which generated strong returns and are now very much a regular and ongoing part of our business.
Speaker Change: We exceeded our capital deployment targets, investing $12.5 billion in some outstanding businesses.
including our investment in global renewable operator and developer Neowind.
Speaker Change: During the year, we advanced our commercial initiatives and continued to partner with the largest buyers of clean power globally, signing contracts for almost 19,000 gigawatt hours per year of generation. Again, another record performance and indicative of the incredible supply-demand imbalance in favor of our product.
Bye-bye.
Speaker Change: We also signed the Landmark Renewable Energy Framework Agreement with Microsoft in May, agreeing to deliver 10.5 GW of new renewable energy capacity between 2026 and 2030 in the U.S. and Europe. And today, we are on track to not only meet, but exceed our delivery targets.
Speaker Change: This agreement will assist Microsoft's data center growth and support its investment in AI-powered cloud services, which continue to accelerate.
Speaker Change: The global hyperscalers are significantly ramping up investment in their data center infrastructure and are expected to continue to increase investment tremendously through the remainder of the decade.
Speaker Change: Power is increasingly a bottleneck to this planned data center development.
Speaker Change: we are seeing these businesses ramp up their efforts to secure supply to ensure the delivery of their growth.
Speaker Change: Our agreement with Microsoft is a testament to our differentiated capabilities and we expect to continue to partner with the largest buyers of power going forward.
Speaker Change: This year, we commissioned a record 7,000 megawatts of new capacity globally, almost seven times the capacity we brought online just three years ago.
Speaker Change: And with our expanding development capabilities, we have also successfully grown our asset rotation activities.
Speaker Change: We generated a record $2.8 billion of proceeds in 2024 and an average return of 25% IRR and approximately 2.5 times our invested capital, crystallizing strong returns for our shareholders and generating significant capital to fund future growth.
Again, this positions us well in the current market.
Speaker Change: We have continued to be uncompromising in how we fund our business, and our balance sheet remains among the strongest in the sector.
Speaker Change: We executed record financings this past year and finished the year with $4.3 billion of liquidity to opportunistically fund our growth.
Speaker Change: With our record results, and in conjunction with our strong liquidity and robust outlook for our business, we are pleased to announce an over 5% increase in our annual distribution to $1.49.2 per unit.
Speaker Change: Since Brookfield Renewable was publicly listed in 2011, we have delivered 14 consecutive years of annual distribution growth of at least 5% per year.
Speaker Change: With that, we will now turn it over to Wyatt to further discuss our growth outlook in the U.S. and globally, and how we are positioned to capitalize in the current market.
Thank you, Connor, and good morning, everyone.
Speaker Change: As Conard outlined in his remarks, there has been elevated volatility in public markets reflecting uncertainty on potential regulatory changes affecting the renewable sector in the U.S.
Speaker Change: And while we see potential for regulatory changes, we do not expect any material adjustments to the policies that have the greatest impact on our business, as these largely have bipartisan support.
Speaker Change: More important to our business are the current fundamentals for power.
Speaker Change: Globally, and in the U.S. specifically, the demand for electricity continues to accelerate at an incredible rate, driven by broad-based electrification of major industries and the global energy grid, and a generational step change in demand for power to drive the AI revolution.
Thank you.
Speaker Change: We also expect that supportive fiscal policy in the U.S. will drive further growth in manufacturing, data center development, and industry in the country, which will in turn drive further electricity demand.
Speaker Change: As a result, the growth prospects for low-cost, mature renewable technologies are better than at any point in history.
Speaker Change: as they play a leading role in any and all increase in generation capacity.
Speaker Change: Simply put, off takers of power will naturally take as much of the lowest cost solutions renewable before turning to other forms of generations to meet their needs.
Speaker Change: As growing energy demand is being met with the new build capacity, it is creating two challenges.
transmission availability, and grid stability.
Speaker Change: We see large-scale battery systems and distributed generation as an increasingly important part of the solution.
Speaker Change: The grid-scale batteries being developed today are able to charge when the sun is shining and when the wind is blowing, and then discharge power at other times, enabling a more consistent power supply.
Speaker Change: Further, by charging when power is cheap and plentiful and distributing when power is scarce and in demand.
Batteries are increasingly lucrative.
Speaker Change: Distributed generation is also able to reduce demand during peak hours and provide backup power when grids are strained.
Speaker Change: The modular nature of both these technologies also makes them relatively easy to deploy almost anywhere.
Speaker Change: As batteries become more cost-effective, with costs declining over 90% in the past decade,
Speaker Change: We expect that they will become a significant component of stabilizing the world's transmission grids and supporting the accelerated build-out of low-cost mature renewable technologies.
Speaker Change: At the end of 2024, we made our largest investment ever in our renewable power and transition business with our investment in Neowen, a leading global renewable platform with best-in-class management and market-leading positions in each of France, Australia, and the Nordics.
Speaker Change: What may not be appreciated is that NAOEN is also a leading global operator and developer of battery energy storage systems, a technology that we are increasingly investing in.
Speaker Change: With growing demand, lower capital costs, and higher potential revenues from stabilizing services, we are focused on deploying capital into battery energy storage solutions in almost all markets.
Speaker Change: And with this investment, we are one of the largest battery developers globally with 3,300 megawatts of operating and under construction capacity and additional 35,000 megawatts in our pipeline.
