Brookfield Renewable Energy Partners L.P.
ANNUAL REPORT
2013
TABLE OF CONTENTS
Letter To Shareholders
Generation for The Years Ended December 31, 2013 and 2012
Financial Review for The Years Ended December 31, 2013 and 2012
Analysis Of Consolidated Financial Statements and Other Information
Audited Consolidated Financial Statements as at and
for The Year Ended December 31, 2013
1
11
12
23
61
OUR OPERATIONS
We operate our facilities through three regional operating centers in the United States, Canada
and Brazil which are designed to maintain and enhance the value of our assets, while cultivating positive
relations with local stakeholders. We own and manage 193 hydroelectric generating stations, 11 wind
facilities, and two natural gas-fired plants. Overall, the assets we own or manage have 5,849 MW of
generating capacity and annual generation of 22,159 GWh based on long-term averages. The table
below outlines our portfolio as at December 31, 2013:
River Generating Generating Capacity
Systems
Facilities
Units
(MW)
LTA(1)(2)
(GWh)
Storage
(GWh)
Hydroelectric generation(3)
United States
Canada
Brazil
Wind energy
United States
Canada
Other
28
18
23
69
-
-
-
-
126
371
2,696
9,951
32
35
72
75
1,323
5,062
671
3,656
3,582
1,261
N/A
193
518
4,690
18,669
4,843
8
3
11
2
724
220
944
6
538
406
944
215
1,394
1,197
2,591
899
-
-
-
-
(1)
(2)
(3)
69
4,843
206
Long-term average (“LTA”) is calculated on an annualized basis from the beginning of the year, regardless of the acquisition
or commercial operation date.
Brazilian hydroelectric assets benefit from a market framework which levelizes generation risk across producers.
Long-term average 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. In Brazil, assured generation levels are used as a proxy for
long-term average.
22,159
1,468
5,849
The following table presents the annualized long-term average generation of our operating
portfolio on a quarterly basis as at December 31, 2013:
LTA (GWh)(1)(2)
Hydroelectric generation(3)
Q1
Q2
Q3
Q4
Total
United States
Canada
Brazil
Wind energy
United States
Canada
Other
2,659
1,196
947
2,829
1,461
892
2,013
1,234
894
2,450
1,171
923
9,951
5,062
3,656
4,802
5,182
4,141
4,544
18,669
311
324
635
222
468
292
760
218
341
238
579
240
274
343
617
219
1,394
1,197
2,591
899
Total
(1)
(2)
(3)
5,659
22,159
Long-term average (“LTA”) is calculated on an annualized basis from the beginning of the year, regardless of the acquisition
or commercial operation date.
Brazilian hydroelectric assets benefit from a market framework which levelizes generation risk across producers.
Long-term average 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. In Brazil, assured generation levels are used as a proxy for
long-term average.
6,160
4,960
5,380
Statement Regarding Forward-Looking Statements and Use of Non-IFRS Measures
This Annual Report contains forward-looking information within the meaning of Canadian and U.S. securities laws. We
may make such statements in this Annual Report, in other filings with Canadian regulators or the U.S. Securities and Exchange
Commission or in other communications - see “Cautionary Statement Regarding Forward-Looking Statements” beginning on page
59. We make use of non-IFRS measures in this Annual Report - see “Cautionary Statement Regarding Use Of Non-IFRS
Measures” beginning on page 60. This Annual Report, our Form 20-F and additional information filed with securities regulators in
Canada and with the U.S. Securities and Exchange Commission are available on our website at www.brookfieldrenewable.com, on
SEDAR’s website at www.sedar.com or on EDGAR’s website at www.sec.gov.
LETTER TO SHAREHOLDERS
In the 15 years since its inception, Brookfield Renewable has produced a compelling track record of value
creation for shareholders. In 2011, we successfully transitioned from a Canadian-focused income trust
into a global renewable power business, now listed on both the New York and Toronto stock exchanges,
with solid performance and outstanding prospects for continued expansion and total returns. We are very
proud of our 2013 successes and believe we are well positioned for even stronger future growth and
returns.
Organic Growth Highlights
Our growth strategy is simple – to invest in and operate high-quality renewable power assets and
accretively grow cash flow on a per-share basis. To do this, we focus on several key organic growth
initiatives that should comfortably support the higher end of our long-term distribution growth target of 3-
5% annually. In addition, we originate and execute an acquisition strategy that has a proven track record.
Our organic growth strategy is built upon the following principles:
Position the portfolio to benefit from improving market conditions and rising power prices. Today,
we have 2 million megawatt hours of annual hydroelectric generation that was acquired in the last 24
months in the U.S. at values reflecting the low power price environment in our core markets. These
facilities (and BREP’s cash flows) stand to benefit directly if power prices rise, either due to the need for
new supply, the continued shift away from carbon producing technologies or increased demand as an
economic recovery gains momentum.
Over the long term, our objective remains to have predominantly contracted cash flows (our portfolio is
93% contracted in 2014 and at least 80% contracted over the next five years), as this provides a high
degree of cash flow stability and margin preservation given the inflation-linked nature of our power
purchase agreements. However, we believe a prudent level of market-based cash flow today,
underwritten in this environment, has embedded the business with attractive upside which we expect to
lock in through long-term contracts once prices reach higher and more sustainable levels.
To put this into perspective, an increase of $10 per MWh in power prices would add $20 million of funds
from operations (FFO) to our business, increasing current cash flow by approximately 3-4% annually.
Commercialize our development pipeline at premium returns. Our development team has a 15-year
track record of building renewable power projects on scope, schedule and budget. Over the last 12
months we have built two hydroelectric facilities comprising nearly 50 MW, we continue to build a 45 MW
hydro facility on scope, schedule and budget and we are broadening our expertise into solar to ensure we
maintain a healthy pipeline and strong growth prospects.
Accordingly, we continue to advance our 1,700 MW development pipeline and expect to invest
approximately $500 million of BREP equity over the next five years at 17%-20% returns. This pipeline is
defined by high-quality hydro, wind and solar development projects in attractive markets and has the
potential to add $80-$100 million of FFO to the business during this period.
Leverage our unique operating platform to enhance efficiencies. In 2013, we undertook the
reorganization of our Canadian and U.S. businesses into a North American platform to benefit from scale
and operating efficiencies and to support our anticipated growth. When it is completed early this year, this
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 1
initiative will reduce operating expenses by approximately $12 million annually. With mature operating
platforms in North America and Latin America, and the early stages of a European platform, we are
positioning the business for global growth in what we believe are the most attractive renewable markets.
Acquisition Highlights
We acquired 650 MW of renewable capacity in the last year, once again demonstrating our ability to work
with sellers of a strategic, industrial or financial nature. In total, we reviewed more than $20 billion worth
of transactions last year, and despite this abundant deal flow we remain extremely disciplined and
selective in our underwriting approach. It was particularly rewarding to see our patient approach to a
European expansion result in us being named in the preferred bidder consortium in the privatization of
Bord Gáis Energy, which owns one of the leading wind portfolios in Ireland and whose operating wind
capacity is expected to surpass 500 MW by 2015. This would represent our first renewable investment in
Europe and provide us with an established platform from which to grow our business through continued
acquisition and development.
This year promises to be another active one and we have started it on strong footing with the announced
acquisition, with our institutional partners, of a 33% stake in a 417 MW hydroelectric facility. This asset is
one of the largest hydro facilities in the U.S. located in Pennsylvania with direct access to the PJM market
and is consistent with our strategy of buying premium hydroelectric facilities with market-based cash flows
in this price environment.
Financial Strength
Our financial position continues to be very strong and provides us with significant flexibility to carry out
our growth objectives while keeping our risk profile low. We currently have over $1 billion of liquidity
available to fund the business. We generated a record $594 million in FFO in 2013. We continue to
pursue numerous cost savings and efficiencies in our operating platforms. And, in the current low rate
environment, we have refinanced over $3 billion of debt and credit facilities, lowering our total borrowing
costs by 30 basis points while maintaining our average debt duration at approximately 11 years.
We have a long track record executing our growth strategy and optimizing our operations. This has
allowed us to consistently grow our distributions for 15 years. In light of all of the accomplishments of
2013, we are once again announcing an increase in our annualized distribution to $1.55 per unit,
representing a 7% increase from 2013 and nearly 20% since the end of 2011. This exceeds the high end
of our target range and reflects the positive impact of the aforementioned initiatives and prospects.
On a final note, I would like to express my sincere appreciation to our employees, directors, shareholders
and many business partners for their ongoing support. I believe Brookfield Renewable’s brightest days
are still ahead and look forward to reporting on our continued progress.
Sincerely,
Richard Legault
President and Chief Executive Officer
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 2
Management’s Discussion and Analysis
For the year ended December 31, 2013
HIGHLIGHTS FOR 2013
Operating Results
Results for 2013 have been very strong, with funds from operations at $594 million and significantly
above the prior year’s result of $347 million. Total generation was 22,222 GWh compared to the long-
term average of 21,836 GWh and to 15,942 GWh for the prior year. Key drivers of these results were as
follows:
• 596 MW of additional capacity was efficiently integrated into the hydroelectric and wind portfolios
through a combination of acquisitions, follow-on investments and greenfield development. This
resulted in a contribution of $53 million to funds from operations. These new assets are expected
to contribute approximately 2.5 TWh of annualized generation.
• Generation for a full year of operations from assets acquired or commissioned in 2012 resulted in
a contribution of $18 million to funds from operations.
• The hydroelectric portfolio benefitted from favorable hydrology conditions when compared to
2012 which had below average conditions. Hydrology levels and inflows were 4% higher than the
long term average contributing $203 million to revenues. The wind portfolio benefited from
improved wind conditions across the U.S. portfolio as compared to the prior year.
Growth and Development
Brookfield Renewable completed initiatives on 596 MW of power generating assets as follows:
• Acquired, with institutional partners, a 360 MW operating portfolio located in Maine for a total
enterprise value of $760 million. The portfolio is expected to generate approximately 1.6 TWh
annually;
• Acquired the remaining 50% interest, previously held by our partner, in an 83 MW facility located
in British Columbia;
• 100% of the common shares of Western Wind which owns 165 MW of wind generation facilities in
California and 440 GWh of expected annual generation; and
• Construction on the 29 MW project in Brazil was completed, and entered commercial operation
on scope, schedule and budget.
Construction on the 45 MW hydroelectric project in British Columbia continues to progress on scope,
schedule and budget, and is expected to enter commercial operation in mid-2014.
In December 2013, we were identified as part of a consortium that was named by the Irish Government
as the preferred bidder to acquire state-owned Bord Gáis Energy. Part of Bord Gáis Energy’s business
includes a portfolio of operating and development wind energy projects in Ireland and Northern Ireland.
Funding and Liquidity
There were a number of achievements during 2013 which enhanced the capital structure and access to
liquidity:
• Renewed and upsized credit facilities by $490 million to $1.48 billion, extended the maturity by
one year, and lowered credit spreads by 50 basis points;
• Completed two separate issuances of Class A Preference Shares with a fixed, annual, yield of
5%, resulting in C$350 million in total gross proceeds;
• On the recently acquired 360 MW operating hydroelectric portfolio located in Maine, we
completed a restructuring of $700 million of borrowings and recapitalized the portfolio with a $279
million bridge loan;
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 3
• Raised C$170 million from incremental long-term borrowings through up-financing initiatives on
two wind facilities in our Canadian portfolio;
• BREP LP units began trading on the New York Stock Exchange on June 11, 2013, under the
symbol BEP; and
•
Increased unitholder distributions from $1.38 per unit to $1.45 per unit on an annualized basis.
The liquidity levels remain strong at $1.2 billion. In addition, through an investment in a private fund
sponsored by Brookfield Asset Management, the liquidity and capital available from institutional partners
provides additional flexibility to pursue large scale opportunities.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 4
SUMMARY OF HISTORICAL CONSOLIDATED FINANCIAL AND OTHER INFORMATION
(MILLIONS, EXCEPT AS NOTED)
Operational information(1):
Capacity (MW)
Long-term average generation (GWh)(2)
Actual generation (GWh)(2)
Average revenue ($ per MWh)
Selected Financial Information:
Revenues
Adjusted EBITDA(3)
Funds from operations(3)
Adjusted funds from operations(3)
Net income (loss)
Distributions per share
Preferred equity(4)
Limited partners' equity(5)
(MILLIONS, EXCEPT AS NOTED)
Balance sheet data:
Property, plant and equipment, at fair value
Equity-accounted investments
Total assets
2013
2012
2011
2010
2009
5,849
21,836
22,222
77
5,304
18,202
15,942
82
4,536
16,297
15,877
74
4,309
15,887
14,480
72
4,198
15,529
15,833
62
$ 1,706 $ 1,309 $ 1,169 $ 1,045 $
1,208
594
538
215
1.18
1.45
852
347
295
(95)
1.27
1.38
804
332
284
(451)
1.34
0.34
751
269
221
294
1.03
-
984
743
324
276
(580)
-
-
2013
2012
Restated (6)
2011
2010
2009
$ 15,741 $ 15,702 $ 14,002 $ 12,260 $ 12,969
283
14,836
344
16,925
269
13,874
405
15,708
290
16,977
Long-term debt and credit facilities
Deferred income tax liabilities
Total liabilities
Preferred equity
Participating non-controlling interests -
in operating subsidiaries
General partnership interest in a holding
subsidiary held by Brookfield
Participating non-controlling interests -
in a holding subsidiary - Redeemable
/Exchangeable units held by Brookfield
Limited partners' equity
Total liabilities and equity
Debt to total capitalization(7)
(1)
(2)
6,623
2,265
9,441
796
6,119
2,349
9,117
500
5,519
2,367
8,524
241
4,994
2,424
8,701
252
4,663
2,773
9,813
-
1,303
1,028
629
206
197
54
63
64
34
40
2,657
2,726
16,977
41%
3,070
3,147
16,925
38%
3,089
3,161
15,708
37%
1,643
1,683
13,874
40%
1,920
1,967
14,836
40%
Includes 100% of generation from equity-accounted investments.
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures.”
Represents the weighted-average distribution to the Series 1, Series 3, Series 5 and Series 6 Shares.
Represents distributions per share to holders of Redeemable/Exchangeable Units, LP Units and general partnership interest.
Restated with the adoption of IAS 19R “Employee Benefits”.
Total capitalization is calculated as total debt plus deferred income tax liabilities, net of deferred income tax assets, and
equity.
(3)
(4)
(5)
(6)
(7)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 5
OUR COMPETITIVE STRENGTHS
Brookfield Renewable is one of the largest publicly-traded, pure-play renewable power
businesses in the world. As the owner and operator of a diversified portfolio of high quality assets that
produce electricity from renewable resources, our track record is strong.
Our assets generate high quality, stable cash flows derived from a highly contracted portfolio. Our
business model is simple: utilize our global reach to identify and acquire high quality renewable power
assets at favorable 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 $17 billion in power assets, 5,849 MW of
installed capacity, and long-term average generation from operating assets of 22,159 GWh annually. Our
portfolio includes 193 hydroelectric generating stations on 69 river systems and 11 wind facilities,
diversified across 12 power markets in the United States, Canada and Brazil.
.
Generation by Technology
Generation by Market
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 approximating 32% of
their annual generation. Our assets in Brazil benefit from a framework that exists in the country to levelize
generation risk across hydroelectric 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.
Well positioned for global growth mandate. We have strong organic growth potential with an
approximate 1,700 MW development pipeline spread across all of our operating jurisdictions, combined
with the ability to capture operating efficiencies and the value of rising power prices for the market-based
portion of our portfolio. Our organic growth is complemented by our strong acquisition ability. Over the
last ten years we have acquired or commissioned approximately 160 hydroelectric assets totaling
approximately 3,200 MW and 11 wind generating assets totaling approximately 950 MW. In 2013, we
acquired or commissioned hydroelectric generating assets that have an installed capacity of 431 MW and
165 MW of wind generating assets. Our ability to develop and acquire assets is strengthened by our
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 6
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 we expect will provide 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. Approximately 93% of our 2014
generation output is sold pursuant to power purchase agreements, to public power authorities, load-
serving utilities, industrial users or to affiliates of Brookfield Asset Management. The power purchase
agreements for our assets have a weighted-average remaining duration of 18 years, providing long-term
cash flow stability.
Strong financial profile. With $17 billion of power assets and a conservative leverage profile,
consolidated debt-to-capitalization is approximately 41%. Our liquidity position remains strong with
approximately $1.2 billion of cash and unutilized portion of committed bank lines. Approximately 74% of
our borrowings are non-recourse to Brookfield Renewable. Corporate borrowings and subsidiary
borrowings have weighted-average terms of approximately 8 and 12 years, respectively.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 7
SUCCESSFUL COMBINATION OF OUR RENEWABLE ENERGY BUSINESS
On November 28, 2011, we completed 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 Energy Partners L.P. (“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.
BASIS OF PRESENTATION
This Management’s Discussion and Analysis for the year ended December 31, 2013 is provided
as of March 17, 2014. Unless the context indicates or requires otherwise, the terms “Brookfield
Renewable”, “we”, “us”, and “our” mean Brookfield Renewable Energy Partners L.P. and its controlled
entities.
Brookfield Renewable’s financial statements are prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”), 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 to the current year’s presentation.
Unless otherwise indicated, all dollar amounts are expressed in United States (“U.S.”) dollars.
The Combination
The Combination does not represent a business combination in accordance with IFRS 3
Business Combinations (“IFRS 3R”) 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 balance sheets, statements of income (loss), and statements of 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.
Voting Agreements with Affiliates
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 certain United States 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 the Voting Arrangements do not represent business combinations in
accordance with 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) — Common control transactions in our
audited consolidated financial statements for our policy on accounting for transactions under common
control.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 8
PRESENTATION TO PUBLIC STAKEHOLDERS
Brookfield Renewable’s consolidated equity interests include LP Units held by public unitholders
and Redeemable/Exchangeable partnership units in Brookfield Renewable Energy L.P. (“BRELP”), a
holding subsidiary of Brookfield Renewable, held by Brookfield (“Participating non-controlling interests –
in a holding subsidiary – Redeemable/Exchangeable units held by Brookfield”). The LP Units and the
Redeemable/Exchangeable partnership units have the same economic attributes in all respects, except
that the Redeemable/Exchangeable partnership units provide Brookfield the right to request that their
units be redeemed for cash consideration. In the event that Brookfield exercises this right, Brookfield
Renewable has the right, at its sole discretion, to satisfy the redemption request with LP Units, rather than
cash, on a one-for-one basis. Brookfield, as holder of Redeemable/Exchangeable partnership units,
participates in earnings and distributions on a per unit basis equivalent to the per unit participation of the
LP Units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with LP
Units, the Redeemable/Exchangeable partnership units are classified under equity, and not as a liability.
Given the exchange feature referenced above, we are presenting the LP Units and the
Redeemable/Exchangeable partnership units as separate components of consolidated equity. This
presentation does not impact the total income (loss), per unit or share information, or total consolidated
equity.
As at the date of this report, Brookfield Asset Management owns an approximate 65% 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 35% is held by the public.
PERFORMANCE MEASUREMENT
We present our key financial metrics based on total results prior to distributions made to LP
Unitholders, the Redeemable/Exchangeable Unitholders and GP Unitholders. In addition, our operations
are segmented by country geography and asset type (i.e. Hydroelectric and Wind), as that is how we
review our results, manage operations and allocate resources. Accordingly, we report our results in
accordance with these segments.
One of our primary business objectives is to generate reliable and growing cash flows while
minimizing risk for the benefit of all stakeholders. We monitor our performance in this regard through four
key metrics — i) Net Income, ii) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization,
iii) Funds From Operations, and iv) Adjusted Funds from Operations.
We also present these same measurements for our 2011 results on a pro forma basis (since
Brookfield Renewable was only formed in November 2011) as if new contracts and contract amendments,
along with the tax implications of the Combination, had each occurred as of January 1, 2011.
It is important to highlight that Adjusted EBITDA, funds from operations, and adjusted funds from
operations do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be
comparable to similar measures presented by other companies. We provide additional information on
how we determine Adjusted EBITDA, funds from operations, and adjusted funds from operations, and we
provide reconciliations to net income (loss) and cash flows from operating activities. See “Financial
Review for the Years Ended December 31, 2013 and 2012”, “Financial Review for the Years Ended
December 31, 2012 and 2011”, and “Reconciliation of Pro Forma Results”.
Net Income (Loss)
Net income (loss) is calculated in accordance with IFRS.
Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (Adjusted
EBITDA)
Adjusted EBITDA means revenues less direct costs (including energy marketing costs), plus our
share of cash earnings from equity-accounted investments and other income, before interest, income
taxes, depreciation, management service costs and the cash portion of non-controlling interests.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 9
Funds From Operations
Funds from operations is defined as Adjusted EBITDA less interest, current income taxes and
management service costs, which is then adjusted for the cash portion of non-controlling interests.
Adjusted Funds From Operations
Adjusted funds from operations is defined as funds from operations less Brookfield Renewable’s
share of levelized sustaining capital expenditures (based on long term capital expenditure plans). Our
payout ratio is defined as distributions to Redeemable/Exchangeable Units, LP Units and general
partnership interest, including general partner incentive distributions, divided by funds from operations.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 10
GENERATION FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
The following tables reflect the actual and LTA generation for the year ended December 31:
GENERATION (GWh)
Hydroelectric generation
United States
Canada
Brazil(2)
Actual Generation(1)
2012
2013
LTA Generation(1)
Actual vs. LTA
2013
2012
2013
2012
Actual vs.
Prior Year
Variance of Results
10,082
5,494
3,656
19,232
5,913
3,953
3,470
13,336
9,681
5,062
3,656
18,399
7,205
4,972
3,470
15,647
401
432
-
833
(1,292)
(1,019)
-
(2,311)
4,169
1,541
186
5,896
Wind energy
United States
Canada
1,145
1,075
2,220
770
22,222
526
1,341
(15)
1,197
511
2,538
(127)
899
6,280
21,836
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
In Brazil, assured generation levels are used as a proxy for long-term average.
Includes 100% of generation from equity-accounted investments.
619
1,090
1,709
897
15,942
837
1,197
2,034
521
18,202
(218)
(107)
(325)
376
(2,260)
(196)
(122)
(318)
(129)
386
Other
Total generation(3)
(1)
(2)
(3)
We compare actual generation levels against the long-term average to highlight the impact of one
of the 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 Adjusted EBITDA and funds from
operations on both an actual generation and a long-term average basis. See “Adjusted EBITDA and
Funds from Operations on a Pro forma Basis Assuming Long-term Average”.
Generation levels during the year ended December 31, 2013 totaled 22,222 GWh, an increase of
6,280 GWh as compared to the same period of the prior year. The increase is attributable to favorable
hydrology and wind conditions when compared to the prior year, the contribution of assets acquired or
commissioned during the year in both our hydroelectric and wind portfolios, and a full year of generation
from wind facilities acquired or commissioned in the first quarter of 2012.
Generation from the hydroelectric portfolio totaled 19,232 GWh, and above the long-term average
of 18,399 GWh and an increase of 5,896 GWh as compared to the prior year. Generation from existing
hydroelectric assets was 15,934 GWh compared to 13,336 GWh in the prior year, as generation returned
to more normal levels relative to the dry conditions in the prior year. In addition, recent acquisitions and
assets reaching commercial operations increased generation by 3,298 GWh.
Generation from the wind portfolio totaled 2,220 GWh, below the long-term average of 2,538
GWh and an increase of 511 GWh as compared to the prior year. The increase from prior year was
primarily due to additional generation of 321 GWh from facilities acquired in California, and more
favorable wind conditions as compared to the prior year. The prior year results do not reflect a full year of
operations for assets acquired or commissioned.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 11
FINANCIAL REVIEW FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
The following table reflects Adjusted EBITDA, funds from operations, adjusted funds from
operations, and reconciliation to net income (loss) and cash flows from operating activities for the year
ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Revenues
Other income
Share of cash earnings from equity-accounted investments
Direct operating costs
Adjusted EBITDA(1)
Interest expense – borrowings
Management service costs
Current income taxes
Less: cash portion of non-controlling interests
Preferred equity
Participating non-controlling interests - in operating subsidiaries
Funds from operations(1)
Less: sustaining capital expenditures(2)
Adjusted funds from operations(1)
Add: cash portion of non-controlling interests
Add: sustaining capital expenditures
Other items:
Depreciation(3)
Unrealized financial instrument gain (loss)
Share of non-cash loss from equity-accounted investments
Deferred income tax recovery
Other
Net income (loss)
Adjustments for non-cash items
Dividends received from equity accounted investments
Net change in working capital balances
Cash flows from operating activities
Net income (loss) attributable to:
Preferred equity
Participating non-controlling interests - in operating subsidiaries
General partnership interest in a holding subsidiary held by Brookfield
Participating non-controlling interests - in a holding subsidiary -
Redeemable/Exchangeable units held by Brookfield
Limited partners' equity
Basic and diluted earnings (loss) per LP Unit(4)
(1)
(2)
(3)
2013
$ 1,706
11
21
(530)
1,208
(410)
(41)
(19)
2012
$ 1,309
16
13
(486)
852
(411)
(36)
(14)
(37)
(107)
594
(56)
538
144
56
(535)
37
(12)
18
(31)
215
514
16
1
746
37
41
1
67
69
$
$
(16)
(28)
347
(52)
295
44
52
(483)
(23)
(18)
54
(16)
(95)
503
12
(22)
398
16
(40)
(1)
(35)
(35)
$
$
$
0.52
$
(0.26)
Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
Based on long-term capital expenditure plans.
See Note 2(f) - Change in accounting estimates in our audited consolidated financial statements concerning changes in
estimates related to depreciation expense.
Average LP Units outstanding during the period totaled 132.9 million (2012: 132.9 million).
(4)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 12
Net income (loss) is one important measure of profitability, in particular because it has a
standardized meaning under IFRS. The presentation of net income (loss) on an IFRS basis for our
business will often lead 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. The primary reason for this is
that we recognize a significantly higher level of depreciation for our assets than we are required to
reinvest in the business as sustaining capital expenditures.
As a result, we also measure our financial results based on Adjusted EBITDA, funds from
operations, and adjusted funds from operations to provide readers with an assessment of the cash flow
generated by our assets and the residual cash flow retained to fund distributions and growth initiatives.
Revenues totaled $1,706 million for the year ended December 31, 2013, representing a year-
over-year increase of $397 million. Approximately $209 million of the increase was attributable to the
return to long-term average generation levels at existing hydroelectric facilities, while contributions from
facilities acquired or commissioned during the year, and full year of contribution from assets acquired in
2012 amount to approximately $218 million. The increase in revenues was partially offset by the
appreciation of the U.S. dollar as compared to the Brazilian real and the Canadian dollar.
