BROOKFIELD RENEWABLE PARTNERS L.P.
All trends are Stable. The Senior Unsecured Debentures and Notes (the Senior Notes) issued by
KEY CREDIT RATING CONSIDERATIONS
The confirmations reflect BEP's solid and stable business risk profile, deconsolidated financial metrics, and Morningstar DBRS's expectation that the Company's credit profile will remain stable over the medium term. BEP's ratings consider the (1) structural subordination of the Company's debt to project-level debt, which is significantly mitigated by the diversification of cash flow, and (2) implicit support from
BEP continues to grow its portfolio, increasing its total consolidated capacity to 32,949 megawatts (MW) in 2023 from 25,377 MW in 2022. Morningstar DBRS expects that this level of growth will continue over the medium term. Some of the growth over the medium term will be completed as part of BEP's announcement in
BEP is targeting to deliver 7,000 MW of new capacity annually through the end of the decade. Morningstar DBRS expects that most expansion will be primarily for contracted assets and that BEP will not begin constructing new projects until power purchase agreements (PPAs) have been signed and it has received fixed-price engineering, procurement, and construction and equipment supply agreements, all of which, along with the Company's development experience, should reduce project execution risks.
BEP's proportionate contracted portfolio is strong, with an average remaining contract life of 13 years on a proportionate basis. As of
Morningstar DBRS assesses BEP using a modified consolidated approach because of BEP's unique contractual arrangements and ownership structure. In this approach, Morningstar DBRS estimates cash flow available to BEP and measures it relative to corporate debt and corporate interest expense, as well as preferred dividends. Using this approach Morningstar DBRS considers BEP's 2023 and last 12 months ending 2024 metrics to be strong. Morningstar DBRS notes that BEP's corporate liquidity remains strong with approximately
CREDIT RATING DRIVERS
Morningstar DBRS does not view a positive rating as likely in the medium term; however, Morningstar DBRS may take a positive rating action if BEP materially improves its business risk and financial risk profile. Morningstar DBRS may take a negative rating action if BEP's business risk profile deteriorates due to a material increase in merchant exposure or financial risk profile with modified consolidated cash flow to debt below 20% on a sustained basis.
EARNINGS OUTLOOK
Earnings increased in 2023 from 2022 reflecting increased growth in BEP's portfolio, partially offset by recently completed assets sales. Morningstar DBRS expects earnings to increase in 2024 due to growth in asset base and from increased contract prices. Morningstar DBRS notes BEP's largely contracted portfolio provides BEP with high earnings certainty over the medium term and should be further bolstered by the recently announced renewable energy framework agreement with Microsoft.
FINANCIAL OUTLOOK
Morningstar DBRS expects that most of BEP's growth will be funded with nonrecourse financing and contributions from noncontrolling interest partners, thus limiting the Company's economic exposure to any specific growth project. Morningstar DBRS expects BEP to prudently fund its contributions to these growth assets through a combination of debt, upsizing projects with nonrecourse debt, and capital recycling initiatives in a credit supportive manner.
Morningstar DBRS also expects BEP to continue make prudent investments in transition asset classes, such as carbon capture and storage, recycling, and green hydrogen, with experienced partners. Morningstar DBRS views these transition assets as having higher business and technology risk profiles than the Company's renewable generation business. Morningstar DBRS does not expect the transition assets to represent a significant portion of BEP's earnings over the medium to long term.
CREDIT RATING RATIONALE
BEP's credit ratings are underpinned by the Company's (1) long-term contracts and diverse solid-credit counterparties, (2) diversified and large generation asset portfolio, and (3) nonrecourse debt financing strategy and strong modified consolidated credit metrics. Credit ratings are constrained by (1) expansion risk and (2) refinancing risk and recontracting risk at project level.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (
BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of BRA Factors
In the analysis of BEP, the BRA factors were considered in the order of importance contemplated in the methodology.
(B) Weighting of FRA Factors
In the analysis of BEP, the FRA factors were considered in the order of importance contemplated in the methodology.
(C) Weighting of the BRA and the FRA
In the analysis of BEP, the BRA carries greater weight than the FRA.
Notes:
All figures are in Canadian dollars unless otherwise noted.
Morningstar DBRS applied the following principal methodology:
Global Methodology for Rating Companies in the
Morningstar DBRS credit ratings may use of one or more sections of the Morningstar DBRS Global Corporate Criteria (
The following criteria has also been applied:
Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (
The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.
Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
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