Brookfield Renewable Energy Partners L.P.
ANNUAL REPORT
2011
OUR OPERATIONS
We operate our facilities through three regional operating centers in, the United States, Brazil and Canada
which are designed to maintain, and where possible, enhance the value of our assets, while cultivating positive
relations with local stakeholders. We own and manage 170 hydroelectric generating stations, three wind
facilities, and two natural gas-fired plants. Overall, the assets we own or manage have 4,536 MW of generating
capacity and annual generation of 16,849 GWh based on long-term averages. The table below outlines our
portfolio as at December 31, 2011:
Markets
Hydroelectric generation
United States
Canada
Brazil (3), (4)
Wind energy(4)
Other
Rivers
Generating
Stations
Generating
Units
Capacity
(MW)
LTA(2)
(GWh)
Storage
(GWh)
26
18
23
67
−
−
67
103
32
35
170
3
2
175
292
72
79
443
220
6
669
1,966
1,323
626
6,745
2,146
5,061
1,261
3,440
N/A
3,915
15,246
3,407
406
215
1,197
406
−
−
4,536
(1)
16,849
3,407
(1) Total net capacity including our share of equity-accounted investments is 4,166 MW.
(2)
Long-term average (“LTA”) is the expected average level of generation as obtained from the results of a simulation based on historical
inflow data, performed over a period of typically 30 years.
(3) Brazil hydro assets benefit from a market framework which levelizes generation across producers.
(4)
Includes annualized LTA for facilities acquired or commissioned during the year.
LETTER TO UNITHOLDERS
We are pleased to report to you our financial and operating results for the first time following the launch of
Brookfield Renewable Energy Partners, which was created from the strategic combination of Brookfield
Renewable Power Fund and the renewable power assets of Brookfield Renewable Power Inc. in the fourth
quarter of 2011 following the approval of investors, who voted overwhelmingly in favour.
As one of the world’s largest, publicly-traded pure-play renewable portfolios, our business is distinguished from
other energy producers by virtue of its truly unique portfolio focused on hydroelectricity. With nearly 5,000 MW
of capacity, 86 percent of which is hydroelectric in nature, our portfolio is firmly centered on the longest-lived
and most value-added power generation technology. Our high-quality wind assets share many of the same
positive attributes and form a strong complement to our hydroelectric assets.
Our many longer-term unitholders know that the Brookfield Renewable Power Fund was a highly successful
income trust with an average annual return exceeding 15% since its inception in 1999. Over that time, the Fund
also delivered a consistent and growing stream of cash distributions to unitholders. We expect that Brookfield
Renewable will enjoy enhanced growth prospects, greater access to capital and improved liquidity; however its
core strategy remains the same – to deliver stable and growing distributions to unitholders from a high-quality
portfolio of renewable power assets. Our cash flows are supported by a virtually fully-contracted portfolio with
power purchase agreements averaging 24 years in duration, among the longest in the industry.
Operating and Financial Results
In 2011, total generation across the portfolio was 15,877 gigawatt hours (GWh) or 10% higher than 14,480
GWh in the prior year and 3% lower than the long-term average of 16,297 GWh. The improvement reflects
stronger hydrological conditions in Eastern Canada and the Northeastern United States. Although hydrology did
return to more normalized levels, it was modestly below the long-term average due to below-average inflows in
Eastern Canada. Helping to offset these conditions were record-breaking inflows for our facilities in the
Northeastern United States. Energy sales in Brazil were in line with expectations. Generation from our wind
facilities also contributed to the increase due primarily to a full year’s contribution from our Ontario wind facility
commissioned in September 2010.
As our long-term investors know, hydrology will vary from one period to the next, and is one of the few but
important variable factors in our results. Over time, we expect our facilities will continue to produce in line with
their long-term averages, which have proven to be reliable indicators of performance. Moreover, the added
geographic and technological diversification resulting from the Combination should lead to less variability in our
annual results when measured against the long-term average.
Growth Developments
We have made great strides across all areas of the business since the Combination was completed just over
three months ago. In terms of growth initiatives, we recently completed construction of four renewable power
facilities — two hydroelectric stations and two wind farms — with a combined 280 MW of capacity. These new
assets are located in attractive markets with strong long-term fundamentals.
With our institutional partners, we also recently acquired new wind generation assets in California, including a
150 MW wind farm adjacent to our Coram wind project in the Tehachapi region. This new facility entered
commercial operation in the first quarter and comes with a 24-year power purchase agreement with Southern
California Edison. We also acquired the remaining 50% stake previously held by our partner in Coram, along
with a further 22 MW of additional operating wind generation capacity.
In Brazil, we continue to make excellent progress on the construction of two hydro facilities with a combined
capacity of 48 MW. We expect these to enter commercial operations in early 2013.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 1
Distribution Profile and Increase
As we have previously indicated, we will maintain a distribution policy that aims to pay out approximately 60%
to 70% of funds from operations, while targeting a long-term distribution growth rate target in the range of 3% to
5% annually. We are pleased to say that we are well on our way to meeting this target for 2012, having recently
announced an increase in unitholder distributions to $1.38 per unit on an annualized basis, an increase of three
cents per unit per year. This is the result of the solid progress in our growth plans and the corresponding
positive impact on our cash flows, and follows a distribution increase, relative to the Fund’s prior distributions,
that was implemented upon the closing of the Combination. The current distribution rate is approximately 6%
higher than it was just prior to the launch of Brookfield Renewable.
Looking Ahead to 2012
We are extremely well-positioned to achieve our objectives in 2012 and beyond. The quality and stability of our
assets, combined with a fully contracted portfolio, provides a high degree of predictability in our cash flows,
which in turn supports stable distributions to unitholders.
From a growth point of view, we believe that our solid financial position, low cost of capital and continuing
strong relationship with Brookfield Asset Management places us in a very strong competitive position. Even
without further debt capacity or equity issuance, we expect to have approximately US$100 million of available
cash each year to further invest in accretive projects or acquisitions.
In addition to acquisitions such as those we recently completed, we are making progress on the strategic
development of our own 2,000 MW project pipeline. During the fourth quarter, we received the environmental
assessment certificate for our hydroelectric project in British Columbia. We expect construction to begin this
year, subject to the successful completion of remaining commercial agreements. Once complete, the 45 MW
facility on the Kokish River is expected to generate enough electricity annually to power approximately 15,000
homes.
Other milestones we expect to achieve in the coming months include a listing of our units on the New York
Stock Exchange and the implementation of our recently established distribution reinvestment plan. We believe
that we have all of the elements needed to become the premium vehicle for investors seeking a proven leader
in the renewable power sector, and that these initiatives will make it easier for unitholders to participate in our
growth over time.
We are grateful for your continued support and look forward to updating you on our progress next quarter.
Sincerely,
Richard Legault
Chief Executive Officer
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 2
Management’s Discussion and Analysis
For the years ended December 31, 2011 and 2010
BUSINESS OVERVIEW
Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) is an owner and operator of a diversified
portfolio of high quality assets that produce electricity from renewable resources and has evolved into one of
the world’s largest listed pure-play renewable power businesses.
Our assets generate high quality, stable cash flows derived from a virtually fully contracted portfolio. Our
business model is simple: utilize our global reach to identify and acquire high quality renewable power assets at
favourable valuations, finance them on a long-term, low-risk basis, and enhance the cash flows and values of
these assets using our experienced operating teams to earn reliable, attractive, long-term total returns for the
benefit of our shareholders.
One of the largest, listed pure-play renewable platforms. We own one of the world’s largest, publicly-traded,
pure-play renewable power portfolios with close to $14 billion in power assets, more than 4,500 MW of installed
capacity, and long-term average generation of over 16,800 GWh annually. Our portfolio includes 170
hydroelectric generating stations on 67 river systems and three wind facilities, diversified across ten power
markets in the United States, Canada and Brazil.
Generation by Technology
Generation by Market
Other
4%
Wind
10%
Hydro
86%
Brazil
20%
U.S.
40%
Canada
40%
Focus on attractive hydroelectric asset class. Our assets are predominantly hydroelectric and represent one
of the longest life, lowest cost and most environmentally preferred forms of power generation. Our North
American assets have the ability to store water in reservoirs up to approximately 38% of our annual generation.
Our assets in Brazil benefit from a framework that exists in the country to levelize generation risk across
producers. This ability to store water and have levelized generation in Brazil, provides partial protection against
short-term changes in water supply. As a result of our scale and the quality of our assets, we are competitively
positioned compared to other listed renewable power platforms, providing significant scarcity value to investors.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 3
Well positioned for global growth mandate. Over the last 10 years we have acquired or developed over 20
hydroelectric assets totaling approximately 3,000 MW. We have strong organic growth potential with a 2,000
MW development pipeline spread across each of our operating jurisdictions. Our net asset value in renewable
power has grown from approximately $900 million in 1999 to over $8 billion today, representing a 20%
annualized growth rate. We are able to acquire and develop assets due to our established operating and
project development teams, strategic relationship with Brookfield Asset Management and our strong liquidity
and capitalization profile.
Attractive distribution profile. We pursue a strategy which provides for highly stable, predictable cash flows
sourced from predominantly long-life hydroelectric assets ensuring an attractive distribution yield. We target a
distribution payout ratio in the range of approximately 60% to 70% of funds from operations and pursue a long-
term distribution growth rate target in the range of 3% to 5% annually.
Stable, high quality cash flows with attractive long-term value for limited partnership unitholders. We
intend to maintain a highly stable, predictable cash flow profile sourced from a diversified portfolio of low
operating cost, long-life hydroelectric and wind power assets that sell electricity under long-term, fixed price
contracts with creditworthy counterparties. Virtually all of our generation output is sold pursuant to power
purchase agreements (“PPAs”), to public power authorities, load-serving utilities, and industrial users or to
affiliates of Brookfield Asset Management. The PPAs for our assets have a weighted-average remaining
duration of 24 years, providing long-term cash flow stability.
Strong financial profile. With close to $14 billion of power generating assets and a conservative leverage
profile, consolidated debt-to-capitalization is approximately 40%. Our liquidity position remains strong with over
$450 million cash and available bank lines. Approximately 80% of our obligations are non-recourse and our
corporate debt has a weighted-average term of 10 years.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 4
SUCCESSFUL COMBINATION OF OUR POWER BUSINESS
On November 28, 2011, we announced the completion of the strategic combination (the “Combination”) of the
renewable power assets of Brookfield Renewable Power Inc. (“BRPI”) and Brookfield Renewable Power Fund
(the “Fund”) to launch Brookfield Renewable, a publicly-traded limited partnership. Public unitholders of the
Fund received one non-voting limited partnership unit of Brookfield Renewable in exchange for each trust unit
of the Fund held, and the Fund was wound up.
The business activities of Brookfield Renewable consist of owning a portfolio of renewable power generating
facilities in the United States, Brazil and Canada, which have historically been held as part of the power
generating operations of BRPI and the Fund.
As at the date of this report, Brookfield Asset Management has an approximate 68% limited partnership
interest, on a fully-exchanged basis, and all general partnership units totaling a 0.01% general partnership
interest in Brookfield Renewable while the remaining 32% is held by the public. Since November 30, 2011,
Brookfield Renewable’s limited partnership units have traded on the Toronto Stock Exchange (“TSX”) under the
symbol “BEP.UN”.
BASIS OF PRESENTATION
This Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2011 is provided as of
March 23, 2012. Unless the context indicates or requires otherwise, the terms “Brookfield Renewable”, “we”,
“us”, and “our” mean Brookfield Renewable Energy Partners, L.P.
Brookfield Renewable’s financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”), which require estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities as at the date of the financial statements and the amounts of
revenue and expense during the reporting periods.
Certain comparative figures have been reclassified to conform with the current year’s presentation.
Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 5
PERFORMANCE MEASUREMENT
Although we monitor and analyze our financial performance using a number of indicators, our primary business
objective of generating reliable and growing cash flow is monitored and analyzed using earnings before interest,
taxes, depreciation and amortization (“EBITDA”), funds from operations (“FFO”) and net asset value. As a
result of the Combination, we have also presented these same measurements on a pro forma basis. While net
income is calculated in accordance with IFRS, EBITDA, FFO, and net asset value do not have any
standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures
presented by other companies. We provide additional information on how we determine EBITDA, FFO, and net
asset value and where applicable, we provide a reconciliation to net income.
NET INCOME
Net income is calculated in accordance with IFRS.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA)
EBITDA means 100% of revenues less direct costs (including energy marketing costs), plus our share of cash
earnings from equity-accounted investments, before interest, current income taxes, depreciation, amortization
and management service costs.
FUNDS FROM OPERATIONS (FFO)
FFO is defined as EBITDA less interest, current income taxes and management service costs, which is then
adjusted for non-controlling interests.
NET ASSET VALUE
Net asset value represents our capital at carrying value, on a pre-tax basis prepared in accordance with the
procedures and assumptions utilized to prepare the Brookfield Renewable’s IFRS financial statements,
adjusted to reflect asset values not otherwise recognized under IFRS.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 6
SUMMARY FINANCIAL REVIEW
In order to provide a full financial understanding of the Combination, we have prepared financial results on the
following basis:
PRO FORMA BASIS
We are providing pro forma financial results that include the impact of the Combination, new contracts and
contract amendments, management service agreements along with the tax impacts resulting from the
Combination, as if each had occurred as of January 1, 2010. The unaudited pro forma financial results have
been prepared based upon currently available information and assumptions deemed appropriate by
management. The pro forma financial results give effect to the following transactions:
Items affecting future cash flows:
amendment and execution of PPAs; and
execution of management service agreements.
Items not affecting cash flows:
changes in the fair value of property, plant and equipment due to the change in power purchase
agreements and the resulting change in depreciation expense;
change in accounting policy for construction work-in-progress to include this asset type in the
assets that are revalued when appropriate criterion are satisfied;
settlement of intercompany balances as at the date of the transaction; and
elimination of the Fund unit liability and related unrealized gain or loss on remeasurement.
Additional information can be found on page 48.
The unaudited pro forma financial results are provided for information purposes only and may not be indicative
of the results that would have occurred had the above transaction been affected on the date indicated. The
accounting for certain of the Combination transactions required the determination of fair value estimates at the
date of the transaction on November 28, 2011 rather than the date assumed in the determination of the pro
forma results of January 1, 2010.
CONSOLIDATED BASIS
This Combination does not represent a business combination under IFRS 3 Business Combinations as it
represents a reorganization of entities under common control of Brookfield Asset Management. Accordingly,
the consolidated financial statements of Brookfield Renewable are presented to reflect such continuing control
and no adjustments were made to reflect fair values or to recognize any new assets or liabilities, as a result of
the Combination. Brookfield Renewable’s consolidated statements of financial position, results of operations
and cash flows are presented as if these arrangements had been in place from the time that the operations
were originally acquired by Brookfield Asset Management. For periods prior to November 28, 2011, the financial
information for Brookfield Renewable represents the combined financial information for the Brookfield
Renewable Power Division (the “Division”) a division of Brookfield Asset Management. Transactions entered
into as part of the Combination are accounted for effective November 28, 2011.
Effective December 2011, Brookfield Renewable entered into voting arrangements with various affiliates of
Brookfield Asset Management, whereby Brookfield Renewable gained control of the entities that own U.S. and
Brazil renewable power generating operations (the “Voting Arrangements”). The Voting Arrangements provide
Brookfield Renewable with all of the voting rights to elect the Boards of Directors of the relevant entities and
therefore provides Brookfield Renewable with control. Accordingly, Brookfield Renewable consolidates the
accounts of these entities.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 7
The Combination and Voting Arrangements do not represent business combinations under IFRS 3, Business
Combinations (“IFRS 3R”), as all combining businesses are ultimately controlled by Brookfield Asset
Management both before and after the transactions were completed. Brookfield Renewable accounts for these
reorganizations of entities under common control in a manner similar to a pooling of interest which requires the
presentation of pre-Combination and Voting Arrangement financial information as if the transactions had always
been in place. Refer to Note 2(o) (ii) in the Consolidated Financial statements for Brookfield Renewable’s policy
on accounting for transactions under common control.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 8
OVERVIEW OF PERFORMANCE ON A PRO FORMA BASIS
Generation (GWh)
Variance of Results
Actual Generation
LTA Generation
Actual vs. LTA
Actual vs.
Prior year
2011
2010
2011
2010
2011
2010
2011
7,150
4,056
3,307
6,651
3,557
3,206
6,811
5,061
3,307
6,727
5,076
3,206
339
(76)
(1,005)
(1,519)
-
-
499
499
101
14,513
13,414
15,179
15,009
(666)
(1,595)
1,099
662
702
499
567
712
406
506
372
(50)
296
(7)
195
15,877
14,480
16,297
15,887
(420)
(1,407)
(3)%
(9)%
163
135
1,397
10%
FOR THE YEARS ENDED DECEMBER 31
Hydroelectric generation
United States
Canada
Brazil (1)
Wind energy
Other
Total generation (2)
% variance
(1) Assured generation levels.
(2) Actual and long-term average generation includes 100% of generation from equity-accounted and long-term investments.
We compare actual generation levels against the expected long-term average to highlight the impact of one of
the few but important factors that affect the variability of our business results. In the short-term, we recognize
that hydrology will vary from one period to the next, over time however, we expect our facilities will continue to
produce in line with their long-term averages, which have proven to be reliable indicators of performance.
Accordingly, we present our generation and the corresponding EBITDA and FFO results on both an actual
generation and a long-term average basis.
Generation levels in 2011 improved from the prior year, due in particular to heavy rainfall during the summer in
the Northeast United States. Hydrology conditions in Eastern Canada continued to underperform during the
year; however we did experience an improvement over the record dry conditions of 2010. Energy sales from
our hydroelectric assets in Brazil were in line with plan and consistent with the framework that exists to levelize
generation across power producers in that market. Overall, generation from our hydro portfolio was 1,099 GWh
above 2010 levels and 666 GWh below long-term average (4% below long-term average) during the year.
Wind production was below long-term average during the year but ahead of the prior year as we had the full
year benefit of wind facilities commissioned in late 2010. Entering the first quarter of 2012, reservoir levels are
7% above long-term average and with a fully contracted portfolio we are well positioned to deliver results in line
with plans for the balance of the year.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 9
EBITDA and FFO on a pro forma basis
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh)
Revenues (1)
Other income
Direct operating costs
EBITDA
Interest expense - borrowings
Current income taxes
Management service costs
Non-controlling interests
Funds from operations (FFO) (2)
Results under actual
generation
Results under LTA
generation
2011
2010
2011
2010
15,877
14,480
16,297
15,887
$ 1,332
$ 1,187
$ 1,392
$ 1,287
19
(425)
926
(411)
(22)
(22)
(52)
12
(346)
853
(404)
(32)
(21)
(46)
19
(425)
986
(411)
(22)
(22)
(50)
12
(346)
953
(404)
(32)
(21)
(46)
$ 419
$ 350
$ 481
$ 450
Includes share of cash earnings from equity-accounted and long-term investments.
(1)
(2) FFO is defined as EBITDA less interest, current income taxes and management service costs, which is then adjusted for non-
controlling interests.
Revenues on a pro forma basis totaled $1,332 million or $84 per MWh at the end of 2011, representing a year-
over-year increase of $145 million or 11%. Approximately $21 million of the increase is attributable to the
acquisition of a 30 MW hydroelectric facility in Brazil in June and the completion of a 166 MW wind facility in
Eastern Canada in November. The balance is due to inflation based escalation included in our power purchase
arrangements along with an increase in overall generation levels.
Pro forma EBITDA in 2011 increased year-over-year by $73 million or 9% to $926 million from $853 million.
EBITDA margins on our hydroelectric facilities approximate 75%. Both revenues and direct operating costs
were in line with expectations ensuring stable operating margins.
Interest costs reflect the cost related to approximately $1.1 billion of corporate debt and $4.2 billion of non-
recourse asset-specific debt. Our financings are predominantly fixed-rate and issued in local currencies
providing protection to our equity capital against changes in foreign exchange and interest rates movements. In
February of 2012 we issued C$400 million of additional corporate debt with a 10- year term at 4.79%.
Proceeds from the issuance were used to repay higher yielding, shorter duration debt resulting in a lower cost
of capital for Brookfield Renewable and an improved debt maturity profile.
Management service costs reflect a base fee of $20 million annually plus 1.25% on growth in our total
capitalization.
FFO, on a pro forma basis, increased year-over-year by $69 million or 20% to $419 million from $350 million.
The increase is consistent with the growth in our portfolio described above and the overall improvement in
generation.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 10
CONTRACT PROFILE
Our portfolio is virtually fully contracted with minimal expiries over the next two years. We operate the business
on a largely contracted basis to ensure a high degree of predictability in funds from operations. We do
however maintain a long-term view that electricity prices and the demand for electricity from renewable sources
will rise due to a growing level of acceptance around climate change and the legislated requirements in some
areas to diversify away from thermal generation.
As at December 31, 2011, we have contracted virtually all of our 2012 generation at an average price of $89
per MWh. The following table sets out our contracts over the next five years for generation from our existing
facilities assuming long-term average hydrology:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
2012
2013
2014
2015
2016
Generation (GWh)
Contracted(1):
Hydroelectric
Wind
Other
Uncontracted
LTA(2)
15,096
15,263
14,589
13,954
13,836
1,606
1,681
1,681
1,681
1,681
521
398
134
-
-
17,223
17,342
16,404
15,635
15,517
252
424
1,053
1,689
1,806
17,475
17,766
17,457
17,324
17,323
Contracted generation – as at December 31, 2011
% of total generation
99%
98%
94%
90%
90%
Contracted revenue
$ 1,536
$ 1,506
$ 1,400
$ 1,338
$ 1,331
Price per MWh
$ 89
$ 87
$ 85 $ 86
$ 86
(1) Assets under construction/development are included in the contract profile only if LTA and pricing details are available and
commercial operation date is imminent.
Increase in generation over 2011 represents the full year contribution of completed projects.
(2)
We have a predictable revenue profile driven by both long-term PPAs with a weighted average remaining
duration of 24 years, combined with a well-diversified generation portfolio that reduces variability in our
generation volumes. The majority of our long-term PPAs are with investment-grade rated or creditworthy
counterparties such as Brookfield Asset Management and its subsidiaries (55%), government-owned utilities or
power authorities (26%), or industrial power users (11%).
Over the next three years we have on average approximately 575 GWh of energy annually which is not
contracted. All of this power can be sold into the current wholesale or bilateral market, however we intend to
maintain flexibility in recontracting to ensure we achieve the most optimal pricing.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 11
NET ASSET VALUE
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Property, plant and equipment, at fair value
Hydroelectric (2)
Wind
Other
Development assets
Working capital and other, net
Long-term debt and credit facilities
Participating non-controlling interests
Preferred equity
Net asset value (3)
Total
Per Share
2011
2010 (1)
2011
2010 (1)
$ 12,463
1,480
86
$ 11,517
564
82
14,029
378
380
(5,519)
(629)
(241)
12,163
492
221
(4,994)
(206)
(252)
$ 47.47
5.64
0.33
53.44
1.44
1.45
(21.02)
(2.40)
(0.92)
$ 43.87
2.15
0.31
46.33
1.87
0.84
(19.01)
(0.78)
(0.96)
$ 8,398
$ 7,424
$ 31.99
$ 28.29
Includes amounts from equity-accounted and long-term investments for 2011: $405 million and 2010: $268 million.
(1) Figures are represented on a pro forma basis
(2)
(3) Net asset value represents our capital at carrying value, on a pre-tax basis prepared in accordance with the procedures and
assumptions utilized to prepare the Brookfield Renewable’s IFRS financial statements, adjusted to reflect asset values not otherwise
recognized under IFRS.
The net asset value of Brookfield Renewable totaled $8.4 billion or $32 per share at December 31, 2011
compared to $7.4 billion in the prior year. Values increased from 2010 by 13% due to lower discount rates and
the completion of plants previously under construction, partially offset by lower foreign exchange rates in
Canada and Brazil.
Net asset value in our property, plant and equipment increased to $14 billion. The increase over the prior year
is in part due to the acquisition of a 30 MW hydroelectric asset in Brazil, the completion of two hydroelectric
development assets totaling 15 MW in the United States and the completion of a 166 MW wind facility in
Eastern Canada which increased asset values by $440 million. Lower interest rates and the corresponding
reduction in discount rates applied to future cash flows increased the value of our plants by $1.3 billion. In
addition, approximately 275 MW of hydroelectric and wind facilities in our portfolio have been acquired with
institutional partners and are consolidated into our operating results. Our net ownership of these facilities
approximates 25% and accordingly we have recognized non-controlling interests in relation to these assets and
reduced FFO by the proportionate share of cash-earnings attributable to our partners.
Development assets include two wind and two hydroelectric projects currently under construction along with
early stage costs associated with a 45 MW hydroelectric facility in Western Canada which we expect to
commence construction in the second quarter of 2012. We record development assets at an estimate of fair
value, where certain criteria are met, based on the value expected on completion, less the costs remaining to
complete the project.
Borrowings increased during the year consistent with the growth of our asset base as overall debt to
capitalization was largely unchanged. At the end of the year, corporate borrowings totaled $1,322 million
(2010: $1,152 million) comprised of $1,071 million of corporate debt (2010: $1,096 million) and $251 million
drawn on our bank lines (2010: $56 million). We have a three-year $600 million bank facility which we typically
use to fund short-term development costs and changes in working capital requirements.
The assets deployed in our renewable power operations are revalued on an annual basis.
The valuations of our property, plant and equipment reflect long-term interest rates at the corresponding
valuation date. Interest rates declined in all of the markets we operate in during 2011 due to the general
weakness of the global economy and the continued flight of capital into government securities. Assumptions
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 12
used to determine our weighted-average cost of capital, other than market interest rates were largely
unchanged. We value our assets based on discounting cash flows over a 20-year period and key assumptions
utilized in 2011 and 2010 were as follows:
Discount rate
Terminal capitalization rate
Exit date
United States
Canada
Brazil
2011
5.6%
7.2%
2031
2010
7.4%
7.9%
2030
2011
5.4%
6.8%
2031
2010
6.4%
7.1%
2030
2011
9.9%
N/A
2029
2010
10.8%
N/A
2029
A 50 bps change in discount rates would have approximately $1 billion impact on our net asset value. A further
discussion on the revaluation of our property, plant and equipment is presented on page 31.
GROWTH INITIATIVES
Our manager has a full scale, globally focused M&A capability which has resulted in tremendous growth of our
business over the last ten years. During 2011, we acquired, with our institutional partners, late stage wind
development assets with long-term power purchase agreements which are currently being constructed, and we
acquired and integrated a fully contracted 30 MW hydroelectric facility in the southeast region of Brazil.
Including the acquired development assets, we had four hydroelectric and three wind projects totaling more
than 440 MW under construction during 2011. By the end of the year we completed construction of two
hydroelectric projects and one wind facility on time and budget and all three have been integrated into our
operations. We secured a 20-year government backed financing for our New Hampshire wind facility with a
3.75% interest rate. The remaining projects under development are on schedule and budget and are expected
to be completed over the next year. We expect to start construction of a 45 MW hydroelectric facility in Western
Canada in the second quarter of this year subject to finalizing construction agreements and receiving final
permits which we expect to receive in the ordinary course. The project has a 40-year PPA with the government
of British Columbia and is expected to be accretive to our overall cash flows.
In addition to the projects referenced above, we have a 2,000 MW development pipeline comprised of primarily
early stage hydroelectric, wind and pump storage opportunities which we may build out over the longer term
subject to project returns and relative opportunities. The development portfolio was transferred to Brookfield
Renewable by our manager, Brookfield Asset Management, at no up-front cost. To the extent we construct or
sell any project in the 2,000 MW pipeline, we are required to reimburse Brookfield Asset Management for its
costs incurred prior to our ownership plus 50% of any profit over our cost of capital.
With our institutional partners, we also recently acquired new wind generation assets in California, including a
150 MW wind farm adjacent to our Coram wind project in the Tehachapi region. This new facility entered
commercial operation in the first quarter and comes with a 24-year power purchase agreement with Southern
California Edison. We also acquired the remaining 50% stake previously held by our partner in Coram, along
with 22 MW of additional operating wind generation capacity.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 13
LIQUIDITY AND CAPITALIZATION
We operate with sufficient liquidity, which along with ongoing cash flow from operations enable us to fund
growth initiatives, capital expenditures, distributions and to finance the business on an investment grade basis.
As part of our financing strategy, we raise the majority of our debt capital in the form of asset-specific, non-
recourse borrowings at our subsidiaries. As at December 31, 2011 corporate borrowings remained unchanged
from the previous year whereas our subsidiary borrowings increased due to additional borrowings for new
assets in our Canadian and Brazilian portfolios. Our debt to capitalization ratio was 37% at December 31, 2011,
which was substantially unchanged from December 31, 2010.
Capitalization
The following table summarizes our capitalization using book values:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Credit facilities
Corporate borrowings
Subsidiary borrowings
Long-term indebtedness
Participating non-controlling interests
Preferred equity
Net asset value
Total capitalization
Debt to total capitalization
(1)
Information for 2010 was prepared on a pro forma basis.
2011
2010 (1)
$
251 $
64
1,071
4,197
5,519
629
241
1,096
3,834
4,994
206
252
8,398
7,424
$
14,787 $
12,876
37%
39%
We have completed over $1 billion in financings since the beginning of 2011 to the date of this report as a result
of financing growth initiatives and refinancing existing debt. In February 2012, we issued C$400 million of 10
year notes, bearing interest at 4.79% per annum. The funds were used to reduce shorter duration borrowings,
extending term on our overall maturity profile and reducing our overall cost of capital.
Available liquidity
Total liquidity is comprised of available cash and the unutilized portion of committed bank lines. We currently
have over $450 million of available liquidity which provides us with significant cushion to fund ongoing growth
and capital requirements and to protect against short term fluctuations in generation.
AS AT DECEMBER 31
(MILLIONS)
Cash and equivalents
Available portion of bank facility
2011
2010
$ 267
$ 188
190
102
$ 457
$ 290
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 14
Corporate and subsidiary borrowings
The following table summarizes our debt maturities over the next three years:
AS AT DECEMBER 31
(MILLIONS)
Corporate borrowings
Subsidiary borrowings - consolidated
Subsidiary borrowings – total (1)
2012
2013
2014
-
-
-
$ 650
$ 741
$ 285
$ 769
$ 742
$ 286
(1)
Includes borrowings from equity-accounted and long-term investments
We have no corporate borrowings maturing over the next three years. Subsidiary borrowings maturing in 2012
include $260 million on our Eastern Canadian wind assets, $120 million associated with our pumped storage
facility in New England, which we own 50% with a partner, and $200 million attributed to our hydroelectric
facilities in New York. We expect to refinance all of the upcoming maturities in the normal course.