Direct operating costs totaled $530 million for the year ended December 31, 2013, representing a
year-over-year increase of $44 million. Of this amount, $62 million was attributable to recently acquired
facilities, and the balance from lower costs with the appreciation of the U.S. dollar relative to the Brazilian
real.
Interest expense totaled $410 million for the year ended December 31, 2013, which was
consistent year-over-year. Lower borrowing costs attributable to the savings provided by the repayment
and refinancing activities, and to changes in foreign exchange rates in the year, were offset by borrowing
costs associated with the financing related to the growth in our portfolio. With the growth in the portfolio of
renewable energy assets, we increased long-term debt by $504 million. We also repaid higher cost
borrowings and refinanced certain subsidiary borrowings. Our weighted average annualized interest rate
on subsidiary borrowings decreased from 6.4% in 2012 to 6.0% in 2013.
Management service costs reflect a base fee of $20 million annually plus 1.25% of the growth in
total capitalization value. Management services costs totaled $41 million for the year ended December
31, 2013, which was $5 million higher than the same period in the prior year. The increase is primarily
attributable to an increase in the average fair market value of the limited partnership units, and the
issuance of preferred equity, on an accretive basis.
The cash portion of non-controlling interests for the year ended December 31, 2013 was $144
million as compared to $44 million in the prior year. An increase in operating results from existing facilities
and contributions from recently acquired facilities amounted to $79 million. The completion of two
separate issuances of Class A Preference Shares during the year increased distributions to preferred
shareholders by $21 million.
Funds from operations totaled $594 million for the year ended December 31, 2013, an increase of
$247 million year-over-year.
Depreciation expense for the year ended December 31, 2013 increased by $72 million due to
recently acquired assets, which was partly offset by a $15 million decrease in depreciation due to the
impact of changes made in the prior year to the estimated service lives of certain assets.
Net income was $215 million for the year ended December 31, 2013 (2012: Net loss $95 million).
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 13
SEGMENTED DISCLOSURES
HYDROELECTRIC
The following table reflects the results of our hydroelectric operations for the year ended
Cash portion of non-controlling interests
Funds from operations(3)
$
$
266
$
169
$
December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA(1)(2)
Generation (GWh) – actual(1)(2)
Revenues
Other income
Share of cash earnings from equity-
accounted investments
Direct operating costs
Adjusted EBITDA(3)
Interest expense - borrowings
Current income taxes
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA(1)(2)
Generation (GWh) – actual(1)(2)
Revenues
Other income
Share of cash earnings from equity-
accounted investments
Direct operating costs
Adjusted EBITDA(3)
Interest expense - borrowings
Current income taxes
United States
9,681
10,082
2013
Canada
5,062
5,494
$
677
$
399
$
-
13
(196)
494
(148)
(3)
(69)
274
-
4
(73)
330
(64)
-
-
Brazil
3,656
3,656
301
11
4
(95)
221
(23)
(17)
(12)
Total
18,399
19,232
$
1,377
11
21
(364)
1,045
(235)
(20)
(81)
709
United States
7,205
5,913
2012
Canada
4,972
3,953
$
438
$
272
$
1
6
(151)
294
(137)
2
(11)
4
2
(65)
213
(65)
-
-
Brazil
3,470
3,470
340
11
5
(120)
236
(58)
(16)
(11)
Total
15,647
13,336
$
1,050
16
13
(336)
743
(260)
(14)
(22)
Cash portion of non-controlling interests
Funds from operations(3)
(1)
(2)
148
Includes 100% generation from equity-accounted investments.
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
447
151
148
$
$
$
$
(3)
United States
Generation from the portfolio was 10,082 GWh for the year ended December 31, 2013 compared
to the long-term average of 9,681 GWh and prior year generation of 5,913 GWh. The increase from prior
year was driven by an additional 3,093 GWh from the recently acquired assets in Tennessee, North
Carolina and Maine, and an increase in generation from existing assets. In the prior year, dry conditions
in New York State and in the mid-western United States resulted in generation levels below long-term
average.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 14
Revenues totaled $677 million for the year ended December 31, 2013 representing a year-over-
year increase of $239 million. Of this amount, $147 million was attributable to generation from recently
acquired facilities, while $92 million was attributable to higher generation levels at existing facilities.
Funds from operations totaled $274 million for the year ended December 31, 2013, an increase of
$126 million resulting primarily from the increase in revenues from higher generation and the contribution
from recently acquired assets. The increase was partially offset by higher direct operating costs and
interest expense associated with the new facilities, and an increase in the cash portion of non-controlling
interests.
Canada
Generation from the portfolio was 5,494 GWh for the year ended December 31, 2013 compared
to the long-term average of 5,062 GWh and to prior year generation of 3,953 GWh. Generation returned
to long-term average, with strong inflows at our eastern Canadian assets.
Revenues totaled $399 million for the year ended December 31, 2013, representing an increase
of $127 million, which was primarily attributable to the increase in generation levels.
Funds from operations totaled $266 million for the year ended December 31, 2013, representing
an increase of $118 million.
Brazil
Generation from the portfolio was 3,656 GWh for the year ended December 31, 2013 compared
to the prior year generation of 3,470 GWh. The increase in generation is primarily attributable to a facility
commissioned during the year, and a full year’s contribution from one facility acquired and one facility
commissioned in the second half of 2012.
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 generate less than their assured energy, up to the total generation within the pool.
Revenues totaled $301 million for the year ended December 31, 2013, representing a year-over-
year decrease of $39 million. Revenues declined with the appreciation of the U.S. dollar compared to the
Brazilian real by $36 million. In addition, revenues were higher by $12 million due to generation from
facilities integrated within the last year and lower by $15 million due to lower allocated energy volumes.
Funds from operations totaled $169 million for the year ended December 31, 2013 representing a
year-over-year increase of $18 million. Funds from operations benefited from the repayment of higher-
yielding subsidiary borrowings in the prior year and resulted in a $37 million decrease in interest expense.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 15
WIND
The following table reflects the results of our wind operations for the year ended December 31:
(MILLIONS, EXCEPT FOR AS NOTED)
Generation (GWh) – LTA(1)(2)
Generation (GWh) – actual(1)(2)
Revenues
Direct operating costs
Adjusted EBITDA(3)
Interest expense - borrowings
Cash portion of non-controlling interests
Funds from operations(3)
(MILLIONS, EXCEPT FOR AS NOTED)
Generation (GWh) – LTA(1)(2)
Generation (GWh) – actual(1)(2)
Revenues
Direct operating costs
Adjusted EBITDA(3)
Interest expense - borrowings
Cash portion of non-controlling interests
Funds from operations(3)
(1)
(2)
2013
United States
Canada
1,341
1,145
125
(40)
85
(38)
(26)
21
1,197
1,075
133
(20)
113
(44)
-
69
$
$
$
$
United States
Canada
2012
837
619
58
(27)
31
(23)
(6)
2
1,197
1,090
131
(18)
113
(44)
-
69
$
$
$
$
Total
2,538
2,220
258
(60)
198
(82)
(26)
90
Total
2,034
1,709
189
(45)
144
(67)
(6)
71
$
$
$
$
Includes 100% generation from equity-accounted investments.
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
(3)
United States
Generation from the portfolio was 1,145 GWh for the year ended December 31, 2013, and lower
than the long-term average of 1,341 GWh and higher than the prior year generation of 619 GWh. The
increase in generation from prior year is attributable to 321 GWh from facilities acquired in California
during the year, a full year of generation from four facilities acquired or commissioned in the first quarter
of 2012, and stronger wind conditions at existing facilities.
Revenues totaled $125 million for the year ended December 31, 2013, representing a year-over-
year increase of $67 million. Of this amount, $34 million was attributable to generation from the assets
acquired in California during the year. In addition, revenues benefited from a full year of contribution from
assets acquired or commissioned in 2012, and from stronger wind conditions.
Funds from operations totaled $21 million for the year ended December 31, 2013 compared to $2
million in the prior year.
Canada
Generation from the portfolio was 1,075 GWh for the year ended December 31, 2013, virtually
unchanged from the prior year, and below the long-term average of 1,197 GWh due to wind conditions.
Revenues and funds from operations totaled $133 million and $69 million, respectively, for the
year ended December 31, 2013.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 16
GENERATION FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
The following tables reflect the actual and LTA generation for the year ended December 31:
Actual Generation(1)
2011
2012
LTA Generation(1)
Actual vs. LTA
Prior Year
2012
2011
2012
2011
Variance of Results
Actual vs.
5,913
3,953
3,470
7,150
4,056
3,307
7,205
4,972
3,470
6,811
5,061
3,307
(1,292)
339
(1,237)
(1,019)
(1,005)
-
-
(103)
163
13,336
14,513
15,647
15,179
(2,311)
(666)
(1,177)
619
1,090
1,709
897
-
662
662
702
837
1,197
2,034
521
-
712
712
406
(218)
(107)
(325)
376
-
(50)
(50)
296
619
428
1,047
195
(GWh)
Hydroelectric generation
United States
Canada
Brazil(2)
Wind energy
United States
Canada
Other
Total generation(3)
(1)
15,942
65
18,202
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
In Brazil, assured generation levels are used as a proxy for long-term average.
Includes 100% of generation from equity-accounted investments.
15,877
16,297
(2,260)
(420)
(2)
(3)
Generation levels during the year ended December 31, 2012 totaled 15,942 GWh, an increase of
65 GWh as compared to the same period of the prior year. Lower generation in our North American
hydroelectric portfolio was offset by an increase in generation from our wind assets acquired or
commissioned in the last 18 months, and higher than planned generation from our co-generation facilities.
Generation from our hydroelectric portfolio totaled 13,336 GWh, a decrease of 1,177 GWh, as a
result of lower levels of precipitation and warmer than average temperatures in the northeastern United
States and mid-western United States. The variance in our year-over-year results also reflects the above
average precipitation and record rainfall levels in 2011 resulting from Hurricane Irene. Generation from
our hydroelectric portfolio in Brazil was positively impacted by the full year’s contribution of a facility
acquired in mid-2011.
Generation from our wind portfolio totaled 1,709 GWh, an increase of 1,047 GWh, as a result of
the contributions from facilities acquired or commissioned in California and New England in early 2012,
and the full year’s contribution from an Eastern Canada facility commissioned in 2011. Results were
below long-term average as a result of lower wind conditions across the portfolio.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 17
FINANCIAL REVIEW FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
The following table reflects Adjusted EBITDA, funds from operations, adjusted funds from
operations, and reconciliation to net income (loss) and cash flows from operating activities for the year
ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Revenues
Other income
Share of cash earnings from equity-accounted investments
Direct operating costs
Adjusted EBITDA(2)
Interest expense – borrowings
Management service costs
Current income taxes
Less: cash portion of non-controlling interests
Preferred equity
Participating non-controlling interests - in operating subsidiaries
Funds from operations(2)
Less: sustaining capital expenditures(3)
Adjusted funds from operations(2)
Add: cash portion of non-controlling interests
Add: sustaining capital expenditures
Other items:
Depreciation(4)
Unrealized financial instrument gain (loss)
Loss on Fund unit liability
Share of non-cash loss from equity-accounted investments
Deferred income tax (expense) recovery
Other
Net income (loss)
Adjustments for non-cash items
Dividends received from equity accounted investments
Net change in working capital balances
Cash flows from operating activities
Net income (loss) attributable to:
Preferred equity
Participating non-controlling interests - in operating subsidiaries
General partnership interest in a holding subsidiary held by Brookfield
Participating non-controlling interests - in a holding subsidiary -
Redeemable/Exchangeable units held by Brookfield
Limited partners' equity
Basic and diluted earnings (loss) per LP Unit(5)
(1)
2012
$ 1,309
16
13
(486)
852
(411)
(36)
(14)
2011(1)
$ 1,169
19
23
(407)
804
(411)
(1)
(8)
(16)
(28)
347
(52)
295
44
52
(483)
(23)
-
(18)
54
(16)
(95)
503
12
(22)
398
16
(40)
(1)
(35)
(35)
$
$
(13)
(39)
332
(48)
284
52
48
(468)
(20)
(376)
(13)
50
(8)
(451)
804
8
(12)
349
13
11
(5)
(232)
(238)
$
$
(1.79)
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.
Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
Based on long-term capital expenditure plans.
See Note 2(f) - Change in accounting estimates in our audited consolidated financial statements concerning changes in
estimates related to depreciation expense.
Average LP Units outstanding during the period totaled 132.9 million (2011: 132.8 million).
(0.26)
$
$
(2)
(3)
(4)
(5)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 18
Revenues totaled $1,309 million for the year ended December 31, 2012, representing a year-
over-year increase of $140 million. Approximately $126 million of the increase in revenues is attributable
to generation from facilities acquired or commissioned in 2012 as well as a full year’s contribution from
facilities acquired or commissioned during 2011. A further $132 million of the increase is primarily
the
attributable
Combination. Offsetting the increase was $121 million resulting from reduced generation levels at existing
facilities and the appreciation of the U.S. dollar relative to the Brazilian real.
the amended power purchase agreement entered
time of
into at
the
to
Direct operating costs totaled $486 million for the year ended December 31, 2012, representing a
year-over-year increase of $79 million. New facilities acquired or commissioned in the last 18 months
added $38 million to operating costs, consistent with our underwriting assumptions. Energy marketing
costs not included in the prior year’s combined statements added $18 million, and fuel purchases in
excess of the prior year associated with our co-generation facility in Ontario accounted for $4 million as
we took advantage of lower gas prices during the year. Lastly, lower allocated energy volumes in Brazil
which allow us to purchase power at cost and re-sell at our contracted rates added $16 million to costs.
The added revenues are included in revenues above.
Adjusted EBITDA totaled $852 million for the year ended December 31, 2012, representing a
year-over-year increase of $48 million. Adjusted EBITDA was impacted by increase in revenues partially
offset by increase in direct operating costs.
Interest expense totaled $411 million for the year ended December 31, 2012, which was
consistent with the prior year. Interest expense on borrowings reflects the cost related to approximately
$4.4 billion of non-recourse asset-specific borrowings and $1.8 billion of corporate borrowings and credit
facilities. During the year, we proactively took advantage of the low interest rate environment to reduce
our cost of capital and increase the duration of borrowings. We issued C$400 million of 10-year term
corporate notes and successfully financed subsidiary borrowings related to the growth in our portfolio
during the year as well as construction of new assets. As a result, borrowing costs on our portfolio
decreased on an annualized basis by approximately $30 million.
Management service costs, which came into effect as part of the Combination in 2011, reflect a
base fee of $20 million annually plus 1.25% of the growth in total capitalization value. Our total
capitalization value increased from initial value of $8.1 billion to $10.1 billion as at year ended December
31, 2012. The growth in total capitalization value during 2012 is primarily due to the increase in fair
market value of LP Units, and the issuance of corporate debt and preferred equity, on an accretive basis.
Funds from operations totaled $347 million for the year ended December 31, 2012, an increase of
$15 million year-over-year. Funds from operations were impacted by the increase in Adjusted EBITDA net
of non-controlling interests and the increase in management service costs.
Throughout the year, analyses were performed on the useful lives of certain components of
property, plant and equipment and we have determined that changes in their estimated service lives will
more accurately reflect the period over which they provide economic benefits. Brookfield Renewable
applied these changes in accounting estimates on a prospective basis effective January 1, 2012 or April
1, 2012 or July 1, 2012 based on timing of completion of the review. Depreciation expense for the year
ended December 31, 2012 was $112 million lower as a result of the changes in estimates. Assets
acquired or commissioned within the past 12 months increased depreciation expense by $86 million.
2011 results also included a revaluation amount on the Fund unit liability. In accordance with
IFRS, Fund units held by the public, which have a feature that allows the holder to redeem the units for
cash, were presented as a liability and recorded at fair value, with the change in fair value recorded in net
income. For the year ended December 31, 2011, the Fund unit price appreciated significantly resulting in
a revaluation amount of $376 million. As a result of the Combination, the Fund units were exchanged for
limited partnership units and the Fund was dissolved. Thus, for the year ended December 31, 2012, there
was no impact from the valuation on the Fund unit liability.
The net loss was $95 million for the year ended December 31, 2012 (2011: $451 million). The net
loss reflects the normal course depreciation of $483 million (2011: $468 million).
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 19
SEGMENTED DISCLOSURES
HYDROELECTRIC
The following table reflects the results of our hydroelectric operations for the year ended
December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA(1)(2)
Generation (GWh) – actual(1)(2)
Revenues
Other income
Share of cash earnings from equity-
accounted investments
Direct operating costs
Adjusted EBITDA(3)
Interest expense - borrowings
Current income taxes
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA(1)(2)
Generation (GWh) – actual(1)(2)
Revenues
Other income
Share of cash earnings from equity-
accounted investments
Direct operating costs
Adjusted EBITDA(3)
Interest expense - borrowings
Current income taxes
Cash portion of non-controlling interests
Funds from operations(3)
$
United States
7,205
5,913
2012
Canada
4,972
3,953
Brazil
3,470
3,470
Total
15,647
13,336
$
438
$
272
$
340
$
1,050
1
6
(151)
294
(137)
2
(11)
148
4
2
(65)
213
(65)
-
-
11
5
(120)
236
(58)
(16)
(11)
$
148
$
151
$
16
13
(336)
743
(260)
(14)
(22)
447
United States
6,811
7,150
2011
Canada
5,061
4,056
Brazil
3,307
3,307
Total
15,179
14,513
$
467
$
237
$
335
$
1,039
-
13
(144)
336
(149)
2
(26)
-
4
(62)
179
(68)
5
-
19
6
(91)
269
(94)
(15)
(13)
19
23
(297)
784
(311)
(8)
(39)
426
Cash portion of non-controlling interests
Funds from operations(3)
(1)
(2)
163
Includes 100% generation from equity-accounted investments.
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
116
147
(3)
$
$
$
$
United States
Generation from the portfolio was 5,913 GWh for the year ended December 31, 2012 compared
to the long-term average of 7,205 GWh and compared to the prior year generation of 7,150 GWh. The
decrease is attributable to lower inflows and generation given the warmer temperatures and below
average rainfall in New York State and in the mid-western United States. The variance in our year-over-
year results also reflects the above average precipitation and record rainfall levels in 2011, with Hurricane
Irene impacting the mid-western and eastern United States.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 20
Revenues totaled $438 million for the year ended December 31, 2012 representing a year-over-
year decrease of $29 million. The decrease in generation affected assets in regions where power
purchase agreement prices are higher than our average, which had a disproportionate impact on our
financial results. The amended power purchase agreements, executed on the date of the Combination
partly offset the impact of lower generation.
Funds from operations totaled $148 million for the year ended December 31, 2012, representing
a year-over-year decrease of $15 million. Funds from operations were impacted by the decrease in
Adjusted EBITDA net of non-controlling interest and lower interest expense from refinancing of certain
borrowings.
Canada
Generation from the portfolio was 3,953 GWh for the year ended December 31, 2012 compared
to the long-term average of 4,972 GWh and compared to the prior year generation of 4,056 GWh. The
decrease in generation is primarily attributable to lower inflows resulting from drier than usual conditions
in Ontario and Québec.
Revenues totaled $272 million for the year ended December 31, 2012, representing a year-over-
year increase of $35 million. Although generation had decreased in the period, the amended power
purchase agreements, executed on the date of the Combination more than offset the impact of lower
generation.
Funds from operations totaled $148 million for the year ended December 31, 2012, representing
a year-over-year increase of $32 million. Funds from operations were impacted by the increase in
revenues.
Brazil
Generation from the portfolio was 3,470 GWh for the year ended December 31, 2012 compared
to the prior year generation of 3,307 GWh. Generation was positively impacted by the addition of three
hydroelectric facilities acquired or commissioned during the last 18 months.
Revenues totaled $340 million for the year ended December 31, 2012, representing a year-over-
year increase of $5 million. The increase in revenues is primarily attributable to generation from the new
facilities acquired or commissioned in the last 18 months.
Funds from operations totaled $151 million for the year ended December 31, 2012 representing a
year-over-year increase of $4 million.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 21
WIND
The following table reflects the results of our wind operations for the year ended December 31:
(MILLIONS, EXCEPT FOR AS NOTED)
Generation (GWh) – LTA(2)(3)
Generation (GWh) – actual(2)(3)
Revenues
Direct operating costs
Adjusted EBITDA(4)
Interest expense - borrowings
United States
$
837
619
58
(27)
31
(23)
$
Canada
1,197
1,090
131
(18)
113
(44)
$
Total
2012
2,034
1,709
189
(45)
144
(67)
$
Total
2011(1)
712
662
70
(12)
58
(25)
Cash portion of non-controlling interests
Funds from operations(4)
(1) Results for 2011 are entirely from Canadian assets.
(2) For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
71
33
69
(6)
(6)
2
-
-
$
$
$
$
commercial operation date.
Includes 100% generation from equity-accounted investments.
(3)
(4) Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
United States
Generation from the portfolio was 619 GWh for the year ended December 31, 2012 compared to
the long-term average of 837 GWh. In 2011, we held no U.S. operating wind assets in our portfolio. In the
first quarter of 2012, we acquired or commissioned four facilities in California and the northeastern United
States. Results were below long-term average as a result of lower wind conditions.
Funds from operations totaled $2 million for the year ended December 31, 2012. Funds from
operations were impacted by the shortfall in revenues resulting from lower generation.
Canada
Generation from the portfolio was 1,090 GWh for the year ended December 31, 2012 compared
to the long-term average of 1,197 GWh and to the prior year generation of 662 GWh. The increase in
generation from prior year of 396 GWh is primarily attributable to the full year’s contribution from our
Ontario facility commissioned in the fourth quarter of 2011. Results were below long-term average for the
year due to lower wind conditions.
Revenues totaled $131 million for the year ended December 31, 2012, representing a year-over-
year increase of $61 million. Approximately $66 million of the increase is attributable to generation from
the eastern Canadian facility commissioned in the fourth quarter of 2011.
Funds from operations totaled $69 million for the year ended December 31, 2012, representing a
year-over-year increase of $36 million. The increase is attributable to the growth of the portfolio.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 22
ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION
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 fair value as opposed to historical
cost, using a 20-year discounted cash flow model. This model incorporates future cash flows from long-
term power purchase agreements that are in place where it is determined that the power purchase
agreements are linked specifically to the related power generating assets. The model also 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 by geographical
location.
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.
Property, plant and equipment, at fair value totaled $15.7 billion as at December 31, 2013. During
the year, 596 MW of hydroelectric and wind facilities were acquired or commissioned into our operating
results. These acquisitions and the development and construction of renewable power generating assets
totaled $1.6 billion. The revaluation of property, plant and equipment is also impacted each year by
fluctuations in foreign exchange and market interest rates. Consequently, the appreciation of the U. S.
dollar compared to the Canadian dollar and Brazilian real decreased fair value by $789 million. In
addition, an increase in the market interest rates during the year resulted in higher discount rates that
were applied in our valuation methodology. This resulted in a decrease in fair value of $217 million.
Finally, we also recognized depreciation expense of $535 million which is significantly higher than what
we are required to reinvest in the business as sustaining capital expenditures.
Fair value of property, plant and equipment can vary with discount and terminal capitalization
rates. The following table summarizes the impact of a change in discount rates and terminal capitalization
rates on the fair value of property, plant and equipment:
(BILLIONS)
50 bps increase in discount rates
50 bps decrease in discount rates
50 bps increase in terminal capitalization rate(1)
50 bps decrease in terminal capitalization rate(1)
(1)
0.3
The terminal capitalization rate applies only to hydroelectric assets in the United States and Canada.
$
$
2013
(1.1)
1.3
(0.3)
2012
(1.2)
1.4
(0.4)
0.3
Terminal values are included in the valuation of hydroelectric assets in the United States and
Canada. For the hydroelectric assets in Brazil, cash flows have been included based on the duration of
the authorization or useful life of a concession asset without consideration of potential renewal value. The
weighted-average remaining duration at December 31, 2013, is 16 years (2012: 17 years). Consequently,
there is no terminal value attributed to the hydroelectric assets in Brazil. If an additional 20 years of cash
flows were included, the fair value of property, plant and equipment would increase by approximately $1
billion. See Note 11 - Property, plant and equipment, at fair value in our consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 23
LIQUIDITY AND CAPITAL RESOURCES
A key element of our financing strategy is to raise the majority of our debt in the form of asset-
specific, non-recourse borrowings at our subsidiaries on an investment grade basis. As at December 31,
2013, long-term indebtedness increased from December 31, 2012 as a result of the portfolio growth. The
debt to capitalization ratio increased to 41% from 38% at December 31, 2012 primarily due to the
increase in subsidiary borrowings to fund the portfolio growth.
Capitalization
The following table summarizes the capitalization using book values as at December 31:
(MILLIONS)
Credit facilities(1)
Corporate borrowings(1)
Subsidiary borrowings(2)
Long-term indebtedness
Deferred income tax liabilities, net of deferred income tax assets
Equity
Total capitalization
$
2013
311
$
1,406
4,906
6,623
2,148
7,536
2012
268
1,504
4,347
6,119
2,268
7,808
$
16,307
$
16,195
41%
38%
Debt to total capitalization
(1)
(2)
Issued by a subsidiary of Brookfield Renewable and guaranteed by Brookfield Renewable. The amounts are unsecured.
Issued by a subsidiary of Brookfield Renewable and secured against its assets. The amounts are not guaranteed.
During 2013 we completed a number of financings associated with the growth in our portfolio.
Highlights include the following:
• Purchased 88% of the $575 million in operating company notes and 100% of the $125 million in
holding notes outstanding with respect to the acquired hydroelectric portfolio in Northeastern
United States. The purchase of the tendered notes was partially funded through a non-recourse,
24-month bridge loan of up to $350 million.
• Refinanced indebtedness on a 166 MW Ontario wind facility and a 51 MW Ontario wind facility
resulting in C$170 million of incremental long term borrowings.
•
Issued Series 5 and Series 6 Class A Preference Shares with a fixed, annual yield of 5%
resulting in C$350 million in proceeds.
• With the acquisition of Western Wind, subsidiary borrowings increased by $250 million.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 24
Available liquidity
We operate with substantial liquidity, which along with ongoing cash flow from operations enables
us to fund growth initiatives, capital expenditures, distributions, and to finance the business on an
investment grade basis.
