Brookfield Renewable Corp Q4 FY2023 earnings call

• 2023 was a record year with record funds from operations, capital deployment, and development. Deployed $9 billion of capital alongside partners, including acquisitions of Westinghouse, Deriva Energy, etc. • Developed almost 5,000 megawatts of new capacity in 2023, up from 3,500 megawatts in 2022, with advanced stage pipeline materially de-risked. • Announced over 5% increase in annual distribution to $1.42 per unit, 13th consecutive year of at least 5% annual distribution growth. • Stephen Gallagher discussed how data center demand drives clean energy needs, with Brookfield positioned to benefit from corporate demand for green power. • Wyatt Hartley mentioned Q4 FFO of $0.38, up 9% year-over-year; full-year record FFO at $1.1 billion or $1.67 per unit, 7% increase over prior year. Highlighted commissioning nearly half of new capacity in Q4, benefits from major acquisitions, and balance sheet strengthening through non-recourse financings and capital recycling.

No detailed breakdown of product segment financial performance by absolute terms and revenue contribution % provided in the transcript.

• Confident in 10% plus FFO per unit growth in 2024 and beyond. • Announced over 5% increase in annual distribution to $1.42 per unit. • Target to deploy $7 billion to $8 billion over the next 5 years. • Expect incremental annual FFO from major acquisitions closed in final 3 months of 2023 to contribute over $100 million. • Fleet reverting to long-term average generation, particularly from hydro assets, to provide uplift.

• Rising interest rates and supply chain challenges faced by the sector in 2023. • Hydrology variability affecting hydro assets, though long-term averages are consistent. • Temporary slowdown in development activity in certain markets due to market price dynamics, e.g., in Brazil due to improved hydrology levels reducing wind and solar project attractiveness.

Q: Good morning. A few questions on the corporate PPA environment. Can you give us perspective on price terms, how that’s trended?

A: What we are seeing is far more corporate offtake demand than ready-to-build projects, allowing pass-through of higher CapEx and funding costs to off-takers while preserving development margin. Contract duration: significant demand for long-term corporate contracts 15-20 years.

Q: Thanks for that detail. And then just one follow-on with respect to datacenters. I know, at least in the U.S., the location of those datacenters tends to be quite concentrated in specific regions. How do you expect that will evolve and can you give perspective on Brookfield’s ability to meet demand in those specific areas?

A: Ability to work with counterparties to co-locate new datacenters near power generation. Strong relationships with large corporate off-takers allow proactive identification of locations. Premium developers with large pipelines in core markets position Brookfield to meet near-term demand.

Q: Good morning, everyone. I wanted to stick on the datacenter theme for today. So when you’re looking at your development pipeline and the contracting strategy there, like, can you maybe add a little bit of color of how it’s moved away from single assets to more groups of assets to serve this demand? And then, when you think about the opportunity set in front of you do large developers such as yourself with large pipeline, should you disproportionately benefit versus the smaller developers in this, we’ll call it, increasing opportunity set so that, in essence, your market share should increase?

A: Corporate counterparty guarantees are from large tech companies, not individual assets. Large developers can meet the remarkable power demand of large tech companies at scale. Brookfield's global capabilities and reliability in delivering projects on time make it a preferred counterparty, leading to better contract terms.

Q: Good morning, everyone. Maybe just kind of building off your comment around interest rate stability, sort of opening up the M&A markets a little bit more, how would you frame the interest competitive dynamics around larger assets or portfolios? Is it the same as it was 6 months ago? Do you think the number of, I guess, potential interested parties have increased in the last couple of months?

A: Stabilization in interest rates has increased the number of interested parties. There's a dramatic shift in activity levels. More interested parties on both buy and sell sides, but some business models still face headwinds.

Q: Hi, good morning, everyone. One more follow-up on the datacenters. So the PPAs you’re looking at, are they typically simple take or pay contracts? Or is there some element of capacity required?

A: Most are 17-20-year take or pay inflation linked contracts. Some large tech companies seek 24/7 green power solutions, which may involve pairing wind/solar with hydros or battery storage at a premium.

Q: Thanks. Good morning, everyone. Maybe just kind of building off your comment around interest rate stability, sort of opening up the M&A markets a little bit more, how would you frame the interest competitive dynamics around larger assets or portfolios? Is it the same as it was 6 months ago? Do you think the number of, I guess, potential interested parties have increased in the last couple of months?

A: Stabilization in interest rates has increased the number of interested parties. There's a dramatic shift in activity levels. More interested parties on both buy and sell sides, but some business models still face headwinds.

Q: Great. Thanks. Good morning, everyone. I had a few questions on your development pipeline. So obviously, you’ve highlighted a lot of opportunities in the U.S., but I was just looking at your development pipeline, and South America is pretty thin. I don’t think there are any wind or utility scale projects in the advanced stage there. So I was just wondering, is there a lack of opportunities there, or are you just mainly focused on developing in North America and Europe at the moment?

A: Vast majority of development activity in Brazil traditionally, but improved hydrology levels in Brazil pushed power prices down, making new wind and solar project development less attractive due to difficulty in securing contracts at attractive levels.

Q: Great. Thanks for the color. I’ll leave it there. Thanks, Connor.

Q: Great. Thanks. Good morning, everyone. I had a few questions on your development pipeline. So obviously, you’ve highlighted a lot of opportunities in the U.S., but I was just looking at your development pipeline, and South America is pretty thin. I don’t think there are any wind or utility scale projects in the advanced stage there. So I was just wondering, is there a lack of opportunities there, or are you just mainly focused on developing in North America and Europe at the moment?

A: Vast majority of development activity in Brazil traditionally, but improved hydrology levels in Brazil pushed power prices down, making new wind and solar project development less attractive due to difficulty in securing contracts at attractive levels.

Q: Thanks. Good morning, everyone. Maybe first one for me just on the comments and the release around in-bounds that you’ve gotten in-bound calls since the Origin deal was announced. Just curious if there’s any color you can provide on what kind of opportunities you see there, maybe in terms of the nature of those deals, geographical location, the scale of those opportunities, any color on that?

A: In-bounds across North America, South America, Europe, and Australia since Origin announcement. These are large, strategic transactions involving multi-year courtship periods as they are significant decisions for companies to transition to less carbon-intensive strategies.

Q: Hi. Thank you. Good morning. I wanted to continue the topic of corporate M&A versus asset acquisitions, and I’m curious when you think about corporate deals with Brookfield Renewable, historical or even how you think about it going forward to them. What do you think are the main benefits for you specifically on the corporate transaction, especially when you talk about maybe that long drawn-off process with courtship?

A: Can differentiate using scale and operating capabilities. Corporates seek credible partners for sustainable business model transitions. Bilateral deals allow targeting attractive returns. Embedded infrastructure in leading corporates can make invested capital more de-risked or higher returning.

Q: Hi, you have Moses Sutton from BNP. How do you think about contracted versus spot power price going forward as the percent moves into the 80%s and 70%s? Would you see decreases or increases in realized price and how it hedges play a role?

A: Brookfield is mostly a 100% contracted business. Contract profile has near-term higher prices fading down over 5 years. Hydro portfolio has modest merchant component. Re-contracting to protect against resource variability. Profile likely to stay same, possibly with slight increase due to constructive power price environment.

Q: That’s all the time we have for Q&A today. I’d like to turn the call back to Connor Teskey, for closing remarks.

A: Thank you for joining, look forward to updating on Q1 results in couple months.