Brookfield Renewable
Partners L.P.
2 0 1 8 A N N U A L R E P O R T
OUR OPERATIONS
We invest in renewable assets directly, as well as with institutional partners, joint venture partners
and through other arrangements. Our portfolio of assets has approximately 17,400 megawatts (“MW”) of
capacity and annualized long-term average (“LTA”) generation of approximately 53,400 gigawatt hours
(“GWh”), in addition to a development pipeline of approximately 8,000 MW, making us one of the largest
pure-play public renewable companies in the world. We leverage our extensive operating experience to
maintain and enhance the value of assets, grow cash flows on an annual basis and cultivate positive
relations with local stakeholders. The table below outlines our portfolio as at December 31, 2018:
River
Systems
Capacity
(MW)
Facilities
Storage
LTA(1) Capacity
(GWh)
(GWh)
Hydroelectric
North America
United States
Canada
Colombia
Brazil
Wind
United States
Canada
Europe
Brazil
Asia(2)
Solar(2)
Storage(3)
30
19
49
6
27
82
-
-
-
-
-
-
-
-
2
136
33
169
6
43
218
24
4
28
50
21
7
106
545
4
2,886
1,361
4,247
2,732
927
7,906
1,888
484
2,372
1,247
552
277
4,448
1,787
2,698
11,982
5,177
17,159
14,476
4,799
36,434
6,565
1,437
8,002
2,813
2,258
536
13,609
3,390
2,523
1,261
3,784
3,703
-
7,487
-
-
-
-
-
-
-
-
-
5,220
Other(4)
-
84
-
12,707
(1) LTA is calculated based on our portfolio as at December 31, 2018, reflecting all facilities on a consolidated and an annualized
basis from the beginning of the year, regardless of the acquisition, disposition or commercial operation date. See “Part 9 –
Presentation to Stakeholders and Performance Measurement” for an explanation on our methodology in computing LTA and
why we do not consider LTA for our Storage and Other facilities.
Includes eleven solar facilities (210 MW) in South Africa, Thailand and Malaysia and one wind facility (27 MW) in South Africa
that have been presented as Assets held for sale.
Includes pumped storage in North America (600 MW) and Europe (2,088 MW) and battery storage in North America (10 MW).
Includes four biomass facilities in Brazil (175 MW), one cogeneration plant in Colombia (300 MW), and one cogeneration plant
in North America (105 MW).
-
53,433
580
17,419
6
879
(3)
(4)
(2)
The following table presents the annualized long-term average generation of our portfolio as at
December 31, 2018 on a consolidated and quarterly basis:
GENERATION (GWh)(1)
Q1
Q2
Q3
Q4
Total
Hydroelectric
North America
United States
Canada
Colombia
Brazil
Wind
North America
United States
Canada
Europe
Brazil
Asia(2)
Solar(2)
3,404
1,228
4,632
3,508
1,181
9,321
3,474
1,508
4,982
3,509
1,198
9,689
2,178
1,223
3,401
3,571
1,210
8,182
2,926
11,982
1,218
5,177
4,144
17,159
3,888
14,476
1,210
4,799
9,242
36,434
1,798
1,762
1,291
1,714
400
345
273
419
2,198
2,107
1,564
2,133
894
434
127
3,653
692
623
513
142
3,385
1,031
533
727
139
2,963
1,032
763
584
128
6,565
1,437
8,002
2,813
2,258
536
3,608
13,609
635
3,390
Total
53,433
(1) LTA is calculated based on our portfolio as at December 31, 2018, reflecting all facilities on an annualized basis from the
beginning of the year, regardless of the acquisition, disposition or commercial operation date. See “Part 9 – Presentation to
Stakeholders and Performance Measurement” for an explanation on our methodology in computing LTA and why we do not
consider LTA for our Storage and Other facilities.
Includes eleven solar facilities (388 GWh) in South Africa, Thailand and Malaysia and one wind facility (82 GWh) in South
Africa that have been presented as Assets held for sale.
13,485
13,666
14,105
12,177
(2)
The following table presents the annualized long-term average generation of our portfolio as at
December 31, 2018 on a proportionate and quarterly basis:
GENERATION (GWh)(1)
Q1
Q2
Q3
Q4
Total
Hydroelectric
North America
United States
Canada
Colombia
Brazil
Wind
North America
United States
Canada
Europe
Brazil
Asia(2)
Solar(2)
2,225
1,109
3,334
844
969
2,361
1,337
3,698
844
985
1,470
1,077
2,547
859
996
1,953
1,073
8,009
4,596
3,026
12,605
935
996
3,482
3,946
5,147
5,527
4,402
4,957
20,033
590
346
936
308
142
37
620
308
928
216
167
42
447
249
696
186
245
41
558
366
924
268
200
36
2,215
1,269
3,484
978
754
156
1,423
1,353
1,168
1,428
5,372
196
300
300
178
974
Total
26,379
(1) LTA is calculated based on our portfolio as at December 31, 2018, reflecting all facilities on an annualized basis from the
beginning of the year, regardless of the acquisition, disposition or commercial operation date. See “Part 9 – Presentation to
Stakeholders and Performance Measurement” for an explanation on our methodology in computing LTA and why we do not
consider LTA for our Storage and Other facilities.
Includes eleven solar facilities (74 GWh) in South Africa, Thailand and Malaysia and one wind facility (16 GWh) in South Africa
that have been presented as Assets held for sale.
6,563
6,766
5,870
7,180
(2)
Statement Regarding Forward-Looking Statements and Use of Non-IFRS Measures
This Annual Report contains forward-looking information within the meaning of U.S. and Canadian securities laws. We may make such statements in
this Annual Report and in other filings with the U.S. Securities and Exchange Commission (“SEC”) and with securities regulators in Canada - see
“PART 10 – Cautionary Statements”. We make use of non-IFRS measures in this Annual Report - see “PART 10 – Cautionary Statements”. This
Annual Report, our Form 20-F and additional information filed with the SEC and with securities regulators in Canada are available on our website at
https://bep.brookfield.com, on the SEC’s website at www.sec.gov or on SEDAR’s website at www.sedar.com.
Letter to Unitholders
2018 was another strong year for the business as we continued to execute on our operating, funding and
growth initiatives. We invested considerable time during the year enhancing our operational and
investment capabilities around the world. We also raised significant amounts of capital to ensure we are
well positioned to invest, on a value basis, during this next cycle. Since our inception in 1999, we have
delivered a 15% per unit compounded annual return to unitholders and we remain focused on delivering
long-term, stable returns as we build the business.
Highlights for the year include:
• Our Funds from Operations increased 14% on a per unit basis over the prior year, as all of our
businesses performed in line with expectations
• We executed on cost reduction initiatives in the U.S. and Colombia. This should improve margins
by approximately $20 million annually in the future
• We enhanced our operating teams in the U.S., Europe, India and China over the year to support
our longer-term plans in these markets
• We commissioned approximately 60 megawatts of new wind and hydro development, advanced
over 350 megawatts of development in our pipeline and maintained our opportunistic approach to
development which minimizes funding obligations and ongoing costs
• We invested $550 million into growth initiatives during the year, including acquisitions,
development and unit buy backs
• We capitalized on market volatility and repurchased approximately 2 million units at $27 per unit
• We executed on our asset recycling strategy, selling a partial interest in mature assets and exiting
non-core markets
• We extended all near-term debt maturities during the year, increasing the average duration of our
debt to 10 years. We now have no material debt maturities until 2023
• We maintained an investment grade balance sheet, increased available liquidity (which should
exceed $2.2 billion once signed asset sales and the announced sale of an additional interest in
our portfolio of select Canadian hydroelectric assets are closed), and improved our distribution
payout ratio to 95% of Funds From Operations on an actual basis and 90% of Funds From
Operations on an annualized basis
Operations
In 2018, we generated Funds From Operations of $676 million, a 16% increase over the prior year.
During the year our focus was on integrating recently-acquired assets and enhancing our operational
depth. At TerraForm Power, post the acquisition and sponsorship by Brookfield, the company was able to
stabilize operations, reinstate preventative maintenance programs, engage with suppliers and establish
new teams and processes. This should lead to improved asset availability, more predictable capital
expenditures and enhanced operating margins over time. In addition, in TerraForm Power, we completed
a significant acquisition of recently built wind and solar assets in Spain which almost doubled the cash
flows of the company on an annualized basis and facilitated the overall improvement of the company’s
capital structure. This also assisted us to eliminate negative financing covenants and improve TerraForm
Power’s balance sheet rating. The acquisition should provide stable long-term cash flows to TerraForm
Power at accretive low-teen returns and based on recent announcements of improving tariffs in Spain,
could exceed our expectations.
We have one of the largest hydroelectric businesses in the world which we have doubled in size and
expanded across multiple geographies over the last 5 years. These assets contributed $671 million to
Funds From Operations in 2018. Hydroelectric assets benefit from long useful lives (often over 100
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 1
years), low operating and ongoing capital costs, and the ability to match power supply with demand given
their embedded battery-like characteristics.
Operationally, we continue to lengthen the term of our power purchase contracts in Colombia and Brazil,
where power price volatility provides opportunities to enhance and stabilize future revenues. Our
contracts in both markets are generally at or below market and therefore we see term extension as a
unique opportunity to lock in upside. In North America, power prices remain low and therefore we
continue to sign shorter term contracts at our hydro facilities to ensure we retain upside optionality if
prices spike. We have several large legacy power purchase agreements rolling off over the next three
years for assets that deliver power to New England. Fortunately, these contracts, on a net basis, deliver
power at prices in the range of the current market. Therefore, on renewal, we expect overall revenue to
be impacted by +/- $5 million to Brookfield Renewable. Beyond these contracts, we do not have any
material power purchase agreements maturities in North America until 2029.
Our wind assets delivered $160 million of Funds From Operations in 2018. Over the last 18 months, we
more than tripled the installed capacity of our wind fleet through large-scale and tuck-in acquisitions, and
development projects coming online. Given that we now have a portfolio of wind assets across ten
countries and four continents, this geographic diversification provides a significant mitigating benefit to
resource variability and is a good example of why we prioritize diversification as a key value driver of our
business.
Our solar, storage and other operations contributed $104 million of Funds From Operations in 2018 as we
benefitted from large-scale acquisitions in 2017 and 2018. Today we have nearly 1,800 megawatts of
photovoltaic, concentrated thermal (CSP) and distributed generation solar, as well as 2,700 megawatts of
both pumped and battery storage. Our solar facilities are underpinned by highly contracted cash flows
with an average remaining power purchase agreements term of 17 years. Our storage facilities continue
to provide critical grid-stabilizing ancillary services and back-up storage capacity – products that are
becoming increasingly valuable given the intermittency of wind and solar.
Balance Sheet and Liquidity
We currently have no material debt maturities over the next four years and our overall debt duration is 10
years. We have limited exposure to rising rates, with only 7% of our debt in North America and Europe
exposed to rising rates. We are well protected from foreign exchange volatility, hedging all our developed
market currencies. We also hedge currencies when we are in the process of an asset sale as we did, for
example, with our select Canadian hydroelectric assets and our South African portfolio, locking in very
attractive returns on these disposals. Accordingly, an overall 10% move in the currencies of markets we
operate in (developed or emerging) would have an overall 4% impact to our Funds From Operations.
Post completion of recently announced asset sales we will have $2.2 billion of available liquidity. Over the
course of the year we announced or completed key capital raising initiatives across the portfolio. These
initiatives included the sale of a 25% interest in a portfolio of select Canadian hydroelectric assets as well
as the announced sale of an additional 25% interest, a small wind development project in the U.K., as
well as sales of our non-core assets in South Africa, Thailand and Malaysia, which were agreed in 2018
and which we expect to close in the first half of 2019. Looking forward we have a robust pipeline of assets
that we believe would attract low cost of capital buyers in a sale process. Therefore, we expect the
majority of our growth to be funded by the proceeds from asset sales, cash flows retained in the business
and issuances of preferred equity or corporate debt. As such, while we may issue equity when it makes
financial sense, given the above noted funding sources we are not reliant on accessing this market to
fund our growth.
Distribution Increase
In light of our recent growth, strong balance sheet and access to capital, we are pleased to announce that
our Board of Directors has approved a 5% increase to Brookfield Renewable’s quarterly distribution,
bringing our annual distribution to $2.06 per unit.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 2
Outlook
Our long-term goal is to continue to deliver 12% to 15% long-term total returns to unitholders, on a per
unit basis. We do this through cash flow growth from existing operations and opportunistic capital
deployment. Looking ahead, we have substantial financial resources and balance sheet strength to
execute on our capital deployment targets.
We also have a track record of operational excellence and a global business with scale in major markets
around the world. These attributes allow us to look at a significant number of investment opportunities
around the world and be highly selective of the types of assets and businesses we acquire, ensuring the
risk-reward profile matches our long-term objectives.
On a final note, on behalf of our employees and directors, we would like to express our sincerest
appreciation to our unitholders and many business partners for your contributions to our success. Thank
you for your continued support. We look forward to updating you on our progress in 2019.
Sincerely,
Sachin Shah
Chief Executive Officer
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 3
OUR COMPETITIVE STRENGTHS
Brookfield Renewable Partners L.P. ("Brookfield Renewable") is a globally diversified, multi-
technology, owner and operator of renewable power assets.
Our business model is to utilize our global reach to acquire and develop high quality renewable
power assets below intrinsic value, finance them on a long-term, low-risk and investment grade basis
through a conservative financing strategy and then optimize cash flows by applying our operating
expertise to enhance value.
One of the largest, public pure play renewable businesses globally. Brookfield Renewable
has a 20 year track record as a publicly-traded operator and investor in the renewable power sector.
Today we have a large, multi-technology and globally diversified portfolio of pure-play renewable assets
that are supported by over 2,500 experienced operators. Brookfield Renewable invests in renewable
assets directly, as well as with institutional partners, joint venture partners and in other arrangements. Our
portfolio consists of approximately 17,400 MW of installed capacity largely across four continents, a
development pipeline of approximately 8,000 MW, and annualized long-term average generation on a
proportionate basis of approximately 26,400 GWh.
The following charts illustrate annualized long-term average generation on a proportionate basis:
Source of Energy
Region
Solar
4%
Wind
20%
Hydro
76%
Europe
and Other
5%
Colombia
15%
Brazil
20%
North
America
60%
Diverse and high quality assets with hydroelectric focus. Brookfield Renewable has a
complementary portfolio of hydroelectric, wind, solar and storage facilities. Our portfolio includes utility-
scale facilities, back-up storage power, and distributed power generation. Hydroelectric power comprises
the significant majority of our portfolio, and is the highest value renewable asset class as one of the
longest life, lowest-cost and most environmentally-preferred forms of power generation. Hydroelectric
plants have high cash margins, storage capacity with the capability to produce power at all hours of the
day, and the ability to sell multiple products in the market including energy, capacity and ancillaries. Our
wind and solar facilities provide exposure to two of the fastest growing renewable power sectors, with
high cash margins, zero fuel input cost, and diverse and scalable applications including distributed
generation. Our storage facilities provide the markets in which they are located with critical services to the
grid and dispatchable generation. With our scale, diversity and the quality of our assets, we are
competitively positioned relative to other power generators, providing significant scarcity value to our
investors.
Stable, diversified and high quality cash flows with attractive long-term value for LP
Unitholders. We intend to maintain a highly stable, predictable cash flow profile sourced from a
diversified portfolio of low operating cost, long-life hydroelectric, wind and solar assets that sell electricity
under long-term, fixed price contracts with creditworthy counterparties. Approximately 90% of our 2019
proportionate generation output is contracted to public power authorities, load-serving utilities, industrial
users or to affiliates of Brookfield Asset Management. Our power purchase agreements have a weighted-
average remaining duration of 14 years, on a proportionate basis, providing long-term cash flow visibility.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 4
Strong financial profile and conservative financing strategy. Brookfield Renewable maintains
a robust balance sheet, strong investment grade rating, and access to global capital markets to ensure
cash flow resiliency through the cycle. Our approach to financing 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 with no
financial maintenance covenants. Approximately 95% of our debt is either investment grade rated or
sized to investment grade. Our corporate debt to total capitalization is 20% and 75% of our borrowings
are non-recourse. Corporate borrowings and non-recourse borrowings have weighted-average terms of
approximately seven and ten years, respectively, with no material maturities over the next four years.
Approximately 85% of our financings are fixed rate, and only 7% of our debt in North America and Europe
is exposed to changes in interest rates. Our available liquidity as at December 31, 2018 is approximately
$1.9 billion of cash and cash equivalents, investments in marketable securities and the available portion
of credit facilities.
Best-in class operating expertise. Brookfield Renewable has over 2,500 experienced operators
and over 140 power marketing experts that are located across the globe to help optimize the performance
and maximize the returns of all our assets. Our expertise in operating and managing power generation
facilities span over 100 years and include full operating, development and power marketing capabilities.
Well positioned for cash flow growth. We are focused on driving cash flow growth from
existing operations, fully funded by internally generated cash flow, including inflation escalations in our
contracts, margin expansion through revenue growth and cost reduction initiatives, and building out our
approximately 8,000 MW proprietary development pipeline at premium returns. While we do not rely on
acquisitions to achieve our growth targets, our business has upside from mergers and acquisitions on an
opportunistic basis. We employ a contrarian strategy, and our global scale and multi-technology
capabilities allow us to rotate capital where it is scarce in order to earn strong risk-adjusted returns. We
take a disciplined approach to allocating capital into development and acquisitions with a focus on
downside protection and preservation of capital. Since 2013, we have deployed $3.3 billion in equity as
we have invested in, acquired, or commissioned 49 hydroelectric facilities totaling approximately 4,200
MW, 103 wind facilities totaling approximately 3,900 MW, 545 solar facilities totaling approximately 1,800
MW, four biomass facilities totaling 175 MW, two hydroelectric pumped storage facilities and one battery
storage asset totaling 2,098 MW and one 300 MW cogeneration plant. Our ability to develop and acquire
assets is strengthened by our established operating and project development teams across the globe,
strategic relationship with Brookfield Asset Management, and our liquidity and capitalization profile. We
have, in the past, and may continue in the future to pursue the acquisition or development of assets
through arrangements with institutional investors in Brookfield Asset Management sponsored or co-
sponsored partnerships.
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 a
sustainable distribution yield. We target a long-term distribution payout ratio of approximately 70% of
Funds From Operations and a long-term distribution growth rate in a range of 5% to 9% annually.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 5
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) MANAGEMENT
Introduction
With over 100 years of experience in renewable power generation, at Brookfield Renewable we
take a long-term view of owning and operating our businesses, and we are committed to providing
sustainable solutions, building and maintaining trust in our communities and operating our businesses
responsibly.
We believe that strong ESG practices benefit the environment, our employees, stakeholders, and
investors while also significantly boosting our potential. Ultimately, ensuring the implementation of these
practices across our business is an important component of creating value for the long-term through:
•
Improved Profitability: the scale of our renewable power portfolio allows us to contribute
significantly to a low-carbon global economy by both profitably investing in this asset class, while
providing our customers with sustainable, renewable power solutions;
• Risk Mitigation: being an owner-operator with a long-term investment horizon, building and
maintaining trust and earning our social license to operate reduces operational and reputational
risks; and
Increased Opportunities: having a strong reputation as a reliable and responsible partner could
lead to increased opportunities in the form of deal flow and off-take contracts.
•
Investment Process
All investments made by or through Brookfield Renewable must be approved by our Investment
Committee. We consider ESG factors throughout the investment process. To ensure that ESG
considerations are fully integrated in the due diligence phase, investment teams provide materials to the
Investment Committee outlining the merits of the transaction and disclosing potential risks, and
opportunities. As part of its deliberations, our Investment Committee considers material ESG issues and
potential mitigation strategies, including bribery and corruption risks, health and safety risks, legal risks,
and environmental and social risks.
After acquiring or investing in an asset, the operations teams at our operating businesses create
a tailored integration plan that, among other things, includes material ESG-related priorities and seeks to
actively manage ESG risks. For governance and health and safety, we adopt common principles and
share best practices for addressing risk across the organization. As long-term investors motivated to drive
value creation, we continually look for opportunities to address ESG matters.
Additionally, Brookfield Renewable has issued $1.4 billion in corporate and project-level green
bonds since 2017. In 2018, we issued C$300 million of our inaugural corporate green bonds and
developed a Brookfield Renewable Green Bond Framework, which defines the investments in renewable
energy generation assets that are being financed by the green bond issuance and how performance will
be measured. Our project-level green bonds, Holtwood, White Pine and Brookfield Power New York
(“BPNY”) received E-1 Green Evaluation scores from S&P—the highest on its scale, citing Brookfield
Renewable’s environmental stewardship, commitment to renewable power and use of proceeds towards
renewable power generation.
The growing green bond market allows debt investors to participate in the financing of sustainable
products and initiatives, and we plan on continuing to offer additional green bond issuances.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 6
Our ESG Principles
Our ESG Principles are summarized in the following table:
Ensure
Safety of Employees
the Well-Being and
Be Good Stewards
Communities
Operate
the
in Which We
in
• Employee Well-Being: Meet or exceed all applicable labor laws
and standards in jurisdictions where we operate, which includes
respecting human
rights, offering competitive wages and
implementing nondiscriminatory, fully inclusive hiring practices.
• Health & Safety: Aim to have zero high risk incidents within our
businesses by working towards implementing consistent health
and safety principles across the organization.
• Community Engagement: Engage with community groups that
might be affected by our actions to ensure that their interests,
safety and well-being are appropriately
into our
decision-making.
integrated
• Philanthropy: Empower our employees to participate in — and use
our resources to give back to — the communities in which we
operate.
Impact of our
Mitigate
Operations on the Environment
the
• Environmental Stewardship: Strive to minimize the environmental
impact of our operations and improve our efficient use of resources
over time.
Conduct Business According to
the Highest Ethical
and
Legal/Regulatory Standards
• Governance, Ethics and Fairness: Operate with high ethical
standards by conducting business activities in compliance with
applicable legal and regulatory requirements, and with our Code of
Business Conduct and Ethics.
• Transparency: Be accessible to our investors and stakeholders by
being responsive to requests for information and timely in our
communication.
Our ESG Priorities
Within these ESG Principles we have established certain ESG Priorities for our business.
Environment
We develop, own and operate renewable power assets that accelerate the world towards a low-
carbon future. With more than a century of experience in renewable power generation, we believe in
investing and managing our facilities for the long term. As such, we recognize that our renewable energy
generation relies on natural resources and that in order to ensure the availability, stability and
sustainability of these resources, we must be stewards of our natural environment, which includes
protecting biodiversity and ecosystems.
Last year, we conducted an inventory of our scope 1 and 2 greenhouse gas (“GHG”) emissions
measurement for our global businesses. In 2018, which represents the base-year calculation, we
estimate total emissions of 282,299 metric tonnes carbon dioxide equivalent (“CO2e”) with a gross
intensity of 7.06 kg CO2e per megawatt hour, confirming our position as one of the lowest GHG emitters
among comparable global electricity generation companies.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 7
Social
Building trust with our employees and local communities is core to our ability to develop and
generate renewable energy. At Brookfield Renewable, we know that we must continuously work to
maintain employee and stakeholder trust, which includes maintaining and cultivating a long-term
relationship with those parties. We promote the safety and well-being of our employees and communities
and foster ongoing and open dialogue with all our stakeholders.
We prioritize a strong health and safety culture. Our objective is to incur zero high-risk incidents.
To meet this objective, our senior leadership are actively involved in the management of our employees’
health and safety. We also empower our employees to detect and address safety issues through industry-
leading health and safety training and our Safe Work Observation program, which encourages employees
to identify and report safety concerns or incidents.
We continue to implement measures to improve diversity within our employee base. We have put
in place guidelines to ensure that we consider candidate pools sufficiently diverse as part of our recruiting
process. We are also providing opportunities and support to promote success for our female employees.
At Brookfield Renewable, 50% of our executive management team are women.
Building strong partnerships with the communities in which we operate is critical. Our Code of
Business Conduct and Ethics requires the involvement of stakeholders in our project development
strategy early on. From the project development stage onwards, we support local communities by
contributing directly to projects, non-profit organizations, recreational and educational programs. For
example, Brookfield Renewable donates €1,000–€5,000 per megawatt annually to communities in Ireland
and Scotland that host wind farms. The funding is used to build and improve recreational facilities and
community safety systems, and to sponsor community events. Further, each year we partner with more
than 300 local charities, non-profit organizations and contribute to projects in regions where we operate
and develop projects across North America.
In Colombia, our Sogamoso hydro facility has been recognized internationally both by the
International Hydropower Association and the World Bank for its best practices in managing infrastructure
and public safety. Key components in the development of the 820 MW hydro facility included
infrastructure and public safety assessments and monitoring, successful testing of efficient emergency
preparedness and response measures, complemented by a number of engineered roads, bridges and
tunnels to improve public safety.
Governance
We believe that growing our business responsibly is essential to our long-term success. It has
always been our policy to ensure that our activities are conducted with the utmost honesty and integrity.
As we grow and expand our business into new geographies and technologies, it is more important than
ever to keep these values at the forefront.
Our efforts to build a responsible business are underpinned by our governance framework and
our commitment to ethical conduct. We aim for best practice, not basic compliance, and we recognize that
without effective leadership and accountability, our policies and procedures will not be effective. That is
why over the past year we have strengthened our governance practices to ensure that our ESG strategy
is well-implemented and scalable. As an example, we have recently formalized ESG principles into the
strategic planning of each of our operating businesses across the world. CEOs of these businesses are
responsible for setting ESG goals, driving action plans and monitoring performance related to their local
priorities.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 8
ESG Highlights
25 million tonnes
55 facilities
Clean Index Leader
of CO2 emissions avoided
annually by Brookfield
Renewable customers –
equivalent to approximately five
million passenger vehicles
removed from the roads
owned & operated by Brookfield
Renewable that have received
the Low Impact Hydropower
Institute (LIHI) Certification
Brookfield Renewable is the
largest member of the S&P/TSX
Renewable Energy and Clean
Technology Index
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 9
Management’s Discussion and Analysis for the year ended December 31, 2018
This Management’s Discussion and Analysis for the year ended December 31, 2018 is provided as of February 28, 2019. Unless
the context indicates or requires otherwise, the terms “Brookfield Renewable”, “we”, “us”, and “our” mean Brookfield Renewable
Partners L.P. and its controlled entities. The ultimate parent of Brookfield Renewable is Brookfield Asset Management Inc.
(“Brookfield Asset Management”). Brookfield Asset Management and its subsidiaries, other than Brookfield Renewable, are also
individually and collectively referred to as “Brookfield” in this Management’s Discussion and Analysis.
by
public
unitholders
and Brookfield,
Brookfield Renewable’s consolidated equity interests include the non-voting publicly traded limited partnership units (“LP Units”)
held
by Brookfield
(“Redeemable/Exchangeable partnership units”), in Brookfield Renewable Energy L.P. (“BRELP”) a holding subsidiary of Brookfield
Renewable, and general partnership interest (“GP interest”) in BRELP held by Brookfield. Holders of the GP interest,
Redeemable/Exchangeable partnership units, and LP Units will be collectively referred to throughout as “Unitholders”, “Units”, or as
“per Unit”, unless the context indicates or requires otherwise. The LP Units and Redeemable/Exchangeable partnership units have
the same economic attributes in all respects. See – “PART 9 – Presentation to Stakeholders and Performance Measurement”.
Brookfield Renewable’s non-controlling interests include preferred equity consisting of Class A Preference Shares of Brookfield
Renewable Power Preferred Equity Inc. (“Class A Preference Shares”). Brookfield Renewable Partners L.P. has also issued capital
of preferred limited partnership units (“Preferred Units”).
redeemable/exchangeable
partnership units
held
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.
References to $, C$, €, R$, and COP are to United States (“U.S.”) dollars, Canadian dollars, Euros, Brazilian reais and Colombian
pesos, respectively. Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars.
For a description on our operational and segmented information and for the non-IFRS financial measures we use to explain our
financial results see “PART 9 – Presentation to Stakeholders and Performance Measurement”. For a reconciliation of the non-IFRS
financial measures to the most comparable IFRS financial measures, see “PART 4 – Financial Performance Review on
Proportionate Information – Reconciliation of non-IFRS measures” and “PART 6 – Selected Annual and Quarterly Information –
Reconciliation of Non-IFRS measures”. This Management’s Discussion and Analysis contains forward looking information within the
meaning of U.S. and Canadian securities laws. Refer to – “PART 10 – Cautionary Statements” for cautionary statements regarding
forward-looking statements and the use of non-IFRS measures. Our Annual Report and additional information filed with the
Securities Exchange Commission (“SEC”) and with securities regulators
in Canada are available on our website
(https://bep.brookfield.com), on the SEC’s website (www.sec.gov/edgar.shtml), or on SEDAR (www.sedar.com).
Organization of the Management’s Discussion and Analysis
PART 1 – 2018 Highlights
11 PART 5 – Liquidity and Capital Resources Continued
PART 2 – Financial Performance Review
on Consolidated Information
PART 3 – Additional Consolidated
Financial Information
Summary consolidated statements of
financial position
Related party transactions
Equity
PART 4 – Financial Performance Review
on Proportionate Information
Proportionate results for the year ended
December 31, 2018 and 2017
Proportionate results for the year ended
December 31, 2017 and 2016
Reconciliation of non-IFRS measures
Contract profile
PART 5 – Liquidity and Capital Resources
Capitalization
Available liquidity
Borrowings
Consolidated statements of cash flows
Shares and units outstanding
14 Dividends and distributions
Contractual obligations
Off-statement of financial position arrangements
PART 6 - Selected Annual and Quarterly Information
16 Historical operational and financial information
17 Summary of historical quarterly results
18 Proportionate results for the fourth quarter
Reconciliation of non-IFRS measures – fourth quarter
PART 7 - Business Risks and Risk Management
20 Risk management and financial instruments
Risk factors
25
PART 8 - Critical Estimates, Accounting Policies
30 and Internal Controls
34
PART 9 - Presentation to Stakeholders and
Performance Measurement
36
36 PART 10 - Cautionary Statements
37
39
41
42
42
42
43
44
45
46
49
52
61
67
71
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 10
PART 1 – 2018 HIGHLIGHTS
YEAR ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Operational information
Capacity (MW)
Total generation (GWh)
Long-term average generation
Actual generation
Proportionate generation (GWh)
Long-term average generation
Actual generation
Average revenue ($ per MWh)
2018
2017
17,419
16,369
51,971
52,056
42,334
43,385
25,844
25,753
75
23,251
23,968
70
Selected financial information(1)
Net income (loss) attributable to Unitholders
(56)
Basic income (loss) per LP Unit
(0.18)
Consolidated Adjusted EBITDA(2)
1,751
Proportionate Adjusted EBITDA(2)
1,142
Funds From Operations(2)
581
Funds From Operations per Unit(1)(2)
1.90
1.87
Distribution per LP Unit
(1) For the year ended December 31, 2018, weighted average LP Units, Redeemable/Exchangeable partnership units and GP
0.13
2,223
1,323
676
2.16
1.96
42 $
$
interest totaled 312.6 million (2017: 305.8 million).