The following table summarizes the available liquidity as at December 31:
(MILLIONS)
Cash and cash equivalents
Credit facilities
Authorized credit facilities
Draws on credit facilities
Issued letters of credit
Available portion of credit facilities
Available liquidity
$
2013
203
$
1,480
(311)
(212)
957
$
1,160
$
2012
137
990
(268)
(182)
540
677
Available liquidity is comprised of cash and the unused portion of credit facilities. As at December
31, 2013, we had $1,160 million of available liquidity (2012: $677 million) which provides the flexibility to
fund ongoing portfolio growth initiatives and to protect against short-term fluctuations in generation.
During the year ended December 31, 2013, we expanded our revolving credit facilities from $990
million to $1,280 million and extended the maturity date to October 31, 2017. Brookfield Asset
Management provided a $200 million committed unsecured revolving credit facility maturing in December
2014, at LIBOR plus 2%.
Long-term debt and credit facilities
The following table summarizes our principal repayments and maturities as at December 31, 2013:
(MILLIONS)
Principal repayments
Subsidiary borrowings(1)
Corporate borrowings and
credit facilities(1)
Equity-accounted investments
Interest payable(2)
Subsidiary borrowings
Corporate borrowings and
credit facilities
Equity-accounted investments
2014
2015
2016
2017
2018 Thereafter
Total
$ 517 $ 501 $ 259 $ 576 $ 278 $ 2,810 $ 4,941
-
1
518
-
34
535
282
1
542
311
125
1,012
188
1
467
942
7
3,759
1,723
169
6,833
285
261
244
223
193
1,384
2,590
79
7
371
79
6
346
79
5
328
62
2
287
58
-
256
1
613
21
251
1,641
3,224
(1)
(2)
$ 889 $ 881 $ 870 $ 1,299 $ 718 $ 5,400 $ 10,057
Subsidiary borrowings and corporate borrowings and credit facilities include $52 million and $11 million of unamortized
deferred financing fees and premiums, respectively.
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.
Subsidiary borrowings maturing in 2014 include $125 million on a New England hydroelectric
facility and $250 million on our portfolio of hydroelectric facilities in the Southeastern United States. All
borrowings are expected to be refinanced in the normal course. In January 2014, the $279 million bridge
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 25
loan associated with our recently acquired 360 MW operating hydroelectric portfolio located in Maine was
refinanced to 2017 at LIBOR plus 2.25%. The bridge loan was due to mature in 2015.
The overall maturity profile and average interest rates associated with our borrowings and credit
facilities are as follows at December 31:
Corporate borrowings
Subsidiary borrowings
Credit facilities
Average term (years) Average interest rate (%)
2013
7.7
11.8
3.8
2012
8.7
11.8
3.8
2013
5.3
6.0
1.4
2012
5.3
6.4
2.0
For the year ended December 31, 2013, we reduced our borrowing costs and extended the
maturity of our subsidiary borrowings and credit facilities, in an environment where interest rates are near
historical lows.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 26
CONTRACT PROFILE
We have a predictable profile driven by both long-term power purchase agreements with a
weighted-average remaining duration of 18 years, combined with a well-diversified portfolio that reduces
variability in our generation volumes. 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
fossil fuel based generation.
The following table sets out contracts over the next five years for generation output from existing
facilities assuming long-term average hydrology and wind conditions:
FOR THE YEAR ENDED DECEMBER 31
2014
2015
2016
2017
2018
Generation (GWh)
Contracted(1)
Hydroelectric
United States
Canada(2)
Brazil
Wind energy
United States
Canada
Other
Uncontracted
7,730
5,152
3,411
6,863
5,200
2,318
6,863
5,200
2,051
6,863
5,200
1,320
6,863
5,200
1,237
16,293
14,381
14,114
13,383
13,300
1,293
1,293
1,292
1,292
1,292
1,197
1,197
1,197
1,197
1,197
2,490
2,490
2,489
2,489
2,489
134
-
-
-
-
18,917
16,871
16,603
15,872
15,789
2,639
4,568
4,809
5,540
5,623
Total long-term average
Long-term average on a proportionate basis(3)
21,556
21,439
21,412
21,412
21,412
17,749
17,621
17,593
17,594
17,594
Contracted generation - as at December 31, 2013
% of total generation
% of total generation on a proportionate basis(3)
88 %
93 %
79 %
86 %
78 %
85 %
74 %
81 %
74 %
81 %
Price per MWh
(1)
Assets under construction are included when long-term average and pricing details are available and the commercial
operation date is established in a definitive construction contract.
Long-term average for 2014 to 2018 includes generation from one facility that is currently under construction with estimated
commercial operation date in mid-2014.
Long-term average on a proportionate basis includes wholly-owned assets, and our share of partially-owned assets and
equity-accounted investments.
(2)
(3)
$
82 $
84 $
85 $
83 $
84
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 27
The majority of the long-term power sales agreements are with investment-rated or creditworthy
counterparties:
Distribution
6%
Industrial
28%
Brookfield
Asset
Management
42%
Government
24%
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 28
SUMMARY CONSOLIDATED BALANCE SHEETS
The following table provides a summary of the key line items on the consolidated balance sheets
as at December 31:
(MILLIONS)
Property, plant and equipment, at fair value
Equity-accounted investments
Total assets
Long-term debt and credit facilities
Deferred income tax liabilities
Total liabilities
Preferred equity
Participating non-controlling interests - in operating subsidiaries
General partnership interest in a holding subsidiary held by Brookfield
Participating non-controlling interests - in a holding subsidiary -
Redeemable/Exchangeable units held by Brookfield
Limited partners' equity
Total liabilities and equity
CONTRACTUAL OBLIGATIONS
Capital expenditures and development and construction
2013
2012
$
15,741
$
15,702
290
16,977
6,623
2,265
9,441
796
1,303
54
2,657
2,726
16,977
344
16,925
6,119
2,349
9,117
500
1,028
63
3,070
3,147
16,925
Brookfield Renewable categorizes its capital spending as either sustaining or development and
construction expenditures. Sustaining capital expenditures relate to maintaining power generating assets,
whereas development and construction expenditures include project costs for new facilities. Total
sustaining capital expenditures for 2014 are expected to be $85 million and of this amount $24 million has
been contractually committed as at December 31, 2013 (2012: $11 million).
The remaining project costs on the 45 MW hydroelectric project in British Columbia are expected
to be $26 million. The project will be fully operational by second quarter of 2014.
Commitments
At the balance sheet date, we had commitments for future minimum lease payments under non-
cancellable leases which fall due as follows:
(MILLIONS)
Operating leases
Capital leases
Total
Guarantees
2014
2015
2016
2017
2018 Thereafter
17 $
17 $
17 $
13 $
13 $
124 $
-
-
-
1
1
47
17 $
17 $
17 $
14 $
14 $
171 $
Total
201
49
250
$
$
Brookfield Renewable, on behalf of its subsidiaries, and subsidiaries themselves have provided
letters of credit, which include, but are not limited to, guarantees for debt service reserves, capital
reserves, construction completion and performance. As at December 31, 2013 letters of credit issued by
subsidiaries of Brookfield Renewable amounted to $93 million.
In the normal course of operations, we execute agreements that provide for indemnification and
guarantees to third parties in transactions such as acquisitions, construction projects, capital projects, and
purchases of assets. We have also agreed to indemnify our directors and certain of our officers and
employees. The nature of the indemnifications prevents us from making a reasonable estimate of the
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 29
maximum potential amount that 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 indemnification agreements.
OFF-BALANCE SHEET ARRANGEMENTS
Brookfield Renewable has no off-balance sheet financing arrangements.
RELATED PARTY TRANSACTIONS
Brookfield Renewable’s related party transactions are in the normal course of business, and are
recorded at the exchange amount. Brookfield Renewable’s related party transactions are primarily with
Brookfield Asset Management.
As discussed in the Significant Accounting Policies Note 2 (b) - Basis of Presentation in our
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 Asset Management
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 (65% 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.
Brookfield Renewable sells electricity to subsidiaries 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 that are fully described in Note 9 - Related Party Transactions in our audited
consolidated financial statements.
In December 2011 and September 2013, 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 and the Brookfield Infrastructure Fund II, 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, 2013
Page 30
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
Purchase and revenue support agreements
Wind levelization agreement
Direct operating costs
Energy purchases
Energy marketing fee
Insurance services
Interest expense
Management service costs
2013
2012
2011
456 $
376 $
6
2
462 $
378 $
(36) $
(40) $
(20)
(26)
(18)
(18)
(82) $
(76) $
- $
- $
(41) $
(36) $
254
7
261
(41)
(11)
(18)
(70)
(19)
(1)
$
$
$
$
$
$
The following table reflects the related party agreements and transactions on the consolidated
balance sheets as at December 31:
(MILLIONS)
Current assets
Due from related parties
Amounts due from
Due from related parties
Amounts due from
Note receivable
Current liabilities
Due to related parties
Amount due to
Related party
2013
2012
Brookfield Asset Management
Equity accounted and other
Brookfield Asset Management
Brascan Energetica
Powell River Energy Inc.(1)
$
$
$
$
36 $
12
48 $
- $
-
- $
20
14
34
3
19
22
Brookfield Asset Management
$
48 $
45
Accrued distributions payable on LP units
and Redeemable/Exchangeable
partnership units
Amount due to
Brookfield Asset Management
Equity accounted
62
-
61
3
(1)
109
Brookfield Renewable acquired the remaining 50% interest in this entity in 2013 bringing the total investment to 100%, and its
results were fully consolidated.
110 $
$
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 31
CONSOLIDATED STATEMENTS OF CASH FLOWS
The following table summarizes the key items on the consolidated statements of cash flows, for
the year ended December 31:
(MILLIONS)
Cash flow provided by (used in):
Operating activities
Financing activities
Investing activities
Foreign exchange (loss) gain on cash
2013
2012
2011
$
746 $
398 $
(263)
(408)
(9)
335
(813)
(8)
349
809
(1,108)
11
61
Increase (decrease) in cash and cash equivalents
$
66 $
(88) $
Cash and cash equivalents as at December 31, 2013 totaled $203 million, representing an
increase of $66 million since December 31, 2012. Cash and cash equivalents as at December 31, 2012
totaled $137 million, representing a decrease of $88 million since December 31, 2011.
Operating Activities
Cash flows provided by operating activities totaled $746 million for year ended December 31,
2013, resulting in a year-over-year increase of $348 million. The increases are primarily attributable to
funds from operations. Cash flows provided by operating activities totaled $398 million for the year ended
December 31, 2012, resulting in a year-over-year increase of $49 million. The increase was primarily due
to a $15 million increase in funds from operations.
Net change in working capital
The net change in working capital balances shown in the consolidated statements of cash flows
for the year ended December 31 is comprised of the following:
(MILLIONS)
Trade receivables and other current assets
Accounts payable and accrued liabilities
Other assets and liabilities
Financing Activities
2013
47
(42)
(4)
1
$
$
2012
(36)
17
(3)
(22)
$
$
Cash flows used in financing activities totaled $263 million for the year ended December 31,
2013. Repayments related to subsidiary borrowings and credit facilities were approximately $1.7 billion.
Long-term debt increased by $1.4 billion due to the growth in our portfolio and re-financings at two
Ontario wind facilities. Capital was provided from the issuances of C$175 million each of the Series 5 and
Series 6 Class A Preference Shares. The capital provided by participating non-controlling interests – in
operating subsidiaries includes the co-investment by a private fund sponsored by Brookfield Asset
Management.
For the year ended December 31, 2013 distributions paid to unitholders were $378 million (2012:
$362 million). The distributions paid to preferred shareholders and participating non-controlling interests -
in operating subsidiaries were $157 million (2012: $38 million). See “Dividends and Distributions” for
further details.
Cash flows provided by financing activities totaled $335 million for the year ended December 31,
2012. Long-term debt – borrowings increased with issuance of C$400 million of 10-year term corporate
notes, with approximately $500 million of subsidiary borrowings related to the growth and construction of
assets, and over $300 million in refinancing of certain existing facilities. Repayments related to subsidiary
borrowings were approximately $1.1 billion. The capital provided by participating non-controlling interests
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 32
– in operating subsidiaries relates to the growth of the business, and the capital provided by preferred
equity is from the issuance of C$250 million Class A Preference Shares.
For the year ended December 31, 2012, distributions paid to unitholders were $362 million (2011:
$109 million). The distributions paid to preferred shareholders and participating non-controlling interests -
in operating subsidiaries were $38 million (2011: $39 million). See “Dividends and Distributions” for
further details.
Investing Activities
Cash flows used in investing activities for the year ended December 31, 2013 totaled $408
million. Our investments were with respect to the acquisition of hydroelectric facilities in Maine, the
remaining 50% interest previously held by our partner in a facility located in British Columbia, and a wind
portfolio in California that when combined totaled $241 million. In addition, our investment in the
construction of renewable power generating assets was $147 million and sustainable capital expenditures
totaled $79 million.
Cash flows used in investing activities for the year ended December 31, 2012 totaled $813
million. Our investments were with respect to the acquisition of wind facilities in California, hydroelectric
facilities in southern United States and a hydroelectric facility in Brazil that totaled $775 million. In
addition, our continued investment in sustainable capital expenditures totaled $55 million and construction
of renewable power generating assets amounted to $307 million. Partly offsetting the cash investments
were $209 million in investment tax credits received pursuant to government incentives to build new
renewable wind facilities, and $172 million from the settlement of certain related party balances.
NON-CONTROLLING INTERESTS
Preferred equity
In January 2013 and May 2013, we issued for total proceeds of C$350 million, C$175 million
each of Series 5 and Series 6 Class A Preference Shares with fixed, annual, cumulative dividends
yielding 5%. The net proceeds were used to repay outstanding indebtedness and for general corporate
purposes. As at December 31, 2013, no preference shares have been redeemed.
General partnership interest in a holding subsidiary held by Brookfield
Brookfield, as the owner of the 1% general partnership interest in BRELP, is entitled to regular
distributions plus an incentive distribution based on the amount by which quarterly distributions exceed
specified target levels. To the extent that distributions exceed $0.375 per unit per quarter, the incentive is
15% of distributions above this threshold. To the extent that quarterly distributions exceed $0.4225 per
unit, the incentive distribution is equal to 25% of distributions above this threshold. No incentive
distributions have been paid.
Participating non-controlling interests - in a holding subsidiary - Redeemable/Exchangeable units
held by Brookfield
BRELP has
to Brookfield Asset
issued Redeemable/Exchangeable partnership units
Management, which may at the request of the holder, require BRELP to redeem these units for cash
consideration. The 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 presented to BRELP that are tendered for redemption in
exchange for LP Units. If Brookfield Renewable elects not to exchange the Redeemable/Exchangeable
partnership units for LP Units, the Redeemable/Exchangeable partnership units are required to be
redeemed for cash. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation
with LP Units, the Redeemable/Exchangeable partnership units are classified as equity, and not as a
liability.
LIMITED PARTNERS’ EQUITY
With the completion of the Combination in November 2011, the number of outstanding units
increased from 104,718,976 to 262,485,747 on a fully-exchanged basis. The fully-exchanged amounts
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 33
assume the exchange of LP Units for the participating non-controlling interests in BRELP, which may or
may not occur since Brookfield can elect to continue to hold its direct interest in BRELP through
Redeemable/Exchangeable partnership units rather than exchanging this interest for LP Units.
Secondary offerings were completed in 2012 and 2013 in which Brookfield Asset Management
sold 13,144,500 and 8,065,000 of its LP Units, respectively, at an offering price of C$26.25 and C$31.00
per LP Unit, respectively. As a result, Brookfield Asset Management now owns, directly and indirectly,
169,685,609 LP Units and Redeemable/Exchangeable partnership units, representing approximately 65%
of Brookfield Renewable on a fully-exchanged basis.
SHARES AND UNITS OUTSTANDING
The shares and units outstanding as at December 31 are presented in the following table:
Class A Preference Shares
Series 1
Series 3
Series 5
Series 6
General partnership units(1)
Redeemable/Exchangeable units(1)
LP Units
Balance, beginning of year
Distribution reinvestment plan
Balance, end of year
Brookfield Asset Management
External LP Unitholders
LP Units on a fully-exchanged basis
(1)
Units held by Brookfield Asset Management
2013
2012
10,000,000
10,000,000
7,000,000
7,000,000
10,000,000
10,000,000
-
-
34,000,000
20,000,000
2,651,506
2,651,506
129,658,623
129,658,623
132,901,916
132,827,124
82,997
74,792
132,984,913
132,901,916
40,026,986
92,957,927
48,091,986
84,809,930
132,984,913
132,901,916
262,643,536
262,560,539
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 34
DIVIDENDS AND DISTRIBUTIONS
The composition of the dividends and distributions for the year ended December 31 are
presented in the following table:
(MILLIONS, EXCEPT AS NOTED)
Class A Preference Shares
Series 1
Series 3
Series 5
Series 6
Participating non-controlling interests - in
operating subsidiaries
General partnership interest in a holding
Accrued
Paid
2013
2012
2011 2013
2012
2011
$
13 $
13 $
13 $
13 $
13 $
13
11
8
5
3
-
-
-
-
-
12
6
4
-
-
-
-
-
-
$
37 $
16 $
13 $
35 $
13 $
13
$
122 $
24 $
25 $
122 $
24 $
25
subsidiary held by Brookfield
$
4 $
4 $
1 $
4 $
4 $
-
Participating non-controlling interests -
in a holding subsidiary - Redeemable/
Exchangeable units held by Brookfield
$
188 $
179 $
43 $
185 $
177 $
-
Limited partners' equity
Brookfield Asset Management
External LP Unitholders
58
135
66
117
21
24
56
133
73
108
193 $
183 $
45 $
189 $
181 $
-
-
-
544 $
406 $
127 $
535 $
399 $
38
$
$
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 35
CRITICAL ESTIMATES AND CRITICAL JUDGMENTS
POLICIES
IN APPLYING ACCOUNTING
The consolidated annual financial statements are prepared in accordance with IFRS, which
require the use of estimates and judgments in reporting assets, liabilities, revenues, expenses and
contingencies. In the judgment of management, none of the estimates outlined in Note 2 – Significant
accounting policies in our audited consolidated financial statements are considered critical accounting
estimates as defined in NI 51-102 with the exception of the estimates related to the valuation of property,
plant and equipment and the related deferred income tax liabilities. These assumptions include estimates
of future electricity prices, discount rates, expected long-term average generation, inflation rates, terminal
year and operating and capital costs, the amount, the timing and the income tax rates of future income
tax provisions. Estimates also include determination of accruals, purchase price allocations, useful lives,
asset valuations, asset impairment testing, deferred tax liabilities, decommissioning retirement obligations
and those relevant to the defined benefit pension and non-pension benefit plans. Estimates are based on
historical experience, current trends and various other assumptions that are believed to be reasonable
under the circumstances.
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 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 “Risk
Factors” section. 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.
Actual results could differ from those estimates.
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 and other
comprehensive income (“OCI”) for the year. Actual results could differ from these 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 from renewable sources, anticipated long-term
average generation, estimated operating and capital expenditures, future inflation rates and discount
rates, as described in Note 11 - Property, plant and equipment, at fair value in our 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 Note 2 (o) - Critical
judgments in applying accounting policies in our audited consolidated financial statements for further
details.
Estimates of useful lives and residual values are used in determining depreciation. 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 Brookfield
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 36
Renewable’s best estimate of electricity prices that would allow new entrants into the market. The fair
value of interest rate swaps is the estimated amount that another party would receive or pay to terminate
the swap agreements at the reporting date, taking into account current market interest rates. This
valuation technique approximates the net present value of future cash flows. See Note 8 - Risk
Management and Financial Instruments in our audited consolidated financial statements 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.
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.
(ii) Common control transactions
Common control business combinations specifically fall outside of scope of IFRS 3R and as such
management has used its judgment to determine an appropriate policy to account for these transactions.
Consideration was given to other relevant accounting guidance 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 (“IAS 8”). 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 (f) - Property plant and equipment and revaluation method in our 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 generally 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 further in the model versus using a discounted terminal value.
The valuation model incorporates future cash flows from long-term power purchase agreements
that are in place where it is determined that the power purchase agreements are linked specifically to the
related power generating assets. With respect to estimated future generation that does not incorporate
long-term power purchase agreement pricing, the cash flow model uses estimates of future electricity
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 37
prices using broker quotes from independent sources for the years in which there is a liquid market. The
valuation of power generating assets not linked to long-term power purchase agreements also requires
the development of a long term estimate of future electricity prices. In this regard the valuation model
uses a discount to the all-in cost of construction with a reasonable return, to secure energy from new
renewable on-shore wind development resources as the benchmark that will establish the market price
for electricity for renewable resources.
Brookfield Renewable’s long term view is anchored to the cost of securing new energy from
renewable sources to meet future demand growth by the year 2020. This year is viewed as the point
when generators in North America must build additional capacity to maintain system reliability and
provide an adequate level of reserve generation with the retirement of older coal fired plants and with the
Environmental Protection Agency emission compliance deadlines. Brookfield Renewable has estimated a
discount to these new-build wind prices to determine renewable electricity prices for hydroelectric
facilities. In Brazil, the estimate of future electricity prices is based on a similar approach as applied in
North America using a forecast of the all-in cost of hydroelectric and wind development.
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 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) Financial instruments
The accounting policy relating to Brookfield Renewable’s financial instruments is described in
Note 2 (i) — Financial instruments in our audited consolidated financial statements. In applying the 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.
(v) Deferred income taxes
The accounting policy relating to Brookfield Renewable’s income taxes is described in Note 2 (k)
— Income taxes in our audited consolidated financial statements. In applying this policy, judgments are
made in determining the probability of whether deductions, tax credits and tax losses can be utilized.
(vi) Consolidation of Brookfield Renewable Power Fund
Brookfield Renewable held a 34% investment in the Fund, on a fully-exchanged basis prior to
November 28, 2011. 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 LP Unit of Brookfield Renewable for each trust unit
of the Fund held, and the Fund was wound up.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 38
FUTURE CHANGES IN ACCOUNTING POLICIES
(i)
Financial Instruments
IFRS 9, Financial Instruments (“IFRS 9”) was issued by the 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 1 January
2018. Management is currently evaluating the impact of IFRS 9 on the consolidated financial statements.
(ii) Levies Imposed by Governments
IFRIC 21, Levies (“IFRIC 21”) provides guidance on when to recognize a liability for a levy
imposed by a government, both for levies that are accounted for in accordance with IAS 37, Provisions,
Contingent Liabilities and Contingent Assets, and those where the timing and amount of the levy is
certain. IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers
the payment of the levy in accordance with the relevant legislation. A liability is recognized progressively
if the obligating event occurs over a period of time or, if an obligation is triggered on reaching a minimum
threshold, the liability is recognized when that minimum threshold is reached. IFRIC 21 is effective for
annual periods beginning on or after January 1, 2014. Management is currently evaluating the impact of
IFRIC 21 on the consolidated financial statements.
ADOPTION OF ACCOUNTING STANDARDS
The following new accounting standards were applied or adopted by Brookfield Renewable during
the year. See Note 2 (p) - New standards, interpretations and amendments adopted by Brookfield
Renewable in our consolidated financial statements for the year ended December 31, 2013.
•
•
•
•
•
•
•
IAS 1, Presentation of Items of Other Comprehensive Income – Amendments to IAS 1,
IFRS 10, Consolidated Financial Statements,
IFRS 11, Joint Arrangements, and IAS 28, Investment in Associates and Joint Ventures,
IFRS 12, Disclosure of Interests in Other Entities,
IFRS 13, Fair Value Measurement,
IAS 19, Employee Benefits (Revised 2011) (IAS 19R), and
IAS 34, Interim Financial Reporting and Segment Information for Total Assets and Liabilities.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 39
DISCLOSURE CONTROLS AND PROCEDURES AND
FINANCIAL REPORTING
INTERNAL CONTROL OVER
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of
the end of the period covered by this Annual Report. Based on such evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that as of December 31, 2013, our disclosure controls
and procedures are designed at a reasonable assurance level and are effective to provide reasonable
assurance that material information we are required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. While disclosure controls and
procedures and internal controls over financial reporting were adequate and effective we continue to
implement certain measures to strengthen control processes and procedures.
Changes in Internal Control
There were no changes in our internal control over financial reporting identified in
management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the
period covered by This Annual Report that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
The Annual Report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of our independent registered public
accounting firm due to a transition period established by the rules of the SEC for newly public companies.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating
the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives. In addition, the design of
disclosure controls and procedures must reflect the fact that there are resource constraints and that
management is required to apply judgment in evaluating the benefits of possible controls and procedures
relative to their costs.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 40
OPERATIONAL REVIEW FOR THE THREE MONTHS ENDED DECEMBER 31, 2013
The following table reflects the actual and long-term average generation for the three months
ended December 31:
GENERATION (GWh)
Hydroelectric generation
United States
Canada
Brazil(2)
Wind energy
United States
Canada
Actual Generation(1)
2012
2013
LTA Generation(1)
Actual vs. LTA
Prior Year
2013
2012
2013
2012
Variance of Results
Actual vs.
2,226
1,401
923
1,447
954
924
2,450
1,171
923
1,869
1,175
924
4,550
3,325
4,544
3,968
175
328
503
158
325
483
274
343
617
191
343
534
(224)
230
-
6
(99)
(15)
(114)
(422)
(221)
-
779
447
(1)
(643)
1,225
(33)
(18)
(51)
17
3
20
Other
Total generation(3)
1,215
(1) For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
4,053
5,268
4,606
5,380
(553)
(112)
141
245
104
219
215
(30)
(4)
commercial operation date.
In Brazil, assured generation levels are used as a proxy for long-term average.
Includes 100% of generation from equity-accounted investments.
(2)
(3)
Generation levels during the three months ended December 31, 2013 totaled 5,268 GWh, an
increase of 1,215 GWh as compared to the same period of the prior year.
The hydroelectric portfolio generated 4,550 GWh, consistent with the long-term average of 4,544
GWh, and an increase of 1,225 GWh from the same period of the prior year. Generation from existing
hydroelectric assets was 3,895 GWh compared to 3,325 GWh for the same period in the prior year, as
generation returned to more normal levels relative to the dry conditions that were experienced in the prior
year. Acquisitions during the year and in the fourth quarter of 2012 and assets reaching commercial
operations contributed 655 GWh compared to the long-term average of 701 GWh.
The wind portfolio generated 503 GWh which was below the long-term average of 617 GWh.