The overall maturity profile and average interest rates associated with corporate and subsidiary borrowings are
as follows:
AS AT DECEMBER 31
Corporate borrowings
Subsidiary borrowings
Average term (years)
Average interest rate
2011
9.6
10.0
2010
10.6
11.1
2011
2010
5.5
7.5
5.5
7.7
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 15
OVERVIEW OF PERFORMANCE ON A CONSOLIDATED BASIS
Generation, EBITDA and FFO
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) (1)
Revenues (2)
Other income
Direct operating costs
EBITDA
Interest expense - borrowings
Current income taxes
Management service costs
Non-controlling interests
Funds from operations (FFO) (3)
2011
2010
15,877
14,480
$ 1,192
$ 1,067
19
(407)
804
(411)
(22)
(1)
(52)
12
(328)
751
(404)
(32)
-
(46)
$ 318
$ 269
Variations in generation are described on page 9 of this report.
Includes share of cash earnings from equity-accounted and long-term investments.
(1)
(2)
(3) FFO is defined as EBITDA less interest, current income taxes and management service costs, which is then adjusted for non-
controlling interest.
Brookfield Renewable was created from the strategic combination of the Fund and the renewable power assets
of a subsidiary of Brookfield Asset Management, in the fourth quarter of 2011.
Brookfield Renewable’s consolidated statements of financial position, results of operations and cash flows are
presented as if these arrangements had been in place from the time that the operations were originally acquired
by Brookfield Asset Management. For periods prior to November 28, 2011, the financial information for
Brookfield Renewable represents the combined financial information for the Brookfield Renewable Power
Division a division of Brookfield Asset Management. Transactions entered into as part of the Combination are
accounted for effective November 28, 2011.
Overall, revenues for the year ended December 31, 2011 were $1,192 million or 12% higher than the prior year.
EBITDA for the year ended December 31, 2011 was $804 million or an increase of 7% from $751 million in the
prior year. FFO for the year ended December 31, 2011 was $318 million or an increase year-over-year by $49
million or 18%.
A discussion of our consolidated results is provided in the following section “Review of Operations on a
consolidated basis.”
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 16
Net Income
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Funds from operations (FFO) – consolidated basis
Non-controlling interests included in FFO
Other items:
Depreciation and amortization
Unrealized financial instrument (losses) gains
Fund unit liability revaluation
Share of non-cash loss in equity-accounted investments
Deferred income tax recovery
Other
Net (loss) income
Basic and diluted earnings per share
2011
2010
$ 318
52
$ 269
46
(468)
(20)
(376)
(13)
50
6
(446)
584
(159)
(7)
3
4
$ (451)
$ 294
$ (1.80)
$ 0.98
We measure our results based on EBITDA and FFO to provide readers with an assessment of the cash flow
generated by our assets and the residual cash flow retained to fund shareholder distributions and growth
initiatives. We recognize that net income is an important measure of profitability. However, the presentation of
net income on an IFRS basis for our business often leads to the recognition of a loss even though the
underlying cash flow generated by the assets is supported by high margins and stable, long-term contracts.
This occurs largely for two reasons. First, under IFRS, we recognize a significantly higher level of depreciation
than we are required to reinvest in the business as sustaining capital expenditures. Second, we are often
required to recognize changes in the fair value of energy contracts which are serviced by our assets and
interests held by others in assets we manage through income, where the corresponding change in the asset
values are recognized through equity. Therefore, when factors which are positive to the long-term prospects of
our business occur, such as rising energy prices or increased asset values, the outcome is the recognition of
losses related to the revaluation of fixed price contracts or our partners share of assets.
The net loss for the year ended December 31, 2011 was $451 million or $1.80 per share. The net loss largely
reflects the impact of depreciation and items revalued on a mark-to-market basis as described above.
Prior to the formation of Brookfield Renewable, we held most of our Canadian assets in a listed fund where
non-controlling shareholders’ interests were treated as a liability and valued at the share price. The stock
market performance of the Fund during 2011 and 2010 increased year over year resulting in the recognition of
a non-cash accounting loss. We view the strengthening performance of our shares as a benefit to all
shareholders, in spite of the recognition of a loss.
Prior to the formation of Brookfield Renewable, certain contracts for energy sales were treated as derivatives for
accounting purposes. In 2010, energy prices declined resulting in a relative gain on the fixed price related to
those energy contracts. The contracts did provide protection against changing prices, however the gain
reflected in our net income reflects the value over the life of the contract and not the actual cash flow benefit
realized in the year. Accordingly, we do not include revaluation gains of this nature in our funds from
operations.
We understand net income is an important measure of our financial performance for certain investors and
accordingly we discuss it in greater detail on page 27 of this report.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 17
REVIEW OF OPERATIONS ON A CONSOLIDATED BASIS
GENERATION (GWH)
Variance of Results
Actual Generation
LTA Generation
Actual vs. LTA
Actual
vs. Prior
year
2011
2010
2011
2010
2011
2010
2011
7,150
6,651
6,811
6,727
339
(76)
4,056
3,557
5,061
5,076
(1,005)
(1,519)
3,307
3,206
3,307
3,206
-
-
499
499
101
14,513
13,414
15,179
15,009
(666)
(1,595)
1,099
662
702
499
567
712
406
506
372
(50)
296
(7)
195
163
135
15,877
14,480
16,297
15,887
(420)
(1,407)
1,397
(3)%
(9)%
10%
FOR THE YEARS ENDED DECEMBER 31
Hydroelectric generation
United States
Canada
Brazil (1)
Wind energy
Other
Total generation (2)
% variance
(1) Assured generation levels
(2) Actual and long-term average generation includes 100% of generation from equity-accounted and long-term investments.
Generation for the year ended December 31, 2011 was 15,877 GWh or 10% higher than 14,480 GWh in the
prior year, and 3% lower than the long-term average of 16,297 GWh. The improvement over the prior year
reflects stronger hydrological conditions in Eastern Canada and New York. Although hydrology did return to
more normalized levels, it was modestly below the long-term averages due to mild conditions and below-
average inflows in Ontario and Quebec. The following tables provide additional generation and operating
information by regional operating centres.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 18
HYDROELECTRIC GENERATION
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA (1)
Generation (GWh) – actual (1)
Revenues (2)
Direct operating costs
EBITDA
Interest expense – borrowings
Current income taxes
Non-controlling interests
2011
United
States Canada
6,811
7,150
5,061
4,056
Brazil
Total
Pro
forma
3,307
15,179
15,179
3,307
14,513
14,513
$ 480
$ 241
$ 360 $ 1,081 $ 1,221
(144)
336
(149)
2
(26)
(62)
179
(68)
5
-
(91)
269
(94)
(15)
(13)
(297)
(297)
784
924
(311)
(311)
(8)
(39)
(8)
(39)
Funds from operations (FFO)
Average revenue per MWh (3)
Average direct operating costs per MWh (3)
$ 163
$ 116
$ 147
$ 426 $ 566
$ 71
$ 70
$ 107
$ 79 $ 90
$ 22
$ 18
$ 29
$ 23 $ 23
Generation (GWh) – LTA (1)
Generation(GWh) – actual (1)
Revenues (2)
Direct operating costs
EBITDA
Interest expense - borrowings
Current income taxes
Non-controlling interests
2010
United
States Canada
6,727
6,651
5,076
3,557
Brazil
Total
Pro
forma
3,206
15,009
15,009
3,206
13,414
13,414
$ 474
$ 209
$ 286 $ 969 $ 1,089
(142)
332
(152)
(16)
(31)
(49)
160
(64)
-
-
(85)
201
(95)
(16)
(4)
(276)
(276)
693
813
(311)
(311)
(32)
(35)
(32)
(35)
Funds from operations (FFO)
Average revenue per MWh (3)
Average direct operating costs per MWh (3)
$ 133
$ 96
$ 86 $ 315 $ 435
$ 75
$ 71
$ 89 $ 77 $ 88
$ 23
$ 17
$ 28 $ 23
$ 23
(1) Actual and long-term average generation includes 100% generation from equity-accounted and long-term investments.
(2)
(3) Average revenue and direct operating costs per MWh excludes generation from equity-accounted and long-term investments.
Includes share of cash earnings from equity-accounted and long-term investments.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 19
United States
Generation from our U.S. renewable asset portfolio was 7,150 GWh, meaningfully higher than long-term
average by 339 GWh or 5%. Results were also 8% ahead of the prior year. Essentially all regions produced
inflows and generation levels in 2011 that were higher than long-term average. With an extremely wet spring
and record setting floods on the Mississippi River, generation levels were well above long-term average in Q2
and Q3 for our Louisiana facility. Regions in the Northeastern United States had record levels of rainfall in Q2,
very dry conditions in July and the wettest August in history as Hurricane Irene brought twice the level of
precipitation compared to long-term average. The Northeastern region represents 60% of the U.S. renewable
asset portfolio, and thus served to impact the overall results.
During the year we acquired and integrated into the business our first hydroelectric generating facility in
California which contributed 90 GWh of generation.
Consequently revenues for the year ended December 31, 2011 were $480 million or 1% ahead of the prior
year. Direct operating costs were in line with the prior year and FFO was $163 million, $30 million higher than
the prior year due to the decreased taxes, increased revenues and decreased interest expense due to lower
interest rates. Average revenues were $71 per MWh which was slightly lower than last year.
Canada
Generation from our Canadian renewable asset portfolio was 4,056 GWh or 20% below long-term average of
5,061 GWh and ahead of the prior year generation of 3,557 GWh. Mild weather conditions and below-average
inflows persisted in Ontario throughout most of the year. At year end, these regions experienced more seasonal
levels of precipitation and with it a return to more normal hydrology conditions.
Generation levels in Quebec were slightly below plan for the year and our Western Canadian assets generated
at above long-term average levels for the year. Consequently, revenues for the year ended December 31, 2011
were $241 million, or 15% ahead of the prior year.
Average revenues were $70 per MWh and in line with the prior year.
Brazil
Generation from our Brazilian renewable asset portfolio was 3,307 GWh, and in line with long-term average.
Results for 2011 include the addition of a new hydroelectric facility which was acquired and integrated during
the third quarter which generated 116 GWh of electricity.
Our risk of a generation shortfall in Brazil continues to be minimized by participation in a hydrological balancing
pool administered by the government of Brazil. This program mitigates hydrology risk by assuring that all
participants receive, at any particular point in time, a reference amount of electricity (assured energy),
irrespective of the actual volume of energy generated. The program reallocates energy, transferring surplus
energy from those who generated in excess of their assured energy to those who generated less that their
assured energy, up to the total generation within the pool.
Revenues for the year ended December 31, 2011 were $360 million, an increase over the prior year by $74
million primarily due to inflation based escalation with our power sales agreements and increased generation
from the new facility. FFO and results on a per MWh basis were in line with expectations.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 20
Net Asset Value for Hydroelectric Facilities
AS AT DECEMBER 31
(MILLIONS)
United
States
Canada
Brazil
Total
2011
Total
2010
Hydroelectric power assets
$ 4,549
$ 4,908
$ 2,681
$ 12,138
$ 11,416
Development assets
Equity-accounted and long-term
investments
Working capital and other, net
Subsidiary borrowings
Participating non-controlling interests
Values not recognized under IFRS
26
169
4,744
169
(1,838)
(250)
2,825
-
-
70
4,978
(50)
(928)
-
4,000
-
121
86
147
325
145
258
2,888
12,610
11,819
181
(645)
(209)
2,215
-
300
69
(3,411)
(3,472)
(459)
9,040
-
(206)
8,210
467
Net Asset Value
$ 2,825
$ 4,000
$ 2,215
$ 9,040
$ 8,677
The net asset value of our hydroelectric facilities was $9.0 billion in 2011, an increase of $363 million from $8.7
billion in 2010. This increase is due primarily to the $1,171 million increase in fair value measurement of our
hydroelectric power assets, partially offset by depreciation expense of $423 million and losses on foreign
exchange of $381 million. In addition, approximately 75 MW of hydroelectric facilities in our portfolio have been
acquired with institutional partners and are consolidated into our operating results. Our net ownership of these
facilities approximates 25% and accordingly we have recognized an increase in non-controlling interests in
relation to these assets and reduced FFO by the proportionate share of cash-earnings attributable to our
partners.
Development assets include two wind and two hydroelectric projects currently under construction along with
early stage costs associated with a 45 MW hydroelectric facility in Western Canada on which we expect to
commence construction in the second quarter of 2012. We record development assets at an estimate of fair
value based on the value expected on completion, less the costs remaining to complete the project. In the prior
year, development assets were carried at cost with the fair value component included as a value not recognized
under IFRS.
The equity-accounted investments increased with the completion of two hydroelectric development assets
totaling 15 MW in the United States.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 21
WIND ENERGY
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT FOR per MWh)
Generation (GWh) – LTA (1)
Generation (GWh) – actual (1)
Revenues
Direct operating costs
EBITDA
Interest expense - borrowings
Funds from operations (FFO)
Average revenue per MWh (2)
Average direct operating costs per MWh (2)
2011 (3)
2010 (3)
712
662
506
499
$ 70
$ 52
(12)
58
(25)
33
(7)
45
(17)
28
$ 106
$ 104
$ 18
$ 14
(1) Actual and LTA generation includes 100% of generation from equity-accounted and long-term investments.
(2) Average revenue and direct operating costs per MWh excludes generation from equity-accounted and long-term investments.
(3) There is no difference for Wind between consolidated and pro forma.
Generation from our renewable wind portfolio in Canada was 662 GWh, or lower than long-term average by 7%
or 50 GWh, due to below average wind conditions for the year. Generation was ahead of the prior year by 33%
due to a full year of generation from an Ontario wind facility which was commissioned in September 2010. The
successful commercial operation and integration of another Ontario wind facility in Q4 2011 also contributed to
the increase in generation.
Revenues for the year ended December 31, 2011 were $70 million, or 35% higher than the previous year
primarily due to the increased generation from new asset commercialization.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 22
Net Asset Value for Wind Facilities
AS AT DECEMBER 31
(MILLIONS)
Wind power assets
Development assets
Equity – accounted investments
Working capital and other, net
Subsidiary borrowings
Participating non-controlling interests
Values not recognized under IFRS
Net Asset Value
2011
2010
$ 1,400
$ 564
231
80
1,711
(26)
(785)
(170)
730
-
53
11
628
(16)
(362)
-
250
133
$ 730
$ 383
The net asset value of our wind facilities was $730 million in 2011 and $383 million in 2010, an increase of $347
million. This increase is due primarily to the completion of a 166 MW wind facility in Eastern Canada which
increased values by approximately $400 million. This was offset by depreciation expense and foreign exchange
losses. In addition, approximately 200 MW of wind assets in our portfolio have been acquired with institutional
partners and are consolidated into our operating results. Our net ownership of these facilities approximates
25% and accordingly we have recognized non-controlling interests in relation to these assets and reduced FFO
by the proportionate share of cash-earnings attributable to our partners.
Consequently, subsidiary borrowings were increased to finance these new facilities. Non-controlling interests
increased in aggregate due to the acquisition of wind development assets in partnership with investors in the
Brookfield Americas Infrastructure Fund.
At December 31, 2011, development assets are revalued to fair value based on the value expected on
completion, less the costs remaining to complete the project. In the prior year, development assets were
carried at cost with the fair value component included as values not recognized under IFRS.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 23
CORPORATE CAPITALIZATION
The long-life nature of our assets allows us to finance the majority of our facilities on an asset-specific, non-
recourse basis. In addition, we utilize a modest amount of corporate debt to provide additional leverage to
unitholders while maintaining strong access to the capital markets.
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Credit facilities
Corporate borrowings
Subsidiary borrowings
Long-term indebtedness
Participating non-controlling interests
Preferred equity
Net asset value
Total capitalization
Debt to total capitalization
(1) Information for 2010 was prepared on a pro forma basis.
2011
2010 (1)
$
251 $
64
1,071
4,197
5,519
629
241
1,096
3,834
4,994
206
252
8,398
7,424
$
14,787 $
12,876
37%
39%
Total capitalization was $14.8 billion, representing an increase of $1.9 billion since December 31, 2010. The
increase in net asset value is largely a result of an increase in the value of our property, plant, and equipment
as discussed on page 31 of this report. The increase in total capitalization was also positively impacted by an
increase in subsidiary borrowings as a result of growth in our asset base.
On a consolidated basis, EBITDA to interest totaled 2.0 times and 1.9 times in 2011 and 2010, respectively. On
a pro-forma basis, EBITDA to interest was 2.3 times in 2011 (2010: 2.1 times) reflecting the increased cash
flows associated with the amended PPAs which occurred as part of the Combination.
On a deconsolidated pro forma basis, FFO to interest expense of Brookfield Renewable totaled 5.6 times
(2010: 4.8 times).
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 24
CORPORATE AND SUBSIDIARY BORROWINGS
The following table summarizes our corporate and subsidiary borrowings.
Maturity
AS AT DECEMBER 31
(MILLIONS)
Corporate borrowings
Average
Term
2012
2013
2014
2015
2016 Thereafter
Total
Credit facilities
2.3
$ -
$ - $ 251
$ -
$ -
$ -
$ 251
Corporate borrowings
9.6
-
-
-
-
-
251
Subsidiary borrowings
United States
Canada
Brazil
12.6
328
53
207
8.3
6.2
261
390
61
298
13
65
-
-
46
14
65
294
294
71
11
28
783
1,077
783
1,328
1,316
2,021
883
1,572
136
653
Consolidated borrowings
$ 650 $ 741
$ 536
$ 125
$ 404
$ 3,118
$5,574
10.0
650
741
285
125
110
2,335
4,246
Borrowings – Equity
accounted investments
Total (1)
119
1
1
35
94
170
420
$ 769
$ 742
$ 537
$ 160
$ 498
$ 3,288
$5,994
(1) Represents consolidated borrowings and borrowings of subsidiaries accounted for on an equity basis
Subsidiary borrowings increased during the year due to the continued growth in our asset base and the
consolidation of entities partially owned with our institutional investors. Subsidiary borrowings maturing in 2012
include $260 million on our Eastern Canadian wind assets, $120 million associated with our pumped storage
facility in New England which we own 50% with a partner and $200 million attributed to our hydroelectric
facilities in New York. We expect to be able to refinance all of the upcoming maturities in the normal course.
Total subsidiary borrowings have an average term of 10 years (2010: 11.1 years) with an average interest rate
of 7.5%. (2010: 7.7%).
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 25
PARTNERSHIP CAPITAL
Brookfield Renewable’s capital structure is comprised of two classes of Partnership units: general partnership
units and limited partnership units. Income and distributions of Brookfield Renewable are allocated to the
partners of record based on their respective interests in Brookfield Renewable. Distributions may be made to
the general partner of Brookfield Renewable with the exception of instances where there is insufficient cash
available, where payment renders Brookfield Renewable unable to pay its debts as and when they fall due, or
when payment of which might leave Brookfield Renewable unable to meet any future or contingent obligations.
BRELP, a subsidiary of Brookfield Renewable has issued redeemable partnership units held 100% by
Brookfield, which may, at the request of the holder, require BRELP to redeem the units for cash consideration
after a mandatory two-year holding period from the date of issuance. The right is subject to Brookfield
Renewable’s right of first refusal which entitle it, at its sole discretion, to elect to acquire all of the units so
presented to BRELP that are tendered for redemption in exchange for Brookfield Renewable units. As
Brookfield Renewable, at its sole discretion, has the right to settle the obligation with limited partnership units,
the BRELP redeemable partnership units are classified as limited partnership units.
As of the date of this report, the total amount of our limited partnership units outstanding was comprised of
262,485,747 limited partnership units, assuming the exchange of all redeemable limited partnership units
discussed above, and one general partnership unit. Based on the number of units outstanding as of the date of
this report, Brookfield Asset Management’s aggregate limited partnership interest in Brookfield Renewable
would be approximately 68%, if it exercised its redemption right in full and Brookfield Renewable exercised its
right of first refusal.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 26
ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT PER UNIT AMOUNTS AND AS NOTED)
Generation (GWh) – LTA (1)
Generation (GWh) – actual (1)
Funds from operations (FFO)
Non-controlling interests
Other items:
Depreciation and amortization
Unrealized financial instrument (losses) gains
Fund unit liability revaluation
Share of non-cash losses from equity-accounted investments
Deferred income tax recovery
Other
Net (loss) income
Basic and diluted earnings per share
2011
2010
16,297
15,887
15,877
14,480
$ 318 $ 269
52
46
(468)
(446)
(20)
584
(376)
(159)
(13)
50
6
(7)
3
4
$ (451) $ 294
$ (1.80) $ 0.98
(1) Actual and LTA generation includes 100% generation from equity-accounted and long-term investments.
Net loss for the year ended December 31, 2011 was $451 million and reflects normal course depreciation and
amortization expense of $468 million (2010: $446 million). It also includes a revaluation amount on the Fund
unit liability. Under IFRS, Fund units held by the public that have a feature that allows the holder to redeem the
units for cash, are presented as a liability and recorded at fair value, with the change in fair value recorded in
net income. In 2011, the Fund unit price appreciated significantly resulting in a revaluation amount of $376
million (2010: $159 million). As a result of the Combination, the Fund units were exchanged for partnership
units and the Fund was dissolved.
On April 1, 2011, Brookfield Renewable designated its two significant long-term energy contracts with related
parties as cash-flow hedges. As a result of new agreements and changes in existing agreements with
Brookfield Asset Management and its subsidiaries arising from the Combination, these contracts are no longer
accounted for as derivatives by Brookfield Renewable effective November 28, 2011. For the period from April 1,
2011 to November 28, 2011, Brookfield Renewable recorded accounting losses of $708 million related to these
contracts that were recorded in OCI. On formation of Brookfield Renewable, $704 million of unrealized
accounting losses were reversed.
Amendments were made to certain energy derivative contracts and other agreements with the related parties
which resulted in the energy derivative contracts no longer meeting the derivatives definition under the IFRS.
Since these amendments arose from the common control reorganization with Brookfield Asset Management the
amounts were adjusted directly into limited partnership equity.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 27
SUMMARY CONSOLIDATED BALANCE SHEETS
AS AT YEAR ENDED DECEMBER 31
(MILLIONS)
Property, plant and equipment
Equity-accounted and long-term investments
Total assets
Long-term debt and credit facilities
Deferred income tax liabilities
Total liabilities
Fund unit liability
Participating non-controlling interests
Preferred equity
Limited partners’ equity
Total liabilities and partners’ equity
2011
2010
$ 13,945 $ 12,173
405
269
15,708
13,874
5,519
4,994
2,374
2,429
8,508
8,689
-
1,355
629
241
206
252
6,330
3,372
$ 15,708
$ 13,874
The carrying value of our assets increased during 2011, primarily due to the increase in fair value measurement
of our renewable power generation facilities, acquisition of assets, new projects that began commercial
operations in 2011 and ongoing sustaining capital expenditures.
Equity-accounted and long-term investments
The following are Brookfield Renewable’s equity-accounted and long-term investments:
AS AT DECEMBER 31
(MILLIONS)
Bear Swamp Power Co. LLC
Brookfield Americas Infrastructure Fund investees (1)
Powell River Energy Inc.
Pingston Power Inc.
Galera Centrais Elétricas S.A.
Other long-term investments
Ownership
Percentage Interest
Carrying value
2011
2010
2011
2010
%
50
50
50
50
50
%
50
50
50
50
50
$ 130
$ 95
119
5
21
49
86
-
40
43
80
6
$ 405
$ 269
( 1 ) Consists of 50% ownership interests in Coram California Development L.P and Malacha Hydro Limited Partnership.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 28
Participating non-controlling interests
AS AT DECEMBER 31
(MILLIONS)
Ownership
Percentage Interest
Carrying value
2011
2010
2011
2010
%
%
Brookfield Americas Infrastructure Fund
50-100
50-100
$ 380
$ -
The Catalyst Group
Brascan Energetica
Other
75
50
50
75
50
50
167
143
74
8
63
-
$ 629
$ 206
In December 2011, Brookfield Renewable entered into voting agreements with subsidiaries of Brookfield Asset
Management whereby these subsidiaries, as managing members of entities related to Brookfield Americas
Infrastructure Fund (the “BAIF Entities”) in which Brookfield Renewable holds investments with institutional
investors, agreed to assign to Brookfield Renewable their voting rights to appoint the directors subsidiaries of
the BAIF Entities. Brookfield Renewable’s economic interests in the BAIF Entities in the United States and
Brazil are 22% and 25%, respectively.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 29
Segmented Net Asset Value
The following table provides a breakdown of our consolidated net asset value by region.
Hydroelectric
United
States
Canada
Brazil
Wind
Other
assets
Corporate
and other
2011
2010
$ 4,549
$ 4,908
$ 2,681
$ 1,400
$ 86
$ -
$13,624 $ 12,062
AS AT DECEMBER 31
(MILLIONS)
Total power assets
Development assets
Equity-accounted and long-
term investments
Working capital and other, net
Long-term debt and credit
26
169
-
70
121
231
86
80
4,744
4,978
2,888
1,711
169
(50)
181
(26)
facilities
(1,838)
(928)
(645)
(785)
Participating non-controlling
interests
Preferred equity
(250)
-
-
-
(209)
(170)
-
-
-
-
86
(11)
-
-
-
-
-
-
378
198
405
269
14,407
12,529
117
380
(197)
(1,323)
(5,519)
(4,994)
-
(629)
(206)
(241)
(241)
(252)
Values not recognized under
IFRS
-
-
-
-
-
-
-
600
2,825
4,000
2,215
730
75
(1,447)
8,398
6,880
Net Asset Value
$2,825
$4,000
$ 2,215
$ 730
$ 75
$ (1,447)
$8,398
$7,480
Net Asset Value - per share
$10.76
$15.24
$ 8.44
$ 2.78
$0.28
$ (5.51)
$31.99
$28.50
Net asset value in our property, plant and equipment increased to $14 billion. The increase over the prior year
is in part due to the acquisition of a 30 MW hydroelectric asset in Brazil, the completion of two hydroelectric
development assets totaling 15 MW in the United States and the completion of a 166 MW wind facility in
Eastern Canada which increased asset values by $440 million. Lower interest rates and the corresponding
reduction in discount rates applied to future cash flows increased the value of our plants by $1.3 billion, net of
non-controlling interests. In addition, approximately 275 MW of hydroelectric and wind facilities in our portfolio
have been acquired with institutional partners and are consolidated into our operating results. Our net
ownership of these facilities approximates 25%. Offsetting these increases for the year ended December 31,
2011, was depreciation expense of $456 million and the net unfavorable impact of foreign exchange on
Canadian and Brazilian assets of approximately $116 million and $277 million, respectively.
Development assets include two wind and two hydroelectric projects currently under construction along with
early stage costs associated with a 45 MW hydroelectric facility in Western Canada which we expect to
commence construction in the second quarter of 2012.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 30
Property, Plant and Equipment
Revaluation of Property, Plant and Equipment
In accordance with IFRS, Brookfield Renewable has elected to revalue its property, plant and equipment at a
minimum on an annual basis, as at December 31st of each year. As a result, certain of Brookfield Renewable’s
property, plant and equipment, are carried at revalued amounts as opposed to historical cost. The property,
plant and equipment assets that are revalued use a discounted cash flow valuation model over a 20-year period
and incorporates Brookfield Renewable’s expectations about several inputs, including future inflation rates and
discount rates, as well as estimates regarding future electricity prices, anticipated long-term average
generation, operating and capital expenditures, including future major maintenance expenditures all over a
twenty-year period. Brookfield Renewable valued the property, plant and equipment using inputs, which vary
according to the type and geographic location of the asset. Brookfield Renewable’s equity can vary with
changing discount and terminal capitalization rates. For example, a 50 bps change in discount rates would have
an approximate $1 billion impact on our net asset value.
Discount rate
Terminal capitalization rate
Exit date
United States
Canada
Brazil
2011
5.6%
7.2%
2031
2010
7.4%
7.9%
2030
2011
5.4%
6.8%
2031
2010
6.4%
7.1%
2030
2011
9.9%
N/A
2029
2010
10.8%
N/A
2029
Brookfield Renewable elected to change its accounting policy for the revaluation of property plant and
equipment to include development assets effective December 31, 2011. We record development assets at an
estimate of fair value based on the value expected on completion, less the costs remaining to complete the
project. In the prior year, development assets were carried at cost with the fair value component included as a
value not recognized under IFRS.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 31
Contractual Obligations
The following table summarizes our significant contractual obligations.
AS AT DECEMBER 31
(MILLIONS)
Principal repayments:
2012
2013
2014
2015
2016
Thereafter
Total
Subsidiary borrowings
$ 650
$ 741
$ 285
$ 125
$ 110
$ 2,335 $ 4,246
Corporate borrowings
Equity-accounted and
long-term investments
Capital projects
Interest payable (1)
Subsidiary borrowings
Corporate borrowings
Equity-accounted and
long-term investments
-
119
769
46
815
-
1
-
1
-
35
294
94
783
1,077
170
420
742
286
160
498
3,288
5,743
-
-
-
-
-
46
742
286
160
498
3,288
5,789
239
204
146
125
116
799
1,629
59
20
59
19
59
19
59
18
59
17
283
121
578
214
318
282
224
202
192
1,203
2,421
Total
$ 1,133 $ 1,024 $ 510
$ 362
$ 690
$ 4,491 $ 8,210
(1) Represents aggregate interest payable expected to be paid over the entire term of the obligations, if held to maturity. Variable rate
interest payments have been calculated based on current rates.
In addition, as a result of the Combination, two management service agreements with Brookfield Asset
Management were executed. For more information see section on Summary of pro forma adjustments: (ii)
Management Service Agreements on page 48.
Guarantees
In the normal course of operations, we execute agreements that provide for indemnification and guarantees to
third parties in transactions such as business dispositions and acquisitions, construction projects, capital
projects, and sales and purchases of assets and services. We have also agreed to indemnify our directors and
certain of our officers and employees. The nature of substantially all of the indemnification undertakings
prevents us from making a reasonable estimate of the maximum potential amount that we could be required to
pay third parties, as many of the agreements do not specify a maximum amount and the amounts are
dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be
determined at this time. Historically, we have made no significant payments under such indemnification
agreements.
Off balance sheet arrangements
Brookfield Renewable has no off-balance sheet financing arrangements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 32
RELATED PARTY TRANSACTIONS
Brookfield Renewable’s related party transactions are in the normal course of business and are recorded at the
exchange amount, except for related party acquisitions. Brookfield Renewables’ related party transactions are
primarily with Brookfield Asset Management.
As discussed in the Significant Accounting Policies Note: - 2b) Basis of Presentation of the December 31, 2011
annual audited consolidated financial statements, effective November 28, 2011, Brookfield Asset Management
and Brookfield Renewable completed the Combination Agreement. This resulted in the strategic combination of
all the renewable power assets of the Fund and certain Brookfield subsidiaries to create Brookfield Renewable.
Consequently at the date of the Combination, Brookfield Asset Management, Brookfield Renewable’s ultimate
parent, held directly or indirectly, approximately a 73% limited partnership interest (68% as at the date of this
report) on a fully-exchanged basis and all general partnership units totaling a 0.01% general partnership
interest in Brookfield Renewable. Details of amended and new agreements entered into by Brookfield
Renewable as a result of the Combination are represented on page 48.
Brookfield Renewable sells electricity to a subsidiary of Brookfield Asset Management through long-term power
purchase agreements to provide stable cash flow and reduce Brookfield Renewable’s exposure to electricity
prices in deregulated power markets. Brookfield Renewable also benefits from a wind levelization agreement
with a subsidiary of Brookfield Asset Management which reduces the exposure to the fluctuation of wind
generation at certain facilities and thus improves the stability of its cash flow.
