Q1 2025 Brookfield Renewable Corp Earnings Call
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Yes.
Speaker Change: Good day, and thank you for standing by welcome to the Brookfield Renewables first quarter 'twenty 'twenty five results conference call and webcast. At this time all participants are in a listen only mode.
Speaker Change: The speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I'd now like to hand, the conference over to your Speaker today, Connor Cheskey Chief Executive Officer. Please go ahead.
Speaker Change: Thank you operator.
Good morning, everyone and thank you for joining us for our first quarter 2025 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 for more information Youre encouraged to review our regulatory filings available on SEDAR Edgar and <unk>.
Speaker Change: On our website.
Speaker Change: Yeah.
Speaker Change: On today's call, we will provide a review of our first quarter performance and then Hannah Lee <unk>, our global head of procurement will speak to the resiliency of our business and how we are well equipped to navigate the current dynamics of the global supply chain and continue to deliver on our target returns and evolve.
Speaker Change: Moving environment.
Speaker Change: Then Patrick will conclude our remarks by discussing our operating results and financial position.
Following our comments, we look forward to taking your questions.
Speaker Change: In light of recently announced tariffs on goods.
Speaker Change: And the resulting volatility in the market, we want to start by discussing the current environment for the energy sector and how renewables fit into the significant demand for energy globally as well as how we are placed to extend our leadership position in a rapidly changing landscape.
Speaker Change: First and foremost.
Speaker Change: Most the most important driver for our business continues to be the fundamentals for energy, which remains very strong today with digitalization and reindustrialization driving accelerating demand that far outpaces supply.
Speaker Change: We believe that the pace of energy demand growth.
Speaker Change: Need for Baseload power.
Speaker Change: And adequate backup will require in any and all solution to build out the grid.
Speaker Change: This includes renewables natural gas batteries and nuclear technology as to name a few.
Speaker Change: Despite tariffs and the potential impacts on the renewable sector renewable technologies, particularly onshore wind.
Speaker Change: Solar and batteries represent a critical part of the solution to meet the insatiable demand for energy given their low cost position their ability to be deployed quickly than almost any region around the world.
Speaker Change: Mature supply chain and the fact that they do not depend on imported fuel.
Today, we are one of the largest renewable operators and developers globally diversified across the lowest cost and most mature technologies and the most attractive geographies.
Speaker Change: With approximately half of our pipeline in North America, and the other half spread across other attractive markets around the world, which mitigates our exposure to regional dynamics market disruptions on our resource variability.
Speaker Change: We are well equipped to navigate near term supply chain challenges given our scale global relationships with the largest tier one suppliers.
Speaker Change: Our approach to development.
And focus over the past several years to increase purchases from domestic U S manufacturers, all of which Hana will discuss in more detail later on the call.
Speaker Change: With the strong underlying demand for power and the superior characteristics of renewables combined with our relationships with the suppliers in the U S and globally, we continue to be very positive on the outlook for the business and our ability to deliver on our growth and return targets for shareholders.
Speaker Change: Moving to our operating results are.
Speaker Change: Our business had a strong quarter to start the year performing well.
Speaker Change: We delivered strong financial results and made significant progress executing on our plans for 2025 and beyond.
Speaker Change: Adjusting for very strong hydro generation in the first quarter of last year, our <unk> per unit was up 15% versus the prior year period and on an all in basis or <unk> <unk> per unit was up 7% year over year.
Speaker Change: These results reflect the benefit of our diverse contracted global fleet of assets successful commissioning of new capacity recently closed investments and the scaling of our normal course capital recycling activities.
Speaker Change: We were successful advancing our commercial initiatives as well, including securing contracts to deliver on an incremental 4500 gigawatt hours per year of generation.
Speaker Change: We also progressed the delivery of projects to Microsoft under a renewable energy framework agreement and continue to view the initial tenant five gigawatt scoped into the agreement as the minimum we will contract under the framework.
Speaker Change: We expect to continue to partner with global technology players on both a project by project basis and by a larger framework agreements given the persistence of the supply demand imbalance, we are seeing globally.
Speaker Change: We progressed, our development activities and commissioned approximately 800 megawatts of renewable energy capacity in the quarter across our platforms and continue to expect to bring approximately eight gigawatts online in 2025.
Speaker Change: Over double our run rate of commissioning capacity just three years ago.
Speaker Change: Another byproduct of the recently announced tariffs is that there are lower public market valuations for renewable energy companies. Despite the strong fundamentals for energy demand.
Speaker Change: With this and the significant capital required to meet energy demand.
Speaker Change: We are seeing meaningful opportunities for those with access to capital carve out capabilities and development expertise to acquire renewable platforms and assets for value.
In the quarter, we committed or deployed $4 6 billion or $500 million net to Brookfield renewable highlighted by the completion of the privatization of neyland and by reaching an agreement to acquire national grid renewables.
Speaker Change: With our acquisition of now and we will drive value creation through the acceleration of their development activities expecting to double the commissioning cadence from around one gigawatt per year to two <unk>.
Speaker Change: And by the implementation of an asset rotation program, which is already well underway.
Speaker Change: National grid renewables is a fully integrated onshore renewable power operator and developer in the United States with three nine gigawatts of operating and under construction assets a one gigawatt.
Speaker Change: Construction ready portfolio, and then over 30 gigawatt development pipeline.
Speaker Change: National Grid's contracted operating portfolio provides strong downside protection and we see an opportunity to deliver significant value through the development of national Grid's large high quality advanced stage pipeline.
Speaker Change: Similar to the carve out of Duke energy is renewables business that we successfully completed about two years ago.
Speaker Change: In contrast to the sentiment for renewables in the public markets today, we continue to see a bifurcation from private markets, where there continues to be robust demand from private investors for our de risked operating assets and platforms with advanced projects and highly executable growth opportunities.