Speaker Change: With the support of demand backdrop and the combination of our global scale, significant access to capital, and our combined operating and development capabilities across multiple suites of technologies, including hydro, wind, utility-scale solar, distributed generation
Speaker Change: We can deliver differentiated solutions to our customers, few others can, thereby generating significant value for our shareholders over the long term.
Speaker Change: And, with that, I'll pass it on to Patrick to discuss our operating results, recent capital recycling initiatives, and financial position.
Thanks, Wyatt, and good morning to everyone on the call.
Patrick Taylor: Our business performed well this year, delivering record results. In the fourth quarter, we delivered an FFO of $304 million, or 46 cents per unit, up from 38 cents per unit in the same quarter last year, representing a 21% increase year on year.
Patrick Taylor: On a full-year basis, we delivered FFO of $1.2 billion, or $1.83 per unit, up 10% year-on-year.
Looking now at our segments.
Patrick Taylor: Our hydroelectric business generated solid results, benefiting from a strong second half of the year from our Colombian business, Isahen, helping offset weaker hydrology in North America.
Patrick Taylor: Our wind and solar segments generated record funds from operations, which were up 30% from last year, as we benefited from a full-year contribution from our recent acquisitions.
Patrick Taylor: Our distributed energy, storage, and sustainable solutions segments also generated record results, up 78% year-on-year, with a full-year contribution from Westinghouse, where we continue to see positive momentum.
Patrick Taylor: On the capital recycling front, the strong fundamentals for power are benefiting our business as we are able to sell our de-risked operating assets and portfolios to lower cost of capital buyers who are looking for long-life, real assets delivering reliable cash flows.
Patrick Taylor: Since 2020, we have generated almost $6 billion in proceeds at an average IRR of approximately 22%, and a 2.1 times multiple on invested capital.
Patrick Taylor: This year, we closed the sale of Syeda, where we realized the significant value we created through operational enhancements and the build-out of their development function.
Patrick Taylor: generating three times our invested capital over a relatively short hold period.
Patrick Taylor: We also closed the sale of a 50% interest in Shepherd Flat, where we executed one of the largest wind repowering projects ever, crystallizing significant value.
Patrick Taylor: Asset recycling will continue as a reliable and consistent way for us to deliver strong returns for our shareholders and generate capital to fund growth.
Looking now at our financial position.
Patrick Taylor: Our balance sheet remains strong and we continue to execute well within our self-funding model.
Patrick Taylor: We finished the year with $4.3 billion in liquidity, providing us with significant flexibility to deploy capital opportunistically to support the growth of the franchise.
Patrick Taylor: During the year, we successfully completed nearly $27 billion in financings, opportunistically extending duration and optimizing our portfolio's capital structure, including executing $800 million of up-financings to support growth initiatives.
Patrick Taylor: With our staggered contract profile, we also have a healthy pipeline of generation coming up for recontracting over the next five years. This should create significant additional up-financing capacity within this portfolio.
Patrick Taylor: In closing, we remain focused on delivering 12-15% long-term total returns for our investors.
Patrick Taylor: while remaining disciplined allocators of capital, leveraging our deep funding sources and operational capabilities to enhance and de-risk our business.
Patrick Taylor: On behalf of the board and management, we thank all our unit holders and shareholders for their ongoing support. We are excited about Brookfield Renewable's future and look forward to updating you on our progress throughout 2025.
Patrick Taylor: 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 the operator for questions.
Patrick Taylor: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Please stand by while we compile the Q&A roster.
Sean Stewart: Our first question comes from a line of Sean Stewart with TD Cowan.
Sean Stewart: Thanks. Good morning, everyone. Congratulations to Wyatt and Patrick. A couple questions. Connor, with respect to the Microsoft framework agreement, you referenced exceeding targets, and I'm wondering if you can give a little more context there. Is that more capacity potentially being built into that agreement, or is it an expedited development timeline? Any detail you can give us there.
Hi Sean
Speaker Change: Yeah, really two things there. Obviously, that agreement, sorry, I shouldn't say obviously, that agreement is structured to deliver 10.5 gigawatts between 2026 and 2030. The first point that we would make is on the back of structuring that agreement in 2024, we expect to deliver and have and will continue to deliver significant capacity to Microsoft ahead of
Speaker Change: And that's obviously additional to the 10 and a half that we'll deliver over the five years in the latter half of the decade. And then secondly, just with the broader growth of our business,
Speaker Change: In the latter half of the decade, we would say that 10.5 gigawatts is increasingly the floor, not the ceiling.
Speaker Change: We continue to add advanced development pipeline in key data center markets around the world. And we are seeing tremendous demand from Microsoft and the other hyperscalers for that product and as offtake to pull those projects out of the ground. So we expect that in those five years, we'll deliver well more than 10 and a half gigawatts.
Speaker Change: Thanks for that. And further to that, you know, it's been nine months since you announced that agreement. Can you give broader updates on efforts to replicate that type of framework deal with other corporates?
Okay.
Absolutely, and we'd probably frame it in two different ways.
Speaker Change: No doubt on the back of that agreement, we are having discussions.
Speaker Change: But I think it's important to recognize that those discussions can show up.
two different ways that are both beneficial for our business.
Thank you.
Speaker Change: What we did with Microsoft is we announced an agreement that we will fill up over time over the five-year period over which that agreement governs.
Speaker Change: The other thing that we can do that's happening real-time is we can just...