In addition to these agreements, Brookfield Renewable and Brookfield Asset Management have executed other
agreements related to the provision of operations, maintenance, administration, insurance services and the
securing of natural gas prices with respect to a gas plant in Eastern Canada. These are fully described in Note
8:- Related Party Transactions of the December 31, 2011 annual audited consolidated financial statements.
In December 2011, Brookfield Renewable entered into voting agreements with subsidiaries of Brookfield Asset
Management whereby these subsidiaries, as managing members of entities related to Brookfield Americas
Infrastructure Fund, in which Brookfield Renewable holds investments with institutional partners, agreed to
assign to Brookfield Renewable their voting rights to appoint the directors of such entities.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 33
The following table reflects the related party agreements and transactions on the consolidated statements of
income (loss):
FOR THE YEAR ENDED DECEMBER 31
(MILLIONS)
Revenues
Related Party
2011 2010
Purchase and revenue support agreements
Brookfield Asset Management
$ 254 $ 205
Wind levelization agreement
Brookfield Asset Management
7
5
Direct operating costs
Energy purchases
Operations, maintenance and administration
services
Insurance services
$261
210
Brookfield Asset Management
$ 41
42
Brookfield Asset Management
Brookfield Asset Management
11
18
17
15
$ 70 $ 74
Interest expense
Brookfield Asset Management
$ 19 $ 40
Management service costs
Brookfield Asset Management
$ 1 $ -
The following table reflects the impact of the related party agreements and transactions on the consolidated
balance sheets:
AS AT DECEMBER 31
(MILLIONS)
Due from related parties
Amounts due from
Note receivable
Amounts due from
Note receivable
Due to related parties
Amounts due to and current portion of note
Note payable
Credit facilities
Related Party
2011 2010
Brookfield Asset Management
Coram California Development
Brookfield Asset Management,
Brascan Energetica
Powell River Energy Inc.
$ 227 $377
23
$253 $400
26
$ 13
19
$ 32
$ -
19
$ 19
Brookfield Asset Management
$ 74 $567
Brookfield Asset Management
$ 74 $567
$ 8 $101
Brookfield Asset Management
$ - $ 8
Amounts due from and the note receivable are not considered impaired based on the credit worthiness of the
counterparties. Accordingly, as at December 31, 2011 and 2010, an allowance for doubtful accounts was not
deemed necessary.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 34
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 (MILLIONS)
Cash flow provided by (used in):
Operating activities
Financing activities
Investing activities
Impact of foreign exchange on cash
Net cash inflow
2011
2010
$ 349
$ 218
809
(1,090)
11
189
(397)
5
$ 79
$ 15
Cash and cash equivalents at the end of the year totaled $267 million, representing an increase of $79 million
since December 31, 2010.
OPERATING ACTIVITIES
We generated $349 million from operating activities for the year ended December 31, 2011, an increase of
$131 million from the same period last year primarily due to FFO of $318 million. This is compared to operating
activities of $218 million which was primarily due to FFO of $269 million in 2010.
NET CHANGE IN NON-CASH WORKING CAPITAL
The net change in working capital shown in the consolidated statements of cash flow is comprised of the
following:
FOR THE YEAR ENDED DECEMBER 31 (MILLIONS)
Trade receivables and other current assets
Accounts payable, accrued liabilities, and other
2011
2010
$ (12)
$ ( 9)
-
(20)
$ (12)
$ (29)
FINANCING ACTIVITIES
Cash flows provided by financing activities totaled $809 million for the year ended December 31, 2011, resulting
from borrowings of $880 million offset by $215 million of repayments, and distributions to partners and non-
controlling interests of $39 million and $109 million, respectively. This is compared to 2010 cash flows provided
by financing activities of $189 million resulting from $747 million in debt borrowings, $239 million of capital
provided by non-controlling interests and the sale of Fund units for $164 million offset by $951 million of debt
repayments, $110 million of distributions to unitholders of the Fund and distributions to non-controlling interests.
INVESTING ACTIVITIES
During 2011, we invested $1,090 million in a number acquisitions and growth oriented initiatives compared to
$397 million in the prior year. Construction of two wind projects in Ontario and California required $698 million.
The acquisition of a Brazil hydroelectric facility and a wind project in Northeastern United States were $212
million.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 35
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
RISK MANAGEMENT
Brookfield Renewable faces market risk from foreign currency assets and liabilities, the impact of changes in
interest rates, and floating rate liabilities. Market risk is managed by funding assets with financial liabilities in
the same currency and with similar interest rate characteristics and holding financial contracts, such as interest
rate swaps and foreign exchange contracts, to minimize residual exposures. Financial instruments held by
Brookfield Renewable that are subject to market risk include borrowings and financial instruments, such as
interest rate, currency and commodity contracts. The categories of financial instruments that can give rise to
significant variability are described below:
Commodity Risk
Our commodity risk is to the price of electricity. Brookfield Renewable sells electricity under long-term contracts
to secure stable prices and mitigate its exposure to wholesale markets. As at December 31, 2011, virtually all
(99%) of the Brookfield Renewable’s generation was sold pursuant to PPAs, either to third parties or through
entities of Brookfield. During 2011, certain of the long-term contracts were considered financial instruments,
and were recorded at fair value in the consolidated financial statements.
Interest Rate
Brookfield Renewable’s assets largely consist of long duration physical assets. Brookfield Renewable’s financial
liabilities consist primarily of long-term fixed rate debt or floating-rate debt that has been swapped to fixed rates
with interest rate financial instruments. All non-derivative financial liabilities are recorded at their amortized cost.
Brookfield Renewable also holds interest rate contracts to lock-in fixed rates on anticipated future debt
issuances.
Interest rate risk exists principally due to our subsidiaries and associates indebtedness with variable rates. Our
subsidiaries have long-term debt principal value of $4,246 million (on a proportionate basis) as of December 31,
2011, of which approximately $1,382 million or 33% has been issued as floating rate debt. Of this amount, $730
million has been hedged through the use of interest rate swaps. Brookfield Renewable has corporate long-term
debt with a principal value of $1,077 as of December 31, 2011, all of which is fixed-rate debt.
Foreign Currency
Brookfield Renewable’s principal foreign exchange risks involve changes in the value of the Canadian dollar
and the Brazilian real versus the U.S. dollar. To mitigate these risks, Brookfield Renewable designates certain
monetary liabilities as hedges against its net investment in the Canadian subsidiaries. In addition, management
monitors the risk associated with foreign currency rate fluctuations and, from time to time, may enter into
forward foreign exchange contracts or employ other hedging strategies.
Brookfield Renewable is also exposed to foreign currency risk arising on the translation of foreign monetary
assets and liabilities recorded in its U.S. functional subsidiaries but as the monetary value of these is small the
impact is minimal.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 36
Credit risk
Brookfield Renewable minimizes credit risk with counterparties to financial instruments and physical electricity
and gas transactions through the selection, monitoring and diversification of counterparties, and the use of
standard trading contracts, and other credit risk mitigation techniques. In addition, Brookfield Renewable’s
PPAs are reviewed regularly and are almost exclusively with customers having long standing credit histories or
investment grade ratings, which limit the risk of non-collection.
Liquidity risk
Liquidity risk is the risk that Brookfield Renewable cannot meet a demand for cash or fund an obligation when
due. Liquidity risk is mitigated by Brookfield Renewable’s cash and cash equivalent balances and its access to
undrawn credit and hydrology reserve facilities. We also ensure that we have access to public debt markets by
maintaining a strong credit rating of BBB.
Brookfield Renewable is also subject to the risk associated with debt financing. This risk is mitigated by the
long-term duration of debt instruments and the diversification in maturity dates over an extended period of time.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 37
RISK FACTORS
The following represents the most relevant risk factors relating to Brookfield Renewable’s business. This
contains only certain risk factors and is not all-inclusive. For a description of other possible risks such as: force
majeure, insurance limits, litigation, investment in newly developed technologies, labour relations, risks
associated with operating in Brazil, credit ratings, greenfield development growth, sourcing and financing of
acquisition opportunities, operational arrangements with partially owned investments, general role, relationship
and operational issues with Brookfield Asset Management, general risks related to our limited partnership units,
general taxation issues – domestic and foreign, and risks associated to being a newly formed partnership,
please see the Annual Information Form filed with SEDAR at www.sedar.com.
Management believes that since the end of 2010 there have been no significant changes in the business
environment and risks that could affect Brookfield Renewable’s activities or results.
RISKS RELATED TO OUR OPERATIONS AND THE RENEWABLE POWER INDUSTRY
Changes to hydrology at our hydroelectric stations or in wind conditions at our wind energy facilities
could materially adversely affect the volume of electricity generated.
The revenues generated by our facilities are proportional to the amount of electricity generated which in turn is
dependent upon available water flows and wind conditions. Hydrology and wind conditions have natural
variations from season to season and from year to year and may also change permanently because of climate
change or other factors. A natural disaster could also impact water flows within the watersheds in which we
operate. Water rights are also generally owned or controlled by governments that reserve the right to control
water levels or may impose water-use requirements as a condition of license renewal. Wind energy is highly
dependent on weather conditions, and, in particular, on wind conditions. The profitability of a wind farm
depends not only on observed wind conditions at the site, which are inherently variable, but also on whether
observed wind conditions are consistent with assumptions made during the project development phase. A
sustained decline in water flow at our hydroelectric stations or in wind conditions at our wind energy facilities
could lead to a material adverse change in the volume of electricity generated, revenues and cash flow.
In Brazil, hydropower generators have access to a hydrological balancing pool program, which, stabilizes
hydrology by assuring that all participant plants receive a reference amount of electricity, approximating long-
term average irrespective of the actual volume of energy generated whether above or below long-term average.
Substantially all our assets are part of this balancing pool. Specific rules provide the minimum percentages of
the reference amount of electricity that must be generated each year for assuring participation in the program.
The energy reference amount is assessed yearly according to the criteria of such regulation, and can be
adjusted positively or negatively. If the program is terminated or changed or Brookfield Renewable’s reference
amount is revised and Brookfield Renewable’s financial results would be exposed to variations in hydrology.
Counterparties to our contracts may not fulfill their obligations and, as our contracts expire, we may not
be able to replace them with agreements on similar terms.
A significant portion of the power we generate is sold under long-term PPAs with Brookfield, public utilities or
industrial or commercial end-users, some of whom may not be rated by any rating agency. Approximately 55%
of our projected annual sales are with a subsidiary of Brookfield Asset Management which is not rated and
whose obligations are not guaranteed by Brookfield Asset Management. If, for any reason, any of the
purchasers of power under such PPAs, including BRPI, are unable or unwilling to fulfill their contractual
obligations under the relevant PPA or if they refuse to accept delivery of power pursuant to the relevant PPA,
our assets, liabilities, business, financial condition, results of operations and cash flow could be materially and
adversely affected as we may not be able to replace the agreement with an agreement on equivalent terms and
conditions. External events, such as a severe economic downturn, could impair the ability of some
counterparties to the PPAs or some end use customers to pay for electricity received.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 38
Certain portions of our hydroelectric portfolio will be subject to re-contracting in the future. We cannot assure
that we will be able to re-negotiate these contracts once their terms expire, and even if we are able to do so, we
cannot assure that we will be able to obtain the same prices or terms we currently receive. If we are unable to
renegotiate these contracts, or unable to receive prices at least equal to the current prices we receive, our
business, financial condition, results of operation and prospects could be adversely affected.
Conversely, a significant percentage of our sales will be made by facilities subject to indefinite term contracts
with BRPI (taking into account its rights of renewal) at fixed prices per MWh of our electricity sold. Accordingly,
with respect to those facilities, our ability to realize improved revenues due to increases in market prices for
renewable power may be limited.
Increases in water rental costs (or similar fees) or changes to the regulation of water supply may
impose additional obligations on Brookfield Renewable.
Water rights are generally owned or controlled by governments that reserve the right to control water levels or
may impose water-use requirements as a condition of license renewal that differ from those arrangements in
place today. We are required to make rental payments and pay property taxes for water rights or pay similar
fees for use of water once our hydroelectric projects are in commercial operation. Significant increases in water
rental costs or similar fees in the future or changes in the way that governments regulate water supply could
have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and
cash flow.
Our operations are highly regulated and may be exposed to increased regulation which could result in
additional costs to Brookfield Renewable.
Our generation assets are subject to extensive regulation by various government agencies and regulatory
bodies in different countries at the federal, regional, state, provincial and local level. As legal requirements
frequently change and are subject to interpretation and discretion, we may be unable to predict the ultimate cost
of compliance with these requirements or their effect on our operations. Any new law, rule or regulation could
require additional expenditure to achieve or maintain compliance or could adversely impact our ability to
generate and deliver energy. Also, operations that are not currently regulated may become subject to regulation
which could result in additional cost to our business. Further, changes in wholesale market structures or rules,
such as generation curtailment requirements or limitations to access the power grid, could have a material
adverse effect on our ability to generate revenues from our facilities.
There is a risk that our concessions and licenses will not be renewed.
We hold concessions and licenses and we have rights to operate our facilities which generally include rights to
the land and water required for power generation. We expect that our rights and/or our licenses will be renewed
by the applicable regulatory bodies in each country. However, if these regulatory bodies do not grant us
renewal rights, or if they decide to renew our concessions and licenses, as the case may be, under conditions
which would impose additional costs, or if additional restrictions such as setting a price ceiling for energy sales,
our profitability and operational activity could be adversely impacted.
The cost of operating our plants could increase for reasons beyond our control.
While we currently maintain a low and competitive cost position, there is a risk that increases in our cost
structure that are beyond our control could materially adversely impact our financial performance. Examples of
such costs include compliance with new conditions imposed during the relicensing process, municipal property
taxes, water rental fees and the cost of procuring materials and services required for our maintenance activities.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 39
We may fail to comply with the conditions in, or may not be able to maintain, our governmental permits.
Our generation assets and construction projects are required to comply with numerous federal, regional, state,
provincial and local statutory and regulatory standards and to maintain numerous licenses, permits and
governmental approvals required for operation. Some of the licenses, permits and governmental approvals that
have been issued to our operations contain conditions and restrictions, or may have limited terms. If we fail to
satisfy the conditions or comply with the restrictions imposed by our licenses, permits and governmental
approvals, or the restrictions imposed by any statutory or regulatory requirements, we may become subject to
regulatory enforcement action and the operation of the assets could be adversely affected or be subject to
fines, penalties or additional costs or revocation of regulatory approvals, permits or licenses. In addition, we
may not be able to renew, maintain or obtain all necessary licenses, permits and governmental approvals
required for the continued operation or further development of our projects, as a result of which the operation or
development of our assets may be limited or suspended. Our failure to renew, maintain or obtain all necessary
licenses, permits or governmental approvals may have a material adverse effect on our assets, liabilities,
business, financial condition, results of operations and cash flow.
We may experience equipment failure.
Our generation assets may not continue to perform as they have in the past and there is a risk of equipment
failure due to wear and tear, latent defect, design error or operator error, among other things, which could have
a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash
flow. In particular, wind generation turbines are less commercially proven than hydroelectric assets and have
shorter lifespans.
The occurrence of dam failures could result in a loss of generating capacity and repairing such failures
could require us to expend significant amounts of capital and other resources.
The occurrence of dam failures at any of our hydroelectric generating stations or the occurrence of dam failures
at other generating stations or dams operated by third parties whether upstream or downstream of our
hydroelectric generating stations could result in a loss of generating capacity and repairing such failures could
require us to expend significant amounts of capital and other resources. Such failures could result in damage to
the environment or harm to third parties or the public, which could expose us to significant liability.
We are subject to foreign currency risk which may adversely affect the performance of our operations.
A significant portion of our current operations are in countries where the U.S. dollar is not the functional
currency. These operations pay distributions in currencies other than the U.S. dollar, which we must convert to
U.S. dollars prior to making distributions. A significant depreciation in the value of such foreign currencies or
measures which may be introduced by foreign governments to control inflation or deflation may have a material
adverse effect on our business, financial condition, results of operations and cash flows.
The ability to deliver electricity to our various counterparties requires the availability of and access to
interconnection facilities and transmission systems.
Our ability to sell electricity is impacted by the availability of and access to the various transmission systems to
deliver power to its contractual delivery point and the arrangements and facilities for interconnecting the
generation projects to the transmission systems. The absence of this availability and access, our inability to
obtain reasonable terms and conditions for interconnection and transmission agreements, the operational
failure of existing interconnection facilities or transmission facilities, the lack of adequate capacity on such
interconnection or transmission facilities, may have a material adverse effect on our ability to deliver electricity
to our various counterparties or the requirement of counterparties to accept and pay for energy delivery, which
could materially and adversely affect our assets, liabilities, business, financial condition, results of operations
and cash flow.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 40
Our operations are exposed to occupational health, safety and environmental risks.
The ownership, construction and operation of our generation assets carry an inherent risk of liability related to
public safety, worker health and safety and the environment, including the risk of government imposed orders to
remedy unsafe conditions and/or to remediate or otherwise address environmental contamination or damage.
We could also be exposed to potential penalties for contravention of health, safety and environmental laws and
potential civil liability. In the ordinary course of business we incur capital and operating expenditures to comply
with health, safety and environmental laws to obtain and comply with licenses, permits and other approvals and
to assess and manage related risks. The costs to comply with these laws (and any future laws or amendments
enacted) may increase over time and result in additional material expenditures. We may become subject to
government orders, investigations, inquiries or other proceedings (including civil claims) relating to health,
safety and environmental matters as a result of which our operations may be limited or suspended. The
occurrence of any of these events or any changes, additions to or more rigorous enforcement of health, safety
and environmental laws could have a material and adverse impact on operations and result in additional
material expenditures. Additional environmental and workers’ health and safety issues relating to presently
known or unknown matters may require unanticipated expenditures, or result in fines, penalties or other
consequences (including changes to operations) that may be material and adverse to our business and results
of operations.
We may suffer a significant loss resulting from fraud, bribery, corruption other illegal acts, inadequate
or failed internal processes or systems, or from external events.
We may suffer a significant loss resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed
internal processes or systems, or from external events, such as the occurrence of disasters or security threats
affecting our ability to operate. We operate in different markets and rely on our employees to follow our policies
and processes as well as applicable laws in their activities. Risk of illegal acts or failed systems is managed
through our infrastructure, controls, systems and people, complemented by central groups focusing on
enterprise-wide management of specific operational risks such as fraud, trading, outsourcing, and business
disruption, as well as personnel and systems risks. Specific programs, policies, standards and methodologies
have been developed to support the management of these risks. These risks can result in direct or indirect
financial loss, reputational impact or regulatory censure.
There are general industry risks associated with operating in the North American and Brazilian power
market sectors.
We operate in the North American and Brazilian power market sectors, which are affected by competition, price,
supply of and demand for power, the location of import/export transmission lines and overall political, economic
and social conditions and policies. A general and extended decline in the North American or Brazilian economy
or sustained conservation efforts to reduce electricity consumption could have the effect of reducing demand for
electric energy over time, which did occur during the recent recession.
Advances in technology could impair or eliminate the competitive advantage of our projects.
There are other alternative technologies that can produce renewable power, such as fuel cells, micro turbines
and photovoltaic (solar) cells. These alternative technologies currently produce electricity at a higher average
price than our generation facilities; however, research and development activities are ongoing to seek
improvements in such alternative technologies and their cost of producing electricity is gradually declining.
Additionally, research and developments activities are ongoing to seek improvements and reductions in carbon
emissions from fossil fuel generation. It is possible that advances will further reduce the cost of alternative
methods of power generation. If this were to happen, the competitive advantage of our projects may be
significantly impaired or eliminated and our assets, liabilities, business, financial condition, results of operations
and cash flow could be materially and adversely affected as a result.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 41
RISKS RELATED TO FINANCING
Our ability to finance our operations are subject to various risks relating to the state of the capital
markets.
Brookfield Renewable Group has corporate debt and limited recourse project level debt, the majority of which is
non-recourse, that will need to be replaced from time to time. Brookfield Renewable Group’s financings may
contain conditions that limit its ability to repay indebtedness prior to maturity without incurring penalties, which
may limit its capital markets flexibility. Refinancing risk includes, among other factors, dependence on continued
operating performance of Brookfield Renewable Group’s assets, future electricity market prices, future capital
markets conditions, the level of future interest rates and investors’ assessment of Brookfield Renewable’s credit
risk at such time. In addition, certain of our financings are, and future financings may be exposed to floating
interest rate risks, and if interest rates increase, an increased proportion of our cash flow may be required to
service indebtedness. Future acquisitions, development and construction of new facilities and other capital
expenditures will be financed out of cash generated from our operations, borrowings and possible future sales
of equity. Our ability to obtain financing to finance our growth is dependent on, among other factors, the overall
state of the capital markets, continued operating performance of our assets, future electricity market prices, the
level of future interest rates and investors’ assessment of our credit risk at such time, and investor appetite for
investments in renewable energy and infrastructure assets in general and in Brookfield Renewable Group’s
securities in particular. To the extent that external sources of capital become limited or unavailable or available
on onerous terms, our ability to make necessary capital investments to construct new or maintain existing
facilities will be impaired, and as a result, our business, financial condition, results of operations and prospects
may be materially and adversely affected.
We are subject to operating and financial restrictions through covenants in our loan, debt and security
agreements.
Brookfield Renewable, BRELP and its subsidiaries are or will in the future be subject to operating and financial
restrictions through covenants in our loan, debt and security agreements. These restrictions prohibit or limit our
ability to, among other things, incur additional debt, provide guarantees for indebtedness, create liens, dispose
of assets, liquidate, dissolve, amalgamate, consolidate or effect corporate or capital reorganizations, declare
distributions, issue equity interests and create subsidiaries. A financial covenant in our bonds and in our
corporate bank credit facilities limits our overall indebtedness to a percentage of total capitalization, a restriction
which may limit our ability to obtain additional financing, withstand downturns in our business and take
advantage of business and development opportunities. If we breach our covenants, our credit facilities may be
terminated or come due and such event may cause our credit rating to deteriorate and subject Brookfield
Renewable to higher interest and financing costs. We may also be required to seek additional debt financing on
terms that include more restrictive covenants, require repayment on an accelerated schedule or impose other
obligations that limit our ability to grow our business, acquire needed assets or take other actions that we might
otherwise consider appropriate or desirable.
RISKS RELATED TO OUR GROWTH STRATEGY
Government regulations providing incentives for renewable energy could change at any time.
Development of renewable energy sources and the overall growth of the renewable energy industry are
dependent on state or provincial, national and international policies in support of such development. In
particular, Canada and the United States, two of our principal markets, and their respective provinces and
states, have pursued for several years, and in many cases continue to pursue, pursued policies of active
support for renewable energy for several years. In Brazil, SHPPs benefit from a special discount for the use of
the transmission and distribution system which enables them to secure higher prices in the market. Policies
which incentivize the development of renewables include renewable energy purchase obligations imposed on
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 42
local service entities, tax incentives, including investment tax credits, production tax credits and accelerated
depreciation and direct subsidies.
The cost of renewable energy to purchasers, as well as the economic return available to project sponsors, is
often dependent on the level of incentives available and the availability of such incentives is uncertain. There is
a risk that government regulations providing incentives for renewable energy or increasing emission standards
or other environmental regulation of traditional thermal coal-fired generation could change at any time in a
manner not dissimilar from Canada’s decision to lower emission reduction targets following withdrawal from
Kyoto Protocol. Any such change may impact the competitiveness of renewable energy generally and the
economic value and ability to develop our projects in particular. In addition, some of these incentives are
subject to sunset provisions that put a burden on the renewable power industry to lobby for renewal of
incentives. The budget difficulties facing many governments create greater challenges and uncertainty in
getting incentives renewed. In addition, even if incentives are renewed prior to their expiration, uncertainty
regarding renewal can create substantial risks and delays for developers of renewable power projects. As a
result, we may face reduced ability to develop our project pipeline and realize our development growth
objectives. We may also suffer material write-offs of development assets as a result.
We may be unable to identify and complete sufficient investment opportunities.
Our strategy for building LP Unitholder value is to seek to acquire or develop high-quality assets and
businesses that generate sustainable and increasing cash flows, with the objective of achieving appropriate
risk-adjusted returns on our invested capital over the long-term. However, there is no certainty that we will be
able to find and complete sufficient investment opportunities that meet our investment criteria. Our investment
criteria considers, among other things, the financial, operating, governance and strategic merits of a proposed
acquisition and, as such, there is no certainty that we will be able to acquire or develop additional high-quality
assets at attractive prices to continue growing our business. Competition for assets is significant and
competition from other well-capitalized investors or companies may significantly increase the purchase price or
prevent us from completing an acquisition.
Future growth of our portfolio may subject us to additional risks.
Our strategy is to continue to expand our business through acquisitions and developments, however,
acquisitions involve risks that could materially and adversely affect our business, including: the failure of the
new acquisitions or projects to achieve the expected investment results, risks related to the integration of the
assets or businesses and integration or retention of personnel relating to the acquired assets or companies and
the inability to achieve potential synergies. In addition, liabilities may exist that Brookfield Renewable Group
does not discover in its due diligence prior to the consummation of an acquisition, or circumstances may exist
with respect to the entities or assets acquired that could lead to future liabilities and, in each case, Brookfield
Renewable Group may not be entitled to sufficient, or any, recourse against the vendors or contractual
counterparties to an acquisition agreement. The discovery of any material liabilities subsequent to an
acquisition, as well as the failure of a new acquisition to perform according to expectations, could have a
material adverse effect Brookfield Renewable Group’s assets, liabilities, business, financial condition, results of
operations and cash flow.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 43
The development of our generating facilities is subject to various construction risks and risks
associated with the various types of arrangements we enter into with communities and joint venture
partners.
Our ability to develop an economically successful project is dependent on, among other things, our ability to
construct a particular project on-time and on-budget. The construction and development of generating facilities
is subject to various environmental, engineering and construction risks that could result in cost-overruns, delays
and reduced performance. A number of factors that could cause such delays, cost over-runs or reduced
performance include, but are not limited to, permitting delays, changing engineering and design requirements,
the costs of construction, the performance and necessary experience of contractors, labour disruptions and
inclement weather. In addition, we enter into various types of arrangements with communities and joint venture
partners for the development of projects. Certain of these communities and partners may have or may develop
interests or objectives which are different from or even in conflict with our objectives. Any such differences
could have a negative impact on the success of our projects.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 44
RISKS RELATED TO OUR RELATIONSHIP WITH BROOKFIELD
Brookfield will exercise substantial influence over Brookfield Renewable and we are highly dependent
on the Manager.
Brookfield, through BRPI, is the sole shareholder of the Managing General Partner. As a result of its ownership
of the Managing General Partner, Brookfield will be able to control the appointment and removal of the
Managing General Partner’s directors and, accordingly, exercise substantial influence over Brookfield
Renewable. In addition, Brookfield Renewable holds its interest in the Operating Entities indirectly and will hold
any future acquisitions indirectly through BRELP, the general partner of which is indirectly owned by Brookfield.
As Brookfield Renewable’s only substantial asset is the limited partnership interests that it holds in BRELP,
except future rights under the Voting Agreement, Brookfield Renewable will not have a right to participate
directly in the management or activities of BRELP or the Holding Entities, including with respect to the making
of decisions (although it will have the right to remove and replace the BRELP GP LP).
Brookfield Renewable and BRELP depend on the management and administration services provided by or
under the direction of the Manager under the Master Services Agreement. Brookfield personnel and support
staff that provide services to us under the Master Services Agreement are not required to have as their primary
responsibility the management and administration of Brookfield Renewable or BRELP or to act exclusively for
either of us and the Master Services Agreement does not require any specific individuals to be provided by
Brookfield. Any failure to effectively manage our current operations or to implement our strategy could have a
material adverse effect on our business, financial condition and results of operations. The Master Services
Agreement continues in perpetuity, until terminated in accordance with its terms.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 45
RECONCILIATION OF PRO FORMA RESULTS AND BALANCE SHEET
The following table reconciles EBITDA, FFO and net income on a consolidated basis to EBITDA, FFO and net
income on a pro forma basis, assuming actual generation, for the respective years:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
EBITDA on a consolidated basis
Change in revenues due to revised PPA
Change in direct operating costs
EBITDA on a pro forma basis
FFO on a consolidated basis
Change in revenues due to revised PPA
Change in direct operating costs
Management service costs
FFO on a pro forma basis
Net income on a consolidated basis
Change in revenues due to revised PPA
Change in direct operating costs
Management service costs
Elimination of loss on Fund unit liability
Transfer of revaluation to other comprehensive income
Change in depreciation expense
Intercompany settlements
Deferred income taxes
Notes
2011
2010
(i)
(ii)
(i)
(ii)
(ii)
(i)
(ii)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
$ 804
$ 751
140
(18)
120
(18)
$ 926
$ 853
$ 318
$ 269
140
(18)
(21)
120
(18)
(21)
$ 419
$ 350
$ (451)
$ 294
140
(18)
(21)
376
20
4
19
10
120
(18)
(21)
159
(606)
25
27
71
Net income on a pro forma basis
$ 79
$ 51
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 46
The following table reconciles total assets, total liabilities and equity on a consolidated basis to total assets,
total liabilities and equity on a pro forma basis.
AS AT DECEMBER 31
(MILLIONS)
Total assets on consolidated balance sheet
Transfer of Division
Revaluation of power assets
Intercompany settlements
Total assets on pro forma basis
Total liabilities on consolidated balance sheet
Transaction costs
Changes in fair value of financial instruments
Intercompany settlements
Total liabilities on pro forma basis
Total equity on consolidated balance sheet
Transfer of Division
Revaluation of power assets
Intercompany settlements
Transaction costs
Total equity on pro forma basis
2010
$ 13,874
5
126
(177)
$ 13,828
2010
$ 8,689
20
(199)
(411)
$ 8,099
2010
$ 5,185
5
325
234
(20)
$ 5,729
There is no reconciliation required for 2011 since the balance sheet on a pro forma basis would be the same as
the consolidated balance sheet presented.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 47
SUMMARY OF PRO FORMA ADJUSTMENTS:
(i) Power Purchase Agreements
Pro forma income (loss) reflects an amendment to the power purchase agreement between Brookfield Asset
Management and an indirect wholly-owned subsidiary of Brookfield Renewable (the ‘‘GLPL PPA’’). Under the
amendment, Brookfield Asset Management has agreed to guarantee the price of electricity generated by
facilities owned by Great Lakes Power Limited, a subsidiary of Brookfield Renewable, at C$82 per MWh. This
price is to be increased annually on January 1 by an amount equal to forty percent (40%) of the increase in the
consumer price index during the previous calendar year.
In a separate transaction, Brookfield Energy Marketing LP (‘‘BEM LP’’) and Mississagi Power Trust (‘‘MPT’’), an
indirect wholly-owned subsidiary of Brookfield Renewable, agreed to an amendment to the existing Master
Power Purchase and Sale Agreement (the ‘‘Mississagi PPA’’) to adjust the price of electricity purchased to
C$103 per MWh. This price is to be increased annually by an amount equal to twenty percent (20%) of the
increase in the consumer price index during the previous calendar year.