Speaker Change: During the quarter, we closed the sale of our stake in first hydro.
Speaker Change: In phase one of our India portfolio sale on our expected timelines generating almost three times, our invested capital and 20% investment returns.
Speaker Change: We also reached an agreement to sell an additional 25% stake in shepherds plan at the same valuation as our previous 50% stake sale generating almost two times, our invested capital and proceeds of approximately $200 million.
Speaker Change: Looking ahead.
Speaker Change: We remain well positioned to continue to capitalize on the current market bifurcation.
Speaker Change: Acquiring for value as well as monetizing our derisked renewables platforms and assets to lower cost of capital buyers and in doing so generating strong returns.
Hana: With that we will now turn the call over to Hana.
Peak: Peak to how our business is well equipped to navigate the evolving supply chain and continue to deliver on our growth and return targets.
Hana: Thank you Conor and good morning, everyone as Conor mentioned current sentiment in the public markets for the renewable sector reflect an elevated level of uncertainty with investors reacting to tariff announcements and how these duties may impact development project returns the pace of development going forward and cash flows from assets operating today.
Hana: We are of the view that many investors today are not discerning between those in this sector that are diversified and well positioned to mitigate the potential impact and those that are not.
Hana: It is at times of heightened uncertainty when the benefits of our global diversified operating and development portfolio and its associated global procurement network becomes clear.
Hana: Today, we have a diversified global platform approaching 45000 megawatts of operating capacity that generate high quality resilient and inflation linked cash flows. These.
Hana: These assets generate a critical resource at the lowest cost in their respective markets and are largely in impacted by tariffs.
Hana: In fact in an inflationary environment, our operating fleet benefits given the index nature of our contracted revenue.
Hana: Regarding our development projects in progress today, we are substantially safeguarded against fluctuations in input costs due to our approach to development.
Hana: Our strategy of focusing on minimizing risk by securing our costs, while simultaneously locking in our cash flow before investing meaningful capex has us well positioned to continue delivering on our target returns.
Hana: As a result of this approach most of our projects currently under construction have fixed price engineering procurement and construction contracts with limited exposure to price increases and.
Hana: And for those where we do retain price exposure, we have taken actions to help limit our impact on our return clauses in our PPA contract to enable price adjustment.
Hana: We will win.
Hana: Limitation of new tariffs on China, specifically, Singapore parallel amount of equipment directly from the country for our U S development activities.
Hana: In the past few years, we have proactively increased consumption of domestic goods in the U S through signing a framework agreements with Oems to support the expansion of domestic suppliers and to minimize the impact of previously enacted tariffs on solar panels manufactured in China.
Hana: With respect to the recently announced updated tariff rates on several southeast Asia countries as part of the U S is antidumping and countervailing investigation on solar panels. We are of the view that this further supports domestic U S investment and benefits players like ourselves, who already have existing relationships with domestic U S manufacturers and the capacity and capabilities to.
Hana: Adjust our orders and suppliers for our projects around the world.
Hana: Furthermore, across our global business, we expect a positive impact on supply chain availability and input costs.
Hana: U S developers, where a meaningful buyer of equipment from Asian suppliers, we could see increasing quantities of equipment available in other geographies in which we operate as those suppliers look to diversify their customer base and global players like ourselves could benefit from higher availability and lower price.
Hana: And so while the environment continues to evolve we feel that we are very well positioned to continue to offer the most competitive pricing to our customers to meet growing demand for energy in the U S and across the regions in which we operate extending our leading position as a partner of choice to the largest corporate buyers of power globally with that I'll pass it on to Patrick.
Patrick: To discuss our operating results and financial position.
Patrick: Thanks, Anna and good morning to everyone on the call.
Patrick: Our business performed well this quarter, we delivered funds from operations of $315 million or <unk> 48 per unit.
Patrick: Adjusting for strong hydro generation in the prior year, our <unk> per unit increased by 15% year over year this quarter.
Patrick: And on an all in basis increased 7% per unit year over year.
Patrick: Our business continues to exhibit strong cash flow resiliency with our operating results, reflecting our stable and growing cash flows from our operating fleet.
Patrick: Which are 90% contracted for approximately 14 years with revenue, 70% index to inflation.
Patrick: In addition, we continue to benefit from our growth initiatives and accretive capital recycling activities.
Patrick: Our hydro electric segment continues to benefit from favorable all in pricing in the current environment, where demand for clean power remains robust.
Patrick: The business delivered solid results and is well positioned for a strong second quarter and 2025 as solid hydrology and a relatively cold winter in North America as a resulted in a healthy snowpack and reservoir levels near the long term average.
Patrick: We continue to see strong demand for hydro generation from the traditional utility customers and increasingly are seeing interest from our corporate partners to procure more power from these assets.
Patrick: With a combined 6000 gigawatt hours available for re contracting over the next five years alone coupled with potentially higher levels of inflation.
Patrick: We expect to be able to contract. These assets at strong prices delivering improved cash flows and opportunities for investment grade up financings to support our growth.
Patrick: Our wind and solar segments performed well.
Patrick: <unk> from newly commissioned capacity and the closing of our investments in the Owen or Doug.
Patrick: Our distributed energy storage and sustainable solutions segments delivered strong performance with <unk> more than doubling from the prior year on the back of solid performance and accretive capital recycling.
Patrick: Results from our distributed generation and storage business were positively impacted by the asset improvement programs. We have been executing the continued buildup of our development pipeline and a gain on the sale of our interest in first hydro, which we completed in the first quarter.
Patrick: Westinghouse also continues to perform well benefiting from the growing demand for nuclear power.
Patrick: Turning to our financial position.