(2) Non-IFRS measures. For reconciliations to the most directly comparable IFRS measure, see “PART 4 – Financial Performance
Review on Proportionate Information - Reconciliation of Non-IFRS Measures” and “PART 10 – Cautionary Statements”.
AS AT DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Liquidity and Capital Resources
Available liquidity
Debt to capitalization - Corporate
Debt to capitalization - Consolidated
Borrowings non-recourse to Brookfield Renewable on a proportionate basis
Floating rate debt exposure on a proportionate basis(1)
Corporate borrowings
Average debt term to maturity
Average interest rate
Subsidiary borrowings on a proportionate basis
Average debt term to maturity
Average interest rate
(1)
Includes interest rate hedges put in place subsequent to the end of 2018.
2018
2017
$
1,875 $
20%
34%
75%
14%
1,539
24%
39%
70%
13%
7 years
4.4%
6 years
4.5%
10 years
5.4%
10 years
5.8%
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 11
Operations
Funds From Operations increased to $676 million and $2.16 on a per unit basis representing a
16% and 14% increase, respectively, from the prior year supported by contributions from the recently
acquired TerraForm Power and TerraForm Global investments in addition to recently commissioned
facilities and the advancement of our organic growth initiatives:
• We generated revenue at higher average realized prices relative to prior year on the back of our
commercial and re-contracting initiatives, primarily in Colombia, Brazil and the U.S. northeast
• We implemented cost reduction initiatives across our businesses that totalled $21 million during
the year and will continue to benefit our Funds From Operations on a recurring basis
The benefits of our organic growth initiatives were partially offset by marginally lower same store
generation, as the prior year benefitted from above average generation (3% above long-term average)
compared to generation in the current year that was in line with long-term average.
Net income attributable to Unitholders and Basic earnings per LP Unit increased $98 million and
$0.31 per Unit, respectively, compared to the prior year due primarily to the above noted increase in
Funds From Operations.
In 2018, we continued to focus on extending our contract profile at premium pricing as we
completed the following:
•
•
In Colombia, we entered into 54 new long-term contracts for energy with five to twelve year terms
representing 950 GWh of annual generation at an average price of COP 186/KWh (~$64/MWh)
In Brazil, we entered into 35 new contracts to deliver 1,506 GWh from 2018 to 2029, at an
average price of R$248/MWh (~$71/MWh)
Liquidity and Capital Resources
Available liquidity remains strong at approximately $1.9 billion as at December 31, 2018.
Executed $3.7 billion of non-recourse financings during the year, maintaining a weighted average
cost of project debt of 5.4% and a weighted average duration of ten years.
Issued C$250 million ($201 million) of Preferred Units in the first quarter at a coupon rate of 5%
and C$300 million ($231 million) ten-year green bond offering in the third quarter which carries a fixed
interest rate of 4.25%.
Completed the sale of a 25% non-controlling, direct interest in a 413 MW portfolio of select
Canadian hydroelectric assets and a small wind development project in the U.K. for combined total
proceeds of ~$320 million, taking advantage of the strong valuations for renewable power assets in the
private sector. In February 2019, we entered into an agreement to sell an additional 25% non-controlling,
indirect interest in this Canadian portfolio to a consortium of buyers for the same price as our initial 25%
non-controlling interest sale, subject to an adjustment for an approximate $45 million dividend
recapitalization completed in the fourth quarter of 2018, the closing of which remains subject to the
satisfaction of customary conditions. Following closing, Brookfield Renewable will retain a 50% economic
interest in this portfolio and will continue to manage and operate the assets in the portfolio. See “PART 8
– Subsequent Events”.
Entered into agreements to sell 237 MW of wind and solar facilities in South Africa, Thailand and
Malaysia for combined proceeds of ~$300 million (Brookfield Renewable’s share ~$90 million). Each of
the transactions are expected to close during the first half of 2019, subject to satisfaction of customary
closing conditions.
Minimal interest rate risk exposure with only 14% floating rate debt on a proportionate basis with
less than 7% being in North America and Europe. Our remaining exposure is in countries where it is too
costly to hedge effectively.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 12
Growth and Development
Deployed $420 million in the second quarter to increase our interest in TerraForm Power from
16% to 30%. TerraForm Power used the proceeds of its $650 million equity offering, along with other
sources of capital, to acquire Saeta Yield, S.A. ("Saeta"), a 1,028 MW solar and wind portfolio located
primarily in Spain.
Repurchased approximately 2 million LP Units at an average price of $27 per unit.
Commissioned 56 MW of development projects (28 MW hydroelectric project in Brazil and 28 MW
wind project in Ireland) that are expected to contribute annualized Funds From Operations to Brookfield
Renewable of $6 million.
Acquired a 23 MW wind facility in Northern Ireland that is expected to contribute annualized
Funds From Operations to Brookfield Renewable of $1 million on average over the life of the asset for
total consideration of $9 million (net of debt financing) with Brookfield Renewable’s share totalling $4
million.
Continued to advance the construction of 151 MW of hydroelectric, pumped storage and rooftop
solar development projects. These projects are expected to be commissioned between 2019 and 2021
and to generate Funds From Operations on a run-rate basis of $15 million.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 13
PART 2 – FINANCIAL PERFORMANCE REVIEW ON CONSOLIDATED INFORMATION
The following table reflects key financial data for the year ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Revenues
Direct operating costs
Management service costs
Interest expense – borrowings
Depreciation
Current income tax expense
Deferred income tax recovery (expense)
Net income (loss) attributable to Unitholders
C$
€
R$
COP
2018
2,982 $
(1,036)
(80)
(705)
(819)
(30)
89
42 $
$
$
2017
2,625 $
(978)
(82)
(632)
(782)
(39)
(49)
(56) $
Average FX rates to USD
1.30
0.85
3.65
2,956
1.30
0.89
3.19
2,951
2016
2,452
(1,038)
(62)
(606)
(781)
(44)
97
(65)
1.33
0.90
3.49
3,045
Current Year Variance Analysis (2018 vs 2017)
Revenues totaling $2,982 million for the year ended December 31, 2018 represent an increase of
$357 million over the same period in the prior year. The contributions from the growth in our portfolio,
both through our recent investments and development projects contributed 2,792 GWh or $272 million to
our revenues, partially offset by the impact from the sale of one of our Irish wind facilities in 2017 that
contributed $8 million or 75 GWh in the same period of the prior year. The contributions of our portfolio on
a same-store basis increased revenue by $93 million. Higher average realized pricing increased revenues
by $221 million primarily due to higher market prices received from our merchant facilities, the impact of
inflation indexation embedded in our existing contracts and higher capacity revenues in the United States.
Lower generation resulted in a $90 million reduction to revenue due to a return to normal hydrology
conditions in New York and Canada where we experienced generation 15% above long-term average in
2017 and the impact of our decision to store water in our reservoirs in Colombia in anticipation of higher
pricing in the upcoming dry season. The impact of foreign exchange differences resulted in a net
reduction of $38 million to revenues, primarily attributable to the depreciation of the Brazilian reais.
Direct operating costs totaling $1,036 million represent an increase of $58 million driven by the
growth in our portfolio which contributed $56 million to direct operating costs. Excluding one-time cost
recoveries of $10 million in the prior year, operating costs were $5 million higher on a same-store basis
as the impact of inflation was mostly offset by the benefit of our cost-reduction initiatives implemented
across our business. The above noted foreign exchange impacts decreased operating costs by $13
million.
Interest expense totaling $705 million represents an increase of $73 million over the prior year
due to the growth in our portfolio, which contributed $96 million of additional interest expense.
Depreciation expense totaling $819 million increased $37 million over the prior year due to
growth, offset partially by the impact of a weakening Brazilian reais against the U.S. dollar.
Management service costs totaling $80 million represents a decrease of $2 million due to the
lower market capitalization of our limited partners’ equity relative to the prior year.
Net income attributable to Unitholders was $42 million compared to a net loss attributable to
Unitholders of $56 million for the year ended December 31, 2017.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 14
Prior Year Variance Analysis (2017 vs 2016)
Revenues totaling $2,625 million in the year ended December 31, 2017 represented an increase
of $173 million over 2016, driven primarily by a return to long-term average generation, and the
contribution from our growth initiatives. Revenues increased $121 million as consolidated generation
increased by 27% or 9.3 TWh due primarily to strong hydrological conditions in North America and
Colombia. Our growth initiatives in 2017 contributed 3.8 TWh in generation which amounted to $100
million in revenues. Partially offsetting those increases was a decrease in our average realized revenue
per MWh (from $72 per MWh to $61 per MWh) driving a $57 million decrease in revenue, as weaker
pricing in Colombia due to above average inflows was partially offset by strong pricing in Brazil caused by
the impact of low hydrology. The depreciation of the U.S. dollar in 2017 versus most of the foreign
currencies in which we operate contributed an additional $57 million of revenues. This also affected
operating and borrowing costs. The above noted increase in revenues was partially offset by the impact
of the sale of one of our Irish wind facilities in the first quarter of 2017 (contributed $28 million in revenues
in 2016). In 2016, revenues also included a $20 million settlement at our hydroelectric and cogeneration
assets in Ontario pertaining to the price escalator for power sold under power purchase agreements.
Direct operating costs in 2017 totaling $978 million represented a decrease of $60 million. The
decrease was primarily attributable to the reduction in power purchases in Colombia and the successful
recovery of excess property taxes at one of our Canadian hydroelectric facilities. This decrease was
partially offset by growth in our portfolio.
Management service costs in 2017 totaling $82 million represented an increase of $20 million,
primarily attributable to the growth in our capitalization due to a 16% increase in Brookfield Renewable’s
unit price.
Interest expense in 2017 totaling $632 million represented an increase of $26 million. The
increase is primarily attributable to the growth in our portfolio which contributed $22 million of additional
interest expense.
Deferred income tax expense in 2017 of $49 million represented a $146 million increase from
2016, due primarily to the U.S. tax reform.
For the year ended December 31, 2017, we reported a net loss attributable to Unitholders of $56
million compared to a net loss attributable to Unitholders of $65 million for the year ended December 31,
2016.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 15
PART 3 - ADDITIONAL CONSOLIDATED FINANCIAL INFORMATION
SUMMARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
The following table provides a summary of the key line items on the audited annual consolidated
statements of financial position as at December 31:
(MILLIONS)
Assets held for sale
Current assets
Equity-accounted investments
Property, plant and equipment, at fair value
Total assets
Liabilities directly associated with assets held for sale
Corporate borrowings
Non-recourse borrowings
Deferred income tax liabilities
Total liabilities and equity
Property, plant and equipment
2018
$
920 $
1,961
1,569
29,025
34,103
533
2,334
8,384
4,140
2017
-
1,666
721
27,096
30,904
-
2,552
9,214
3,588
34,103
30,904
Property, plant and equipment totaled $29 billion as at December 31, 2018 compared to $27.1
billion as at December 31, 2017. The $1.9 billion increase was primarily attributable to the annual
revaluation of property, plant and equipment which recognized the benefit of the United States tax reform
enacted into law in late 2017 and the successful implementation of certain cost saving and revenue
enhancing initiatives, partially offset by the foreign exchange devaluation caused by the weakening of the
Brazilian reais, Colombian peso, and Canadian dollar relative to the United States dollar during the year.
Capitalized expenditures of $301 million during the year relate primarily to construction and development
activities that advanced ongoing construction projects and contributed to the successful commissioning of
a 28 MW hydroelectric facility in Brazil and a 28 MW wind facility in Ireland. Upon entering into
agreements to sell 237 MW of wind and solar facilities in South Africa, Thailand, and Malaysia, we
reclassified $749 million of property, plant and equipment to Assets held for sale on the audited annual
consolidated statements of financial position.
See Note 12 – Property, plant and equipment in our audited annual consolidated financial
statements for information on the revaluation assumptions used and sensitivity analysis.
Equity-accounted investments
Equity-accounted investments totaled $1,569 million as at December 31, 2018 compared to $721
million as at December 31, 2017. During the second quarter of 2018, TerraForm Power closed the
acquisition and privatization of Saeta – a 1,028 MW European solar and wind portfolio. TerraForm Power
funded its acquisition of Saeta through available liquidity and asset-level financing initiatives, as well as
through issuing additional equity of which Brookfield Renewable contributed $420 million. The additional
equity acquired through the private placement increased the collective interest of Brookfield Renewable
and its institutional partners in TerraForm Power from 51% to 65%, with Brookfield Renewable’s interest
increasing from 16% to 30%. Brookfield Renewable performed a revaluation of the property, plant and
equipment associated with its equity-accounted investments which resulted in a $426 million increase to
the carrying value of the equity-accounted investments.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 16
Assets held for sale
During the year ended December 31, 2018, we entered into agreements alongside our
institutional investors to sell our controlling interests in 237 MW of wind and solar facilities in South Africa,
Thailand and Malaysia in separate transactions for combined proceeds of approximately $300 million.
Brookfield Renewable’s share from the sale of all three portfolios is approximately $90 million. Each of
these transactions are expected to close in the first half of 2019, subject to the satisfaction of customary
closing conditions.
We reclassified the associated assets, including the aforementioned $749 million of Property,
plant and equipment, to Assets held for sale on the audited annual consolidated statements of financial
position. We also reclassified the directly associated liabilities, including $360 million of non-recourse
borrowings, to Liabilities directly associated with assets held for sale on the audited annual consolidated
statements of financial position.
See Note 4 – Assets held for sale in our audited annual consolidated financial statements for
additional details.
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.
Brookfield Renewable sells electricity
long-term power purchase
agreements, or provides fixed price guarantees to provide contracted 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 Brookfield which reduces the exposure to the fluctuation
of wind generation at certain facilities and thus improves the stability of its cash flow. The wind
levelization agreement expired in February 2019.
to Brookfield
through
In addition to these agreements, Brookfield Renewable and Brookfield have executed other
agreements that are described in Note 27 – Related Party Transactions in our audited annual
consolidated financial statements, including amendments made in 2018 to existing agreements.
Brookfield Renewable has also entered into a number of voting agreements with Brookfield
whereby Brookfield, as managing member of entities related to Brookfield Americas Infrastructure Fund,
Brookfield Infrastructure Fund II and Brookfield Infrastructure Fund III, in which Brookfield Renewable
holds investments in power generating operations with institutional partners, agreed to provide to
Brookfield Renewable the authority to direct the election of the Boards of Directors of such entities.
Brookfield Renewable has entered into agreements with Brookfield Americas Infrastructure Fund,
Brookfield Infrastructure Fund II, Brookfield Infrastructure Fund III and Brookfield Infrastructure Debt Fund
(“Private Funds”), in which they provide Brookfield Renewable with access to short-term financing using
the Private Funds’ credit facilities.
During the year, Brookfield Asset Management extended the maturity of the $400 million
committed unsecured revolving credit facility to December 2019. Brookfield Renewable repaid all
outstanding draws and accrued interest from the $400 million unsecured revolving credit facility as of
December 31, 2018. During the year, Brookfield Asset Management had also placed funds on deposit
with Brookfield Renewable in the amount of $200 million, which have since been paid back in full
including any interest that had been accrued. The interest expense on the deposit and draws from the
credit facility for the year ended December 31, 2018 totaled $8 million (2017: $1 million). Subsequent to
December 31, 2018, Brookfield Asset Management placed funds on deposit with Brookfield Renewable in
the amount of $251 million.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 17
The following table reflects the related party agreements and transactions in the audited annual
consolidated statements of income, for the year ended December 31:
(MILLIONS)
Revenues
Power purchase and revenue agreements
Wind levelization agreement
Direct operating costs
Energy purchases
Energy marketing fee
Insurance services
Interest (expense) income - borrowings
Management service costs
2018
2017
2016
535 $
601 $
7
6
542 $
607 $
(20) $
(13) $
(24)
(25)
(69) $
(8) $
(80) $
(24)
(19)
(56) $
- $
(82) $
527
8
535
(3)
(23)
(20)
(46)
6
(62)
$
$
$
$
$
$
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
Contract asset
Due from related parties
Related party
Brookfield
Amounts due from
Brookfield
Equity-accounted investments and other
Non-current assets
Contract asset
Current liabilities
Due to related parties
Amount due to
Brookfield
Brookfield
Equity-accounted investments and other
Accrued distributions payable on
LP Units and Redeemable/
Exchangeable partnership units Brookfield
Non-current liabilities
Contract liability
EQUITY
Brookfield
$
$
$
$
$
2018
2017
$
45 $
-
54
6
60
-
48
32
55
10
110 $
402 $
54 $
12
35
101 $
479
32
112
9
General partnership interest in a holding subsidiary held by Brookfield
Brookfield, as the owner of the 1% GP interest in BRELP, is entitled to regular distributions plus
an incentive distribution based on the amount by which quarterly LP Unit distributions exceed specified
target levels. To the extent that LP Unit distributions exceed $0.375 per LP Unit per quarter, the incentive
is 15% of distributions above this threshold. To the extent that LP Unit distributions exceed $0.4225 per
LP Unit per quarter, the incentive distribution is equal to 25% of distributions above this threshold.
Incentive distributions of $40 million were declared during the year ended December 31, 2018 (2017: $30
million).
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 18
Preferred limited partners’ equity
In January 2018, Brookfield Renewable issued 10,000,000 Class A Preferred Limited Partnership
Units, Series 13 (the “Series 13 Preferred Units”) at a price of C$25 per unit for gross proceeds of C$250
million ($201 million). The holders of the Series 13 Preferred Units are entitled to receive a cumulative
quarterly fixed distribution yielding 5.0% for the initial period ending April 30, 2023. Thereafter, the
distribution rate will be reset every five years at a rate equal to the greater of: (i) the five-year Government
of Canada bond yield plus 3.00%, and (ii) 5.00%.
The holders of the Series 13 Preferred Units will have the right, at their option, to reclassify their
Series 13 Preferred Units into Class A Preferred Limited Partnership Units, Series 14 (the “Series 14
Preferred Units”), subject to certain conditions, on April 30, 2023 and on April 30 every five years
thereafter. The holders of the Series 14 Preferred Units will be entitled to receive floating rate cumulative
preferential cash distributions equal to the three month Government of Canada Treasury Bill Rate plus
3.00%.
The Preferred Units do not have a fixed maturity date and are not redeemable at the option of the
holders. As at December 31, 2018, none of the Preferred Units have been redeemed by Brookfield
Renewable.
Limited partners’ equity
Brookfield Asset Management owns, directly and indirectly 185,727,567 LP Units and
Redeemable/Exchangeable partnership units, representing approximately 60% of Brookfield Renewable
on a fully-exchanged basis and the remaining approximately 40% is held by public investors.
During the year ended December 31, 2018, Brookfield Renewable issued 289,641 LP Units
(2017: 302,037 LP Units) under the distribution reinvestment plan at a total cost of $8 million (2017: $10
million).
In December 2018, Brookfield Renewable renewed its normal course issuer bid in connection
with its LP Units. Under this normal course issuer bid Brookfield Renewable is permitted to repurchase up
to 8.9 million LP Units, representing approximately 5% of the issued and outstanding LP Units, for capital
management purposes. The bid will expire on December 30, 2019, or earlier should Brookfield
Renewable complete its repurchases prior to such date. Unitholders may receive a copy of the notice,
free of charge, by contacting Brookfield Renewable. Under the prior normal course issuer bid that expired
on December 28, 2018, Brookfield Renewable had repurchased 1,856,798 LP Units, on the Toronto
Stock Exchange and the New York Stock Exchange, at a total cost of $51 million (2017: $nil). An
additional 20,000 LP Units were repurchased on December 28, 2018 but were not cancelled until January
31, 2019.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 19
PART 4 – FINANCIAL PERFORMANCE REVIEW ON PROPORTIONATE INFORMATION
SEGMENTED DISCLOSURES
Segmented information is prepared on the same basis that Brookfield Renewable’s Chief Executive Officer and Chief Financial Officer
(collectively, the chief operating decision maker or “CODM”) manages the business, evaluates financial results, and makes key operating
decisions. See “Part 9 – Presentation to Stakeholders and Performance Measurement” for information on segments and an explanation on the
calculation and relevance of proportionate information.
PROPORTIONATE RESULTS FOR THE YEAR ENDED DECEMBER 31
The following chart reflects the generation and summary financial figures on a proportionate basis for the year ended December 31:
(GWh)
(MILLIONS)
Actual Generation LTA Generation
Revenues
Adjusted EBITDA
Funds From
Operations
Net Income (Loss)
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
13,308 13,942 12,980 13,059 $
893 $
945 $
619 $
665 $
443 $
486 $
189 $
170
3,633
3,426
3,927
3,874
3,364
3,683
3,482
3,488
244
216
243
191
20,305 21,051 20,389 20,421
1,353
1,379
173
126
918
178
99
942
North America
2,713
1,765
3,108
2,019
219
161
157
119
677
626
160
490
278
-
764
706
153
513
245
-
4,176
2,533
4,731
2,777
753
519
-
56
724
53
328
-
-
-
-
-
73
42
12
346
146
85
-
46
26
-
233
8
59
-
57
33
8
255
117
49
(16)
26
22
-
167
6
33
(6)
25,753 23,968 25,844 23,251 $ 1,930 $ 1,679 $ 1,323 $ 1,142 $
676 $
581 $
42 $
(56)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 20
142
86
671
93
38
24
5
160
72
32
148
52
686
3
(3)
87
279
19
186
74
(18)
15
16
-
105
2
19
5
1
4
(8)
33
(2)
9
(15)
11
-
5
(5)
(6)
(259)
(231)
(260)
(236)
Hydroelectric
North America
Brazil
Colombia
Wind
Europe
Brazil
Asia
Solar
Storage & Other
Corporate
Total
HYDROELECTRIC OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for hydroelectric operations for the year
ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA
Generation (GWh) – actual
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Interest expense
Current income taxes
Funds From Operations
Depreciation
Deferred taxes and other
Net income
2018
20,389
20,305
1,353 $
21
(456)
918
(232)
(15)
671 $
(385)
(7)
279 $
2017
20,421
21,051
1,379
15
(452)
942
(240)
(16)
686
(388)
(112)
186
$
$
$
The following table presents our proportionate results by geography for hydroelectric operations
for the year ended December 31:
Actual
Generation (GWh)
Average
revenue
per MWh
Adjusted
EBITDA
Funds From
Operations
Net
Income
2017
2018
2017
2018
2017
2018
2017
2018
2017
(MILLIONS, EXCEPT AS NOTED) 2018
North America
United States
Canada
Brazil
Colombia
Total
North America
8,245
5,063
8,030 $
5,912
13,308 13,942
3,426
3,683
3,633
3,364
69 $
64
67
67
64
71 $ 360 $ 360 $ 252 $ 248 $
64
68
71
52
259
619
173
126
305
665
178
99
238
486
148
52
191
443
142
86
123
189
3
87
66 $
6
164
170
(3)
19
20,305 21,051 $
67 $
66 $ 918 $ 942 $ 671 $ 686 $ 279 $ 186
Funds From Operations at our North American business were $443 million versus $486 million in
the prior year. While generation was 3% above long-term average, it was 5% below the prior year in
which we benefitted from above average generation (7% above long-term average). Average revenue per
MWh was in line with the prior year as the benefit of inflation indexation of our contracts was offset by the
impact of generation mix (generation was highest on lower price contracts). We also benefitted from cost-
reduction initiatives.
Net income attributable to Unitholders increased by $19 million over the prior year as the above
noted decrease in Funds From Operations was more than offset by savings on deferred income expense
as the prior year was impacted by a one-time deferred tax expense attributable to the impact the U.S. tax
reform passed at the end of 2017.
Brazil
Funds From Operations at our Brazilian business was $142 million versus $148 million in the
prior year. On a local currency basis, Funds From Operations increased by 5% versus the prior year due
to the benefit of higher same-store generation, higher average revenue per MWh due to inflation
indexation of our contracts and the benefit of re-contracting efforts as well as contribution from
development projects. These benefits were more than offset by the weakening of the Brazilian reais
versus the U.S. dollar.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 21
Net income attributable to Unitholders increased by $6 million over the prior year as the above
noted decrease in Funds From Operations was more than offset by lower depreciation expense due to
the weakening of the Brazilian reais versus the U.S. dollar.
Colombia
Funds From Operations at our Colombian business was $86 million versus $52 million in the prior
year as our cost-reduction initiatives and a 23% increase in revenue per MWh due to inflation indexation
of our contracts and re-contracting efforts were partially offset by generation that was 3% below long-term
average as we stored water in anticipation of higher pricing in the upcoming dry season.
Net income attributable to Unitholders increased by $68 million over the prior year due to above
noted increase in Funds From Operations and a deferred tax recovery resulting from the tax legislation
that was passed at the end of 2018.
WIND OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for wind operations for the year ended
December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA
Generation (GWh) – actual
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Interest expense
Current income taxes
Funds From Operations
Depreciation
Deferred taxes and other
Net income
2018
4,731
4,176
346 $
13
(104)
255
(93)
(2)
160 $
(180)
12
(8) $
2017
2,777
2,533
233
-
(66)
167
(61)
(1)
105
(122)
22
5
$
$
$
The following table presents our proportionate results by geography for wind operations for the
year ended December 31:
Actual
Generation (GWh)
Average
revenue
per MWh
Adjusted
EBITDA
2017
2018
2017
2018
2017
Funds From
Operations
2017
2018
Net
Income
2018
2017
1,613
1,100
2,713
677
626
160
4,176
658 $
1,107
1,765
490
278
-
2,533 $
76 $
88
81
110
69
66
84 $
91 $
91
91
94
94
-
76 $
81
157
57
33
8
37 $
82
119
26
22
-
92 $ 255 $ 167 $ 160 $ 105 $
17 $
57
74
15
16
-
36 $
57
93
38
24
5
(1) $
(17)
(18)
5
1
4
(8) $
11
(2)
9
(15)
11
-
5
(MILLIONS, EXCEPT AS NOTED) 2018
North America
United States
Canada
Europe
Brazil
Asia
Total
North America
Funds From Operations at our North American business were $93 million versus $74 million in
the prior year due primarily to contribution from our investment in TerraForm Power. On a same store
basis, our portfolio performed in line with the prior year.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 22
Net income attributable to Unitholders decreased by $27 million over the prior year as the above
noted increase in Funds From Operations was more than offset by increased depreciation expense due
to growth in the portfolio.
Europe
Funds From Operations at our European business were $38 million versus $15 million in the prior
year due primarily to the contributions from TerraForm Power’s acquisition of Saeta during the year and
an $8 million gain on the sale of a development project in the United Kingdom. On a same store basis,
improved average revenue per MWh due to stronger market prices was offset by a decrease in
generation due to lower wind resource availability.
Net income attributable to Unitholders increased by $20 million over the prior year due primarily
to the above noted increase in Funds From Operations.
Brazil
Funds From Operations at our Brazilian business were $24 million versus $16 million in the prior
year due primarily to contribution from our investment in TerraForm Global – $12 million of Funds From
Operations and 375 GWh of generation. On a same store basis, higher average revenue per MWh due to
re-contracting initiatives was offset by lower generation as the prior year benefited from above average
wind conditions (13% above long-term average) and the weakening of the Brazilian reais versus the U.S.
dollar.
Net income attributable to Unitholders decreased by $10 million over the prior year as the above
noted increase in Funds From Operations was more than offset by increased depreciation expense due
to growth in the portfolio and foreign exchange.
Asia
Funds From Operations and Net income attributable to Unitholders at our Asian wind business
were $5 million and $4 million, respectively. The business is operating in line with expectations following
our investment in TerraForm Global.
SOLAR OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for solar operations for the year ended
December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA
Generation (GWh) – actual
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Interest expense
Current income taxes
Funds From Operations
Depreciation
Deferred taxes and other
Net (loss) income
2018
724
753
146 $
5
(34)
117
(45)
-
72 $
(40)
1
33 $
2017
53
56
8
-
(2)
6
(3)
(1)
2
(4)
(3)
(5)
$
$
$
Funds From Operations and Net income attributable to Unitholders at our solar business were
$72 million and $33 million, respectively, versus $2 million and a $5 million loss, respectively, in the prior
year. The business is operating in line with expectations following our investments in TerraForm Power
and TerraForm Global. Generation was roughly in line with long-term average.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 23
STORAGE AND OTHER OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for storage and other operations for the
year ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – actual
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Interest expense
Funds From Operations
Depreciation
Deferred taxes and other
Net (loss) income
2018
519
85 $
-
(36)
49
(17)
32 $
(23)
(11)
(2) $
2017
328
59
6
(32)
33
(14)
19
(25)
-
(6)
$
$
$
Funds From Operations at our pumped storage and biomass businesses increased $13 million
due to improved performance at our facility in New England supported by improved capacity pricing and
generation and a full year contribution from our pumped storage facility in the United Kingdom.
Net loss attributable to Unitholders decreased $4 million as the above noted increase in Funds
From Operations was partially offset by the disposal of our Ontario cogeneration facility during the year.