Additionally, BEM LP and Brookfield Power U.S. Holding America Co. (‘‘BPUSHA’’), an indirect wholly-owned
subsidiary of Brookfield Renewable, agreed to an Energy Revenue Agreement under which BEM LP will
guarantee the price for energy delivered by certain facilities in the United States at $75 per MWh. This price is
to be increased annually on January 1 by an amount equal to forty percent (40%) of the increase in the
consumer price index during the previous calendar year, but not exceeding an increase of three percent (3%) in
any calendar year. In conjunction with the Energy Revenue Agreement, BEM LP and each of the owners of the
facilities entered into power agency agreements (the ‘‘Power Agency Agreements’’) under which BEM LP will
provide certain services. BEM LP will be entitled to be reimbursed for any third party costs incurred and, except
in a few cases, receives no additional fee for its services under the Power Agency Agreements.
The impacts of these contract price amendments and agreements are summarized as follows:
Actual generation (GWh)
Incremental Revenue
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
GLPL PPA
Mississagi PPA
Energy Revenue Agreements
2011
964
473
3,512
4,949
2010
2011
2010
$ 13
14
93
$ 13
17
110
$ 140
$ 120
997
412
3,470
4,879
(ii) Management Service Agreements
An exclusive agreement with Brookfield Asset Management to provide operating, management and consulting
services to the Brookfield Renewable provides for a management service fee to be paid on a quarterly basis
and will continue in perpetuity. The fee has a fixed quarterly component of $5 million and a variable component
calculated as a percentage of the increase in the total capitalization value of Brookfield Renewable, as defined.
For the year ended December 31, 2011 pro forma results reflect an expense of $22 million (2010: $21 million).
Brookfield Renewable will also pay an annual marketing service fee of $18 million to a subsidiary of Brookfield
Asset Management to reflect an agreement to provide energy marketing services. The fee will be increased
annually on January 1 by an amount equal to the increase in the U.S. consumer price index during the previous
calendar year. Pro forma results for the year ended December 31, 2011 reflects an expense of $18 million
(2010: $18 million).
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 48
(iii) Transfer of Brookfield Renewable Power Fund (the Fund) Units
The transfer of the 66% of the Fund units not previously owned by Brookfield Asset Management was
completed at fair value satisfied by the issuance of Partnership units. The result of this transaction is to reflect
the settlement of the Fund unit liability and the issuance of Partnership units to satisfy the transfer as equity of
Brookfield Renewable. As a result of this transaction, the loss on Fund unit liability already on the balance sheet
of $376 million (2010: $159 million), related to the change in fair value of the units and the distributions made on
such Fund units, were eliminated.
(iv) Changes in Fair Value of Financial Instruments
During the year ended December 31, 2011, certain power guarantee agreements between Brookfield
Renewable and Brookfield Asset Management were accounted for as financial instruments with an unrealized
gain of $20 million (2010: $606 million).
As a result of new agreements and changes in existing agreements with Brookfield Asset Management and its
subsidiaries arising from the Combination, the contracts are not accounted for as financial instruments by
Brookfield Renewable. Thus the unrealized financial instrument gains (losses) described above have been
eliminated.
(v) Intercompany Settlements
Brookfield Renewable and its subsidiaries settled certain intercompany loans and transactions with Brookfield
Asset Management upon completion of the Combination. During the year ended December 31, 2011, $19
million of interest income was recorded in the pro forma statement of income to reflect these transactions
(2010: $27 million).
(vi) Change in Depreciation Expense
The reduction in fair value of the power generating assets from Brookfield Renewable’s statement of income
and loss financial information results in a decrease in pro forma depreciation expense of $4 million and $25
million for the years ended December 31, 2011 and December 31, 2010, respectively.
(vii) Deferred Income Tax
The audited consolidated balance sheet as of December 31, 2011 reflects an increase in deferred tax assets of
$30 million as a result of the contract amendment payments and a decrease in deferred tax liabilities of $30
million as a result of changes in temporary differences arising from the adjustments discussed above, primarily
related to the increase in the fair value of property, plant and equipment and the elimination of the financial
instrument liability and the change in applicable tax rate for certain subsidiaries as a result of the dissolution of
the Fund as part of the Combination. Net income on a pro forma basis for the year ended December 31, 2011,
reflects increases in deferred tax recoveries of $10 million (2010: $71 million).
Critical Accounting Estimates and Judgments
The preparation of financial statements in conformity in IFRS requires management to select appropriate
accounting policies to make estimates and assumptions that affect the reported amounts of assets, liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the period. In particular, critical accounting policies and estimates
utilized in the normal course of preparing Brookfield Renewable’s consolidated financial statements require the
determination of the fair value of property, plant and equipment, the estimation of useful lives of assets of
property, plant and equipment, depreciation and amortization; value of intangible assets; ability to utilize tax
losses; effectiveness of financial hedges for accounting purposes; and fair values for recognition, measurement
and disclosure purposes.
In making estimates, management relies on external information and observable conditions where possible,
supplemented by internal analysis, as required. These estimates have been applied in a manner consistent
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 49
with that in the prior year and there are no known trends, commitments, events or uncertainties that we believe
will materially affect the methodology or assumptions utilized in this report. These estimates are impacted by,
among other things, future power prices, movements in interest rates, foreign exchange and other factors,
some of which are highly uncertain, as described in the analysis of business and environmental risks section of
this report. The interrelated nature of these factors prevents us from quantifying the overall impact of these
movements on Brookfield Renewable’s financial statements in a meaningful way. These sources of estimation
uncertainty relate in varying degrees to virtually all asset and liability account balances.
Critical estimates
Brookfield Renewable makes estimates and assumptions that affect the carrying value of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amount of earnings for the year. Actual results
could differ from estimates. The estimates and assumptions that are critical to the determination of the amounts
reported in the consolidated financial statements relate to the following:
(i)
Property, plant and equipment
The fair value of Brookfield Renewable’s property, plant and equipment is calculated using estimates and
assumptions about future electricity prices, anticipated long-term average generation, estimated operating and
capital expenditures, future inflation rates and discount rates, as described in Note 9 - Property, Plant and
Equipment of the December 31, 2011 annual audited consolidated financial statements. Judgment is involved in
determining the appropriate estimates and assumptions in the valuation of Brookfield Renewable’s property,
plant and equipment. See “Critical judgments in applying accounting policies” for further details.
Estimates of useful lives and residual values are used in determining depreciation and amortization. To ensure
the accuracy of useful lives and residual values, these estimates are reviewed on an annual basis.
(ii) Financial instruments
Brookfield Renewable makes estimates and assumptions that affect the carrying value of its financial
instruments, including estimates and assumptions about future electricity prices, long-term average generation,
capacity prices, discount rates and the timing of energy delivery. Non-financial instruments are valued using
estimates of future electricity prices which are estimated by considering broker quotes for the years in which
there is a liquid market and for the subsequent years its best estimate of electricity prices that would allow new
entrants into the market.
(iii) Deferred income tax
The consolidated financial statements include estimates and assumptions for determining the future tax rates
applicable to subsidiaries and identifying the temporary differences that relate to each subsidiary. Deferred
income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted at the
balance sheet date. Operating plans and forecasts are used to estimate when temporary difference will reverse.
CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES
The following are the critical judgments that have been made in applying the accounting policies used in the
consolidated financial statements and that have the most significant effect on the amounts in the consolidated
financial statements:
(i)
Preparation of consolidated financial statements
These consolidated financial statements present the financial position, results of operations and cash flows of
Brookfield Renewable. Judgment is required in determining what assets, liabilities and transactions are
recognized in the consolidated financial statements as pertaining to Brookfield Renewable’s operations.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 50
(ii) Common control transactions
IFRS 3R does not include specific measurement guidance for transfers of businesses or subsidiaries between
entities under common control. Accordingly, Brookfield Renewable has developed a policy to account for such
transactions taking into consideration other guidance in the IFRS framework and pronouncement of other
standard-setting bodies. Brookfield Renewable’s policy is to record assets and liabilities recognized as a result
of transactions between entities under common control at the carrying value on the transferor’s financial
statements, and to have the financial statements reflect the results of combining entities for all periods
presented for which the entities were under the transferor’s common control, irrespective of when the
combination takes place.
(iii) Property, plant and equipment
The accounting policy relating to the Brookfield Renewable’s property, plant and equipment is described in Note
2 (e) of the December 31, 2011 annual audited consolidated financial statements. In applying this policy,
judgment is used in determining whether certain costs are additions to the carrying amount of the property,
plant and equipment as opposed to repairs and maintenance. If an asset has been developed, judgment is
required to identify the point at which the asset is capable of being used as intended and to identify the directly
attributable costs to be included in the carrying value of the development asset. The useful lives of property,
plant and equipment are determined by independent engineers periodically with an annual review by
management.
Annually Brookfield Renewable determines the fair value of its property, plant and equipment using a
methodology that it has judged to be reasonable. The methodology is a twenty year discounted cash flow
model. Twenty years is the period considered reasonable as Brookfield Renewable has twenty year capital
plans and it believes a reasonable third party would be indifferent between extending the cash flows further in
the model versus using a discounted terminal value.
In developing a view on electricity prices, Brookfield Renewable has concluded that independent market quotes
for the first four years are appropriate to utilize for this timeframe as it represents a liquid market. Long-term
electricity prices have been developed to reflect the renewable nature of the portfolio, and are within a range of
what a new build renewable asset would achieve and the price that a new thermal facility would require in order
to earn a reasonable return.
Discount rates are determined each year by considering the current interest rates, average market cost of
capital as well as the price risk and the geographical location of the operational facilities as judged by
management. Inflation rates are also determined by considering the current inflation rates and the expectations
of future rates by economists. Operating costs are based on long-term budgets escalated thereafter for
inflation. Each operational facility has a twenty year capital plan that it follows to ensure the maximum life of its
assets is achieved. Foreign exchange rates are forecasted by using the spot rates and the available forward
rates, extrapolated beyond the period available. The inputs described above to the discounted cash flow model
require management to consider facts, trends and plans in making its judgments as to what derives a
reasonable fair value of its property, plant and equipment.
(iv) Consolidation of the Brookfield Renewable Power Fund
Included within the consolidated financial statements prior to the Combination was the 34% investment in the
Fund, on a fully-exchanged basis. As a result of the reduction in ownership share of the Fund during 2010,
Brookfield Asset Management reassessed whether it continued to control the Fund. In making this assessment,
the definition of control and guidance as set out in IAS 27 - Consolidated and Separate Financial Statements,
(“IAS 27”) was considered. Prior to the Combination, Brookfield Asset Management concluded that control did
exist as it had the power to govern the financial and operating policies of the Fund under specific agreements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 51
As a result, the Fund was controlled by Brookfield Asset Management, and the financial position, results of
operations and cash flows of the Fund were consolidated within the consolidated financial statements.
(v) Financial instruments
In applying the policy on Financial Instruments, judgments are made in applying the criteria set out in IAS 39,
Financial Instruments: Recognition and Measurement (“IAS 39”), to record financial instruments at fair value
through profit and loss, and the assessments of the effectiveness of hedging relationships.
(vi) Deferred income tax
In applying this policy, judgments are made in determining the probability of whether deductions, tax credits and
tax losses can be utilized.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 52
RECENTLY ADOPTED ACCOUNTING POLICIES
(i)
Related party disclosures – revised definition of related parties
On January 1, 2011, Brookfield Renewable adopted the revised version of IAS 24, Related Party Disclosures
(“IAS 24”). IAS 24 is required to be applied retrospectively for annual periods beginning on or after January 1,
2011, and requires entities to disclose in their financial statements information about transactions with related
parties. Generally, two parties are related to each other if one party controls, or significantly influences, the
other party. IAS 24 has simplified the definition of a related party. Implementation of IAS 24 did not have a
material impact to the Brookfield Renewable’s annual consolidated financial statements.
(ii) Defined benefit assets and minimum funding requirements
On January 1, 2011, the Brookfield Renewable adopted Prepayments of a Minimum Funding Requirement
(Amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, IAS 19, The
Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (“IFRIC 14"). Without
the amendments, in some circumstances entities were not permitted to recognise as an asset some voluntary
prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the
amendments correct the problem. Implementation of IFRIC 14 did not have a material impact on the Brookfield
Renewable’s annual consolidated financial statements.
(iii)
Improvements to IFRS
On January 1, 2011, Brookfield Renewable adopted Improvements to IFRS – a collection of amendments to
seven IFRS – as part of the IASB’s program of annual improvements to its standards. Implementation of
Improvements to IFRS did not have a material impact on Brookfield Renewable’s annual consolidated financial
statements.
(iv) Extinguishing Financial Liabilities with Equity Instruments
On January 1, 2011, Brookfield Renewable adopted Interpretation 19, Extinguishing Financial Liabilities with
Equity Instruments (“IFRIC 19”). This interpretation provides guidance on how to account for the
extinguishment of a financial liability by the issue of equity instruments. IFRIC 19 clarifies that the entity’s
equity instruments issued to a creditor, which are part of the consideration paid to extinguish the financial
liability are measured at their fair value. If their fair value cannot be reliably measured, the equity instruments
should be measured to reflect the fair value of the financial liability extinguished. Differences between the
carrying amount of the financial liability extinguished and the initial measurement amount of the equity
instruments issued is included in the entity’s profit or loss for the period. Implementation of IFRIC 19 did not
have a material impact on Brookfield Renewable’s consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 53
FUTURE CHANGES IN ACCOUNTING POLICIES
(i)
Financial Instruments
IFRS 9, Financial Instruments (“IFRS 9”) was issued by the International Accounting Standards Board (“IASB”)
on October 28, 2010, and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial
asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS
9 is based on how an entity manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets. Two measurement categories continue to exist to
account for financial liabilities in IFRS 9, fair value through profit or loss (“FVTPL”) and amortized cost.
Financial liabilities held for trading are measured at FVTPL, and all other financial liabilities are measured at
amortized cost unless the fair value option is applied. The treatment of embedded derivatives under the new
standard is consistent with IAS 39 and is applied to financial liabilities and non-derivative hosts not within the
scope of the standard. IFRS 9 is effective for annual periods beginning on or after January 1, 2015.
Management is currently evaluating the impact of IFRS 9 on the consolidated financial statements.
(ii) Consolidation
IFRS 10, Consolidation (“IFRS 10”) was issued by the IASB on May 12, 2011, and replaces SIC-12,
Consolidation – Special Purpose Entities and parts of IAS 27. IFRS 10 requires an entity to consolidate an
investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Under IAS 27, consolidation is required when
an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from
its activities. IFRS 10 is effective for annual periods beginning on or after January 1, 2013. Management is
currently evaluating the impact of IFRS 10 on the consolidated financial statements.
(iii) Joint arrangements
IFRS 11, Joint Arrangements (“IFRS 11”) was issued by the IASB on May 12, 2011, and replaces IAS 31,
Interests in Joint Ventures (“IAS 31”), and SIC-13, Jointly Controlled Entities—Non-monetary Contributions by
Venturers. IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint
operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint
operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint
operation. Under IAS 31, entities have the choice to proportionately consolidate or equity account for interests
in joint ventures. IFRS 11 is effective for annual periods beginning on or after January 1, 2013. Management is
currently evaluating the impact of IFRS 11 on the consolidated financial statements.
(iv) Disclosure of interests in other entities
IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”) was issued by the IASB on May 12, 2011. IFRS
12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates,
special purpose vehicles and off-balance sheet vehicles. The standard carries forward existing disclosures and
also introduces significant additional disclosure requirements that address the nature of, and risks associated
with, an entity’s interests in other entities. IFRS 12 is effective for annual periods beginning on or after January
1, 2013. Management is currently evaluating the impact of IFRS 12 on the consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 54
(v) Fair value measurement
IFRS 13, Fair Value Measurement (“IFRS 13”), a comprehensive standard for fair value measurement and
disclosure requirements for use across all IFRS standards, was issued by the IASB on May 12, 2011. The new
standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability
in an orderly transaction between market participants, at the measurement date. It supersedes the fair value
guidance that currently exists in IAS 16 concerning the use of the revaluation method. It also establishes
disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair
value is dispersed among the specific standards requiring fair value measurements and in many cases does
not reflect a clear measurement basis or consistent disclosures. IFRS 13 is effective for annual periods
beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 13 on the
consolidated financial statements.
(vi) Accounting for employee benefits and minimum funding requirements
In June 2011, the IASB issued significant amendments to IAS 19, Employee Benefits (“IAS 19”). These
changes affect the recognition of actuarial gains and losses by removing the option to use the corridor
approach and requiring immediate recognition in OCI. These OCI amounts cannot be recycled to the income
statement. There are also changes to the recognition, measurement and presentation of past service costs,
cost of benefits and finance expense or income relating to employee benefits. Further, termination benefits are
recognized as a liability only when the entity can no longer withdraw the offer of the termination benefit or
recognizes any related restructuring costs. There are additional disclosure requirements. The amendment is
effective for periods beginning on or after January 1, 2013. Management is currently evaluating the impact of
these amendments on the consolidated financial statements.
(vii) Presentation of items of Other Comprehensive Income
In June 2011, IASB issued amendments to IAS 1, Presentation of Financial Statements. These amendments
include a requirement for entities to group items presented in OCI on the basis of whether they are potentially
re-classifiable to profit or loss subsequently (reclassification adjustments), and emphasize the importance of
presenting profit or loss and OCI together and with equal prominence. The amendment is effective for annual
periods starting on or after July 1, 2012. Management is currently evaluating the impact of these amendments
on the consolidated financial statements.
(viii) Income Taxes
In December 2010, IASB issued amendments to IAS 12, Income Taxes. Under these amendments, an entity is
required to measure the deferred tax relating to an asset depending on whether the entity expects to recover
the carrying amount of the asset through use or sale. The amendment is effective for annual periods starting on
or after January 1, 2012. Management is currently evaluating the impact of these amendments on the
consolidated financial statements.
(ix) Consolidation and Separate Financial Statements
In May 2011, IASB amended and reissued IAS 27. The amended standard is to be applied in accounting for
investments in subsidiaries, jointly ventures, and associates when an entity elects, or is required by local
regulations, to present separate (non-consolidated) financial statements. The amendment is effective for annual
periods starting on or after January 1, 2013. Management is currently evaluating the impact of these
amendments on the consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 55
(x)
Investment in Associates
In May 2011, IASB amended and reissued IAS 28, Investment in Associates and Joint Ventures. The amended
standard prescribes the accounting treatment for investments in associates and sets out the requirements for
the application of the equity method when accounting for investments in associates and joint ventures. The
amendment is effective for annual periods starting on or after January 1, 2013. Management is currently
evaluating the impact of these amendments on the consolidated financial statements.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL
REPORTING
The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of Brookfield
Renewable’s disclosure controls and procedures and internal controls over financial reporting. Based on those
evaluations, the Chief Executive Officer and Chief Financial Officer concluded that such disclosure, controls
and procedures and internal controls over financial reporting were adequate and effective as of December 31,
2011 in providing reasonable assurance that material information relating to Brookfield Renewable and its
consolidated subsidiaries would be made known to them within those entities as well as in regards to the
reliability of financial reporting and preparation of financial statements for external purposes in accordance with
IFRS.
FOURTH QUARTER RESULTS FOR 2011
Generation for the three months ended December 31, 2011 was 3,848 GWh compared to 4,002 GWh in the
same period last year and long-term average of 4,076 GWh. This is a decrease of 154 GWh or 4% in the
quarter compared to last year and a 228 GWh or 6% decrease from long-term average.
Hydroelectric generation for the three months ended December 31, 2011 was 3,391 GWh compared to 3,586
GWh in the same period last year and long-term average of 3,723 GWh. This is a decrease of 195 GWh or 5%
in the quarter compared to last year and 332 GWh or 9% decrease than long-term average.
Wind generation for the three months ended December 31, 2011 was 255 GWh compared to 186 GWh in the
same period last year and long-term average of 249 GWh. This is an increase of 69 GWh or 37% in the quarter
compared to last year and an increase of 6 GWh or 2% increase from long-term average.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 56
FOR THE THREE MONTHS ENDED DECEMBER 31
(GWH)
Hydroelectric generation
Actual Generation
2010
2011
LTA Generation
2010
2011
Variance of Results
Actual
vs. Prior
year
2011
Actual
vs. LTA
2011
United States
1,756
1,711
1,655
1,621
45
101
Canada
Brazil (1)
Wind energy
Other
Total generation (2)
% variance
756
879
1,054
1,189
1,193
(298)
(433)
821
879
821
58
-
3,391
3,586
3,723
3,635
(195)
(332)
255
202
186
230
249
104
154
104
69
(28)
6
98
3,848
4,002
4,076
3,893
(154)
(228)
(4)%
(6)%
(1)
(2)
Assured generation levels
Actual and long-term average generation includes 100% of generation from equity-accounted and long-term investments.
SUMMARY OF HISTORICAL QUARTERLY RESULTS
Funds from operations (FFO) can vary with the amount of electricity generated in any given quarter and the
realized prices of selling that electricity. The volume of electricity generated depends on available water inflows
that rely upon precipitation and the management of storage capabilities. Realized prices are influenced by
PPAs, and changes in foreign exchange rates. The following is a summary of unaudited quarterly financial
information for the last eight consecutive quarters:
FOR THE PERIODS ENDED,
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) (1)
Revenues
EBITDA
FFO
2011
2010
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
3,848
3,614
4,491
3,924
4,002
2,890
3,407
4,181
$ 267 $ 280
$ 332
$ 290 $ 281 $ 222
$ 244 $ 298
Net(loss) income
(72)
(232)
(80)
(91)
135
21
205
87
249
215
112
98
201
68
414
166
174
210
39
73
89
(55)
(55)
(45)
Net (loss) per unit
(0.27)
(0.89)
(0.30)
(0.34)
1.57
(0.21)
(0.21)
(0.17)
Distributions
$ 89
$ 34
$ 34
$ 35
$ 34
$ 33 $ 33 $ 32
(1) Actual generation includes 100% of generation from equity-accounted and long-term investments.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 57
SUBSEQUENT EVENTS
Growth developments
With its institutional partners, Brookfield Renewable recently acquired new wind generation assets in California,
including a 150 MW wind farm adjacent to the Coram wind project in the Tehachapi region. This new facility
entered commercial operation in the first quarter of 2012 and comes with a 24-year PPA with Southern
California Edison. Brookfield Renewable also acquired the remaining 50% stake previously held by its partner in
Coram, along with a further 22 MW of additional operating wind generation capacity.
Unitholder distribution increase
In January 2012, Brookfield Renewable announced an increase in unitholder distributions to $1.38 per unit on
an annualized basis, an increase of three cents per unit per year, to take effect during the first quarter
distribution payable in April 2012.
Secondary offering and over-allotment option exercised
In the first quarter of 2012, a bought-deal secondary offering that was completed, through which a wholly-
owned subsidiary of Brookfield Asset Management sold 13,144,500 of its limited partnership units of Brookfield
Renewable (11,430,000 limited partnership units plus 1,714,500 limited partnership units pursuant to an over-
allotment option that was exercised in full) at an offering price of C $26.25 per limited partnership unit.
Brookfield Asset Management had previously owned approximately 73% of Brookfield Renewable on a fully-
exchanged basis. Upon the completion of the secondary offering, and giving effect to the over-allotment option,
Brookfield Asset Management now owns, directly and indirectly, 177,750,609 limited partnership units,
representing approximately 68% of Brookfield Renewable on a fully-exchanged basis.
Medium-term note offering
In February 2012, Brookfield Renewable successfully completed a C$400 million offering of medium-term notes
bearing interest at a rate of 4.79% per year that are due February 2022. Proceeds of the offering were used to
refinance existing indebtedness and for general business purposes.
Distribution reinvestment plan
In the first quarter of 2012, the Board of Directors for Brookfield Renewable approved the adoption and
implementation of a distribution reinvestment plan. The plan has been implemented in the current quarter and
allows registered or beneficial holders of Brookfield Renewable limited partnership units who are residents in
Canada to acquire additional units by reinvesting all or a portion of their cash distributions without paying
commissions.
Credit facilities
In March 2012, Brookfield Renewable expanded its revolving credit facilities from $600 million to $900 million,
with maturity dates out to October 2016.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 58
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENT
This Management’s Discussion and Analysis contains forward-looking statements and information, within the
meaning of Canadian securities laws, concerning the business and operations of Brookfield Renewable.
Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections,
guidance or other statements that are not statements of fact. Forward-looking statements in this Management’s
Discussion and Analysis include statements regarding the quality of Brookfield Renewable’s assets and the
resiliency of the cash flow they will generate, Brookfield Renewable anticipated financial performance, the
future growth prospects and distribution profile of Brookfield Renewable and Brookfield Renewable’s access to
capital. Forward-looking statements can be identified by the use of words such as “plans”, “expects”,
“scheduled”, “estimates”, “intends”, “anticipates”, “believes”, “potentially”, “tends”, “continue”, “attempts”, “likely”,
“primarily”, “approximately”, “endeavours”, “pursues”, “strives”, “seeks” or variations of such words and phrases,
or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or
be achieved. Although we believe that our anticipated future results, performance or achievements expressed
or implied by the forward-looking statements and information in this Management’s Discussion and Analysis are
based upon reasonable assumptions and expectations, we cannot assure you that such expectations will prove
to have been correct. You should not place undue reliance on forward-looking statements and information as
such statements and information involve known and unknown risks, uncertainties and other factors which may
cause our actual results, performance or achievements to differ materially from anticipated future results,
performance or achievement expressed or implied by such forward-looking statements and information.
Factors that could cause actual results to differ materially from those contemplated or implied by forward-
looking statements include, but are not limited to: changes to hydrology at our hydroelectric stations or in wind
conditions at our wind energy facilities; the risk that counterparties to our contracts do not fulfill their obligations,
and as our contracts expire, we may not be able to replace them with agreements on similar terms; increases in
water rental costs (or similar fees) or changes to the regulation of water supply; our operations being highly
regulated and exposed to increased regulation which could result in additional costs; the risk that our
concessions and licenses will not be renewed; increases in the cost of operating our plants; our failure to
comply with conditions in, or our inability to maintain, governmental permits; equipment failure; dam failures and
the costs of repairing such failures; force majeure events; exposure to uninsurable losses; adverse changes in
currency exchange rates; our inability to access interconnection facilities and transmission systems;
occupational, health, safety and environmental risks; disputes and litigation; losses resulting from fraud, other
illegal acts, inadequate or failed internal processes or systems, or from external events; general industry risks
relating to the North American and Brazilian power market sectors; advances in technology that impair or
eliminate the competitive advantage of our projects; newly developed technologies in which we invest not
performing as anticipated; labour disruptions and economically unfavourable collective bargaining agreements;
risks related to operating in Brazil; our inability to finance our operations; the operating and financial restrictions
imposed on us by our loan, debt and security agreements; changes in our credit ratings; changes to
government regulations that provide incentives for renewable energy; our inability to identify and complete
sufficient investment opportunities; the growth of our portfolio; our inability to develop existing sites or find new
sites suitable for the development of greenfield projects; risks associated with the development of our
generating facilities and the various types of arrangements we enter into with communities and joint venture
partners; Brookfield Asset Management’s inability to source acquisition opportunities for us and our lack of
access to all renewable power acquisitions that Brookfield Asset Management identifies; our lack of control over
all our operations; our obligations to issue equity or debt for future acquisitions and developments; and foreign
laws or regulation to which we become subject as a result of future acquisitions in new markets.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. The
forward-looking statements represent our views as of the date of this Management’s Discussion and Analysis
and should not be relied upon as representing our views as of any date subsequent to March 23, 2012, the date
of this Management’s Discussion and Analysis. While we anticipate that subsequent events and developments
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 59
may cause our views to change, we disclaim any obligation to update the forward-looking statements, other
than as required by applicable law. For further information on these known and unknown risks, please see “Risk
Factors”.
CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS ACCOUNTING
MEASURES
This Management’s Discussion and Analysis contains references to EBITDA and FFO which are not generally
accepted accounting measure under IFRS and therefore may differ from definitions of EBITDA and FFO, used
by other entities. We believe that operating EBITDA and FFO are useful supplemental measures that may
assist investors in assessing the financial performance and the cash anticipated to be generated by our
operating portfolio. None of EBITDA and FFO should be considered as the sole measure of our performance
and should not be considered in isolation from, or as a substitute for, analysis of our financial statements
prepared in accordance with IFRS. As a result of the Combination, we have presented these measurements on
a pro forma basis.
A reconciliation of EBITDA and FFO to net income is presented in our Management’s Discussion and Analysis
related to our audited consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 60
MANAGEMENT’S RESPONSIBILITY
Management’s Responsibility for Financial Statements
The accompanying consolidated financial statements have been prepared by and are the responsibility of the
Board of Directors and Management.
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards and reflect Management’s best estimates and judgments based on currently available information.
Brookfield Renewable has developed and maintains a system of internal controls in order to ensure, on a
reasonable and cost effective basis, the reliability of its financial information.
The consolidated financial statements have been audited by Ernst & Young LLP. Their report outlines the scope
of their examination and opinion on the consolidated financial statements.
Richard Legault Sachin Shah
Chief Executive Officer Chief Financial Officer
March 23, 2012
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 61
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Brookfield Renewable Energy Partners L.P.
We have audited the accompanying consolidated financial statements of Brookfield Renewable Energy
Partners L.P. (“Brookfield Renewable”), which comprise the consolidated balance sheet as at December 31,
2011 and the consolidated statements of (loss) income, comprehensive income (loss), changes in equity and
cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information.
Management's responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement. We were
not engaged to perform an audit of Brookfield Renewable’s internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
Brookfield Renewable’s internal control over financial reporting. Accordingly, we express no such opinion.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis
for our audit opinion.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 62
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Brookfield Renewable Energy Partners L.P. as at December 31, 2011, and its financial performance and its
cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
Other Matters
The financial statements of Brookfield Renewable for the year ended December 31, 2010, were audited by
another auditor who expressed an unmodified opinion on those statements on September 29, 2011.