Patrick: Our balance sheet remains best in class and we ended the quarter with $4 5 billion of available liquidity providing.
Patrick: Providing us with significant flexibility to pursue growth.
Patrick: In March we Opportunistically issued $450 million Canadian dollars of 10 year notes.
Patrick: At our lowest coupon in the past five years and that our tightest new issue spreads in almost 20 years.
Patrick: <unk> was consistent with our funding strategy of conservatively accessing the investment grade corporate debt market as our underlying cash flow grows.
Patrick: Given our strong financial position and the recent volatility in the market, we have been active repurchasing our units, which we see as an accretive use of capital.
Patrick: Year to date, we have bought back approximately $35 million worth of units.
Patrick: In closing, we remain focused on delivering 12% to 15% long term total returns for our investors, while remaining disciplined allocators of capital.
Patrick: Leveraging our deep funding sources and operational capabilities to enhance and Derisk our business.
Patrick: On behalf of the board and management, we thank all of our unit holders and shareholders for their ongoing support.
Patrick: We are excited about Brookfield renewable future and look forward to updating you on our progress throughout the year.
Patrick: That concludes our formal remarks for today's call. Thank.
Patrick: Thank you for joining us this morning with that I'll pass it back to our operator for questions.
Patrick: Thank you as a reminder to ask a question. Please press star one wondering your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Our first question comes from the line of Nelson <unk> with RBC capital markets. Your line is now open.
Nelson: Great. Thanks, and good morning, everyone.
Patrick: So Conor you.
Patrick: You mentioned.
Patrick: We have limited exposure to cost inflation and tariffs.
Patrick: But in the U S. Can you just talk about the permitting situation are you still seeing some delays in the receipt of federal permits.
Patrick: And I guess, given the strong demand for power in the U S. Like are you able to start construction on a number of projects to meet demand.
Nelson: Good morning, Nelson. Thank you for the question.
Nelson: Absolutely right, we see the impact of the tariff announcements as.
Nelson: Sure.
Nelson: Not material to our business given what Ken has said the the way that we procure.
Nelson: Procured equipment already for our existing projects and our global procurement programs, our ability to have a multitude.
Nelson: Solutions to to provide equipment to two projects in the future in terms of permitting.
Nelson: A reminder to everyone on the call.
Nelson: Within the executive orders in the United States those were largely focused on offshore wind.
Nelson: And.
Nelson: Federal permits for onshore wind.
Nelson: On federal lands of which we have very little if no exposure to either we have no offshore wind exposure.
Nelson: And only a de minimis number of our projects are exposed to federal lands.
Nelson: However.
Nelson: Even some projects on private lands do require federal permits.
Nelson: You can think about these as FAA permit sort of certain endangered species permits that are regulated at the federal level.
Nelson: This does mark a <unk>.
Nelson: Very modest portion of our portfolio.
U S wind.
Nelson: <unk> is less than 10% we.
Nelson: We would put it in kind of the mid single digit portion of our development pipeline and yes.
Nelson: That process is still slower than it was prior to the executive orders.
Nelson: But we are hopeful to see that resolved in the near term and it's given its relative size, it's not going to have.
Nelson: A meaningful impact on our our business or our growth plans either way.
Nelson: Got it that's great color and then you mentioned Microsoft in the call. So.
Nelson: Microsoft The only company you have with the framework agreement and I presume.
Nelson: Other off takers.
Nelson: Getting interested or.
Nelson: In terms of some form of similar agreements, but can you just talk about.
Nelson: Your willingness or what is your approach to entering into additional framework agreements potentially with other parties.
Nelson: So Microsoft is certainly our largest framework agreement and.
Nelson: It's certainly in a scale that differentiates it from our contracting arrangements with any other individual counter party.
Nelson: Our approach to contracting our projects is always done with a focus on generating the greatest value.
Nelson: For our business and for our shareholders and the joy of the Microsoft <unk>.
Nelson: Range meant in that regard was it allowed us to significantly de risks such a significant portion of some of our development activities business plans. It allowed us to accelerate the pace of contracting a number of those assets and the way. The framework agreement works. There is no obligation to do that at any.
Nelson: A price discount.
Nelson: In terms of other type agreements.
Nelson: I would say the inbounds and the interest.
Nelson: Different corporate Counterparties and doing.
Nelson: Renewable power framework agreements with Brookfield renewable.
Nelson: Has been hot.
Nelson: Hi ever since the Microsoft agreement was announced and has only accelerated in recent months.
Nelson: And as we sit here today, we would suggest that.
Nelson: It is probably far more likely than not that we would execute similar type agreements within 2025.
Speaker Change: Okay. That's great news counter just one last question before I turn it over so I noticed that the <unk>.
Speaker Change: Asia Pacific Development pipeline has really grown in the past year is that mainly due to the <unk> acquisition.
Speaker Change: And I presume a lot of that growth is taking place.
Speaker Change: China, India, Australia, but can you just talk about.
Speaker Change: How each.
Speaker Change: Each country is developing from your perspective and is it mostly solar and batteries or is there a material amount of wind as well.
Speaker Change: Sure. So the biggest driver of that change is definitely now in.
Speaker Change: <unk> is a French headquartered company and.
Speaker Change: Prior to our private taste privatization. It was listed on the French stock exchange, but interestingly the biggest component of that business is in Australia.
Speaker Change: <unk>, Australia operation make it the largest renewable power player in the country of Australia. So that is the biggest driver of the significant increase that you are referencing.
Speaker Change: In terms of what nail and focuses on in Australia.
Speaker Change: It actually is a lot of wind and a lot of batteries and that is because similar to other markets around the world that have a very high degree of solar penetration there is a premium.
Speaker Change: On those asset classes that offer a differentiated load profile.