Speaker Change: do more and more activity with the hyperscalers on a project-by-project basis, even outside of a global framework agreement. And we are absolutely seeing that in real time across our business. We've delivered more projects and more power to them in 2024 than 2023, and we'll deliver more power and projects to the hyperscalers in 2025 than 2024, even absent those agreements. While we are in discussions and may sign similar framework agreements...
Speaker Change: in the future, the demands showing up in our development activities on a project-by-project basis regardless.
Speaker Change: Okay, thanks for that, Connor. And then just one last one. Asset recycling is an ongoing focus for funding. We've seen lots of valuation pressure for public equities, but it sounds like returns for your asset recycling,
initiatives we've held in.
Speaker Change: Just interested in your perspective on how that spread for returns between asset recycling.
Speaker Change: And organic development could shift it, you know, those spreads have been strong for you over the last five years and then 2024, but any expectations on how that could shift.
in the veneer to midterm.
Speaker Change: Sean, it's a very topical question and we'd come at this two different ways. Absolutely one of the themes that
Speaker Change: we were quite strong about in 2024 is a very, very strong bifurcation of the market where there is robust demand and incredible amounts of capital for high quality operating cash generative assets, particularly those that still have a growth angle to them.
Speaker Change: Well, there is far less capital available for construction, development, the building out and ongoing investment in the growth of platforms.
Speaker Change: That bifurcation remains very, very strong in the market today, and as we've referenced in our prepared remarks, we expect our asset recycling activities to continue, and we expect to really lean into that bifurcation, looking to sell those high-quality, cash-generative, operating de-risked assets.
Speaker Change: The other point that we would highlight that's a little bit tangential to your question is
is...
Speaker Change: There is also a very clear market bifurcation between the demand for exposure to renewables in private markets versus public markets.
Speaker Change: We continue to see significant private capital demand for the renewable power space despite the fact that certainly sentiment in the public markets is weaker today and given our business model, we absolutely will look to capitalize on that in 2025.
Speaker Change: Our next question comes from the line of Nelson Ng with RBC Capital Markets.
Nelson Ng: Great. Thanks. And congrats, Wyatt and Patrick. So first question, just sticking with the data center theme. So with their need for firm power and gas generation being more in favor generally in the market, Conor, what is your – what are your thoughts in terms of developing or acquiring a gas-fired generation? Can it be used to firm up your portfolio?
Thanks, Nelson. So, just... Thanks. Bye. Bye. Bye.
thinking macro and then our approach to it.
Nelson Ng: We believe that this step change increase in energy demand is good for all forms of power generation. You can use your token phrase, any and all, or all of the above. The fact of the matter is the fundamental demand for electricity generation is going to lead to support and growth across a number of different technologies, whether that's renewables, whether that's gas, whether that's nuclear.
Speaker Change: The thing that is very important for us and I think important to highlight on this call is that the the the the the the the the the the the the the the the the the the the the the the
Speaker Change: Off-takers and users of electricity are always going to take as much renewables as they can because it is the cheapest, and then they will look to fill out the remainder of their demand with other forms of power generation.
Speaker Change: So, when we think about our business, it's obviously going to continue to be incredibly focused.
on renewable power.
Speaker Change: Um, we do believe that gas will have a role, uh, in the transition and is going to see greater demand. But we would only ever considering investing in gas if it would result in the acceleration of the build out of renewables and ultimately reduce the carbon intensity of the broader grid.
further in any such investment.
We would need.
Speaker Change: to be seeing a more attractive risk-adjusted return proposition than what we are seeing in the build-out of renewables today, which is...
Speaker Change: among as attractive as we've seen it at any point in history. So could we potentially invest in some thermals if it came as part of a broader portfolio? We wouldn't rule it out, but our business is going to continue to be very focused on renewables because that's simply where we're seeing the greatest amount of demand growth and the most attractive returns.
Speaker Change: That's great color Connor. Next question I understand your point in terms of renewables being the cheapest form
Speaker Change: power even in the U.S. But with all the uncertainty in the U.S., can you just talk about how – I think looking at your development pipeline, you have about, I think, 2 gigawatts
Speaker Change: projects to be commissioned in 2025 and another 3.4 gigawatts in 2026. Can you just talk about how some of these contracts are structured? Just in terms of risk allocation, if there were any changes to the tax subsidies, are they essentially passed through or how are they structured in general?
Speaker Change: Sure, so there's really two important things there. One across our business, we've always taken an approach of only locking in contracts when we can lock in CapEx.
Speaker Change: revenue meaning PPA, EPC and financing up front. So we don't have what we would call basis risk exposure where we've locked in capex and or we've locked in revenue and one of the other variables could change and augment our returns.
Speaker Change: The one place, and your question's a very good one, the one thing that we are seeing in the market right now, because this is obviously very topical.
right now in the United States is.
Speaker Change: If there is a retroactive change or a near-term change to things like the tax credits, we are increasingly putting adjusters in those PPAs to essentially keep our development margins whole. So that is increasingly becoming, I would say, market standard. And I think it is reflective of a broader dynamic that it is very simple.
Speaker Change: The offtakers simply need the power, and therefore, they're not going to let short-term uncertainty stop them from signing contracts, and they will do what is necessary to protect the developers in order to pull those projects out of the ground.
Speaker Change: Great. It's good to see that it's essentially passed through. And so one last question. You mentioned the public market versus private market and valuations.