Toronto, Canada
March 23, 2012
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 63
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31
(U.S. $ MILLIONS)
Assets
Current assets
Cash and cash equivalents
Trade receivables and other current assets
Due from related parties
Due from related parties
Equity-accounted and long-term investments
Property, plant and equipment, at fair value
Intangible assets
Deferred income tax assets
Other long-term assets
Liabilities and Partners’ equity
Current liabilities
Accounts payable and accrued liabilities
Financial instrument liabilities
Due to related parties
Current portion of long-term debt and credit facilities
Financial instrument liabilities
Due to related parties
Long-term debt and credit facilities
Deferred income tax liabilities
Other long-term liabilities
Fund unit liability
Non-controlling interests
Participating non-controlling interests
Preferred equity
Limited partners’ equity
Notes
2011
2010
5
6
8
8
9
10
11
15
12
13
7
8
14
7
8
14
15
16
18
22
23
18
$ 267
158
253
678
32
405
13,945
57
306
285
$ 15,708
$ 190
99
139
650
1,078
15
8
4,869
2,374
164
8,508
-
629
241
6,330
7,200
$ 15,708
$ 188
146
400
734
19
269
12,173
87
276
316
$ 13,874
$ 190
25
567
135
917
221
101
4,859
2,429
162
8,689
1,355
206
252
3,372
5,185
$ 13,874
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of Brookfield Renewable Energy Partners L.P.:
Patricia Zuccotti David Mann
Director Director
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 64
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
FOR THE YEARS ENDED DECEMBER 31
(U.S. $ MILLIONS)
Revenues
Other income
Direct operating costs
Share of cash earnings in equity-accounted investments
Earnings before interest, tax, depreciation and amortization
Interest expense – borrowings
Management service costs
Current income taxes
Funds from operations prior to non-controlling interests
Other items
Depreciation and amortization
Unrealized financial instrument (losses) gains
Loss on Fund unit liability
Share of non-cash loss in equity-accounted investments
Deferred income tax recovery
Other
Net (loss) income
Net (loss) income attributable to:
Non-controlling interests
Participating non-controlling interests
Preferred equity
Limited partners
Basic and diluted earnings per share
Notes
8, 25
8, 20
9
25
25
8
15
10,11
7
18
9
15
2011
$ 1,169
19
(407)
23
804
(411)
(1)
(22)
370
(468)
(20)
(376)
(13)
50
6
2010
$ 1,045
12
(328)
22
751
(404)
-
(32)
315
(446)
584
(159)
(7)
3
4
$(451)
$ 294
22
23
18
11
13
(475)
$(451)
$(1.80)
25
10
259
$ 294
$0.98
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 65
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31
(U.S. $ MILLIONS)
Net (loss) income
Other comprehensive income (loss)
Revaluations of property, plant and equipment
Financial instruments designated as cash-flow hedges
Foreign currency translation
Deferred income taxes on above items, net
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Non-controlling interests
Limited partners’ equity
Notes
9, 10
7
15
22,23
2011
$ (451)
1,774
(774)
(169)
239
1,070
$ 619
$ 218
401
$ 619
2010
$294
(959)
-
168
444
(347)
$ (53)
$ 51
(104)
$(53)
The accompanying notes are an integral part of the consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 66
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31
(U.S. $ MILLIONS)
Participating non-controlling interests
Balance, beginning of year
Net income
Other comprehensive income
Acquisitions
Distributions
Other
Balance, end of year
Preferred equity
Balance, beginning of year
Net income
Other comprehensive (loss) income
Shares issued
Distributions
Other
Balance, end of year
Limited partners’ equity
Balance, beginning of year
Net (loss) income
Distributions
Adjustments related to the Combination
Settlement of the Fund unit liability
Derivative balances
Settlement of related party balances
Transfer of assets
Balance, end of year
Accumulated other comprehensive income
Fund unit liability
Notes
2011
2010
22
23
18
24
18
$206
11
200
223
(25)
14
$ 629
$ 252
13
(6)
-
(13)
(5)
$241
$197
25
10
-
(23)
(3)
$206
$ -
10
8
244
(10)
-
$252
$(1,569)
$(1,196)
(475)
(98)
1,568
163
350
47
$ (14)
6,344
$ 6,330
-
$ 7,200
259
(632)
-
-
-
-
$(1,569)
4,941
$ 3,372
1,355
$ 5,185
The accompanying notes are an integral part of these consolidated financial statements
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 67
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(U.S. $ MILLIONS)
Operating activities
Net (loss) income
Adjustments for the following non-cash items:
Depreciation and amortization
Unrealized financial instrument losses (gains)
Loss on Fund unit liability
Share of earnings in equity-accounted investments
Deferred income tax recovery
Other
Dividends received from equity-accounted investments
Net change in working capital balances
Financing activities
Long-term debt – borrowings
Long-term debt – repayments
Capital provided by participating non-controlling interests and preferred equity
Sale of Fund units held by Brookfield Renewable
Contributions from common parent
Distributions:
To participating non-controlling interests and preferred equity
To unitholders of the Fund
Investing activities
Due to (from) related parties
Acquisitions
Investment in:
Sustaining capital expenditures
Development and construction of renewable power generating assets
Change in restricted cash and other
Foreign exchange gain on cash held in foreign currencies
Cash and cash equivalents
Increase
Balance, beginning of year
Balance, end of year
Supplemental cash flow information:
Interest paid
Interest received
Income taxes paid
Notes
2011
2010
$(451)
$294
10,11
7
18
9
15
21
14
14
14
22,23
18
4
468
20
376
(10)
(50)
-
8
361
(12)
349
880
(215)
186
-
106
(39)
(109)
809
(120)
(212)
(66)
(698)
6
(1,090)
11
79
188
$ 267
$ 318
$ 27
$ 48
446
(584)
159
(15)
(3)
(87)
37
247
(29)
218
747
(951)
239
164
100
(33)
(77)
189
(115)
-
(53)
(247)
18
(397)
5
15
173
$188
$ 299
$ 15
$ 39
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 68
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
The business activities of Brookfield Renewable consist of owning a portfolio of renewable power
generating facilities in Canada, the United States and Brazil, which have historically been held as part of
the power generating operations of Brookfield Renewable Power Inc. (“BRPI”) and Brookfield Renewable
Power Fund ( the “Fund”).
Brookfield Renewable is a publicly traded limited partnership established under the laws of Bermuda
pursuant to an amended and restated limited partnership agreement dated November 20, 2011.
The registered office of Brookfield Renewable is Canon’s Court, 22 Victoria Street, Hamilton HM12,
Bermuda.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
The consolidated financial statements were prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The accounting
policies used in the consolidated financial statements are based on the IFRS applicable as at December
31, 2011, and encompasses
International Accounting Standards (“IAS”), and
interpretations made by the International Financial Reporting Interpretations Committee (“IFRIC”) and the
Standing Interpretations Committee (“SIC”). The policies set out below are consistently applied to all
periods presented.
individual
IFRS,
These consolidated financial statements have been authorized for issuance by the Board of Directors of
its general partner, Brookfield Renewable Partners Limited, on March 23, 2012.
Certain comparative figures have been reclassified to conform with the current year’s presentation.
All figures are presented in millions of United States (“U.S.”) dollars unless otherwise noted.
(b) Basis of presentation
The consolidated financial statements have been prepared on the basis of historical cost, except for the
revaluation of property, plant and equipment and certain assets and liabilities which have been measured
at fair value. Cost is recorded based on the fair value of the consideration given in exchange for assets.
(i) Consolidation
These consolidated financial statements include the accounts of Brookfield Renewable and its
subsidiaries, which are the entities over which Brookfield Renewable has control. Control exists when
Brookfield Renewable has the power, directly or indirectly, to govern the financial and operating policies
of an entity, so as to obtain benefits from its activities. Non-controlling interests in the equity of Brookfield
Renewable’s subsidiaries are shown separately in partners’ equity in the consolidated balance sheets.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 69
(ii) Strategic combination of the renewable power generating operations
On November 28, 2011, Brookfield Renewable announced the completion of the strategic combination
(the “Combination”) of the renewable power assets of BRPI and the Fund to launch Brookfield
Renewable. Also, on that date, the public unitholders of the Fund received one non-voting limited
partnership unit of Brookfield Renewable in exchange for each trust unit of the Fund held, and the Fund
was wound up. In addition, all required approvals were obtained from the holders of preferred shares of
Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”) and BRPI’s unsecured noteholders as
well as the required regulatory, governmental, corporate and contractual consents, assignments and
approvals.
Brookfield Renewable also created a new subsidiary BRP Finance ULC (“BRP Finance”) to assume
BRPI’s term notes with maturities ranging from 2016 to 2036.
Also as part of the Combination, Brookfield Renewable entered into a voting agreement with Brookfield
Asset Management Inc. (“Brookfield Asset Management”), which provides Brookfield Renewable with
control of the general partner of Brookfield Renewable Energy L.P. (“BRELP”). Accordingly, Brookfield
Renewable consolidates the accounts of BRELP and its subsidiaries. In addition, BRELP issued
redeemable partnership units, to a subsidiary of Brookfield Asset Management Inc. (“Brookfield Asset
Management”), pursuant to which the holder may at its request require BRELP to redeem the units for
cash consideration after a mandatory two-year holding period from the date of issuance. This right is
subject to Brookfield Renewable’s right of first refusal which entitles it, at its sole discretion, to elect to
acquire all of the units so presented to BRELP that are tendered for redemption in exchange for
Brookfield Renewable limited partnership units. As Brookfield Renewable, at its sole discretion, has the
right to settle the obligation with limited partnership units, the BRELP redeemable partnership units are
classified as limited partnership units.
At the date of the Combination, Brookfield Asset Management, Brookfield Renewable’s ultimate parent
company, held directly or indirectly, approximately a 73% limited partnership interest on a fully-exchanged
basis and all general partnership units including a 0.01% general partnership interest in Brookfield
Renewable. Subsequent to year-end, Brookfield Asset Management sold limited partnership units in
Brookfield Renewable and now holds, directly or indirectly as of the date of this report, approximately a
68% limited partnership interest on a fully-exchanged basis.
Effective November 30, 2011, Brookfield Renewable’s limited partnership units traded under the symbol
“BEP.UN” on the TSX.
Effective December 2011, Brookfield Renewable entered into voting arrangements with various affiliates
of Brookfield Asset Management, whereby Brookfield Renewable gained control of the entities that own
U.S. and Brazil renewable power generating operations (the “Voting Arrangements”). The Voting
Arrangements provide Brookfield Renewable with all of the voting rights to elect the Boards of Directors of
the relevant entities and therefore provides Brookfield Renewable with control. Accordingly, Brookfield
Renewable consolidates the accounts of these entities.
The Combination and Voting Arrangements do not represent business combinations under IFRS 3,
Business Combinations (“IFRS 3R”), as all combining businesses are ultimately controlled by Brookfield
Asset Management both before and after the transactions were completed. Brookfield Renewable
accounts for these reorganizations of entities under common control in a manner similar to a pooling of
interest which requires the presentation of pre-Combination and Voting Arrangement financial information
as if the transactions had always been in place. Refer to Note 2(o) (ii) for Brookfield Renewable’s policy
on accounting for transactions under common control.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 70
Financial information for the periods prior to November 28, 2011 is presented based on the historical
combined financial information for the contributed operations as previously reported by Brookfield Asset
Management. For the period after completion of the Combination, the results are based on the actual
results of the new entity, Brookfield Renewable, including the adjustments associated with the
Combination and the execution of several new and amended agreements, including power purchase
agreements (“PPA”) and management service agreements. Refer to Note 8 - Related party transactions
for further information.
(iii) Equity-accounted investments and joint ventures
Equity-accounted investments are entities over which Brookfield Renewable has significant influence or
which it jointly controls. Significant influence is the ability to participate in the financial and operating
policy decisions of the investee, but it has no control or joint control over those investees. Such
investments are accounted for using the equity method. A joint venture is a contractual arrangement
whereby two or more parties undertake an economic activity that is subject to joint control.
Brookfield Renewable accounts for its interests in jointly controlled entities using the equity method.
Under the equity method, the carrying value of an interest in an investee is initially recognized at cost and
adjusted for Brookfield Renewable’s share of net income, other comprehensive income (“OCI”),
distributions by the equity-accounted investment and other adjustments to Brookfield Renewable’s
proportionate interest in the investee.
(c) Foreign currency translation
All figures reported in the consolidated financial statements and tabular disclosures to the consolidated
financial statements are reflected in millions of U.S. dollars, which is the functional currency of Brookfield
Renewable. Each of the foreign operations included in these consolidated financial statements
determines its own functional currency, and items included in the financial statements of each subsidiary
are measured using that functional currency.
Assets and liabilities of foreign operations having a functional currency other than the U.S. dollar are
translated at the rate of exchange prevailing at the reporting date and revenues and expenses at the rate
of exchange prevailing at the dates of the transactions during the period. Gains or losses on translation of
foreign subsidiaries are included in OCI. Gains or losses on foreign currency denominated balances and
transactions that are designated as hedges of net investments in these operations are reported in the
same manner.
the consolidated
financial statements of Brookfield Renewable,
In preparing
foreign currency
denominated monetary assets and liabilities are translated into the functional currency using the closing
rate at the applicable consolidated balance sheet dates. Non-monetary assets and liabilities,
denominated in a foreign currency and measured at fair value, are translated at the rate of exchange
prevailing at the date when the fair value was determined and non-monetary assets measured at
historical cost are translated at the historical rate. Revenues and expenses are measured in the functional
currency at the rates of exchange prevailing at the dates of the transactions with gains or losses included
in income.
(d) Cash and cash equivalents
Cash and cash equivalents include cash, term deposits and money market instruments with original
maturities of less than 90 days. Restricted cash expected to be used within the next twelve months has
been classified as cash and cash equivalents.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 71
(e) Property, plant and equipment and revaluation method
Power generating assets are classified as property, plant and equipment and are accounted for using the
revaluation method. Property, plant and equipment are initially measured at cost and subsequently
carried at their revalued amount, being the fair value at the date of the revaluation, less any subsequent
accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are made
on an annual basis to ensure that the carrying amount does not differ significantly from fair value. Third
party appraisers are retained to review the fair value values of Brookfield Renewable’s power generating
assets on a rotating basis every three to five years.
Where the carrying amount of an asset increased as a result of a revaluation, the increase is recognized
in income to the extent the increase reverses a previously recognized decrease recorded through income,
with the remainder of the increase recognized in OCI and accumulated in equity under revaluation
surplus. Where the carrying amount of an asset decreased, the decrease is recognized in OCI to the
extent that a balance exists in revaluation surplus with respect to the asset, with the remainder of the
decrease recognized in income as a revaluation decrease under IAS 16, Property, Plant and Equipment
(“IAS 16”).
Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount
of the asset, and the net amount is restated to the revalued amount of the asset.
Gains and losses on disposal of an item of property, plant and equipment are recognized in ‘Other’ in the
consolidated statements of (loss) income. The revaluation surplus is not transferred from the total reserve
when the assets are disposed.
Brookfield Renewable determines the fair value of its property, plant and equipment by using a 20-year
discounted cash flow model. This model includes estimates of future electricity prices, anticipated long-
term average generation, estimated operating and capital expenditures, and assumptions about future
inflation rates and discount rates. Discount rates are calculated, giving consideration to the price risk and
geographical location of Brookfield Renewable’s facilities.
Depreciation on power generating assets is calculated on a straight-line basis over the estimated service
lives of the assets, which are as follows:
Dams
Penstocks
Powerhouses
Hydroelectric generating units
Wind generating units
Gas-fired co-generating units
Other assets
Estimated service lives
Up to 115 years
Up to 60 years
Up to 115 years
Up to 115 years
Up to 22 years
Up to 40 years
Up to 60 years
Costs are allocated to significant components of property, plant and equipment. When items of property,
plant and equipment have different useful lives, they are accounted for as separate items (significant
components) and depreciated separately. To ensure the accuracy of useful lives and residual values, a
review is conducted annually. Depreciation is calculated based on the cost of the asset less its residual
value. Depreciation commences when the asset is in the location and conditions necessary for it to be
capable of operating in the manner intended by management. It ceases at the earlier of the date the asset
is classified as held-for-sale and the date the asset is de-recognized. An item of property, plant and
equipment and any significant component is de-recognized upon disposal or when no future economic
benefits are expected from its use. Other assets include equipment, buildings, gas-fired cogenerating
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 72
units and leasehold improvements. Buildings, furniture and fixtures, leasehold improvements and office
equipment are recorded at historical cost, less accumulated depreciation. Land and construction work-in-
progress (“CWIP”) are not subject to depreciation.
The depreciation of property, plant and equipment in Brazil is based on the duration of the concession or
authorization. The average remaining concession or authorization duration at December 31, 2011, is 18
years (2010: 21 years). Since land rights are part of the concession or authorization, this cost is also
subject to depreciation.
Brookfield Renewable elected to change its accounting policy for the revaluation of property, plant and
equipment to include eligible CWIP effective December 31, 2011. Brookfield Renewable historically
accounted for CWIP at cost until the asset was available for use to produce power for sale. Brookfield
Renewable has elected to change its policy to provide more accurate and reliable information of the fair
value of its property, plant and equipment. Brookfield Renewable will revalue CWIP when sufficient
information exists to determine fair value using the discounted cash flow method. The impact of this
change in accounting policy was to record an increase in property, plant and equipment and equity-
accounted investments of $89 million and $65 million, respectively. Accordingly, there was also an
increase in OCI of $58 million net of non-controlling interests and deferred income taxes.
(f) Asset impairment
At each balance sheet date, management assesses whether there is any indication that assets are
impaired. For non-financial tangible and intangible assets (including equity-accounted investments), an
impairment is recognized, if the recoverable amount, determined as the greater of the estimated fair
value, less costs to sell, and the discounted future cash flows generated from use and eventual disposal
of an asset or cash generating unit, is less than its carrying value. The projections of future cash flows
take into account the relevant operating plans and management’s best estimate of the most probable set
of conditions anticipated to prevail. Should an impairment loss subsequently reverse, the carrying amount
of the asset is increased to the lesser of the revised estimate of the recoverable amount, and the carrying
amount that would have been recorded had no impairment loss been recognized previously.
(g) Trade receivable and other current assets
Trade receivables and other current assets are recognized initially at fair value, and subsequently
measured at amortized cost using the effective interest rate method, less any allowance for
uncollectability.
(h) Intangible assets
Intangible assets with finite lives are carried at cost, less any accumulated amortization and any
accumulated impairment losses, and are amortized on a straight-line basis over their estimated useful
lives of 4 to 25 years. Amortization commences when the asset is in the condition necessary for it to be
capable of operating in the manner intended by management and ceases at the earlier of the date the
asset is classified as held-for-sale and the date the asset is derecognized.
A service concession arrangement is an arrangement whereby a private sector entity (an operator)
constructs or upgrades the infrastructure for public service, and operates and maintains that infrastructure
for a specified period of time. The operator is paid for its services over the period of the arrangement.
The grantor controls or regulates what services the operator using the assets must provide, to whom, and
at what price, and also controls any significant residual interest in the assets at the end of the term of the
arrangement. In Brazil, the power industry is regulated by the government and overseen by the National
Agency of Electric Energy (“ANEEL”).
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 73
At December 31, 2011, the consolidated financial statements include service concession arrangements in
place relating to one of the Brazilian subsidiaries. The price of power sold under these concessions is set
by ANEEL at the beginning of the concession period and is based on the recovery of Brookfield
Renewable’s costs incurred each year. Prices are regulated periodically throughout the term of the
concession at the discretion of ANEEL. Brookfield Renewable is responsible for operating the
hydroelectric facilities and to provide energy at ANEEL’s regulatory and industry standards. At the end of
the concession arrangement, Brookfield Renewable is obliged to return the hydroelectric facilities and
land to ANEEL. Additional investments or expansions made to the facilities operated under these
concession arrangements by Brookfield Renewable must be authorized by ANEEL and Brookfield
Renewable has the right to be reimbursed for any authorized additions made to the facility at the end of
the concession term. No additions were made to the facilities throughout 2011 and no such obligation
exists at December 31, 2011. Current service concession arrangements expire within a range of 4 to 25
years, at which time management expects to request renewal from ANEEL.
Revenues earned from the service concession arrangements are recognized in accordance with the
revenue recognition policies used in these consolidated financial statements. The service concession
arrangements are recognized as intangible assets as Brookfield Renewable has a contractual right to
charge users of the public service, through its power purchase agreements (“PPAs”). The service
concession agreement is initially recognized at fair value and subsequently recorded using amortized
cost. Amortization commences upon approval of the arrangement by the grantor, ANEEL, and is
amortized on a straight-line basis over the term of the concession.
(i) Financial instruments
All financial instruments are classified into one of the following categories: assets and liabilities at fair
value through profit or loss (“FVTPL”) cash, loans and receivables, financial instruments used for
hedging, and other financial liabilities. All financial instruments are recorded at fair value at recognition.
Subsequent to initial recognition, financial assets classified as loans and receivables, and other financial
liabilities are measured at amortized cost using the effective interest method. Financial assets and
liabilities classified as financial instruments used for cash-flow hedging continue to be recognized at fair
value through OCI. Other financial assets and liabilities and non-hedging financial instruments are
recorded at fair value through profit and loss.
Brookfield Renewable presents the liability and equity components separately upon recognition of such
financial instruments. The amount of accretion relating to the liability component is recognized in profit or
loss; and the amount of consideration relating to the equity component is recognized in equity.
Brookfield Renewable selectively utilizes derivative financial instruments to manage financial risks,
including interest rate, commodity and foreign exchange risks. A derivative is a financial instrument,
which requires no initial investment, settles at a future date, and has a value that changes in response to
the change in a specified variable such as an interest rate, financial instrument price, commodity price,
foreign exchange rate, index of prices or rates, credit rating or credit index. Hedge accounting is applied
when the derivative is designated as a hedge of a specific exposure, and it is highly probable that it will
continue to be effective as a hedge based on an expectation of offsetting cash flows or fair value. Hedge
accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the
hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative
that was previously recorded in equity by the application of hedge accounting is recognized in income
over the remaining term of the original hedging relationship, unless the originally forecasted transaction is
no longer expected to occur, at which point it is released to income. The fair values of derivative financial
instruments are included in financial instrument assets or financial instrument liabilities, respectively.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 74
(i) Items qualifying as hedges
Cash flow hedge
The effective portion of unrealized gains and losses on interest rate forward and swap contracts
designated as hedges of future interest rate payments are included in equity as cash flow hedges when
the interest rate risk relates to an anticipated interest payment. The periodic exchanges of payments on
interest rate swap contracts designated as hedges of debt are recorded on an accrual basis as an
adjustment to interest expense. The periodic exchanges of payments on interest rate contracts
designated as hedges of future interest payments are recorded in income over the term of the
corresponding interest payments.
Net investment hedge
Realized and unrealized gains and losses on foreign exchange forward contracts designated as hedges
of currency risks are included in equity when the currency risk relates to a net investment in a subsidiary
with a functional currency other than the U.S. dollar and are included in income in the period in which the
subsidiary is disposed.
(ii) Items not qualifying as hedges
Upon initial recognition of a derivative financial instrument that is not designated as a hedge, a derivative
asset or liability is recorded with an offsetting deferred liability or asset, respectively. Gains or losses
arising from changes in fair value of the derivative asset or liability are recognized in income through fair
value gains or losses in the period the changes occur. The deferred liability or asset is amortized through
income, on a straight-line basis, over the life of the derivative financial instrument.
(j) Revenue and expense recognition
Revenue from the sale of electricity is recorded when the power is delivered. The revenue must be
considered collectible and the costs incurred to provide the electricity to be measurable before
recognizing the related revenue. Costs related to the purchases of power or fuel is recorded upon
delivery. All other costs are recorded as incurred.
(k) Income taxes
Current income tax assets and liabilities are measured at the amount expected to be paid to tax
authorities, net of recoveries, based on the tax rates and laws enacted or substantively enacted at the
balance sheet date. Current income tax assets and liabilities are included in trade receivables and other
current assets and accounts payable and accrued liabilities, respectively.
Deferred tax is recognized on taxable temporary differences between the tax bases and the carrying
amounts of assets and liabilities. Deferred tax is not recognized if the temporary difference arises from
goodwill or from initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither taxable profit nor accounting profit. Deferred income tax assets are
recognized for all deductible temporary differences, carry forwards of unused tax credits and unused tax
losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the
extent it is no longer probable that the income tax assets will be recovered. Deferred income tax assets
and liabilities are measured at the tax rates that are expected to apply to the year when the assets are
realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted at the
balance sheet dates.
Current and deferred income taxes relating to items recognized directly in OCI are also recognized
directly in OCI.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 75
Current and deferred income taxes are recorded based on the accounting records of the individual
entities that are included within Brookfield Renewable. No additional allocation was considered
necessary, prior to the Combination.
(l) Business combinations
The acquisition of a business is accounted for using the acquisition method. The consideration for an
acquisition is measured at the aggregate of the fair values, at the date of exchange, of the assets
transferred, the liabilities incurred to former owners of the acquired business, and equity instruments
issued by the acquirer in exchange for control of the acquired business. The acquired business’
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS
3, Business Combinations (“IFRS 3”) are recognized at their fair values at the acquisition date, except for
non-current assets that are classified as held-for-sale in accordance with IFRS 5, Non-Current Assets
Held for Sale and Discontinued Operations. These are recognized and measured at fair value, less costs
to sell, income taxes which are measured in accordance with IAS 12, Income Taxes and share-based
payments which are measured in accordance with IFRS 2, Share-based Payment. The non-controlling
interest in the acquiree is initially measured at the non-controlling interest’s proportion of the net fair value
of the identifiable assets, liabilities and contingent liabilities recognized.
To the extent that the aggregate of the fair value of consideration paid, the amount of any non-controlling
interest and the fair value of any previously held interest in the acquiree exceeds the fair value of the net
identifiable tangible and intangible assets, goodwill is recognized. To the extent that this excess is
negative, the excess is recognized as a gain in income.
When a business combination is achieved in stages, previously held interests in the acquired entity are
re-measured to fair value at the acquisition date, which is the date control is obtained, and the resulting
gain or loss, if any, is recognized in income. Amounts arising from interests in the acquired business prior
to the acquisition date that have previously been recognized in OCI are reclassified to income. Upon
disposal or loss of control of a subsidiary, the carrying amount of the net assets of the subsidiary
(including any OCI relating to the subsidiary) are derecognized with the difference between any proceeds
received and the carrying amount of the net assets recognized as a gain or loss in income.
(m) Other items
(i) Capitalized costs
Capitalized costs related to CWIP include all eligible expenditures incurred in connection with the
development and construction of the power generating asset. The expenditures consist of cost of
materials, direct labor and any other costs directly attributable to bringing the asset to a working condition
for its intended use, and the costs of dismantling and removing the items and restoring the site on which
they are located. Interest and borrowings costs are capitalized when activities that are necessary to
prepare the asset for its intended use or sale are in progress, expenditures for the asset have been
incurred and funds have been used or borrowed to fund the construction or development. Capitalization
of interest and borrowing costs ceases when the asset is ready for its intended use.
(ii) Pension and employee future benefits
Pension and employee future benefits are recognized in the consolidated financial statements in respect
of employees of the operating entities within Brookfield Renewable. The costs of retirement benefits for
defined benefit plans and post-employment benefits are recognized as the benefits are earned by
employees. The consolidated financial statements use the accrued benefit pro-rated method, using the
length of service and management’s best estimate assumptions to value its pension and other retirement
benefits. Assets are valued at fair value for purposes of calculating the expected return on plan assets.
For defined contribution plans, amounts are expensed based on employee entitlement. The consolidated
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 76
financial statements use the ‘corridor’ method of recognizing actuarial gains and losses. The ‘corridor’
method is based on recognizing actuarial gains and losses that fall outside the plus or minus 10%
‘corridor.’
(iii) Decommissioning, restoration and environmental liabilities
Legal and constructive obligations associated with the retirement of property, plant and equipment are
recorded as liabilities when those obligations are incurred and are measured at the present value of the
expected costs to settle the liability, discounted at a current credit-adjusted pre-tax rate specific to the
liability. The liability is accreted up to the date the liability will be incurred with a corresponding charge to
operating expenses. The carrying amount of decommissioning, restoration and environmental liabilities is
reviewed annually with changes in the estimates of timing or amount of cash flows added to or deducted
from the cost of the related asset.
(iv) Interest and borrowing costs
Interest and borrowing costs are capitalized when such costs are directly attributable to the acquisition,
construction or production of a qualifying asset. A qualifying asset is an asset that takes a substantial
period of time to prepare for its intended use.
(v) Provisions
A provision is a liability of uncertain timing or amount. A provision is recognized if Brookfield Renewable
has a present legal or constructive obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation and the amount can be reliably estimated. Provisions
are not recognized for future operating losses. The provision is measured at the present value of the best
estimate of the expenditures expected to be required to settle the obligation using a discount rate that
reflects the current market assessments of the time value of money and the risks specific to the
obligation. Provisions are re-measured at each balance sheet date using the current discount rate. The
increase in the provision due to the passage of time is recognized as interest expense.
(vi) Interest income
Interest income is earned with the passage of time and is recorded on an accrual basis.
(n) Critical estimates
Brookfield Renewable makes estimates and assumptions that affect the carrying value of assets and
liabilities, disclosure of contingent assets and liabilities and the reported amount of income for the year.
Actual results could differ from those estimates. The estimates and assumptions that are critical to the
determination of the amounts reported in the consolidated financial statements relate to the following:
i) Property, plant and equipment
The fair value of Brookfield Renewable’s property, plant and equipment is calculated using estimates and
assumptions about future electricity prices, anticipated long-term average generation, estimated operating
and capital expenditures, future inflation rates and discount rates, as described in Note 10 - Property,
Plant and Equipment. Judgment is involved in determining the appropriate estimates and assumptions in
the valuation of Brookfield Renewable’s property, plant and equipment. See Note 2(o) - Critical judgments
in applying accounting policies for further details.
Estimates of useful lives and residual values are used in determining depreciation and amortization. To
ensure the accuracy of useful lives and residual values, these estimates are reviewed on an annual basis.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 77
ii) Financial instruments
Brookfield Renewable makes estimates and assumptions that affect the carrying value of its financial
instruments, including estimates and assumptions about future electricity prices, long-term average
generation, capacity prices, discount rates and the timing of energy delivery. Non-financial instruments
are valued using estimates of future electricity prices which are estimated by considering broker quotes
for the years in which there is a liquid market and for the subsequent years Brookfield Renewable’s best
estimate of electricity prices that would allow new entrants into the market. See Note 7 - Risk
Management and Financial Instruments, for more details.
iii) Deferred income taxes
The consolidated financial statements include estimates and assumptions for determining the future tax
rates applicable to subsidiaries and identifying the temporary differences that relate to each subsidiary.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply during
the year when the assets are realized or the liabilities settled, using the tax rates and laws enacted or
substantively enacted at the consolidated balance sheet dates. Operating plans and forecasts are used to
estimate when the temporary difference will reverse.
(o) Critical judgments in applying accounting policies
The following are the critical judgments that have been made in applying the accounting policies used in
the consolidated financial statements and that have the most significant effect on the amounts in the
consolidated financial statements:
i) Preparation of consolidated financial statements
These consolidated financial statements present the financial position, results of operations and cash
flows of Brookfield Renewable. Judgment is required in determining what assets, liabilities and
transactions are recognized in the consolidated financial statements as pertaining to Brookfield
Renewable’s operations prior to the Combination.
ii) Common control transactions
Common control business combinations specifically fall outside the scope of IFRS 3 and as such
management has used its judgment to determine an appropriate policy to account for these transactions,
considering other relevant accounting guidance that is within the framework of principles in IFRS and that
reflects the economic reality of the transactions, in accordance with IAS 8, Accounting Policies, Changes
in Accounting Estimates and Errors. As a result, the consolidated financial statements account for assets
and liabilities acquired at the previous carrying value on the predecessor’s financial statements.