Speaker Change: Two solar so while it is diversified across solar wind and batteries I would say the focus of now and then Australia is largely on wind and batteries, because thats certainly where the greatest value is for a developer.
Speaker Change: Other thing I would just highlight as a point of context as are our business in India is performing very well.
Speaker Change: Not only in terms of.
Speaker Change: The existing operations and how they're performing and this was illustrated by our very successful sale of some of our mature assets in recent months, but the growth we're seeing within some of our Indian platforms, whether it be ever in whether it be clean Max.
Speaker Change: It has been very strong and that's also adding to some of the pipeline growth in Asia Pac that you're referencing.
Speaker Change: Alright, Thanks Connor.
Speaker Change: Thank you. Our next question comes from the line of Sean Stewart with TD Cowen. Your line is now open.
Sean Stewart: Thank you good morning, everyone.
Speaker Change: The first question.
Speaker Change: The $29 eight gigawatts of advanced stage capacity.
Speaker Change: Development activity you have in North America.
Speaker Change: I imagine most of that is U S. Solar can you give us a rough percentage there and of that.
Speaker Change: What percentage of the solar Youre planning to build in the U S. As the equipment already secure costs are locked in and I. Appreciate all the commentary around mitigation you guys have given you.
Speaker Change: Our scale and diversity, but can you give me some perspective on that front.
Speaker Change: Yes sure so.
Speaker Change: I'll, let Patrick Crunch, some percentages really quickly here what we're talking so we can we can answer that breakdown question for you but in terms of.
Speaker Change: Our solar pipeline in the United States in terms of what is in an advanced stage.
Speaker Change: We should leave no doubt here the absolute vast majority of it has already secured its equipment.
Speaker Change: Equipment and has done so under a construct where we're not exposed to the recent tariff announcements.
Speaker Change: Because of our approach of not locking in.
Not locking in RA.
Revenue contracts until we can also lock in.
Speaker Change: Opex and that consistent approach about how we de risked development across our platform not only in the United States in terms of what's in our advanced stage pipeline. The vast majority of it is.
Speaker Change: Fully secured from an equipment perspective in that.
Speaker Change: Your sense that you are looking for of solar U S. It's about 60%.
Speaker Change: Okay.
Speaker Change: Okay. Thanks for that.
Speaker Change: I wanted to follow up on Microsoft as well their call earlier. This week. They reiterated the disconnect between data centers to client demand.
Speaker Change: But they they have canceled or deferred some of their their data center leases and just trying to get a sense of that.
Speaker Change: The framework agreement you have with them the $10 five gigawatts with any of that be exposed to some of the <unk>.
Speaker Change: Data center activity, they might be deferring or canceling.
Speaker Change: A little bit of context on that front if you can.
Speaker Change: Please remain on your line your conference will resume momentarily once again, please <unk> your line you're comfortable will resume momentarily.
Speaker Change: Please remain on your line your conference will resume momentarily once again. Please <unk> your line your conference will resume momentarily.
Speaker Change: Speakers you may resume.
Speaker Change: Hi, there sorry about that our line dropped and I believe we got the entirety of the question.
Speaker Change: Before the line drop there but.
Speaker Change: But just in terms of Microsoft and their demand for power in data centers.
Speaker Change: Two or three things we would highlight there.
Speaker Change: One.
Speaker Change: There have been headlines about.
Speaker Change: Then relinquishing certain data center leases and things like that it is important to put that in context that is a very small number of data centers and what is.
Speaker Change: A generationally large build out the growth.
Speaker Change: They are seeing in their data center demand is still historic bye.
By any perspective, and we are very fortunate to have great interaction with Microsoft given.
Speaker Change: Are the size of our ongoing relationship and we would really just say two things one there their growth.
Speaker Change: Continues to be exceptionally robust.
Speaker Change: Any changes in terms of their demand, we would really just see that as a optimizations and a tweaking of their data center needs as they understand their demands for AI.
Going forward, it's really a tweaking around the edges as opposed to any.
Speaker Change: Change in trajectory in terms of <unk>.
Speaker Change: Growth.
Speaker Change: And therefore, the impact on our framework agreement.
Speaker Change: Nothing.
Speaker Change: If anything.
Speaker Change: We probably have more confidence in our arrangement with Microsoft than we did 12 or 15 months ago as their needs are changing.
We like to think there is no platform around the world that has that is better equipped to to adjust with them and as such we expect our partnership to only.
Speaker Change: Grow and increase beyond what was originally announced.
Speaker Change: The other thing I.
Speaker Change: I would perhaps add in.
Speaker Change: I recognize you didn't ask this question but.
Speaker Change: Whether it's the headlines about Microsoft and tweaking some of their data center demands or whether it was the headlines around deep seek earlier. This year. It is important to recognize the demand for data centers.
Speaker Change: And the power that is required to support that demand far exceeds any reasonable amount of supply that can be brought online in the short and medium term the supply demand imbalance is still so robustly in favor of those that can bring on new data center capacity in the <unk>.
Speaker Change: Power that supports it.
Speaker Change: And as such even if that demand forecast is tweaked is augmented even if it was the the.
Speaker Change: The growth trajectory was to plateau, a little bit lower the supply demand is still very much in our favor and very constructive backdrop for our business.
Connor Cheskey: That's great context, thanks, very much Connor.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Robert Hope with Scotiabank. Your line is now open.
Speaker Change: Good morning in the prepared remarks, you noted that there is an increased demand to re contract your hydro capacity from a variety of buyers can you speak to the strategy of how you want to re contract. These assets could you wait until there is a cluster of and contracted assets and then group them together.
Speaker Change: Could you see a period of time, where you'd be happy to have been a little bit more merchant in advance of a longer term contract.