Speaker Change: From your perspective, you've done a lot of acquisitions and developments in the past.
Could you just comment on your capital allocation mix?
Speaker Change: in the past few years compared to what you see going forward. Your development pipeline is increasing, but obviously with some of the valuations we've seen in the public market, you expect to see, do you expect to step up your pace?
the acquisition of public entities or investments in public entities?
So
Yeah.
Maybe to hit that question very bluntly and head-on.
Speaker Change: We expect to be very active this year from a growth perspective just
Speaker Change: given one, where public market valuations are, and two, the current market environment very much plays to our favor.
Speaker Change: in that we are fortunate to have a fortress balance sheet and lots of liquidity, and we're seeing tremendous offtake demand in our underlying business. And others may not have the capital resources that we have available to capitalize on some of the growth opportunities at very attractive value entry points that we're seeing in the market today. So we expect 2025.
Speaker Change: to be another very attractive and very active year of activity for us on the growth front. In terms of bias between public and private,
Speaker Change: That's going to be on a case-by-case basis, and we'll allocate capital where we see the best risk-adjusted returns. Executability certainly comes into that, but based on what we're seeing today, public markets do look very, very attractive, and therefore, we are certainly looking at a number of things in that space.
Great, thanks Connor. I'll leave it there.
Our next question comes from Robert Hope with Scotiabank.
Robert Hope: Good morning, everyone. First question is on the development pipeline. You know, when we take a look at the build-out of renewables in the U.S. in your pipeline, can you help us parse out how much is wind in the near-term versus the long-term, just given it does appear that there's a little bit more uncertainty or perceived uncertainty on wind out there in the market?
Robert Hope: You're absolutely right, Rob, and I'll start, and I can give you these answers, these numbers.
Robert Hope: It's pretty clear, but if you need more specifics, we can certainly provide that. In terms of our development pipeline over what I would call the short term, about two-thirds of it around the world is outside of the United States, and that obviously is seeing tremendous corporate demand and not subject to some of the regulatory uncertainty that we have
Robert Hope: is in the market around the more recent executive orders and things like that. When we look at what is in the United States, somewhere in the, call it 25 to 30% of that is wind.
Robert Hope: So, when we look at our broader portfolio, wind in the United States is a very modest portion of it.
Robert Hope: And maybe the summary point there is, while there is no doubt some uncertainty, particularly around wind in the United States, we do not expect it to change our growth trajectory or our strategic approach in the short term whatsoever.
Robert Hope: Perhaps the added clarity that we just give around U.S. wind is we obviously have zero exposure to U.S. offshore, and we have essentially zero exposure to projects on, onshore projects on federal lands.
Robert Hope: Almost the entirety of our onshore wind exposure in the U.S. is on private lands.
There are obviously some uncertainties around federal permitting.
Robert Hope: for onshore wind projects, even if they are on private lands.
Robert Hope: And we'll be prepared to manage those projects however this plays out. We continue to believe that no government around the world wants to deny its country access to cheap electricity, particularly in this market where that's a significant competitive advantage. So while there is some short-term uncertainty today, given we're entirely on onshore and entirely on private lands, we expect it to get resolved relatively quickly.
Robert Hope: If it doesn't, we'll manage through it. It's not a material part of our business.
Speaker Change: All right. I appreciate that. And then maybe just keeping with the U.S. theme, in the letter you speak about how there could be potential regulatory changes in the renewable sector in the U.S., however, adjustments to policies that have the greatest impact on your business, you don't think that those will occur. Can you maybe just add a little bit more color there? What changes do you think you could see in the U.S.? And it seems to allude that you don't expect ITCs or PTCs to change.
Certainly. So the... The...
Speaker Change: Given that we're not in offshore and our business is heavily focused in the most mature, lowest cost technologies, the ones that see the greatest amount of corporate demand, the thing that would impact our business the most is a change to the tax credits, as you mentioned.
Speaker Change: Obviously, thus far, there's been no changes announced to that. The one thing we would highlight is, even if there were changes announced, these asset classes, these technologies are the cheapest form of electricity by such a wide margin that we would very much expect to be able to pass through the loss of those.
Speaker Change: tax credits through in the form of a higher PPA price and still preserve our development margins.
Speaker Change: This is very akin to what we've seen over the last two or three years, where we've been able to pass through higher funding costs in the form of a higher PPA and see no change in the demand for our off-take. So there's no question, the most important thing to our business, the most relevant thing is those tax credits, but even if there were to be a change to that, we would not expect
margins or our demand.
Appreciate that. Thank you.
Speaker Change: Hi, sorry, I might have missed that. I think it's my turn. Rupert here. Just wanted to follow up on that last.
Speaker Change: You've talked about the potential to offset the impact from tax credit changes. How much exposure do you think you have from tariffs and potential for higher equipment costs or higher steel costs and how are you covered off on that?
Speaker Change: Rupert, it's a fantastic question, and you're right to piggyback on the back of the tax credit question, because it's the same dynamic.
Speaker Change: If you think about what tax credits do to the economics of a renewables project today, they essentially lower the cost.
Speaker Change: it. And that allows us to offer that project at attractive development returns at a lower PPA. If we were to lose the tax credits, we would
Speaker Change: have to offer a higher PPA to preserve our development returns, and we think there's plenty of cushion to do that.
The same thing is true on tariff.
If incremental pair of
Speaker Change: are added to equipment that is used to build out renewables.