CORPORATE
The following table presents our results for corporate for the year ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Management service costs
Interest expense
Distributions(1)
Funds From Operations
Deferred taxes and other
Net (loss)
(1) Distributions on Preferred Units and Class A Preference Shares.
$
$
$
2018
- $
7
(23)
(16)
(80)
(99)
(64)
(259) $
(1)
(260) $
2017
-
19
(25)
(6)
(82)
(89)
(54)
(231)
(5)
(236)
Management service costs totaling $80 million represents a decrease of $2 million over the prior
year due to the lower market capitalization of our limited partners’ equity relative to the prior year.
Interest expense increased $10 million compared to the prior year as a result of increased
borrowings to fund growth in our business.
Distributions increased $10 million compared to the prior year as a result of the C$250 million
($201 million) Preferred Units issuance completed in the first quarter of 2018.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 24
PROPORTIONATE RESULTS FOR THE YEAR ENDED DECEMBER 31, 2017 AND 2016
The following chart reflects the generation and summary financial figures on a proportionate basis for the year ended December 31:
(GWh)
(MILLIONS)
Actual Generation LTA Generation
Revenues
Adjusted EBITDA
Funds From
Operations
Net (Loss) Income
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Hydroelectric
North America
13,942 11,960 13,059 12,977 $
945 $
819 $
665 $
548 $
486 $
367 $
170 $
128
Brazil
Colombia
Wind
3,426
3,078
3,874
3,761
3,683
2,419
3,488
2,994
243
191
187
192
21,051 17,457 20,421 19,732
1,379
1,198
178
99
942
130
88
766
North America
1,765
1,421
2,019
1,780
161
151
119
115
Europe
Brazil
490
278
571
266
513
245
605
245
2,533
2,258
2,777
2,630
Solar
56
-
53
Storage & Other
328
507
-
-
-
-
-
46
26
233
8
59
-
56
17
224
-
58
1
26
22
167
6
33
(6)
32
13
160
-
31
148
52
686
74
15
16
105
2
19
97
46
510
(3)
(26)
19
186
25
127
74
18
6
98
-
19
9
(15)
11
5
(5)
(6)
47
(8)
1
40
-
1
Corporate
Total
-
-
(15)
(231)
(208)
(236)
(233)
23,968 20,222 23,251 22,362 $ 1,679 $ 1,481 $ 1,142 $
942 $
581 $
419 $
(56) $
(65)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 25
HYDROELECTRIC OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for hydroelectric operations the year ended
December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA
Generation (GWh) – actual
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Interest expense
Current income taxes
Funds From Operations
Depreciation
Deferred taxes and other
Net income
2017
20,421
21,051
1,379 $
15
(452)
942
(240)
(16)
686 $
(388)
(112)
186 $
2016
19,732
17,457
1,198
40
(472)
766
(237)
(19)
510
(400)
17
127
$
$
$
The following table presents our proportionate results by geography for hydroelectric operations
for the year ended December 31:
Actual
Generation (GWh)
Average
revenue
Per MWh
Adjusted
EBITDA
2016
2017
2016
2017
2016
Funds From
Operations
2016
2017
Net
Income
2017
2016
8,030
5,912
6,745 $
5,215
13,942 11,960
3,078
2,419
3,426
3,683
71 $
64
68
71
52
74 $ 360 $ 284 $ 248 $ 165 $
61
68
61
79
305
665
178
99
264
548
130
88
202
367
97
46
238
486
148
52
6 $
164
170
(3)
19
32
96
128
(26)
25
21,051 17,457 $
66 $
69 $ 942 $ 766 $ 686 $ 510 $ 186 $ 127
(MILLIONS, EXCEPT AS NOTED) 2017
North America
United States
Canada
Brazil
Colombia
Total
North America
Funds From Operations in the prior year increased by $119 million over 2016 primarily due to a
2.0 TWh (17%) increase in generation due to strong hydrology, specifically in Canada and New York
where strong inflows persisted throughout the year. Average revenue per MWh was in line with the 2016
as the benefit of stronger market pricing was offset by the final step down in pricing at our Louisiana
facility.
Net income attributable to Unitholders increased by $42 million over 2016 as the increase in
Funds From Operations was partially offset by an increase in deferred tax expense primarily attributable
to the impact of the U.S. tax reform passed at the end of 2017.
Brazil
Funds From Operations in the prior year increased by $51 million over 2016 primarily due to
increased revenues driven by an overall increase in generation. While hydrology in Brazil was lower than
long-term average, our business benefitted from an 11% increase in generation which was driven by the
contribution from a 25 MW development project commissioned in the first quarter as well as a 377 GWh
outage that impacted one of our facilities in the prior year. Average revenue per MWh increased 16% due
to strong market pricing.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 26
Net income attributable to Unitholders increased by $23 million over 2016 due to the above noted
increase in Funds From Operations was partially offset by increased depreciation on our growing asset
base.
Colombia
Funds From Operations increased by $6 million over 2016 as the prior year benefited from a full
year of ownership.
Same store Funds From Operations was in line with 2016 as the benefit of generation that was
6% ahead of long-term average was offset by lower market prices.
Net income attributable to Unitholders decreased by $6 million over 2016 as deferred income
taxes were impacted by a tax rate reduction that occurred in 2016.
WIND OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for wind operations for the year ended
December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA
Generation (GWh) – actual
Revenue
Direct operating costs
Adjusted EBITDA
Interest expense
Current income taxes
Funds From Operations
Depreciation
Deferred taxes and other
Net income (loss)
2017
2,777
2,533
233 $
(66)
167
(61)
(1)
105 $
(122)
22
5 $
2016
2,630
2,258
224
(64)
160
(62)
-
98
(122)
64
40
$
$
$
The following table presents our proportionate results by geography for wind operations for the
year ended December 31:
Actual
Generation (GWh)
2016
2017
Average
revenue
per MWh
2017
2016
Adjusted
EBITDA
2017
2016
Funds From
Operations
2017
2016
Net
Income
2017
2016
658
1,107
1,765
490
278
2,533
452 $
969
1,421
571
266
2,258 $
91 $ 119 $
91
91
94
94
92 $
100
106
98
64
99 $ 167 $ 160 $ 105 $
35 $
80
115
32
13
37 $
82
119
26
22
17 $
57
74
15
16
21 $
53
74
18
6
98 $
11 $
(2)
9
(15)
11
5 $
(7)
54
47
(8)
1
40
(MILLIONS, EXCEPT AS NOTED)
North America
United States
Canada
Europe
Brazil
Total
North America
Funds From Operations were consistent with 2016 as a 24% increase in generation due to
stronger wind resources in Canada and contributions from our investment in TerraForm Power was offset
by a 14% decrease in average revenue per MWh. The average revenue per MWh decreased as 2016
included a $6 million settlement for lost revenue due to wake effect at one our facilities in the United
States.
Net income attributable to Unitholders decreased by $41 million over 2016 due primarily to
depreciation expense relating to the investment in TerraForm Power.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 27
Europe
Adjusting for the 137 MW wind portfolio sold during the first quarter of the prior year, Funds From
Operations increased by $4 million over 2016 to $15 million as a result of the acquisition and
development of 50 MW of additional capacity during the year. Generation of existing assets was slightly
below 2016 due to lower wind resources.
Generation and Funds From Operations were impacted by 106 GWh and $7 million, respectively,
as a result of the aforementioned asset sale.
Net loss attributable to Unitholders decreased by $7 million over the prior year to $20 million as a
result of unrealized hedging losses from our ongoing foreign currency hedging program.
Brazil
Funds From Operations at our Brazilian business was $16 million versus $6 million in 2016. This
increase was driven by a 5% increase in generation due to above average wind resource and a 47%
increase in the average revenue per MWh due to strong market pricing.
Net income attributable to Unitholders increased by $10 million over the prior year primarily due
to the above noted increase in Funds From Operations.
SOLAR, STORAGE AND OTHER OPERATIONS ON PROPORTIONATE BASIS
The following table presents our proportionate results for solar, storage and other operations for
the year ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Generation (GWh) – LTA
Generation (GWh) – actual
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Interest expense
Current income taxes
Funds From Operations
Depreciation
Deferred taxes and other
Net income
2017
53
384
67 $
6
(34)
39
(17)
(1)
21 $
(29)
(3)
(11) $
2016
-
507
58
(1)
(26)
31
(12)
-
19
(18)
-
1
$
$
$
Funds From Operations at our pumped storage business increased $14 million over 2016 due to
the addition of our pumped storage business in the U.K. and improved performance at our facility in New
England.
Our solar business operated in line with expectations after the acquisition of Terra Form Power
was completed during the fourth quarter of 2017.
In 2016, our Ontario cogeneration asset benefitted from a settlement pertaining to the price
escalator for power sold under power purchase agreements contributing $18 million to Funds From
Operations.
Net loss attributable to Unitholders decreased by $10 million over 2016 as the increase in Funds
From Operations was offset by additional depreciation on our growing portfolios and deferred tax
expenses attributable to the U.S. tax reform.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 28
CORPORATE
The following table presents our results for corporate for the year ended December 31:
(MILLIONS, EXCEPT AS NOTED)
Revenue
Other income
Direct operating costs
Adjusted EBITDA
Management service costs
Interest expense
Distributions(1)
Funds From Operations
Deferred taxes and other
Net (loss)
(1) Distributions on Preferred Units and Class A Preference Shares.
2017
- $
19
(25)
(6)
(82)
(89)
(54)
(231) $
(5)
(236) $
2016
1
8
(24)
(15)
(62)
(91)
(40)
(208)
(25)
(233)
$
$
$
Management fees increased primarily due to a higher LP Unit price compared to 2016.
Distributions increased $14 million compared to 2016 as a result of the C$250 million ($190
million) Preferred Units issuance completed in the first quarter of the prior year.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 29
RECONCILIATION OF NON-IFRS MEASURES
The following table reflects Adjusted EBITDA and Funds From Operations and provides a reconciliation to net income (loss) for the year
ended December 31, 2018:
Contribution
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instrument loss
Deferred income tax recovery
Other
Share of earnings from
equity accounted investments
Net income attributable to
non-controlling interests
Net income (loss) attributable
Hydroelectric
North
Wind
North
Attributable to Unitholders
America Brazil Colombia America Europe Brazil
42
-
(9)
219
2
(64)
73
11
(27)
216
4
(94)
(286) (76)
244
5
893
12
Asia
12
-
146
5
and
Other
85
-
(36)
from Attributable
equity
to non-
accounted controlling
interests
investments
1,338
11
(469)
(286)
(7)
86
As per
IFRS
financials(1)
2,982
50
(1,036)
- 1,930
46
7
(4) (34)
(23) (653)
Solar Storage Corporate Total
-
-
619 173
-
-
(172) (22)
(9)
(4)
-
126
-
(38)
(2)
-
157
-
(63)
(1)
-
57
-
(17)
(2)
-
33
-
(9)
-
-
8
-
-
117
-
(4) (45)
1
-
-
49
-
(17)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(16) 1,323
(80)
(80)
(99) (486)
(17)
-
(38)
(26)
(38)
(26)
207
-
-
82
3
-
-
20
900
-
(301)
(16)
-
-
227
(80)
(705)
(30)
(38)
(26)
-
-
(85)
(12)
(97)
-
142
-
443
(231) (136)
-
86
(18)
-
93
(122)
-
24
-
38
(43) (13)
-
-
5
72
(2) (40)
-
32
(23)
-
-
(259) 676
(2) (630)
(1)
(1)
(21)
(1)
1
(3)
-
-
-
-
7
18
(6)
-
-
2
20
(11)
9
2
(1)
(10)
-
-
3
-
(9)
21
(2) (11)
(2)
-
(9)
-
24
(23)
(2)
85
(87)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
96
(3)
(50)
19
(62)
(571)
-
(285)
(571)
(819)
(29)
54
(14)
-
(34)
89
(82)
(62)
-
274
274
(1)
(2)
to Unitholders(2)
189
42
Share of earnings from equity-accounted investments of $68 million is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and
share of earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $297 million is comprised of amounts found on Share of
Funds From Operations attributable to non-controlling interests and Net Income attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
(260)
(18)
33
(2)
87
42
-
3
1
4
5
-
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 30
The following table reflects Adjusted EBITDA and Funds From Operations and provides a reconciliation to net income (loss) for the year
ended December 31, 2017:
Contribution
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instrument loss
Deferred income tax expense
Other
Share of earnings from
equity accounted investments
Net income attributable to
non-controlling interests
Attributable to Unitholders
Hydroelectric
North
Wind
North
America Brazil Colombia America Europe Brazil
26
-
(4)
161
-
(42)
46
-
(20)
191
2
(94)
(281) (77)
243
12
945
1
Solar Storage Corporate
and
Other
59
6
(32)
8
-
(2)
19
(25)
- 1,679
40
(577)
Total
from Attributable
equity
to non-
accounted controlling
interests
investments
1,020
18
(429)
(74)
(11)
28
As per
IFRS
financials(1)
2,625
47
(978)
-
-
665 178
-
-
(180) (18)
(12)
1
-
-
-
-
-
-
-
148
-
486
(220) (142)
(12)
(67)
(17)
(3)
2
(8)
-
-
-
170
-
(3)
-
99
-
(42)
(5)
-
-
-
-
52
(26)
(3)
(10)
6
-
-
19
-
119
-
(45)
-
-
26
-
(10)
(1)
-
22
-
(6)
-
-
-
-
-
74
(90)
-
-
-
-
-
-
-
16
-
15
(25)
(7)
-
-
2
-
1
28
(4)
(14)
5
4
-
-
-
9
-
33
-
(14)
-
-
-
-
-
-
(6) 1,142
(82)
(89)
-
(82)
(407)
(18)
(28)
(26)
(28)
(26)
57
-
-
21
1
-
-
-
-
(22)
-
19
(25)
-
-
(231) 581
-
(539)
(15)
16
(6)
(47)
(25)
(26)
-
-
-
-
-
-
22
2
(3)
12
6
-
(3)
(1)
-
-
2
(4)
(1)
1
(3)
-
-
609
-
(246)
(22)
-
-
-
(341)
-
(265)
(1)
(21)
(1)
-
-
(33)
-
57
(82)
(632)
(39)
(28)
(26)
(22)
(341)
(782)
(46)
(49)
(15)
(33)
288
(56)
Net income (loss) attributable to Unitholders(2)
(1)
Share of earnings from equity-accounted investments of $2 million is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and share
of earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $53 million is comprised of amounts found on Share of Funds
From Operations attributable to non-controlling interests and Net Income attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
(2)
-
-
(15) 11
-
(5)
-
(6)
-
(236)
-
(56)
-
-
288
-
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 31
The following table reflects Adjusted EBITDA and Funds From Operations and provides a reconciliation to net income (loss) for the year
ended December 31, 2016:
Contribution
Hydroelectric
North
America Colombia Brazil
187
13
(70)
192
3
(107)
819
24
(295)
-
548
-
(177)
(4)
-
-
-
-
367
(244)
1
31
(27)
-
88
-
(36)
(6)
-
130
-
(24)
(9)
-
-
-
-
-
-
-
-
97
46
(31) (125)
-
7
(5)
1
6
3
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Unrealized financial instrument loss
Deferred income tax expense (recovery)
Other
Share of earnings from
equity accounted investments
Net income attributable to
non-controlling interests
Net income (loss) attributable to Unitholders(2)
Attributable to Unitholders
Wind
Storage Corporate
Total
from Attributable
equity
accounted
investments
(37)
-
16
to non-
controlling
As per
IFRS
interests financials(1)
2,452
64
(1,038)
1,008
17
(468)
1
8
1,481
47
(24) (586)
North
and
America Europe Brazil Other
58
(1)
(26)
17
-
(4)
56
-
(24)
151
-
(36)
-
115
-
(41)
-
-
32
-
(14)
-
-
13
-
(7)
-
-
-
-
-
-
-
-
-
-
-
31
-
(12)
-
-
-
-
-
-
(15) 942
(62)
(62)
(91) (402)
(19)
-
(15)
(25)
(15)
(25)
21
-
-
12
-
-
-
-
-
(12)
557
-
(216)
(25)
-
-
-
(316)
-
(252)
-
19
(18)
21
(62)
(606)
(44)
(15)
(25)
(12)
(316)
(781)
4
97
(46)
-
(9)
-
74
(80)
-
49
4
-
18
(38)
-
6
6
-
6
(4)
-
-
(1)
-
19
(18)
2
-
(2)
-
-
(208) 419
-
-
(21)
(4)
(540)
4
78
(26)
-
-
11
-
-
(2)
(9)
-
-
-
-
-
-
-
-
-
251
(65)
(1) Share of earnings from equity-accounted investments of $nil is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and share of
-
(233)
-
(65)
-
(8)
-
(26)
-
128
251
-
-
47
-
25
-
1
-
1
-
earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $65 million is comprised of amounts found on Share of Funds
From Operations attributable to non-controlling interests and Net Income attributable to non-controlling interests.
(2) Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net
income (loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 32
The following table reconciles net income (loss) attributable to Limited partners’ equity and earnings (loss) per LP Unit, the most directly
comparable IFRS measures, to Funds From Operations, Funds From Operations per Unit and Adjusted EBITDA, all non-IFRS financial metrics for
the years indicated:
(MILLIONS, EXCEPT AS NOTED)
Net income (loss) attributable to:
Limited partners' equity
General partnership interest in a holding
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
Per unit
$
24 $
(32) $
(36) $
2 $
58 $
0.13 $
(0.18) $
(0.23) $
0.01 $
0.42
subsidiary held by Brookfield
1
(1)
-
-
1
Participating non-controlling interests -
in a holding subsidiary - Redeemable/
Exchangeable units held by Brookfield
Net income (loss) attributable to Unitholders
Depreciation
Foreign exchange and
unrealized financial instruments loss (gain)
Deferred income tax (recovery) expense
Other
17
$
42 $
630
2
(85)
87
Funds From Operations
Distributions attributable to:
Preferred limited partners equity
Preferred equity
Current income taxes
Interest expense - borrowings
Management service costs
Proportionate Adjusted EBITDA
Attributable to non-controlling interests
Consolidated Adjusted EBITDA
Weighted average Units outstanding(1)
(1)
(23)
(56) $
539
(29)
(65) $
540
1
3 $
462
55
114 $
456
-
-
-
-
-
-
-
-
-
-
0.13 $
2.02
(0.18) $
1.76
(0.23) $
1.87
0.01 $
1.68
0.42
1.68
47
25
26
(4)
(78)
26
8
(78)
72
(12)
(29)
31
0.01
(0.27)
0.27
0.15
0.08
0.09
(0.01)
(0.27)
0.09
0.03
(0.28)
0.25
(0.04)
(0.11)
0.12
$
676 $
581 $
419 $
467 $
560 $
2.16 $
1.90 $
1.45 $
1.69 $
2.07
38
26
17
486
80
28
26
18
407
82
1,323
1,142
900
609
15
25
19
402
62
942
557
1
30
15
346
48
907
317
-
38
6
353
51
1,008
211
2,223
1,751
1,499
1,224
1,219
312.6
305.8
288.7
275.6
271.1
Includes GP interest, Redeemable/Exchangeable partnership units, and LP Units.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 33
CONTRACT PROFILE
We operate the business on a largely contracted basis to provide a high degree of predictability in
Funds From Operations. We 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,
the legislated requirements in some areas to diversify away from fossil fuel based generation and
because renewables are becoming increasingly cost competitive.
In Brazil and Colombia, we also expect power prices will continue to be supported by the need to
build new supply over the medium- to long-term to serve growing demand. In these markets, contracting
for power is the only current mechanism to buy and sell power, and therefore we would expect to capture
rising prices as we re-contract our power over the medium-term.
The following table sets out our contracts over the next five years for generation output in North
America, Europe and certain other countries, assuming long-term average on a proportionate basis. The
table excludes Brazil and Colombia, where we would expect the energy associated with maturing
contracts to be re-contracted in the normal course given the construct of the respective power markets. In
these countries we currently have a contracted profile of approximately 90% and 70%, respectively, of the
long-term average and we would expect to maintain this going forward. Overall, our portfolio has a
weighted-average remaining contract duration of 14 years (on a proportionate basis).
(GWh, except as noted)
Hydroelectric
North America
United States(1)
Canada(1)
Wind
North America
United States
Canada
Europe
Asia(2)
Solar(2)
Contracted on a proportionate basis
Uncontracted on a proportionate basis
Contracted generation as a % of
2019
2020
2021
2022
2023
6,683
4,048
10,731
7,191
3,876
11,067
5,159
2,637
7,796
4,446
2,591
7,037
4,446
2,512
6,958
2,011
1,269
3,280
967
266
4,513
977
16,221
2,407
18,628
1,943
1,269
3,212
913
266
4,391
977
16,435
2,193
18,628
1,867
1,269
3,136
906
266
4,308
977
13,081
5,547
18,628
1,862
1,269
3,131
900
266
4,297
977
12,311
6,317
18,628
1,862
1,269
3,131
892
266
4,289
977
12,224
6,404
18,628
total generation on a proportionate basis
87 %
88 %
70 %
66 %
66 %
Price per MWh - total generation on a
proportionate basis
(1)
(2)
Includes generation of 1,995 GWh for 2019 and 2,405 GWh for 2020 secured under financial contracts.
Includes the proportionate contracted generation of eleven solar facilities (74 GWh) and one wind facility (16 GWh) that are
classified as Assets held for sale.
$
80 $
80 $
90 $
93 $
93
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 34
Weighted-average remaining contract durations on a proportionate basis are 17 years in North
America, 8 years in Brazil, 2 years in Colombia, 12 years in Europe and 17 years across our remaining
jurisdictions.
In North America, over the next five years, a number of contracts will expire at our hydroelectric
facilities. Based on current market prices for energy and ancillary products, we do not foresee a negative
impact to cash flows from contracts expiring over the next five years.
In our Brazilian and Colombian portfolios, we continue to focus on securing long-term contracts
while maintaining a certain percentage of uncontracted generation so as to mitigate hydrology risk.
The majority of Brookfield Renewable’s long-term power purchase agreements within our North
American and European businesses are with investment-grade rated or creditworthy counterparties. The
economic exposure of our contracted generation on a proportionate basis is distributed as follows: power
authorities (36%), distribution companies (23%), industrial users (23%) and Brookfield (18%). The
decrease of our economic exposure to Brookfield from 42% as at December 31, 2017 is the result of
amendments to certain related party agreements and the transfer of certain power purchase and revenue
support agreements in connection with the energy marketing internalization which was assumed to take
place on January 1, 2019 (see Note 27 – Related party transactions in the audited annual consolidated
financial statements).
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 35
PART 5 - LIQUIDITY AND CAPITAL RESOURCES
CAPITALIZATION
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 with no maintenance
covenants. Almost 95% of our debt is either investment grade rated or sized to investment grade and
approximately 80% of debt is project level.
The following table summarizes our capitalization as at December 31:
(MILLIONS, EXCEPT AS NOTED)
Corporate borrowings(1)
Non-recourse borrowings
Deferred income tax liabilities, net(2)
Equity
Non-controlling interest
Preferred equity
Preferred limited partners' equity
Unitholders equity
Total capitalization
Corporate
2018
Consolidated
2017
2018
$
2,334 $
2,552 $
2,334 $
-
-
8,384
2017
2,552
8,774
2,334
2,552
10,718
11,326
-
-
568
707
-
-
616
511
4,049
3,411
8,129
6,298
568
707
616
511
7,802
6,857
7,802
6,857
$ 11,411 $ 10,536 $ 31,973 $ 29,019
Debt to total capitalization
39%
(1) Corporate borrowings are unsecured and guaranteed by Brookfield Renewable. Corporate credit facility amounts are
guaranteed by Brookfield Renewable and include $6 million (2017: $202 million) borrowed under Private Funds credit facilities.
34%
24%
20%
(2) Deferred income tax liabilities less deferred income tax assets.
AVAILABLE LIQUIDITY
The following table summarizes the available liquidity as at December 31:
(MILLIONS)
Brookfield Renewable's share of cash and cash equivalents(1)
Investments in equity securities
Corporate credit facilities
Authorized credit facilities(2)
Draws on credit facilities(2)
Issued letters of credit
$
2018
169 $
117
2,100
(721)
(8)
1,371
2017
195
159
2,090
(685)
(193)
1,212
Available portion of corporate credit facilities
Available portion of subsidiary credit facilities
on a proportionate basis
Available liquidity
(1)
131
1,697
In 2017, amounts were net of cash and cash equivalents on TerraForm Global's balance sheet which, under the indenture,
were not available for distribution.
218
1,875 $
$
(2) Amounts are guaranteed by Brookfield Renewable. Excludes $6 million (2017: $202 million) borrowed under Private Funds
credit facilities.
We operate with sufficient liquidity to enable us to fund growth initiatives, capital expenditures,
distributions and withstand sudden adverse changes in economic circumstances or short-term
fluctuations in generation. We maintain a strong, investment grade balance sheet characterized by a
conservative capital structure, access to multiple funding levers including a focus on capital recycling on
an opportunistic basis, and diverse sources of capital. Principal sources of liquidity are cash flows from
operations, our credit facilities, up-financings on non-recourse borrowings and proceeds from the
issuance of various securities through public markets.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 36
BORROWINGS
During the year ended December 31, 2018, we successfully executed $3.7 billion of non-recourse
financings, which reduced the weighted-average cost of our project debt to 5.4% while maintaining the
weighted-average duration of our project debt at ten years.
The composition of debt obligations, overall maturity profile, and average interest rates
associated with our borrowings and credit facilities on a proportionate basis as at December 31 is
presented in the following table:
(MILLIONS, EXCEPT AS NOTED)
Corporate borrowings
Medium term notes
Credit facilities(1)
Proportionate non-recourse borrowings
Hydroelectric
Wind(2)
Solar(2)
Storage and other
Proportionate unamortized financing
fees, net of unamortized premiums
Subsequent financings
Equity-accounted borrowings
Non-controlling interests
2018
2017
Weighted-average
Weighted-average
Interest
Term
Interest
Term
rate (%)
(years)
Total
rate (%)
(years)
Total
4.4
3.3
5.8
4.7
5.2
5.4
5.4
6.5 $ 1,613
4.4
9.4
9.6
727
3,640
1,786
10.9
1,022
6.0
9.5
249
6,697
$ 9,037
4.5
2.6
6.1
5.1
6.0
5.3
5.8
6.4 $ 1,670
4.5
887
10.5
11.3
10.5
7.1
3,741
1,286
456
277
10.5
5,760
$ 8,317
(48)
8,989
-
(1,972)
3,701
(47)
8,270
(33)
(834)
4,363
As per IFRS Statements
(1)
$ 11,766
Draws on our corporate credit facilities are presented based on available capacity of our longest dated facilities irrespective of
the credit facility drawn.
2018 amounts exclude $60 million of proportionate debt associated with our portfolios in South Africa and Malaysia that are
classified as held for sale as at December 31, 2018. Proportionate debt outstanding associated with these portfolios as at
December 31, 2017 was $52 million.
$ 10,718
(2)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 37
The following table summarizes our undiscounted principal repayments and scheduled
amortization on a proportionate basis as at December 31, 2018:
Amortizing debt principal repayments
Non-recourse borrowings
($, MILLIONS)
Debt principal repayments
Corporate borrowings(1)
Non-recourse borrowings
Credit facilities
Hydro
Wind
Solar
Storage and other
Hydro
Wind
Solar
Storage and other
Total
Interest payable(2)
Corporate borrowings(1)
Non-recourse borrowings
Hydro
Wind
Solar
Storage and other
2019
2020
2021
2022
2023 Thereafter
Total
-
330
-
293
727
990
2,340
-
43
-
-
-
-
348
-
-
-
43
348
73
111
46
3
233
276
47
106
38
3
194
872
7
7
-
-
58
72
60
106
40
3
209
281
-
177
96
53
-
113
560
47
52
-
-
120
1,676
2,811
286
233
170
429
338
228
326
772
2,365
3,926
65
106
41
3
215
834
59
160
99
4
525
708
360
5
829
1,297
624
21
322
1,821
1,598
2,771
4,953
9,037
94
95
78
71
64
208
610
387
199
171
68
825
361
189
166
68
784
337
177
158
67
739
317
234
149
14
714
261
133
119
18
531
1,238
2,901
451
574
38
1,383
1,337
273
2,301
5,894
Total
(1)
(2)
6,504
Draws on our corporate credit facilities are presented based on available capacity of our longest dated facilities irrespective of
the credit facility drawn.
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 estimated interest rates.
2,509
817
919
879
785
595
We remain focused on refinancing near-term facilities on acceptable terms and maintaining a
manageable maturity ladder. We do not anticipate material issues in addressing our borrowings through
2023 on acceptable terms and will do so opportunistically based on the prevailing interest rate
environment.
As part of the TerraForm Global transaction, Brookfield Renewable acquired assets with non-
recourse financings that were in default prior to the acquisition. As at December 31, 2018, the loans had
outstanding principal amounts totaling $183 million, and mature between 2026 and 2031. These loans
have remained not in compliance with certain covenants due to conditions that existed prior to the
acquisition of TerraForm Global, including issues with contractors under engineering, procurement and
construction contracts. The loan balances relating to the project debts in South Africa have been
classified as Liabilities directly associated with assets held for sale. See Note 4 – Assets held for sale in
our audited annual consolidated financial statements. The remaining balances have been classified as
current as at December 31, 2018 on our IFRS financial statements. Brookfield Renewable is currently
working with all the lenders to cure such defaults and release the restrictions placed on the projects. As
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 38
we expect a successful outcome, we have presented these loans according to their original maturity date
in the above maturity table. These loans have a total outstanding balance as at December 31, 2018 of
$13 million. Except for the aforementioned defaults, Brookfield Renewable complied with all material
financial covenants as of December 31, 2018.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The following table summarizes the key items in the audited annual 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
2018
2017
2016
$
1,103 $
928 $
(1,080)
(624)
(17)
(27)
(328)
3
632
2,709
(3,191)
10
160
(Decrease) increase in cash and cash equivalents
$
(618) $
576 $
Operating Activities
Cash flows provided by operating activities totaled $1,103 million for the year ended December
31, 2018, a $175 million increase from 2017. The increase in cash flows provided by operating activities
over the same period in the prior year was driven primarily by the contribution from growth in our portfolio,
offset partially by the cash flow impact of lower generation relative to the prior year from our hydroelectric
business segment.