Generation increased 20 GWh compared to the same period in the prior year. The facilities recently
acquired in California resulted in generation of 48 GWh compared to the long-term average of 81 GWh,
while generation from existing wind facilities declined compared to the prior year due to wind conditions
across the U.S. portfolio.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 41
SUMMARY OF HISTORICAL QUARTERLY RESULTS ON A CONSOLIDATED BASIS
The following is a summary of unaudited quarterly financial information for the last twelve consecutive quarters:
Q4
5,380
5,268
Q3
4,960
5,154
$ 393 $ 392 $
272
137
260
108
Q1
5,325
5,535
2013
Q2
2012
2011(1)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
6,171
6,265
4,606
4,053
4,049
2,971
4,062
4,998 4,549
3,924
4,101 4,817
484 $ 437 $ 317 $ 229 $ 337 $ 426 $ 267 $ 280 $ 329 $ 293
215
357
103
187
3,671
3,614
4,488
4,491
4,076
3,848
318
175
319
162
238
116
221
87
118
11
197
79
195
74
154
34
10
10
10
7
6
4
3
3
3
3
4
3
(7)
8
24
16
(14)
(11)
(14)
(1)
1
7
9
(6)
-
-
-
1
(1)
-
-
-
(1)
(3)
-
(1)
10
11
24
0.08
5
5
28
0.04
22
22
78
0.17
30
31
85
0.23
(27)
(28)
(64)
(0.20)
(26)
(26)
(59)
(0.20)
10
10
10
1
1
1
7
1
6
1
3
1
4
4
(3)
0.03
4
1
14
15
31
0.11
(44)
(45)
(86)
(0.33)
(123)
(126)
(242)
(0.95)
(21)
(22)
(30)
(0.17)
(44)
(45)
(93)
(0.34)
3
1
3
1
3
-
4
-
3
-
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) - LTA(2)(3)
Generation (GWh) - actual(2)(3)
Revenues
Adjusted EBITDA(4)
Funds from operations(4)
Net (loss) income:
Non-controlling interests
Preferred equity
Participating non-controlling
interests - in operating subsidiaries
General partnership interest in a holding
subsidiary held by Brookfield
Participating non-controlling
interests - in a holding subsidiary Redeemable/
Exchangeable units held by Brookfield
Limited partners' equity
Basic and diluted earnings (loss) income per LP Unit(5)
Distributions:
Preferred equity
General partnership interest in a holding
subsidiary held by Brookfield
Participating non-controlling interests -
in a holding subsidiary - Redeemable/
Exchangeable units held by Brookfield
Limited partners' equity
(1)
-
-
Comparative quarterly consolidated financial information for the year ended December 31, 2011 was revised to reflect adjustments, primarily related to deferred income tax and
foreign currency translation, which were identified through the completion of the Combination. The adjustments do not impact the comparative annual consolidated financial
information for the year ended December 31, 2011.
Includes 100% of generation from equity-accounted investments.
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or commercial operation date.
Non-IFRS measures. See "Cautionary Statement Regarding Use of Non-IFRS Measures".
Average LP Units outstanding totaled 132.9 million (2012: 132.9 million and 2011: 132.8 million).
44
45
47
48
45
47
47
49
47
48
45
46
47
48
45
45
43
45
-
-
-
-
(2)
(3)
(4)
(5)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 42
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
(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:
(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 will fluctuate because of changes in commodity prices. Commodity price
risk arises from the sale of Brookfield Renewable’s uncontracted generation and stabilization of the gas
purchases.
Brookfield Renewable sells electricity under long-term contracts to secure stable prices and
mitigate its exposure to wholesale markets. As at December 31, 2013, 93% of our 2014 generation on a
proportionate basis was sold pursuant to purchase price agreements, 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 loss” or
OCI, as applicable.
The table below summarizes the impact of changes in the market price of electricity and gas 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 gas and electricity for the year ended December 31:
(MILLIONS)
5% increase
5% decrease
(ii) Interest rate risk
Effect on net income
Effect on OCI
2013
2012
2011
2013
2012
2011
$
- $
1 $
2 $
1 $
-
(1)
(2)
(1)
- $
-
-
-
Interest rate risk is defined for these purposes as the risk that the fair value or future cash flows of
a financial instrument 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 certain 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 $1,515 million (2012: $1,592 million). Of this
amount, $806 million (2012: $1,102 million) has been hedged through the use of interest rate swaps.
Brookfield Renewable Energy Partners L.P.
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December 31, 2013
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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.
Impact of a 1% change in interest rates for the year ended December 31:
(MILLIONS)
1% increase
1% decrease
(b) Credit risk
Effect on net income
Effect on OCI
2013
2012
2011
2013
2012
$
(7) $
(7) $
(7) $
96 $
51 $
7
7
7
(96)
(51)
2011
48
(48)
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 power purchase agreements 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, 2013, 99% (2012: 99%) of
Brookfield Renewable’s trade receivables of $105 million were current. See Note 7 - Trade receivables
and other current assets in our audited consolidated financial statements for additional details regarding
Brookfield Renewable’s trade receivables balance.
The maximum credit exposure at December 31 was as follows:
(MILLIONS)
Cash and cash equivalents
Restricted cash
Trade receivables and other current assets
Financial instrument assets
Other long-term assets
Restricted cash
Other
Due from related parties(1)
(1)
Includes both the current and long-term amounts.
(c) Liquidity risk
$
2013
203
169
184
15
75
-
48
$
2012
137
157
194
-
80
2
56
$
694
$
626
Liquidity risk is the risk that we cannot meet a demand for cash or fund an obligation when due.
Liquidity risk is mitigated by 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 – Long-term
debt and credit facilities in our audited consolidated financial statements. We also ensure that we have
access to public debt markets by maintaining a strong credit rating of BBB (high).
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December 31, 2013
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We are 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.
The sensitivity analysis discussed above reflects only the risks associated with instruments that
we consider are market sensitive and the potential loss resulting from one or more selected hypothetical
changes. Therefore, the discussion above is not intended to reflect fully the risk exposure that we may
have.
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, labor relations, risks associated with
operating in Brazil, greenfield development growth, sourcing and financing of acquisition opportunities,
operational arrangements with partially owned investments, new markets in foreign countries, 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 Form 20-F and other public disclosures which can be
accessed at EDGAR and SEDAR.
Management believes that, since the end of 2012 there have been no changes in the business
environment and risks that could affect Brookfield Renewable’s activities or results, other than risks
related to the volatility of supply and demand in the energy markets.
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, hydroelectric power generators have access to a hydrology balancing program (“MRE”),
which, within the limitation referred to below, stabilizes hydrology by assuring that all participant plants in
the MRE 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 and substantially all our
assets are part of that pool. In cases of nationwide drought, when the pool as a whole is in shortfall
relative to the long-term average, an asset can expect to share the nationwide shortfall pro-rata with the
rest of the pool. In addition, specific rules provide the minimum percentages of the reference amount of
electricity that must be actually generated each year for assuring participation in the MRE. The energy
reference amount is assessed yearly according to the criteria of such regulation, and can be adjusted
positively or negatively. If the MRE is terminated or changed or Brookfield Renewable’s reference amount
is revised, Brookfield Renewable’s financial results would be exposed to variations in hydrology in Brazil.
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December 31, 2013
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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 power purchase
agreements with Brookfield Asset Management, public utilities or industrial or commercial end-users,
some of whom may not be rated by any rating agency. For example, as at December 31, 2013,
approximately 37% of our sales were with Brookfield Asset Management entities which are not rated and
whose obligations are not guaranteed by Brookfield Asset Management. If, for any reason, any of the
purchasers of power under such power purchase agreements, including Brookfield, are unable or
unwilling to fulfill their contractual obligations under the relevant power purchase agreement or if they
refuse to accept delivery of power pursuant to the relevant power purchase agreement, 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 power purchase agreements or some end use customers to pay for electricity
received.
Certain portions of our hydroelectric portfolio will be subject to re-contracting in the future. We
cannot provide any assurance 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 provide any assurance 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 a subsidiary of Brookfield Asset Management (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.
Supply and demand in the energy market, including the non-renewable energy market, is volatile
and such volatility could have an adverse impact on electricity prices and a material adverse
effect on Brookfield Renewable’s assets, liabilities, business, financial condition, results of
operations and cash flow.
A portion of Brookfield Renewable’s revenues are tied, either directly or indirectly, to the
wholesale market price for electricity in the markets in which Brookfield Renewable operates. Wholesale
market electricity prices are impacted by a number of factors including: the price of fuel (for example,
natural gas) that is used to generate other sources of electricity; the management of generation and the
amount of excess generating capacity relative to load in a particular market; the cost of controlling
emissions of pollution, including potentially the cost of carbon; the structure of the market; and weather
conditions that impact electrical load. More generally, there is uncertainty surrounding the trend in
electricity demand growth, which is greatly influenced by macroeconomic conditions, by absolute and
relative energy prices, and by developments
in energy conservation and demand-side
management. Correspondingly, from a supply perspective, there are uncertainties associated with the
timing of generating plant retirements – in part driven by environmental regulations – and with the scale,
pace and structure of replacement capacity, again reflecting a complex interaction of economic and
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Annual Report
December 31, 2013
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political pressures and environmental preferences. This volatility and uncertainty in the energy market,
including the non-renewable energy market, could have a material adverse effect on Brookfield
Renewable’s 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. In particular, Brazil’s proposed electricity sector measures adopted in
September 2012 could have a negative impact on power prices in Brazil.
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.
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, early obsolescence,
among other things, which could have a material adverse effect on our assets, liabilities, business,
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
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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 damages and 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.
Our operations are exposed to health, safety, security and environmental risks.
The ownership, construction and operation of our generation assets carry an inherent risk of
liability related to public safety, health, safety, security 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, security and environmental laws and potential civil liability. In the ordinary
course of business we incur capital and operating expenditures to comply with health, safety, security 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, security 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, security and environmental laws could have a material and adverse impact
on operations and result in additional material expenditures. Additional environmental, 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.
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December 31, 2013
Page 48
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.
We rely on computerized business systems.
Our business places significant reliance on information technology. In addition, our business also
relies upon telecommunication services to remotely monitor and control our assets and interface with
regulatory agencies, wholesale power markets and customers. The information and embedded systems
of key business partners and regulatory agencies are also important to our operations. In light of this, we
may be subject to cybersecurity risks or other breaches of information technology security. A breach of
our cyber/data security measures or the failure or malfunction of any of our computerized business
systems, associated backup or data storage systems for a significant time period could have a material
adverse effect on our business operations, financial reporting, financial condition and results of
operations.
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, for example, occurred 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,
microturbines 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.
RISKS RELATED TO FINANCING
Our ability to finance our operations is subject to various risks relating to the state of the capital
markets.
Brookfield Renewable 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’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’s assets, future electricity
market prices, future capital markets conditions, the level of future interest rates and investors’
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Annual Report
December 31, 2013
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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’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.
Changes in our credit ratings may have an adverse effect on our financial position and ability to
raise capital.
The credit rating assigned to Brookfield Renewable or any of our subsidiaries’ debt securities may
not remain in effect for any given period of time. A rating may be changed by the relevant rating agency.
A lowering or withdrawal of such ratings may have an adverse effect on our financial position and ability
to raise capital.
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,
policies of active support for renewable energy. 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 local service entities, tax incentives, including investment tax credits, production tax credits
and accelerated depreciation and direct subsidies.
The attractiveness of renewable energy to purchasers, as well as the economic return available
to project sponsors, is often dependent on the cost of fossil fuels as well as 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
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Annual Report
December 31, 2013
Page 50
from Canada’s decision to lower emission reduction targets following withdrawal from Kyoto Protocol to
the United Nations Framework Convention on Climate Change. 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 which mean
they will expire unless renewed. 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 consider, 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 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 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 on Brookfield Renewable’s assets,
liabilities, business, financial condition, results of operations and cash flow.
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, labor disruptions and inclement weather. In addition, we enter into various
types of arrangements with communities and joint venture partners, including in some cases, First
Nations and other aboriginal peoples, 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.
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December 31, 2013
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RISKS RELATED TO OUR RELATIONSHIP WITH BROOKFIELD ASSET MANAGEMENT
Brookfield will exercise substantial influence over Brookfield Renewable and we are highly
dependent on the Service Provider.
Brookfield Asset Management, through BRPI, is the sole shareholder of the managing general
partner of Brookfield Renewable. As a result of its ownership of the managing general partner, Brookfield
Asset Management 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 its operating entities indirectly and will hold any future
acquisitions indirectly through BRELP, the general partner of which is indirectly owned by Brookfield
Asset Management. 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 its holding entities,
including with respect to the making of decisions (although it will have the right to remove and replace the
general partner of BRELP).
Brookfield Renewable and BRELP depend on the management and administration services
provided by or under the direction of the Service Provider under the Master Services Agreement.
Brookfield Asset Management 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 Asset
Management. 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.
ADDITIONAL INFORMATION
Additional information, including our Form 20-F filed with securities regulators in Canada and with
the Securities Exchange Commission, are available on our website at www.brookfieldrenewable.com, on
SEDAR’s website at www.sedar.com and on EDGAR’s website at www.sec.gov.
SUBSEQUENT EVENTS
In January 2014, we completed the acquisition of a 70 MW hydroelectric portfolio in Maine
consisting of nine facilities which are expected to generate approximately 400 GWh annually. In February
2014, $140 million of financing was obtained with a private placement bond that matures in 2024. The
acquisition was completed with institutional partners, and Brookfield Renewable retains an approximate
40% interest in the portfolio.
In January 2014, we acquired, with our institutional partners, the remaining 50% interest in the 30
MW Malacha Hydro facility in California. We will retain an approximate 22% interest in the facility.
In January 2014, the $279 million bridge loan associated with the recently acquired 360 MW
operating hydroelectric portfolio located in Maine was refinanced to 2017 at LIBOR plus 2.25%.
In February 2014, we announced an agreement to acquire a 33% economic and 50% voting
interest in a 417 MW hydroelectric facility in Pennsylvania. This facility is expected to generate
approximately 1,100 GWh annually. The acquisition is being pursued with institutional partners, and
Brookfield Renewable’s share of the acquired interest is approximately 40%. This transaction is subject to
regulatory approvals and other customary closing conditions and is expected to close in the first quarter
of 2014.
In February 2014, we announced an increase in unitholder distributions to $1.55 per unit on an
annualized basis, an increase of ten cents per unit, to take effect with the first quarter distribution payable
in March 2014.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 52
ADJUSTED EBITDA AND FUNDS FROM OPERATIONS ON A PRO FORMA BASIS
ASSUMING LONG-TERM AVERAGE
Revenues on a pro forma basis are computed by using long-term average generation for each
facility, and multiplied by the pricing in the respective power purchase agreements, where applicable. The
majority of direct operating costs are fixed, regardless of changes in generation levels or revenue, except
for certain items such as water royalty fees which are charged based on generation or revenues and will
vary from time to time. The following table reflects Adjusted EBITDA and funds from operations, assuming
long-term average generation, for the year ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh)(1)
Revenues
Other income
Share of cash earnings from equity-accounted investments
Direct operating costs
Adjusted EBITDA(2)
Interest expense – borrowings
Management service costs
Current income taxes
2013
2012
21,836
18,202
$
1,688
$
1,520
11
21
(529)
1,191
(410)
(41)
(19)
16
13
(496)
1,053
(411)
(36)
(14)
Less: cash portion of non-controlling interests
Funds from operations(2)
532
(1) For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
(139)
582
(60)
$
$
commercial operation date.
(2) Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 53
PRO FORMA FINANCIAL REVIEW FOR THE YEAR ENDED DECEMBER 31, 2011
We are providing pro forma financial results that include the impact of the Combination, new
contracts and contract amendments, management and other service agreements along with the tax
impacts resulting from the Combination, as if each had occurred as of January 1, 2011. 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 power purchase agreements; and
• execution of management and other 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;
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.
For additional information on the pro forma adjustments see “Summary of Pro Forma
Adjustments as They Relate to the Comparative Financial Results”.
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 effected on the date
indicated. The accounting for certain of the Combination transactions required the determination of fair
value estimates as 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, 2011.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 54
ADJUSTED EBITDA AND FUNDS FROM OPERATIONS ON A PRO FORMA BASIS
The following table reflects the Adjusted EBITDA and funds from operations for the year ended
December 31, 2011(1):
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh)(2)
Revenues
Other income
Share of cash earnings from equity-accounted investments
Direct operating costs
Adjusted EBITDA(3)
Interest expense – borrowings
Management service costs
Current income taxes
15,877
$
1,309
19
23
(425)
926
(411)
(22)
(8)
(52)
Less: cash portion of non-controlling interests
Funds from operations(3)
(1)
433
Pro forma results reflect new contracts and contract amendments, along with the tax implications of the Combination, as if
each had occurred as of January 1, 2011.
For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or
commercial operation date.
Non-IFRS measure. See ”Cautionary Statement Regarding Use of Non-IFRS Measures” and “Reconciliation of Pro Forma
Results”.
$
(2)
(3)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 55
RECONCILIATION OF PRO FORMA RESULTS
The following table reconciles Adjusted EBITDA, funds from operations and net loss on a
consolidated basis to Adjusted EBITDA, funds from operations and net income for the year ended
December 31, 2011:
(MILLIONS)
Adjusted EBITDA on a consolidated basis
Change in revenues due to revised PPA
Change in direct operating costs
Adjusted EBITDA on a pro forma basis
Funds from operations on a consolidated basis
Change in revenues due to revised PPA
Change in direct operating costs
Management service costs
Funds from operations on a pro forma basis
Net loss 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 OCI
Intercompany settlements
Change in depreciation expense
Deferred income taxes
Net income on a pro forma basis
Notes
Pro forma Basis
(i)
(ii)
(i)
(ii)
(ii)
(i)
(ii)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
$
$
$
$
$
$
804
140
(18)
926
332
140
(18)
(21)
433
(451)
140
(18)
(21)
376
20
19
4
10
79
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 56
SUMMARY OF PRO FORMA ADJUSTMENTS AS THEY RELATE TO THE COMPARATIVE
FINANCIAL RESULTS:
(i) Power Purchase Agreements
Pro forma net income reflects the following contract changes that took effect at the time of the
Combination; pursuant an amendment to the power purchase agreement between Brookfield Asset
Management and an indirect wholly-owned subsidiary of Brookfield Renewable (the “GLPL PPA”).
Brookfield Asset Management guarantees 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.
Brookfield Energy Marketing LP (“BEM LP”) and Mississagi Power Trust (“MPT”), an indirect
wholly-owned subsidiary of Brookfield Renewable, entered into 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, entered into 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.
The impacts of these contract price amendments and agreements for the year ended December
31, 2011 are summarized as follows:
(MILLIONS, EXCEPT AS NOTED)
GLPL PPA
Mississagi PPA
Energy Revenue Agreement
Actual generation (GWh) Incremental revenue
13
964
$
473
3,512
4,949
$
17
110
140
(ii) Management and Other Service Agreements
An exclusive agreement with Brookfield Asset Management to provide operating, management
and consulting services to 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. For the year ended December 31, 2011 pro forma results for management
services costs reflect an expense of $22 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, included in direct operating costs.
(iii) Transfer of 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 limited partnership units. The result of this
transaction is to reflect the settlement of the Fund unit liability and the issuance of limited partnership
units to satisfy the transfer as equity of Brookfield Renewable. As a result of this transaction, the loss on
Fund unit liability, related to the change in fair value of the units and the distributions made for the year
ended December 31, 2011 of $376 million, was eliminated.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 57
(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 unrealized losses of $20 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 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.
(vi) Change in Depreciation Expense
The reduction in fair value of the power generating assets from Brookfield Renewable’s statement
of income and loss results in a decrease in pro forma depreciation expense for the year ended December
31, 2011 of $4 million.
(vii) Deferred Income Tax
Net income on a pro forma basis for the year ended December 31 2011, reflects an increase in
deferred taxes by $10 million.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 58
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements and information, within the meaning of Canadian
securities laws and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities
Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, “safe
harbor” of the United States Private Securities Litigation Reform Act of 1995 and in any applicable
Canadian securities regulations, 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 Annual
Report include statements regarding the quality of Brookfield Renewable’s assets and the resiliency of
the cash flow they will generate, Brookfield Renewable’s anticipated financial performance, future
commissioning of assets, contracted portfolio, technology diversification, acquisition opportunities,
expected completion of acquisitions, future energy prices and demand for electricity, economic recovery,
the future growth prospects, achieving long term average generation, project development and capital
expenditure costs, diversification of shareholder base, energy policies, economic growth, growth
potential of renewable asset class 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”, “endeavors”, “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 Annual Report 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: our limited operating history; the risk that we may be
deemed an “investment company” under the Investment Company Act; the fact that we are not subject to
the same disclosure requirements as a U.S. domestic issuer; the risk that the effectiveness of our internal
controls over financial reporting could have a material effect on our business; 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; volatility in supply and demand in the energy market; our operations are 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; exposure to force majeure events; exposure to
uninsurable
to
interconnection facilities and transmission systems; health, safety, security and environmental risks;
disputes, governmental and regulatory investigations and litigation; our operations could be affected by
local communities; losses resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed
internal processes or systems, or from external events; risks relating to our reliance on computerized
business systems; general industry risks relating to operating in 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 unfavorable collective bargaining agreements; our inability to finance our
operations due to the status of the capital markets; 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 sufficient investment
opportunities and complete transactions; risks related to the growth of our portfolio and our ability to
in currency exchange rates; availability and access
losses; adverse changes
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 59
realize the expected benefits of our transactions; 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 election not 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 our operations conducted through joint ventures, partnerships and consortium
arrangements; our ability to issue equity or debt for future acquisitions and developments will be
dependent on capital markets; foreign laws or regulation to which we become subject as a result of future
acquisitions in new markets; and the departure of some or all of Brookfield’s key professionals.
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 Annual Report and should not be
relied upon as representing our views as of any date subsequent to March 17, 2014, the date of this
Annual Report. While we anticipate that subsequent events and developments 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”
included in our Form 20-F.
CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES
This Annual Report contains references to Adjusted EBITDA, funds from operations and adjusted funds
from operations which are not generally accepted accounting measures under IFRS and therefore may
differ from definitions of Adjusted EBITDA, funds from operations and adjusted funds from operations
used by other entities. We believe that Adjusted EBITDA, funds from operations and adjusted funds from
operations are useful supplemental measures that may assist investors in assessing the financial
performance and the cash anticipated to be generated by our operating portfolio. Neither Adjusted
EBITDA, funds from operations nor adjusted funds from operations 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 of the 2011 results on a pro forma basis.
A reconciliation of Adjusted EBITDA, funds from operations and adjusted funds from operations to net
income (loss) and cash flows from operating activities is presented in our Management’s Discussion and
Analysis. We have also provided a reconciliation of Adjusted EBITDA and funds from operations to net
income (loss) in Note 24 - Segmented information in our audited consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 60
MANAGEMENT’S RESPONSIBILITY
Management’s Responsibility for Financial Statements
The accompanying consolidated financial statements have been prepared by the Brookfield Renewable
Energy Partners L.P. (“Brookfield Renewable”) management which is responsible for their integrity,
consistency, objectivity and reliability. To fulfill this responsibility, Brookfield Renewable maintains
policies, procedures and systems of internal control to ensure that its reporting practices and accounting
and administrative procedures are appropriate to provide a high degree of assurance that relevant and
reliable financial information is produced and assets are safeguarded. These controls include the careful
selection and training of employees, the establishment of well-defined areas of responsibility and
accountability for performance, and the communication of policies and code of conduct throughout the
company.
These consolidated financial statements have been prepared in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board and, where appropriate,
reflect estimates based on management’s judgment.
Ernst & Young LLP, the Independent Registered Chartered Accountants appointed by the directors of the
general partner of Brookfield Renewable, have audited the consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board (United States) to
enable them to express to the partners their opinion on the consolidated financial statements. Their report
outlines the scope of their examination and opinion on the consolidated financial statements.
The consolidated financial statements have been further reviewed and approved by the Board of
Directors of the general partner of Brookfield Renewable acting through its Audit Committee, which is
comprised of directors who are not officers or employees of Brookfield Renewable. The Audit Committee,
which meets with the auditors and management to review the activities of each and reports to the Board
of Directors, oversees management’s responsibilities for the financial reporting and internal control
systems. The auditors have full and direct access to the Audit Committee and meet periodically with the
committee both with and without management present to discuss their audit and related findings.
Richard Legault
Chief Executive Officer
March 17, 2014
Sachin Shah
Chief Financial Officer
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
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 balance sheets of Brookfield Renewable Energy
Partners L.P. (“Brookfield Renewable”) as at December 31, 2013 and 2012, and the related consolidated
statements of income (loss), comprehensive income (loss), changes in equity and cash flows for each of
the years in the three-year period ended December 31, 2013. These consolidated financial statements
are the responsibility of Brookfield Renewable’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we 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 audits 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 also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Brookfield Renewable Energy Partners L.P. at December
31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 2013, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
As discussed in Note 2 (p) to the consolidated financial statements, Brookfield Renewable has changed
its method of accounting for defined benefit plans resulting from the adoption of the amended
International Accounting Standard 19, “Employee Benefits” effective January 1, 2013, which included the
disclosure of a consolidated balance sheet as of January 1, 2012.