Differences between the consideration given and the assets and liabilities received are recorded directly
to equity.
iii) Property, plant and equipment
The accounting policy relating to Brookfield Renewable’s property, plant and equipment is described in
Note 2(e). In applying this policy, judgment is used in determining whether certain costs are additions to
the carrying amount of the property, plant and equipment as opposed to repairs and maintenance. If an
asset has been developed, judgment is required to identify the point at which the asset is capable of
being used as intended and to identify the directly attributable costs to be included in the carrying value of
the development asset. The useful lives of property, plant and equipment are determined by independent
engineers periodically with an annual review by management.
Annually, Brookfield Renewable determines the fair value of its property, plant and equipment using a
methodology that it has judged to be reasonable. The methodology is a 20-year discounted cash flow
model. Twenty years is the period considered reasonable as Brookfield Renewable has 20-year capital
plans and it believes a reasonable third party would be indifferent between extending the cash flows
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 78
further in the model versus using a discounted terminal value. The cash flow model uses estimates of
future electricity prices, considering broker quotes for the years in which there is a liquid market and for
the subsequent years, its best estimate of electricity prices that would allow new entrants into the market.
Discount rates are determined each year by considering the current interest rates, average market cost of
capital as well as the price risk and the geographical location of the operational facilities as judged by
management. Inflation rates are also determined by considering the current inflation rates and the
expectations of future rates by economists. Operating costs are based on long-term budgets escalated
thereafter for inflation. Each operational facility has a 20-year capital plan that it follows to ensure the
maximum life of its assets is achieved. Foreign exchange rates are forecasted by using the spot rates
and the available forward rates, extrapolated beyond the period available. The inputs described above to
the discounted cash flow model require management to consider facts, trends and plans in making its
judgments as to what derives a reasonable fair value of its property, plant and equipment.
iv) Consolidation of Brookfield Renewable Power Fund
Brookfield Renewable held a 34% investment in the Fund, on a fully-exchanged basis. As a result,
Brookfield Renewable assessed whether it continued to control the Fund, given its reduced ownership
level. In making this assessment, Brookfield Renewable considered the definition of control and guidance
as set out in IAS 27, Consolidated and Separate Financial Statements (“IAS 27”). Brookfield Renewable
concluded that control did exist as it had the power to govern the financial and operating policies of the
Fund under specific agreements. Effective November 28, 2011, public unitholders of the Fund received
one non-voting limited partnership unit of Brookfield Renewable in exchange for each trust unit of the
Fund held, and the Fund was wound up.
v) Financial instruments
The accounting policy relating to Brookfield Renewable’s financial instruments is described in Note 2(i). In
applying this policy, judgments are made in applying the criteria set out in IAS 39, Financial Instruments:
Recognition and Measurement (“IAS 39”), to record financial instruments at fair value through profit and
loss, and the assessments of the effectiveness of hedging relationships.
vi) Deferred income taxes
The accounting policy relating to Brookfield Renewable’s income taxes is described in Note 2(k). In
applying this policy, judgments are made in determining the probability of whether deductions, tax credits
and tax losses can be utilized.
(p) Recently adopted accounting policies
Related party disclosures – revised definition of related parties
(i)
On January 1, 2011, Brookfield Renewable adopted the revised version of IAS 24, Related Party
Disclosures (“IAS 24”). IAS 24 is required to be applied retrospectively for annual periods beginning on or
after January 1, 2011, and requires entities to disclose in their financial statements information about
transactions with related parties. Generally, two parties are related to each other if one party controls, or
significantly influences, the other party. IAS 24 has simplified the definition of a related party.
Implementation of IAS 24 did not have a material impact on Brookfield Renewable’s consolidated
financial statements.
(ii) Defined benefit assets and minimum funding requirements
On January 1, 2011, Brookfield Renewable adopted Prepayments of a Minimum Funding Requirement
(Amendments to IFRIC 14). The amendments corrected an unintended consequence of IFRIC 14, IAS
19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (“IFRIC
14"). Without the amendments, in some circumstances entities were not permitted to recognise as an
asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 79
14 was issued, and the amendments correct the problem. Implementation of IFRIC 14 did not have a
material impact on Brookfield Renewable’s consolidated financial statements.
(iii) Improvements to IFRS
On January 1, 2011, Brookfield Renewable adopted Improvements to IFRS – a collection of amendments
to seven IFRS – as part of the IASB’s program of annual improvements to its standards. Implementation
of Improvements to IFRS did not have a material impact on Brookfield Renewable’s consolidated financial
statements.
(iv) Extinguishing Financial Liabilities with Equity Instruments
On January 1, 2011, Brookfield Renewable adopted Interpretation 19, Extinguishing Financial Liabilities
with Equity Instruments (“IFRIC 19”). This interpretation provides guidance on how to account for the
extinguishment of a financial liability by the issue of equity instruments. IFRIC 19 clarifies that the entity’s
equity instruments issued to a creditor, which are part of the consideration paid to extinguish the financial
liability are measured at their fair value. If their fair value cannot be reliably measured, the equity
instruments should be measured to reflect the fair value of the financial liability extinguished. Differences
between the carrying amount of the financial liability extinguished and the initial measurement amount of
the equity instruments issued is included in the entity’s profit or loss for the period. Implementation of
IFRIC 19 did not have a material impact on Brookfield Renewable’s consolidated financial statements.
(q) Future changes in accounting policies
Financial Instruments
(i)
IFRS 9, Financial Instruments (“IFRS 9”) was issued by the International Accounting Standards Board
(“IASB”) on October 28, 2010, and will replace IAS 39. IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS
39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of
its business model and the contractual cash flow characteristics of the financial assets. Two
measurement categories continue to exist to account for financial liabilities in IFRS 9, FVTPL and
amortized cost. Financial liabilities held for trading are measured at FVTPL, and all other financial
liabilities are measured at amortized cost unless the fair value option is applied. The treatment of
embedded derivatives under the new standard is consistent with IAS 39 and is applied to financial
liabilities and non-derivative hosts not within the scope of the standard. IFRS 9 is effective for annual
periods beginning on or after January 1, 2015. Management is currently evaluating the impact of IFRS 9
on the consolidated financial statements.
(ii) Consolidation
IFRS 10, Consolidation (“IFRS 10”) was issued by the IASB on May 12, 2011, and replaces SIC-12,
Consolidation – Special Purpose Entities and parts of IAS 27. IFRS 10 requires an entity to consolidate
an investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Under IAS 27,
consolidation is required when an entity has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. IFRS 10 is effective for annual periods beginning on or
after January 1, 2013. Management is currently evaluating the impact of IFRS 10 on the consolidated
financial statements.
(iii) Joint arrangements
IFRS 11, Joint Arrangements (“IFRS 11”) was issued by the IASB on May 12, 2011, and replaces IAS 31,
in Joint Ventures (“IAS 31”), and SIC-13, Jointly Controlled Entities—Non-monetary
Interests
Contributions by Venturers. IFRS 11 requires a venturer to classify its interest in a joint arrangement as a
joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 80
whereas for a joint operation the venturer will recognize its share of the assets, liabilities, and revenue
and expenses of the joint operation. Under IAS 31, entities have the choice to proportionately consolidate
or equity account for interests in joint ventures. IFRS 11 is effective for annual periods beginning on or
after January 1, 2013. Management is currently evaluating the impact of IFRS 11 on the consolidated
financial statements.
(iv) Disclosure of interests in other entities
IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”) was issued by the IASB on May 12, 2011.
IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements,
associates, special purpose vehicles and off-balance sheet vehicles. The standard carries forward
existing disclosures and also introduces significant additional disclosure requirements that address the
nature of, and risks associated with, an entity’s interests in other entities. IFRS 12 is effective for annual
periods beginning on or after January 1, 2013. Management is currently evaluating the impact of IFRS 12
on the consolidated financial statements.
(v) Fair value measurement
IFRS 13, Fair Value Measurement (“IFRS 13”), a comprehensive standard for fair value measurement
and disclosure requirements for use across all IFRS standards, was issued by the IASB on May 12, 2011.
The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to
transfer a liability in an orderly transaction between market participants, at the measurement date. It
supersedes the fair value guidance that currently exists in IAS 16 concerning the use of the revaluation
method. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on
measuring and disclosing fair value is dispersed among the specific standards requiring fair value
measurements and in many cases does not reflect a clear measurement basis or consistent disclosures.
IFRS 13 is effective for annual periods beginning on or after January 1, 2013. Management is currently
evaluating the impact of IFRS 13 on the consolidated financial statements.
(vi) Accounting for employee benefits and minimum funding requirements
In June 2011, the IASB issued significant amendments to IAS 19, Employee Benefits (“IAS 19”). These
changes affect the recognition of actuarial gains and losses by removing the option to use the corridor
approach and requiring immediate recognition in OCI. These OCI amounts cannot be recycled to the
income statement. There are also changes to the recognition, measurement and presentation of past
service costs, cost of benefits and finance expense or income relating to employee benefits. Further,
termination benefits are recognized as a liability only when the entity can no longer withdraw the offer of
the termination benefit or recognizes any related restructuring costs. There are additional disclosure
requirements. The amendment is effective for periods beginning on or after January 1, 2013.
Management is currently evaluating the impact of these amendments on the consolidated financial
statements.
(vii) Presentation of items of OCI
In June 2011, IASB issued amendments to IAS 1, Presentation of Financial Statements. These
amendments include a requirement for entities to group items presented in OCI on the basis of whether
they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments), and
emphasize the importance of presenting profit or loss and OCI together and with equal prominence. The
amendment is effective for annual periods starting on or after July 1, 2012. Management is currently
evaluating the impact of these amendments on the consolidated financial statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 81
(viii) Income Taxes
In December 2010, IASB issued amendments to IAS 12, Income Taxes. Under these amendments, an
entity is required to measure the deferred tax relating to an asset depending on whether the entity
expects to recover the carrying amount of the asset through use or sale. The amendment is effective for
annual periods starting on or after January 1, 2012. Management is currently evaluating the impact of
these amendments on the consolidated financial statements.
(ix) Consolidation and Separate Financial Statements
In May 2011, IASB amended and reissued IAS 27. The amended standard is to be applied in accounting
for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by
local regulations, to present separate (non-consolidated) financial statements. The amendment is
effective for annual periods starting on or after January 1, 2013. Management is currently evaluating the
impact of these amendments on the consolidated financial statements.
(x) Investment in Associates
In May 2011, IASB amended and reissued IAS 28, Investment in Associates and Joint Ventures. The
amended standard prescribes the accounting treatment for investments in associates and sets out the
requirements for the application of the equity method when accounting for investments in associates and
joint ventures. The amendment is effective for annual periods starting on or after January 1, 2013.
Management is currently evaluating the impact of these amendments on the consolidated financial
statements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 82
3. PRINCIPAL SUBSIDIARIES
The following table lists the subsidiaries of Brookfield Renewable which, in the opinion of management,
significantly affects its financial position and results of operations:
Country of
incorporation,
registration or
operations
AS AT DECEMBER 31
Brookfield Renewable Energy L.P.(1)
Brookfield Renewable Power Fund(2)
Brookfield Renewable Power Preferred Equity Inc.
BRP Finance ULC
Great Lakes Power Limited
Mississagi Power Trust
Lievre Power L.P.
Catalyst Old River Hydroelectric L.P.
Erie Boulevard Hydropower L.P.
Brookfield Energia Renovavel S.A.
Itiquira Energetica S.A.
Bermuda
Canada
Canada
Canada
Canada
Canada
Canada
U.S.
U.S.
Brazil
Brazil
Proportion of ownership
interest held by
Brookfield Renewable
2010
%
-
34
100
-
100
100
100
75
100
100
100
2011
%
50
-
100
100
100
100
100
75
100
100
100
Proportion of the voting
power held by
Brookfield Renewable
2010
%
-
34
100
-
100
100
100
75
100
100
100
2011
%
100
-
100
100
100
100
100
75
100
100
100
(1) Since the redeemable partnership units of BRELP are classified as limited partnership units of Brookfield Renewable (Note
18), Brookfield effectively has a 99% economic interest in BRELP.
(2) The proportion of voting power of the Fund is on a fully-exchanged basis. On November 28, 2011, upon completion of the
Combination, the Fund was wound up.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 83
4. ACQUISITIONS
Brookfield Americas Infrastructure Fund
Effective December 2011, Brookfield Renewable entered into Voting Arrangements with various affiliates
of Brookfield Asset Management, whereby Brookfield Renewable gained control of certain entities that
own U.S. and Brazil renewable power generating operations. The Voting Arrangements do not represent
business combinations under IFRS 3, Business Combinations (IFRS 3R), as all combining businesses
are ultimately controlled by Brookfield Asset Management both before and after the transactions were
completed. Brookfield Renewable accounts for these reorganizations of entities under common control in
a manner similar to a pooling of interest which requires the presentation of pre-Voting Arrangement
financial information as if the transactions had always been in place. The entities that own the U.S. and
Brazil renewable power generating operations completed the following acquisitions in 2011:
In February 2011, a 75% controlling interest in a 99 MW wind development project located in
Northeastern United States was acquired, with a further 15% acquired in July 2011. Cash consideration
paid in the first quarter of 2011 was $25 million, with a further $5 million paid in the third quarter, for a
total cash consideration of $30 million.
In July 2011, a 100% interest in a 30 MW hydroelectric facility located in Brazil was acquired for
consideration of $190 million. The acquisition cost was partially funded from the issuance of debt in the
amount of $77 million.
Other
In January 2011, a 50.25% controlling interest in an early stage wind development project located in
Western Canada was acquired. Cash consideration paid in the first quarter of 2011 was $7 million.
Purchase price allocations, at fair values, with respect to the above acquisitions were as follows:
(MILLIONS)
Cash and cash equivalents
Trade receivables and other current assets
Property, plant and equipment
Total assets
Accounts payable and accrued liabilities
Non-controlling interests
Total liabilities
Net assets acquired
United
States
$ 4
-
30
34
(1)
(3)
Canada
$ -
Brazil
$ -
Total
$ 4
-
14
14
-
(7)
5
190
195
(5)
-
(5)
5
234
243
(6)
(10)
(16)
(4)
(7)
$ 30
$ 7
$ 190
$ 227
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 84
5. CASH AND CASH EQUIVALENTS
AS AT DECEMBER 31
(MILLIONS)
Cash
Short-term deposits
Restricted cash
6. TRADE RECEIVABLES AND OTHER CURRENT ASSETS
AS AT DECEMBER 31
(MILLIONS)
Trade receivables
Prepaids and other
2011
$ 106
119
42
$ 267
2010
$ 87
77
24
$ 188
2011
$ 84
74
$ 158
2010
$ 111
35
$ 146
As at December 31, 2011, 100% (2010: 97%) of trade receivables were current. Trade receivables are
generally on 30-day terms and credit limits are assigned and monitored for all counterparties. In
determining the recoverability of trade receivables, management performs a risk analysis considering the
type and age of the outstanding receivables and the credit worthiness of the counterparties.
Management also reviews trade receivable balances on an ongoing basis. Bad debt expense related to
trade receivables is recognized at the time an account is deemed uncollectible. Accordingly, as at
December 31, 2011 and 2010 an allowance for doubtful accounts was not deemed necessary.
7. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
RISK MANAGEMENT
Brookfield Renewable’s activities expose it to a variety of financial risks, including market risk (i.e.,
commodity price risk, interest rate risk, and foreign currency risk), credit risk and liquidity risk. Brookfield
Renewable uses financial instruments primarily to manage these risks.
(a) Market risk
Market risk is defined for these purposes as the risk that the fair value or future cash flows of a financial
instrument held by Brookfield Renewable will fluctuate because of changes in market prices.
Brookfield Renewable faces market risk from foreign currency assets and liabilities, the impact of changes
in interest rates, and floating rate liabilities. Market risk is managed by funding assets with financial
liabilities in the same currency and with similar interest rate characteristics and holding financial contracts,
such as interest rate swaps and foreign exchange contracts, to minimize residual exposures. Financial
instruments held by Brookfield Renewable that are subject to market risk include borrowings and financial
instruments, such as interest rate, currency and commodity contracts. The categories of financial
instruments that can give rise to significant variability are described below:
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 85
(i) Commodity price risk
Commodity price risk is defined for these purposes as the risk that the fair value or future cash flows of a
financial instrument held by Brookfield Renewable will fluctuate because of changes in commodity prices.
Commodity price risk arises from the sale of Brookfield Renewable’s uncontracted generation, as well as
impacts on the carrying values of Brookfield Renewable’s non-financial derivative contracts.
Brookfield Renewable sells electricity under long-term contracts to secure stable prices and mitigate its
exposure to wholesale markets. As at December 31, 2011, virtually all (99%) of Brookfield Renewable’s
generation was sold pursuant to PPAs, either to third parties or through entities of Brookfield. During
2011, certain of the long-term contracts were considered financial instruments, and were recorded at fair
value in the consolidated financial statements. The change in fair value of long-term contracts was
recorded in either income as “unrealized financial instrument (losses) gains” or OCI, as applicable.
The table below summarizes the impact of changes in the market price of electricity as at December 31.
The impact is expressed in terms of the effect on net income and OCI. The sensitivities are based on the
assumption that the market price changes by five percent with all other variables held constant.
Impact of a 5% change in the market price of electricity
(MILLIONS)
5% increase
5% decrease
(ii) Interest rate risk
Effect on net income
2010
2011
Effect on OCI
2011
2010
$ (2)
$ 2
$ (125)
$ 139
$ -
$ -
$ -
$ -
Interest rate risk is defined for these purposes as the risk that the fair value or future cash flows of a
financial instrument held by Brookfield Renewable will fluctuate, because of changes in interest rates.
Brookfield Renewable’s assets largely consist of long duration physical assets. Brookfield Renewable’s
financial liabilities consist primarily of long-term fixed rate debt or floating-rate debt that has been
swapped to fixed rates with interest rate financial instruments. All non-derivative financial liabilities are
recorded at their amortized cost. Brookfield Renewable also holds interest rate contracts to lock-in fixed
rates on anticipated future debt issuances.
Fluctuations in interest rates could impact Brookfield Renewable’s cash flows, primarily with respect to the
interest payable against Brookfield Renewable’s variable rate debt, which is limited to certain subsidiary
borrowings with a total principal value of $1,382 million (2010: $1,140 million). Of this amount, $730
million (2010: $463 million) has been hedged through the use of interest rate swaps. Brookfield
Renewable’s subsidiaries will enter into agreements designed to minimize the exposure to interest rate
fluctuations on these debts. The fair values of the recognized liability for these agreements were
calculated using a valuation model with observable interest rates.
The table below summarizes the impact of changes in the interest rate as at December 31. The impact is
expressed in terms of the effect on income and OCI. The sensitivities are based on the assumption that
the interest rate changes by one percent with all other variables held constant.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 86
Impact of a 1% change in interest rates
(MILLIONS)
1% increase
1% decrease
(b) Credit risk
Effect on net income
2011
$ (7)
$ 7
2010
$ (7)
$ 7
Effect on OCI
2011
2010
$ 48
$ (48)
$ 1
$ (1)
Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual
obligations. Brookfield Renewable’s exposure to credit risk in respect of financial instruments relates
primarily to counterparty obligations regarding energy contracts, interest rate swaps, forward foreign
exchange contracts and physical electricity and gas transactions.
Brookfield Renewable minimizes credit risk with counterparties through the selection, monitoring and
diversification of counterparties, and the use of standard trading contracts, and other credit risk mitigation
techniques. In addition, Brookfield Renewable’s PPAs are reviewed regularly and are almost exclusively
with customers having long standing credit histories or investment grade ratings, which limit the risk of
non-collection. As at December 31, 2011, 100% (2010: 97%) of Brookfield Renewable’s trade
receivables of $84 million were current. See Note 6 - Trade receivables and other current assets, for
additional details regarding Brookfield Renewable’s trade receivables balance.
The maximum credit exposure at December 31 was as follows:
AS AT DECEMBER 31
(MILLIONS)
Cash and cash equivalents
Trade receivables and other current assets
Due from related parties
(c) Liquidity risk
2011
2010
$
267 $
158
285
$
710 $
188
146
419
753
Liquidity risk is the risk that Brookfield Renewable cannot meet a demand for cash or fund an obligation
when due. Liquidity risk is mitigated by Brookfield Renewable’s cash and cash equivalent balances and
its access to undrawn credit and hydrology reserve facilities. Details of the undrawn credit facilities are
included in Note 14 - Debt obligations. Brookfield Renewable also ensures that it has access to public
debt markets by maintaining a strong credit rating of BBB.
Brookfield Renewable is also subject to the risk associated with debt financing. This risk is mitigated by
the long-term duration of debt instruments and the diversification in maturity dates over an extended
period of time.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 87
The table below classifies the cash obligations related to Brookfield Renewable’s liabilities into relevant
maturity groupings based on the remaining period from the balance sheet dates to the contractual
maturity date. As the amounts are the contractual undiscounted cash flows, they may not agree with the
amounts disclosed in the consolidated balance sheets.
$
AS AT DECEMBER 31, 2011
(MILLIONS)
Accounts payable and accrued liabilities
Financial instrument liabilities (1)
Due to related parties
Other long-term liabilities - concession payments
Long-term debt and credit facilities
Interest payable - borrowings (2)
Total
$
< 1 year
190
99
139
4
650
$
2-5 years
-
15
8
24
1,806
298
1,380
$
827
2,680
>5 years
-
-
-
120
3,118
$
Total
190
114
147
148
5,574
1,082
4,320
2,207
$ 8,380
$
$
AS AT DECEMBER 31, 2010
(MILLIONS)
Accounts payable and accrued liabilities
< 1 year
190
$
2-5 years
-
$
$
>5 years
-
$
Financial instrument liabilities (1)
Due to related parties
Other long-term liabilities - concession payments
Long-term debt and credit facilities
Interest payable - borrowings (2)
Total
$
15
567
-
201
291
1,264
$
11
101
21
1,429
905
2,467
-
-
260
3,414
1,220
4,894
$
Total
190
26
668
281
5,044
2,416
$ 8,625
(1) Financial instruments liabilities exclude amounts determined to be non-financial derivatives.
(2) Represents aggregate interest payable expected to be paid over the entire term of the obligations, if held to maturity. Variable-rate
interest payments have been calculated based on current rates.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 88
FINANCIAL INSTRUMENT DISCLOSURES
Brookfield Renewable classifies its assets and liabilities as outlined below:
AS AT DECEMBER 31, 2011
(MILLIONS)
Financial assets and liabilities
Cash, loans
and
receivables
Assets(1)
(liabilities)
Derivatives
used for
hedging
Other
financial
liabilities
Non-
financial
assets and
liabilities
Total
Cash and cash equivalents
$ 267 $ -
$ -
$ -
$ -
$ 267
Trade receivables and other
current assets(2)
Due from related parties(2)
Equity-accounted and long-term
investments
Property, plant and equipment
Intangible assets
Deferred income tax assets
122
285
-
-
-
-
Other long-term assets
156
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36
-
405
158
285
405
13,945
13,945
57
306
129
57
306
285
Total assets
$ 830
$ -
$ -
$ -
$ 14,878 $ 15,708
Accounts payable and
accrued liabilities(2)
$ -
$ -
$ -
$ (190)
$ -
$ (190)
Financial instrument liabilities
Due to related parties (2)
Long-term debt and credit facilities (2)
Deferred income tax liabilities
Other long-term liabilities
-
-
-
-
-
(26)
(88)
-
(147)
(5,519)
-
-
-
-
-
-
-
-
-
-
-
(114)
(147)
(5,519)
-
-
(2,374)
(2,374)
(164)
(164)
Total liabilities
$ -
$ (26)
$ (88)
$(5,856)
$(2,538)
$(8,508)
(1) Measured at fair value with all gains and losses recorded in the consolidated statement of (loss) income.
(2) Measured at fair value at inception and subsequently recorded at amortized cost using the effective interest rate method.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 89
AS AT DECEMBER 31, 2010
(MILLIONS)
Financial assets and liabilities
Cash, loans
and
receivables
Assets(1)
(liabilities)
Derivatives
used for
hedging
Other
financial
liabilities
Non-
financial
assets and
liabilities
Total
Cash and cash equivalents
$ 188
$ -
$ -
$ -
$ -
$ 188
Trade receivables and other
current assets(2)
Due from related parties(2)
Equity-accounted and long-term
investments
Property, plant and equipment
Intangible assets
Deferred income tax assets
111
419
-
-
-
-
Other long-term assets
156
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
-
-
-
-
35
-
263
146
419
269
12,173
12,173
87
87
276
276
160
316
Total assets
$ 874
$ -
$ -
$ 6
$ 12,994
$ 13,874
Accounts payable and
accrued liabilities(2)
Financial instrument liabilities
Due to related parties (2)
Long-term debt and credit
facilities (2)
Deferred income tax liabilities
Other long-term liabilities
Fund unit liability
Total liabilities
$ -
$ -
$ -
$ (190)
$ -
$ (190)
-
-
-
-
-
-
(220)
(26)
-
-
-
-
(1,355)
-
-
-
-
-
-
(668)
(4,994)
-
-
-
(246)
(668)
(4,994)
-
(2,429)
(2,429)
(162)
-
-
-
(162)
(1,355)
$ -
$(1,575)
$ (26)
$ (6,014)
$ (2,429) $(10,044)
(1) Measured at fair value with all gains and losses recorded in the consolidated statement of (loss) income.
(2) Measured at fair value at inception and subsequently recorded at amortized cost using the effective interest rate method.
The fair value of financial instruments is the amount of consideration that would be agreed upon in an
arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act.
Fair values determined using valuation models require the use of assumptions concerning the amount
and timing of estimated future cash flows and discount rates. In determining those assumptions,
management looks primarily to external readily observable market inputs such as interest rate yield
curves, currency rates, and price, as applicable. The fair value of interest rate swap contracts, which form
part of financing arrangements, is calculated by way of discounted cash flows, using market interest rates
and applicable credit spreads.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 90
Financial instruments measured at fair value are categorized into one of three hierarchy levels, described
below. Each level is based on the transparency of the inputs used to measure the fair values of assets
and liabilities.
Level 1 – inputs are based on unadjusted quoted prices in active markets for identical assets and
liabilities;
Level 2 – inputs, other than quoted prices in Level 1, that are observable for the asset or liability, either
directly or indirectly; and
Level 3 – inputs for the asset or liability that are not based on observable market data.
The following table presents Brookfield Renewable’s financial assets and financial liabilities measured at
fair value classified by the fair value hierarchy:
AS AT DECEMBER 31
(MILLIONS)
Level 1
Level 2
Level 3
2011
2010
Cash and cash equivalents
$ 267
$ -
$
Fund unit liability
Financial instrument liabilities, net
Energy derivative contracts
Interest rate swaps
Foreign exchange contracts
-
(2)
-
-
-
(24)
(88)
-
Total
$ 265
$ (112)
$
-
-
-
-
-
-
$ 267
$ 188
-
(1,355)
(26)
(88)
-
(220)
(23)
(3)
$ 153
$ (1,413)
There were no transfers between levels during the year.
The following table presents the changes in fair value measurements for Brookfield Renewable’s net
financial instrument position included in level 3 of the fair value hierarchy as set out above:
FOR THE YEAR ENDED, DECEMBER 31, 2011
(MILLIONS)
Balance, December 31, 2010
Settled
Balance, December 31, 2011
Level 3
$
(199)
199
-
$
The aggregate amount of Brookfield Renewable’s net financial instrument positions are as follows:
AS AT DECEMBER 31
(MILLIONS)
Energy derivative contracts
Interest rate swaps
Foreign exchange contracts
Notes
2011
2010
(a)
(b)
(c)
$
(26)
(88)
-
$
(220)
(23)
(3)
$
(114)
$
(246)
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 91
The following table presents the change in Brookfield Renewable’s total net financial instrument position
during the year:
(MILLIONS)
Balance, beginning of year
(Decreases) increases in the net financial position:
Unrealized loss through income on energy derivative contracts
Unrealized accounting loss through OCI on energy derivative contracts
Unrealized loss through income on interest rate swaps
Unrealized loss through OCI on interest rate swaps
Unrealized loss through OCI on foreign exchange contracts
Reversal of energy derivative contracts designated as cash-flow
hedges through accumulated OCI
Foreign exchange and other
Reversal of energy derivative contracts designated as cash-flow
hedges through retained earnings
Balance, end of year
AS AT DECEMBER 31
(MILLIONS)
Derivative liabilities not designated as hedging instruments:
Energy derivative contracts
Net position
Derivate liabilities designated as hedging instruments:
Interest rate swaps
Foreign exchange contracts
Net position
(a) Energy derivative contracts
Note
2011
2010
$ (246)
$ (808)
(a)
(a)
(b)
(b)
(19)
(708)
(1)
(66)
-
704
-
222
584
-
-
1
(1)
-
(22)
-
$ (114)
$ (246)
Note
2011
2010
(a)
$ (26)
$ (220)
$ (26)
$ (220)
(b)
(c)
$(88)
$(23)
-
(3)
$ (88)
$ (26)
Brookfield Renewable has entered into long-term energy derivative contracts primarily to eliminate the
price risk on the sale of future power generation. Certain energy contracts are recorded in Brookfield
Renewable’s consolidated financial statements at an amount equal to fair value, using quoted market
prices or, in their absence, a valuation model using both internal and third-party evidence and forecasts.
As at December 31, 2011, Brookfield Renewable had total net financial instrument liabilities of $26 million
relating to energy derivative contracts (2010: $220 million).
On April 1, 2011, Brookfield Renewable designated its two significant long-term energy contracts with
related parties as cash-flow hedges. As a result of new agreements and changes in existing agreements
with Brookfield Asset Management and its subsidiaries arising from the Combination, these contracts are
no longer accounted for as derivatives by Brookfield Renewable effective November 28, 2011. For the
period from April 1, 2011 to November 28, 2011, Brookfield Renewable recorded accounting losses of
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 92
$708 million related to these contracts that were recorded in OCI. On formation of Brookfield Renewable,
$704 million of unrealized accounting losses were reversed.
Amendments made to certain energy derivative contracts and other agreements with the related parties,
effective November 28, 2011, resulted in the energy derivative contracts no longer meeting the
derivatives definition under the IFRS. Since these amendments arose from the common control
reorganization with Brookfield Asset Management the amounts were adjusted directly into limited
partnership equity.
In the next 12 months, it is expected that a $24 million loss (2010: $4 million loss) will be settled or
reclassified into income.
(b) Interest rate swaps
Brookfield Renewable has entered into interest rate swap contracts primarily to minimize exposure to
interest rate fluctuations on its variable rate debt or to lock in interest rates on future debt refinancing. All
interest rate swap contracts are recorded in the consolidated financial statements in OCI at an amount
equal to fair value.
At December 31, 2011, agreements with a total notional value of $1,226 million were outstanding (2010:
$900 million). The fixed interest rates resulting from these agreements range from 2.03% to 4.50%
(2010: 2.03% to 4.50%).
(c) Foreign exchange contracts
Brookfield Renewable has entered into foreign exchange contracts primarily to minimize exposure to
fluctuations in foreign currencies in which it and its subsidiaries operate. All foreign exchange contracts
are recorded in Brookfield Renewable’s consolidated financial statements in OCI at an amount equal to
fair value.