Cash flows provided by operating activities for the year ended December 31, 2017 totaled $928
million, an increase of $296 million over the year ended December 31, 2016. The increase was primarily
attributable to improved performance of our business following a return to normal hydrology conditions
and the advancement of our organic growth initiatives and contributions from new acquisitions.
The net change in working capital balances shown in the audited annual 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
Financing Activities
$
2018
(122) $
32
22
$
(68) $
2017
(40) $
32
(17)
(25) $
2016
30
(160)
(7)
(137)
Cash flows used in financing activities totaled $1,080 million for the year ended December 31,
2018. We issued $3.3 billion and repaid $3.5 billion of long-term debt, for a net repayment of $266 million
during the year which was primarily related to scheduled amortizing debt repayments. We completed the
sale of a 25% non-controlling interest in a portfolio of select Canadian hydroelectric assets in the fourth
quarter of 2018 for proceeds of $300 million. To optimize our capital structure and enhance our liquidity
position, we issued Preferred Units during the first quarter of 2018 for net proceeds of $196 million.
Distributions of $553 million were paid to non-controlling interests of our operating subsidiaries, of which
$107 million is attributable to the growth in our portfolio following the acquisition of TerraForm Global in
the prior year that was made along with our institutional investors.
For
the year ended December 31, 2018, distributions paid
to LP Unitholders and
Redeemable/Exchangeable Partnership Unitholders were $643 million. We increased our distributions to
$1.96 per LP Unit, an increase of $0.09 per LP Unit which took effect in the first quarter of 2018. The
distributions paid to preferred equity and preferred limited partners’ equity totaled $63 million.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 39
Cash flows used in financing activities totaled $27 million for the year ended December 31, 2017.
We issued $1.9 billion and repaid $1.6 billion of long-term debt, for a net borrowing of $267 million during
the year which was primarily related to funding the growth in our portfolio and our project-level financing
initiatives. The capital provided by participating non-controlling interests – in operating subsidiaries relates
to the growth in our portfolio with our institutional partners and amounted to $294 million. To fund growth
in our portfolio, capital markets activities resulted in the issuance of LP Units and Preferred Units
providing net proceeds of $598 million. Distributions of $539 million paid to Participating non-controlling
interests – in operating subsidiaries was primarily due to higher dividends paid out of our Colombian
business and the sale of our Irish wind portfolio.
For
the year ended December 31, 2017, distributions paid
to LP Unitholders and
Redeemable/Exchangeable Partnership Unitholders were $591 million. We increased our distributions to
$1.87 per LP Unit, an increase of $0.09 per LP Unit which took effect in the first quarter of 2017. The
distributions paid to preferred equity and preferred limited partners’ equity totaled $51 million.
Cash flows provided by financing activities totaled $2,709 million for the year ended December
31, 2016. Long-term debt – borrowings totaling $3,477 million were related to the growth in our portfolio,
our subsidiary financing initiatives and the issuance of corporate medium-term notes. Long-term debt –
repayments totaling $1,975 million were related to the repayment of our Series 6, medium-term notes
upon maturity and our subsidiary financing initiatives. The capital provided by participating non-controlling
interests – in operating subsidiaries relates to the growth in our portfolio with our institutional partners and
amounted to $2,621 million. An amount of $1,540 million was paid for the shares owned by public
shareholders of Isagen, in regards to the mandatory tender offers (“MTOs”), which included $6 million in
related acquisition costs. The issuance of LP Units and Preferred Units provided net proceeds of $657
million and $147 million, respectively.
For the year ended December 31, 2016, distributions paid to unitholders of Brookfield Renewable
or BRELP were $522 million. We increased our distributions to $1.78 per LP Unit, an increase of $0.12
per LP Unit which took effect in the first quarter of 2016. The distributions paid to preferred equity,
preferred limited partners’ equity and participating non-controlling interests - in operating subsidiaries
totaled $156 million.
Investing Activities
Cash flows used in investing activities totaled $624 million for the year ended December 31,
2018. During the second quarter of 2018, our equity-accounted interest in TerraForm Power increased
from 16% to 30% from an incremental $420 million investment. Our continued investment in our property,
plant and equipment was $235 million. The cash used to acquire a 49 MW solar and wind portfolio in
South Africa in the first quarter and a 23 MW wind portfolio in Ireland in the fourth quarter of 2018 totaled
$56 million, net of cash acquired.
Cash flows used in investing activities totaled $328 million for the year ended December 31,
2017. Our acquisitions of TerraForm Global and an Irish wind facility along with investments in TerraForm
Power and a European storage portfolio, totaled $62 million, net of cash acquired. Our continued
investment in our property, plant and equipment was $355 million. Proceeds from the sale of the Irish
wind facility were $150 million.
Cash flows used in investing activities for the year ended December 31, 2016 totaled $3,191
million. Our investment in Isagen, a hydroelectric portfolio in Brazil, a hydroelectric portfolio in
Pennsylvania and a wind development project in Ireland totaled $2,769 million, net of cash acquired. Our
continued investment in our property, plant and equipment was $369 million. Our investment in available-
for-sale securities amounted to $60 million.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 40
SHARES AND UNITS OUTSTANDING
Shares and units outstanding as at December 31 are as follows:
Class A Preference Shares(1)
Preferred Units(2)
Balance, beginning of year
Issuance
Balance, end of year
GP interest
2018
2017
31,035,967
31,035,967
27,885,496
10,000,000
37,885,496
17,885,496
10,000,000
27,885,496
2,651,506
2,651,506
Redeemable/Exchangeable partnership units
129,658,623
129,658,623
LP Units
Balance, beginning of year
Issuance
Distribution reinvestment plan
Repurchase for cancellation
Balance, end of year
180,388,361
166,839,324
-
13,247,000
289,641
(1,856,798)
302,037
-
178,821,204
180,388,361
Total LP Units on a fully-exchanged basis(3)
310,046,984
(1) Class A Preference Shares are broken down by series as follows: 5,449,675 Series 1 Class A Preference Shares are
outstanding; 4,510,389 Series 2 Class A Preference Shares are outstanding; 9,961,399 Series 3 Class A Preference Shares
are outstanding; 4,114,504 Series 5 Class A Preference Shares are outstanding; and 7,000,000 Series 6 Class A Preference
Shares are outstanding.
308,479,827
(2) Preferred Units are broken down by series and certain series are convertible on a one for one basis at the option of the holder
as follows: 2,885,496 Series 5 Preferred Units are outstanding; 7,000,000 Series 7 Preferred Units are outstanding (convertible
for Series 8 Preferred Units beginning on January 31, 2021); 8,000,000 Series 9 Preferred Units are outstanding (convertible
for Series 10 Preferred Units beginning on July 31, 2021); 10,000,000 Series 11 Preferred Units are outstanding (convertible for
Series 12 Preferred Units beginning on April 30, 2022); and 10,000,000 Series 13 Preferred Units are outstanding (convertible
for Series 14 Preferred Units beginning on April 30, 2023).
(3) The fully-exchanged amounts assume the exchange of all Redeemable/ Exchangeable partnership units for LP Units.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 41
DIVIDENDS AND DISTRIBUTIONS
The following table summarizes the dividends and distributions declared and paid, for the year
ended December 31:
(MILLIONS)
Class A Preference Shares
Preferred Units
Participating non-controlling
Declared
Paid
2018 2017 2016 2018 2017 2016
$ 26 $ 26 $ 25 $ 26 $ 25 $ 25
$ 38 $ 28 $ 15 $ 37 $ 26 $ 12
interests - in operating subsidiaries
$ 553 $ 539 $ 119 $ 553 $ 539 $ 119
GP Interest and incentive distributions
$ 45 $ 35 $ 24 $ 44 $ 34 $ 23
Redeemable/Exchangeable Partnership Units
$ 255 $ 243 $ 232 $ 254 $ 242 $ 230
LP Units
$ 355 $ 328 $ 281 $ 345 $ 315 $ 269
LP Unitholder distributions per unit on an annualized basis were increased as follows:
Date of
Increase
February 2015
February 2016
February 2017
February 2018
February 2019
Amount of
Increase
$0.11
$0.12
$0.09
$0.09
$0.10
CONTRACTUAL OBLIGATIONS
Annual
Distribution
$1.66
$1.78
$1.87
$1.96
$2.06
Distribution
Effective Date
March 2015
March 2016
March 2017
March 2018
March 2019
Please see Note 26 – Commitments, contingencies and guarantees in the audited annual
consolidated financial statements, for further details on the following:
• Commitments – Water, land, and dams usage agreements, and agreements and conditions
on committed acquisitions of operating portfolios and development projects;
• Contingencies – Legal proceedings, arbitrations and actions arising in the normal course of
business, and providing for letters of credit;
• Guarantees – Nature of all the indemnification undertakings.
OFF-STATEMENT OF FINANCIAL POSITION ARRANGEMENTS
Other than the available portion of credit facilities disclosed above, Brookfield Renewable has no
off-statement of financial position financing arrangements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 42
PART 6 - SELECTED ANNUAL AND QUARTERLY INFORMATION
HISTORICAL OPERATIONAL AND FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Operational information:
Capacity (MW)
Total generation (GWh)
2018
2017
2016
2015
2014
17,419
16,369
10,731
7,284
6,707
Long-term average generation
Actual generation
51,971
52,056
42,334
43,385
38,982
34,071
24,467
23,332
22,315
22,548
Proportionate generation (GWh)
Long-term average generation
Actual generation
Average revenue ($ per MWh)
Additional financial information:
Net income (loss) attributable to
Unitholders(1)
Basic earnings (loss) per LP Unit(2)
Consolidated Adjusted EBITDA(3)(4)
Proportionate Adjusted EBITDA(3)(4)
Funds From Operations(3)
Funds From Operations per Unit(1)(3)
Distribution per LP Unit
AS AT DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Property, plant and equipment,
at fair value
Equity-accounted investments
Total assets
Total borrowings
Deferred income tax liabilities
Other liabilities
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
Preferred equity
Preferred limited partners' equity
Limited partners' equity
25,844
25,753
75
23,249
23,968
70
22,362
20,222
73
18,749
17,662
73
17,942
18,173
78
$
42 $
(56) $
(65) $
3 $
0.13
2,223
1,323
676
2.16
1.96
(0.18)
1,751
1,142
581
1.90
1.87
(0.23)
1,499
942
419
1.45
1.78
0.01
1,224
907
467
1.69
1.66
114
0.42
1,219
1,008
560
2.07
1.55
2018
2017
2016
2015
2014
$ 29,025 $ 27,096 $ 25,257 $ 18,358 $ 18,566
273
19,849
197
19,507
721
30,904
1,569
34,103
206
27,737
10,718
4,140
2,039
11,766
3,588
1,268
10,182
3,802
1,081
7,338
2,695
711
7,678
2,637
653
8,129
6,298
5,589
2,587
2,062
66
58
55
52
59
3,252
568
707
4,484
2,843
616
511
3,956
2,680
576
324
3,448
2,559
610
128
2,827
2,865
728
-
3,167
Total liabilities and equity
Debt to capitalization
(1) Unitholders and per Unit include holders of the GP interest, Redeemable/Exchangeable partnership units, and LP Units.
(2) For the year ended December 31, 2018, weighted average LP Units, Redeemable/Exchangeable partnership units and GP
30,904
40%
19,507
39%
34,103
34%
27,737
38%
19,849
40%
interest totaled 312.6 million (2017: 305.8 million, 2016: 288.7 million, 2015: 275.6 million and 2014: 271.1 million).
(3) Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”. Comparative figures have been
conformed to current year’s presentation.
(4) Comparative figures have been conformed to the current year’s presentation.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 43
SUMMARY OF HISTORICAL QUARTERLY RESULTS
The following is a summary of unaudited quarterly financial information for the last twelve consecutive quarters on a consolidated basis:
2018
2017
2016
(MILLIONS, EXCEPT AS NOTED)
Total Generation (GWh) - LTA
Total Generation (GWh) - actual
Proportionate Generation (GWh) - LTA
Proportionate Generation (GWh) - actual
Revenues
Net income (loss) attributable
to Unitholders
Basic earnings (loss) per LP Unit
Consolidated Adjusted EBITDA
Proportionate Adjusted EBITDA
Funds From Operations
Funds From Operations per Unit
Distribution per LP Unit
Q4
Q1
Q3
Q4
Q2
13,485 12,113 13,521 12,852 12,198
14,445 11,609 13,122 12,880 11,913
6,030
6,935
5,890
6,455
Q1
8,843
9,029
5,341
5,896
$ 780 $ 674 $ 735 $ 793 $ 657 $ 608 $ 683 $ 677 $ 571 $ 580 $ 627 $ 674
Q4
9,098 10,674 10,364 10,319
8,728
9,370 11,618 10,484
5,739
5,889
6,277
5,053
4,734
6,161
6,719
5,198
Q2
9,092 10,728
8,792
7,522
6,214
5,068
5,197
4,395
6,351
6,694
6,602
7,052
5,956
5,552
Q3
Q3
Q2
Q1
91
0.29
604
371
206
0.66
(55)
(0.18)
494
277
105
0.33
(2)
(0.01)
543
324
172
0.55
8
0.03
582
351
193
0.62
(67)
(0.22)
454
296
143
0.46
(43)
(0.14)
381
232
91
0.29
38
0.13
460
312
181
0.61
16
0.05
456
302
166
0.55
(47)
(0.16)
326
189
54
0.18
(33)
(0.12)
335
213
73
0.24
(28)
(0.11)
380
237
105
0.37
0.490
0.490
0.490
0.490
0.468
0.468
0.468
0.468
0.445
0.445
0.445
43
0.16
458
303
187
0.68
0.445
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 44
PROPORTIONATE RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31
The following chart reflects the generation and summary financial figures on a proportionate basis for the three months ended December 31:
(GWh)
(MILLIONS)
Actual Generation LTA Generation
Revenues
Adjusted EBITDA
Funds From
Operations
Net Income (Loss)
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Hydroelectric
North America
3,604
3,076
3,065
3,143 $
238 $
219 $
164 $
145 $
121 $
100 $
59 $
(28)
Brazil
Colombia
Wind
North America
Europe
Brazil
Asia
Solar
Storage & Other
Corporate
Total
902
982
867
978
996
935
978
935
5,488
4,921
4,996
5,056
808
264
153
43
648
128
74
-
924
268
200
36
693
146
82
-
59
56
353
61
27
9
3
1,268
850
1,428
921
100
184
112
-
56
63
-
178
53
-
-
-
-
40
23
-
65
51
335
40
35
239
43
26
214
33
24
178
33
14
147
(2)
46
103
52
11
7
-
70
8
17
-
48
30
7
2
87
30
16
(1)
36
7
7
-
50
6
16
10
29
25
4
2
60
15
9
22
6
5
-
33
2
12
21
17
2
7
47
14
4
(56)
(51)
(77)
(50)
(6)
7
(27)
22
(9)
3
-
16
(5)
(1)
7,052
5,890
6,602
6,030 $
516 $
430 $
371 $
296 $
206 $
143 $
91 $
(67)
For the three months ended December 31, 2018, Funds From Operations were $206 million versus $143 million in the prior year due to
contributions from growth in our portfolio and improved generation across our portfolio (20% over the same period of the prior year and 7% above long-
term average) due to strong hydrology during the fourth quarter. On a same-store basis average realized revenue per MWh decreased slightly as the
benefit of inflation indexation of our contracts and re-contracting efforts was more than offset by the impact of generation mix (generation was highest on
lower price contracts) and a stronger U.S. dollar.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 45
RECONCILIATION OF NON-IFRS MEASURES
The following table reflects Adjusted EBITDA and Funds From Operations and provides reconciliation to net income (loss) for the three
months ended December 31, 2018:
Contribution
Hydroelectric
Wind
North
North
America Brazil Colombia America Europe Brazil Asia
Attributable to Unitholders
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instruments gain (loss)
Deferred income tax recovery (expense)
Other
Share of earnings from
equity accounted investments
238
6
59
2
(80) (21)
-
164
-
(44)
1
-
40
-
(5)
(2)
-
-
-
-
-
-
-
-
121
33
(61) (33)
3
(2)
(2)
(1)
-
(1)
56
3
(24)
-
35
-
(9)
(2)
-
-
-
-
24
(4)
6
22
(2)
Solar Storage Corporate Total
and
Other
23
-
(7)
3
-
40
1
(1) (11)
from Attributable
equity
accounted
investments
516
28
-
5
(6) (173)
(89)
(2)
23
to non-
controlling
As per
IFRS
interests financials(1)
780
24
(276)
(2)
(126)
353
-
2
-
-
30
-
(1) (15)
1
-
-
16
-
(7)
-
-
-
(1) 371
(16)
(16)
(24) (132)
(2)
-
(9)
(6)
(9)
(6)
-
-
-
-
-
-
68
-
-
28
-
-
-
8
233
-
(67)
(8)
-
-
76
(16)
(171)
(10)
(9)
(6)
-
-
(28)
(3)
(31)
-
15
(16)
-
9
(6)
-
-
(56) 206
(1) (170)
(6)
22
(1)
-
-
-
1
-
(14)
-
(6)
(4)
71
(12)
-
-
-
-
34
3
(52)
4
11
(155)
-
(72)
(155)
(208)
2
72
(2)
1
91
(10)
-
11
27
10
61
1
(14)
(7)
-
48
-
(19)
-
-
30
-
(5)
-
-
-
-
-
-
-
9
-
(2)
-
7
-
(3)
-
-
-
-
-
25
-
29
(33) (13)
-
4
(3)
(1)
29
(3)
3
-
2
-
1
-
-
-
-
-
-
-
2
-
5
-
-
-
-
-
-
-
Net income attributable to
non-controlling interests
Net income (loss) attributable to Unitholders(2)
(1)
-
91
Share of earnings from equity-accounted investments of $56 million is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and
share of earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $155 million is comprised of amounts found on Share of
Funds From Operations attributable to non-controlling interests and Net loss attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
-
(77)
-
17
-
14
-
46
-
(2)
-
59
-
21
-
91
-
-
-
2
-
7
-
4
-
-
(2)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 46
The following table reflects Adjusted EBITDA and Funds From Operations and provides reconciliation to net income (loss) for the three
months ended December 31, 2017:
Contribution
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instrument gain (loss)
Deferred income tax recovery (expense)
Other
Share of earnings from
equity accounted investments
Net loss attributable to
Hydroelectric
North
Wind
North
America Brazil Colombia America Europe Brazil
Attributable to Unitholders
from Attributable
Solar Storage Corporate Total
219
-
65
2
(74) (24)
-
145
-
(45)
-
-
43
-
(6)
(4)
-
-
-
-
-
-
-
33
-
100
(57) (36)
(5)
(62)
(4)
-
(1)
(2)
51
-
(25)
-
26
-
(10)
(2)
-
-
-
-
14
(2)
(2)
(1)
(2)
and
Other
17
6
(7)
-
16
-
(4)
-
-
-
-
-
12
(6)
-
-
(7)
8
-
(2)
6
-
(3)
(1)
-
-
2
(4)
(1)
1
(3)
equity
accounted
investments
430
26
-
18
(8) (160)
(39)
(11)
13
-
296
-
10
(24)
(24)
(23) (108)
(7)
-
(7)
(7)
(7)
(7)
37
-
-
12
1
-
-
-
-
(13)
-
-
(51) 143
-
(143)
2
(2)
1
(6)
(32)
(29)
-
-
13
1
(3)
14
to non-
controlling
As per
IFRS
interests financials(1)
657
22
(262)
266
7
(115)
-
158
-
(59)
(6)
-
-
-
(93)
-
(52)
3
3
(23)
37
(24)
(155)
(12)
(7)
(7)
(13)
(93)
(182)
(2)
(32)
(38)
(25)
52
-
(16)
11
-
(4)
7
-
-
-
36
-
(14)
-
-
7
-
(1)
-
-
7
-
(2)
-
-
-
-
-
-
-
-
22
(28)
-
32
(4)
-
6
(8)
-
1
(8)
-
-
-
-
5
(2)
-
-
-
-
-
-
-
-
-
-
-
-
-
(25)
-
non-controlling interests
Net income (loss) attributable to Unitholders(2)
(1)
69
(67)
Share of loss from equity-accounted investments of $1 million is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and share of
earnings lines. Net loss attributable to participating non-controlling interests – in operating subsidiaries of $24 million is comprised of amounts found on Share of Funds From
Operations attributable to non-controlling interests and Net loss attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
-
(28)
-
(67)
-
(50)
-
(1)
-
(9)
-
(6)
-
(5)
-
7
-
22
69
-
-
-
-
3
(2)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 47
The following table reconciles net income (loss) attributable to Limited partners’ equity and
earnings (loss) per LP Unit, the most directly comparable IFRS measures, to Funds From Operations,
and Funds From Operations per Unit, both non-IFRS financial metrics for the three months ended
December 31:
(MILLIONS, EXCEPT AS NOTED)
Net income (loss) attributable to:
Limited partners' 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
Net income (loss) attributable to Unitholders
Adjusted for proportionate share of:
Depreciation
Foreign exchange and
unrealized financial instruments loss
Deferred income tax (recovery) expense
Other
Funds From Operations
Weighted average Units outstanding(1)
(1)
Includes GP interest, Redeemable/Exchangeable partnership units, and LP Units.
2018
2017
2018
2017
Per unit
$
52 $
(38) $
0.29 $
(0.22)
2
(1)
37
(28)
-
-
-
-
$
91 $
(67) $
0.29 $
(0.22)
170
143
0.54
0.46
4
(71)
6
32
0.01
(0.23)
12
206 $
29
143 $
0.05
0.66 $
$
0.02
0.10
0.10
0.46
312.2
312.6
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 48
PART 7 - BUSINESS RISKS AND RISK MANAGEMENT
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Management’s objectives are to protect Brookfield Renewable against material economic
exposures and variability of results from various financial risks that include electricity price risk, foreign
currency risk, interest rate risk, credit risk, and liquidity risk. These risks are further discussed in Note 5 -
Risk Management and Financial Instruments in the audited annual consolidated financial statements.
The following table outlines Brookfield Renewable’s financial risks and how they are managed:
Financial Risk
Electricity price
Description of Risk
Management of Risk
We have exposure to movements in
the market price of electricity.
• Enter into long-term contracts that specify
the price at which electricity is sold
Foreign currency
We are exposed to foreign currency
risk – including Canadian dollar,
Brazilian real, Euro, British pound
sterling, Colombian peso, Indian
rupee, South African rand, Malaysian
ringgit, Thai baht and Chinese yuan –
related to operations, anticipated
transactions, and certain foreign
currency debt.
• Maintain a portfolio of short, medium, and
long-term contracts to mitigate our
exposure to short-term fluctuations in
electricity prices
• Ensure limits and controls are in place for
trading activities
• As of December 31, 2018, we had
approximately 87% of 2019 (2017: 92% of
2018) production, excluding Brazil and
Colombia, on a proportionate basis under
short-term and long-term power purchase
agreements and financial contracts. See
“Part 4 – Financial Performance Review
on Proportionate Information”
• Enter into foreign currency contracts
designed to minimize the exposure to
foreign currency fluctuations
• 35% of cash flow is generated in the
United States while Canadian Dollar and
Euro exposure, representing 35% of our
portfolio, is proactively managed through
foreign currency contracts
• Limited foreign currency contracts to
hedge our South American and Asian
exposures – representing 30% of our
portfolio – due to the high associated
costs of hedging certain currencies.
However, these specific exposures are
mitigated by the annual inflation-linked
escalations in our power purchase
agreements
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 49
Financial Risk
Interest rate
Description of Risk
Management of Risk
We are exposed to risk on the
interest rates of our debt, and on
dividend and distribution rate resets
on our Class A Preference Shares
and Preferred Units, respectively.
• Assets largely consist of long duration
physical assets, and 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 to minimize the
exposure to interest rate fluctuations
• Enter into interest rate contracts to lock-in
fixed rates on certain anticipated future
debt issuances
• Our proportionate floating rate exposure
represents 14% of our total debt, after
affecting for variable rate debt that has
been hedged through the use of interest
rate swaps (including those entered
subsequent to year-end). Our floating rate
exposure arises primarily from our South
American operations, as we have limited
opportunities to raise fixed rate debt or
hedge due to the high associated costs
• Diverse counterparty base with long
standing credit histories
• Exposure to counterparties with
investment-grade credit ratings
• Use of standard trading contracts and
other standard credit risk mitigation
techniques
• As at December 31, 2018, 74% (2017:
99%) of Brookfield Renewable’s trade
receivables were current
Credit
We are exposed to credit risk from
operating activities and certain
financing activities, the maximum
exposure of which is represented by
the carrying amounts reported in the
statements of financial position. We
are exposed to credit risk if
counterparties to our energy
contracts, interest rate swaps,
forward foreign exchange contracts
and physical electricity and gas
transactions as well as trade
receivables are unable to meet their
obligations.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 50
Financial Risk
Liquidity
Description of Risk
Management of Risk
We are exposed to liquidity risk for
financial liabilities.
We are also subject to internal
liquidity risk because we conduct our
business activities through separate
legal entities (subsidiaries and
affiliates) and are dependent on
receipts of cash from those entities to
defray corporate expenses and to
make dividend and distribution
payments to shareholders and
Unitholders, respectively. Under the
credit agreements for subsidiary debt,
it is conventional for distributions of
cash to Brookfield Renewable to be
prohibited if the loan is in default
(notably for non-payment of principal
or interest) or if the entity fails to
achieve a benchmark debt service
coverage ratio.
For the year ended December 31,
2018, Brookfield Renewable and its
subsidiaries were in compliance with
its debt covenants except certain
covenants mentioned in Note 18 –
Capital Management of the annual
audited consolidated financial
statements.
• As at December 31, 2018, available
liquidity was $1.9 billion. Liquidity is
comprised of our share of cash and cash
equivalents, available-for-sale securities
and undrawn corporate line of credit
available. Details of the available portion
of credit facilities and debt maturity ladder
are included in “PART 5 - Liquidity and
Capital Resources”
• Effective and regular monitoring of debt
covenants and cooperation with lenders
to cure any defaults
• Target investment grade debt or debt with
investment grade characteristics with the
ability to absorb volatility in cash flows
• Long-term duration of debt instruments
and the diversification in maturity dates
over an extended period of time
• Sufficient cash from operating activities,
access to undrawn credit facilities, and
possible capital markets financing to fund
our operations and fulfill our obligations
as they become due
• Ensure access to public capital markets
and maintain a strong investment grade
credit rating
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 51
RISK FACTORS
The following represents the most relevant risk factors relating to Brookfield Renewable’s
business, and is not all-inclusive. For a description of other possible risks please see the Form 20-F which
can be accessed on EDGAR and SEDAR.
Risks Related to Our Operations and the Renewable Power Industry
Changes to hydrology at our hydroelectric facilities, wind conditions at our wind energy facilities,
irradiance at our solar facilities or weather conditions generally, as a result of climate change or
otherwise, at any of our facilities could materially adversely affect the volume of electricity
generated.
The revenues generated by our facilities are correlated to the amount of electricity generated,
which in turn is dependent upon available water flows and upon wind, irradiance and weather conditions
generally. Hydrology, wind, irradiance and weather 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.
If one or more of our generation facilities were to be subject in the future to flooding, extreme
weather conditions (including severe wind and droughts), fires, natural disasters, or if unexpected
geological or other adverse physical conditions were to develop at any of our generation facilities, the
generation capacity of that facility could be significantly reduced or even eliminated. For example, our
hydroelectric facilities depend on the availability of water flows within the watersheds in which we operate
and could be materially impacted by changes to hydrology patterns, such as droughts. In the event of
severe flooding, our hydrology facilities may be damaged. Wind energy and solar energy are highly
dependent on weather conditions and, in particular, on wind conditions and irradiance, respectively. 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 or when a given project was acquired. Similarly, projections of solar resources
depend on assumptions about weather patterns, shading and irradiance, which are inherently uncertain
and may not be consistent with actual conditions at the site. A sustained decline in water flow at our
hydroelectric facilities or in wind conditions at our wind energy facilities or of irradiance at our solar
facilities could lead to a material adverse change in the volume of electricity generated, revenues and
cash flow.
Climate change may increase the frequency and severity of severe weather conditions and may
have the long-term effect of changing weather patterns, which could result in more frequent and severe
disruptions to our generation facilities. In addition, customers’ energy needs generally vary with weather
conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate
change, customers’ energy use could increase or decrease depending on the duration and magnitude of
changing weather conditions, which could adversely affect our business, results of operations and cash
flows.
Weather conditions have also historically caused variability in sugarcane harvest. A decline in
sugarcane supply caused by drought, frost or floods, to the sugar and ethanol mills that are the feedstock
suppliers of our biomass cogeneration facilities, could limit the volume of electricity these facilities are
able to generate.
Supply and demand in the 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 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 the cost of emitting CO2; the structure of the electricity market; and weather conditions (such as
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 52
extremely hot or cold weather) that impact electrical load. More generally, there is uncertainty surrounding
the trend in electricity demand growth, which is influenced by: macroeconomic conditions; absolute and
relative energy prices; and 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 political pressures and environmental
preferences. This volatility and uncertainty in the power market generally, including the non-renewable
power market, could have a material adverse effect on Brookfield Renewable’s assets, liabilities,
business, financial condition, results of operations and cash flow.
As our contracts expire, we may not be able to replace them with agreements on similar terms.
Certain power purchase agreements in our portfolio will be subject to re-contracting in the future.