Toronto, Canada
March 17, 2014
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 62
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
Dec 31
2013
Dec 31
2012
Restated
Jan 1
2012
Restated
Notes
(See Note 2(p))
(MILLIONS)
Assets
Current assets
Cash and cash equivalents
Restricted cash
Trade receivables and other current assets
Due from related parties
Financial instrument assets
Due from related parties
Equity-accounted investments
Property, plant and equipment, at fair value
Deferred income tax assets
Other long-term assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Financial instrument liabilities
Due to related parties
Current portion of long-term debt
Financial instrument liabilities
Long-term debt and credit facilities
Deferred income tax liabilities
Other long-term liabilities
Equity
Non-controlling interests
Preferred equity
Participating non-controlling interests - in
operating subsidiaries
General partnership interest in a holding subsidiary
held by Brookfield
Participating non-controlling interests - in a holding
subsidiary - Redeemable/Exchangeable units
held by Brookfield
Limited partners' equity
5 $
6
7
9
$
$
8
9
10
11
15
12
13
8
9
14
8
14
15
16
18
18
18
18
19
$
$
$
203
169
184
48
604
15
-
290
15,741
117
210
16,977
209
62
110
517
898
9
6,106
2,265
163
9,441
137 $
157
194
34
522
-
22
344
15,702
81
254
16,925 $
207 $
113
109
532
961
32
5,587
2,349
188
9,117
796
500
1,303
1,028
54
63
225
42
158
253
678
-
32
405
14,002
306
285
15,708
190
99
147
650
1,086
15
4,869
2,367
187
8,524
241
629
64
2,657
2,726
7,536
16,977
$
3,070
3,147
7,808
$
16,925 $
3,089
3,161
7,184
15,708
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of Brookfield Renewable Energy Partners L.P.:
Patricia Zuccotti
Director
David Mann
Director
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 63
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31
(MILLIONS, EXCEPT PER UNIT AMOUNTS)
Revenues
Other income
Direct operating costs
Management service costs
Interest expense – borrowings
Share of earnings (loss) from equity-accounted
investments
Unrealized financial instrument gain (loss)
Depreciation
Other
Loss on Fund unit liability
Income (loss) before income taxes
Income tax (expense) recovery
Current
Deferred
Net income (loss)
Net income (loss) attributable to:
Non-controlling interests
Preferred equity
Participating non-controlling interests - in operating
subsidiaries
General partnership interest in a holding subsidiary
held by Brookfield
Participating non-controlling interests - in a holding
subsidiary - Redeemable/Exchangeable units held by
Brookfield
Limited partners' equity
Basic and diluted earnings (loss) per LP Unit
Notes
2013
2012
2011
9
$ 1,706
$ 1,309
$ 1,169
21
9
24
10
8
11
4
19
15
15
11
(530)
(41)
(410)
9
37
(535)
(31)
-
216
(19)
18
(1)
16
(486)
(36)
(411)
(5)
(23)
(483)
(16)
-
(135)
(14)
54
40
19
(407)
(1)
(411)
10
(20)
(468)
(8)
(376)
(493)
(8)
50
42
$
215
$
(95)
$
(451)
18
$
37
$
16
$
13
18
18
18
19
41
1
67
69
215
0.52
$
$
(40)
(1)
11
(5)
(35)
(35)
(95)
(0.26)
$
$
(232)
(238)
(451)
(1.79)
$
$
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 64
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31
Notes
10,11
20
15
(MILLIONS)
Net income (loss)
Other comprehensive income (loss) that will not be
reclassified to net income (loss)
Revaluations of property, plant and equipment
Actuarial gains (losses) on defined benefit plans
Deferred income taxes on above items
Total items that will not be reclassified to net income (loss)
Other comprehensive income (loss) that may be
reclassified to net income (loss)
Financial instruments designated as cash-flow hedges
Gains (losses) arising during the year
Reclassification adjustments for amounts recognized
in net income (loss)
Foreign currency translation
15
Deferred income taxes on above items
Total items that may be reclassified subsequently to net income (loss)
Other comprehensive (loss) income
Comprehensive (loss) income
Comprehensive income (loss) attributable to:
Non-controlling interests
Preferred equity
Participating non-controlling interests - in operating
subsidiaries
General partnership interest in a holding subsidiary held by
Brookfield
Participating non-controlling interests - in a holding subsidiary -
Redeemable/Exchangeable units held by Brookfield
Limited partners' equity
18
19
18
18
8
8
2013
2012
Restated
2011
Restated
$
215 $
(See Note 2(p))
(95) $ (451)
(211)
12
104
(95)
784
(8)
(224)
552
1,774
(6)
47
1,815
60
37
(760)
(1)
(501)
(11)
(453)
(548)
$ (333) $
(16)
(145)
(1)
(125)
427
332 $
(14)
(169)
194
(749)
1,066
615
18 $
(16) $
23 $
7
140
(26)
211
(5)
3
4
(224)
(228)
$ (333) $
163
169
332 $
194
199
615
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 65
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Accumulated other comprehensive income
Actuarial
gains
(losses) on
defined
benefit Cash flow
hedges
plans
Total
limited
partners'
equity
Preferred
equity
Participating
non-controlling
interests - in
operating
subsidiaries
General
partnership
Participating
non-controlling
interests - in a
interest in holding subsidiary
- Redeemable
a holding
/Exchangeable
subsidiary
units held by
held by
Brookfield
Brookfield
FOR THE YEAR ENDED DECEMBER 31
(MILLIONS)
Balance, as at January 1, 2013
Effect of retrospectively adopting IAS 19R
Balance as at January 1, 2013 (restated)
Net income
Other comprehensive income (loss)
Shares issued
Acquisitions (Note 4)
Distributions
Contributions and other
Change in year
Balance, as at December 31, 2013
Limited
partners'
equity
$ (227) $
Foreign
currency Revaluation
translation
surplus
125 $ 3,285 $
- $
(25) $ 3,158 $
-
-
-
$ (227) $
69
-
-
14
(193)
-
(110)
$ (337) $
125 $ 3,285 $
-
(208)
-
-
-
-
(208)
-
(111)
-
(14)
-
-
(125)
(83) $ 3,160 $
(11)
(11) $
-
4
-
-
-
-
4
(7) $
-
(11)
(25) $ 3,147 $
-
18
-
-
-
-
18
(7) $ 2,726 $
69
(297)
-
-
(193)
-
(421)
$
$
(9) $
-
(9) $
Balance, as at January 1, 2012
Effect of retrospectively adopting IAS 19R
Balance at January 1, 2012 (restated)
Net (loss) income
Other comprehensive (loss) income
Shares issued
Acquisitions
Distributions
Other
Change in year
Balance, as at December 31, 2012 (restated) $ (227) $
(35)
-
-
-
(183)
-
(218)
194 $ 3,015 $
- $
(31) $ 3,169 $
-
-
194 $ 3,015 $
-
(69)
-
-
-
-
(69)
125 $ 3,285 $
-
270
-
-
-
-
270
(8)
(8) $
-
(3)
-
-
-
-
(3)
(11) $
-
(8)
(31) $ 3,161 $
-
6
-
-
-
-
6
(35)
204
-
-
(183)
-
(14)
(25) $ 3,147 $
500 $
-
500 $
37
(53)
349
-
(37)
-
296
796 $
241 $
-
241 $
16
7
252
-
(16)
-
259
500 $
1,028 $
-
1,028 $
41
99
-
205
(122)
52
275
1,303 $
629 $
-
629 $
(40)
14
-
446
(24)
3
399
1,028 $
63 $
-
63 $
1
(6)
-
-
(4)
-
(9)
54 $
64 $
-
64 $
(1)
4
-
-
(4)
-
(1)
63 $
(11)
Total
equity
3,081 $ 7,830
(22)
3,070 $ 7,808
215
(548)
349
205
(544)
51
(272)
2,657 $ 7,536
67
(291)
-
-
(188)
(1)
(413)
(8)
3,097 $ 7,200
(16)
3,089 $ 7,184
(95)
427
252
446
(406)
-
624
3,070 $ 7,808
(35)
198
-
-
(179)
(3)
(19)
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 66
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Accumulated other comprehensive income
Participating
General
non-controlling
partnership
interests - in a
Limited
Foreign
Actuarial
losses on
defined
Total
limited
Participating
interest in holding subsidiary
non-controlling
a holding
- Redeemable
interests - in
subsidiary
/Exchangeable
FOR THE YEAR ENDED DECEMBER 31
partners'
currency Revaluation
benefit Cash flow
partners'
Preferred
operating
held by
units held by
Total
translation
surplus
plans
hedges
equity
equity
subsidiaries
Brookfield
(MILLIONS)
Balance, as at January 1, 2011
Effect of retrospectively adopting IAS 19R
Balance at January 1, 2011 (restated)
Net (loss) income
Other comprehensive (loss) income
Acquisitions
Distributions
Adjustments related to the Combination
Settlement of Fund unit liabilities
Derivative balances
Settlement of related party balances
Transfer of assets
Other
Change in year
Balance, as at December 31, 2011 (restated)
equity
$ (787) $
266 $ 2,213 $
-
-
-
$ (787) $
(238)
-
-
(49)
266 $ 2,213 $
-
(72)
-
-
-
802
-
-
785
81
175
24
-
778
$
(9) $
-
-
-
-
-
(72)
194 $ 3,015 $
-
-
-
-
-
802
- $
(6)
(6) $
-
(2)
-
-
-
-
-
-
-
(2)
(8) $
(4) $ 1,688 $
-
(6)
(4) $ 1,682 $
-
(291)
-
-
(238)
437
-
(49)
-
264
-
-
-
(27)
(31) $ 3,161 $
785
345
175
24
-
1,479
252 $
-
252 $
13
(6)
-
(13)
-
-
-
-
(5)
(11)
241 $
206 $
-
206 $
11
200
223
(25)
-
-
-
-
14
423
629 $
34 $
-
34 $
(5)
9
-
(1)
16
7
4
-
-
30
64 $
Brookfield
(6)
equity
1,650 $ 3,830
(12)
1,644 $ 3,818
(451)
1,066
223
(136)
(232)
426
-
(48)
1,568
767
690
338
350
171
47
23
9
-
3,366
1,445
3,089 $ 7,184
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 67
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31
(MILLIONS)
Operating activities
Net income (loss)
Adjustments for the following non-cash items:
Depreciation
Unrealized financial instrument (gain) loss
Share of (earnings) loss from equity accounted
investments
Deferred income tax recovery
Loss on Fund unit liability
Other non-cash items
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 -
in operating subsidiaries
Issuance of preferred equity
Contributions from common parent
Distributions:
To participating non-controlling interests - in operating subsidiaries
and preferred equity
To unitholders of Brookfield Renewable or BRELP
Investing activities
Acquisitions
Investment in:
Sustaining capital expenditures
Development and construction of renewable power
generating assets
Investment tax credits related to renewable power generating assets
Due to or from related parties
Investment in securities
Restricted cash and other
Foreign exchange gain (loss) on cash
Cash and cash equivalents
Increase (decrease)
Balance, beginning of year
Balance, end of year
Supplemental cash flow information:
Interest paid
Interest received
Income taxes paid
Notes
2013
2012
2011
$
215 $
(95) $
(451)
11
8
10
15
19
10
22
14
14
535
(37)
(9)
(18)
-
43
16
1
746
483
23
5
(54)
-
46
12
(22)
398
1,353
(1,683)
1,193
(1,140)
4,18
18
265
337
-
434
248
-
468
20
(10)
(50)
376
-
8
(12)
349
880
(215)
186
-
106
(39)
(109)
809
18
19
4
11
11
11
9
(157)
(378)
(263)
(38)
(362)
335
(241)
(775)
(212)
(79)
(55)
(66)
(147)
-
(11)
-
70
(408)
(9)
(307)
209
172
(28)
(29)
(813)
(8)
(698)
-
(120)
-
(12)
(1,108)
11
$
$
66
137
203 $
(88)
225
137 $
388 $
11
29
380 $
16
10
61
164
225
318
27
48
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 68
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
The business activities of Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) consist of
owning a portfolio of renewable power generating facilities in the United States, Canada and Brazil, which
prior to November 28, 2011 were 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 73 Front Street, Fifth Floor, Hamilton HM12, Bermuda.
The immediate parent of Brookfield Renewable is its general partner. The ultimate parent of Brookfield
Renewable is Brookfield Asset Management Inc. (“Brookfield Asset Management”).
2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
The consolidated financial statements have been 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, 2013, and encompasses individual IFRS, 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, unless otherwise noted.
These consolidated financial statements have been authorized for issuance by the Board of Directors of
its general partner, Brookfield Renewable Partners Limited, on March 17, 2014.
Certain comparative figures have been reclassified to conform to the current year’s presentation.
All figures are presented in millions of United States (“U.S.”) dollars unless otherwise noted.
(b) Basis of preparation
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.
Consolidation
(i)
These consolidated financial statements include the accounts of Brookfield Renewable and its
subsidiaries, which are the entities over which Brookfield Renewable has control. An investor controls 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. Non-controlling interests in the
equity of Brookfield Renewable’s subsidiaries are shown separately in equity in the consolidated balance
sheets.
(ii) Strategic combination of the renewable power generating operations
On November 28, 2011, upon completion of the strategic combination (the “Combination”) of the
renewable power assets of BRPI and the Fund, the public unitholders of the Fund received one non-
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 69
voting limited partnership unit (“LP Unit”) of Brookfield Renewable in exchange for each trust unit of the
Fund held and the Fund was wound up.
Also as part of the Combination, Brookfield Renewable entered into a voting agreement with Brookfield
Asset Management and its subsidiaries, which provides Brookfield Renewable with control of the general
partner of Brookfield Renewable Energy L.P. (“BRELP”), a holding subsidiary. Accordingly, Brookfield
Renewable consolidates the accounts of BRELP and its subsidiaries. In addition, BRELP issued
redeemable/exchangeable partnership units (the “Redeemable/Exchangeable Partnership Units”), to a
subsidiary of Brookfield Asset Management, pursuant to which the holder may at its request require
BRELP to redeem the Redeemable/Exchangeable Partnership 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
Redeemable/Exchangeable Partnership Units so presented to BRELP that are tendered for redemption in
exchange for Brookfield Renewable LP units. As Brookfield Renewable, at its sole discretion, has the
right to settle the obligation with LP Units, the Redeemable/Exchangeable Partnership Units are classified
as equity of Brookfield Renewable (“Participating non-controlling interests – in a holding subsidiary –
Redeemable/Exchangeable units held by Brookfield”).
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 including a
0.01% general partnership interest in Brookfield Renewable. Brookfield Asset Management and its
subsidiaries, other than Brookfield Renewable, are collectively referred to as Brookfield in these financial
statements. In the first quarter of 2012 and in the first quarter of 2013, Brookfield sold LP Units in
Brookfield Renewable and Brookfield Asset Management currently holds, directly or indirectly,
approximately a 65% limited partnership interest on a fully-exchanged basis. On an unexchanged basis,
Brookfield Asset Management holds a 30% direct limited partnership interest in Brookfield Renewable, a
49% direct interest in BRELP through the ownership of Redeemable/Exchangeable Partnership Units and
a direct 1% general partnership interest in BRELP.
Effective November 30, 2011, Brookfield Renewable’s LP Units traded under the symbol “BEP.UN” on the
Toronto Stock Exchange.
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. Refer to Note 9 - Related party transactions for
further information.
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.
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
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 70
Management. For the period since 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 and management service agreements. Refer to Note 9 - Related party transactions for
further information.
Effective June 11, 2013, Brookfield Renewable’s LP Units traded under the symbol “BEP” on the New
York Stock Exchange.
(iii) Equity-accounted investments and joint ventures
Equity-accounted investments are entities over which Brookfield Renewable has significant influence or
joint arrangements representing joint ventures. 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 type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control. Brookfield Renewable accounts for its interests
in joint ventures 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.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 71
(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.
(e) Restricted cash
Restricted cash includes cash and cash equivalents, where the availability of funds is restricted by credit
agreements.
(f) 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 under IAS 16, Property, Plant and Equipment (“IAS 16”). 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.
Brookfield Renewable generally determines the fair value of its property, plant and equipment by using a
20-year discounted cash flow model. This model incorporates future cash flows from long-term power
purchase agreements that are in place where it is determined that the power purchase agreements are
linked specifically to the related power generating assets. The model also 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 by geographical location.
Effective December 31, 2011 construction work-in-progress (“CWIP”) is revalued when sufficient
information exists to determine fair value using the discounted cash flow method. Revaluations are made
on an annual basis as at December 31 to ensure that the carrying amount does not differ significantly
from fair value.
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
and non-controlling interest. 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.
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.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 72
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 derecognized. An item of property, plant and equipment and any significant
component is derecognized upon disposal or when no future economic benefits are expected from its
use. Other assets include equipment, buildings and leasehold improvements. Buildings, furniture and
fixtures, leasehold improvements and office equipment are recorded at historical cost, less accumulated
depreciation. Land and CWIP are not subject to depreciation.
The depreciation of property, plant and equipment in Brazil is based on the duration of the authorization
or the useful life of a concession asset. The weighted-average remaining duration at December 31, 2013,
is 16 years (2012: 17 years). Since land rights are part of the concession or authorization, this cost is also
subject to depreciation.
Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount
of the asset, and the net amount is applied 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 income (loss). The revaluation surplus is reclassified within the respective
components of equity and not reclassified to net income (loss) when the assets are disposed.
Change in accounting estimates
In 2012, Brookfield Renewable retained third party engineers to review the estimated useful lives of
certain assets. As a result, Brookfield Renewable revised the estimated remaining useful life of certain
assets to more accurately reflect the period over which they provide economic benefits. Brookfield
Renewable accounted for these changes in accordance with IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors (“IAS 8”), which requires a change in an accounting estimate to be
applied prospectively from the date of the change based on timing of completion of the review. The
effective dates of changes were January 1, 2012, April 1, 2012 or July 1, 2012 based on the timing of
completion of the review. The consolidated statements of income (loss) reflect a decrease in depreciation
of $112 million for the year ended December 31, 2012 as a result of the changes in accounting estimate.
(g) 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.
(h) Trade receivables 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 method, less any allowance for uncollectability.
(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
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 73
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
financial liabilities classified as financial instruments used for cash-flow hedging continue to be
recognized at fair value through OCI. Other financial assets and financial 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 little or 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.
(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.
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(iii) Available-for-sale investments
Investments in publicly quoted equity securities are categorized as available-for-sale when it is not
Brookfield Renewable’s strategic intent to sell the securities and the securities were not acquired
principally for their near-term sale. Available-for-sale equity investments are recorded at fair value with
unrealized gains and losses recorded in OCI. Realized gains and losses are recorded in income when
investments are sold and are calculated using the average carrying amount of securities sold. If the fair
value of an investment declines below the carrying amount, qualitative and quantitative assessments of
whether the impairment is either significant or prolonged is undertaken. All relevant facts and
circumstances in this assessment are undertaken to determine, particularly the length of time and extent
to which fair value has been less than the carrying amount.
(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 are 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 dates. 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.
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
3R are recognized at their fair values at the acquisition date, except for income taxes which are measured
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in accordance with IAS 12, Income Taxes, share-based payments which are measured in accordance
with IFRS 2, Share-based Payment and non-current assets that are classified as held-for-sale which are
measured at fair value less costs to sell in accordance with IFRS 5, Non-Current Assets Held for Sale and
Discontinued Operations. 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 difference is
negative, the amount 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
Capitalized costs
(i)
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 costs ceases when the asset is ready for its intended use.
Pension and employee future benefits
(ii)
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 project unit credit method, using the length of service and management’s best estimate
assumptions, is used to value its pension and other retirement benefits. Assets are valued at fair value for
purposes of calculating the expected return on plan assets. All actuarial gains and losses are recognized
immediately through OCI in order for the net pension asset or liability recognized in the consolidated
balance sheets to reflect the full value of the plan deficit or surplus. Net interest is calculated by applying
the discount rate to the net defined benefit asset or liability. Changes in the net defined benefit obligation
related to service costs (comprising of current service costs, past services costs, gains and losses on
curtailments and non-routine settlements), and net interest expense or income are recognized in the
consolidated statements of income (loss).
Re-measurements, comprising of actuarial gains or losses, the effect of the asset ceiling, and the return
on plan assets (excluding net interest), are recognized immediately in the consolidated balance sheets
with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
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December 31, 2013
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Re-measurements are not reclassified to profit or loss in subsequent periods. For defined contribution
plans, amounts are expensed based on employee entitlement.
(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.
Interest and borrowing costs
(iv)
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.
Interest income
(vi)
Interest income is earned with the passage of time and is recorded on an accrual basis.
(vii) Government grants
Brookfield Renewable becomes eligible for government grants by constructing or purchasing renewable
energy facilities, and by bringing those facilities to commercial operation, coupled with a successful
application to the applicable program or agency. The assessment of whether or not a project has
complied with the conditions and that there is reasonable assurance the grants will be received will be
undertaken on a case by case basis. Brookfield Renewable reduces the cost of the asset by the amount
of the grant. The grant amounts are recognized in income on a systematic basis as a reduction of
depreciation over the periods, and in the proportions, in which depreciation on those assets is charged.
With respect to grants related to income, the government assistance (in the form of the difference
between market price and guaranteed fixed price) typically becomes payable once the renewable energy
is produced and delivered to the relevant grid. It is at this point that the receipt of the grant becomes
reasonably assured, and therefore the grant is recognized as revenue in the month that delivery of the
energy occurs.
(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 and OCI for
the year. Actual results could differ from these estimates. The estimates and assumptions that are critical
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December 31, 2013
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to the determination of the amounts reported in the consolidated financial statements relate to the
following:
Property, plant and equipment
(i)
The fair value of Brookfield Renewable’s property, plant and equipment is calculated using estimates and
assumptions about future electricity prices from renewable sources, anticipated long-term average
generation, estimated operating and capital expenditures, future inflation rates and discount rates, as
described in Note 11 - Property, plant and equipment, at fair value. 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.
Financial instruments
(ii)
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. The fair value of interest rate
swaps is the estimated amount that another party would receive or pay to terminate the swap agreements
at the reporting date, taking into account current market interest rates. This valuation technique
approximates the net present value of future cash flows. See Note 8 - 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:
Preparation of consolidated financial statements
(i)
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.
(ii) Common control transactions
Common control business combinations specifically fall outside of scope of IFRS 3R 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
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Annual Report
December 31, 2013
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reflects the economic reality of the transactions, in accordance with IAS 8. 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.
Property, plant and equipment
(iii)
The accounting policy relating to Brookfield Renewable’s property, plant and equipment is described in
Note 2 (f). 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 generally 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 further in the model versus using a discounted terminal value.
The valuation model incorporates future cash flows from long-term power purchase agreements that are
in place where it is determined that the power purchase agreements are linked specifically to the related
power generating assets. With respect to estimated future generation that does not incorporate long-term
power purchase agreement pricing, the cash flow model uses estimates of future electricity prices using
broker quotes from independent sources for the years in which there is a liquid market. The valuation of
power generating assets not linked to long-term power purchase agreements also requires the
development of a long-term estimate of future electricity prices. In this regard the valuation model uses a
discount to the all-in cost of construction with a reasonable return, to secure energy from new renewable
on-shore wind development resources as the benchmark that will establish the market price for electricity
for renewable resources.
Brookfield Renewable’s long-term view is anchored to the cost of securing new energy from renewable
sources to meet future demand growth by the year 2020. This year is viewed as the point when
generators in North America must build additional capacity to maintain system reliability and provide an
adequate level of reserve generation with the retirement of older coal fired plants and with the
Environmental Protection Agency emission compliance deadlines. Brookfield Renewable has estimated a
discount to these new-build wind prices to determine renewable electricity prices for hydroelectric
facilities. In Brazil, the estimate of future electricity prices is based on a similar approach as applied in
North America using a forecast of the all-in cost of hydroelectric and wind development.
Terminal values are included in the valuation of hydroelectric assets in the United States and Canada.
For the hydroelectric assets in Brazil, cash flows have been included based on the duration of the
authorization or useful life of a concession asset without consideration of potential renewal value.
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
for inflation. Each operational facility has a 20 year capital plan that it follows to ensure the maximum life
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Annual Report
December 31, 2013
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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) Financial instruments
The accounting policy relating to Brookfield Renewable’s financial instruments is described in Note 2 (i).
In applying the 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.
(v) 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.
(vi) Consolidation of Brookfield Renewable Power Fund
Brookfield Renewable held a 34% investment in the Fund, on a fully-exchanged basis prior to November
28, 2011. 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 LP Unit of Brookfield Renewable for each trust unit of the Fund held,
and the Fund was wound up.
(p) New standards, interpretations and amendments adopted by Brookfield Renewable
The following new accounting standards applied or adopted in the year ended December 31, 2013 had no
material impact on the consolidated financial statements.
•
•
•
IFRS 10, Consolidated Financial Statements,
IFRS 11, Joint Arrangements, and IAS 28, Investment in Associates and Joint Ventures,
IAS 34, Interim Financial Reporting and Segment Information for Total Assets and Liabilities.
Brookfield Renewable applied, for the first time, certain standards and amendments that require
restatement of previous financial statements. These include IAS 19 (Revised 2011), Employee Benefits,
and amendments to IAS 1, Presentation of Financial Statements. The nature and the impact of the new
standards or amendments applied or adopted in the year ended December 31, 2013 are described below:
IFRS 12, Disclosure of Interests in Other Entities (IFRS 12)
IFRS 12 establishes disclosure requirements for interests in subsidiaries, joint arrangements, associates,
unconsolidated structured entities, special purpose vehicles and off-balance sheet vehicles. The adoption
of IFRS 12 has resulted in more comprehensive disclosures in the consolidated financial statements that
address the nature of, and risks associated with, an entity’s interest in other entities (refer to Notes 3, 10
and 18).
IFRS 13, Fair Value Measurement (IFRS 13)
IFRS 13 was adopted on January 1, 2013. IFRS 13 establishes a single source of guidance for fair value
fair value measurement
measurements and disclosures about
fair value measurements. The
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Annual Report
December 31, 2013
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requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for
which other IFRSs require or permit fair value measurements. 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 also establishes additional disclosures about fair
value measurements. It supersedes the fair value guidance that currently exists in IAS 16 concerning the
use of the revaluation method.
In addition specific transitional provisions were given to entities such that they need not apply the
disclosure requirements set out in the Standard in comparative information provided for periods before
the initial application of the Standard. In accordance with these transitional provisions, Brookfield
Renewable has not made any new disclosures required by IFRS 13 for the 2012 comparative period.
Other than the additional disclosures, the application of IFRS 13 did not have any material impact on the
amounts recognized in the consolidated financial statements.
IAS 1, Presentation of Items of Other Comprehensive Income – Amendments to IAS 1
The amendments to IAS 1 introduced a grouping of items presented in other comprehensive income
(“OCI”). Items that could be reclassified (or recycled) to profit or loss at a future point in time (e.g., net
gain on hedge of net investment, exchange differences on translation of foreign operations, net
movement on cash flow hedges and net loss or gain on available-for-sale financial assets) now have to
be presented separately from items that will never be reclassified (e.g., actuarial gains and losses on
defined benefit plans and revaluation of power generating assets). The amendment affected presentation
and had no impact on Brookfield Renewable’s financial position or performance.
IAS 19, Employee Benefits (Revised 2011) (IAS 19R)
IAS 19R introduced amendments to the accounting for defined benefit plans, including the treatment of
actuarial gains and losses that are now recognized in OCI and permanently excluded from profit and loss.
Also, expected returns on plan assets are no longer recognized in profit or loss, instead there is a
requirement to recognize interest on the net defined benefit liability (asset) in profit or loss, calculated
using the discount rate used to measure the defined benefit obligation.
Brookfield Renewable assessed its accounting policy on the recognition of actuarial gains and losses
from its defined benefit plans. Brookfield Renewable previously recognized the net cumulative
unrecognized actuarial gains and losses, which exceeded 10% of the higher of the defined benefit
obligation and the fair value of the plan assets.