Speaker Change: We would look to pass that cost through in the form of a higher PPA, and again, we'll keep coming back to this point. The demand, what we are seeing fundamentally on the ground with our corporate offtake counterparties, is the demand is stronger than ever before.
Speaker Change: That means there is lots of capacity. Should these things change the economics of a project, we will very simply push it through the PPA price.
When it comes to potential tariffs,
This is something where we feel Brookfield Renewable has.
Um, a.
a very material competitive advantage.
Speaker Change: Over the last number of years, using our centralized procurement across our broader business, we've executed a number of framework agreements with leading manufacturers, both domestic in the U.S. and international, which will enable us to source
equipment from a wide variety of sources.
Speaker Change: such that no matter how the tariff discussions play out, we will be able to maximize our sourcing of equipment from the most tariff preferential areas. So we're obviously following that space closely. We do not expect it to change our project economics. And regardless of how the tariffs play out, we think our global procurement capabilities will ensure that we'll be on the front foot when this market settles.
Speaker Change: Okay, great. Thanks, Nikola. And second will be a follow-up on the data center market. So of course, we've seen a lot of market volatility driven by
changing expectations for power-to-man growth.
Speaker Change: from AI. When you talk to your corporate customers like Microsoft, how much of the data center growth that you see is driven by expectations for growth in demand from AI versus cloud and and crypto? And are there any comments you can make on that changing landscape for AI power demand?
Yeah, so it's a very, um...
Speaker Change: Very big topic, but I think probably the two most important things we would say is
Speaker Change: the biggest step change of the demand that the the biggest demand driver that you mentioned there?
Speaker Change: is artificial intelligence, bar none. It is ahead of cloud, it is ahead of crypto by miles.
Speaker Change: This is really driven by AI, and we expect it to be driven by AI for the medium term at a minimum here. That obviously lends itself to another question, which is, in the last couple weeks, new technologies have come out or been socialized that maybe are more energy efficient.
Speaker Change: That's great. The important thing that we highlight from those discussions and those topics, which are early days, are two things. The first is the benefits that a bachelor's degree provides to students who get a scholarship as a student.
The supply, demand, and balance.
Speaker Change: is so strong right now. There is very simply not enough power to support all the AI growth that is forecasted, and those forecasts would need to come down unforeseeable amounts for the supply, demand, and balance not to be in favor of power producers. So even with the new technologies, the supply, demand, and balance is still wildly in our favor.
Speaker Change: And then the second thing is, any new technology we expect will become more efficient over time.
Speaker Change: And the reality of it is, if new AI technologies become more efficient, that means their cost is going to go down, and that means they're going to become more prevalent, and they're going to be in demand from more places, and it's actually going to lead to faster growth in the sector, which is obviously good for broad-based electricity demand as well. So we continue to follow all the recent changes, but none of them change the fact that we see
Speaker Change: long-term supply-demand imbalance very much in favor of those that can generate new electricity, especially those that can do it at low cost.
Great. Excellent. Thanks for the color. I'll leave it there.
Our next question comes from Mark Jarvie with CIBC.
Thank you.
Mark Jarvie: Thanks. Good morning, everyone. We were just following up on the tariff and the tax credit conversation. Has anything dramatically changed in terms of what you're hearing around that? And then if there isn't adjustments and there's a period of sort of
Mark Jarvie: having to pass that through to customers, does that impact development opportunities the next couple of years, or do you think as a safe harbour and things that are already on the go, that that would be more of a three to five-year adjustment period in terms of any delay on projects?
So we'll take those in order.
Mark Jarvie: You know, we're obviously following this situation very closely. We would never contend to be able to forecast exactly what this new administration will do. At this point, they have not said anything about those tax credits.
Mark Jarvie: Historically, a lot of those have gone to Republican states. And while they've changed and issued executive orders on many other things, they have not touched the tax credits. And we'll remain flexible and follow this, but I think that's probably our best indicator of what may or may not happen in the future. The next thing we would say is just around the development pipeline.
Mark Jarvie: We've been preparing, whether it be through how we're contracting things or how we're procuring equipment, we've been preparing for a market that could have this type of uncertainty. I think it's not an unreasonable thing to say that in periods of market uncertainty that often favours larger players with more capabilities to manage this type of uncertainty,
Mark Jarvie: out for us in 2025. So while there might be some very modest disruption to individual projects, it's not going to change our growth trajectory. We don't expect anything to happen that would materially change what we've outlined in terms of our forecast.
Mark Jarvie: Okay, and then just coming back to the Microsoft's agreement, are you able to share how many megawatts you've signed today and what's the expected amount of volume you'd have contracted by the end of this year, just to sort of gauge progress through that 10.5 gigawatts?
So, I'll...
Mark Jarvie: We can perhaps follow up later with an exact figure. It's important to recognize that the 10.5 gigawatt agreement we have with Microsoft applies to the years of 2026 through 2030.
So it actually hasn't even started yet.
Mark Jarvie: That does not mean we are not contracting significant sums of our new wind and solar capacity with Microsoft, even ahead of 2026. They are one of our largest, if not our largest, off-taker, and we continue to do more and more with them on an ongoing basis, even before that 2026 agreement starts.
Mark Jarvie: So, I would say our activity prior to that agreement is already above what we would have expected – call it 18 months ago – and as we look to that agreement of 2026 to 2030, that five-year period, we would expect to exceed the 10.5 gigawatts.