If the price of electricity in power markets is declining at the time of such re-contracting, it may impact our
ability to re-negotiate or replace these contracts on terms that are acceptable to us, or at all. In addition, a
concentrated pool of potential buyers for electricity generated by our renewable energy facilities in certain
jurisdictions may restrict our ability to negotiate favorable terms under new power purchase agreements
or existing power purchase agreements that are subject to re-contracting. We cannot provide any
assurance that we will be able to re-negotiate or replace these contracts once they 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 re-negotiate or replace these contracts, or unable to
secure prices at least equal to the current prices we receive, our business, financial condition, results of
operation and prospects could be adversely affected.
Conversely, certain of our sales will be made by facilities subject to indefinite term contracts with
Brookfield (taking into account its rights of renewal) at fixed prices per MWh. Accordingly, with respect to
those facilities, our ability to realize improved revenues due to increases in market prices may be limited.
A significant portion of the power we generate is sold under long-term power purchase
agreements with public utilities, industrial or commercial end-users and Brookfield, some of whom may
not be rated by any rating agency. For example, approximately 18% of our economic exposure for 2019
(on a proportionate basis) is with Brookfield entities, the majority of which are not publicly rated and
whose obligations are not guaranteed by Brookfield Asset Management, which reflects the Energy
Marketing Internalization, including the associated amendments and transfers of certain power purchase
and revenue support agreements.
Advances in technology could impair or eliminate the competitive advantage of our projects.
Technology related to the production of renewable power and conventional power generation are
continually advancing, resulting in a gradual decline in the cost of producing electricity. If advances in
technology further reduce the cost of producing power, the competitive advantage of our existing 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.
The amount of uncontracted generation in our portfolio may increase.
As at December 31, 2018, approximately 75% of our generation (on a proportionate basis) was
contracted over the following five years under long-term, fixed price contracts with creditworthy
counterparties. In 2017 and 2018, approximately 90% of our generation (on a proportionate basis) was
contracted in each of those calendar years. The portion of our portfolio that is uncontracted may increase
gradually over time. While increases in uncontracted generation may allow us to be opportunistic and
take advantage of high spot-market prices, it will also increase our exposure to variability in power prices,
which could, in certain circumstances, have an adverse effect on our business, financial condition, results
of operations and cash flows.
There are general industry risks associated with the power markets in which we operate.
We currently operate in power markets in North America, South America, Europe and Asia, each
of which is 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. Our operations are
also largely concentrated in a relatively small number of countries, and accordingly are exposed to
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 53
country-specific risks (such as weather conditions, local economic conditions or political/regulatory
environments) that could disproportionately affect us. A general and extended decline in the North
American, South American, European or Asian economies, or in the economies of the specific countries
in which we operate, or sustained conservation efforts to reduce electricity consumption, could have the
effect of reducing demand for electricity and could thereby have an adverse effect on our business,
financial condition, results of operations and cash flows.
The occurrence of dam failures could result in a loss of generating capacity and damage to the
environment, third parties or the public, which could require us to expend significant amounts of
capital and other resources and expose us to significant liability.
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 until the
failure has been repaired. If the failure is at one of our facilities, repairing such failure 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. A dam failure at a generating station or dam operated by a third party could result in new and
potentially onerous regulations that could impact Brookfield Renewable’s facilities. Any such new
regulations could require material capital expenditures to maintain compliance and our financial position
could be adversely affected.
We may be exposed to force majeure events.
The occurrence of a significant event that disrupts the ability of our generation assets to produce
or sell power for an extended period, including events which preclude customers from purchasing
electricity, could have a material adverse effect on our assets, liabilities, business, financial condition,
results of operations and cash flow. In addition, force majeure events affecting our assets could result in
damage to the environment or harm to third parties or the public, which could expose us to significant
liability. Our generation assets could be exposed to severe weather conditions, natural disasters and
potentially catastrophic events. An assault or an act of malicious destruction, cyber-attacks, sabotage or
terrorism committed on our generation assets could also disrupt our ability to generate or sell power. In
certain cases, there is the potential that some events may not excuse Brookfield Renewable from
performing its obligations pursuant to agreements with third parties and therefore may expose Brookfield
Renewable to liability. In addition, many of our generation assets are located in remote areas which may
make access for repair of damage difficult.
We are subject to foreign currency risk which may adversely affect the performance of our
operations and our ability to manage such risk depends, in part, on our ability to implement an
effective hedging strategy.
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 such distributions. A significant depreciation in the value of
such foreign currencies, measures introduced by foreign governments to control inflation or deflation,
currency exchange or export controls may have a material adverse effect on our business, financial
condition, results of operations and cash flows. When managing our exposure to currency risks, we use
foreign currency forward contracts and other strategies to mitigate currency risk and there can be no
assurances that these strategies will be successful.
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 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 cost of compliance with these laws (and any future laws or amendments enacted) may increase over
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 54
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.
Counterparties to our contracts may not fulfill their obligations
If, for any reason, any of the purchasers of power under our 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 customers to pay for
electricity received. In addition, inadequate performance by counterparties to operation and maintenance
contracts related to certain of our assets or investments may increase the risk of operational or
mechanical failures of such facilities.
We rely on computerized business systems, which could expose us to cyber-attacks.
information
technology.
Our business relies on
In addition, our business 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, including suppliers of the information technology systems on which we rely, and
regulatory agencies are also important to our operations. In light of this, we may be subject to cyber
security risks or other breaches of information technology security intended to obtain unauthorized access
to our proprietary information and that of our business partners, destroy data or disable, degrade, or
sabotage these systems through the introduction of computer viruses, fraudulent emails, cyber attacks
and other means, and such breaches could originate from a variety of sources including our own
employees or unknown third parties. There can be no assurance that measures implemented to protect
the integrity of these systems will provide adequate protection, and any such breach of our information
technology could go undetected for an extended period of time. A breach of our cyber security measures
or the failure or malfunction of any of our computerized business systems, associated backup or data
storage systems could cause us to suffer a disruption in one or more parts of our business and
experience, among other things, financial loss, a loss of business opportunities, misappropriation or
unauthorized release of confidential or personal information, damage to our systems and those with
whom we do business, violation of privacy and other laws, litigation, regulatory penalties and remediation
and restoration costs as well as increased costs to maintain our systems. For example, the European
General Data Protection Regulation, which came into effect in May 2018, includes stringent operational
requirements for entities processing personal information and significant penalties for non-compliance.
Cyber-security breaches or failures of our information technology systems could have a material adverse
effect on our business operations, financial reporting, financial condition and results of operations, and
result in reputational damage.
Risks Related to Financing
Our ability to finance our operations is subject to various risks relating to the state of the capital
markets.
We expect to finance future acquisitions, the development and construction of new facilities and
other capital expenditures out of cash generated from our operations, capital recycling, debt and possible
future issuances of equity. There is debt throughout our corporate structure that will need to be replaced
from time to time: BEP, BRELP and the Holding Entities have corporate debt and many Operating Entities
have limited recourse project level debt (which is non-recourse to BEP). Our ability to obtain debt or
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 55
equity financing to fund our growth, and our ability to refinance existing indebtedness, is dependent on,
among other factors, the overall state of the capital markets (as well as local market conditions,
particularly in the case of non-recourse financings), continued operating performance of our assets, future
electricity market prices, the level of future interest rates, lenders’ and investors’ assessment of our credit
risk, capital markets conditions and investor appetite for investments in renewable energy and
infrastructure assets in general and in Brookfield Renewable’s securities in particular. Also, Brookfield
Renewable’s financing agreements contain conditions that limit our ability to repay indebtedness prior to
maturity without incurring penalties, which may limit our ability to raise capital and financing on favorable
terms. To the extent that external sources of capital become limited or unavailable or available on
onerous terms, our ability to fund acquisitions and 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 is 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, grant 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 corporate 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. From time to time, we also acquire
businesses and assets that have debt obligations that are in default, including assets acquired as part of
the TerraForm Global transaction. 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 BEP or any of our subsidiaries’ debt securities may be changed or
withdrawn entirely 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
We may be unable to identify sufficient investment opportunities and complete transactions as
planned.
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 sufficient investment opportunities and complete transactions that
meet our investment criteria. Our investment criteria consider, among other things, the financial,
operating, governance and strategic merits of a proposed acquisition including whether we expect it will
meet our targeted return hurdle and, as such, there is no certainty that we will be able to continue growing
our business by making acquisitions or developing assets at attractive returns. 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. We may also decline opportunities that
we do not believe meet our investment criteria, which our competition may pursue instead. Further, our
growth initiatives may be subject to a number of closing conditions, including, as applicable, third party
consents, regulatory approvals (including from competition authorities) and other third-party approvals or
actions that are beyond our control. If all or some of our growth initiatives are unable to be completed on
the terms agreed, we may need to delay certain acquisitions or abandon them altogether or may not fully
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 56
realize their anticipated benefit. In addition, we occasionally seek to recycle capital to fund future
acquisitions and the development and construction of new facilities by selling certain assets. For
example, in 2018, as part of our capital recycling initiatives, we sold a 25% non-controlling, direct interest
in a 413 MW contracted hydroelectric portfolio in Canada to a consortium of buyers, and entered into
agreements to sell our interest in a 178 MW wind and solar portfolio in South Africa and our interest in a
solar portfolio in each of Thailand and Malaysia. In February 2019, we also entered into an agreement to
sell an additional 25% non-controlling, indirect interest in this Canadian hydroelectric portfolio to a
consortium of buyers. We may not be able to complete all or some of our capital recycling initiatives on
our desired timelines, at favorable prices or at all, which could result in less liquidity to fund future growth.
Future growth of our portfolio may subject us to additional risks and the expected benefits of our
transactions, including acquisitions, may not materialize.
A key part of Brookfield Renewable’s strategy involves seeking acquisition opportunities.
Acquisitions in general, and large-scale acquisitions in particular, have the potential to materially increase
the scale, scope and complexity of our operations. If we do not effectively manage the additional
operations, our business, financial condition and results of operations may be adversely affected.
Acquisitions will likely involve some or all of the following risks, which could materially and
adversely affect our business, financial condition or results of operations: the potential to not close or
otherwise realize the expected benefits of an announced transaction, the difficulty of integrating the
acquired operations and personnel into our current operations; the inability to achieve potential synergies;
potential disruption of our current operations; diversion of resources, including the time and attention of
Brookfield’s professionals; the difficulty of managing the growth of a larger organization; the risk of
entering markets in which we have little experience; the risk of becoming involved in labor, commercial or
regulatory disputes or litigation related to the new operations; the risk of environmental or other liabilities
associated with the acquired business; the risk of alleged or actual violation of applicable anti-bribery/anti-
corruption laws of the acquired business; and the risk of a change of control resulting from an acquisition
triggering rights of third parties or government agencies under contracts with, or authorizations held by,
the operating business being acquired. While it is our practice to conduct extensive due diligence
investigations into businesses being acquired, it is possible that due diligence may fail to uncover or
adequately assess all material risks in the business being acquired, whether operational, financial, legal
or otherwise. For example, we may fail to identify a change of control trigger in a material contract or
authorization, or a contractual counterparty or government agency may take a different view on the
interpretation of such a provision to that taken by us, thereby resulting in a dispute. The discovery of any
material liabilities subsequent to an acquisition, as well as the failure of an acquisition to perform
according to expectations, could have a material adverse effect on Brookfield Renewable’s business,
financial condition and results of operations. In addition, if returns are lower than anticipated from new
acquisitions, we may not be able to achieve growth in our distributions in line with our stated goals and
the market value of our Units may decline.
We do not control all our operations and investments.
We have structured some of our operations and investments as joint ventures, partnerships and
consortium arrangements. An integral part of our strategy is to participate with institutional investors in
Brookfield sponsored or co-sponsored consortiums for asset acquisitions and as a partner in or alongside
Brookfield sponsored or co-sponsored partnerships that target acquisitions that suit our profile. These
arrangements are driven by the magnitude of capital required to complete acquisitions of renewable
assets and other industry-wide trends that we believe will continue. Such arrangements involve risks not
present where a third party is not involved, including the possibility that partners or co-venturers might
become bankrupt or otherwise fail to fund their share of required capital contributions. Additionally,
partners or co-venturers might at any time have economic or other business interests or goals different
from Brookfield Renewable and Brookfield.
Joint ventures, partnerships and consortium investments generally provide for a reduced level of
control over an acquired company because governance rights are shared with others or in some cases
may be delegated to a third party like Brookfield. Consequently, management and operations, as well as
the timing and nature of any exit, are often made by a majority vote of the investors or by separate
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December 31, 2018
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agreements that are reached with respect to individual decisions. For example, when we participate with
institutional investors in Brookfield sponsored or co-sponsored consortiums for asset acquisitions and as
a partner in or alongside Brookfield sponsored or co-sponsored partnerships, there is often a finite term to
the investment, which could lead to the investment being sold prior to the date we would otherwise
choose. Similarly, our investment in TerraForm Power, which was made together with our institutional
partners, did not result in BEP having control of TerraForm Power. Accordingly, decisions relating to the
management and operation of TerraForm Power and its assets are not made by BEP.
In addition, such operations may be subject to the risk that any joint venture, partnership or
consortium may make business, financial or management decisions with which we do not agree or the
management of the company may take risks or otherwise act in a manner that does not serve our
interests. Because we may not have the ability to exercise control over such operations, we may not be
able to realize some or all of the benefits that we believe will be created from Brookfield’s involvement. If
any of the foregoing were to occur, our financial condition and results of operations could suffer as a
result.
The sale or transfer of interests in certain of our operations that are joint ventures, partnerships or
consortium arrangements are subject to rights of first refusal or first offer, tag along rights or drag along
rights and some agreements in these operations provide for buy-sell or similar arrangements. Such rights
may be triggered at a time when we may not want them to be exercised and such rights may inhibit our
ability to sell our interest in an entity within the desired time frame or on any other desired basis. In
addition, the operations are also all subject to pre-emptive or default rights which may lead to the joint
venture or third parties compulsorily acquiring assets from the joint venture.
We may pursue acquisitions in new markets that are subject to foreign laws or regulations that
are more onerous or uncertain than the laws and regulations we are currently subject to.
We may pursue acquisitions in new markets that are regulated by foreign governments and
regulatory authorities and subject to foreign laws. For example, through the acquisition of TerraForm
Global, we acquired additional interests in 307 MW in Brazil, 301 MW in India, 168 MW in China, 178 MW
in South Africa, 40 MW in Thailand, 26 MW in Uruguay and 19 MW in Malaysia. Foreign laws or
regulations may not provide for the same type of legal certainty and rights, in connection with our
contractual relationships in such countries, as are afforded to our projects in, for example, the U.S., which
may adversely affect our ability to receive revenues or enforce our rights in connection with our foreign
operations. In addition, the laws and regulations of some countries may limit our ability to hold a majority
interest in some of the projects that we may develop or acquire, thus limiting our ability to control the
development, construction and operation of such projects. Any existing or new operations may be subject
to significant political, economic and financial risks, which vary by country, and may include: (i) changes in
government policies, including protectionist policies, or personnel; (ii) changes in general economic
conditions; (iii) restrictions on currency transfer or convertibility; (iv) changes in labor relations; (v) political
instability and civil unrest; (vi) regulatory or other changes in the local electricity market; (vii) less
developed or efficient financial markets than in North America; (viii) the absence of uniform accounting,
auditing and financial reporting standards, practices and disclosure requirements; (ix) less government
supervision and regulation; (x) a less developed legal or regulatory environment; (xi) heightened
exposure to corruption risk; (xii) political hostility to investments by foreign investors; (xiii) less publicly
available information in respect of companies; (xiv) adversely higher or lower rates of inflation; (xv) higher
transaction costs; (xvi) difficulty in enforcing contractual obligations, breach or repudiation of important
contractual undertakings by governmental entities and expropriation and confiscation of assets and
facilities for less than fair market value; and (xvii) fewer investor protections.
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Other Risks Related to Brookfield Renewable
We could become regulated as an “investment company” under the Investment Company Act
(and similar legislation in other jurisdictions) which would make it impractical for us to operate as
contemplated.
The Investment Company Act (and similar legislation in other jurisdictions) provides certain
protections to investors and imposes certain restrictions on companies that are registered as investment
companies. Brookfield Renewable is not an “investment company” under the Investment Company Act
and does not intend to become one. If Brookfield Renewable were to be deemed an investment company
under the Investment Company Act, we might be required to materially restrict or limit the scope of our
operations or plans as it would be impractical for us to operate as intended: certain agreements we have
with Brookfield would be impaired, the type and amount of acquisitions that we would be able to make as
a principal would be limited, and our business, financial condition and results of operations would be
materially adversely affected. We would also be limited in the types of acquisitions that we might make,
and we might need to modify our organizational structure or dispose of assets of which we would not
otherwise dispose. Accordingly, we would be required to take extraordinary steps to address the situation,
such as the amendment or termination of our Master Services Agreement, the restructuring of Brookfield
Renewable and the Holding Entities, the amendment of the Amended and Restated Limited Partnership
Agreement of Brookfield Renewable or the termination of Brookfield Renewable, any of which could
materially adversely affect the value of our Units. In addition, if Brookfield Renewable were deemed to be
an investment company under the Investment Company Act, it would be taxable as a corporation for U.S.
federal income tax purposes, which could materially adversely affect the value of our Units.
Brookfield exercises substantial influence over Brookfield Renewable and we are highly
dependent on the Service Provider.
A subsidiary of Brookfield Asset Management is the sole shareholder of the Managing General
Partner. As a result of its ownership of the Managing General Partner, Brookfield is able to control the
appointment and removal of the Managing General Partner’s directors and, accordingly, exercise
substantial influence over Brookfield Renewable. In addition, Brookfield Renewable holds its interest in
the Operating Entities indirectly through Brookfield Renewable Energy L.P. and will hold any future
acquisitions indirectly through Brookfield Renewable Energy L.P., the general partner of which is
indirectly owned by Brookfield. As Brookfield Renewable’s only substantial asset is the limited partnership
interests that it holds in Brookfield Renewable Energy L.P., except future rights under the Voting
Agreement, Brookfield Renewable does not have a right to participate directly in the management or
activities of Brookfield Renewable Energy L.P. or the Holding Entities, including with respect to the
making of decisions (although it has the right to remove and replace the Brookfield Renewable Energy
L.P. General Partner Limited Partner).
Brookfield Renewable and Brookfield Renewable Energy L.P. depend on the management and
administration services provided by or under the direction of the Service Provider under our Master
Services Agreement. Brookfield personnel and support staff that provide services to us under our Master
Services Agreement are not required to have as their primary responsibility the management and
administration of Brookfield Renewable or Brookfield Renewable Energy L.P. or to act exclusively for
either of us and our Master Services Agreement does not require any specific individuals to be provided
by Brookfield to Brookfield Renewable. Failing 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. Our Master Services Agreement continues in perpetuity, until terminated in
accordance with its terms.
The departure of some or all of Brookfield’s professionals could prevent us from achieving our
objectives.
We depend on the diligence, skill and business contacts of Brookfield’s professionals and the
information and opportunities they generate during the normal course of their activities. Our future
success will depend on the continued service of these individuals, who are not obligated to remain
employed with Brookfield. Brookfield has experienced departures of key professionals in the past and
may experience departures again in the future, and we cannot predict the impact that any such
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December 31, 2018
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departures will have on our ability to achieve our objectives. The departure of a significant number of
Brookfield’s professionals for any reason, or the failure to appoint qualified or effective successors in the
event of such departures, could have a material adverse effect on our ability to achieve our objectives.
The Amended and Restated Limited Partnership Agreement of Brookfield Renewable and our Master
Services Agreement do not require Brookfield to maintain the employment of any of its professionals or to
cause any particular professionals to provide services to us or on our behalf.
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PART 8 – CRITICAL ESTIMATES, ACCOUNTING POLICIES AND INTERNAL CONTROLS
CRITICAL ESTIMATES AND CRITICAL JUDGMENTS
POLICIES
IN APPLYING ACCOUNTING
The audited annual consolidated 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 1 – Basis of
preparation and significant accounting policies in our audited annual consolidated financial statements
are considered critical accounting estimates as defined in Canadian National Instrument 51-102 –
Continuous Disclosure Obligations 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 volatility 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 substantially 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 12 – Property, plant and equipment, at fair value in our audited annual
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 1(r)(iii) –
Critical judgments in applying accounting policies – Property, plant and equipment in our audited annual
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
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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 5 – Risk
Management and Financial Instruments in our audited annual 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 statements of financial position 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 3, Business
Combinations (“IFRS 3”), 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 1(h) – Property plant and equipment and revaluation method in our audited annual
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 twenty 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
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December 31, 2018
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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 2025 in North America and Colombia, 2023
in Europe, and 2022 in Brazil. The year of new entry is viewed as the point when generators 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 rising environmental compliance costs in North America and
Europe, and overall increasing demand in Colombia and Brazil. For the North American and European
businesses, Brookfield Renewable has estimated a discount to these new-build wind prices to determine
renewable electricity prices for hydroelectric and wind facilities. In Brazil and Colombia, 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 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 are 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 1(k) – Financial instruments in our audited annual consolidated financial statements. In applying the
policy, judgments are made in applying the criteria set out in IFRS 9, Financial instruments (“IFRS 9”) and
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 1(m)
– Income taxes in our audited annual 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.
NEW ACCOUNTING STANDARDS
(i) IFRS 15 – Revenue from contracts from customers
On January 1, 2018 Brookfield Renewable adopted IFRS 15 using the modified retrospective
method applied to those contracts which were not completed as of January 1, 2018. The new standard
replaces the majority of existing IFRS requirements on revenue recognition including IAS 18, Revenue,
IAS 11, Construction Contracts and related interpretations. The core principle of the standard is to
recognize revenue to depict the transfer of goods and services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods and services. The
standard has prescribed a five-step model to apply the principles which requires the identification of a
contract with a customer, the identification of performance obligations with the contract, determination of
the transaction price, the allocation of the transaction price to the performance obligations and the
recognition of revenue when performance obligations have been satisfied. The standard also specifies
how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a
contract as well as requiring more informative and relevant disclosures. IFRS 15 applies to nearly all
contracts with customers, unless covered by another standard, such as leases, financial instruments and
insurance contracts.
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The pattern and timing of revenue recognition under the new standard is consistent with prior
practice. There were no adjustments recognized on the adoption of IFRS 15.
(ii) IFRS 9 – Financial instruments
Brookfield Renewable adopted IFRS 9 as issued by the IASB in 2014, which provides more
reliable and relevant information for users to assess the amounts, timing and uncertainty of future cash
flows. The new accounting policies were applied retrospectively from January 1, 2018 and, in accordance
with the transitional provisions in IFRS 9, comparative figures were not restated. The adoption of IFRS 9
did not result in any material transition adjustments being recognized as at January 1, 2018.
IFRS 9 replaces certain provisions of IAS 39 that relate to the recognition, classification and
measurement of financial assets and financial liabilities; derecognition of financial instruments;
impairment of financial assets; and hedge accounting. IFRS 9 also significantly amends other standards
dealing with financial instruments such as IFRS 7, Financial Instruments: Disclosures.
FUTURE CHANGES IN ACCOUNTING POLICIES
(i)
Leases
In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”). IFRS 16 brings most leases onto
the statement of financial position for lessees under a single model, eliminating the distinction between
operating and finance leases. Lessor accounting remains largely unchanged and the distinction between
operating and finance leases is retained. Under IFRS 16 a lessee recognizes a right-of-use asset and a
lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated
accordingly, and the liability accrues interest. The lease liability is initially measured at the present value
of the lease payments payable over the lease term, discounted at the rate implicit in the lease. Lessees
are permitted to make an accounting policy election, by class of underlying asset, to apply a method like
IAS 17’s operating lease accounting and not recognize lease assets and lease liabilities for leases with a
lease term of 12 months or less, and on a lease-by-lease basis, to apply a method similar to current
operating lease accounting to leases for which the underlying asset is of low value. IFRS 16 supersedes
IAS 17, Leases and related interpretations. A lessee will apply IFRS 16 to its leases either retrospectively
to each prior reporting period presented or retrospectively with the cumulative effect of initially applying
IFRS 16 being recognized at the date of initial application. IFRS 16 is effective for annual periods
beginning on or after January 1, 2019, with early adoption permitted. Management has chosen to adopt
the standard retrospectively in accordance with IFRS 16 paragraph C5(b), recognizing the cumulative
effect at the date of initial application as an adjustment to the statement of financial position. For leases
that meet the short-term recognition exemption of being less than 12 months in length from the date of
initial application, or leases that meet the low-value recognition exemption, Management has elected to
apply the respective practical expedients and these leases will be accounted for using IAS 17 operating
lease accounting, whereby the lease payments will be recognized as an expense on either a straight line
basis over the lease term or another systematic basis. At the date of initial application, excluding the
subsidiaries that are accounted for as held for sale, Brookfield Renewable anticipates recognizing a right-
of-use asset of $149 million and a corresponding lease liability of $151 million.
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, 2018, 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
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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.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the
supervision and with the participation of our management, including persons performing the functions of
principal executive and principal financial officers for us, we conducted an evaluation of the effectiveness
of our internal control over financial reporting as of December 31, 2018, based on the criteria set forth in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on evaluation under the foregoing, our management concluded that
our internal control over financial reporting was effective as of December 31, 2018. Management
excluded from its design and assessment of internal control over financial reporting the internal controls
of investments acquired in 2018, which include the 23 MW wind project in Northern Ireland and the 49
MW Biotherm wind and solar project in South Africa which we agreed to sell in 2018, whose total assets,
net assets on a combined basis constitute approximately 1% and 1%, respectively, of the consolidated
financial statement amounts as of December 31, 2018 and 1% and 2% of revenues and net income
respectively, for the year then ended.
Internal control systems, no matter how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Report of Independent Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 2018 has
been audited by Ernst & Young LLP, Chartered Professional Accountants, Licensed Public Accountants,
who have also audited our consolidated financial statements, as stated in their reports which are included
herein.
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.
Changes in Internal Control
There was no change in our internal control over financial reporting during the year ended
December 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
SUBSEQUENT EVENTS
On February 25, 2019, Brookfield Renewable completed a C$70 ($53 million) non-recourse
financing associated with a 20 MW hydroelectric facility in Ontario. The debt bears an interest rate of
4.13% and matures in 2045.
In February 2019, Brookfield Renewable entered into an agreement to sell an additional 25%
non-controlling, indirect interest in a 413 MW portfolio of select Canadian hydroelectric assets to a
consortium of buyers for the same price, subject to an adjustment for an approximate $45 million dividend
recapitalization completed in the fourth quarter of 2018, as our initial 25% non-controlling, direct interest
sale. The closing of the sale of the additional 25% interest remains subject to the satisfaction of
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December 31, 2018
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customary conditions. Following closing, Brookfield Renewable will retain a 50% economic interest in this
portfolio and will continue to manage and operate the assets in the portfolio.
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PART 9 – PRESENTATION TO STAKEHOLDERS AND PERFORMANCE MEASUREMENT
PRESENTATION TO PUBLIC STAKEHOLDERS
Equity
Brookfield Renewable’s consolidated equity interests include the non-voting LP Units held by
public LP Unitholders and Brookfield, Redeemable/Exchangeable Limited Partnership Units in BRELP, a
holding subsidiary of Brookfield Renewable, held by Brookfield, and GP interest in BRELP 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
referenced above, we are presenting LP Units,
Redeemable/Exchangeable Partnership Units, and the GP Interest as separate components of
consolidated equity. This presentation does not impact the total income (loss), per unit or share
information, or total consolidated equity.
feature
As at the date of this report, Brookfield owns an approximate 60% LP Unit interest, on a fully-
exchanged basis, and all general partnership interests in Brookfield Renewable, representing a 0.01%
interest, while the remaining approximately 40% is held by the public.
Actual and Long-term Average Generation
For assets acquired, disposed or reaching commercial operation during the year, reported
generation is calculated from the acquisition, disposition or commercial operation date and is not
annualized. As it relates to Colombia only, generation includes both hydroelectric and cogeneration
facilities. “Other” includes generation from North America cogeneration and Brazil biomass.
North America hydroelectric long-term average is the expected average level of generation based on
the results of a simulation based on historical inflow data performed over a period of typically 30 years.
Colombia hydroelectric long-term average is the expected average level of generation based on the
results of a simulation based on historical inflow data performed over a period of typically 20 years.
Hydroelectric assets located in Brazil benefit from a market framework which levelizes generation risk
across producers. Wind long-term average is the expected average level of generation based on the
results of simulated historical wind speed data performed over a period of typically 10 years. Solar long-
term average is the expected average level of generation based on the results of a simulation using
historical irradiance levels in the locations of our projects from the last 14 to 20 years combined with
actual generation data during the operational period.
We compare actual generation levels against the long-term average to highlight the impact of an
important factor that affects the variability of our business results. In the short-term, we recognize that
hydrology, wind and irradiance conditions 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.
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, an assured energy amount,
irrespective of the actual volume of energy generated. The program reallocates energy, transferring
surplus energy from those who generated an excess to those who generate less than their assured
energy, up to the total generation within the pool. Periodically, low precipitation across the entire country’s
system could result in a temporary reduction of generation available for sale. During these periods, we
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December 31, 2018
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expect that a higher proportion of thermal generation would be needed to balance supply and demand in
the country potentially leading to higher overall spot market prices.
Generation from our North American pumped storage and cogeneration facilities is highly dependent
on market price conditions rather than the generating capacity of the facilities. Our European pumped
storage facility generates on a dispatchable basis when required by our contracts for ancillary services.
Generation from our biomass facilities is dependent on the amount of sugar cane harvested in a given
year. For these reasons, we do not consider a long-term average for these facilities.
Voting Agreements with Affiliates
Brookfield Renewable has entered into voting agreements with Brookfield, whereby Brookfield
Renewable gained control of the entities that own certain United States, Brazil and Europe renewable
power generating operations as well as the entity that owns the renewable power generating operations
acquired as part of the investment in TerraForm Global. Brookfield Renewable has also entered into a
voting agreement with its consortium partners in respect of the Colombian operations. The voting
agreements provide Brookfield Renewable the authority to direct the election of the Boards of Directors of
the relevant entities, among other things, and therefore provide Brookfield Renewable with control.