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December 31, 2013
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The adoption of IAS 19R required Brookfield Renewable to retroactively restate its consolidated financial
statements. The following table summarizes these amounts:
(MILLIONS)
Consolidated Balance Sheets:
Other long-term liabilities
Deferred income tax liabilities
Participating non-controlling interests - in a
holding subsidiary - Redeemable/Exchangeable
units held by Brookfield
Limited partners' equity
Consolidated Statements of Changes in Equity:
As at December 31, 2012
As at January 1, 2012
Previously
presented Adjustment
Restated
Previously
presented Adjustment
Restated
$
157 $
2,358
31 $
(9)
188 $
164 $
2,349
2,374
23 $
(7)
187
2,367
3,081
3,158
(11)
(11)
3,070
3,147
3,097
3,169
(8)
(8)
3,089
3,161
Actuarial losses on defined benefit plans
$
- $
(11) $
(11) $
- $
(8) $
(8)
Consolidated Statements of Comprehensive Income (Loss):
Actuarial losses on defined benefit plans
Deferred income taxes on above items, net
$
- $
(227)
(8) $
2
(8) $
(225)
- $
239
(6) $
2
(6)
241
For the year ended December 31, 2012 For the year ended December 31, 2011
(q) Future changes in accounting policies
Financial Instruments
(i)
IFRS 9, Financial Instruments (“IFRS 9”) was issued by the 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 1 January 2018. Management is currently evaluating the
impact of IFRS 9 on the consolidated financial statements.
(ii) Levies Imposed by Governments
IFRIC 21, Levies (“IFRIC 21”) provides guidance on when to recognize a liability for a levy imposed by a
government, both for levies that are accounted for in accordance with IAS 37, Provisions, Contingent
Liabilities and Contingent Assets, and those where the timing and amount of the levy is certain. IFRIC 21
identifies the obligating event for the recognition of a liability as the activity that triggers the payment of
the levy in accordance with the relevant legislation. A liability is recognized progressively if the obligating
event occurs over a period of time or, if an obligation is triggered on reaching a minimum threshold, the
liability is recognized when that minimum threshold is reached. IFRIC 21 is effective for annual periods
beginning on or after January 1, 2014. Management is currently evaluating the impact of IFRIC 21 on the
consolidated financial statements.
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December 31, 2013
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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 as at December 31, 2013:
Brookfield Renewable Energy L.P.(1)
BRP Bermuda Holdings I Limited
Brookfield Renewable Power Preferred Equity Inc.
Brookfield Renewable Energy Partners ULC(2)
Brookfield BRP Canada Corp.
Great Lakes Power Limited
Mississagi Power Trust
Lievre Power L.P.
BAIF U.S. Renewable Power Holdings LLC(3)
BIF II WP Investco I LLC(4)
Catalyst Old River Hydroelectric L.P.(5)
Erie Boulevard Hydropower L.P.
Brookfield Energia Renovavel S.A.
Itiquira Energetica S.A.
(1)
Percentage of
Country of incorporation,
voting securities
registration or operations
owned or controlled
Bermuda
Bermuda
Canada
Canada
Canada
Canada
Canada
Canada
U.S.
U.S.
U.S.
U.S.
Brazil
Brazil
(%)
100
100
100
100
100
100
100
100
100
100
75
100
100
100
Brookfield Asset Management holds Redeemable/Exchangeable Partnership Units and a general partnership interest of 49%
and 1%, respectively. BRELP is controlled by Brookfield Renewable through a voting agreement with Brookfield Asset
Management.
Formerly BRP Finance ULC.
Effective December 2011, Brookfield Renewable entered into Voting Arrangements with various affiliates of Brookfield Asset
Management, whereby Brookfield Renewable gained control (as discussed in Note 4 - Business Combinations).
Effective September 2013, Brookfield Renewable entered into a voting arrangement with various affiliates of Brookfield Asset
Management whereby Brookfield Renewable gained control (as discussed in Note 9 – Related Party Transactions).
Non-voting economic interest held through preferred shares and secured notes.
(2)
(3)
(4)
(5)
4. BUSINESS COMBINATIONS
The following investments were accounted for using the acquisition method, and the results of operations
have been included in the consolidated financial statements since the respective dates of acquisition.
Completed During 2013
Northeastern United States Hydroelectric Generation Assets
In March 2013, Brookfield Renewable acquired a 100% interest in a 360 MW portfolio of hydroelectric
generation facilities. Total consideration was paid as follows: $57 million that included $55 million in cash
and $2 million related to the pre-closing payments and working capital adjustments; holding and project
level notes, with a face value of $700 million, were also assumed. The acquisition costs of $8 million were
expensed as incurred. In September 2013, upon the closing of a private fund sponsored by Brookfield
Asset Management, institutional partners co-invested 49.9% in these facilities for $205 million.
If the acquisition had taken place at the beginning of the year the additional revenue from the acquisition
would have been $104 million (unaudited) for the year ended December 31, 2013.
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December 31, 2013
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California Wind Generation Assets
In August 2012, Brookfield Renewable acquired 16% of the outstanding common shares of Western Wind
Energy Corp. (“Western Wind”) for a total cash consideration of $25 million.
On November 26, 2012, Brookfield Renewable launched an offer to purchase, through an indirect wholly-
owned subsidiary, all of the issued and outstanding common shares of Western Wind (excluding those
Brookfield Renewable already owns) for C$2.50 in cash per common share. This offer was subsequently
increased to C$2.60 per common share. On February 21, 2013, Brookfield Renewable announced that it
was successful in its bid for Western Wind and following take up of the tendered shares, would own
66.1% of the issued and outstanding common shares.
On March 1, 2013, the Board of Directors were replaced by directors appointed by Brookfield Renewable
and, as a result Brookfield Renewable began consolidating the operating results, cash flows and net
assets of Western Wind. Further, Brookfield Renewable was required to re-measure its previously held
16% interest to fair value, and the net impact of this re-measurement was not material.
On March 7, 2013, Brookfield Renewable increased its ownership to 93% of the outstanding common
shares for additional cash consideration of $143 million. As Brookfield Renewable held more than 90% of
the common shares, on May 21, 2013, it acquired all of the remaining common shares on the same terms
that the common shares were acquired under the offer, for additional cash consideration of $15 million.
The common shares of Western Wind were delisted from the TSX Venture Exchange on May 24, 2013.
If the acquisition had taken place at the beginning of the year the additional revenue from the acquisition
would have been $38 million (unaudited) for the year ended December 31, 2013.
Canadian Hydroelectric Generation Asset
In March 2013, Brookfield Renewable acquired the remaining 50% interest, previously held by its partner,
in a hydroelectric generation facility in Canada taking its total investment to 100% (the “Canadian
Hydroelectric Step Acquisition”).
The Canadian Hydroelectric Step Acquisition included cash consideration of $32 million and the
assumption of the partner’s portion of the non-recourse debt. Prior to the Canadian Hydroelectric Step
Acquisition, Brookfield Renewable’s financial interest amounted to $22 million. Brookfield Renewable re-
measured its previously held 50% interest to fair value and reversed any amounts previously recorded in
OCI. In addition, $30 million related to revaluation surplus on the initial 50% interest was reclassified
within equity of which $14 million related to limited partners’ equity.
If the acquisition had taken place at the beginning of the year the revenue would have been $22 million
(unaudited) for the year ended December 31, 2013.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 84
Purchase price allocations, at fair values, with respect to the acquisitions were as follows:
(MILLIONS)
Cash and cash equivalents
Restricted cash
Other current assets
Property, plant and equipment, at fair value
Other long-term assets
Current liabilities
Long-term debt
Other long-term liabilities
Non-controlling interests
Net assets acquired
Northeastern
United States
California
Canada
$
-
$
32
12
721
22
(10)
(720)
-
-
$
2
8
9
453
30
(23)
(250)
(43)
(68)
$
6
-
9
213
-
(29)
(105)
(39)
-
$
57
$
118
$
55
$
Total
8
40
30
1,387
52
(62)
(1,075)
(82)
(68)
230
The estimated fair values of the assets acquired and liabilities assumed are expected to be finalized
within 12 months of the acquisition date.
Completed During 2012
California Wind Generation Assets
In March 2012, the following investments were made by Brookfield Renewable and certain institutional
partners through BAIF U.S. Renewable Power Holdings LLC (“BAIF U.S. Holdings”), in which Brookfield
Renewable holds a 22% controlling interest. The investments were accounted for using the acquisition
method, and the results of operations have been included in the audited consolidated financial statements
since the respective dates of acquisition.
BAIF U.S. Holdings acquired 100% interests in two wind generation facilities in California. BAIF U.S.
Holdings also acquired the remaining 50% interest in a wind generation facility, bringing Brookfield
Renewable’s total investment to 100% (the “California Wind Step Acquisition”). Total consideration paid of
$206 million for these interests included $180 million in cash and the settlement of certain liabilities.
The California Wind Step Acquisition required Brookfield Renewable to re-measure its previously held
50% interest to fair value of $63 million and to reverse any amounts previously recorded in OCI related to
the initial 50% interest. Net income for year ended December 31, 2012 reflects an expense of $11 million
related to the reclassification from OCI on financial instruments designated as cash flow hedges prior to
the California Wind Step Acquisition. In addition, $5 million related to revaluation surplus on the initial
50% interest was reclassified within equity.
Acquisition costs of $2 million related to the above acquisitions were expensed as incurred.
These wind generating facilities are now all in commercial operation.
Brazil Hydroelectric Generation Asset
In July 2012, a Brookfield Americas Infrastructure Fund (“BAIF”) entity, in which Brookfield Renewable
holds a 25% controlling interest (“BAIF Brazil”), acquired a 100% interest in a hydroelectric generation
facility in Brazil for cash consideration of $14 million. A bargain purchase gain of $12 million was
recognized, from the excess fair value of the assets acquired over the consideration paid. The bargain
purchase gain was recorded in Other, and acquisition costs were expensed at the acquisition date.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 85
Southern United States Hydroelectric Generation Assets
In November 2012, BAIF U.S. Holdings acquired a 100% interest in a portfolio of hydroelectric generation
facilities, located in Tennessee and North Carolina in the southern region of the United States, for cash
consideration of $597 million. The acquisition costs of $7 million were expensed as incurred. If the
acquisition had taken place at the beginning of the year, assuming long-term average generation,
revenue would have increased by $56 million (unaudited) for the year ended December 31, 2012.
Purchase price allocations, at fair values, with respect to the acquisitions in 2012 were as follows:
California
Brazil United States
Southern
(MILLIONS)
Current assets(1)
Property, plant and equipment, at fair value
Other long-term assets
Current liabilities
Long-term debt
50
748
9
(102)
(436)
Net assets acquired
(1) Includes $49 million of cash and cash equivalents.
$
269
$
-
32
-
-
(6)
26
4
594
-
(1)
-
$
597
$
Total
54
1,374
9
(103)
(442)
892
During the year ended December 31, 2013, the purchase price allocations for the acquisitions in 2012
were finalized. No changes to the provisional purchase price allocations disclosed in the audited
consolidated financial statements for 2012 had to be considered for acquisitions made in 2012.
5. CASH AND CASH EQUIVALENTS
Brookfield Renewable’s cash and cash equivalents as at December 31 are as follows:
(MILLIONS)
Cash
Short-term deposits
6. RESTRICTED CASH
Brookfield Renewable’s restricted cash as at December 31 is as follows:
(MILLIONS)
Development projects
Operations
Total
Less: non-current
Current
2013
164
39
203
2013
42
202
244
(75)
169
$
$
$
$
2012
91
46
137
2012
103
134
237
(80)
157
$
$
$
$
Refer to Note 12 – Other long-term assets for information on long-term restricted cash.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 86
7. TRADE RECEIVABLES AND OTHER CURRENT ASSETS
Brookfield Renewable’s trade receivables and other current assets as at December 31 are as follows:
(MILLIONS)
Trade receivables
Prepaids and other
2013
105
79
184
$
$
2012
106
88
194
$
$
As at December 31, 2013, 99% (2012: 99%) 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, 2013 and 2012 an allowance for doubtful accounts was not deemed necessary.
8. 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:
(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 and
stabilization of the gas purchases.
Brookfield Renewable sells electricity under long-term contracts to secure stable prices and mitigate its
exposure to wholesale markets. 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 loss” or
OCI, as applicable.
The table below summarizes the impact of changes in the market price of electricity and gas as at
December 31. The impact is expressed in terms of the effect on net income and OCI. The sensitivities
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 87
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 gas and electricity for the year ended December 31:
(MILLIONS)
5% increase
5% decrease
(ii) Interest rate risk
Effect on net income
Effect on OCI
2013
2012
2011
2013
2012
2011
$
- $
1 $
2 $
1 $
-
(1)
(2)
(1)
- $
-
-
-
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 certain 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 $1,515 million (2012: $1,592 million). Of this amount, $806
million (2012: $1,102 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.
Impact of a 1% change in interest rates for the year ended December 31:
(MILLIONS)
1% increase
1% decrease
(b) Credit risk
Effect on net income
Effect on OCI
2013
2012
2011
2013
2012
$
(7) $
(7) $
(7) $
96 $
51 $
7
7
7
(96)
(51)
2011
48
(48)
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 power purchase agreements 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, 2013, 99% (2012: 99%) of Brookfield
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 88
Renewable’s trade receivables of $105 million were current. See Note 7 - 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:
(MILLIONS)
Cash and cash equivalents
Restricted cash
Trade receivables and other current assets
Financial instrument assets
Other long-term assets
Restricted cash
Other
Due from related parties(1)
(1)
Includes both the current and long-term amounts.
(c) Liquidity risk
$
2013
203
169
184
15
75
-
48
$
2012
137
157
194
-
80
2
56
$
694
$
626
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 – Long-term debt and credit facilities. Brookfield Renewable also ensures that it has
access to public debt markets by maintaining a strong credit rating of BBB (high).
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.
The sensitivity analysis discussed above reflects the risks associated with instruments that Brookfield
Renewable considers are market sensitive and the potential loss resulting from one or more selected
hypothetical changes. Therefore, the discussion above is not intended to reflect fully Brookfield
Renewable’s risk exposure.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 89
CASH OBLIGATIONS
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 (gross of unamortized
financing fees and accumulated amortization, where applicable), they may not agree with the amounts
disclosed in the consolidated balance sheets. Refer to Note 18 – Non-controlling interests for additional
details regarding how liquidity risk is mitigated for the Redeemable/Exchangeable partnership units.
AS AT DECEMBER 31, 2013
(MILLIONS)
Accounts payable and accrued liabilities
Financial instrument liabilities(1)(2)
Due to related parties
Other long-term liabilities - concession payments
Long-term debt and credit facilities(2)
Interest payable on long-term debt(3)
Total
AS AT DECEMBER 31, 2012
(MILLIONS)
Accounts payable and accrued liabilities
Financial instrument liabilities(1)(2)
Due to related parties
Other long-term liabilities - concession payments
Long-term debt and credit facilities(2)
Interest payable on long-term debt(3)
Total
(1)
(2)
(3)
< 1 year 2-5 years
> 5 years
$
209 $
- $
- $
62
110
1
517
364
9
-
5
2,395
1,199
-
-
117
3,752
1,640
Total
209
71
110
123
6,664
3,203
$
1,263 $
3,608 $
5,509 $ 10,380
< 1 year 2-5 years
> 5 years
$
207 $
- $
- $
113
109
8
532
284
30
-
22
1,902
931
2
-
104
3,739
1,331
$
1,253 $
2,885 $
5,176 $
Total
207
145
109
134
6,173
2,546
9,314
Financial instruments liabilities exclude amounts determined to be non-financial derivatives.
Includes both the current and long-term amounts.
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, 2013
Page 90
Brookfield Renewable classifies its assets and liabilities as outlined below:
AS AT DECEMBER 31, 2013
(MILLIONS)
Cash, cash equivalents and
restricted cash
Trade receivables and other current assets(2)
Due from related parties(2)
Financial instrument assets
Equity-accounted investments
Property, plant and equipment, at fair value
Deferred income tax assets
Other long-term assets
Total assets
Accounts payable and accrued liabilities(2)
Financial instrument liabilities(3)
Due to related parties(2)
Long-term debt and credit facilities(2)(3)
Deferred income tax liabilities
Other long-term liabilities
Cash, loans Derivatives
used for
hedging
and
receivables
Other
financial
liabilities
Non-financial
assets and
non-financial
liabilities
$
372 $
184
48
-
-
-
-
96
- $
-
-
15
-
-
-
-
- $
-
-
-
-
-
-
-
Total
372
184
48
15
- $
-
-
-
290
290
15,741
15,741
117
114
117
210
$
$
700 $
15 $
- $ 16,262 $ 16,977
- $
- $
209 $
71
-
- $
-
-
-
209
71
110
6,623
110
6,623
-
-
-
-
-
2,265
2,265
163
-
163
-
-
-
-
-
$
- $
71 $ 7,105 $
2,265 $ 9,441
Total liabilities
(1)
(2)
(3)
Measured at fair value with all gains and losses recorded in the consolidated statements of income (loss).
Measured at fair value at inception and subsequently recorded at amortized cost using the effective interest rate method.
Includes both the current and long-term amounts.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 91
AS AT DECEMBER 31, 2012
(MILLIONS)
Cash, cash equivalents and
restricted cash
Trade receivables and other current assets(2)
Due from related parties(2)(3)
Equity-accounted investments
Property, plant and equipment, at fair value
Deferred income tax assets
Other long-term assets
Total assets
Accounts payable and accrued liabilities(2)
Financial instrument liabilities(3)
Due to related parties(2)
Long-term debt and credit facilities(2)(3)
Deferred income tax liabilities
Other long-term liabilities
Cash, loans
and
receivables
Assets(1)
liabilities
Derivatives
used for
hedging
Other
financial
liabilities
Non-financial
assets and
non-financial
liabilities
Total
294
194
56
344
- $
-
-
344
$
294 $
- $
- $
- $
194
56
-
-
-
-
-
-
-
-
100
26
644 $
26 $
- $
- $
$
$
-
-
-
-
-
-
- $
- $
-
-
-
-
-
-
15,702
15,702
81
128
81
254
- $ 16,255 $ 16,925
207 $
- $
-
-
-
-
-
80
65
-
109
6,119
-
-
-
-
-
-
-
-
-
2,349
188
-
-
-
-
207
145
109
6,119
2,349
188
Total liabilities
(1)
(2)
(3)
$
Measured at fair value with all gains and losses recorded in the consolidated statements of income (loss).
Measured at fair value at inception and subsequently recorded at amortized cost using the effective interest rate method.
Includes both the current and long-term amounts.
65 $ 6,623 $
80 $
- $
2,349 $ 9,117
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.
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.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
Assets and liabilities 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.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 92
The following table presents Brookfield Renewable’s assets and liabilities measured and disclosed at fair
value classified by the fair value hierarchy as at December 31:
(MILLIONS)
Assets measured at fair value:
Cash and cash equivalents
Restricted cash
Financial instrument assets
Interest rate swaps
Available-for-sale investments(1)
Property, plant and equipment(2)
Liabilities measured at fair value:
Financial instrument liabilities
Energy derivative contracts
Interest rate swaps
Level 1
Level 2
Level 3
2013
2012
$ 203 $
169
- $
-
-
-
-
-
-
15
-
-
(3)
(68)
- $
203 $
-
-
-
169
15
-
137
157
-
26
15,741
15,741
15,702
-
-
(3)
(68)
(13)
(132)
Liabilities for which fair value is disclosed:
Long-term debt and credit facilities
-
(7,128)
-
(7,128)
(6,760)
Total
$ 372 $ (7,184) $ 15,741 $ 8,929 $ 9,117
(1) Available-for-sale investments represent an investment in securities of Western Wind and were included in Other long-term
assets.
(2) Refer to Note 11 - Property, plant and equipment, at fair value for further information.
There were no transfers between levels during the year ended December 31, 2013.
The aggregate amount of Brookfield Renewable’s net financial instrument positions as at December 31
are as follows:
(MILLIONS)
Energy derivative contracts
Interest rate swaps
Total
Less: current portion
Long-term portion
2013
2012
Assets
Liabilities Net Liabilities Net Liabilities
$
$
- $
3 $
15
15
-
68
71
62
15 $
9 $
3
53
56
62
(6)
$
$
13
132
145
113
32
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 93
The following table presents the change in Brookfield Renewable’s total net financial instrument position
as at and for the year ended December 31:
(MILLIONS)
Balance, beginning of year
(Decreases) increases in the net financial position:
Note
2013
2012
2011
$ 145 $ 114 $ 246
Unrealized (gain) loss through income on energy derivative contracts
(a)
(18)
(16)
19
Unrealized accounting loss through OCI on energy derivative
contracts
Unrealized (gain) loss through income on interest rate swaps
Unrealized (gain) loss through OCI on interest rate swaps
Reversal of energy derivative contracts designated as cash-flow
hedges through accumulated OCI and non-controlling interests
Reversal of energy derivative contracts designated as cash-flow
hedges through retained earnings
Acquisitions and other
(a)
(b)
(b)
7
(19)
(65)
-
-
6
4
12
(4)
708
1
66
-
(704)
-
35
(222)
-
Balance, end of year
$
56 $ 145 $ 114
Derivative liabilities not designated as hedging instruments:
Energy derivative contracts
Interest rate swaps
Net position
Derivative liabilities designated as hedging instruments:
Energy derivative contracts
Interest rate swaps
Net positions
Derivative assets designated as hedging instruments:
Interest rate swaps
Net positions
(a) Energy derivative contracts
(a) $
(b)
- $
13 $
26
-
67
-
$
- $
80 $
26
(a) $
(b)
$
3
68 $
71 $
-
65 $
65 $
(b) $
$
(15) $
(15) $
- $
- $
-
88
88
-
-
Brookfield Renewable has entered into long-term energy derivative contracts primarily to stabilize the
price of gas purchases or eliminate the price risk on the sale of certain 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.
In the next 12 months, it is expected that a $3 million loss (2012: $4 million loss) will be settled or
reclassified into income.
On April 1, 2011, Brookfield Renewable designated 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, 2013
Page 94
$708 million related to these contracts that were recorded in OCI. On formation of Brookfield Renewable,
$704 million of unrealized accounting losses were reversed.
Since these amendments arose from the common control reorganization with Brookfield Asset
Management the amounts were adjusted directly into equity.
(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 at an amount equal to
fair value.
At December 31, 2013, agreements with a total notional value of $1,600 million were outstanding (2012:
$1,698 million) including notional values of $nil (2012: $562 million) associated with agreements that are
not formally designated as hedging instruments. The fixed interest rates resulting from these agreements
range from 0.38% to 5.30% (2012: 0.42% to 5.30%).
For the year ended December 31, 2013, losses of $1 million, relating to cash flow hedges were realized
and reclassified from OCI to net income (loss) (2012: losses of $16 million).
9. 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.
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.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 95
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
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 its 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 power purchase agreements on generating assets in Ontario were amended in 2011 in
connection with the Combination 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 power purchase agreement 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
In 2011, 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, 2013
Page 96
Other Revenue Agreements
Pursuant to a 20-year power purchase agreement, 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 power purchase agreement, 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
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.
Power Services Agreements
Power Agency Agreements
Certain Brookfield Renewable subsidiaries have 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, in certain cases,
receives an 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 (subject to increase by a specified inflation factor
beginning on January 1, 2013).
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
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 97
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
Payment obligations relating to power purchase agreements
Pursuant to a 20-year power purchase agreement 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$0.5 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 exchanged value.
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 the
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 of the BAIF Entities. Brookfield Renewable’s economic interests in the BAIF Entities
in the United States and Brazil are 22% and 25%, respectively.
In September 2013, Brookfield Renewable entered into a voting agreement with subsidiaries of Brookfield
Asset Management whereby these subsidiaries, as managing members of entities related to Brookfield
Infrastructure Fund II (the “BIF II Entities”) in which Brookfield Renewable holds investments with
institutional investors, agreed to assign to Brookfield Renewable their voting rights to appoint the directors
of the BIF II Entities. Brookfield Renewable’s economic interests in the BIF II Entities was 50.1% as at
December 31, 2013.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 98
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
Purchase and revenue support agreements
Wind levelization agreement
Direct operating costs
Energy purchases
Energy marketing fee
Insurance services
Interest expense
Management service costs
2013
2012
2011
456 $
376 $
6
2
462 $
378 $
(36) $
(40) $
(20)
(26)
(18)
(18)
(82) $
(76) $
- $
- $
(41) $
(36) $
254
7
261
(41)
(11)
(18)
(70)
(19)
(1)
$
$
$
$
$
$
The following table reflects the impact of the related party agreements and transactions on the
consolidated balance sheets as at December 31:
(MILLIONS)
Current assets
Due from related parties
Amounts due from
Due from related parties
Amounts due from
Note receivable
Current liabilities
Due to related parties
Amount due to
Related party
2013
2012
Brookfield Asset Management
Equity accounted and other
Brookfield Asset Management
Brascan Energetica
Powell River Energy Inc.(1)
$
$
$
$
36 $
12
48 $
- $
-
- $
20
14
34
3
19
22
Brookfield Asset Management
$
48 $
45
Accrued distributions payable on LP units
and Redeemable/Exchangeable
partnership units
Amount due to
Brookfield Asset Management
Equity accounted
62
-
61
3
(1)
109
Brookfield Renewable acquired the remaining 50% interest in this entity in 2013 bringing the total investment to 100%, and its
results were fully consolidated.
110 $
$
Current assets
Amounts due from Brookfield Asset Management are non-interest bearing, unsecured and due on
demand.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 99
Amounts due from related parties
Amounts due from Brookfield Asset Management are non-interest bearing, unsecured and due on
demand.
Amounts due are not considered impaired based on the credit worthiness of the related - party
counterparties. Accordingly, as at December 31, 2013 and 2012, an allowance for doubtful accounts was
not deemed necessary.
Current liabilities
Amounts due to Brookfield Asset Management are unsecured, payable on demand and relate to recurring
transactions.
10. EQUITY-ACCOUNTED INVESTMENTS
The following are Brookfield Renewable’s equity-accounted investments as at December 31:
Carrying value
(MILLIONS)
Bear Swamp Power Co. L.L.C.
Galera Centrais Eletricas S.A.
Pingston Power Inc.
Brookfield Americas Infrastructure Fund Investees United States
United States
Brookfield Infrastructure Fund II Investees
Powell River Energy Inc.(1)
Canada
2012
155
67
59
41
-
22
344
In 2013, Brookfield Renewable acquired the remaining 50% interest in this entity, bringing the total investment to 100%, and
its results were fully consolidated.