Speaker Change: It's a great question and I'll try and answer it but also perhaps provide some some background context, there's a few.
Speaker Change: Exciting things happening for us within our hydro portfolio.
As Patrick mentioned.
Speaker Change: <unk> got a number of hydro contract hydro facilities coming off contract in the next few years and if we were very simply.
Just to contract those hydro's at current market rates, that's a very significant step up relative to the contracts that are coming.
Speaker Change: Two maturity, that's obviously, a very positive EBITDA bump for our business, but really where it becomes incredibly accretive as if you lock in a long term contract at a higher rate. It immediately creates some very low cost up financing opportunities for our <unk>.
Speaker Change: <unk> provides a very large injection of capital at attractive rates, let's say give or take 5% that we can turnaround and deploy into new growth and new M&A at 15%.
Speaker Change: And that is really the incredible value lever that we think is sometimes underappreciated in our business. This isn't just an increase in earnings. It's an increase in earnings that creates enough financing opportunity that allows us to fund our growth at an exceptionally.
Speaker Change: Accretive way.
Speaker Change: In terms of what we're seeing from from hydro contracting it's not just a more robust price environment in the current.
Speaker Change: <unk>.
Speaker Change: Market.
Speaker Change: Where demand for energy is very high end.
Speaker Change: Off takers are really taking in any and all approach to finding power to support their growth.
Speaker Change: Interest in our Hydro's has increased very dramatically in recent years.
Speaker Change: Some of the largest corporate buyers.
Speaker Change: Off takers of power.
Speaker Change: Three or four years ago, there were intensely focused on only wind and solar what I would say has changed in our business is now those same corporate buyers are very interested in looking at long term contracts from from our hydro's.
Speaker Change: And that is creating incremental demand so in terms of how we turn that into execution.
Speaker Change: Really no different to what we do elsewhere in our portfolio.
Speaker Change: Sure.
Speaker Change: We will look to contract those as.
Speaker Change: As efficiently and as expeditiously as possible because it pulls forward that really really attractive financing opportunity, which is an incredible value lever for our business.
Speaker Change: But in terms of.
Speaker Change: Well, we group hydro's together or do them individually, that's very much on a case by case basis, and we'll be flexible based on on.
Speaker Change: What we're seeing from the market.
Speaker Change: That's great I appreciate that.
Speaker Change: And then maybe in a different direction.
Speaker Change: In the prepared remarks, you also mentioned that the weakness in public valuations and Youre seeing increased opportunities to acquire platforms and portfolios of assets. When you take a look at the opportunity set in front of you or are these largely north American centric or are you seeing them spread across Europe.
Charter fees as well as modalities.
Speaker Change: It's a great question.
Speaker Change: I think it's fair to say, what we're seeing in terms of public market opportunities is probably primarily.
Speaker Change: North American focused but.
Speaker Change: The comment we would make there is I don't know that that specifically because some of the announcements related to tariffs and stuff is having an outsized impact on north American companies I think the impact those are happening is quite broad based I think the fact that most of the public market opportunities we see.
Speaker Change: See being in North America, as a function because thats, where most of the public companies are listed.
Speaker Change: I would say that's probably the bigger driver.
Speaker Change: The.
Speaker Change: What's interesting.
Speaker Change: Both the public market opportunity as maybe two or three points of context there.
Speaker Change: There has absolutely been a trend in recent years around market consolidation.
Speaker Change: Renewable power development is a very very capital intensive business and being entirely predicated on the capital markets to fund consistent and ongoing growth.
Speaker Change: It has always been difficult for a number of publicly listed companies and Thats difficulty has only been enhanced as the public markets have become more volatile and more uncertain.
Speaker Change: Particularly in the last six or 12 months.
Speaker Change: That is no doubt, creating an opportunity I do think that opportunity needs to be counterbalanced by the fact that.
Speaker Change: The uncertainty in the markets is undoubtedly potentially going to push transactions volumes lower for a period of time, however, if those.
Speaker Change: Is that are heavily reliant on the capital markets to fund their growth don't get relief uncertainty in the markets.
Speaker Change: Some period of time, they will need to consider strategic alternatives, and that's where the real opportunity will be.
Speaker Change: For market participants like us.
Speaker Change: The only other point I would make on this quest.
Speaker Change: Question is I think when people hear public market opportunities. They always think of take privates.
Speaker Change: But.
Speaker Change: Take for example, the transaction we did with National grid renewables just in Q1, that's a much broader and much bigger publicly traded utility that wasn't getting the appropriate value of four it's renewables business.
Speaker Change: It's public market valuation and Thats, what created an opportunity for us to buy that business. So the the current uncertainty and low valuations and public markets creates a number of opportunities, including carve outs not not only take privates.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Mark Jarvi with CIBC. Your line is now open.
Mark Jarvi: Thanks, Good morning, Ron.
Speaker Change: You talked about how well you think you're insulated and can manage some of the tariff risk someone who ultimately has to bear that cost how do you feel like the entire ecosystem can manage it where the vulnerabilities and combine a powerfully absorb inflationary pressures.
Mark Jarvi: Alright.
Mark Jarvi: Thanks, Mark and Dan.
Mark Jarvi: Yeah.
Mark Jarvi: Youre, absolutely right and I do think there is some.
Mark Jarvi: There needs to be a situation where money can still be made.
Mark Jarvi: Of course, and a lot of this does center around the tariff announcements and in particular in the United States and there is two points.
Mark Jarvi: We would make here.
Mark Jarvi: The first is.
Mark Jarvi: There have been a lot of headlines about the tariffs and a lot of very large percentages get thrown around but it's important to ground yourself in the fundamentals.
Mark Jarvi: When you look at building, our renewables project in the United States.