Accordingly, Brookfield Renewable consolidates the accounts of these entities.
Brookfield Renewable has also entered into a voting agreement with Brookfield, whereby
Brookfield Renewable gained certain rights in respect of the partnership that controls TerraForm Power
and its subsidiaries. This voting agreement provides Brookfield Renewable the authority to direct the
election of one member of the Board of Directors of the relevant entity, among other things, and therefore
provides Brookfield Renewable with significant influence over the partnership that controls TerraForm
Power. Accordingly, Brookfield Renewable equity accounts for the partnership that controls TerraForm
Power.
For entities previously controlled by Brookfield Asset Management, the voting agreements
entered into do not represent business combinations in accordance with IFRS 3, as all combining
businesses are ultimately controlled by Brookfield Asset Management both before and after the
transactions were completed. Brookfield Renewable accounts for these transactions involving entities
under common control in a manner similar to a pooling of interest, which requires the presentation of pre-
voting agreement financial information as if the transactions had always been in place. Refer to Note
1(r)(ii) – Critical judgments in applying accounting policies - Common control transactions in our
December 31, 2018 audited consolidated financial statements for our policy on accounting for
transactions under common control.
PERFORMANCE MEASUREMENT
Segment Information
Our operations are segmented by – 1) hydroelectric, 2) wind, 3) solar, 4) storage & other
(cogeneration and biomass), and 5) corporate – with hydroelectric and wind further segmented by
geography (i.e., North America, Colombia, Brazil, Europe and Asia). This best reflects the way in which
the CODM reviews results, manages operations and allocates resources. Our investment in the
TerraForm Power and TerraForm Global businesses led to the creation of the solar segment which is now
reviewed on a standalone basis. Our investment in First Hydro also resulted in the creation of a storage
segment which is now reviewed along with our cogeneration and biomass businesses, on an aggregate
basis. The Colombia segment aggregates the financial results of its hydroelectric and cogeneration
facilities. The results of our wind assets in South Africa that are classified as held for sale have been
aggregated in the Asia wind business segment. The corporate segment represents all activity performed
above the individual segments for the business.
We report our results in accordance with these segments and present prior period segmented
information in a consistent manner. See Note 6 – Segmented information in our audited annual
consolidated financial statements.
One of our primary business objectives is to generate stable and growing cash flows while
minimizing risk for the benefit of all stakeholders. We monitor our performance in this regard through
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December 31, 2018
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three key metrics — i) Net Income (Loss), ii) Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (“Adjusted EBITDA”), and iii) Funds From Operations.
It is important to highlight that Adjusted EBITDA and 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 and have limitations as analytical tools. We provide additional
information below on how we determine Adjusted EBITDA and Funds From Operations. We also provide
reconciliations to net income (loss). See “PART 4 – Financial Performance Review on Proportionate
Information – Reconciliation of Non-IFRS Measures” and “PART 6 – Selected Annual and Quarterly
Information – Reconciliation of Non-IFRS measures”.
Proportionate Information
Reporting to the CODM on the measures utilized to assess performance and allocate resources
has been provided on a proportionate basis since the fourth quarter of 2017. Information on a
proportionate basis reflects Brookfield Renewable’s share from facilities which it accounts for using
consolidation and the equity method whereby Brookfield Renewable either controls or exercises
significant influence or joint control over the investment, respectively. Proportionate information provides
a Unitholder perspective that the CODM considers important when performing internal analyses and
making strategic and operating decisions. The CODM also believes that providing proportionate
information helps investors understand the impacts of decisions made by management and financial
results allocable to Unitholders.
Proportionate financial information is not, and is not intended to be, presented in accordance with
IFRS. Tables reconciling IFRS data with data presented on a proportionate basis have been disclosed.
Segment revenues, other income, direct operating costs, interest expense, depreciation, current and
deferred income taxes, and other are items that will differ from results presented in accordance with IFRS
as these items (1) include Brookfield Renewable’s proportionate share of earnings from equity-accounted
investments attributable to each of the above-noted items, and (2) exclude the proportionate share of
earnings (loss) of consolidated investments not held by us apportioned to each of the above-noted items.
The presentation of proportionate results has limitations as an analytical tool, including the following:
• The amounts shown on the individual line items were derived by applying our overall economic
ownership interest percentage and do not necessarily represent our legal claim to the assets and
liabilities, or the revenues and expenses; and
• Other companies may calculate proportionate results differently than we do.
Because of these limitations, our proportionate financial information should not be considered in
isolation or as a substitute for our financial statements as reported under IFRS.
Brookfield Renewable does not control those entities that have not been consolidated and as such,
have been presented as equity-accounted investments in its financial statements. The presentation of the
assets and liabilities and revenues and expenses do not represent Brookfield Renewable’s legal claim to
such items, and the removal of financial statement amounts that are attributable to non-controlling
interests does not extinguish Brookfield Renewable’s legal claims or exposures to such items.
Net Income (Loss)
Net income (loss) is calculated in accordance with IFRS.
Net income (loss) is an 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 flows generated by
the assets are supported by strong margins and stable, long-term power purchase agreements. The
primary reason for this is that accounting rules require us to recognize a significantly higher level of
depreciation for our assets than we are required to reinvest in the business as sustaining capital
expenditures.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
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Adjusted EBITDA
EBITDA is a non-IFRS measure used by investors to analyze the operating performance of
companies.
Brookfield Renewable uses Adjusted EBITDA to assess the performance of its operations before
the effects of interest expense, income taxes, depreciation, management service costs, non-controlling
interests, unrealized gain or loss on financial instruments, non-cash gain or loss from equity-accounted
investments, distributions to preferred limited partners and other typical non-recurring items. Brookfield
Renewable adjusts for these factors as they may be non-cash, unusual in nature and/or are not factors
used by management for evaluating operating performance.
Brookfield Renewable believes that presentation of this measure will enhance an investor’s ability
to evaluate our financial and operating performance on an allocable basis to Unitholders.
Funds From Operations and Funds From Operations per Unit
Funds From Operations is a non-IFRS measure used by investors to analyze net earnings from
operations without the effects of certain volatile items that generally have no current financial impact or
items not directly related to the performance of the business.
Brookfield Renewable uses Funds From Operations to assess the performance of the business
before the effects of certain cash items (e.g. acquisition costs and other typical non-recurring cash items)
and certain non-cash items (e.g. deferred income taxes, depreciation, non-cash portion of non-controlling
interests, unrealized gain or loss on financial instruments, non-cash gain or loss from equity-accounted
investments, and other non-cash items) as these are not reflective of the performance of the underlying
business. In our audited annual consolidated financial statements we use the revaluation approach in
accordance with IAS 16, Property, Plant and Equipment, whereby depreciation is determined based on a
revalued amount, thereby reducing comparability with our peers who do not report under IFRS as issued
by the IASB or who do not employ the revaluation approach to measuring property, plant and equipment.
We add back deferred income taxes on the basis that we do not believe this item reflects the present
value of the actual tax obligations that we expect to incur over our long-term investment horizon.
Brookfield Renewable believes that analysis and presentation of Funds From Operations on this
basis will enhance an investor’s understanding of the performance of the business. Funds From
Operations per Unit is not a substitute measure of performance for earnings per share and does not
represent amounts available for distribution to LP Unitholders.
Funds From Operations is not intended to be representative of cash provided by operating
activities or results of operations determined in accordance with IFRS. Furthermore, this measure is not
used by the CODM to assess Brookfield Renewable’s liquidity.
Brookfield Renewable Partners L.P.
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December 31, 2018
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PART 10 – CAUTIONARY STATEMENTS
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” provisions 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
and payout ratio, future commissioning of assets, contracted nature of our portfolio, technology
diversification, acquisition opportunities, expected completion of acquisitions, financing and refinancing
opportunities, future energy prices and demand for electricity, economic recovery, achieving long-term
average generation, project development and capital expenditure costs, energy policies, economic
growth, growth potential of the renewable asset class, the future growth prospects and distribution profile
of Brookfield Renewable and Brookfield Renewable’s access to capital. In some cases, forward-looking
statements can be identified by the use of words such as “plans”, “expects”, “scheduled”, “estimates”,
“intends”, “anticipates”, “believes”, “potentially”, “tends”, “continue”, “attempts”, “likely”, “primarily”,
“approximately”, “endeavours”, “pursues”, “strives”, “seeks”, “targets”, “believes”, or variations of such
words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “should”,
“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.
Changes to hydrology at our hydroelectric facilities, to wind conditions at our wind energy facilities, to
irradiance at our solar facilities or to weather generally at any of our facilities; volatility in supply and
demand in the energy markets; our inability to re-negotiate or replace expiring power purchase
agreements on similar terms; increases in water rental costs (or similar fees) or changes to the regulation
of water supply; advances in technology that impair or eliminate the competitive advantage of our
projects; an increase in the amount of uncontracted generation in our portfolio; industry risks relating to
the power markets in which we operate; the termination of, or a change to, the hydrological balancing
pool in Brazil; increased regulation of our operations; concessions and licenses expiring and not being
renewed or replaced on similar terms; increases in the cost of operating our plants; our failure to comply
with conditions in, or our inability to maintain, governmental permits; equipment failures, including failures
related to wind turbines and solar panels; dam failures and the costs and potential liabilities associated
with such failures; force majeure events; uninsurable losses; adverse changes in currency exchange
rates and our inability to effectively manage foreign currency exposure; availability and access to
interconnection facilities and transmission systems; health, safety, security and environmental risks;
disputes, governmental and regulatory investigations and litigation; counterparties to our contracts not
fulfilling their obligations; the time and expense of enforcing contracts against non-performing counter-
parties and the uncertainty of success; our operations being affected by local communities; fraud, bribery,
corruption, other illegal acts or inadequate or failed internal processes or systems; our reliance on
computerized business systems, which could expose us to cyber-attacks; newly developed technologies
in which we invest not performing as anticipated; labor disruptions and economically unfavorable
collective bargaining agreements; our inability to finance our operations due to the status of the capital
markets; operating and financial restrictions imposed on us by our loan, debt and security agreements;
changes to our credit ratings; our inability to identify sufficient investment opportunities and complete
transactions; the growth of our portfolio and our inability to realize the expected benefits of our
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Annual Report
December 31, 2018
Page 71
transactions or acquisitions; our inability to develop greenfield projects or find new sites suitable for the
development of greenfield projects; delays, cost overruns and other problems associated with the
construction and operation of generating facilities and risks associated with the 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; we do not have control over all our operations or investments; foreign laws
or regulation to which we become subject as a result of future acquisitions in new markets; changes to
government policies that provide incentives for renewable energy; a decline in the value of our
investments in securities, including publicly traded securities of other companies; we are not subject to
the same disclosure requirements as a U.S. domestic issuer; the separation of economic interest from
control within our organizational structure; the incurrence of debt at multiple levels within our
organizational structure; being deemed an “investment company” under the U.S. Investment Company
Act of 1940; the effectiveness of our internal controls over financial reporting; our dependence on
Brookfield Asset Management and Brookfield Asset Management’s significant influence over us; the
departure of some or all of Brookfield Asset Management’s key professionals; changes in how Brookfield
Asset Management elects to hold its ownership interests in Brookfield Renewable; and Brookfield Asset
Management acting in a way that is not in the best interests of Brookfield Renewable or our unitholders.
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 subsequent date. 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 Funds From
Operations per Unit (collectively, “Brookfield Renewable’s Non-IFRS Measures”) which are not generally
accepted accounting measures under IFRS and therefore may differ from definitions of Adjusted EBITDA,
Funds From Operations and Funds From Operations per Unit used by other entities. In particular, our
definition of Funds From Operations may differ from the definition of funds from operations used by other
organizations, as well as the definition of funds from operations used by the Real Property Association of
Canada and the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), in part because
the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. We believe that Brookfield
Renewable’s Non-IFRS Measures are useful supplemental measures that may assist investors in
assessing our financial performance. Brookfield Renewable’s Non-IFRS Measures should not 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. These non-IFRS
measures reflect how we manage our business and, in our opinion, enable the reader to better
understand our business.
A reconciliation of Adjusted EBITDA and Funds From Operations to net income 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 in Note 6 – Segmented information in the audited annual
consolidated financial statements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 72
MANAGEMENT’S RESPONSIBILITY
Management’s Responsibility for Financial Statements
The accompanying consolidated financial statements have been prepared by Brookfield Renewable
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 the 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 Public 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.
Sachin Shah
Chief Executive Officer
February 28, 2019
Wyatt Hartley
Chief Financial Officer
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Brookfield Renewable Partners Limited (General Partner of Brookfield
Renewable Partners L.P.) and Partners of Brookfield Renewable Partners L.P.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Brookfield
Renewable Partners L.P. (“Brookfield Renewable”) as of December 31, 2018 and 2017, the related
consolidated statements of income, comprehensive income, changes in equity and cash flows for each of
the three years in the period ended December 31, 2018, and the related notes (collectively referred to as
the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Brookfield Renewable as at December 31, 2018 and 2017, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with
International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards
Board.
Report on internal control over financial reporting
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), Brookfield Renewable’s internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“2013 framework”) and our report
dated February 28, 2019 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 1 to the consolidated financial statements, Brookfield Renewable changed its
method of accounting for Revenue and Financial Instruments in 2018 due to the adoption of IFRS 15,
Revenue from Contracts with Customers and IFRS 9, Financial Instruments.
Basis for Opinion
These financial statements are the responsibility of Brookfield Renewable’s management. Our
responsibility is to express an opinion on Brookfield Renewable’s consolidated financial statements based
on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to Brookfield Renewable in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 74
We have served as Brookfield Renewable’s auditors since 2011.
Toronto, Canada
February 28, 2019
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 75
INTERNAL CONTROL OVER FINANCIAL REPORTING
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Brookfield Renewable Partners L.P. (“Brookfield Renewable”) is responsible for
establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and
the Chief Financial Officer and effected by the Board of Directors, management and other personnel to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board as defined in Regulation 240.13a–15(f) or
240.15d–15(f).
Management assessed the effectiveness of Brookfield Renewable’s internal control over financial
reporting as of December 31, 2018, based on the criteria set forth in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this assessment, management concludes that, as of December 31, 2018, Brookfield Renewable’s
internal control over financial reporting is effective. Management excluded from its design and
assessment of the internal controls of investments acquired in 2018, which include the 23 MW wind
project in Northern Ireland and the 49 MW of the Biotherm wind and solar project in South Africa which
we agreed to sell in 2018, whose total assets, net assets on a combined basis constitute approximately
1% and 1%, respectively, of the consolidated financial statement amounts as of December 31, 2018 and
1% and 2% of revenues and net income respectively, for the year then ended.
Brookfield Renewable’s internal control over financial reporting as of December 31, 2018, has been
audited by Ernst & Young LLP, the Independent Registered Public Accounting Firm, who also audited
Brookfield Renewable’s consolidated financial statements for the year ended December 31, 2018. As
stated in the Report of Independent Registered Public Accounting Firm, Ernst & Young LLP expressed an
unqualified opinion on the effectiveness of Brookfield Renewable’s internal control over financial reporting
as of December 31, 2018.
Sachin Shah
Chief Executive Officer
February 28, 2019
Wyatt Hartley
Chief Financial Officer
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 76
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Brookfield Renewable Partners Limited (General Partner of Brookfield
Renewable Partners L.P.) and Partners of Brookfield Renewable Partners L.P.
Opinion on Internal Control over Financial Reporting
We have audited Brookfield Renewable Partners L.P. (“Brookfield Renewable”)’s internal control over
financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (“COSO criteria”). In our opinion, Brookfield Renewable maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial
reporting did not include the internal controls of the 23 MW wind project in Northern Ireland and the 49
MW Biotherm wind and solar project in South Africa acquired in 2018, which are included in the 2018
consolidated financial statements of Brookfield Renewable and constituted approximately 1% and 1% of
total and net assets, respectively, as of December 31, 2018 and 1% and 2% of revenues and net income
for the year then ended. Our audit of internal control over financial reporting of Brookfield Renewable also
did not include an evaluation of the internal control over financial reporting of the 23 MW wind project in
Northern Ireland and the 49 MW Biotherm wind and solar project in South Africa acquired in 2018.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), the 2018 consolidated financial statements of Brookfield Renewable and
our report dated February 28, 2019 expressed an unqualified opinion on those consolidated financial
statements.
Basis for Opinion
Brookfield Renewable’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on Brookfield Renewable’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to Brookfield Renewable in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada, the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 77
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Toronto, Canada
February 28, 2019
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
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BROOKFIELD RENEWABLE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
(MILLIONS, EXCEPT AS NOTED)
Revenues
Other income
Direct operating costs
Management service costs
Interest expense – borrowings
Share of earnings from
equity-accounted investments
Foreign exchange and
unrealized financial instruments (loss) gain
Depreciation
Other
Income tax recovery (expense)
Current
Deferred
Net income
Net income attributable to:
Non-controlling interests
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
Preferred equity
Preferred limited partners' equity
Limited partners' equity
Basic and diluted earnings (loss) per LP Unit
Notes
27
$
2018
2,982 $
2017
2,625 $
7
8
27
13
19
5
12
9
11
11
50
(1,036)
(80)
(705)
47
(978)
(82)
(632)
68
2
(34)
(819)
(82)
(30)
89
59
(46)
(782)
(15)
(39)
(49)
(88)
$
403 $
51 $
14
$
297 $
53 $
14
14
14
15
16
$
$
1
17
26
38
24
(1)
(23)
26
28
(32)
403 $
51 $
2016
2,452
64
(1,038)
(62)
(606)
-
4
(781)
(46)
(44)
97
53
40
65
-
(29)
25
15
(36)
40
0.13 $
(0.18) $
(0.23)
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 79
BROOKFIELD RENEWABLE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31
(MILLIONS)
Net income
Other comprehensive income (loss) that will not be
reclassified to net income
Revaluations of property, plant and equipment
Actuarial gain (loss) on defined benefit plans
Deferred income taxes on above items
Equity-accounted investments
Total items that will not be reclassified to net income
Other comprehensive income that may be
reclassified to net income
Foreign currency translation
(Losses) gains arising during the year on financial
instruments designated as cash-flow hedges
Unrealized gain (loss) on foreign exchange swaps -
net investment hedge
Unrealized (loss) gain on investments
in equity securities
Reclassification adjustments for amounts
recognized in net income
Deferred income taxes on above items
Total items that may be reclassified
subsequently to net income
Other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Non-controlling interests
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
Preferred equity
Preferred limited partners' equity
Limited partners' equity
Notes
$
2018
403 $
2017
51 $
2016
40
12
29
11
19
4,558
9
(975)
426
4,018
872
(2)
338
54
1,262
10
(825)
190
5
5
5
5
11
(5)
93
(16)
18
(19)
4
(94)
(22)
(1)
11
417
(2)
(34)
7
388
986
8
(66)
61
(41)
(7)
(754)
3,264
3,667 $
88
1,350
1,401 $
941
1,329
1,369
$
14
$
2,004 $
436 $
700
14
14
14
15
16
14
8
6
683
(22)
38
950
3,667 $
370
65
28
494
1,401 $
275
41
15
332
1,369
$
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 80
BROOKFIELD RENEWABLE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT DECEMBER 31
(MILLIONS)
Assets
Current assets
Cash and cash equivalents
Restricted cash
Trade receivables and other current assets
Financial instrument assets
Due from related parties
Assets held for sale
Financial instrument assets
Equity-accounted investments
Property, plant and equipment, at fair value
Goodwill
Deferred income tax assets
Other long-term assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Financial instrument liabilities
Due to related parties
Corporate borrowings
Non-recourse borrowings
Liabilities directly associated with assets held for sale
Financial instrument liabilities
Corporate borrowings
Non-recourse borrowings
Deferred income tax liabilities
Other long-term liabilities
Equity
Non-controlling interests
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
Preferred equity
Preferred limited partners' equity
Limited partners' equity
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of Brookfield Renewable Partners L.P.:
Patricia Zuccotti
Director
David Mann
Director
Notes
2018
2017
20
21
22
5
27
4
5
19
12
17
11
23
24
5
27
13
13
4
5
13
13
11
25
14
14
14
14
15
16
$
$
$
173 $
136
607
60
65
920
1,961
124
1,569
29,025
828
91
505
34,103 $
533 $
27
101
6
489
533
1,689
111
2,328
7,895
4,140
734
8,129
66
3,252
568
707
4,484
$
34,103 $
799
181
554
72
60
-
1,666
113
721
27,096
901
177
230
30,904
542
184
112
159
1,517
-
2,514
86
2,393
7,697
3,588
344
6,298
58
2,843
616
511
3,956
30,904
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 81
BROOKFIELD RENEWABLE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Accumulated other comprehensive income (loss)
Non-controlling interests
Participating
non-controlling
General
partnership
Participating
non-controlling
interests - in a
interest in holding subsidiary
- Redeemable
a holding
/Exchangeable
interests - in subsidiary
units held by
held by
Brookfield
subsidiaries Brookfield
operating
Limited
Foreign
partners' currency Revaluation
surplus
equity translation
Actuarial
losses on
defined
Invest-
ments in
Total Preferred
limited
limited
benefit Cash flow
plans hedges securities
equity partners' partners' Preferred
equity
equity
equity
$ (259) $ (378) $ 4,616 $
-
(205)
-
-
1,131
-
24
-
-
(9) $
-
3
-
(29) $
-
5
-
15 $ 3,956 $ 511 $ 616 $
-
(8)
-
24
926
-
38
-
196
26
(48)
-
(51)
-
-
(355)
8
(315)
(689)
-
-
-
-
-
(69)
(274)
-
-
-
-
-
373
1,504
$ (948) $ (652) $ 6,120 $
$ (257) $ (404) $ 4,124 $
-
26
-
-
-
-
-
-
-
26
$ (259) $ (378) $ 4,616 $
(32)
-
411
(63)
-
-
(328)
10
-
(2)
-
508
-
-
-
-
-
-
(16)
492
-
-
-
-
-
-
3
(6) $
(8) $
-
(1)
-
-
-
-
-
-
-
(1)
(9) $
-
-
-
-
-
(10)
(5)
(34) $
(31) $
-
2
-
-
-
-
-
-
-
2
(29) $
-
-
-
-
-
(3)
(11)
(51)
-
-
(355)
8
(24)
528
-
-
-
(38)
-
-
196
4 $ 4,484 $ 707 $ 568 $
-
-
-
(26)
-
-
(48)
24 $ 3,448 $ 324 $ 576 $
(32)
526
411
(63)
-
-
(328)
10
(16)
508
-
(9)
-
-
-
-
-
-
-
(9)
15 $ 3,956 $ 511 $ 616 $
28
-
187
-
-
-
(28)
-
-
187
26
39
-
-
-
-
(26)
-
1
40
6,298 $
297
1,707
-
-
307
21
(553)
-
52
1,831
8,129 $
5,589 $
53
383
-
-
294
525
(539)
-
(7)
709
6,298 $
58 $
1
13
-
-
-
-
(45)
-
39
8
66 $
55 $
(1)
9
-
1
-
-
(35)
-
29
3
58 $
Total
equity
2,843 $ 14,282
403
3,264
196
17
666
-
-
-
-
(255)
-
(19)
409
(51)
307
21
(1,272)
8
48
2,924
3,252 $ 17,206
2,680 $ 12,672
51
1,350
598
-
294
525
(1,199)
10
(19)
1,610
2,843 $ 14,282
(23)
393
-
62
-
-
(243)
-
(26)
163
YEAR ENDED DECEMBER 31
(MILLIONS)
Balance, as at December 31, 2017
Net income
Other comprehensive income (loss)
Preferred Units issued (Note 15)
LP Units purchased
for cancellation (Note 16)
Capital contributions (Note 14)
Acquisition (Note 3)
Distributions or dividends declared
Distribution reinvestment plan
Other
Change in year
Balance, as at December 31, 2018
Balance, as at December 31, 2016
Net (loss) income
Other comprehensive income
Preferred Units and LP Units issued
Adjustments
Capital contributions
Acquisition
Distributions or dividends declared
Distribution reinvestment plan
Other
Change in year
Balance, as at December 31, 2017
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 82
BROOKFIELD RENEWABLE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Accumulated other comprehensive income (loss)
Non-controlling interests
Limited
partners'
Foreign
currency Revaluation
surplus
translation
Actuarial
losses on
defined
benefit Cash flow
hedges
plans
Available-
for-sale
invest-
ments
Participating
non-controlling
General
partnership
Participating
non-controlling
interests - in a
interest in holding subsidiary
- Redeemable
a holding
/Exchangeable
interests - in subsidiary
units held by
held by
Brookfield
subsidiaries Brookfield
operating
limited
Total Preferred
limited
partners' partners' Preferred
equity
equity
equity
Total
equity
YEAR ENDED DECEMBER 31
(MILLIONS)
Balance, as at December 31, 2015
Net (loss) income
Other comprehensive income
Exchange of preferred shares
Preferred Units and LP Units issued
Net proceeds
Adjustment
Capital contributions
Acquisition
Distributions or dividends declared
Distribution reinvestment plan
MTO Adjustments
Other
Change in year
Balance, as at December 31, 2016
$ (485) $
equity
(36)
-
-
-
241
-
657
(85)
-
-
(281)
9
(24)
(12)
228
-
-
-
-
-
-
25
-
266
(670) $ 4,019 $
(7) $
-
105
-
-
-
-
-
-
-
-
-
105
(30) $
-
(1)
-
-
-
-
-
-
-
-
-
(1)
(31) $
- $ 2,827 $ 128 $ 610 $
-
24
-
(36)
368
-
25
16
(49)
15
-
49
657
(85)
-
-
(281)
9
1
(12)
621
-
-
-
-
-
-
-
-
24
24 $ 3,448 $ 324 $ 576 $
147
-
-
-
(15)
-
-
-
196
-
-
-
-
(25)
-
-
(1)
(34)
2,587 $
65
635
-
-
-
2,621
1,417
(119)
-
(1,617)
-
3,002
5,589 $
52 $
-
6
-
2,559 $
(29)
304
-
8,763
40
1,329
-
-
2
-
-
(24)
-
-
19
3
55 $
-
83
-
-
(232)
-
-
(5)
121
804
-
2,621
1,417
(696)
9
(1,616)
1
3,909
2,680 $ 12,672
-
(1)
-
-
-
-
-
-
-
-
-
(1)
(8) $
$ (257) $
(404) $ 4,124 $
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 83
BROOKFIELD RENEWABLE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
(MILLIONS)
Operating activities
Net income
Adjustments for the following non-cash items:
Depreciation
Unrealized foreign exchange and
financial instrument loss
Share of earnings from
equity-accounted investments
Deferred income tax (recovery) expense
Other non-cash items
Dividends received from equity-accounted investments
Changes in due to or from related parties
Net change in working capital balances
Financing activities
Long-term debt - borrowings
Long-term debt - repayments
Capital contributions from participating non-controlling
interests - in operating subsidiaries
Acquisition of Isagen from non-controlling interests
Issuance of preferred limited partnership units
Issuance of LP Units
Repurchase of LP Units
Distributions paid:
To participating non-controlling interests - in operating
subsidiaries
To preferred shareholders
To preferred limited partners' unitholders
To unitholders of Brookfield Renewable or BRELP
Borrowings from related party
Repayments to related party
Investing activities
Acquisitions net of cash and
cash equivalents in acquired entity
Investment in equity-accounted investments
Investment in property, plant and equipment
Proceeds from disposal of assets
Disposal of (investment in) securities
Restricted cash and other
Foreign exchange (loss) gain on cash
Cash and cash equivalents
(Decrease) increase
Net change in cash classified within assets held for sale
Balance, beginning of year
Balance, end of year
Supplemental cash flow information:
Interest paid
Interest received
Income taxes paid
Notes
2018
2017
2016
12
5
19
11
19
28
13
13
14
14
15
16
14
14
15
14, 16
13
13
3
19
12
5
4
$
403 $
51 $
819
8
(68)
(89)
53
42
3
(68)
1,103
782
43
(2)
49
(6)
31
5
(25)
928
3,261
(3,527)
1,874
(1,607)
300
-
196
-
(51)
(553)
(26)
(37)
(643)
200
(200)
(1,080)
(39)
(420)
(235)
23
27
20
(624)
(17)
294
(5)
187
411
-
(539)
(25)
(26)
(591)
-
-
(27)
377
(439)
(355)
150
(77)
16
(328)
3
(618)
(8)
799
173 $
665 $
22 $
68 $
$
$
$
$
576
-
223
799 $
611 $
27 $
48 $
40
781
1
-
(97)
27
6
11
(137)
632
3,477
(1,975)
2,621
(1,540)
147
657
-
(119)
(25)
(12)
(522)
-
-
2,709
(2,769)
-
(369)
-
(60)
7
(3,191)
10
160
-
63
223
588
40
55
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 84
BROOKFIELD RENEWABLE PARTNERS L.P.
NOTES TO THE AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
The business activities of Brookfield Renewable
Partners L.P. (“Brookfield Renewable”) consist
of owning a portfolio of renewable power
generating facilities primarily in North America,
Colombia, Brazil, Europe, India and China.
9, Series 11 and Series 13 preferred limited
partners’ equity are traded under the symbols
“BEP.PR.E”,
“BEP.PR.I”,
“BEP.PR.G”,
“BEP.PR.K” and “BEP.PR.M” respectively, on
the Toronto Stock Exchange.
the context
indicates or
requires
Unless
otherwise,
term “Brookfield Renewable”
means Brookfield Renewable Partners L.P. and
its controlled entities.
the
Brookfield Renewable is a publicly traded limited
partnership established under
laws of
Bermuda pursuant to an amended and restated
limited partnership agreement dated November
20, 2011.
the
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, Brookfield Renewable
Partners Limited (“BRPL”). The ultimate parent
of Brookfield Renewable is Brookfield Asset
Management
Asset
Management”). Brookfield Asset Management
and
than Brookfield
Renewable, are also individually and collectively
referred to as “Brookfield” in these financial
statements.
its subsidiaries, other
(“Brookfield
Inc.