2013
138 $
58
51
40
3
-
290 $
United States
Brazil
Canada
Principal place Ownership
interest
of business
%
50 $
50
50
50
14 - 50
(1)
$
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 100
The following table outlines the changes in Brookfield Renewable’s equity-accounted investments for the
year ended December 31:
(MILLIONS)
Balance, beginning of year
$
2013
344 $
2012
405 $
Acquisitions
Revaluation recognized through OCI
Share of OCI
Share of net income (loss)
Dividends received
Foreign exchange loss
Other
Balance, end of year
(19)
(15)
1
9
(18)
(12)
-
(63)
16
-
(5)
(12)
(5)
8
$
290 $
344 $
The following tables summarize certain financial information of equity-accounted investments:
2011
269
20
136
(7)
10
(8)
(14)
(1)
405
(MILLIONS)
As at December 31:
Current assets
Property, plant and equipment, at fair value
Other assets
Current liabilities
Long-term debt
Other liabilities
(MILLIONS)
For the year ended December 31:
Revenue
Net income (loss)
Share of net income (loss)
Cash earnings
Non-cash loss
2013
2012
$
54 $
726
232
27
202
203
2012
106 $
(12)
13
(18)
2013
$
110 $
19
21
(12)
66
1,018
241
46
320
272
2011
117
19
23
(13)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 101
11. PROPERTY, PLANT AND EQUIPMENT, AT FAIR VALUE
The following table presents a reconciliation of property, plant and equipment, at fair value:
(MILLIONS)
As at December 31, 2010
Additions(3)
Transfers and other
Items recognized through OCI
Change in fair value
Foreign exchange
Items recognized through net income
Change in fair value
Depreciation(4)
As at December 31, 2011
Additions(3)
Transfers and other
Items recognized through OCI
Change in fair value
Foreign exchange
Items recognized through net income
Change in fair value
Depreciation(4)
As at December 31, 2012
Additions(3)
Transfers and other
Hydroelectric(1) Wind energy
554
$ 11,409
$
CWIP
$ 234
Other(2)
63
$
Total
$ 12,260
222
90
1,181
(390)
(14)
(419)
73
380
489
(11)
-
(35)
716
(501)
(52)
(11)
-
-
18
-
20
(1)
1
(14)
1,029
(31)
1,638
(413)
(13)
(468)
$ 12,079
$ 1,450
$ 386
$
87
$ 14,002
607
107
637
(70)
385
429
490
(558)
62
40
82
(8)
-
-
-
4
(13)
2
11
(21)
1,482
(18)
768
(36)
(13)
(483)
(20)
(349)
(4)
(113)
$ 12,991
$ 2,249
$ 392
$
70
$ 15,702
921
183
(215)
(672)
(21)
(381)
430
(4)
8
(90)
(3)
(142)
255
(205)
24
(25)
-
-
-
-
(19)
(2)
9
(12)
1,606
(26)
(202)
(789)
(15)
(535)
$
46
$ 15,741
Items recognized through OCI
Change in fair value
Foreign exchange
Items recognized through net income
Change in fair value
Depreciation(4)
As at December 31, 2013
(1)
(2)
(3)
(4) Assets not subject to depreciation include CWIP and land.
$ 2,448
Includes $31 million of intangible assets (2012: $44 million and 2011: $57 million).
Included in “Other” are gas-fired generating (“co-gen”) units.
Includes acquisitions of $1,387 million (2012: $1,374 million and 2011: $234 million) (See Note 4).
$ 12,806
$ 441
The fair value of Brookfield Renewable’s property, plant and equipment is calculated as described in
Notes 2 (f) - Property, plant and equipment and revaluation method and 2 (n) - Critical estimates.
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.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 102
Discount rates, terminal capitalization rates and exit dates used in the valuation methodology, are
provided in the following table:
Discount rate
Contracted
Uncontracted
Terminal capitalization rate(1)
Exit date
(1)
United States
Canada
Brazil
2013
2012
2013
2012
2013
2012
5.8%
7.6%
7.1%
2033
5.2%
7.0%
7.0%
2032
5.1%
6.9%
6.4%
2033
4.7%
6.5%
6.5%
2032
9.1%
10.4%
N/A
2029
8.6%
9.9%
N/A
2029
The terminal capitalization rate applies only to hydroelectric assets in the United States and Canada.
The following table summarizes the impact of a change in discount rates and terminal capitalization rates
on the fair value of property, plant and equipment:
(BILLIONS)
50 bps increase in discount rates
50 bps decrease in discount rates
50 bps increase in terminal capitalization rate(1)
50 bps decrease in terminal capitalization rate(1)
( 1 )
0.3
The terminal capitalization rate applies only to hydroelectric assets in the United States and Canada.
$
$
2013
(1.1)
1.3
(0.3)
2012
(1.2)
1.4
(0.4)
0.3
Terminal values are included in the valuation of hydroelectric assets in the United States and Canada.
For the hydroelectric assets in Brazil, cash flows have been included based on the duration of the
authorization or useful life of a concession asset without consideration of potential renewal value. The
weighted-average remaining duration at December 31, 2013, is 16 years (2012: 17 years). Consequently,
there is no terminal value attributed to the hydroelectric assets in Brazil.
The following table summarizes the percentage of total generation contracted under power purchase
agreements:
1 - 10 years
11 - 20 years
United States
64%
50%
Canada
91%
68%
Brazil
42%
31%
The following table summarizes power prices from long-term power purchase agreements that are linked
specifically to the related power generating assets:
Per MWh(1)
1 - 10 years
11 - 20 years
(1)
Assumes nominal prices based on weighted-average generation.
United States
Canada
$
$
89 C$
104 C$
90 R$
96 R$
Brazil
240
374
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 103
The following table summarizes the estimates of future electricity prices:
Per MWh(1)
1 - 10 years
11 - 20 years
(1)
Assumes nominal prices based on weighted-average generation.
United States
Canada
$
$
74 C$
99 R$
119 C$
119 R$
Brazil
239
367
A 5% change in the estimates of future electricity prices would increase or decrease the fair value of
property, plant and equipment by approximately $400 million.
Brookfield Renewable’s long term view is anchored to the cost of securing new energy from renewable
sources to meet future demand growth by the year 2020. A one year change would increase or decrease
the fair value of property, plant and equipment by approximately $200 million.
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 at December
31:
(MILLIONS)
Hydroelectric
Wind
Other(1)
2013
5,305
1,935
386
7,626
$
$
2012
4,639
1,652
357
6,648
$
$
( 1 )
Included within the “Other” category are gas-fired generating units and CWIP.
12. OTHER LONG-TERM ASSETS
The composition of Brookfield Renewable’s other long-term assets as at December 31 is presented in the
following table:
Accumulated
Amortization Net Book Value Net book value
Cost
(MILLIONS)
Water rights
Restricted cash
Available-for-sale investments
Unamortized financing fees
Other
2013
$
100
$
(26)
$
75
-
37
54
$
266
$
-
-
(26)
(4)
(56)
$
74
75
-
11
50
2012
84
80
26
11
53
$
210
$
254
Brookfield Renewable is required to pay the Brazilian Federal Government for the usage of public assets
(“Water rights”) over the concession terms associated with two of its Brazilian facilities. Water rights are
monetarily adjusted by the Brazilian General Market Price Index. As at December 31, 2013, an asset of
$74 million (2012: $84 million) was included in other long-term assets and corresponding liability of $89
million was recorded within other long-term liabilities (Note 16) (2012: $101 million).
At December 31, 2013, $75 million of long-term restricted cash (2012: $80 million) was held to satisfy
lease payments and meet debt service obligations.
At December 31, 2012, an investment in securities owned by Brookfield Renewable was classified as
available-for-sale. The investment totaled $26 million and related to Western Wind. No gains (losses)
have been recorded in OCI.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 104
The unamortized fees primarily relate to the sale and leaseback of a hydroelectric facility. Unamortized
fees are amortized on a straight-line basis over the term of the arrangement to interest expense.
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Brookfield Renewable’s accounts payable and accrued liabilities as at December 31 are as follows:
(MILLIONS)
Operating accrued liabilities
Interest payable on corporate and subsidiary borrowings
Accounts payable
LP Unitholders’ distribution and preferred dividends payable
Other
$
2013
101
49
11
40
8
$
2012
97
41
23
34
12
$
209
$
207
14. LONG-TERM DEBT AND CREDIT FACILITIES
The composition of debt obligations as at December 31 is presented in the following table:
(MILLIONS EXCEPT AS NOTED)
Corporate borrowings
Series 3 (CDN$200)
Series 4 (CDN$150)
Series 6 (CDN$300)
Series 7 (CDN$450)
Series 8 (CDN$400)
Subsidiary borrowings
United States
Canada
Brazil
Credit facilities(1)
Total debt
Add: Unamortized premiums(2)
Less: Unamortized financing fees(2)
Less: Current portion
2013
2012
Weighted-average
Interest Term
rate (%)
(years)
Weighted-average
Interest Term
(years)
rate (%)
5.3
5.8
6.1
5.1
4.8
5.3
6.0
5.8
7.4
6.0
1.4
4.8
22.9
2.9
6.8
8.1
7.7
9.7
15.2
11.1
11.8
3.8
5.3
5.8
6.1
5.1
4.8
5.3
6.4
5.9
8.5
6.4
2.0
$
188
141
282
424
377
$ 1,412
$ 2,826
1,877
238
$ 4,941
$
311
$ 6,664
11
(52)
(517)
5.8
$
202
151
302
454
403
$ 1,512
$ 2,264
1,781
348
23.9
3.9
7.8
9.1
8.7
11.4
12.7
9.7
11.8
$ 4,393
3.8
$
268
$ 6,173
-
(54)
(532)
$ 5,587
Amounts are unsecured and revolving. Interest rate is at the London Interbank Offered Rate (“LIBOR”) plus 1.25% (2012:
1.75%).
Unamortized premiums and unamortized financing fees are amortized to interest expense over the terms of the borrowing.
$ 6,106
(1)
(2)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 105
Future maturities of Brookfield Renewable’s debt obligations, for each of the next five years and
thereafter are as follows:
(MILLIONS)
Corporate borrowings(1)
Subsidiary borrowings(1)
United States
Canada
Brazil
2014
2015
2016
2017
2018 Thereafter
Total
$
- $
- $
282 $
- $
188 $
942 $ 1,412
442
48
27
517
425
50
26
501
96
139
24
541
505
47
24
576
206
49
23
466
1,152
1,544
114
3,752
2,826
1,877
238
6,353
Credit facilities
311
466 $ 3,752 $ 6,664
Corporate borrowings and subsidiary borrowings include $52 million and $11 million of unamortized deferred financing fees
and premiums, respectively.
311
887 $
-
501 $
-
541 $
-
517 $
-
-
$
(1)
Future maturities of borrowings for subsidiaries accounted for on an equity-accounted basis for each of
the next five years and thereafter are as follows:
(MILLIONS)
United States
Canada
$
$
2014
2015
2016
1 $
1 $
1 $
2017
125 $
-
33
-
-
1 $
-
2018 Thereafter
1 $
34 $
1 $
125 $
1 $
Total
136
33
169
7 $
-
7 $
The unamortized financing fees of each debt obligation as at December 31 are as follows:
(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
Total
2013
2012
2011
$
$
$
$
$
8
-
(2)
6
46
17
(17)
46
52
$
$
$
$
$
6
3
(1)
8
49
15
(18)
46
54
$
$
$
$
$
6
-
-
6
44
15
(10)
49
55
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 106
Long-term debt and credit facilities are recorded at amortized cost.
The following table provides information about management’s best estimate of the fair value of long-term
debt and credit facilities as at December 31:
(MILLIONS)
Corporate borrowings
Subsidiary borrowings
United States
Canada
Brazil
Credit facilities
$
$
2013
Carrying value(1)
1,406
$
$
2,804
1,864
238
4,906
311
$
Net of unamortized financing fees and premiums.
(1)
6,623
$
Corporate borrowings
2012
Fair value Carrying value(1)
1,504
1,535
$
2,988
2,056
238
5,282
311
7,128
$
2,244
1,755
348
4,347
268
$
$
Fair value
1,700
2,440
2,004
348
4,792
268
$
6,119
$
6,760
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, and interest on
corporate borrowings is paid semi-annually.
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.
In February 2013, Brookfield Renewable refinanced indebtedness associated with a 166 MW Ontario
wind facility through a C$450 million loan for a term of 18 years at 5.1%.
In February 2013, a subsidiary of Brookfield Renewable issued a $75 million floating rate credit facility
maturing in 2015.
In March 2013, Brookfield Renewable refinanced indebtedness associated with a 51 MW Ontario wind
facility through a C$130 million loan for a term of 19 years at 5.0%.
In March 2013, Brookfield Renewable purchased 88% of the $575 million in operating company notes
outstanding with respect to the recently acquired, 360 MW hydroelectric portfolio in Northeastern United
States. In May 2013, Brookfield Renewable purchased 100% of the $125 million of holding level notes
with respect to the same facilities. Brookfield Renewable financed a portion of the tendered notes through
a 24-month, bridge loan of up to $350 million.
As part of the acquisition of wind assets in California, Brookfield Renewable assumed an aggregate of
$250 million in subsidiary borrowings, of which $200 million is subject to a fixed interest rate of 7.2% and
matures in 2032.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 107
With the Canadian Hydroelectric Step Acquisition and the assumption of the other partners’ portion of the
non-recourse debt, Brookfield Renewable increased subsidiary borrowings by $96 million. The debt
matures in 2016 and bears a fixed interest rate of 6.5%.
Net repayments of $373 million were made during the year ended December 31, 2013.
Credit facilities
In 2013, Brookfield Renewable expanded its committed unsecured revolving credit facilities to $1,280
million and extended the maturity date to October 31, 2017. The credit facilities are 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”) rate loans (iii) LIBOR loans and (iv) letters of
credit. Refer to Note 25 – Commitments, contingencies and guarantees for further details. The credit
facility bears interest at the applicable BA rate or LIBOR plus an applicable margin. The applicable margin
is tiered on the basis of Brookfield Renewable’s unsecured long-term debt rating. At December 31, 2013,
the margin was 1.25% (2012: 1.75%). Standby fees are charged on the undrawn balance.
In addition, Brookfield Asset Management provided a $200 million committed unsecured revolving credit
facility maturing in December 2014, at LIBOR plus 2%.
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.
(MILLIONS)
Available revolving credit facilities
Drawings
Issued letters of credit
Unutilized revolving credit facilities
2013
$
1,480
$
(311)
(212)
$
957
$
2012
990
(268)
(182)
540
Net draws of $43 million were made during the year ended December 31, 2013.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 108
15. INCOME TAXES
The major components of income tax (expense) recovery for the year ended December 31 are as follows:
(MILLIONS)
Income tax (expense) recovery applicable to:
Current taxes
Attributed to the current period
Deferred taxes
Income taxes - origination and reversal of temporary differences
Relating to change in tax rates / imposition of new tax laws
Relating to unrecognized temporary differences and tax losses
Total income tax (expense) recovery
2013
2012
2011
$
$
$
$
(19) $
(14) $
(8)
24 $
14
(20)
18 $
(1) $
82 $
(5)
(23)
54 $
40 $
75
(3)
(22)
50
42
The major components of deferred income tax (expense) recovery for the year ended December 31
recorded directly to OCI are as follows:
(MILLIONS)
Deferred income taxes attributed to:
Financial instruments designated as cash flow hedges
Revaluation surplus
Origination and reversal of temporary differences
Relating to changes in tax rates / imposition of new tax laws
2013
2012
2011
(11) $
(1) $
194
98
6
93 $
(218)
(6)
(225) $
(268)
315
241
$
$
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 109
Brookfield Renewable’s effective income tax (expense) recovery for the year ended December 31 is
different from its recovery at its statutory income tax rate due to the differences below:
(MILLIONS)
Statutory income tax (expense) recovery(1)
(Reduction) increase resulting from:
Increase in tax assets not recognized
Deemed profit method differences in Brazil
Differences between statutory rate and future tax rate
Losses (gains) recorded not taxable to Brookfield Renewable
Other
Effective income tax (expense) recovery, before change in
2013
2012
$
(76) $
47 $
(20)
12
69
13
1
(23)
7
25
(24)
8
2011
173
(21)
11
15
6
(33)
Fund unit liability
Change in Fund unit liability
$
(1) $
-
40 $
-
151
(109)
Effective income tax (expense) recovery
(1)
42
Statutory income tax (expense) recovery is calculated at the domestic rates applicable to the profits in the country concerned.
40 $
(1) $
$
The above reconciliation has been prepared by aggregating the information for all of Brookfield
Renewable’s subsidiaries using the domestic rate in each tax jurisdiction.
The following table details the expiry date, if applicable, of the unrecognized deferred tax assets as at
December 31:
(MILLIONS)
2014 to 2018
2019 and thereafter
$
$
2013
1
62
63
$
$
2012
1
71
72
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 110
The deferred tax assets and liabilities of the following temporary differences have been recognized in the
consolidated financial statements for the year ended December 31:
Recognized
in Net
(MILLIONS)
Non-capital losses
Amount available for future
deductions
Difference between tax and carrying
value
Jan 1,
2013
270 $
$
(loss)
32 $
income Recognized
Business
in Equity Combinations
Foreign
Exchange
7 $
41 $
(9) $
Dec 31,
2013
341
131
(13)
-
-
(8)
110
(2,669)
(1)
97
(123)
97
(2,599)
Net deferred tax (liabilities) assets
$ (2,268) $
18 $
104 $
(82) $
80 $ (2,148)
Recognized
in Net
(MILLIONS)
Non-capital losses
Amount available for future
deductions
Difference between tax and carrying
value
Jan 1,
2012
168 $
$
(loss)
97 $
income Recognized
Business
in Equity Combinations
Foreign
Exchange
- $
- $
5 $
Dec 31,
2012
270
138
(14)
-
-
7
131
(2,367)
(29)
(225)
(2)
(46)
(2,669)
Net deferred tax (liabilities) assets
$ (2,061) $
54 $ (225) $
(2) $
(34) $ (2,268)
Recognized
in Net
(MILLIONS)
Non-capital losses
Capital losses
Amount available for future
deductions
Difference between tax and carrying
value
Jan 1,
2011
124 $
5
$
(loss)
44 $
(5)
income Recognized
Business
in Equity Combinations
Foreign
Exchange
- $
-
- $
-
- $
-
Dec 31,
2011
168
-
147
(9)
-
(2,424)
20
241
-
-
-
138
(204)
(2,367)
Net deferred tax (liabilities) assets
$ (2,148) $
50 $
241 $
- $ (204) $ (2,061)
The deferred income tax liabilities includes $2,283 million (2012: $2,395 million) of liabilities which relate
to property, plant and equipment revaluations included in equity.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 111
16. OTHER LONG-TERM LIABILITIES
Brookfield Renewable’s other long-term liabilities as at December 31 are comprised of the following:
(MILLIONS)
Concession payment liability
Decommissioning retirement obligations
Pension obligations (Note 20)
Other
$
$
2013
89
28
33
13
$
163
$
2012
101
27
47
13
188
At December 31, 2013, Brookfield Renewable recorded a liability associated with a future obligation
relating to concession payments of $89 million (2012: $101 million). The future obligation is being settled
through monthly payments made over the concession term. In 2013 $1 million (2012: $1 million) of
concessions payments were made to the Brazilian Federal Government. See Note 12 - Other long-term
assets for additional details regarding water rights.
Brookfield Renewable has recorded decommissioning retirement obligations associated with certain
power generating assets. The estimated cost of decommissioning activities is based on a third party
assessment. The decommissioning retirement obligation of $28 million at December 31, 2013 (2012: $27
million), has been established for wind operation sites in Canada and United States that are expected to
be restored between the years 2031 to 2064.
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, 2013, 2012 and
2011.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 112
Brookfield Renewable’s strategy during 2013, which was unchanged from 2012, was to maintain the
measure set out in the following schedule as at December 31:
(MILLIONS)
Total debt
Current portion of long-term debt
Long-term debt and credit facilities
Deferred income tax liability, net(1)
Preferred equity
Participating non-controlling interests - in operating subsidiaries
General partnership interest in a holding subsidiary held by
Brookfield
Participating non-controlling interests - in a holding
subsidiary - Redeemable/Exchangeable units held by Brookfield
Limited partners' equity
Total capitalization(2)
Debt to total capitalization
(1)
(2)
2013
517
6,106
6,623
2,148
796
1,303
54
2,657
2,726
16,307
41%
$
$
$
$
2012
532
5,587
6,119
2,268
500
1,028
63
3,070
3,147
16,195
38%
Deferred income tax liability minus deferred income tax asset.
Total debt plus deferred income tax liability, net of deferred income tax assets, non-controlling interests, and limited partners’
equity.
18. NON-CONTROLLING INTERESTS
Brookfield Renewable’s non-controlling interests are comprised of the following as at December 31:
(MILLIONS)
Preferred equity
Participating non-controlling interests - in operating subsidiaries
General partnership interest in a holding subsidiary held by Brookfield
Participating non-controlling interests - in a holding subsidiary -
Redeemable/Exchangeable units held by Brookfield
Total
Preferred equity
$
2013
796 $
2012
500
1,303
1,028
54
63
2,657
$
4,810 $
3,070
4,661
Brookfield Renewable’s preferred equity as at December 31, consists of Class A Preference Shares as
follows:
Earliest
(MILLIONS)
Series 1
Series 3
Series 5
Series 6
Shares
Outstanding
Cumulative
Dividend
Rate
permitted Dividends declared
For the year ended
redemption
date
2013
2012
2013
10
10
7
7
34
5.25% Apr 30, 2015 $
13 $
13 $
234 $
4.40% Jul 31, 2019
5.00% Apr 30, 2018
5.00% Jul 31, 2018
11
8
5
3
-
-
234
164
164
$
37 $
16 $
796 $
500
2012
250
250
-
-
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 period ending April 30, 2015. The
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 113
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%.
The holders of the Series 3 preferred shares are entitled to receive fixed cumulative dividends at an
annual rate of C$1.10 per share, a yield of 4.4% for the initial period ending July 31, 2019. The dividend
will reset on July 31, 2019 and every five years thereafter at a rate equal to the then five-year
Government of Canada Bond yield plus 2.94%.
In January 2013 and May 2013, Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”) issued
7 million of Series 5 and 7 million of Series 6 perpetual preferred shares, respectively, at a price of C$25
per share. The holders of the preferred shares are entitled to receive fixed cumulative dividends at an
annual rate of C$1.25 per share, for a yield of 5%.
Brookfield Renewable, BRELP and certain holding company subsidiaries fully and unconditionally
guarantee the payment of dividends on all of the Class A Preference Shares, the amount due on
redemption, and the amounts due on the liquidation, dissolution or winding-up of BRP Equity.
The Class A Preference Shares do not have a fixed maturity date and are not redeemable at the option of
the holders. As at December 31, 2013, none of the issued Class A Preference Shares have been
redeemed by BRP Equity.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 114
Participating non-controlling interests – in operating subsidiaries
The net change in participating non-controlling interests – in operating entities is as follows:
Brookfield
Americas
Brookfield
(MILLIONS)
Fund
Fund
Infrastructure Infrastructure The Catalyst
Brascan
Group Energetica
Other
As at December 31, 2010
$
- $
- $
143 $
63 $
- $
Net income (loss)
OCI
Acquisitions
Distributions
Other
1
173
209
-
(3)
-
-
-
-
-
5
16
-
(14)
17
5
11
-
(5)
-
-
-
14
(6)
-
As at December 31, 2011
$
380 $
- $
167 $
74 $
8 $
Net income (loss)
OCI
Acquisitions
Distributions
Other
(44)
24
447
-
(1)
-
-
-
-
-
2
(28)
-
(18)
-
2
(7)
(9)
(6)
4
-
25
8
-
-
Total
206
11
200
223
(25)
14
629
(40)
14
446
(24)
3
As at December 31, 2012
$
806 $
- $
123 $
58 $
41 $ 1,028
Net income
OCI
Acquisitions and contributions
Distributions
Other
21
133
51
(119)
(1)
As at December 31, 2013
$
891 $
1
(2)
214
-
(6)
207 $
18
(26)
-
-
1
116 $
1
(10)
-
(3)
-
46 $
99
41
-
4
-
-
(2)
43 $ 1,303
(122)
265
(8)
Interests held by third parties
75-80%
50%
25%
20-30%
24-50%
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 115
The following tables summarize certain financial information of operating subsidiaries that have non-
controlling interests that are material to Brookfield Renewable:
Brookfield
Americas
Brookfield
(MILLIONS)
Interests held by third parties
Place of business
For the year ended December 31, 2011:
Revenue
Net income (loss)
Total comprehensive income
Net income allocated to
non-controlling interests
Carrying value of third party interests
For the year ended December 31, 2012:
Revenue
Net income (loss)
Total comprehensive (loss) income
Net (loss) income allocated to
non-controlling interests
As at December 31, 2012:
Infrastructure Infrastructure The Catalyst
Group
Fund
Fund
Other
Total
75-80%
50%
25%
United States
Brazil United States United States
20-50%
United States
Brazil
Canada
$
14 $
- $
188 $
44 $
246
$
$
1
233
1
-
-
-
65
122
21
98
87
453
5
5
11
380 $
- $
167 $
82 $
629
86 $
- $
137 $
30 $
253
(55)
(60)
(44)
-
-
-
10
(103)
6
111
(39)
(52)
2
2
(40)
Property, plant and equipment, at fair value
$ 1,756 $
- $ 1,166 $
472 $ 3,394
Total assets
Total borrowings
Total liabilities
$
$
Carrying value of third party interests
For the year ended December 31, 2013:
Revenue
Net income
Total comprehensive income (loss)
Net income allocated to
non-controlling interests
As at December 31, 2013:
1,919
787
884
-
-
-
1,242
630
646
626
60
84
3,787
1,477
1,614
806 $
- $
123 $
99 $ 1,028
195 $
74 $
188 $
25 $
482
23
258
21
2
(1)
1
72
(15)
18
2
2
1
99
244
41
Property, plant and equipment, at fair value
$ 1,841 $
735 $ 1,039 $
520 $ 4,135
Total assets
Total borrowings
Total liabilities
1,973
784
830
794
349
379
1,161
578
597
575
56
80
4,503
1,767
1,886
Carrying value of third party interests
$
891 $
207 $
116 $
89 $ 1,303
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 116
General partnership interest in a holding subsidiary held by Brookfield and Participating non-controlling
interests – in a holding subsidiary - Redeemable/Exchangeable units held by Brookfield
Brookfield, as the owner of the 1% general partnership interest in BRELP, is entitled to regular
distributions plus an incentive distribution based on the amount by which quarterly distributions exceed
specified target levels. To the extent that distributions exceed $0.375 per unit per quarter, the incentive is
15% of distributions above this threshold. To the extent that quarterly distributions exceed $0.4225 per
unit, the incentive distribution is equal to 25% of distributions above this threshold.