Speaker Change: Understood. And then, Connor, you mentioned about the fact that there's dislocation between private and public markets and there's some weakness in share prices. I'm sure you see the same thing in your own. So how do you view your own share price right now in terms of a place to allocate capital and buybacks versus opportunities and other investment opportunities?
Certainly.
Speaker Change: If we could draw a parallel here, the current market feels somewhat similar to.
kind of Q3 2023, which is not that long ago.
Speaker Change: five quarters, 16, 18 months ago. And at the time that market, sentiment was really down. Select players were seeing very significant headwinds. It was dragging the whole sector down. And at the time,
Speaker Change: Despite our share price being lower, we saw unbelievable fundamentals in our business.
and we
Speaker Change: The way we approach that is, if we continue to allocate capital into the best opportunities and we continue to execute on our business plan, we would add a lot of value that would eventually show up in our share price. If you look at what's happened in the 15 months or five quarters since then, our FFO per share is up almost 15%.
Speaker Change: That's all multiples in kind of a 15 or 18 month stretch.
Speaker Change: it feels very, very similar again today. So our focus today is absolutely continuing to execute on the same strategy that we have had, as we feel it captures incredible value and captures the significant market demand we are seeing.
Speaker Change: Without doubt, in this environment and with our shares trading where they're at, we will absolutely be looking at doing share buybacks the same way we did in that time period, call it 15 months ago.
Speaker Change: As a reminder, to ask a question, please press star 1 1 on your touchtone phone.
Speaker Change: Our next question comes from the line of William Grippen with UBS.
William Grippen: Hey, good morning. Thanks for the time. I just wanted to see if you could provide a bit more color on some of the comments made in the press release regarding framework agreements with your suppliers.
William Grippen: you know, to what degree are those agreements enabling you to safe harbor your U.S. development plans as it pertains to the PTC and ITC at current levels? You know, you've talked about passing higher costs through PPA rates, but I would think some of that friction or potential friction could be eliminated with safe harboring. So just try and understand how you're thinking about that.
William Grippen: Absolutely, and the point we would make here is, I think this goes beyond simply framework agreements and I'll draw back to, I apologize for not remembering who asked the question,
William Grippen: Rather than whether or not it's a framework agreement or just our ongoing dialogue with our largest customers,
on working with them on a project-by-project basis.
William Grippen: The point that we were trying to draw out in the press release is the size and scale of our platform.
L.L.
William Grippen: Significant amount of advanced pipeline that is available in the near term to capture this market demand and are really robust access to capital that allows us to grow as much as possible in this environment is really differentiating us from our peers. The value and scale of our platform is more of a competitive advantage today than any time in history, and we expect that only to grow going forward.
William Grippen: And therefore, whether it is within a framework agreement or done on a project-by-project basis, our ability to engage with some of the largest corporate offtakers of green power and get
William Grippen: incredible unmatched visibility around their demands in the next few years is allowing us to take advantage of some of the activities and value creation initiatives you mentioned. I guess the point I'm making is, I don't think we need a framework agreement in order to do that. It's more just something we get the benefit of given our large scale relationships with the largest off takers of green power.
Speaker Change: Yep, I hear. I think the question was more focused on, you specifically referenced agreements with your equipment suppliers.
Speaker Change: Yeah, certainly. So sorry if I misunderstood. On that point, what we have been doing over the last
Speaker Change: Few years in particular in the US is given the scale of our pipeline there we've negotiated very large.
Speaker Change: arrangements with them that, similar to what we do elsewhere around the world, we use our scale to ensure that, one, we're getting best-in-class pricing, and two, we're essentially near the top of the order list whenever it comes to securing volumes. So in an environment where tariffs kick in and the opportunity to procure domestically
Speaker Change: about our position given the framework agreements we've secured with domestic manufacturers over the last couple of years.
Speaker Change: Got it. Appreciate the call, Connor, and good luck in 2025.
Thank you.
Speaker Change: Our next question comes from the line of Anthony Crowdell with Mizzou Health.
Anthony Crowdell: Hey, good morning, and Connor, apologies, I jumped in a little late, so if you've answered this, sorry. Just, are you surprised when we look at the pace of data center announcements and the size of them, it appears that the pace of maybe PPAs or contracts to supply electricity to these data centers seems like it's not matching up. I mean, do you see that in any thoughts that there may be a difference in tenure that the tech companies want to sign versus what the power generators want to offer?
Bye.
Anthony Crowdell: You're highlighting a good point but I think the reason for it is something slightly different.
Speaker Change: If we could say it this clearly, the demand for power is now.
And it is a mess.
It completely, there is more demand.
for power, then they're all ready to build projects.
And if there were more ready-to-build projects...
Speaker Change: The large corporate off-takers and the large tech companies would be signing them all up today.
Speaker Change: The issue is there are not enough ready-to-build projects, and that's because permitting and development, that takes time, and that is the bottleneck in the system. Not demand, not the willingness of customers to sign PPA.
The thing that that is highlighting...
Speaker Change: One, the supply, demand, and balance is going to maintain for a while, because permitting and development is a long process. It does take time. If you want to capture this demand, and therefore you start developing a project today, well, these projects take years and years and years to develop.
Speaker Change: It highlights perhaps a more important point and one we'd love to reiterate which is advanced pipeline that is ready to be contracted and ready to be built is the most valuable thing in the market today.