Brookfield Renewable’s non-voting
limited
partnership units (“LP Units”) are traded under
the symbol “BEP” on the New York Stock
Exchange and under the symbol “BEP.UN” on
the Toronto Stock Exchange. Brookfield
Renewable’s Class A Series 5, Series 7, Series
Notes to consolidated financial statements
GENERAL APPLICATION
1. Basis of preparation and significant accounting
policies
2. Principal subsidiaries
3. Acquisitions
4. Assets held for sale
5. Risk management and financial instruments
6. Segmented information
CONSOLIDATED RESULTS OF OPERATIONS
7. Other income
8. Direct operating costs
9. Other
10. Foreign currency translation
11.
Income taxes
CONSOLIDATED FINANCIAL POSITION
12. Property, plant and equipment, at fair value
13. Borrowings
14. Non-controlling interests
15. Preferred limited partner’s equity
16. Limited partners’ equity
17. Goodwill
18. Capital management
19. Equity-accounted investments
20. Cash and cash equivalents
21. Restricted cash
22. Trade receivables and other current assets
23. Other long-term assets
24. Accounts payable and accrued liabilities
25. Other long-term liabilities
26. Commitments, contingencies and guarantees
OTHER
27. Related party transactions
28. Supplemental information
29. Pension and employee future benefits
30. Subsidiary public issuers
31. Subsequent events
Page
86
104
105
110
112
122
128
128
129
129
129
132
135
139
144
144
145
145
147
148
148
148
149
149
150
150
152
157
157
161
162
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 85
1. 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, 2018, which encompass individual IFRS, International Accounting Standards (“IAS”), and
interpretations made by the International Financial Reporting Interpretations Committee (“IFRIC”) and the
Standard 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
Brookfield Renewable’s general partner, BRPL, on February 28, 2019.
Certain comparative figures have been reclassified to conform to the current year’s presentation.
References to $, C$, €, £ ,R$, COP, ZAR, THB and MYR are to United States (“U.S.”) dollars, Canadian
dollars, Euros, British pound sterling, Brazilian reais, Colombian pesos, South African rand, Thai baht and
Malaysian ringgit, respectively.
All figures are presented in millions of 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.
(i) Consolidation
These consolidated financial statements include the accounts of Brookfield Renewable and its
subsidiaries, which are the entities over which Brookfield Renewable has control. 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
statements of financial position.
issued
redeemable/exchangeable
Brookfield Renewable has entered into a voting agreement with Brookfield, 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
to Brookfield
(“Redeemable/Exchangeable Partnership Units”), pursuant to which the holder may at its request require
BRELP to redeem the Redeemable/Exchangeable Partnership Units for cash consideration. 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 LP Units on a one for one basis. 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”).
limited partnership units
Brookfield Renewable has entered into voting agreements with Brookfield, whereby Brookfield
Renewable gained control of the entities that own certain renewable power generating operations in the
United States, Brazil, Europe and other countries (including India and China). Brookfield Renewable has
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 86
also entered into a voting agreement with our consortium partners in respect of our Colombian
operations. These voting agreements provide Brookfield Renewable the authority to direct the election of
the Boards of Directors of the relevant entities, among other things, and therefore provide Brookfield
Renewable with control. Accordingly, Brookfield Renewable consolidates the accounts of these entities.
Refer to Note 27 - Related party transactions for further information.
For entities previously controlled by Brookfield Asset Management, the voting agreements entered into do
not represent business combinations in accordance with IFRS 3, Business Combinations (“IFRS 3”), as
all combining businesses are ultimately controlled by Brookfield Asset Management both before and after
the transactions were completed. Brookfield Renewable accounts for these transactions involving entities
under common control in a manner similar to a pooling of interest, which requires the presentation of pre-
voting agreement financial information as if the transactions had always been in place. Refer to Note
1(r)(ii) - Critical judgments in applying accounting policies - Common control transactions for Brookfield
Renewable’s policy on accounting for transactions under common control.
(ii) Equity-accounted investments
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 without controlling or jointly controlling 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) Recently adopted accounting standards
(i) IFRS 15, Revenue from contracts with customers (“IFRS 15”)
On January 1, 2018 Brookfield Renewable adopted IFRS 15 using the modified retrospective method
applied to those contracts which were not completed as of January 1, 2018. IFRS 15 supersedes IAS 11
Construction Contracts, IAS 18 Revenue and related interpretations and it applies, with limited
exceptions, to all revenue arising from contracts with its customers. IFRS 15 requires that revenue be
recognized at an amount that reflects the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer using a five-step model, which requires the
identification of a contract with a customer, the identification of performance obligations within the
contract, determination of the transaction price, the allocation of the transaction price to the performance
obligations and the recognition of revenue when performance obligations have been satisfied.
IFRS 15 requires entities to exercise judgement, taking into consideration all the relevant facts and
circumstances when applying each step of the model to contracts with their customers. The standard also
specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to
fulfilling a contract.
The pattern and timing of revenue recognition under the new standard is consistent with prior practice.
There were no adjustments recognized on the adoption of IFRS 15.
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December 31, 2018
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(ii) IFRS 9, Financial instruments (“IFRS 9”)
Brookfield Renewable adopted IFRS 9, as issued by the IASB in 2014, which provides more reliable and
relevant information for users to assess the amounts, timing and uncertainty of future cash flows. The
new accounting policy was applied prospectively, with an initial application date of January 1, 2018.
Brookfield Renewable has not restated the comparative information, which continues to be reported under
IAS 39, Financial Instruments Recognition and Measurement (“IAS 39”). The adoption of IFRS 9 did not
result in any material transition adjustments being recognized as at January 1, 2018
IFRS 9 replaces certain provisions of IAS 39 that relate to the recognition, classification and
measurement of financial assets and financial liabilities; derecognition of financial instruments;
impairment of financial assets; and hedge accounting. IFRS 9 also significantly amends other standards
dealing with financial instruments such as IFRS 7, Financial Instruments: Disclosures.
(d) Changes to and impact of financial instrument accounting policies
Classification and measurement
Under IFRS 9, financial assets are subsequently measured at fair value through profit or loss, amortized
cost, or fair value through OCI. The classification is based on two criteria: Brookfield Renewable’s
business objectives for managing the assets; and whether the instruments’ contractual cash flows
represent ‘solely payments of principal and interest’ on the principal amount outstanding.
The assessment of Brookfield Renewable’s business objectives was made as of January 1, 2018, the
date of initial application. The assessment of whether contractual cash flows on debt instruments are
solely comprised of principal and interest was made based on the facts and circumstances as at the initial
recognition of the assets.
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December 31, 2018
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As at January 1, 2018, the date of initial application, Brookfield Renewable’s financial instruments and
new classification categories under IFRS 9 were as follows:
Classification category
Financial assets
Cash and cash equivalents
Restricted cash(1)
Trade receivables
and other current assets
Financial instrument assets - investments
in equity securities(1)(2)
Financial instrument assets -
derivative financial instruments(1)(3)
Financial instrument assets - derivative
financial instruments designated as
hedges(1)(3)
IAS 39
FVPL
FVPL
IFRS 9
Amortized cost
Amortized cost
Loans and receivables
Amortized cost
Available-for-sale
FVPL
FVOCI
FVPL
Financial instruments
designated as hedges
Financial instruments
designated as hedges
Due from related parties
Loans and receivables
Amortized cost
Financial liabilities
Accounts payable
and accrued liabilities
Financial instrument liabilities -
derivative financial instruments(1)(3)
Financial instrument liabilities - derivative
financial instruments designated as
hedges(1)(3)
Due to related parties
Corporate borrowings(1)
Non-recourse borrowings(1)
(1)
(2)
Other liabilities
Amortized cost
FVPL
FVPL
Financial instruments
designated as hedges
Financial instruments
designated as hedges
Other liabilities
Other liabilities
Other liabilities
Amortized cost
Amortized cost
Amortized cost
Carrying amount
IAS 39 and IFRS 9
($ Millions)
799
284
554
159
20
6
60
542
145
125
112
2,552
9,214
Includes both current and non-current portions.
Investments in equity securities were originally referred to as available-for-sale securities in the 2017 annual consolidated
financial statements.
Derivative financial instruments comprise of energy derivative contracts, interest rate swaps and foreign exchange swaps.
(3)
The classification and measurement requirements of IFRS 9 did not have a significant impact to
Brookfield Renewable. Brookfield Renewable continued measuring at fair value all financial assets
previously held at fair value under IAS 39. There are no changes in classification and measurement for
Brookfield Renewable’s financial liabilities and there have been no financial liabilities designated at fair
value through profit or loss.
Impairment
From January 1, 2018, Brookfield Renewable assesses on a forward-looking basis the expected credit
losses (“ECL”) associated with its assets carried at amortized cost and FVOCI, including finance lease
receivables. For trade receivables only, Brookfield Renewable applies the simplified approach permitted
by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the
receivables. The simplified approach to the recognition of ECL does not require entities to track the
changes in credit risk; rather, entities recognize a loss allowance at each reporting date based on the
lifetime ECL since the date of initial recognition of the trade receivable.
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December 31, 2018
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Evidence of impairment may include:
Indications that a debtor or group of debtors is experiencing significant financial difficulty;
•
• A default of delinquency in interest or principal payments;
• Probability that a debtor or a group of debtors will enter into bankruptcy or other financial
reorganization;
• Changes in arrears or economic conditions that correlate with defaults, where observable data
indicates that there is a measurable decrease in the estimated future cash flows.
Trade receivables are reviewed qualitatively on a case by case basis to determine if they need to be
written off.
ECL are measured as the difference in the present value of the contractual cash flows that are due under
contract and the cash flows expected to be received. ECL is measured by considering the risk of default
over the contract period and incorporates forward looking information into its measurement.
Measurement of ECL on financial assets resulted in immaterial amounts; therefore, an allowance for
doubtful accounts was not recorded.
Derivatives and hedge accounting
Before January 1, 2018, hedge documentation included identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how Brookfield Renewable will
assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to
changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges were
expected to be highly effective in achieving offsetting changes in fair value or cash flows and were
assessed on an ongoing basis to determine that they had actually been highly effective throughout the
financial reporting periods for which they were designated.
Beginning January 1, 2018, the documentation includes identification of the hedging instrument, the
hedged item, the nature of the risk being hedged and how Brookfield Renewable will assess whether the
hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of
hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge
accounting if it meets all of the following effectiveness requirements:
• There is ‘an economic relationship’ between the hedged item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship.
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that Brookfield Renewable actually hedges and the quantity of the hedging
instrument that Brookfield Renewable actually uses to hedge that quantity of hedged item.
Refer to Note 1(k) – Financial Instruments for details of Brookfield Renewable’s accounting policies for
hedge accounting from January 1, 2018 under IFRS 9.
(e) 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
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December 31, 2018
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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 statement of financial position 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.
(f) Cash and cash equivalents
Cash and cash equivalents include cash, term deposits and money market instruments with original
maturities of less than 90 days.
(g) Restricted cash
Restricted cash includes cash and cash equivalents, where the availability of funds is restricted primarily
by credit agreements.
(h) 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 for the majority of its assets. 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. 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. For power generating assets acquired through business combinations during the year, Brookfield
Renewable initially measures the assets at fair value consistent with the policy described in Note 1(n) –
Business combinations. Accordingly, in the year of acquisition, power generating assets are not revalued
at year-end unless there is an indication that assets are impaired.
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.
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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
Solar generating units
Gas-fired cogenerating (“Cogeneration”) units
Other assets
Estimated service lives
Up to 115 years
Up to 60 years
Up to 115 years
Up to 115 years
Up to 30 years
Up to 30 years
Up to 40 years
Up to 60 years
Costs are allocated to significant components of property, plant and equipment. When items of property,
plant and equipment have different useful lives, they are accounted for as separate items (significant
components) and depreciated separately. To ensure the accuracy of useful lives and residual values, a
review is conducted annually.
Depreciation is calculated based on the cost of the asset less its residual value. Depreciation commences
when the asset is in the location and conditions necessary for it to be capable of operating in the manner
intended by management. It ceases at the earlier of the date the asset is classified as held-for-sale and
the date the asset is 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, 2018
is 29 years (2017: 15 years). Since land rights are part of the concession or authorization, this cost is also
subject to depreciation. In June of 2018, the federal government of Brazil provided further clarification to a
law that was passed in 2016, which resulted in Brookfield Renewable including a one-time thirty year
concession renewal period in the valuation of certain of its hydroelectric facilities in Brazil.
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 income
in the consolidated statements of income. The revaluation surplus is reclassified within the respective
components of equity and not reclassified to net income when the assets are disposed.
(i) Asset impairment
At each statement of financial position 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
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amount, and the carrying amount that would have been recorded had no impairment loss been
recognized previously.
(j) 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 provision for expected credit
losses.
(k) Financial instruments
The following accounting policies are applicable to the accounting for financial instruments from January
1, 2018 under IFRS 9. The impact to the Consolidated Financial Statements of the adoption of IFRS 9 in
the current period and comparison to IAS 39 applied in the comparative period is explained in Note 1(d) -
Changes to and Impact of Financial Instrument Accounting Policies.
Initial recognition
Under IFRS 9, regular purchases and sales of financial assets are recognized on the trade date, being
the date on which Brookfield Renewable commits to purchase or sell the asset. Financial assets are
derecognized when the rights to receive cash flows from the financial assets have expired or have been
transferred and Brookfield Renewable has transferred substantially all the risks and rewards of
ownership.
At initial recognition, Brookfield Renewable measures a financial asset at its fair value. In the case of a
financial asset not categorized as FVPL, transaction costs that are directly attributable to the acquisition
of the financial asset are included at initial recognition. Transaction costs of financial assets carried at
FVPL are expensed in profit or loss.
Classification and measurement
Subsequent measurement of financial assets depends on Brookfield Renewable’s business objective for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which Brookfield Renewable classifies its financial assets:
Amortized cost – Financial assets held for collection of contractual cash flows that represent solely
payments of principal and interest are measured at amortized cost. Interest income is recognized as other
income in the financial statements, and gains/losses are recognized in profit or loss when the asset is
derecognized or impaired.
FVOCI – Financial assets held to achieve a particular business objective other than short-term trading are
designated at FVOCI. Unlike debt instruments designated at FVOCI, there is no recycling of gains or
losses through profit and loss. Upon derecognition of the asset, accumulated gains or losses are
transferred from OCI directly to retained earnings.
FVPL – Financial assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL.
Financial liabilities are classified as financial liabilities at fair value through profit and loss, amortized cost,
or derivatives designated as hedging instruments in an effective hedge. Brookfield Renewable determines
the classification of its financial liabilities at initial recognition. Brookfield Renewable’s financial liabilities
include accounts payable and accrued liabilities, corporate borrowings, non-recourse borrowings,
derivative liabilities, and due to related party balances. Financial liabilities are initially measured at fair
value, with subsequent measurement determined based on their classification as follows:
FVPL – Financial liabilities held for trading, such as those acquired for the purpose of selling in the near
term, and derivative financial instruments entered into by Brookfield Renewable that do not meet hedge
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December 31, 2018
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accounting criteria are classified as fair value through profit and loss. Gains or losses on these types of
liabilities are recognized in profit and loss.
Amortized cost – All other financial liabilities are classified as amortized cost using the effective interest
rate method. Gains and losses are recognized in profit and loss when the liabilities are derecognized as
well as through the amortization process. Amortized cost is computed using the effective interest method
less any principal repayment or reduction. The calculation takes into account any premium or discount on
acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.
This category includes trade and other payables, dividends payable, interest-bearing loans and
borrowings, and corporate credit facilities.
Derivatives and hedge accounting
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The accounting for
subsequent changes in fair value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
Brookfield Renewable designates its derivatives as hedges of:
• Foreign exchange risk associated with the cash flows of highly probable forecast transactions
(cash flow hedges);
• Foreign exchange risk associated with net investment in foreign operations (net investment
hedges);
• Commodity price risk associated with cash flows of highly probable forecast transactions (cash
flow hedges); and
• Floating interest rate risk associated with payments of debts (cash flow hedges).
The fair values of various derivative financial instruments used for hedging purposes and movements in
the hedge reserve within equity are shown in Note 5 – Risk Management and Financial Instruments.
When a hedging instrument expires, is sold, is terminated, or no longer meets the criteria for hedge
accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time
remain in equity until the forecasted transaction occurs. When the forecasted transaction is no longer
expected to occur, the cumulative gain or loss and deferred costs of hedging are immediately reclassified
to profit and loss.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective
remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will
be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item
so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge
ineffectiveness is calculated and accounted for in profit and loss at the time of the hedge relationship
rebalancing.
(i) Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges is recognized in the cash flow hedge reserve within equity, limited to the cumulative change
in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss
relating to the ineffective portion is recognized immediately in profit and loss, within unrealized financial
instruments gain (loss).
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Gains and losses relating to the effective portion of the change in fair value of the entire forward contract
are recognized in the cash flow hedge reserve within equity. Amounts accumulated in equity are
reclassified in the period when the hedged item affects profit and loss.
(ii) Net investment hedges that qualify for hedge accounting
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain
or loss on the hedging instrument relating to the effective portion of the hedge is recognized in OCI and
accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognized
immediately in profit and loss within foreign exchange and unrealized financial instruments gain (loss).
Gains and losses accumulated in equity will be reclassified to profit and loss when the foreign operation is
partially disposed of or sold.
(iii) Hedge ineffectiveness
Brookfield Renewable’s hedging policy only allows for the use of derivative instruments that form effective
hedge relationships. Hedge effectiveness is determined at the inception of the hedge relationship and
through periodic prospective effectiveness assessments to ensure that an economic relationship exists
between the hedged item and hedging instrument. Where the critical terms of the hedging instrument
match exactly with the terms of the hedged item, a qualitative assessment of effectiveness is performed.
For other hedge relationships, the hypothetical derivative method to assess effectiveness is used.
(l) Revenue and expense recognition
The majority of revenue is derived from the sale of power and power related ancillary services both under
contract and in the open market, sourced from Brookfield Renewable’s power generating facilities. The
obligations are satisfied over time as the customer simultaneously receives and consumes benefits as
Brookfield Renewable delivers electricity and related products. Revenue is recorded based upon the
output delivered and capacity provided at rates specified under either contract terms or prevailing market
rates. The revenue reflects the consideration Brookfield Renewable expects to be entitled to in exchange
for those goods or services. Costs related to the purchases of power or fuel are recorded upon delivery.
All other costs are recorded as incurred.
Details of the revenue recognized per geographical region are included in Note 6 – Segmented
information.
Where available, Brookfield Renewable has elected the practical expedient available under IFRS 15 for
measuring progress toward complete satisfaction of a performance obligation and for disclosure
requirements of remaining performance obligations. The practical expedient allows an entity to recognize
revenue in the amount to which the entity has the right to invoice such that the entity has a right to the
consideration in an amount that corresponds directly with the value to the customer for performance
completed to date by the entity.
If the consideration in a contract that does not apply the practical expedient available under IFRS 15 for
measuring progress toward complete satisfaction of a performance obligation includes a variable amount,
Brookfield Renewable estimates the amount of consideration to which it will be entitled in exchange for
transferring the goods to the customer. The variable consideration is estimated at contract inception and
constrained until it is highly probable that a significant revenue reversal in the amount of cumulative
revenue recognised will not occur when the associated uncertainty with the variable consideration is
subsequently resolved.
Brookfield Renewable also sells power and related products under bundled arrangements. Energy,
capacity and renewable credits within power purchase agreements are considered to be distinct
performance obligations. A contract’s transaction price is allocated to each distinct performance
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obligation and recognized as revenue when, or as, the performance obligation is satisfied under IFRS 15.
Brookfield Renewable views the sale of energy and capacity as a series of distinct goods that is
substantially the same and has the same pattern of transfer measured by the output method. Brookfield
Renewable views renewable credits to be performance obligations satisfied at a point in time. During the
year ended December 31, 2018, revenues recognized at a point in time corresponding to the sale of
renewable credits were $17 million (2017: $18 million). Measurement of satisfaction and transfer of
control to the customer of renewable credits in a bundled arrangement coincides with the pattern of
revenue recognition of the underlying energy generation. Accordingly, Brookfield Renewable has
determined that the pattern of revenue recognition under IFRS 15 is consistent with IAS 18.
Revenues recognized that are outside the scope of IFRS 15 include realized gains and losses from
derivatives used in the risk management of the Brookfield Renewable's generation activities related to
commodity prices. Financial transactions included in revenues for the year ended December 31, 2018
decreased revenues by $21 million (2017: $16 million).
Contract Balances
Contract assets – A contract asset is the right to consideration in exchange for goods or services
transferred to the customer. If Brookfield Renewable performs by transferring goods or services to a
customer before the customer pays consideration or before payment is due, a contract asset is
recognized for the earned consideration that is conditional.
Trade receivables – A receivable represents Brookfield Renewable’s right to an amount of consideration
that is unconditional (i.e., only the passage of time is required before payment of the consideration is
due).
Contract liabilities – A contract liability is the obligation to transfer goods or services to a customer for
which Brookfield Renewable has received consideration (or an amount of consideration is due) from the
customer. If a customer pays consideration before Brookfield Renewable transfers goods or services to
the customer, a contract liability is recognized when the payment is made or the payment is due
(whichever is earlier). Contract liabilities are recognized as revenue when Brookfield Renewable performs
under the contract.
(m) 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
statement of financial position 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 statement of financial position 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 statement of financial position dates.
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Current and deferred income taxes relating to items recognized directly in OCI are also recognized
directly in OCI.
(n) Business combinations
The acquisition of a business is accounted for using the acquisition method. The consideration for an
acquisition is measured at the aggregate of the fair values, at the date of exchange, of the assets
transferred, the liabilities incurred to former owners of the acquired business, and equity instruments
issued by the acquirer in exchange for control of the acquired business. The acquired business’
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS
3, Business Combinations, are recognized at their fair values at the acquisition date, except for income
taxes which are measured 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 or when applicable, at the fair value of the shares
outstanding.
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 acquired, goodwill is recognized. To the extent that this
difference is negative, the amount is recognized as a gain in income. Goodwill is not amortized and is not
deductible for tax purposes. However, after initial recognition, goodwill will be measured at cost less any
accumulated impairment losses. An impairment assessment will be performed at least annually, and
whenever circumstances such as significant declines in expected revenues, earnings or cash flows
indicate that it is more likely than not that goodwill might be impaired. Goodwill impairment charges are
not reversible.
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.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a
contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes
in fair values are adjusted against the cost of the acquisition where they qualify as measurement period
adjustments. All other subsequent changes in the fair value of contingent consideration classified as
liabilities will be recognized in the consolidated statements of income, whereas changes in the fair values
of contingent consideration classified within equity are not subsequently re-measured.
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(o) Assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the non-current asset or disposal group is
available for immediate sale in its present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale within one year from the date of
classification subject to limited exceptions.
When Brookfield Renewable is committed to a sale plan involving loss of control of a subsidiary, all of the
assets and liabilities of that subsidiary are classified as held for sale when the criteria described above
are met, regardless of whether Brookfield Renewable will retain a non-controlling interest in its former
subsidiary after the sale.
Non-current assets and disposal groups classified as held for sale are measured at the lower of their
previous carrying amount and fair value less costs to sell.
Non-current assets classified as held for sale and the assets of a disposal group are presented separately
from other assets in the consolidated statements of financial position and are classified as current. The
liabilities of a disposal group classified as held for sale are presented separately from other liabilities in
the consolidated statements of financial position.
Once classified as held for sale, property, plant and equipment and intangible assets are not depreciated
or amortized.
(p) Other items
(i) Capitalized costs
Capitalized costs related to CWIP include all eligible expenditures incurred in connection with the
development and construction of the power generating asset. The expenditures consist of cost of
materials, direct labor and any other costs directly attributable to bringing the asset to a working condition
for its intended use, and the costs of dismantling and removing the items and restoring the site on which
they are located. Interest and borrowing 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.
(ii) Pension and employee future benefits
Pension and employee future benefits are recognized in the consolidated financial statements in respect
of employees of the operating entities within Brookfield Renewable. The costs of retirement benefits for
defined benefit plans and post-employment benefits are recognized as the benefits are earned by
employees. The 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. All actuarial gains and losses are
recognized immediately through OCI in order for the net pension asset or liability recognized in the
consolidated statements of financial position 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.
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 statements of
financial position with a corresponding debit or credit to OCI in the period in which they occur. Re-
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 98
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, using a discount rate that reflects the current market assessments of
the time value of money and the risks specific to the liability. The liability is accreted up to the date the
liability will be incurred with a corresponding charge to operating expenses. The carrying amount of
decommissioning, restoration and environmental liabilities is reviewed annually with changes in the
estimates of timing or amount of cash flows added to or deducted from the cost of the related asset.
(iv) Interest and borrowing costs
Interest and borrowing costs are capitalized when such costs are directly attributable to the acquisition,
construction or production of a qualifying asset. A qualifying asset is an asset that takes a substantial
period of time to prepare for its intended use.
(v) Provisions
A provision is a liability of uncertain timing or amount. A provision is recognized if Brookfield Renewable
has a present legal or constructive obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation and the amount can be reliably estimated. Provisions
are not recognized for future operating losses. The provision is measured at the present value of the best
estimate of the expenditures expected to be required to settle the obligation using a discount rate that
reflects the current market assessments of the time value of money and the risks specific to the
obligation. Provisions are re-measured at each statement of financial position date using the current
discount rate. The increase in the provision due to the passage of time is recognized as interest expense.
(vi) Interest income
Interest income is earned with the passage of time and is recorded on an accrual basis.
(vii) Government grants
Brookfield Renewable becomes eligible for government grants by constructing or purchasing renewable
power generating assets, and by bringing those assets 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 electricity 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 electricity
occurs.
(q) 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
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 99
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 12 - 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 1(r)(iii) - Critical judgments in applying accounting policies - Property, plant and
equipment for further details.
Estimates of useful lives and residual values are used in determining depreciation and amortization. To
ensure the accuracy of useful lives and residual values, these estimates are reviewed on an annual basis.
(ii) Financial instruments
Brookfield Renewable makes estimates and assumptions that affect the carrying value of its financial
instruments, including estimates and assumptions about future electricity prices, long-term average
generation, capacity prices, discount rates and the timing of energy delivery. 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 5 - 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 statement of financial position dates. Operating plans and
forecasts are used to estimate when the temporary difference will reverse.
(r) 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. Brookfield Renewable exercises judgment in determining whether non-
wholly owned subsidiaries are controlled by Brookfield Renewable. Brookfield Renewable’s judgement
included the determination of (i) how the relevant activities of the subsidiary are directed; (ii) whether the
rights of shareholdings are substantive or protective in nature; and (iii) Brookfield Renewable’s ability to
influence the returns of the subsidiary.
(ii) Common control transactions
Common control business combinations specifically fall outside of scope of IFRS 3 and as such
management has used its judgment to determine an appropriate policy to account for these transactions,
considering other relevant accounting guidance that is within the framework of principles in IFRS and that
reflects the economic reality of the transactions, in accordance with IAS 8, Accounting Policies, Changes
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 100
in Accounting Estimates and Errors. As a result, the consolidated financial statements account for assets
and liabilities acquired at the previous carrying value on the predecessor’s financial statements.
Differences between the consideration given and the assets and liabilities received are recorded directly
to equity.
(iii) Property, plant and equipment
The accounting policy relating to Brookfield Renewable’s property, plant and equipment is described in
Note 1(h) - Property, plant and equipment and revaluation method. 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 2025 in North America and Colombia, 2023 in Europe,
and 2022 in Brazil. The year of new entry is viewed as the point when generators 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 rising environmental compliance costs in North America and
Europe, and overall increasing demand in Colombia and Brazil. For the North American and European
businesses, Brookfield Renewable has estimated a discount to these new-build wind prices to determine
renewable electricity prices for hydroelectric and wind facilities. In Brazil and Colombia, 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 development.
Terminal values are included in the valuation of hydroelectric assets in North America and Colombia. 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 with consideration of a one-time 30-year renewal on our
qualifying hydroelectric assets.
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
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 101
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 1(k) -
Financial instruments. In applying the policy, judgments are made in applying the criteria set out in IFRS 9
and IAS 39, to record financial instruments at fair value through profit and loss, fair value through other
comprehensive income 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 1(m) -
Income taxes. In applying this policy, judgments are made in determining the probability of whether
deductions, tax credits and tax losses can be utilized.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 102
(s) Future changes in accounting policies
The following table provides a brief description of accounting standards issued but not yet effective, none
of which will be early adopted by Brookfield Renewable:
Standard
In January
2016, the IASB
issued IFRS
16, Leases
(“IFRS 16”).
Effective date Effect on financial statements
The standard
has a
mandatory
effective date
for annual
periods
beginning on or
after January 1,
2019, with early
adoption
permitted.
Management has chosen to adopt
the standard retrospectively in
accordance with IFRS 16 paragraph
C5(b), recognizing the cumulative
effect at the date of initial application
as an adjustment to the statement of
financial position. For leases that
meet the short-term recognition
exemption of being less than 12
months in length from the date of
initial application, or leases that meet
the low-value recognition exemption,
Management has elected to apply the
respective practical expedients and
these leases will be accounted for
using IAS 17 operating lease
accounting, whereby the lease
payments will be recognized as an
expense on either a straight line
basis over the lease term or another
systematic basis. At the date of initial
application excluding the subsidiaries
that are accounted for as held for
sale (Note 4 – Assets held for sale),
Brookfield Renewable anticipates
recognizing a right-of-use asset of
$149 million and a corresponding
lease liability of $151 million.
Description
IFRS 16 was issued by the IASB on January 13,
2016. IFRS 16 brings most leases onto the
statement of financial position for lessees under
a single model, eliminating the distinction
between operating and finance leases. Lessor
accounting remains largely unchanged and the
distinction between operating and finance leases
is retained. Under IFRS 16, a lessee recognizes
a right-of-use asset and a lease liability. The
right-of-use asset is treated similarly to other
non-financial assets and depreciated accordingly,
and the liability accrues interest. The lease
liability is initially measured at the present value
of the lease payments payable over the lease
term, discounted at the rate implicit in the lease
or an entity's incremental borrowing rate if the
implicit rate cannot be readily determined.