Consolidated equity includes Redeemable/Exchangeable Partnership Units issued by BRELP. The
Redeemable/Exchangeable Partnership Units are held 100% by Brookfield Asset Management, which at
its discretion has the right to redeem these units for cash consideration. No Redeemable/Exchangeable
Partnership Units have been redeemed for cash consideration. Since this redemption right is subject to
Brookfield Renewable’s right, at its sole discretion, to satisfy the redemption request with LP Units of
Brookfield Renewable, the Redeemable/Exchangeable Partnership Units are classified as equity in
accordance with
Instruments: Presentation. The Redeemable/Exchangeable
Partnership Units are presented as non-controlling interests since they provide Brookfield the direct
economic benefits and exposures to the underlying performance of BRELP. Both the LP Units issued by
Brookfield Renewable and the Redeemable/Exchangeable Partnership Units issued by its subsidiary
BRELP have the same economic attributes in all respects, except for the redemption right described
above. The Redeemable/Exchangeable Partnership Units participate in earnings and distributions on a
per unit basis equivalent to the per unit participation of the LP Units of Brookfield Renewable.
IAS 32, Financial
Consistent with the basis of presentation for the Combination (Note 2(b) (ii)), income (loss) attributable to
Redeemable/Exchangeable Partnership Units held by Brookfield Asset Management has been calculated
as if the Redeemable/Exchangeable Partnership Units had always been issued and outstanding.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 117
The following table summarizes certain financial information regarding General partnership interest in a
holding subsidiary held by Brookfield and Participating non-controlling interests – in a holding subsidiary -
Redeemable/Exchangeable units held by Brookfield:
(MILLIONS)
For the year ended December 31:
Revenue
Net income (loss)
Comprehensive (loss) income
Net income (loss) allocated to(1):
General partnership interests held by Brookfield
Redeemable/Exchangeable units held by Brookfield
As at December 31:
Property, plant and equipment, at fair value
Total assets
Total borrowings
Total liabilities
Carrying value of(2):
General partnership interests held by Brookfield
Redeemable/Exchangeable units held by Brookfield
(1)
2013
2012
2011
$
1,706 $
215
(333)
1,309 $
(95)
332
1,169
(451)
615
1
67
(1)
(35)
(5)
(232)
$ 15,741 $ 15,702
16,925
6,119
9,117
16,977
6,623
9,441
54
2,657
63
3,070
Allocated based on weighted-average General partnership units, Redeemable/Exchangeable units and LP units of 2.7 million, 129.7 million, and
132.9 million, respectively (2012: 2.7 million, 129.7 million, and 132.9 million, respectively; 2011: 2.7 million, 129.7 million, and 132.8 million,
respectively).
Allocated based on outstanding General partnership units, Redeemable/Exchangeable units and LP units of 2.7 million, 129.7 million, and 133.0
million, respectively (2012: 2.7 million, 129.7 million, and 132.9 million, respectively).
(2)
As at December 31, 2013, General Partnership Units and Redeemable/Exchangeable Partnership Units
outstanding were 2,651,506 (2012: 2,651,506) and 129,658,623 (2012: 129,658,623), respectively.
For the year ended December 31, 2013, BRELP declared $4 million in distributions on the general
partnership interest (2012: $4 million and 2011: $1 million) and no incentive distributions have been paid
since the Combination. For the year ended December 31, 2013, BRELP declared distributions on the
Redeemable/Exchangeable Partnership Units held by Brookfield of $188 million (2012: $179 million and
2011: $43 million).
19. LIMITED PARTNERS’ EQUITY
Limited partners’ equity
As at December 31, 2013, LP Units outstanding were 132,984,913 (2012: 132,901,916) including
40,026,986 (2012: 48,091,986) held by Brookfield Asset Management. General partnership interests
represent 0.01% of Brookfield Renewable.
Consistent with the basis of presentation for the Combination (Note 2(b) (ii)), net loss per LP Unit has
been calculated as if the LP Units had always been issued and outstanding.
During 2012, a distribution re-investment plan was implemented, allowing holders of LP Units who are
resident in Canada to acquire additional LP Units by reinvesting all or a portion of their cash distributions
without paying commissions. During the year ended December 31, 2013, 82,997 LP Units were issued
(2012: 74,792 LP Units).
Distributions
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
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 118
debt or payment of which might leave Brookfield Renewable unable to meet any future contingent
obligations.
For the year ended December 31, 2013, Brookfield Renewable declared distributions on its LP Units of
$193 million or $1.45 per LP Unit (2012: $183 million or $1.38 per LP Unit).
The composition of the distribution is presented in the following table:
(MILLIONS)
Brookfield Asset Management
External LP Unitholders
2013
58
135
193
$
$
2012
66
117
183
$
$
During 2011, the Fund made distributions of $103 million consisting of $33 million paid to Brookfield and
$70 million paid to the external unitholders of the Fund. In December 2011, Brookfield Renewable
declared distributions on LP Units of $45 million ($0.3375 per LP 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.
Unitholder distributions were increased from $1.35 per unit to $1.38 per unit in March 2012 and increased
further to $1.45 per unit in March 2013, on an annualized basis.
Transactions related to the Combination
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 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, were transferred to
Brookfield Renewable. The transfer was completed at fair value and satisfied by the issuance of LP Units
of Brookfield Renewable. The result of this transaction is to reflect the settlement of the Fund unit liability
at the date of the Combination of $1,568 million and the LP Units issued to satisfy the transfer are treated
as equity of Brookfield Renewable. As a result of the Combination, $767 million of equity was allocated to
the Redeemable/Exchangeable Partnership Units to reflect the relative interests of Brookfield Renewable
and Brookfield Asset Management in BRELP. For the year ended December 31, 2011, and prior to the
Combination, Brookfield Renewable recorded a mark-to-market loss of $306 million and expensed $70
million of distributions to external unitholders of the Fund.
Settlement of related party balances
Brookfield Renewable settled certain intercompany loans and transactions with Brookfield. The
consolidated balance sheets include the reduction in amounts due from and amounts due to related
parties, as they were exchanged for LP 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
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 119
from the common control reorganization with Brookfield Asset Management the amounts were adjusted
directly into equity.
20. 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.
the
The Brookfield Renewable Pension Governance Committee
implementation of strategic decisions and monitoring of the administration of Brookfield Renewable’s
defined benefit pension plans. Specifically, the BRGC will establish the investment strategies, approve
the funding policies as well as assess that Brookfield Renewable has complied with all applicable law,
fiduciary, reporting and disclosure requirements.
responsible
(BRGC)
for
is
Actuarial valuations for Brookfield Renewable’s pension plans are required as per governing provincial or
federal regulations. For Québec and the United States 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 December 31, 2010 to January 1, 2013. Brookfield Renewable
measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at
December 31 of each year.
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:
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
benefit plans
pension plans
pension plans
pension plans
benefit plans
benefit plans
2013
(%)
2012
(%)
2011
(%)
4.0 - 5.0
2.0 - 2.5
4.9 - 5.0
N/A
3.5 - 4.5
2.0 - 2.8
4.1 - 4.5
N/A
4.2 - 5.3
2.5 - 2.8
4.5 - 5.3
N/A
2.5 - 4.0
N/A
3.0 - 3.0
6.5 - 7.7
3.0 - 4.0
N/A
3.0 - 3.0
6.4 - 7.8
3.5 - 4.0
N/A
3.5 - 4.0
6.6 - 7.8
Discount rate(1)
Rate of price inflation(1)
Rate of compensation
increases(1)
Health care trend rate(2)
(1)
(2)
Determined on a weighted-average basis.
Assumed immediate trend rate at year end.
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, rate of price inflation and inflation-linked assumptions and health care cost trend rate
are the assumptions that generally have the most significant impact on the benefit obligations.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 120
The discount rate for benefit obligation purposes is the rate at which the pension obligation could be
effectively settled. Rate of compensation increases reflect the best estimate of merit increases to be
provided, consistent with assumed inflation rates.
A 50 basis point change in the assumptions mentioned before, used for the calculation of the benefit
obligations as at December 31, 2013, would result in the following increase (decrease) of the benefit
obligations:
(MILLIONS)
Discount rate
50 basis point increase
50 basis point decrease
Rate of price inflation and inflation-linked assumptions
50 basis point increase
50 basis point decrease
Health care cost trend rate
50 basis point increase
50 basis point decrease
Defined benefit
pension plans
Non-pension
benefit plans
(4)
6
3
(3)
N/A
N/A
(2)
2
N/A
N/A
2
(1)
The sensitivity analysis presented above may not be representative of the actual change in the defined
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another
as some of the assumptions may be correlated.
Expense recognized in the Consolidated statements of income (loss) and Consolidated statements of
comprehensive income (loss) for the year ended December 31:
(MILLIONS)
Current service costs
Past service costs
Interest expense
Administrative expenses
Recognized in consolidated
statement of income (loss)
Remeasurement on the net
defined benefit liability:
Return on plan assets
Actuarial changes arising
from changes in
demographic assumptions
Actuarial changes arising
from changes in
financial assumptions
Experience adjustments
Exchange differences
Recognized in consolidated
statement of comprehensive
income (loss)
Total
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
pension plans benefit plans
pension plans benefit plans
2011
2012
2
2
$
$
-
-
1
1
1
1
pension plans benefit plans
2013
2
$
1
1
1
1
(1)
1
-
1
2
1
-
1
-
1
-
$
$
$
5
(7)
2
(4)
-
1
-
-
(3)
-
4
(2)
-
7
1
4
-
1
2
(1)
4
3
-
5
(1)
(9)
(4)
$
(3)
(2)
$
6
10
$
2
6
$
7
11
$
$
2
-
(2)
1
-
(1)
1
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 121
The amounts included in the consolidated balance sheets arising from Brookfield Renewable’s obligations
in respect of its defined benefit plans are as follows:
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
benefit plans
pension plans
pension plans
pension plans
benefit plans
benefit plans
(MILLIONS)
Present value of defined
benefit obligation
Fair value of plan assets
Net liability
Defined benefit obligations
2013
2012
2011
$
$
80
(74)
6
$
$
27
-
27
$
$
82
(64)
18
$
$
29
-
29
$
$
73
(56)
17
$
$
23
-
23
The movement in the defined benefit obligation for the year ended December 31 is as follows:
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
benefit plans
pension plans
pension plans
pension plans
benefit plans
benefit plans
(MILLIONS)
Balance, beginning of year
Current service cost
Past service cost
Interest expense
Remeasurement losses (gains)
Actuarial changes arising
from changes in
$
2013
$
82
2
1
4
$
29
1
(1)
1
2012
$
73
2
-
4
$
23
1
2
1
2011
$
66
2
-
4
23
1
-
1
demographic assumptions
2
-
-
1
-
(2)
Actuarial changes arising
from changes in
financial assumptions
Experience adjustments
Benefits paid
Business combination
Exchange differences
Balance, end of year
(4)
-
(3)
-
(4)
80
$
(3)
-
(1)
1
-
27
$
7
1
(3)
(2)
-
82
$
2
(1)
(1)
-
1
29
$
5
(1)
(2)
-
(1)
73
$
1
-
(1)
-
-
23
$
Expected contributions to the defined pension plans for the year ended December 31, 2014 are $8
million.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 122
Fair value of plan assets
The movement in the fair value of plan assets for the year ended December 31 is as follows:
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
benefit plans
pension plans
pension plans
pension plans
benefit plans
benefit plans
(MILLIONS)
Balance, beginning of year
Interest income
Return on plan assets
Employer contributions
Business combination
Benefits paid
Exchange differences
Balance, end of year
$
$
2013
$
64
3
7
7
-
(3)
(4)
74
-
-
-
1
-
(1)
-
-
$
$
2012
$
56
3
2
7
(2)
(3)
1
64
-
-
-
1
-
(1)
-
-
$
$
2011
$
53
3
(3)
6
-
(2)
(1)
56
$
$
$
The composition of plan assets as at December 31 is as follows:
Asset category:
Equity securities
Debt securities
21. DIRECT OPERATING COSTS
2013
(%)
69
31
100
-
-
-
1
-
(1)
-
-
2012
(%)
66
34
100
Brookfield Renewable’s direct operating costs for the year ended December 31 are comprised of the
following:
(MILLIONS)
Operations, maintenance and administration
$
Water royalties, property taxes and other
Fuel and power purchases
Energy marketing fees (Note 9)
Total direct operating costs
$
2013
331
137
42
20
$
2012
292
112
64
18
2011
254
97
44
12
$
530
$
486
$
407
The remuneration of key management personnel of Brookfield Renewable for the years ended December
31, was as follows:
(MILLIONS)
Share-based benefits
Salaries and benefits
2013
2012
2011
6
3
9
$
$
7
3
10
$
$
6
3
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 Officer and Chief Operating
Officer. Share-based benefits relate to costs allocated from Brookfield Asset Management.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 123
22. SUPPLEMENTAL INFORMATION
The net change in working capital balances for the year ended December 31 shown in the consolidated
statements of cash flows is comprised of the following:
(MILLIONS)
Trade receivables and other current assets
Accounts payable and accrued liabilities
Other assets and liabilities
23. SUBSIDIARY PUBLIC ISSUERS
2013
47
(42)
(4)
1
$
$
2012
(36)
17
(3)
(22)
$
$
As a result of the Combination, Brookfield Renewable created Brookfield Renewable Energy Partners
ULC (formerly BRP Finance ULC) (“BREP Finance”) to contractually assume BRPI’s term notes with
maturities ranging from 2016 and 2036 with a principal value of C$1.1 billion. BREP 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. Subsequently, in February 2012,
BREP Finance issued C$400 million of 10-year term corporate notes. The term notes payable by BREP
Finance are unconditionally guaranteed by Brookfield Renewable, BRELP and certain other subsidiaries.
See Note 14 – Long-term debt and credit facilities for additional details regarding issuances of mid-term
corporate notes. See Note 18 – Non-controlling interests for additional details regarding the issuances of
Class A Preference Shares.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 124
The following tables provide consolidated summary financial information for Brookfield Renewable, BRP
Equity, and BREP Finance:
(MILLIONS)
As at December 31, 2013:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Preferred equity
Participating non-controlling interests -
in operating subsidiaries
Participating non-controlling interests -
in a holding subsidiary - Redeemable/
Exchangeable units held by Brookfield
As at December 31, 2012:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Preferred equity
Participating non-controlling interests -
in operating subsidiaries
Participating non-controlling interests -
in a holding subsidiary - Redeemable/
Exchangeable units held by Brookfield
(1)
(2)
Brookfield
Renewable
BRP
Equity
BREP
Other Consolidating
Finance Subsidiaries(1) adjustments(2)
Brookfield
Renewable
consolidated
$
48 $
- $ 1,429 $
610
$ (1,483)
$
604
2,728
785
-
16,365
(3,505)
16,373
50
10
17
-
-
-
-
1,406
796
-
-
-
2,256
7,914
-
1,303
(1,435)
898
(777)
8,543
-
-
796
1,303
-
-
-
2,657
-
2,657
$
46 $
- $ 1,528 $
530
$ (1,582)
$
522
3,153
495
52
-
-
-
7
-
500
-
-
-
-
16
1,506
-
-
-
16,398
(3,643)
16,403
2,468
7,142
-
1,028
(1,582)
961
(492)
8,156
-
-
500
1,028
3,070
-
3,070
Includes subsidiaries of Brookfield Renewable, other than BRP Equity and BREP Finance.
Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a
consolidated basis.
(MILLIONS)
For the year ended Dec 31, 2013
Revenues
Net income (loss)
For the year ended Dec 31, 2012
Revenues
Net (loss) income
For the year ended Dec 31, 2011
Revenues
Brookfield
Renewable
BRP
BREP
Renewable
Equity Finance Subsidiaries(1) adjustments(2) consolidated
Other Consolidating
Brookfield
$
$
$
- $
- $
- $
1,706 $
- $
1,706
69
-
-
215
(69)
215
- $
- $
- $
1,309 $
- $
1,309
(35)
-
(2)
(93)
35
(95)
- $
- $
- $
1,169 $
- $
1,169
Net (loss) income
(1)
(451)
Includes subsidiaries of Brookfield Renewable, other than BRP Equity and BREP Finance, general partnership interest in a
holding subsidiary held by Brookfield and participating non-controlling
-
Redeemable/Exchangeable units held by Brookfield.
Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a
consolidated basis.
in a holding subsidiary
interests
(238)
(453)
238
2
(2)
-
-
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 125
24. SEGMENTED INFORMATION
Brookfield Renewable operates renewable power assets, which include conventional hydroelectric
generating assets located in the United States, Canada and Brazil, wind farms located in the United
States and Canada and a pumped storage hydroelectric facility located in the United States. Brookfield
Renewable also operates two natural gas-fired co-gen facilities. Management evaluates the business
based on the type of power generation (Hydroelectric, Wind and Co-gen). Hydroelectric and wind are
further evaluated by major region (United States, Canada and Brazil). “Equity-accounted investments”
includes Brookfield Renewable’s interest in certain hydroelectric facilities. The “Other” segment includes
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 performance. 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, Adjusted EBITDA and funds from operations. Adjusted EBITDA means
revenues less direct costs (including energy marketing costs), plus Brookfield Renewable’s share of cash
earnings from equity-accounted investments and other income, before interest, income taxes,
depreciation, management service costs and the cash portion of non-controlling interests. Funds from
operations is defined as Adjusted EBITDA less interest, current income taxes and management service
costs, which is then adjusted for the cash portion of non-controlling interests. Transactions between the
reportable segments occur at fair value.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 126
(MILLIONS)
U.S. Canada
Brazil
U.S. Canada
Hydroelectric
Wind energy
Co-gen
Other
Total
For the year ended Dec 31, 2013:
Revenues
Adjusted EBITDA
$ 677 $ 399 $ 301 $ 125 $ 133 $ 71 $
- $ 1,706
494
330
221
85
113
23
(58)
1,208
Interest expense - borrowings
(148)
(64)
(23)
(38)
(44)
-
(93)
(410)
Funds from operations prior to
non-controlling interests
343
266
181
47
69
23
(191)
738
Cash portion of non-controlling interests
(69)
-
(12)
(26)
-
-
(37)
(144)
Funds from operations
Depreciation
For the year ended Dec 31, 2012:
Revenues
Adjusted EBITDA
274
266
169
21
69
23
(228)
594
(140)
(85)
(156)
(65)
(77)
(12)
-
(535)
$ 438 $ 272 $ 340 $
58 $ 131 $ 70 $
- $ 1,309
294
213
236
31
113
20
(55)
(84)
852
(411)
Interest expense - borrowings
(137)
(65)
(58)
(23)
(44)
-
Funds from operations prior to
non-controlling interests
159
148
162
Cash portion of non-controlling interests
(11)
-
(11)
148
148
151
8
(6)
2
69
20
(175)
-
-
(16)
69
20
(191)
391
(44)
347
(116)
(81)
(152)
(38)
(75)
(21)
-
(483)
$ 467 $ 237 $ 335 $
- $
70 $ 60 $
- $ 1,169
Funds from operations
Depreciation
For the year ended Dec 31, 2011:
Revenues
Adjusted EBITDA
336
179
269
Interest expense - borrowings
(149)
(68)
(94)
Funds from operations prior to
non-controlling interests
189
116
160
Cash portion of non-controlling interests
(26)
-
(13)
Funds from operations
Depreciation
163
116
147
(130)
(151)
(138)
-
-
-
-
-
-
58
25
(25)
-
(63)
(75)
804
(411)
33
25
(139)
-
-
(13)
33
25
(152)
384
(52)
332
(35)
(14)
-
(468)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 127
The following table reconciles Adjusted EBITDA and funds from operations, presented in the above
tables, to net income (loss) as presented in the consolidated statements of income (loss), for the year
ended December 31:
(MILLIONS)
Revenues
Other income
Share of cash earnings from equity-accounted investments
Direct operating costs
Adjusted EBITDA
Interest expense - borrowings
Management service costs
Current income tax (expense) recovery
Funds from operations prior to non-controlling interests
Less: cash portion of non-controlling interests
Preferred equity
Participating non-controlling interests - in operating subsidiaries
Funds from operations
Add: cash portion of non-controlling interests
Depreciation
Unrealized financial instruments gain (loss)
Share of non-cash loss from equity-accounted investments
Deferred income tax (expense) recovery
Other
Loss on Fund unit liability
Net income (loss)
Notes
2013
2012
2011
9
$ 1,706
$ 1,309
$ 1,169
11
21
(530)
1,208
(410)
(41)
(19)
738
(37)
(107)
594
144
(535)
37
(12)
18
(31)
-
10
21
24
9
15
11
8
10
15
4
19
16
13
(486)
852
(411)
(36)
(14)
391
(16)
(28)
347
44
19
23
(407)
804
(411)
(1)
(8)
384
(13)
(39)
332
52
(483)
(468)
(23)
(18)
54
(16)
-
(20)
(13)
50
(8)
(376)
$
215
$
(95) $
(451)
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 128
The following table presents information about Brookfield Renewable’s certain balance sheet items on a
segmented basis:
(MILLIONS)
U.S. Canada
Brazil
Hydroelectric
Wind energy
Equity-
accounted
U.S. Canada investments
Co-gen
Other
Total
As at December 31, 2013:
Property, plant and
equipment, at fair value
Total assets
Total borrowings
Total liabilities
For the year ended
December 31, 2013:
Additions to property, plant
and equipment
As at December 31, 2012:
Property, plant and
equipment, at fair value
Total assets
Total borrowings
Total liabilities
For the year ended
December 31, 2012:
Additions to property, plant
and equipment
$ 5,771 $ 4,830 $ 2,205 $ 1,198 $ 1,250
$
- $
46 $
441 $
15,741
6,065
4,947
2,426
1,282
1,297
290
62
608
16,977
2,157
1,143
3,328
2,144
238
398
647
720
721
995
-
-
-
1,717
4
1,852
6,623
9,441
715
206
-
430
-
-
-
255
1,606
$ 5,244 $ 5,177 $ 2,570 $ 834 $ 1,415
$
- $
70 $
392 $
15,702
5,418
5,386
2,805
910
1,452
344
83
527
16,925
1,784
1,126
2,997
2,162
348
556
460
531
629
957
-
-
-
1,772
15
1,899
6,119
9,117
621
85
147
610
14
-
5
-
1,482
The following information is about Brookfield Renewable’s equity accounted investments:
(MILLIONS)
As at December 31, 2013
As at December 31, 2012
Hydroelectric
Wind energy
Co-gen
Other
Total
U.S. Canada
Brazil
U.S. Canada
$
$
181 $
196 $
51 $
81 $
58 $
67 $
- $
- $
- $
- $
- $
- $
- $
- $
290
344
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 129
25. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
In the course of its operations, Brookfield Renewable and its subsidiaries have entered into agreements
for the use of water, land and dams. Payment under those agreements varies with the amount of power
generated. The various agreements are renewable and extend up to 2054.
Brookfield Renewable has recorded decommissioning retirement obligations associated with its power
generating assets. Refer to Note 16 – Other long-term liabilities for details.
The remaining project costs on the 45 MW hydroelectric project in British Columbia are expected to be
$26 million.
At the balance sheet date, Brookfield Renewable had commitments for future minimum lease payments
under non-cancellable leases which fall due as follows:
(MILLIONS)
Operating leases
Capital leases
Total
Contingencies
2014
2015
2016
2017
2018 Thereafter
17 $
17 $
17 $
13 $
13 $
124 $
-
-
-
1
1
47
17 $
17 $
17 $
14 $
14 $
171 $
Total
201
49
250
$
$
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, and the subsidiaries themselves
have 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 by
Brookfield Renewable can be found in Note 14 – Long-term debt and credit facilities. As at December 31,
2013, letters of credit issued by subsidiaries of Brookfield Renewable amounted to $93 million.
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 material payments under such indemnification agreements.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 130
26. SUBSEQUENT EVENTS
In January 2014, Brookfield Renewable completed the acquisition of a 70 MW hydroelectric portfolio in
Maine consisting of nine facilities which are expected to generate approximately 400 GWh annually. In
February 2014, $140 million of financing was obtained with a private placement bond that matures in
2024. The acquisition was completed with institutional partners, and Brookfield Renewable retains an
approximate 40% interest in the portfolio.
In January 2014, Brookfield Renewable acquired, with institutional partners, the remaining 50% interest in
the 30 MW Malacha Hydro facility in California. Brookfield Renewable will retain an approximate 22%
interest in the facility.
In January 2014, the $279 million bridge loan associated with the recently acquired 360 MW operating
hydroelectric portfolio located in Maine was refinanced to 2017 at LIBOR plus 2.25%.
In February 2014, Brookfield Renewable announced an agreement to acquire a 33% economic and 50%
voting interest in a 417 MW hydroelectric facility in Pennsylvania. This facility is expected to generate
approximately 1,100 GWh annually. The acquisition is being pursued with institutional partners, and
Brookfield Renewable’s share of the acquired interest is approximately 40%. This transaction is subject to
regulatory approvals and other customary closing conditions and is expected to close in the first quarter
of 2014.
In February 2014, Brookfield Renewable announced an increase in unitholder distributions to $1.55 per
unit on an annualized basis, an increase of ten cents per unit, to take effect with the first quarter
distribution payable in March 2014.
Brookfield Renewable Energy Partners L.P.
Annual Report
December 31, 2013
Page 131
GENERAL INFORMATION
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 Service Provider, BRP
Energy Group L.P.
Harry Goldgut
Chairman of BRE Group
Richard Legault
President and Chief Executive
Officer
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
Directors of the General Partner of
Brookfield Renewable Energy Partners L.P.
Jeffrey Blidner
Eleazar de Carvalho Filho
John Van Egmond
David Mann
Lou Maroun
Patricia Zuccotti
Lars Josefsson
Exchange Listing
TSX: BEP.UN (L.P. Units)
NYSE: BEP (L.P. Units)
TSX: BRF.PR.A (Preferred shares – Series 1)
TSX: BRF.PR.C (Preferred shares – Series 3)
TSX: BRF.PR.E (Preferred shares – Series 5)
TSX: BRF.PR.F (Preferred shares – Series 6)
Investor Information
Visit Brookfield Renewable online at
www.brookfieldrenewable.com for more information.
The 2013 Annual Report is also available online. For
detailed and up-to-date news and information, please
visit the News Release section.
Additional financial information is filed electronically
with various securities regulators in Canada and
United States through SEDAR at www.sedar.com
and through EDGAR at www.sec.gov.
Shareholder enquiries should be directed to the
Investor Relations Department at (416) 359-1955 or
unitholderenquiries@brookfieldrenewable.com
TSX:
BEP.UN
NYSE:
BEP
www.brookfieldrenewable.com