Brookfield Renewable Energy Partners (BREP) reported fourth quarter (Q4) earnings for 2014, with funds from operations (FFO) falling roughly 6 percent to $560 million from $594 million in 2013, with a $21 million drop from quarterly earnings in the same period in 2013.
In a quarterly earnings call, newly-appointed BREP senior vice president of finance, Nick Goodman, said that the lower year-over-year FFO is in line with annual plans, but below the prior year due to above-average generation in North America and higher-priced contracts in 2013.
Total quarterly generation levels rose to 5,839 gigawatt hours (GWh) from 5,770 GWh during the same period last year. Annual generation was 22,548 GWh, up from 22,222 GWh last year but lower than the 23,296 GWh long-term average.
Upside variants included strong inflows from Ontario and improved hydroelectric conditions in New England, Tennessee and North Carolina, which were partially offset by a return to normal inflows in New York, according to the quarterly report. On the downside, projections in Brazil were not met due to drought-like conditions, according to newly-appointed chief financial officer Sachin Shah.
Shah said in the earnings call that structural supply issues in Brazil are a function of consistent 30-year demand growth at 4 percent to 5 percent per year as more of the country's middle class consumes power with current supply lagging.
“I think in the last two years that has been exacerbated by very low water levels in the country, and reservoir levels have come down very, very significantly. We continue to see that theme right now [and] there is some dialogue around rationing,” Shah said. “Our view internally is that if they do what they say, which is about 5 percent rationing across the board, it would have an impact to our business in the near term from a cash flow perspective of about $15 million to $20 million.”
In the long-term, however, Shah said BREP has “great confidence and conviction in making investments in the country,” because the company believes scarcity of supply will unlock “tremendous value” in the long term for the BREP portfolio.
In 2014, the company brought online the 45-megawatt (MW) Kokish River Hydro project in British Columbia, and saw substantial completion of the 88MW Knockacummer and 37MW Killhills facilities in Ireland, with both of the latter generating revenue under long-term contracts. In total, the company acquired over 300MW of operating wind and meaningful development pipeline in Ireland during 2014, Shah said.
He also said BREP plans to bring 500 to 750 megawatts of greenfield projects into operation in the next five years.
“The recent commodity-related stress, the impact of low oil prices and the continued significant supply-side issues in our core markets are providing substantial opportunities to meaningfully grow our business,” Shah said. “As always, we look for and remain committed to value opportunities that will allow us to compound our capital at 12 percent to 15 percent over the long term.”