Mark Jarvi: Approximately 50% of the cost of that project is EPC. The majority of which is domestic labor that wasn't subject to tariffs, maybe a 3rd% to 40% is is equipment and capex.
Mark Jarvi: Only a portion of which is subject to tariffs and then the rest is other and therefore when you look at the potential for these tariff cost to pass through.
Mark Jarvi: It's not the triple digits that people suggest in terms of cost increases we view it as something more.
Mark Jarvi: Much more marginal and much more manageable something in the very low double digits maybe.
Mark Jarvi: In the teens range.
Mark Jarvi: And if that will obviously depend differently on different projects and different technologies in different regions.
Mark Jarvi: But that is a very manageable increase in capex that can be pushed through into the market to the end customer in form of off take.
Mark Jarvi: And renewables will still be the cheapest form of bulk electricity, so even with that that cost increase we are well inside the other.
Mark Jarvi: Forms of electricity production and that's what gives us confidence that there will still be very very strong demand no impact on demand and no impact on developer margins.
Mark Jarvi: The other way that we manage our portfolio is often to put the tariff risk back on the equipment supplier and the important thing to highlight here is again focusing on the U S market.
Mark Jarvi: The U S market has been one of the fastest growing highest margin and most profitable markets for equipment suppliers in recent memory and therefore in that component of call. It the value creation chain. There is certainly some cushion to absorb slightly higher.
Mark Jarvi: On cost as well.
So at this point no increase sort of concern around the health of the supply chain in terms of the ability to absorb.
Mark Jarvi: All of these costs at this point.
Speaker Change: Not at this point and maybe I'll start and hand, if there's anything you'd want to add.
Mark Jarvi: When we think about trying to simplify.
Speaker Change:
Speaker Change: The impact of.
Speaker Change: Of the.
Speaker Change: <unk>.
Speaker Change: Tariffs and the announcements theres, two or three things that we think.
Speaker Change: Are important to recognize they will lead to slightly higher costs and slightly higher power prices in the U S. But one we think it's very manageable. That's 0.1 0.2 is the one point that is often overlooked is a lot of the equipment that we use.
Speaker Change: In the United States was already subject to different duties and tariffs before let's say the liberation day announcements. So some of the increased <unk>.
Speaker Change: Tariffs that were announced.
Speaker Change: Yes, they were increased tariffs, but their increased tariffs on essentially zero percent of our volumes. So they don't actually they generate a lot of headlines, but they don't have a material impact on our business.
Speaker Change: And then maybe the last point I would make and this is where Brookfield renewable.
Speaker Change: We feel is exceptionally differentiated in a positive way versus.
Speaker Change: Please remain on your line your conference will resume momentarily. Please many of your line of conference will resume momentarily.
Speaker Change: Can you hear me.
Speaker Change: Yes.
Speaker Change: I'll take over from Conor I apologize he lost his line again I think two ways in which we are quite differentiated from others. One is we've been pushing a domestic strategy in the U S. For a long time solar has been subject to tariffs for many years and in particular against Chinese equipment that along with with other geographies as well and so we've.
Speaker Change: Worked really hard at it focusing on that domestic strategy that mitigates a significant amount of the tariff risk that we're seeing right now.
Speaker Change: With regards to our current 2025 project, we have already all the primary equipment in the country. Most of the major other incendiary equipments also in the country country and then I think thirdly, I would add from a technology point of view one of the big underappreciated things that renewables is the pace of technology growth.
Speaker Change: And if you look anywhere else in the world, we've seen massive decreases in capex with regards to that technology and so as you see the technology improving there is also some natural cost decreases as a result of those technology improvement and so there's some room there in terms of technology increases getting offset by tariffs that helped.
Speaker Change: To mitigate and integrate the technologies as well.
Speaker Change: Another question is you mentioned about.
Speaker Change: Potentially positive impact on availability of equipment and input costs outside of the U S. Can you quantify that do you think that lasts for a while do you think that gets arbitrage out in the market from the developer side.
Speaker Change: So.
Speaker Change: First of all our apologies Patrick and I clearly have a faulty line, we will get it sorted for next quarter, but.
Speaker Change: This is actually the point I think we were trying to make a great before we drop there.
Speaker Change: One of the big benefits of our business, where we're unique versus our peers is our globally diversified platform and and what tariffs do is they make.
Speaker Change: Acquiring goods from one region of the world from another region of the world more expensive, but that product needs to go somewhere and therefore, while it might make the cost of goods expensive more expensive in one region around the world. It equally has an offsetting impact of making cost of goods less X.
Speaker Change: Spence us in another area around the world.
A very readily available example in the current market due to some of the tariffs that were announced just four or five weeks ago.
Speaker Change: Solar panel costs and equipment costs, and India are probably at historic lows and that is because previously a lot of that equipment produced in India was was exported to the U S. But now it's more expensive to do so so it makes more sense to keep.
Speaker Change: A certain amount of that equipment in country, and we're certainly seeing the benefit of that for our Indian development pipeline.
Speaker Change: To address your question it would be naive and ignorant to suggest that tariffs don't create some inefficiency in the system.
Speaker Change: The global nature of our business is not a full offset.
Speaker Change: But I would say it is a very very material offset.
Tom: Okay. Thanks for the question Tom.
Speaker Change: Thank you. Our next question comes from the line of Christine Cho with Barclays. Your line is now open.
Christine Cho: Good morning.
Christine Cho: So I appreciate your comments around all the tariffs up and locking in your equipment cost, but can you just go into some detail on how contracts with your EPC. Your supplier then ppas work for the renewable projects I understand it's going to be different on a project by project basis, but high level.
Christine Cho: It sounds like you have clauses to pass through some change orders you might get on the EPC side are higher with higher PPA prices, but is it like within a certain range as just easily passed but if it falls outside that range there needs to be a more in depth negotiation and if so could that delay the timing of your projects.