Speaker Change: We are fortunate that over the last number of years, we have had a strategy that has been very focused on acquiring large-scale advanced pipeline in the largest data center markets around the world.
Speaker Change: And will we be able to meet all the demand of the large hyperscalers? Absolutely not. The demand outweighs the supply, but the advanced pipelines that we've been acquiring over the last two or three or four years, whether it be in the United States or in Western Europe, has incredible scarcity value today. And that's what's showing up in our development margins, which are now at an all-time high.
Thank you.
Speaker Change: Great. Thanks. And this one's a weird one. Apologies. I know you don't enjoy talking about other companies, but...
Speaker Change: One of the other, like, renewable companies, smaller, different model, but a yield co.
Name change, looks like it's...
Speaker Change: really cut back their growth, just curious if that's really just a separate isolated entity or is that maybe just the structure may be more challenging as we go forward?
Speaker Change: So what we would say is I would say all renewables companies are seeing incredible demand for their product. That is broad-based, that is across the sector, everyone can participate in that.
Speaker Change: Some are more well-positioned than others to take advantage of that. We certainly see ourselves near the top of that list.
Bye.
Speaker Change: What I think is really important when we think about our business is as we've grown over the last number of years, we're thrilled with the growth we've delivered in our business, the increased cash flows, the increased profitability.
Speaker Change: But there's two things that we're also very proud of that we've done over that time frame and we very much reiterated that at our investor day last year, which is one we focused on
Speaker Change: the most mature, lowest risk, lowest cost technologies, and we've really avoided sectors of the market that are seeing the biggest headwinds today. And secondly, we've never compromised in terms of our discipline and how we fund our business.
Speaker Change: And while there is incredible tailwinds for the renewable sector more broadly, there are discrete examples of individual companies that are seeing greater headwinds because either concentrations in technologies that are out of favor, taking too much development risk, or using more aggressive capital structures.
Speaker Change: And the tailwinds for the broader sector are tremendous today, but we feel very fortunate in terms of where we focused our business and the discipline that we've executed across our balance sheet.
Speaker Change: Great. Thanks for taking my questions and congrats Patrick and Wyatt. Looking forward to work with you.
Speaker Change: That concludes today's question and answer session. I'd like to turn the call back to Connor Teske for closing remarks.
Connor Teske: Great, well thank you everyone for joining our call and for your interest and support of Brookfield Renewable. We look forward to updating you on our progress throughout 2025. Have a great day.
This concludes today's conference call.
Thank you for participating.
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Speaker Change: Good day and thank you for standing by. Welcome to the Brookfield Renewable Partners fourth quarter 2024 results conference call and webcast.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.
To withdraw your question, please press star 1 once again.
Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to your speaker today, Conor Teske, Chief Executive Officer. Please go ahead.
Thank you very much.
Speaker Change: Thank you, operator, and good morning, everyone, and thank you for joining us for our fourth quarter 2024 conference call.
Speaker Change: Before we begin, we would like to remind you that a copy of our news release, investor supplement, and letter to unit holders can be found on our website. We also want to remind you that we may make forward-looking statements on this call. These statements are subject to known and unknown risks, and our future results may differ materially.
Speaker Change: For more information, you are encouraged to review our regulatory filings available on CDAR, EDGAR, and on our website.
Speaker Change: Before starting, we would like to welcome Patrick Taylor, our newly appointed CFO to the call. We are thrilled to have Patrick on the team as we continue to add depth and talent to our leadership group.
Speaker Change: On today's call, we will provide a review of our 2024 performance and then Wyatt will discuss our growth outlook in the U.S. and globally.
Speaker Change: And then, lastly, Patrick will conclude the call by discussing our operating results, recent asset recycling activities, and our financial position.
Speaker Change: Following our prepared remarks, we look forward to taking your questions.
Now, before going through our 2024 results,
We wanted to comment briefly on the current environment.
Speaker Change: Following several decades of modest electricity demand growth, we are experiencing a dramatic shift in demand driven by the AI revolution, one of, if not the most, significant advancement in technology in our lifetime.
Speaker Change: This is driving a significant step change in demand for our product, supporting our continued and accelerating growth.
Speaker Change: And while the renewable sector has traded down in the public markets on weaker sentiments stemming from the new U.S. administrations announced executive orders and potential policy changes for renewables,
Speaker Change: The simple fact is that the fundamentals for energy have never been better.
Speaker Change: The low-cost renewable technologies that we have built our business on are the cheapest form of electricity production and are seeing greater demand than ever before.
Speaker Change: As a result, we believe that low-cost renewables, which are readily available to deploy, will play a leading role in the requirements for any and all increases in generation capacity that we are already seeing unfold.
Speaker Change: Our focus on the lowest cost, most mature renewables technologies that have the greatest demand from corporate customers and are not reliant on government subsidy has positioned us well to benefit in the current environment.
Speaker Change: We have no exposure to the sectors of the market which are seeing the greatest headwinds and we feel we are best positioned across the industry to capture the accelerating corporate demand.
Speaker Change: with our extensive 200,000 megawatt development pipeline which is highly concentrated in the top data center markets globally.
Speaker Change: Executing our business plan will create significant value in our company, and as market sentiment passes, we expect to see that translate into the price of our shares.
Speaker Change: The current market dislocation is also presenting significant investment opportunities for us.