The notional amount at December 31, 2011 of the foreign exchange contracts was $nil (2010: $180
million).
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 93
8. RELATED PARTY TRANSACTIONS
Brookfield Renewable’s related party transactions are recorded at the exchange amount. Brookfield
Renewable’s related party transactions are primarily with Brookfield Asset Management and its
subsidiaries.
The immediate parent of Brookfield Renewable is its general partner. The ultimate parent of Brookfield
Renewable is Brookfield Asset Management.
As discussed in the Significant Accounting Policies Note 2(b) - Basis of Presentation, effective November
28, 2011, Brookfield Asset Management and Brookfield Renewable completed the Combination
agreement. This resulted in the strategic combination of all the renewable power assets of the Fund and
certain Brookfield Asset Management subsidiaries to create Brookfield Renewable.
Consequently at the date of the Combination, Brookfield Asset Management held directly or indirectly,
approximately a 73% limited partnership interest on a fully-exchanged basis and all general partnership
units equal to 0.01% general partnership interest in Brookfield Renewable. Effective, November 30, 2011,
Brookfield Renewable’s limited partnership units have traded under the symbol “BEP.UN” on the TSX.
Agreements relating to the Combination
In connection with the completion of the Combination, Brookfield Renewable and its subsidiaries entered
into a number of agreements with Brookfield Asset Management, including the following agreements:
Principal Agreements
Combination Agreement
The Combination was effected pursuant to a Combination Agreement which contains covenants,
representations and warranties of and from each of BRPI, the Fund, Brookfield Renewable Power Trust
(“BRPT”) and Brookfield Renewable pursuant to which Brookfield Renewable agreed to acquire all of the
assets of the Fund and all of the other renewable power assets of BRPI pursuant to a court-approved
Plan of Arrangement under Ontario corporate law.
Limited Partnership Agreements
Each of the amended and restated limited partnership agreements of Brookfield Renewable and BRELP
outline the key terms of the partnerships, including provisions relating to management, protections for
limited partners, capital contributions, distributions and allocation of income and losses. Pursuant to
BRELP’s amended and restated limited partnership agreement, BRELP’s general partner is entitled to
receive incentive distributions from BRELP as a result of its ownership of the general partnership interest
in BRELP. The incentive distributions are to be calculated in increments based on the amount by which
quarterly distributions on the limited partnership units of BRELP exceed specified target levels as set forth
in the amended and restated partnership agreement.
Relationship Agreement
Brookfield Asset Management and certain of its subsidiaries entered into an agreement with Brookfield
Renewable pursuant to which Brookfield Asset Management agreed that Brookfield Renewable will serve
as its primary vehicle through which it will acquire renewable power assets on a global basis.
Master Services Agreement
Brookfield Renewable entered into an exclusive agreement with Brookfield Asset Management pursuant
to which Brookfield Asset Management has agreed to provide oversight of the business and provide the
services of senior officers to Brookfield Renewable for a management service fee. The fee is paid on a
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 94
quarterly basis and has a fixed quarterly component of $5 million and a variable component calculated as
a percentage of the increase in the total capitalization value of Brookfield Renewable over an initial
reference value (subject to an annual escalation by a specified inflation factor beginning on January 1,
2013). The Master Services Agreement continues in perpetuity, until terminated in accordance with its
terms.
BRELP Voting Agreement
Pursuant to a voting agreement dated November 28, 2011 (the “Voting Agreement”), between Brookfield
Renewable and Brookfield Asset Management, Brookfield Renewable, through the Managing General
Partner, has a number of voting rights, including the right to direct all eligible votes in the election of the
directors of BRELP’s general partner.
Revenue Agreements
Contract Amendments
Two long-term PPAs on generating assets in Ontario were amended to increase the price from C$68 per
MWh to an average of C$88 per MWh on a portfolio basis. The agreements described below are with
respect to generating assets held by the Mississagi Power Trust (“MPT”), and Great Lakes Power Limited
(“GLPL”). In addition, the term of the Mississagi PPA has been extended to December 1, 2029 and MPT
has been granted the unilateral option to terminate the agreement, on 120 days written notice, at certain
times between 2017 and 2024.
As amended, the GLPL power purchase agreement requires a subsidiary of Brookfield Asset
Management to support the price that GLPL receives for energy generated by certain facilities in Canada
at a price of C$82 per MWh subject to an annual adjustment equal to 40% of the Consumer Price Index
(“CPI”) in the previous year. The GLPL agreement has an initial term to 2029, and the contract
automatically renews for successive 20-year periods with certain termination provisions. If the contract is
not terminated prior to 2029, the price under this agreement reverts back to the original C$68 per MWh
subject to an annual adjustment equal to 40% of the CPI for each year.
As amended, the MPT power purchase agreement requires a subsidiary of Brookfield Asset Management
to purchase the energy generated at a price of C$103 per MWh subject to an annual adjustment equal to
20% of the CPI in the previous year. The MPT contract terminates on December 1, 2029, subject to the
early termination options described above.
Energy Revenue Agreement
The Energy Revenue Agreement was entered into between a subsidiary of Brookfield Asset Management
and Brookfield Power U.S. Holdings America Co. (“BPUSHA”) that indirectly owns substantially all of the
U.S. facilities of Brookfield Renewable. The subsidiary of Brookfield Asset Management will support the
price that BPUSHA receives for energy generated by certain facilities in the United States at a price $75
per MWh. This price is to be increased annually on January 1 by an amount equal to 40% of the increase
in the CPI during the previous calendar year, but not exceeding an increase of 3% in any calendar year.
The Energy Revenue Agreement will have an initial term of 20 years, with automatic renewals for
successive 20-year periods with certain termination provisions.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 95
Power Services Agreements
Power Agency Agreements
In conjunction with the Energy Revenue agreement, certain Brookfield Renewable subsidiaries entered
into Power Agency Agreements appointing a subsidiary of Brookfield Asset Management as the exclusive
agent of the owner in respect of the sales of electricity, including the procurement of transmission and
other additional services. In addition, this subsidiary will schedule, dispatch and arrange for transmission
of the power produced and the power supplied to third-parties in accordance with prudent industry
practice. Pursuant to each Agreement, the subsidiary will be entitled to be reimbursed for any third-party
costs incurred, and, except in a few cases, receives no additional fee for its services in connection with
the sale of power and for providing the other services.
Energy Marketing Agreement
A subsidiary of Brookfield Asset Management has agreed to provide energy marketing services to
Brookfield Renewable’s North American businesses. Under this Agreement, Brookfield Renewable pays
an annual energy marketing fee of $18 million per year.
Development Projects Agreement
As part of the Combination, Brookfield Renewable indirectly acquired a number of development projects
in the United States, Canada and Brazil from a subsidiary of Brookfield Asset Management. This
subsidiary received no upfront proceeds on closing for the transfer of these projects, but is entitled to
receive on commercial operation or sale of the projects, in each case if developed or sold in the 25 years
following closing, up to 100% of the development costs that it contributed to each project and 50% of the
fair market value of the projects in excess of a priority return on each party’s invested capital. These
amounts will only be payable on projects upon substantial completion or sale of the project. With respect
to the projects located in the United States and Canada, the Development Projects Agreement provides
for the reimbursement of expenses to a subsidiary of Brookfield Asset Management for such projects, and
a separate royalty agreement exists to provide royalties on each project. With respect to projects located
in Brazil, a subsidiary of Brookfield Asset Management subscribed for special shares which contain a
redemption feature that provides for the reimbursement of expenses as well as the sharing of the fair
market value on projects.
Other Agreements
In addition, the following related party agreements were in place with either the Fund or BRPI and
continue to be in effect, and were thus transferred to Brookfield Renewable on the effective date of the
Combination.
Revenue Agreements
Pursuant to a 20-year PPA, a subsidiary of Brookfield Asset Management purchases all energy from
several power facilities in Maine and New Hampshire held by Great Lakes Holding America (“GLHA”) at
$37 per MWh. The energy rates are subject to an annual adjustment equal to 20% of the increase in the
CPI during the previous year.
Pursuant to a 20-year PPA, a subsidiary of Brookfield Asset Management purchases all energy from
Lievre Power in Quebec at C$68 per MWh. The energy rates are subject to an annual adjustment equal
to the lesser of 40% of the increase in the CPI during the previous calendar year or 3%.
Pursuant to a power guarantee agreement, a subsidiary of Brookfield Asset Management will purchase all
energy from the two facilities of Hydro Pontiac Inc. at a price of C$68 per MWh, to be increased annually
each calendar year beginning in 2010 by an amount equal to 40% of the increase in the CPI during the
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 96
previous calendar year. This power guarantee agreement is scheduled to commence in 2019 for one
facility and in 2020 for the other, upon the expiration of existing power agreements. This agreement has
an initial term to 2029 and automatically renews for successive 20-year period with certain termination
provisions.
Pursuant to a 10-year Wind Levelization agreement expiring in 2019, a subsidiary of Brookfield Asset
Management mitigates any potential wind variation from the expected annual generation of 506 GWh with
regards to the Prince Wind assets in Ontario. Any excess generation compared to the expected
generation results in a payment from Brookfield Renewable to the subsidiary of Brookfield Asset
Management, while a shortfall would result in a payment from a subsidiary of Brookfield Asset
Management to Brookfield Renewable.
Payment obligations relating to PPAs
Pursuant to a 20-year PPA guarantee, expiring in 2021, a subsidiary of Brookfield Asset Management
guarantees to Powell River Energy the payment of obligations of an industrial power purchaser for an
annual fee of C$.5 million.
Purchase of natural gas
A subsidiary of Brookfield Asset Management acting as an agent on behalf of Brookfield Renewable
secures the price of natural gas with respect to a gas plant in Ontario until the end of 2013 for a weighted
average price of $6 per MMbtu.
Insurance services
In the normal course of operations, an insurance broker affiliated with Brookfield Asset Management,
entered into transactions with Brookfield Renewable to provide insurance services. These transactions
are measured at fair value. In 2011, $nil (2010: $10 million) was included in “Other” on the consolidated
statements of (loss) income for insurance claims.
The following table reflects the related party agreements and transactions on the consolidated statements
of (loss) income:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Revenues
Related Party
2011
2010
Purchase and revenue support agreements Brookfield Asset Management
$ 254
$ 205
Wind Levelization agreement
Brookfield Asset Management
7
5
$ 261
$210
Direct operating costs
Energy purchases
Operations, maintenance and
administration services
Insurance services
Brookfield Asset Management
$ 41
$ 42
Brookfield Asset Management
Brookfield Asset Management
11
18
$ 70
$ 19
$ 1
17
15
$ 74
$ 40
$ -
Interest expense
Brookfield Asset Management
Management service costs
Brookfield Asset Management
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 97
Amounts due to/from related parties
Current assets and note receivable outstanding
Current assets due from Brookfield Asset Management are non-interest bearing, unsecured and due on
demand. The note receivable from an equity-accounted investment is non-interest bearing, unsecured
and due on demand.
Amounts due and note receivable outstanding
Amounts due from Brookfield Asset Management are non-interest bearing, unsecured and due on
demand. The note receivable from an equity-accounted investment is unsecured, due on demand and
interest bearing with the annual interest rate between 10% and 18%. The rate for 2011 was 13% (2010:
10%). The note is due December 2020.
Amounts and note payable outstanding
Amounts due to Brookfield Asset Management are unsecured, due on demand and interest bearing with
the annual interest rate ranging between 5.8% and 14%. The rate for 2011 was 10% (2010: 5.8%).
Amounts and the note receivable are not considered impaired based on the credit worthiness of the
related- party counterparties. Accordingly, as at December 31, 2011 and 2010, an allowance for doubtful
accounts was not deemed necessary.
Current portion of long-term debt and credit facilities
Brookfield Asset Management has provided a hydrology reserve facility to Brookfield Renewable to be
used to maintain cash distributions due to changes in hydrology from year to year. This is discussed
further in Note 14 - Debt Obligations.
The following table reflects the impact of the related party agreements and transactions on the
consolidated balance sheets:
AS AT DECEMBER 31
(MILLIONS)
Due from related parties
Amounts due from
Note receivable
Amounts due from
Note receivable
Due to related parties
Amounts due to and current portion of note
payable
Accrued unitholders distributions payable
(Note 18)
Note payable
Credit facilities
Related Party
2011
2010
Brookfield Asset Management
Coram California Development
Brookfield Asset Management,
Brascan Energetica
Powell River Energy Inc.
$227
26
$253
$ 13
19
$ 32
$ 377
23
$ 400
$ -
19
$ 19
Brookfield Asset Management
$ 74
$ 567
Brookfield Asset Management
$ 65
$ -
Brookfield Asset Management
$139
$ 8
$ 567
$ 101
Brookfield Asset Management
$ -
$ 8
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 98
Voting Agreements
In December 2011, Brookfield Renewable entered into voting agreements with subsidiaries of Brookfield
Asset Management whereby these subsidiaries, as managing members of entities related to Brookfield
Americas Infrastructure Fund (the “BAIF Entities”) in which Brookfield Renewable holds investments with
institutional investors, agreed to assign to Brookfield Renewable their voting rights to appoint the directors
subsidiaries of the BAIF Entities. Brookfield Renewable’s economic interests in the BAIF Entities in the
United States and Brazil are 22% and 25%, respectively.
9. EQUITY-ACCOUNTED AND LONG-TERM INVESTMENTS
The following are Brookfield Renewable’s equity-accounted and long-term investments:
AS AT DECEMBER 31
(MILLIONS)
Bear Swamp Power Co. L.L.C.
Brookfield Americas Infrastructure Fund investees (1)
Powell River Energy Inc.
Pingston Power Inc.
Galera Centrais Elétricas S.A.
Other long-term investments
Ownership
percentage interest
2010
2011
Carrying Value
2011
2010
%
50
50
50
50
50
%
50
50
50
50
50
$ 130
$ 95
119
21
49
86
5
40
43
80
$ 405
$ 263
-
6
$ 405
$ 269
(1) Consists of 50% ownership interests in Coram California Development L.P and Malacha Hydro Limited Partnership.
The following table presents the changes in Brookfield Renewable’s equity-accounted and long-term
investments:
AS AT DECEMBER 31
(MILLIONS)
Balance, beginning of year
Share of net income
Share of OCI
Revaluation recognized through OCI
Other
Balance, end of year
2011
$ 269
10
(7)
136
(3)
$ 405
2010
$ 283
15
-
(30)
1
$ 269
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 99
The following tables summarize certain financial information of equity-accounted investments:
AS AT DECEMBER 31
(MILLIONS)
Bear Swamp Power Co.
L.L.C.
Brookfield Americas
Infrastructure Fund
Powell River Energy Inc.
Pingston Power Inc.
Galera Centrais Elétricas
S.A
FOR THE YEARS ENDED
DECEMBER 31
(MILLIONS)
Bear Swamp Power Co.
L.L.C.
Brookfield Americas
Infrastructure Fund
Powell River Energy Inc.
Pingston Power Inc.
Galera Centrais Elétricas
S.A
Current
assets
Long-
term
assets
Current
liabilities
Long-
term
liabilities
Current
assets
Long-
term
assets
Current
liabilities
Long-
term
liabilities
2011
2010
$ 40 $ 572 $ (150)
$ (201)
$ 31
$ 467 $ (21) $ (301)
17
9
3
412
212
165
(25)
(5)
(1)
(165)
(173)
(68)
11
5
3
17
230
155
(23)
(4)
(2)
-
(150)
(68)
171
(3)
7
$ 76 $1,532 $ (183) $ (610)
(2)
7
$ 57
138
$ 1,007
(3)
(1)
$ (51) $ (522)
Revenue
Net income
(loss)
2011
Share of
net income
(loss)
Revenue
Net income
(loss)
Share of net
income (loss)
2010
$ 58
$ 16
$ 8
$ 69
$ 29
$ 14
10
24
8
-
(2)
1
-
(1)
1
-
20
9
-
(5)
3
17
$ 117
4
$ 19
2
$ 10
13
$ 111
3
$ 30
-
(2)
1
2
$ 15
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 100
10. PROPERTY, PLANT AND EQUIPMENT
The composition of the net book value of Brookfield Renewable’s property, plant and equipment, is
presented in the following table:
(MILLIONS)
As at January 1, 2010
Foreign exchange
Additions/transfers
Revaluation recognized through OCI
Disposals
Revaluation through income
Depreciation
As at December 31, 2010
$ 10,957 $
Foreign exchange
Additions/transfers
Revaluation recognized through OCI
Disposals
Revaluation recognized through income
(293)
514
1,094
(2)
(13)
Hydroelectric
Wind
Other (1)
Total
$ 11,882 $
360
$
634 $ 12,876
244
126
(974)
(3)
60
(378)
19
185
13
-
-
(22)
555
(12)
396
489
-
-
31
37
2
(2)
(3)
294
348
(959)
(5)
57
(38)
(438)
$
661 $ 12,173
(89)
119
55
(29)
-
(394)
1,029
1,638
(31)
(13)
Depreciation
(381)
(33)
(43)
(457)
As at December 31, 2011
$ 11,876 $
1,395
$
674
$ 13,945
(1)
(2)
Included within the “Other” category are land, roads, decommissioning assets, leasehold improvements, gas-fired generating
units and CWIP.
Assets not subject to depreciation include CWIP and land.
Certain of Brookfield Renewable’s property, plant and equipment, comprised of hydroelectric, wind, and
gas-fired generating units are carried at revalued amounts as opposed to historical cost. These items of
property, plant and equipment were revalued by using a discounted cash flow valuation model that
incorporates management’s expectations about future electricity prices in geographic areas in which it
operates, anticipated long-term average generation, estimated capital expenditures for each of Brookfield
Renewable’s respective plants over a 20-year period, and assumptions about future inflation rates and
discount rates. The valuation model also incorporates future cash inflows from PPAs that are in place
with certain of Brookfield Renewable’s customers and Brookfield Asset Management, and estimated
future major maintenance expenditures over a 20-year period.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 101
The key valuation metrics of the discounted cash flow valuation model at the dates of the last revaluations
are set out in the following table:
United States
Canada
Brazil
2011
2010
2011
2010
2011
2010
Discount rate
5.6%
7.4%
5.4%
6.4%
9.9%
10.8%
Terminal capitalization rate
7.2%
7.9%
6.8%
7.1%
N/A
N/A
Exit date
2031
2030
2031
2030
2029
2029
The valuation metrics above are based on weighted-average, post-tax discount and terminal
capitalization rates. The valuations are impacted primarily by the discount rate and anticipated long-term
electricity prices.
A 50 bps change in discount rates would have approximately $1 billion impact on the net asset value.
A revaluation increase of $1,638 million was recorded through OCI on December 31, 2011 (2010: $959
million decrease). Certain contract amendments and agreements related to the Combination resulted in
changes in the fair value of certain power generating facilities. The impact of these changes is included
in OCI. For the year ended December 31, 2011, Brookfield Renewable recognized a net revaluation
impairment of $13 million included in “Other” in the consolidated statements of (loss) income (2010: $57
million recovery) due to changes in discount rates and long-term electricity prices in the valuation model.
For the year ended December 31, 2011, $11 million of interest was capitalized (2010: $3 million) and the
average borrowing rate for the year was 5.16% (2010: 5.12%).
Had Brookfield Renewable’s revalued property, plant and equipment been measured on a historical cost
basis, the carrying amounts, net of accumulated depreciation would have been as follows:
AS AT DECEMBER 31
(MILLIONS)
Hydroelectric
Wind
Other(1)
Total
2011
$ 4,137
824
654
$ 5,615
2010
$ 3,997
444
579
$ 5,020
(1)
Included within the “Other” category are land, roads, decommissioning assets, leasehold improvements, gas-fired generating units and CWIP.
Brookfield Renewable has pledged a significant amount of its property, plant and equipment as collateral
for its subsidiary borrowings.
In the normal course of operations, Brookfield Renewable has committed as at December 31, 2011, to
spend approximately $46 million (2010: $71 million) on capital projects. Brookfield Renewable
categorizes its capital spending as either sustaining or development and construction expenditures.
Sustaining capital expenditures relate to maintaining currently owned power generating assets, whereas
development and construction expenditures include project costs for new facilities.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 102
11. INTANGIBLE ASSETS
The composition of Brookfield Renewable’s intangible assets is presented in the following tables:
AS AT DECEMBER 31
(MILLIONS)
Service concession arrangements
FERC licences
Cost
$ 73
2
$ 75
Accumulated
Amortization
2011
$ (18)
-
$ (18)
Net book value Net book value
$ 55
2
$ 57
2010
$ 85
2
$ 87
The following table describes the changes in the carrying value of intangible assets during the year:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Balance, beginning of year
Foreign exchange and other
Amortization
Balance, end of year
2011
$ 87
(19)
(11)
$ 57
2010
$ 93
2
(8)
$ 87
Brookfield Renewable’s U.S. operations holds licenses issued by the Federal Energy Regulatory
Commission (“FERC”), the federal agency that regulates the licensing of substantially all hydro power
plants in the U.S. FERC licenses allow for the use by the license holder of the defined “project facilities”,
which generally include the land and water required for power generation. FERC licenses are recorded at
cost and amortized either on a straight-line basis over the remaining life of the licenses.
12. OTHER LONG-TERM ASSETS
Cost
Accumulated
Amortization Net book value Net book value
AS AT DECEMBER 31
(MILLIONS)
Restricted cash
Service concession arrangements
Unamortized financing fees
Other
$ 139
125
33
49
2011
$ -
(36)
(23)
(2)
$ 139
89
10
47
$ 346
$ (61)
$ 285
2010
$ 139
96
20
61
$ 316
At December 31, 2011, $139 million of long-term restricted cash (2010: $139 million) was held to cover
lease payments and meet debt service obligations.
The unamortized financing fees relate to the sale and leaseback arrangement of a hydroelectric facility.
Unamortized financing fees are amortized on a straight-line basis over the term of the arrangement to
interest expense. In 2011, Brookfield Renewable capitalized financing fees of $nil (2010: $5 million).
Amortization of the unamortized financing fees included in other long-term assets was $1 million during
2011 (2010: $1 million).
Brookfield Renewable is required to pay the Brazilian Federal Government for the usage of public assets
(“Concessions payment”) over the concession terms associated with two of its Brazilian facilities.
Concessions payments are monetarily adjusted by the Brazilian General Market Price Index. As at
December 31, 2011, an asset of $89 million (2010: $96 million) was included in other long-term assets
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 103
and corresponding liabilities of $nil and $107 million were recorded within accounts payable and accrued
liabilities and other long-term liabilities, respectively (2010: $1 million and $123 million).
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The composition of accounts payable and other are as follows:
AS AT DECEMBER 31
(MILLIONS)
Accounts payable and accrued liabilities
Interest payable
Unitholders’ distribution and preferred dividends payable
2011
$ 128
36
26
2010
$ 133
49
8
$ 190
$ 190
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 104
14. DEBT OBLIGATIONS
AS AT DECEMBER 31
(MILLIONS)
Corporate borrowings
2011
2010
5.25% Series 3 (CDN$200) due November 2018
$ 196
$ 200
5.84% Series 4 (CDN$150) due November 2036
6.13% Series 6 (CDN$300) due November 2016
5.14% Series 7 (CDN$450) due October 2020
Unamortized financing fees, net(1)
Current maturities
Subsidiary borrowings
United States
Canada
Brazil
Unamortized financing fees, net(1)
Current maturities
Revolving credit facilities
147
294
440
150
301
451
$ 1,077
$ 1,102
(6)
-
(6)
-
$ 1,071
$ 1,096
$ 2,021
$ 1,873
1,572
653
1,327
678
$ 4,246
$ 3,878
(49)
(650)
(44)
(127)
$ 3,547
$ 3,707
Unsecured corporate and hydrology reserve facilities
$ 251
$ 64
Current maturities
-
$ 251
$ 4,869
(8)
$ 56
$ 4,859
(1) Unamortized financing fees are amortized to interest expense over the terms of the borrowing.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 105
The weighted-average duration and weighted-average interest rates of Brookfield Renewable’s debt
obligations are as follows:
AS AT DECEMBER 31
(MILLIONS)
Corporate borrowings
Subsidiary borrowings
United States
Canada
Brazil
Revolving credit facilities(1)
2011
Interest rate
(%)
5.5
7.0
6.2
12.1
7.5
2.8
2010
Term
(years)
9.6
Interest rate
(%)
Term
(years)
5.5
10.6
12.6
8.3
6.2
10.0
2.3
7.4
6.6
9.8
7.5
3.0
13.2
10.2
7.0
11.1
3.0
(1) Interest rate is at the Canadian Dealer Offered Rate (“CDOR”) plus 1.75% for 2011 (2010: CDOR plus 1.75%).
Future maturities of Brookfield Renewable’s debt obligations, excluding $55 million in unamortized
financing fees, for each of the next five years and thereafter are as follows:
AS AT DECEMBER 31
(MILLIONS)
2012
2013
2014
2015
2016
Thereafter
Total
Corporate borrowings
$ -
$ -
$ -
$ -
$ 294
$ 783
$ 1,077
Subsidiary borrowings
United States
Canada
Brazil
Revolving credit facilities
328
261
61
650
-
53
390
298
741
-
207
13
65
285
251
46
14
65
125
-
71
11
28
110
-
1,316
883
136
2,335
-
2,021
1,572
653
4,246
251
$ 650
$ 741
$ 536
$ 125
$ 404
$ 3,118
$ 5,574
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 106
The unamortized financing fees of each the debt obligations are as follows:
AS AT DECEMBER 31
(MILLIONS)
Corporate borrowings
Unamortized financing fees, beginning of year
Additional financing fees
Amortization of financing fees
Unamortized financing fees, end of year
Subsidiary borrowings
Unamortized financing fees, beginning of year
Additional financing fees
Amortization of financing fees
Unamortized financing fees, end of year
The fair value of each the debt obligations are as follows:
AS AT DECEMBER 31
(MILLIONS)
Corporate borrowings
Subsidiary borrowings
United States
Canada
Brazil
Revolving credit facilities
Corporate borrowings
2011
2010
$ 6
-
-
$ 6
$ 44
15
(10)
$ 49
$ 6
3
(3)
$ 6
$ 43
9
(8)
$ 44
2011
2010
$ 1,203
$ 1,170
$ 2,187
$ 1,967
1,763
653
1,470
678
$ 4,603
$ 4,115
251
64
$ 6,057
$ 5,349
Corporate borrowings are obligations of a finance subsidiary of Brookfield Renewable (Note 23: -
Subsidiary Public Issuers). The finance subsidiary may redeem some or all of the borrowings from time
to time, pursuant to the terms of the indenture. The balance is payable upon maturity. Interest on
corporate borrowings is paid semi-annually. For periods prior to November 28, 2011, interest on the
corporate borrowings of $77 million (2010: $100 million) was paid by BRPI on behalf of Brookfield
Renewable.
Subsidiary borrowings
Subsidiary borrowings are generally asset-specific, long-term, non-recourse borrowings denominated in
the domestic currency of the subsidiary. Subsidiary borrowings in the United States and Canada consist
of both fixed and floating interest rate debt. Brookfield Renewable uses interest rate swap agreements to
minimize its exposure to floating interest rates. Subsidiary borrowings in Brazil consist of floating interest
rates of TJLP, the Brazil National Bank for Economic Development’s long-term interest rate, or Interbank
Deposit Certificate rate, plus a margin.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 107
Future maturities of borrowings for subsidiaries accounted for an equity-accounted basis for each of the
next five years and thereafter are as follows:
AS AT DECEMBER 31
(MILLIONS)
United States
Canada
Brazil
2012
$ 118
-
1
$ 119
2013
$ 1
-
-
$ 1
2014
$ 1
-
-
$ 1
2015
$ 1
34
-
$ 35
2016 Thereafter
$ 150
$ 1
20
93
-
-
$ 170
$ 94
Total
$272
147
1
$420
Revolving credit facilities
In November 2011, Brookfield Renewable negotiated a $600 million (Note 26) committed unsecured
revolving credit facility used for general working capital purposes. The credit facility is available by way of
advances in either Canadian or U.S. dollars of (i) prime rate loans (ii) bankers’ acceptance (“BA”) loans
and (iii) letters of credit.
The facility expires in March 2014, and may be extended for additional one year periods. The credit
facility bears interest at the applicable BA rate or London Interbank Offered Rate plus an applicable
margin. The applicable margin is tiered on the basis of Brookfield Renewable’s unsecured long-term debt
rating. At December 31, 2011, the margin was 1.75%. Standby fees are charged on the undrawn
balance.
Brookfield Asset Management provides a facility to be used to maintain cash distributions to unitholders
due to changes in hydrology from year to year, with no annual drawdown limit (maximum drawdown in
2011- $nil). The facility is unsecured and bears interest at the prime rate or banker’s acceptance rate of a
Canadian chartered bank plus 2% and is repayable from revenues in years when generation exceeded
long-term average levels. As at December 31, 2011, the balance owing on the facility was $1 million
(2010: $8 million).
Brookfield Renewable and its subsidiaries issue letters of credit from its credit facilities for general
corporate purposes, which include, but are not limited to, security deposits, performance bonds and
guarantees for debt service reserve accounts.
AS AT DECEMBER 31
(MILLIONS)
Available revolving credit facilities
Drawings
Issued letters of credit
Unutilized revolving credit facilities
2011
601
(251)
(160)
190
$
$
$
$
2010
258
(64)
(92)
102
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 108
15. INCOME TAXES
The major components of income tax expense are as follows:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Total current income tax (expense)
Total deferred income tax recovery (origination and reversal of
temporary differences)
Financial instruments designated as cash flow hedges
Origination and reversal of temporary differences in revaluation surplus
Effect of changes in tax rates in revaluation surplus
2011
$
(22)
$
50
194
(270)
315
239
267
$
2010
(32)
3
-
383
61
444
415
Total income tax recoveries
$
Brookfield Renewable’s effective income tax rate is different from Brookfield Renewable’s domestic
statutory income tax rate due to the differences below:
FOR THE YEARS ENDED DECEMBER 31
Statutory income tax rate (calculated at the domestic rates applicable
to the profits in the country concerned)
(Reduction) increase in rate resulting from:
Foreign exchange gains and losses
Non-taxable gain regarding equity-accounted investments
Deemed profit method differences in Brazil
Difference between statutory rate and future tax rate
Other
Effective income tax rate, before change in Fund unit liability
Change in Fund unit liability
Effective income tax rate
2011
%
(35)
-
-
2
3
2
(28)
22
(6)
2010
%
32
(9)
1
3
(33)
2
(4)
15
11
As Brookfield Renewable is not subject to tax, the above reconciliation has been prepared by aggregating
the separate reconciliations for its subsidiaries using the domestic rate in each tax jurisdiction. The
change in applicable tax rate in 2011 as compared to 2010 is a result of changes in the proportion of
income (loss) relating to the various jurisdictions.
Brookfield Renewable’s loss in the Fund unit liability represented a loss for which Brookfield Renewable
does not receive a tax benefit. During the year ended December 31, 2011, Brookfield Renewable
recorded a loss of $376 million (2010: $159 million loss) relating to the Fund unit liability. This loss
decreased accounting income before income taxes, therefore creating a higher effective income tax rate.