Christine Cho: Also it sounds like a lot of the contract may have embedded in past tied to raw materials like steel or aluminum, but I sort of got the impression that country specific carrick tariffs such as the one brought on by the reciprocal Paris.
Christine Cho: As explicit in the contract. So can you talk about how that works.
Speaker Change: Christine and welcome to the call and thank you for the question I'll start and then I'll hand to Hana.
Hana: She is our internal expert on this and is best positioned to speak to the details of how we're seeing this play out in contracts, but from a high level. There is really two different ways that we protect our business one is.
Hana: We don't commit to projects in last week and lock in the revenue the financing and the Capex purchase.
Hana: On a fully wrap derisk basis, all at once and at which point, we are no longer exposed to changes in the tariffs or changes in the cost of that Capex and that project is largely derisked beyond the construction execution, which we are very happy to take that as one way in which case the tariff risk in that.
Hana: That scenario is really left with the supplier.
Hana: The other way we can derisk our business is is kind of de risking it using the customer.
Hana: And in that situation if under the Capex arrangement, we absorb the tariff risk with the equipment supplier. What we will look to do is put a PPA adjuster in the off take agreement such that.
Hana: If tariffs come into play and our cost of construction increases there is an offsetting increase in the PPA that preserves our development margins and our returns on the projects. So.
Hana: That's it from a high level, but perhaps I'll hand to Hannah just speaks through some of the specifics.
Hannah Lee: Yeah sure. So I think a couple of points there one with regards to your question about the country specific tariffs and whether they are incorporated in those clauses.
Hannah Lee: And I think there's a different answer for wind versus everything else. So I would agree with you that typically in wind you might see specific clauses on for example, like steel and aluminum tariffs.
Hannah Lee: The difference being in wind it has a strong domestic supply chain. That's been there for a number of years and most of the components like nacelle and towers are already domestic and so the most material risk you have in terms of price changes are with regards to this deal. So in wind I would say, yes, you are correct that those clauses tend to.
Hannah Lee: Contemplate specific tariffs.
Hannah Lee: In the remainder of our contracts, it's typically all tariffs and tariff changes from the day of contract signature onwards, then we would specifically address what happens in those contracts.
Speaker Change: With regards to what Youre question over delay and I would say not really I would say, perhaps in wind you could see a delay through the renegotiation, but that's why those clauses are so specific in the wind contracts to specifically avoided that.
Speaker Change: We had one renegotiation last week that we resolved with the supplier with a very minimal change and we resolved it within a day and a half so I would say our supplier and our supplier relationships are very strong and we do have a large global footprint with the suppliers to typically be have orders with them in a variety of geographies and so we are important to them in <unk>.
Speaker Change: The author fees around the world and despite what might a headwind in one geography, they still want our business in other geographies and so I think we tend to see an increasing amount of cooperation there as we work together to absorb any of the changes.
Speaker Change: By kind of Resourcing, our changing certain pieces of the contract we've seen really significant speed excuse me from the suppliers and the ability to execute on that.
Speaker Change: Okay.
Speaker Change: So helpful. Thank you.
Speaker Change: And then just my follow up question on the.
Speaker Change: The PPA side, you've mentioned for both carrier and India, Bangladesh, ITC removal or Hep down that you have adjusters and PPA to keep that developed margin pool.
Speaker Change: Again, I know, it's going to be different on a project by project basis, but can you just sort of give us a ballpark percentage of how much cushion. The PPA prices can go up before the off takers may be start to push back or some way to think about that.
Speaker Change: Yes sure.
Speaker Change: <unk>.
Speaker Change: It Shouldnt.
Speaker Change: Most of the adjusters that we've been seeing and we've been executing on more recently have been around tariffs.
Speaker Change: It probably perhaps to a lesser extent tax credits.
Speaker Change: Just to speak about.
Speaker Change: Tax credits and the impact on our business.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: To date, there has been no changes to the tax credit regime in the United States.
Speaker Change: As mentioned a few times in the prepared remarks.
Speaker Change: The thing that is.
Speaker Change: Really shining through about our business right now is our very large installed cash generative high quality inflation linked operating base that that really is not subject to any change in those tax credits going forward.
Speaker Change: And then you get to the point, where I think your question was going which is the most important thing for our business and the ability to continue growing and continue to preserve our development margins is that the very robust fundamental demand for power right now as long as there is a supply demand Miss.
Speaker Change: Match, where there are more off takers looking for power than there are ready to build projects. We remain quite confident that we will be able to push.
Speaker Change: Any direct or indirect increase in in construction capex through to the end customer that that can be both in the form of a tariff or in the form of a reduction of a tax credit.
Hannah Lee: And in terms of how much cushion do we have I would say more than enough and this is where I'll tie it back to something Hannah said on a previous question.
Hannah Lee: Renewables are not only the cheapest form of bulk electricity production today by a very significant margin theyre getting cheaper than the alternatives on an ongoing basis. So that cushion that we have to push costs through to the end customer or to the suppliers and still be the cheapest form of bulk electricity.
Hannah Lee: Production is widening year after year quarter after quarter, and therefore in any reasonable outcome.
Hannah Lee: We expect that we'll be able to push things through and not see change in our demand or change in our developer returns.
Hannah Lee: Thank you.
Speaker Change: Our next question comes from the line of Benjamin Pham with BMO. Your line is now open.
Benjamin Pham: Hi, Good morning, maybe a couple of questions on the <unk> acquisition I'm, just curious what gear.
Speaker Change: Near term integration priorities are.
Benjamin Pham: I think the development backlog evolves over the next couple of years.
Benjamin Pham: And is there any sort of mature assets are mature assets, you might be able to salaried and sell in our portfolio.