Speaker Change: Our strong liquidity and robust funding model, combined with lower public share prices across the sector and increased uncertainty for private market investors, could also create the opportunity to acquire assets for value and further grow our business.
Turning now to our results.
2024 was another record year for our business.
Speaker Change: We delivered our strongest operating and financial results ever and positioned the business for significant further growth and value creation in the future.
Speaker Change: We delivered 10% FFO per unit growth year-on-year, as we benefited from our inflation-linked and contracted cash flows, contributions from acquisitions,
Speaker Change: and the execution of various organic growth and value creation initiatives across our business.
Speaker Change: including the sale of de-risked operating assets and platforms, which generated strong returns and are now very much a regular and ongoing part of our business.
Speaker Change: We exceeded our capital deployment targets, investing $12.5 billion in some outstanding businesses.
including our investment in global renewable operator and developer, Neon.
Speaker Change: During the year, we advanced our commercial initiatives and continued to partner with the largest buyers of clean power globally, signing contracts for almost 19,000 gigawatt hours per year of generation. Again, another record performance and indicative of the incredible supply-demand imbalance in favor of our product.
Speaker Change: We also signed the Landmark Renewable Energy Framework Agreement with Microsoft in May, agreeing to deliver 10.5 GW of new renewable energy capacity between 2026 and 2030 in the U.S. and Europe. And today, we are on track to not only meet, but exceed our delivery targets.
Speaker Change: This agreement will assist Microsoft's data center growth and support its investment in AI-powered cloud services, which continue to accelerate.
Speaker Change: The global hyperscalers are significantly ramping up investment in their data center infrastructure and are expected to continue to increase investment tremendously through the remainder of the decade.
Speaker Change: Power is increasingly a bottleneck to this planned data center development.
Speaker Change: And we are seeing these businesses ramp up their efforts to secure supply to ensure the delivery of their growth.
Speaker Change: Our agreement with Microsoft is a testament to our differentiated capabilities and we expect to continue to partner with the largest buyers of power going forward.
Speaker Change: This year, we commissioned a record 7,000 megawatts of new capacity globally, almost seven times the capacity we brought online just three years ago.
Speaker Change: And with our expanding development capabilities, we have also successfully grown our asset rotation activities.
Speaker Change: We generated a record $2.8 billion of proceeds in 2024 and an average return of 25% IRR and approximately 2.5 times our invested capital, crystallizing strong returns for our shareholders and generating significant capital to fund future growth.
Again, this positions us well in the current market.
Speaker Change: We have continued to be uncompromising in how we fund our business, and our balance sheet remains among the strongest in the sector.
Speaker Change: We executed record financings this past year and finished the year with $4.3 billion of liquidity to opportunistically fund our growth.
Speaker Change: With our record results, and in conjunction with our strong liquidity and robust outlook for our business, we are pleased to announce an over 5% increase in our annual distribution to $1.49.2 per unit.
Speaker Change: Since Brookfield Renewable was publicly listed in 2011, we have delivered 14 consecutive years of annual distribution growth of at least 5% per year.
Speaker Change: With that, we will now turn it over to Wyatt to further discuss our growth outlook in the U.S. and globally, and how we are positioned to capitalize in the current market.
Thank you, Connor, and good morning, everyone.
Speaker Change: And while we see potential for regulatory changes, we do not expect any material adjustments to the policies that have the greatest impact on our business, as these largely have bipartisan support.
Speaker Change: More important to our business are the current fundamentals for power.
Speaker Change: Globally, and in the U.S. specifically, the demand for electricity continues to accelerate at an incredible rate, driven by broad-based electrification of major industries and the global energy grid, and a generational step change in demand for power to drive the AI revolution.
Bye.
Speaker Change: We also expect that supportive fiscal policy in the U.S. will drive further growth in manufacturing, data center development, and industry in the country, which will in turn drive further electricity demand.
Speaker Change: As a result, the growth prospects for low-cost, mature renewable technologies are better than at any point in history.
Speaker Change: as they play a leading role in any and all increase in generation capacity.
Speaker Change: Simply put, off takers of power will naturally take as much of the lowest cost solutions renewable before turning to other forms of generations to meet their needs.
Speaker Change: As growing energy demand is being met with the new build capacity it is creating two challenges.
transmission availability, and grid stability.
Speaker Change: We see large-scale battery systems and distributed generation as an increasingly important part of the solution.
Speaker Change: The grid-scale batteries being developed today are able to charge when the sun is shining and when the wind is blowing, and then discharge power at other times, enabling a more consistent power supply.
Speaker Change: Further, by charging when power is cheap and plentiful and distributing when power is scarce and in demand.
Binaries are increasingly lucrative.
Speaker Change: Distributed generation is also able to reduce demand during peak hours and provide backup power when grids are strained.
Speaker Change: The modular nature of both these technologies also makes them relatively easy to deploy almost anywhere.
Speaker Change: As batteries become more cost-effective, with costs declining over 90% in the past decade,
Speaker Change: We expect that they will become a significant component of stabilizing the world's transmission grids and supporting the accelerated build-out of low-cost mature renewable technologies.
Speaker Change: At the end of 2024, we made our largest investment ever in our renewable power and transition business with our investment in Neowen, a leading global renewable platform with best-in-class management and market-leading positions in each of France, Australia, and the Nordics.
Speaker Change: What may not be appreciated is that NAOEN is also a leading global operator and developer of battery energy storage systems, a technology that we are increasingly investing in.