As a result of the reorganization of the renewable power generating operations of Brookfield Asset
Management on November 28, 2011, the terms of the newly-issued partnership units do not contain a
redemption feature that requires a Fund unit liability to be calculated.
The following table details the expiry date, if applicable, of the unrecognized deferred tax assets:
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 109
AS AT DECEMBER 31
(MILLIONS)
2012 to 2016
2017 and thereafter
2011
1
44
45
2010
1
26
27
$
$
$
$
Brookfield Renewable’s deferred income tax assets and liabilities relate to the following:
AS AT DECEMBER 31
(MILLIONS)
Deferred income tax assets
Non-capital losses
Capital losses
Amount available for future deductions
Total deferred income tax assets
Deferred income tax liabilities
Difference between tax and carrying value
Total deferred income tax liabilities
2011
2010
$
$
$
$
168
-
138
306
$ 124
5
147
276
$
2,374
2,374
29
$
$ 2,429
The deferred income tax liabilities include $2,157 million of liabilities (2010: $2,210 million) principally
property plant and equipment revaluations included in accumulated OCI.
16. OTHER LONG-TERM LIABILITIES
Brookfield Renewable’s other long-term liabilities are comprised of the following:
AS AT DECEMBER 31
(MILLIONS)
Concession payment liability
Decommissioning retirement obligations
Pension obligations (Note 19)
Other
2011
$ 107
24
17
16
2010
$ 123
12
21
6
$ 164
$ 162
At December 31, 2011, Brookfield Renewable recorded a liability associated with a future obligation
relating to Concessions payments of $107 million (2010: $123 million). The future obligation is being
settled through monthly payments made over the concession term. In 2011, $1 million of concessions
payments were made to the Brazilian Federal Government. See Note 12 - Other long-term assets for
additional details.
Brookfield Renewable has recorded decommissioning retirement obligations associated with its power
generating assets. The estimated cost of the decommissioning activities is based on a third party
assessment and has been discounted using the interest rate of the related property-specific debt. The
decommissioning retirement liability of $24 million at December 31, 2011 (2010: $12 million), has been
established for two separate wind operation sites in Canada and are expected to be restored in 2030 and
2033, respectively.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 110
17. CAPITAL MANAGEMENT
Brookfield Renewable’s primary capital management objectives are to ensure the sustainability of its
capital to support continuing operations, meet its financial obligations, allow for growth opportunities and
provide stable distributions to its unitholders. Brookfield Renewable’s capital is monitored through total
debt to total debt plus equity which is defined as the total long-term debt and credit facilities divided by
total long-term debt and credit facilities plus equity.
Brookfield Renewable has provided covenants to certain of its lenders for its corporate borrowings and
credit facilities. The covenants require Brookfield Renewable to meet minimum debt to capitalization
ratios. Subsidiaries of Brookfield Renewable have provided covenants to certain of their lenders for their
property-specific borrowings. These covenants vary from one agreement to another and include ratios
that address debt service coverage. Certain lenders have also put in place requirements that oblige
Brookfield Renewable and its subsidiaries to maintain debt and capital expenditure reserve accounts.
The consequences to the subsidiaries as a result of failure to comply with their covenants could include a
limitation of distributions from the subsidiaries to Brookfield Renewable, as well as repayment of
outstanding debt. Brookfield Renewable is dependent on the distributions made by its subsidiaries to
service its debt.
Financial covenants associated with Brookfield Renewable’s various banking and debt arrangements are
reviewed regularly and controls are in place to maintain compliance with these covenants. Brookfield
Renewable complied with all financial covenants for the years ended December 31, 2011 and 2010.
Brookfield Renewable’s strategy during 2011, which was unchanged from 2010, was to maintain the
measure set out in the following schedule.
AS AT DECEMBER 31
(MILLIONS)
Total debt
Current portion of long-term debt and credit facilities
Long-term debt and credit facilities
Deferred income tax liability, net(1)
Fund unit liability
Participating non-controlling interests
Preferred equity
Limited partners’ equity
Total capitalization (total debt plus deferred income tax liability, non-
controlling interests and equity)
Debt to total capitalization
2011
2010
$ 650
4,869
$ 135
4,859
5,519
2,068
-
629
241
4,994
2,153
1,355
206
252
6,330
3,372
$ 14,787
$ 12,332
37%
40%
(1) Deferred income tax liability, net is expressed as deferred income tax liability minus deferred income tax asset.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 111
18. PARTNERSHIP EQUITY
The number of general and limited partnership units issued and outstanding was as follows:
AUTHORIZED TO ISSUE
December 31, 2010
Unit issuance
Redeemable unit issuance
December 31, 2011
General partnership units Limited partnership units
Total
1
-
1
132,827,124
132,827,125
129,658,623
129,658,623
262,485,747
262,485,748
Consistent with the basis of presentation for the Combination (Note 2(b) (ii)), (loss) income per unit has
been calculated as if the Partnership units had always been issued and outstanding.
Brookfield Renewable’s capital structure is comprised of two classes of Partnership units: general
partnership units and limited partnership units. Income and distributions of Brookfield Renewable are
allocated to the partners of record based on their respective interests in Brookfield Renewable.
Distributions may be made by the general partner of Brookfield Renewable with the exception of
instances that there is insufficient cash available, payment rends Brookfield Renewable unable to pay its
debt or payment of which might leave Brookfield Renewable unable to meet any future contingent
obligations.
BRELP, a subsidiary of Brookfield Renewable has issued redeemable partnership units held 100% by
Brookfield, which may, at the request of the holder, require BRELP to redeem the units for cash
consideration after a mandatory two-year holding period from the date of issuance. The right is subject to
Brookfield Renewable’s right of first refusal which entitle it, at its sole discretion, to elect to acquire all of
the units so presented to BRELP that are tendered for redemption in exchange for Brookfield Renewable
units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with limited
partnership units, the BRELP redeemable partnership units are classified as limited partnership units.
Prior to the Combination, the Fund made distributions of $103 million consisting of $33 million paid to
Brookfield Asset Management and $70 million paid to the external unitholders of the Fund. In December
2011, Brookfield Renewable declared distributions on its limited partnership units of $45 million ($0.3375
per limited partnership unit) payable on January 31, 2012, consisting of $21 million payable to Brookfield
Asset Management and $24 million payable to external unitholders of Brookfield Renewable. On
December 31, 2011, BRELP also declared redeemable limited partnership and general partnership
distributions to Brookfield Asset Management of $44 million payable on January 31, 2012.
This note should be read in conjunction with Note 2(b) - Basis of presentation. Brookfield Renewable’s
consolidated balance sheet was adjusted for the effects of the following transactions that took place on
the effective date of the Combination:
Settlement of the Fund unit liability
At December 31, 2010, Brookfield Renewable recorded a $1,355 million liability relating to the Fund unit
liability. In 2010, Brookfield Asset Management reduced its ownership in the Fund from 50.01% to 34%,
on a fully-exchanged basis. Through various management, administration, agency and PPAs with the
Fund, along with BRPI’s 34% ownership interest, BRPI continued to control the Fund, and therefore,
consolidated its results. As at the date of the Combination, the Fund units, not previously owned by
Brookfield Asset Management, were transferred to Brookfield Renewable. The transfer was completed at
fair value and satisfied by the issuance of limited partnership units of Brookfield Renewable. The result of
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 112
this transaction is to reflect the settlement of the Fund unit liability at the date of the Combination of
$1,568 million and the limited partnership units issued to satisfy the transfer are treated as equity of
Brookfield Renewable. For the year ended December 31, 2011, and prior to the Combination, Brookfield
Renewable recorded a mark-to-market loss of $306 million (2010: $82 million) and expensed $70 million
(2010: $77 million) of distributions to external unitholders of the Fund.
Settlement of related party balances
Brookfield Renewable and its subsidiaries settled certain intercompany loans and transactions with
Brookfield Asset Management. The consolidated balance sheets include the reduction in amounts due
from and amounts due to related parties, as they were exchanged for limited partnership units in lieu of a
cash settlement.
Derivative balance
Amendments were made to certain energy revenue agreements with the related parties which resulted in
those agreements no longer meeting the derivatives definition under the IFRS. Since this change arose
from the common control reorganization with Brookfield Asset Management the amounts were adjusted
directly into limited partners’ equity.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 113
19. PENSION AND EMPLOYEE FUTURE BENEFITS
Brookfield Renewable offers a number of pension plans to its employees, as well as certain health care,
dental care, life insurance and other benefits to certain retired employees pursuant to Brookfield
Renewable’s policy. The plans are funded by contributions from Brookfield Renewable and from plan
members. Pension benefits are based on length of service and final average earnings and some plans
are indexed for inflation after retirement. The pension plans relating to employees of Brookfield
Renewable have been included in the consolidated financial statements.
Actuarial valuations for Brookfield Renewable’s pension plans are required as per governing provincial
regulations or state. For Québec registered plans, actuarial valuations are required annually. For Ontario
registered plans, actuarial valuations are required on a triennial basis if the funding level of the plan is
above a certain threshold. Currently, all Ontario registered plans are on a triennial schedule. The dates of
the most recent actuarial valuations for Brookfield Renewable’s pension and non-pension benefit plans
range from July 1, 2009 to May 31, 2011. Brookfield Renewable measures its accrued benefit obligations
and the fair value of plan assets for accounting purposes as at December 31 of each year.
Brookfield Renewable has elected under IFRS 1 to not disclose the five year history of the defined
benefits obligations and plan assets, and of experience adjustments. The benefit liabilities represent the
amount of pension and other employee future benefits that Brookfield Renewable’s employees and
retirees have earned at year-end. The benefit obligation under these plans is determined through periodic
actuarial reports which were based on the assumptions indicated in the following table.
Actuarial assumptions:
AS AT DECEMBER 31
Discount rate
Benefit obligation
Benefit expense
Defined benefit
pension plans
Non-pension
benefit plans
Defined benefit
pension plans
Non-pension
benefit plans
2011
2010
4.2 - 5.3% 4.5 - 5.3%
5.1 - 5.8%
5.4 - 5.8%
5.1 - 5.8% 5.4 - 5.8%
5.7 - 6.7%
5.9 - 6.7%
Long-term rate of return on plan assets
6.2 - 7.5%
N/A
7.5%
N/A
Rate of compensation increases
3.5 - 4.0% 3.5 - 4.0%
3.5 - 4.0%
3.5 - 4.0%
Plan obligations and the annual pension expense are determined on an actuarial basis and are affected
by numerous assumptions and estimates including the market value of plan assets, estimates of the long-
term rate of return on plan assets, discount rates, rate of compensation increases and other assumptions.
The discount rate, assumed long-term rate of return on plan assets and compensation increases are the
assumptions that generally have the most significant impact on our pension cost and obligation.
The discount rate for benefit obligation and benefit expense purposes is the rate at which the pension
obligation could be effectively settled. The long-term rate of return on assets for pension cost purposes is
the weighted average of expected long-term asset rate of return assumptions for the various categories of
plan assets held. The assessment of the expected return is based on historical return trends and
analysts’ predictions of the market for the assets in the next twelve months. Rate of compensation
increases reflect the best estimate of merit increases to be provided, consistent with assumed inflation
rates.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 114
The assumed health care cost trend had a minimal effect on the amounts reported. A one percentage
point change in the assumed health care cost trend rate at December 31, 2011 would have had no
significant effect on the post-retirement obligation and would have had no significant effect on the benefit
expense for 2011.
Expense recognized in the Statement of (loss) income
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Current service costs
Interest on accrued benefits
Expected return on plan assets
Settlement/curtailment gain
Plan liabilities
AS AT DECEMBER 31
(MILLIONS)
Deficit for funded plans
Present value of wholly unfunded
obligations
Unrecognized net actuarial loss
Unrecognized past service cost
Defined benefit
pension plans
Non-pension
benefit plans
Defined benefit
pension plans
Non-pension
benefit plans
2011
2010
$ 2
$ 1
$ 1
$ 1
3
(3)
-
1
-
-
3
(3)
-
1
-
2
$ 2
$ 2
$ 1
$ 4
Defined benefit
pension plans
Non-pension
benefit plans
Defined benefit
pension plans
Non-pension
benefit plans
2011
2010
$ 14
$ -
$ 11
$ -
1
(15)
-
23
(5)
(1)
1
(9)
-
23
(4)
(1)
Accrued liability
$ -
$ 17
$ 3
$ 18
Defined benefit obligations
The movement in the defined benefit obligation over the year is as follows:
Defined benefit
pension plans
Non-pension
benefit plans
Defined benefit
pension plans
Non-pension
benefit plans
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
2011
2010
Balance, beginning of year
$ 59
$ 23
$ 48
$ 15
Current service cost
Interest cost
Benefits paid
Actuarial loss (gain)
Plan settlements and amendments
Foreign exchange rate changes
1
3
(2)
3
(2)
(1)
1
1
(1)
(1)
-
-
1
3
(3)
8
-
2
1
1
(1)
3
3
1
Balance, end of year
$ 61
$ 23
$ 59
$ 23
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 115
Expected contributions to the defined pension plans for the year ended December 31, 2012 are $8
million.
Fair value of plan assets
The movement in the fair value of plan assets over the year is as follows:
Defined benefit
pension plans
Non-pension
benefit plans
Defined benefit
pension plans
Non-pension
benefit plans
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
2011
2010
Balance, beginning of year
$ 47
$ -
$ 40
$ -
Expected return on plan assets
Actuarial (loss) gain
Employer contributions
Benefits paid
Plan settlements
Foreign exchange rate changes
3
(3)
5
(2)
(2)
(1)
-
-
1
(1)
-
-
3
1
5
(4)
-
2
-
-
1
(1)
-
-
Balance, end of year
$ 47
$ -
$ 47
$ -
AS AT DECEMBER 31
Asset category
Equity securities
Debt securities
2011
2010
62%
38%
62%
38%
100%
100%
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 116
20. DIRECT OPERATING COSTS
Brookfield Renewable’s direct operating costs are comprised of the following:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Operations, maintenance and administration
Water royalties, property taxes and other
Management fees (Note 8)
Fuel and power purchases (Note 7)
Total direct operating costs
2011
$
254
$
97
12
44
2010
201
90
-
37
$
407
$
328
The remuneration of key management personnel of Brookfield Renewable for the years ended December
31, was as follows:
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Salaries and benefits
Share-based benefits
2011
2010
$
$
3
6
9
$
$
4
5
9
Key management personnel include those individuals having authority and responsibility for planning,
directing and controlling the activities of Brookfield Renewable, directly or indirectly. Key management
personnel include the Chairman, Chief Executive Officer, Chief Financial Officers and Chief Operating
Officer. Share-based benefits relate to costs allocated from Brookfield Asset Management.
21. SUPPLEMENTAL INFORMATION
The net change in non-cash working capital shown in the consolidated statements of cash flows is
comprised of the following:
AS AT DECEMBER 31
(MILLIONS)
Trade receivables and other current assets
Accounts payable, accrued liabilities, and other
2011
$
(12) $
-
$
(12) $
2010
(9)
(20)
(29)
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 117
22. NON-CONTROLLING INTERESTS
The net change in non-controlling interests is as follows:
(MILLIONS)
Balance, December 31, 2009
Net income
OCI
Other
Distributions
Brookfield
Americas
Infrastructure
Fund
$ -
The Catalyst
Group
$ 140
Brascan
Energetica
$ 57
-
-
-
-
23
7
(3)
(24)
2
3
-
1
Other (1)
$ -
-
-
-
-
Balance, December 31, 2010
$ -
$ 143
$ 63
$ -
Net income
OCI
Acquisitions
Other
Distributions
$ 1
$ 5
$ 5
$ -
173
209
(3)
-
16
-
17
(14)
11
-
-
(5)
-
14
-
(6)
Total
$ 197
25
10
(3)
(23)
$ 206
$ 11
200
223
14
(25)
Balance, December 31, 2011
$ 380
$ 167
$ 74
$ 8
$ 629
(1)
Includes the acquisition of a controlling interest in wind development project in Western-Canada.
23. SUBSIDIARY PUBLIC ISSUERS
On March 10, 2010, BRP Equity issued 10 million Series 1 preferred shares at a price of C$25 per share.
The holders of the Series 1 preferred shares are entitled to receive fixed cumulative dividends at an
annual rate of C$1.3125 per share, a yield of 5.25% for the initial five-year period ending April 30, 2015.
The dividend rate will reset on April 30, 2015 and every five years thereafter at a rate equal to the then
five-year Government of Canada Bond yield plus 2.62%. Brookfield Renewable, BRELP and certain key
holding company subsidiaries fully and unconditionally guarantee the payment of dividends on the
preferred shares, the amounts due on redemption, and the amounts due on the liquidation, dissolution or
winding-up of BRP Equity. For the year ended December 31, 2011, dividends declared on the Series 1
preferred shares were $13 million (2010: $10 million).
As a result of the Combination, Brookfield Renewable created BRP Finance to contractually assume
BRPI’s term notes with maturities ranging from 2016 and 2036 with a principal value of approximately
C$1.1 billion. BRP Finance assumed these term notes, including accrued interest, in exchange for an
interest-bearing demand promissory note issued by another wholly-owned subsidiary of Brookfield
Renewable. The term notes payable by BRP Finance are unconditionally guaranteed by Brookfield
Renewable, BRELP and certain other subsidiaries.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 118
The following tables set forth certain consolidated summary financial information for Brookfield
Renewable, BRP Equity, and BRP Finance:
(MILLIONS)
For the year ended December 31, 2011:
Revenue
Net (loss) income
For the year ended December 31, 2010:
Revenue
Net income
Brookfield
Renewable(1)
BRP Equity
BRP
Finance
Consolidating
adjustments(2)
Brookfield
Renewable
consolidated
$ 1,169
(453)
$ -
-
$ -
2
$ -
-
$ 1,169
(451)
$ 1,045
$ 293
$ -
$ 1
$ -
$ -
$ -
$ -
$ 1,045
$ 294
(MILLIONS)
As at December 31, 2011:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Participating non-controlling interests
Preferred equity
Brookfield
Renewable(1)
BRP Equity
BRP
Finance
Consolidating
adjustments(2)
Brookfield
Renewable
consolidated
$ 678
$ -
$ 1,087
$ (1,087)
$ 678
15,024
(2,148)
(6,597)
(629)
-
244
(8)
-
(9)
-
(1,071)
-
(241)
-
-
(238)
1,087
238
-
-
15,030
(1,078)
(7,430)
(629)
(241)
As at December 31, 2010:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Fund unit liability
$ 734
$ -
$ -
$ -
$ 734
12,890
(915)
(7,772)
(1,355)
250
(2)
-
-
-
-
-
-
-
-
-
-
-
-
-
13,140
(917)
(7,772)
(1,355)
(206)
Participating non-controlling interests
(206)
Preferred equity
$ -
$ (252)
$ -
$ -
$ (252)
(1)
(2)
Includes subsidiaries of Brookfield Renewable other than BRP Equity and BRP Finance.
Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a
consolidated basis.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 119
24. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a reconciliation of Brookfield Renewable’s accumulated other comprehensive income
(“AOCI”) attributable to the limited partners’ equity:
(MILLIONS)
Balance, January 1, 2010:
OCI
Income taxes
Balance, December 31, 2010:
OCI
Reversal of unrealized accounting losses on
energy derivative contract
Income taxes
Balance, December 31, 2011
Foreign
currency
translation
$ 370
160
-
Revaluation
surplus
$ 4,943
(967)
444
$ 530
(143)
$ 4,420
1,554
Cash flow
hedges
$ (9)
-
-
$ (9)
(774)
Total
$ 5,304
(807)
444
$ 4,941
637
-
-
$ 387
-
45
$ 6,019
527
194
$ (62)
527
239
$ 6,344
During 2011, a loss of $4 million relating to cash flow hedges was realized (2010: $1 million loss) and was
reclassified from OCI to net (loss) income.
25. SEGMENTED INFORMATION
Brookfield Renewable operates mostly renewable power assets, which include conventional hydroelectric
generating assets located in the United States, Canada and Brazil, a pumped storage hydroelectric
facility located in the United States and wind farms located in Canada and the United States. Brookfield
Renewable also operates two combined cycle natural gas-fired generating units (“co-gen”), one in
Canada and one in the United States. Management evaluates the business based on the type of power
generation (Hydroelectric, Wind and Other). Hydroelectric is further evaluated by major region (United
States, Canada and Brazil). “Equity-accounted investments” includes Brookfield Renewable’s interest in
hydroelectric and wind facilities. The other segment includes co-gen facilities, CWIP and corporate costs.
In accordance with IFRS 8, Operating Segments, Brookfield Renewable discloses information about its
reportable segments based upon the measures used by management in assessing the performance of
those reportable segments. The accounting policies of the reportable segments are the same as those
described in Note 2 of these consolidated financial statements. Brookfield Renewable analyzes the
performance of its operating segments based on revenues, earnings before interest, tax, depreciation and
amortization (“EBITDA”), and funds from operations (“FFO”). EBITDA consists of 100% of revenues less
direct costs (including energy marketing costs), plus Brookfield Renewable’s share of cash earnings from
equity-accounted investments, before interest, current income taxes, depreciation, amortization and
management service costs. FFO is defined as EBITDA less interest, current income taxes and
management service cost, which is then adjusted for non-controlling interests included in FFO.
Transactions between the reportable segments occur at fair value.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 120
Conventional Hydroelectric
United
States Canada
Equity-
accounted
Brazil Wind
investments Other
Total
(MILLIONS)
For the year ended December 31, 2011:
Revenues
EBITDA
Interest expense - borrowings
FFO prior to non-controlling
interests
Non-controlling interests in FFO
FFO
Depreciation and amortization
$ 467
336
149
189
(26)
163
$130
$ 459
332
152
For the year ended December 31, 2010:
Revenues
EBITDA
Interest expense - borrowings
FFO prior to non-controlling
interests
Non-controlling interests in FFO
FFO
Depreciation and amortization
164
(31)
133
$144
$ 237
179
68
$ 335
269
94
116
-
116
$151
160
(13)
147
$138
$ 205
160
64
$ 271
201
95
96
-
96
$153
90
(4)
86
$118
$ 70
58
25
33
-
$33
$35
$52
45
17
28
-
28
$24
$ - $ 60
(38)
75
-
-
$1,169
804
411
-
-
-
$ -
(128)
(13)
(141)
$14
370
(52)
318
$468
$ - $ 58
13
76
-
-
$1,045
751
404
-
-
-
$ -
(63)
(11)
(74)
$ 7
315
(46)
269
$446
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 121
The following table reconciles EBITDA and FFO, presented in the above tables, to net (loss) income as
presented in the consolidated statements of loss (income):
FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
EBITDA
Interest expense - borrowings
Management service costs
Current income taxes
Funds from operations prior to non-controlling interests
Less: cash portion of non-controlling interest
FFO
Depreciation and amortization
Unrealized financial instrument (losses) gains
Loss on Fund unit liability
Share of non-cash loss in equity-accounted investments
Deferred income tax recovery
Other
Add: cash portion of non-controlling interests
2011
$
804 $
(411)
(1)
(22)
370
(52)
318
(468)
(20)
(376)
(13)
50
6
52
Net (loss) income
$
(451) $
2010
751
(404)
-
(32)
315
(46)
269
(446)
584
(159)
(7)
3
4
46
294
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 122
The following is information about Brookfield Renewable’s certain balance sheet items:
Conventional Hydroelectric
United
States
Canada
Brazil
Wind
Equity-
accounted
investments
Other
Total
(MILLIONS)
As at December 31, 2011:
Property, plant and
equipment
$ 4,547
$ 4,908
$ 2,626
$ 1,400
$ - $ 464 $13,945
Addition to property, plant
and equipment
Total assets
Total borrowings
Total liabilities
As at December 31, 2010:
Property, plant and
$ 136
$ 5,064
$ 1,838
$ 3,008
$ 46
$ 5,139
$ 928
$ 2,098
$ 210
$ 2,963
$ 645
$ 869
$ 399
$ 1,315
$ 785
$ 1,070
$ - $ 238 $ 1,029
$ 405 $ 822 $15,708
$ - $1,323 $ 5,519
$ - $1,463 $ 8,508
equipment
$ 4,678
$ 4,386
$ 2,248
$ 554
$ - $ 307 $12,173
Addition to property, plant
and equipment
Total assets
Total borrowings
Total liabilities
$ 23
$5,093
$1,857
$1,428
$ 19
$ 4,713
$ 950
$ 2,683
$ 117
$ 2,814
$ 665
$ 955
$ 289
$ 645
$ 362
$ 406
$ - $ - $ 348
$ 269 $ 340 $13,874
$ - $1,160 $ 4,994
$ - $3,217 $ 8,689
The following is information about Brookfield Renewable’s total assets for its equity-accounted investment:
(MILLIONS)
As at December 31, 2011
As at December 31, 2010
Conventional Hydroelectric
United
States
$169
$ 95
Canada
$ 70
$ 83
Brazil
$ 86
$ 80
Wind
$ 80
$ 5
Other
$ -
$ 6
Total
$ 405
$ 269
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 123
26. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
In the course of its operations, Brookfield Renewable and its subsidiaries has entered into agreements for
the use of water, land and/or dams. Payment under those agreements varies with the amount of power
generated. The various agreements are renewable and extend as far as the year 2054.
Brookfield Renewable has recorded decommissioning retirement obligations associated with its power
generating assets. Refer to Note 16 - Other long-term liabilities for details.
At the balance sheet date, Brookfield Renewable had commitments for future minimum lease payments
under non-cancellable leases which fall due as follows:
AS AT DECEMBER 31
(MILLIONS)
Operating leases
Capital leases
Total
Contingencies
2012
$ 6
-
$ 6
2013
$ 6
-
$ 6
2014
$ 4
-
$ 4
2015
$ 4
-
$ 4
2016 Thereafter
$ 30
$ 4
47
-
$ 77
$ 4
Total
$ 54
47
$ 101
Brookfield Renewable and its subsidiaries are subject to various legal proceedings, arbitrations and
actions arising in the normal course of business. While the final outcome of such legal proceedings and
actions cannot be predicted with certainty, it is the opinion of management that the resolution of such
proceedings and actions will not have a material impact on Brookfield Renewable’s consolidated financial
position or results of operations.
Guarantees
Brookfield Renewable, on behalf of Brookfield Renewable’s subsidiaries, provided letters of credit, which
include, but are not limited to, guarantees for debt service reserves, capital reserves, construction
completion and performance. The activity on the issued letters of credit can be found in Note 14 - Debt
Obligations.
In the normal course of operations, Brookfield Renewable and its subsidiaries execute agreements that
provide for indemnification and guarantees to third parties of transactions such as business dispositions,
capital project purchases, business acquisitions, and sales and purchases of assets and services.
Brookfield Renewable has also agreed to indemnify its directors and certain of its officers and employees.
The nature of substantially all of the indemnification undertakings prevents Brookfield Renewable from
making a reasonable estimate of the maximum potential amount that Brookfield Renewable could be
required to pay third parties as the agreements do not always specify a maximum amount and the
amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which
cannot be determined at this time. Historically, neither Brookfield Renewable nor its subsidiaries have
made significant payments under such indemnification agreements.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 124
27. SUBSEQUENT EVENTS
Growth developments
With its institutional partners, Brookfield Renewable recently acquired new wind generation assets in
California, including a 150 MW wind farm adjacent to the Coram wind project in the Tehachapi region.
This new facility entered commercial operation in the first quarter of 2012 and comes with a 24-year PPA
with Southern California Edison. Brookfield Renewable also acquired the remaining 50% stake previously
held by its partner in Coram, along with a further 22 MW of additional operating wind generation capacity.
Unitholder distribution increase
In January 2012, Brookfield Renewable announced an increase in unitholder distributions to $1.38 per
unit on an annualized basis, an increase of three cents per unit per year, to take effect during the first
quarter distribution payable in April 2012.
Secondary offering and over-allotment option exercised
In the first quarter of 2012, a bought-deal secondary offering that was completed, through which a wholly-
owned subsidiary of Brookfield Asset Management sold 13,144,500 of its limited partnership units of
Brookfield Renewable (11,430,000 limited partnership units plus 1,714,500 limited partnership units
pursuant to an over-allotment option that was exercised in full) at an offering price of C$26.25 per limited
partnership unit. Brookfield Asset Management had previously owned approximately 73% of Brookfield
Renewable on a fully-exchanged basis. Upon the completion of the secondary offering, and giving effect
to the over-allotment option, Brookfield Asset Management now owns, directly and indirectly, 177,750,609
limited partnership units, representing approximately 68% of Brookfield Renewable on a fully-exchanged
basis.
Medium-term note offering
In February 2012, Brookfield Renewable successfully completed a C$400 million offering of medium-term
notes bearing interest at a rate of 4.79% per year that are due February 2022. Proceeds of the offering
were used to refinance existing indebtedness and for general business purposes.
Distribution reinvestment plan
In the first quarter of 2012, the Board of Directors for Brookfield Renewable approved the adoption and
implementation of a distribution reinvestment plan. The plan has been implemented in the current quarter
and allows registered or beneficial holders of Brookfield Renewable limited partnership units who are
residents in Canada to acquire additional units by reinvesting all or a portion of their cash distributions
without paying commissions.
Credit facilities
In March 2012, Brookfield Renewable expanded its revolving credit facilities from $600 million to $900
million, with maturity dates to October 2016.
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 125
LP UNITHOLDERS’ INFORMATION
Directors of the General Partner of
Brookfield Renewable Energy Partners LP
Jeffrey Blidner
Eleazar de Cavalho Filho
John Van Egmond
David Mann
Lou Maroun
Patricia Zuccotti
Exchange Listing
TSX: BEP.UN (L.P. units)
TSX: BRF.PR.A (Preferred shares)
Investor Information
Visit Brookfield Renewable online at
www.brookfieldrenewable.com for more information. The
2011 Annual Report is also available online. For detailed
and up-to-date news and information, please visit the News
Press Release section.
Additional financial information is filed electronically with
various securities regulators in Canada through SEDAR at
www.sedar.com.
Unitholder enquiries should be directed to the Investor
Relations Department at
(416) 359-1955 or
unitholderenquiries@brookfieldrenewable.com
Corporate Office
73 Front Street
Fifth Floor
Hamilton, HM12
Bermuda
Tel: +1(441) 294-3304
Fax: +1(441) 516-1988
www.brookfieldrenewable.com
Officers of Brookfield
Renewable Energy Partners
L.P.’s Manager, BRP Energy
Group L.P.
Harry A. Goldgut
Chairman
Richard Legault
Chief Executive Officer
Benjamin Vaughan
President and Chief Operating
Officer
Donald Tremblay
Executive Vice President
Sachin Shah
Chief Financial Officer
Transfer Agent & Registrar
Computershare Trust Company
of Canada
100 University Avenue
9th floor
Toronto, Ontario, M5J 2Y1
Tel Toll Free: 1 (800) 564-6253
Fax Toll Free: 1 (888) 453-0330
www.computershare.com
Brookfield Renewable Energy Partners L.P. Annual Report December 31, 2011
Page 126
TSX:
BEP.UN
www.brookfieldrenewable.com