Speaker Change: Great question. Thanks, Ben.
Benjamin Pham: We're essentially right on all three accounts, but our business plan on nail win.
Speaker Change: Is pretty.
Speaker Change: Despite the size of the business down the fairway and what you would expect to see with us across other businesses that we acquire first thing. We wanted to do is we want to provide capital to that business to accelerate.
Speaker Change: Its development activities one thing we felt in our due diligence of the company as it had one of the most attractive most derisked and highest value development pipelines, we've seen in the industry, but as a public company it lacked access to capital to build it out as fast as they could.
Speaker Change: And we want to take the regulators off that business give the management team access to capital to accelerate that growth and we're going to look to double.
Speaker Change: The pace of development from about one gigawatt a year to two gigawatts a year within that company that's 0.1.
Speaker Change: Two I would say is we want to bring <unk> into our broader platform, where it will get some of the benefits of our scale.
Speaker Change: That can be helping them with more efficient capital structures, leveraging our financing capabilities more efficient procurement of equipment, leveraging hana and her team and also integrating them into some of our our broad based key accounts with corporate off takes like the Microsoft <unk>.
Speaker Change: Work agreement, so that would be bucket number two.
Speaker Change: And then the third bucket is one of the unbelievable things about <unk> is it comes with eight gigawatts of either operating or under construction assets. These are recently built contracted.
Speaker Change: High quality assets in very attractive markets around the world and immediately it is already underway. We will look to begin to sell some of those derisked assets to lower cost of capital buyers and use the proceeds from those sales to reinvest into accretive development.
Speaker Change: <unk> paid distributions up to Brookfield renewable so.
Speaker Change: Despite the size of the business I would say, it's actually a very similar playbook to what we've executed with our other developers around the world in the past whether it be eczema Leo we're on path or other investments we've made in recent years.
Speaker Change: Okay, that's great sounds it sounds exciting.
Speaker Change: Maybe on the you talked about Microsoft.
Speaker Change: Interest levels in data center opportunity.
Speaker Change: How do you think that.
Speaker Change: Evolves then.
Speaker Change: Going forward our geographics.
Speaker Change: On point with your discussions with them later, okay. Okay is this more of a U S.
Speaker Change: Thematic or do you think of it as more of a broader one outside of that.
Speaker Change: Okay.
Certainly in the comment we would make is it's not so much a geographic tweaking or optimization that theyre doing.
Speaker Change: It's more as their AI activities Theyre cloud activities have grown.
Speaker Change: They are themselves becoming.
Speaker Change: Please remain on your line your conference will resume momentarily. Please from any of your line your conference will resume momentarily.
Benjamin Pham: Hi, Ben we're back sorry about that as we were saying it's not so much Microsoft.
Speaker Change: Is.
Speaker Change: Adjusting their geographic demand from our perspective, it's just as they've learned more about their forecasted growth in their AI activities in their cloud activities.
Speaker Change: They are really learning that may need different types of data centers in different places, whether it's for cloud whether it's for learning whether it's for inference that determines different types of data centers have different latency needs and different types of data centers have different supply needs.
Speaker Change: That really is going to lead to different needs for power.
Speaker Change: In different places within their portfolio I would say the concentration of Buildout is still in North America and after North America, its western Europe, but the changes we are seeing are much more modest in terms of different types of plants in different different.
Speaker Change: Types of data centers in different sizes of data centers and again I tie it back to the comment from earlier, we feel very well equipped to to complement Microsoft as their needs change and and if anything they're refinement in their optimization is only going to.
Speaker Change: The partnership between the two firms to become stronger.
Speaker Change: Okay.
Speaker Change: Just one quick one more detailed on the segments sustainable solutions.
Speaker Change: Okay.
Speaker Change: Down year over year can you provide context on what's driving that and that Westinghouse.
Speaker Change: Underwriting projections, you more or less tracking thats, though.
Speaker Change: I'll start on the year over year on the sustainable solution side in the corner can maybe touch on on Westinghouse and what we're seeing there.
Speaker Change: So last year, we had.
Speaker Change: On item with respect to.
Speaker Change: Our investment within an Indian business, where we were.
Speaker Change: Successful in realizing on our premium within one of our sustainable solution financial assets that we have in that business in India and that was that was what was in the last year's figures.
Speaker Change: And then in terms of Westinghouse I'm sure as everyone can imagine on this call we're thrilled with our exposure to Westinghouse the the tailwind for nuclear.
Speaker Change: Get stronger day by day, just one given the electricity demands around the world and nuclear its ability to provide clean dispatch will baseload power at scale.
Speaker Change: The added benefit that should not go unrecognized is.
Speaker Change: In all of the headlines.
Speaker Change: Clear is a key focus of the new U S administration and as the leading.
Speaker Change: Technology.
Speaker Change: Globally in this space, but.
Speaker Change: Of U S origin, Westinghouse's, certainly the beneficiary of that in terms. The one thing I would highlight is the tremendous demand and growth we are seeing.
Speaker Change: In terms of nuclear isn't actually even showing up in westinghouse's financials, yet the financials are performing well I would say theyre, absolutely tracking to underwriting, but the thing that's exciting for US is the orders that are coming in.
Speaker Change: Or certainly above what we initially expected and that creates a very positive outlook for financials in.
Speaker Change: Future periods that will take a few years to play out, but it gives us incredible confidence.
Speaker Change: For the foundation and outlook for that business.
Speaker Change: Thank you I would now like to turn the call back over to <unk> for closing remarks.
Speaker Change: Great well. Thank you everyone for joining our call today and thank you for your interest and support of Brookfield renewable we look forward to providing you an update on our Q2 call in a few months. Thank you and have a great day.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
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