Lessees are permitted to make an accounting
policy election, by class of underlying asset, to
apply a method like IAS 17, Leases (“IAS 17”)
operating lease accounting and not recognize
lease assets and lease liabilities for leases with a
lease term of 12 months or less, and on a lease-
by-lease basis, to apply a method similar to
current operating lease accounting to leases for
which the underlying asset is of low value. A
lessee will apply IFRS 16 to its leases either
retrospectively to each prior reporting period
presented or retrospectively with the cumulative
effect of initially applying IFRS 16 being
recognized at the date of initial application. IFRS
16 supersedes IAS 17 and related interpretations
and is effective for periods beginning on or after
January 1, 2019, with earlier adoption permitted if
IFRS 15 has also been applied.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 103
2. PRINCIPAL SUBSIDIARIES
The following table lists the subsidiaries of Brookfield Renewable which, in the opinion of management,
significantly affect its financial position and results of operations as at December 31, 2018:
Alta Wind VIII LLC(1)
BIF II Safe Harbor Holdings LLC(1)
BIF III Holtwood LLC(1)
BRE GLBL Holdings L.P.(1)
BRI Green Energy Limited(1)
Brookfield BRP Canada Corp.
Brookfield Energia Comercializadora Ltda
Brookfield Power US Holding America Co.
Brookfield Renewable UK Hydro Limited
Brookfield Smoky Mountain Hydropower LLC(1)
Brookfield White Pine Hydro LLC(1)
Catalyst Old River Hydroelectric Limited Partnership(2)
Erie Boulevard Hydropower, L.P.
Great Lakes Hydro America, LLC
Great Lakes Power Limited
Hawks Nest Hydro LLC
Isagen S.A. E.S.P.(1)
Kwagis Power Limited Partnership
Lièvre Power L.P.
Mississagi Power Trust
Orion Canadian Holdings 1 AIV L.P.
Powell River Energy Inc.
Rumford Falls Hydro LLC
Safe Harbor Water Power Corporation(1)
Tangará Energia S.A.(1)
Windstar Energy, LLC
2016 Comber Wind Limited Partnership
(1)
(2)
Voting control held through voting agreements with Brookfield.
Non-voting economic interest held through preferred shares and secured notes.
Jurisdiction of
Incorporation
or Organization
Delaware
Delaware
Delaware
Bermuda
Republic of Ireland
Alberta
Brazil
Delaware
England and Wales
Delaware
Delaware
Louisiana
Delaware
Delaware
Ontario
Delaware
Colombia
British Columbia
Québec
Québec
Ontario
Canada
Delaware
Pennsylvania
Brazil - São Paulo
California
Ontario
Percentage of
voting securities
owned or controlled (%)
100
100
100
100
100
100
100
100
100
100
100
75
100
100
75
100
99.5
75
100
100
100
100
100
100
100
100
100
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 104
3. ACQUISITIONS
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 date of acquisition.
Biotherm
Brookfield Renewable previously acquired TerraForm Global, Inc. (“TerraForm Global”) on December
28th, 2017. Included in the net identifiable assets of TerraForm Global was $56 million in restricted cash
and deposits for the acquisition of controlling interests (ranging between 65% and 70%) in three separate
companies that cumulatively operate 49 MW of wind and solar assets in South Africa (“Biotherm”).
In March 2018, Brookfield Renewable acquired Biotherm for a total consideration of $71 million. This
amount was transferred in two tranches and included the aforementioned deposit, a cash payment of $12
million and deferred consideration of $3 million.
The total acquisition costs of less than $1 million were expensed as incurred and have been classified
under Other in the consolidated statement of income (loss).
Northern Ireland Wind
In March 2018, Brookfield Renewable entered into an agreement to acquire, along with its institutional
partners, a 100% interest in a 23 MW wind facility in Northern Ireland (“Northern Ireland Wind”).
In October 2018, Brookfield Renewable, along with its institutional partners, completed the acquisition of
Northern Ireland Wind. The total consideration was £22 million ($28 million). Brookfield Renewable
retains an approximate 40% controlling interest.
The total acquisition costs of less than $1 million were expensed as incurred and have been classified
under Other in the consolidated statement of income (loss).
Purchase price allocations
Final purchase price allocations, at fair value, with respect to the acquisitions are as follows:
(MILLIONS)
Cash and cash equivalents
Trade receivables and other current assets
Property, plant and equipment, at fair value
Current liabilities
Current portion of non-recourse borrowings
Financial instruments
Non-recourse borrowings
Deferred income tax liabilities
Non-controlling interests
Fair value of net assets acquired
Goodwill
Purchase price
Note
Biotherm
Northern
Ireland
Wind
$
12 $
1 $
7
158
(3)
(3)
(2)
(69)
(35)
(21)
44
27
-
53
(4)
-
-
(18)
(4)
-
28
-
$
71 $
28 $
17
Total
13
7
211
(7)
(3)
(2)
(87)
(39)
(21)
72
27
99
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 105
Completed in 2017
The following investments were accounted for using the equity method as Brookfield Renewable has
significant influence through its position in the business, and the results of operations have been included
in the audited annual consolidated financial statements since the date of investment.
European Storage
In August 2017, Brookfield Renewable, along with its institutional partners, acquired a 25% interest in
FHH Guernsey Ltd which owns a 2.1 GW pumped storage portfolio in the United Kingdom (“European
Storage”). Brookfield Renewable retains an approximate 7% economic interest in the portfolio. Total
consideration was £194 million ($248 million). The acquisition costs of £1 million ($1 million) were
incurred and capitalized.
TerraForm Power
In October 2017, along with its institutional partners, Brookfield Renewable closed the acquisition of a
51% interest in TerraForm Power, Inc. (“TerraForm Power”). TerraForm Power is a 2,600 MW large scale
diversified portfolio of solar and wind assets located predominately in the U.S. Brookfield Renewable
retains an indirect economic interest of approximately 16% in TerraForm Power for a total net investment
of $203 million.
Brookfield Renewable had previously accounted for its indirect interest in TerraForm Power as an
available for sale investment. The change from available for sale accounting to equity method accounting
resulted in a gain of $13 million being reclassified from the audited annual consolidated statement of
comprehensive income to the statement of income and included in Other income, representing the
accumulated gain on the previously held indirect investment. The acquisition costs of $1 million were
incurred and capitalized.
In October 2017, Brookfield Renewable entered into a voting agreement with the Brookfield subsidiary
that ultimately controls TerraForm Power. Pursuant to this voting agreement, Brookfield Renewable is
entitled to direct the election for one of the four directors of the Brookfield subsidiary, thereby providing
Brookfield Renewable with significant influence over this subsidiary.
The following investments were accounted for using the acquisition method, and the results of operations
have been included in the audited annual consolidated financial statements since the date of acquisition.
European Wind
In February 2017, Brookfield Renewable entered into an agreement to acquire, along with its institutional
partners, a 100% interest in a 16 MW wind facility in Northern Ireland (“European Wind”).
In August 2017, Brookfield Renewable, along with its institutional partners, completed the acquisition of
European Wind, which was commissioned in July of 2017. If the acquisition had taken place at the
beginning of the year, the revenue from European Wind earned prior to the date of acquisition would have
been immaterial. The total consideration was £24 million ($32 million). Brookfield Renewable retains an
approximate 40% controlling interest in the asset. The total acquisition costs of less than $1 million were
expensed as incurred and have been classified under Other in the audited annual consolidated
statements of income.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 106
TerraForm Global
In December 2017, along with its institutional partners, Brookfield Renewable closed the acquisition of a
100% interest in TerraForm Global. TerraForm Global is a 919 MW portfolio of diversified solar and wind
assets located predominately in Brazil and Asia. The total consideration paid was $657 million and the fair
value of the interest previously held was $100 million. Brookfield Renewable retains a 31% economic
interest in TerraForm Global with its share of the fair value of previously held interest on the acquisition
date totaling $30 million. Brookfield Renewable’s share of the consideration paid was $202 million.
Brookfield Renewable had previously accounted for its indirect interest in TerraForm Global as an
available for sale investment. The change from available for sale accounting to consolidation accounting
resulted in a gain of $2 million being reclassified from the audited annual consolidated statement of
comprehensive income to the statement of income and included in Other income, representing the
accumulated gain on the previously held indirect investment.
If the acquisition had taken place at the beginning of the year, the revenue from TerraForm Global for the
year ended December 31, 2017 would have been $250 million. The total acquisition costs of $1 million
were expensed as incurred and have been classified under Other in the audited annual consolidated
statements of income.
In December 2017, Brookfield Renewable entered into a voting agreement with an affiliate of Brookfield
Renewable that ultimately controls TerraForm Global. Pursuant to this voting agreement, Brookfield
Renewable is entitled to direct the election of the directors of the Brookfield subsidiary.
Purchase price allocations
Final purchase price allocations, at fair value, with respect to the acquisitions completed in 2017 are as
follows:
(MILLIONS)
Cash and cash equivalents
Restricted cash
Trade receivables and other current assets
Financial instruments
Property, plant and equipment, at fair value
Deferred tax assets
Other long-term assets
Current liabilities
Current portion of non-recourse borrowings
Financial instruments
Non-recourse borrowings
Deferred income tax liabilities
Other long-term liabilities
Non-controlling interests
TerraForm
Global
European
Wind
$
611 $
- $
90
62
20
1,208
18
94
(73)
(1,183)
(15)
(5)
(15)
(54)
(1)
-
1
-
37
-
-
(4)
-
-
-
(2)
-
-
Total
611
90
63
20
1,245
18
94
(77)
(1,183)
(15)
(5)
(17)
(54)
(1)
Fair value of net assets acquired
$
757 $
32 $
789
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 107
Completed in 2016
The following investments were accounted for using the acquisition method, and the results of operations
have been included in the audited annual consolidated financial statements since the respective dates of
acquisition.
Colombia Portfolio
On January 22, 2016, Brookfield Renewable and its institutional partners (the “consortium”) acquired a
57.6% interest in Isagen S.A. E.S.P (“Isagen”) from the Colombian government (the “Initial Investment”).
Isagen was a listed entity in Colombia. It is Colombia’s third-largest power generation company and owns
and operates a 3,032 MW portfolio, consisting predominantly of a portfolio of largely reservoir-based,
hydroelectric facilities. Annual generation is expected to approximate 15,000 GWh.
Following the closing of the Initial Investment, the consortium was required to conduct two mandatory
tender offers (“MTOs”) for the Isagen public shareholders at the same price per share paid for its initial
57.6% controlling interest.
The consortium closed the First MTO and the Second MTO on May 13, 2016 and September 14, 2016,
respectively. During 2017, the consortium acquired further shares from public shareholders and
completed delisting of Isagen from the Colombia Stock Exchange. After giving effect to the MTOs and
additional shares the consortium ownership stands at 99.5% as of December 31, 2018.
Brookfield Renewable is the general partner of and controls the entity that holds the consortium’s 99.5%
interest in Isagen. Brookfield Renewable’s investment is equivalent to an approximate 24% economic
interest. The total acquisition costs of $13 million were expensed as incurred and have been classified
under Other in the audited annual consolidated statements of income in 2016.
If the acquisition had taken place at the beginning of the year, the revenue from Isagen for the year ended
December 31, 2016 would have been $900 million.
Brazil Portfolio
In January 2016, Brookfield Renewable acquired a 51 MW hydroelectric portfolio in Brazil (“Brazil
Portfolio”). Total consideration of R$417 million ($103 million) included cash paid of R$355 million ($88
million), deferred consideration of R$35 million ($9 million) and the impact of the foreign currency
contracts of R$24 million ($6 million). Brookfield Renewable retains a 100% interest in the portfolio.
The total acquisition costs of less than $1 million were expensed as incurred and classified under Other in
the audited annual consolidated statements of income in 2016.
North American Portfolio
In April 2016, Brookfield Renewable acquired a 296 MW portfolio of hydroelectric facilities in
Pennsylvania that are expected to generate 1,109 GWh annually (“Pennsylvania Hydro”). The acquisition
was completed with institutional partners, and Brookfield Renewable retains approximately 28.6% interest
in the portfolio.
Total cash consideration was $859 million. The acquisition costs of $6 million were expensed as incurred
and have been classified under Other in the audited annual consolidated statements of income in 2016.
If the acquisition had taken place at the beginning of the year, the revenue from Pennsylvania Hydro for
the year ended December 31, 2016 would have been $46 million.
In April 2016, Brookfield Renewable entered into a voting agreement with a Brookfield subsidiary that
forms part of Brookfield Infrastructure Fund III. Pursuant to this voting agreement, Brookfield Renewable
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 108
is entitled to direct the election of the directors of the entity that ultimately controls and operates the
Pennsylvania Hydro assets.
European Wind Development Project
In September 2016, Brookfield Renewable acquired a 19 MW wind development project in Ireland. The
total consideration of €8 million ($9 million) included cash consideration of €7 million ($8 million) and
deferred consideration and working capital adjustments of €1 million ($1 million). The acquisition was
completed with institutional partners, and Brookfield Renewable retained an approximately 40%
controlling interest in the asset. The total acquisition costs of less than $1 million were expensed as
incurred and have been classified under Other in the audited annual consolidated statements of income.
Purchase price allocations
Final purchase price allocations, at fair value, with respect to the acquisitions completed in 2016 are as
follows:
(MILLIONS)
Cash and cash equivalents
Colombia
$
113 $
Brazil Pennsylvania
Ireland
4 $
- $
- $
Trade receivables and other current assets
174
Property, plant and equipment, at fair value
4,772
2
100
-
(3)
-
-
-
-
103
-
1
859
-
(1)
-
-
-
-
859
-
15
(463)
(899)
(1,019)
(149)
(1,417)
1,127
799
Total
117
177
5,741
15
(467)
(899)
-
10
-
-
-
(1)
(1,020)
-
-
9
-
(149)
(1,417)
2,098
799
Other long-term assets
Current liabilities
Non-recourse borrowings
Deferred income tax liabilities
Other long-term liabilities
Non-controlling interests
Fair value of net assets acquired
Goodwill
Purchase price
$ 1,926 $
103 $
859 $
9 $ 2,897
During the years ended December 31, 2018 and 2017, the purchase price allocations for the acquisitions
in 2017 and 2016, respectively, were finalized. No material changes to the provisional purchase price
allocations disclosed in the audited annual consolidated financial statements for 2017 and 2016 had to be
considered for acquisitions made in the respective years.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 109
4. ASSETS HELD FOR SALE
The following is a summary of the major items of assets and liabilities classified as held for sale as at
December 31, 2018:
(MILLIONS)
Assets
Cash and cash equivalents
Restricted cash
Trade receivables and other current assets
Property, plant and equipment, at fair value
Goodwill
Other long-term assets
Assets held for sale
Liabilities
Current liabilities
Non-recourse borrowings
Other long-term liabilities
Liabilities directly associated with assets held for sale
Total
8
47
28
749
22
66
920
23
360
150
533
$
$
$
$
A revaluation of the property, plant, and equipment associated with the disposal groups discussed below
was performed immediately prior to classification as held for sale in accordance with our accounting
policy election to apply the revaluation method. The cumulative amount recognized in other
comprehensive income relating to limited partners’ equity for the assets held for sale is $21 million.
Brookfield Renewable continues to consolidate and recognize, in the consolidated statements of income
(loss), consolidated statements of comprehensive income, and the consolidated statements of cash flows,
the revenues, expenses and cash flows associated with assets held for sale. Non-current assets
classified as held for sale are not depreciated.
South Africa Portfolio
In July 2018, Brookfield Renewable, along with its institutional partners, entered into an agreement to sell
its controlling interest in a 178 MW wind and solar portfolio in South Africa (“South Africa Portfolio”) for a
total consideration of ZAR 2,031 million (approximately $166 million – Brookfield Renewable’s share
totaling approximately $50 million). The transaction is subject to closing conditions, including regulatory
and lender approvals. Brookfield Renewable holds a 31% economic interest and 100% voting interest in
the South Africa Portfolio. The proportionate amount of consideration attributable to the institutional
partners upon the closing of the transaction approximates their economic interest in the South Africa
Portfolio. Each of the project entities included in the South Africa Portfolio contain additional non-
controlling economic interest ranging between 30% and 49%.
Thailand Portfolio
In December 2018, Brookfield Renewable, along with its institutional partners, entered into an agreement
to sell its controlling interest in a 40 MW solar portfolio in Thailand (“Thailand Portfolio”) for a total
consideration of THB 3,070 million (approximately $95 million – Brookfield Renewable’s share totaling
approximately $29 million). The transaction is subject to the satisfaction of closing conditions. The
proportionate amount of consideration attributable to the institutional partners upon the closing of the
transaction approximates their economic interest in the Thailand Portfolio. Brookfield Renewable holds a
31% economic interest and 100% voting interest in the Thailand Portfolio.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 110
Malaysia Portfolio
In December 2018, Brookfield Renewable, along with its institutional partners, entered into an agreement
to sell its controlling interest in a 19 MW solar portfolio in Malaysia (“Malaysia Portfolio”) for a total
consideration of MYR 154 million (approximately $37 million – Brookfield Renewable’s share totaling
approximately $11 million). The transaction is subject to the satisfaction of closing conditions. Brookfield
Renewable holds a 31% economic interest and 100% voting interest in the Malaysia Portfolio. The
proportionate amount of consideration attributable to the institutional partners upon the closing of the
transaction approximates their economic interest in the Malaysia Portfolio. Each of the project entities
included in the Malaysia Portfolio contain additional non-controlling economic interest ranging between
5% and 49%.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 111
5. 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.
The sensitivity analysis discussed below reflect 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 below is not intended to fully reflect Brookfield
Renewable’s risk exposure.
(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) Electricity price risk
Electricity 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 electricity prices.
Electricity price risk arises from the sale of Brookfield Renewable’s uncontracted generation. Brookfield
Renewable aims to sell electricity under long-term contracts to secure stable prices and mitigate its
exposure to wholesale markets.
The table below summarizes the impact of changes in the market price of electricity as at December 31.
The impact is expressed in terms of the effect on net income and OCI. The sensitivities are based on the
assumption that the market price changes by 5% with all other variables held constant.
Impact of a 5% change in the market price of electricity, on outstanding energy derivative contracts, for
the year ended December 31:
(MILLIONS)
5% increase
Effect on net income(1)
2018
2017
2016
$
(3) $
(3) $
(1) $
5% decrease
(1) Amounts represent the potential annual net pretax impact.
3
3
1
10
(ii) Foreign currency risk
Effect on OCI(1)
2018
(10) $
2017
(4) $
4
2016
(7)
7
Foreign currency risk is defined for these purposes as the risk that the fair value of a financial instrument
held by Brookfield Renewable will fluctuate because of changes in foreign currency rates.
Brookfield Renewable has exposure to the Canadian dollar, Brazilian real, Euro, British pound sterling,
Colombian peso, Indian rupee, South African rand, Malaysian ringgit, Thai baht and Chinese yuan
through its investments in foreign operations. Consequently, fluctuations in the U.S. dollar exchange rate
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 112
against these currencies increase the volatility of net income and other comprehensive income. Brookfield
Renewable holds foreign currency contracts primarily to mitigate this exposure.
The table below summarizes the impact to Brookfield Renewable’s financial instruments of changes in the
exchange 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 currency exchange rate changes by five percent
with all other variables held constant.
Impact of a 5% change in U.S. dollar exchange rates, on outstanding foreign exchange swaps, for the
year ended December 31:
(MILLIONS)
5% increase
Effect on net income(1)
2018
2017
Effect on OCI(1)
2016
2018
2017
$
30 $
4 $
1 $
44 $
79 $
5% decrease
(1) Amounts represent the potential annual net pretax impact.
(30)
(4)
(1)
(44)
(79)
2016
51
(51)
(iii) Interest rate risk
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.
Brookfield Renewable will enter into interest rate swaps designed to minimize the exposure to interest
rate fluctuations on its variable rate debt. 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 non-recourse borrowings with a total principal value of
$3,764 million (2017: $4,176 million). Of this principal value, $1,447 million (2017: $824 million) has been
hedged through the use of interest rate swaps. The fair values of the recognized liability for the interest
rate swaps 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, on outstanding interest rate swaps and variable rate debt, for the
year ended December 31:
(MILLIONS)
1% increase
$
Effect on net income(1)
2018
(10) $
17 $
2017
Effect on OCI(1)
2016
(17) $
2018
2017
42 $
54 $
1% decrease
(1) Amounts represent the potential annual net pretax impact.
11
(17)
17
(42)
(54)
(b) Credit risk
2016
115
(115)
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
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 113
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. See Note 22 - 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)
Trade receivables and other short-term receivables
Due from related parties
Other long-term assets
(c) Liquidity risk
2018
493
65
402
$
960 $
2017
442
60
-
502
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 facilities. Details of the available portion of credit facilities are included in
Note 13 – Borrowings. Brookfield Renewable also ensures that it has access to public capital markets
and maintains a strong investment grade credit rating.
Brookfield Renewable is also subject to the risk associated with debt financing. This risk is mitigated by
the long-term duration of debt instruments and the diversification in maturity dates over an extended
period of time.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 114
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 statement of financial position 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 statements of financial position.
AS AT DECEMBER 31, 2018
(MILLIONS)
Accounts payable and accrued liabilities
Financial instrument liabilities(1)
Due to related parties
Other long-term liabilities - concession payments
Corporate borrowings(1)
Non-recourse borrowings(1)
Interest payable on borrowings(2)
Total
AS AT DECEMBER 31, 2017
(MILLIONS)
Accounts payable and accrued liabilities
Financial instrument liabilities(1)
Due to related parties
< 1 year 2-5 years > 5 years
Total
$
533 $
- $
- $
27
101
1
6
489
577
57
-
4
1,344
2,806
1,906
54
-
10
990
5,164
1,684
533
138
101
15
2,340
8,459
4,167
$
1,734 $
6,117 $
7,902 $ 15,753
< 1 year 2-5 years > 5 years
Total
$
542 $
- $
- $
184
112
62
-
24
-
542
270
112
Other long-term liabilities - concession payments
Corporate borrowings(1)
Non-recourse borrowings(1)
Interest payable on borrowings(2)
Total
(1)
(2) Represents aggregate interest payable expected to be paid over the entire term of the obligations, if held to maturity. Variable
Includes both the current and long-term amounts.
7,310 $ 17,035
3,149 $
6,576 $
1,697
4,744
1,924
3,024
1,563
1,517
9,285
2,557
4,255
159
835
634
14
10
$
3
1
rate interest payments have been calculations based on estimated interest rates.
Fair value disclosures
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, commodity prices and, as applicable, credit spreads.
A fair value measurement of a non-financial asset is the consideration that would be received in an
orderly transaction between market participants, considering the highest and best use of the asset.
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;
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 115
Level 2 – inputs, other than quoted prices in Level 1, that are observable for the asset or liability, either
directly or indirectly; and
Level 3 – inputs for the asset or liability that are not based on observable market data.
The following table presents Brookfield Renewable’s 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(1)
Financial instrument assets(2)(3)
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Investments in equity securities(2)
Property, plant and equipment
Liabilities measured at fair value:
Financial instrument liabilities(3)
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Contingent consideration(4)
Assets for which fair value is disclosed:
Equity-accounted investments(5)
Liabilities for which fair value is disclosed:
181
-
-
-
60
-
-
-
-
-
703
Level 1
Level 2
Level 3
2018
2017
$
173 $
- $
- $
173 $
-
3
9
55
57
-
-
-
-
-
181
3
9
55
117
799
284
-
6
20
159
-
29,025
29,025
27,096
(22)
(116)
-
-
-
-
-
-
(3)
-
-
-
(22)
(116)
-
(3)
(19)
(155)
(96)
(18)
703
278
(2,367)
(2,641)
(8,696)
(9,838)
Corporate borrowings
Non-recourse borrowings
(1,640)
(727)
(370)
(8,326)
Includes both the current amount and long-term amount included in Other long-term assets.
Total
(1)
(2) Amounts in Level 2 include Brookfield Infrastructure Debt Fund holdings.
(3)
(4) Amount relates to business combinations with obligations lapsing in 2021 and 2024.
(5) The fair value corresponds to Brookfield Renewable’s investment in publicly-quoted common shares of TerraForm Power, Inc.
(893) $ (9,067) $ 29,022 $ 19,062 $ 15,875
Includes both current and long-term amounts.
$
There were no transfers between levels during the year ended December 31, 2018.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 116
Financial instruments disclosures
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
Foreign exchange swaps
Investments in equity securities
Total
Less: current portion
Long-term portion
2018
2017
Net Assets
Net Assets
Assets
Liabilities
(Liabilities)
(Liabilities)
$
3 $
22 $
(19)
$
9
55
117
184
60
116
-
-
138
27
$
124 $
111 $
(107)
55
117
46
33
13
$
(19)
(149)
(76)
159
(85)
(112)
27
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 117
The following table presents the change in Brookfield Renewable’s total net financial instrument asset
position as at and for the year ended December 31:
(MILLIONS)
Balance, beginning of year
Increases (decreases) in the net financial instrument liability position:
Unrealized (loss) gain through OCI on investments in equity securities
Unrealized (loss) through income on energy derivative contracts
Unrealized (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
Unrealized gain (loss) through income on foreign exchange swaps
Unrealized gain (loss) through OCI on foreign exchange swaps
Acquisitions, settlements and other
Balance, end of year
Financial instrument assets designated at fair value through OCI
Note
2018
2017
2016
$
(85) $
(28) $ (145)
(a)
(b)
(b)
(c)
(c)
(d)
(d)
(16)
(3)
-
17
14
76
87
(20)
(5)
(17)
1
18
(29)
(94)
52
-
(28)
(7)
(1)
3
(61)
(44)
89
159
$
46 $
(85) $
(28)
Investments in equity securities
(a)
117
159
136
Derivative assets not designated as hedging instruments:
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Net positions
Derivative assets designated as hedging instruments:
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Net positions
Derivative liabilities not designated as hedging instruments:
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Net positions
Derivative liabilities designated as hedging instruments:
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Net positions
Total financial instruments, net
(b) $
3 $
- $
(c)
(d)
-
32
1
19
$
35 $
20 $
(b) $
- $
- $
(c)
(d)
9
23
5
1
$
32 $
6 $
3
1
10
14
5
6
39
50
(b) $
(7) $
(5) $
(c)
(d)
(82)
(107)
-
(33)
(3)
(2)
(6)
$
(89) $ (145) $
(11)
(b) $
(15) $
(14) $
(2)
(c)
(d)
(34)
(48)
(176)
-
(63)
(39)
$
(49) $ (125) $ (217)
$
46 $
(85) $
(28)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 118
(a) Investments in equity securities
Investments in equity securities are held to achieve a particular business objective other than short-term
trading and are designated at fair value through OCI. There is no recycling of gains or losses through
profit or loss. Upon derecognition of the associated asset, accumulated gains or losses are transferred
from OCI directly to retained earnings.
In the comparative periods presented in accordance with IAS 39, investments in equity securities were
classified as available-for-sale securities and were assessed for impairment at each reporting date. For
the year ended December 31, 2017, gains of $2 million (2016: gains of $9 million) relating to available-for-
sale securities were reclassified from OCI to net income.
(b) Energy derivative contracts
Brookfield Renewable has entered into long-term energy derivative contracts primarily to stabilize 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.
There is an economic relationship between the hedged items and the hedging instruments as the terms of
the energy derivative contracts match the terms of the expected highly probable forecast transactions (i.e.
notional amount and expected payment date). Brookfield Renewable has established a hedge ratio of 1:1
for the hedging relationships as the underlying risk of the energy derivative contracts are identical to the
hedged risks. To test the hedge effectiveness, Brookfield Renewable uses the hypothetical derivative
method and compares changes in the fair value of the hedging instruments against the changes in fair
value of the hedged items attributable to the hedged risks. The hedge ineffectiveness can arise from
different indexes (and accordingly different curves) linked to the hedged risk of the hedged items and
hedging instruments.
For the year ended December 31, 2018, losses of $6 million relating to energy derivative contracts were
realized and reclassified from OCI to revenues in the consolidated statements of income (loss) (2017: $23
million gains and 2016: $48 million gains).
Based on market prices as of December 31, 2018, unrealized losses of $14 million (2017: $9 million
losses and 2016: $6 million gains) recorded in accumulated other comprehensive income (“AOCI”) on
energy derivative contracts are expected to be settled or reclassified into income in the next twelve
months. The actual amount reclassified from AOCI, however, could vary due to future changes in market
prices.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 119
The following table summarizes the energy derivative contracts designated as hedging instruments:
Energy derivative contracts
Carrying amount (asset/(liability))
Notional amount - millions of U.S. dollars
Notional amount - GWh
Weighted average hedged rate for the year ($/MWh)
Maturity dates
Hedge ratio
Change in discounted spot value of outstanding hedging instruments
Change in value of hedged item used to determine hedge effectiveness
Dec 31
2018
(15)
188
5,024
37
Jan 2019 - Dec 2020
1:1
(8)
9
The hedge ineffectiveness loss recognized in Unrealized financial instruments loss in the consolidated
statements of income related to energy derivative contracts (cash flow hedges) for the year ended
December 31, 2018 was $2 million.
(c) Interest rate hedges
Brookfield Renewable has entered into interest rate hedge 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 hedge contracts are recorded in the consolidated financial statements at fair value.
There is an economic relationship between the hedged items and the hedging instruments as the terms of
the interest rate hedges match the terms of the respective fixed rate loans (i.e., notional amount, maturity,
payment and reset dates). Brookfield Renewable established a hedge ratio of 1:1 for the hedging
relationships as the underlying risk of the interest rate swaps are identical to the hedged risks. To test the
hedge effectiveness, Brookfield Renewable uses the hypothetical derivative method and compares the
changes in the fair value of the hedging instrument against the changes in fair value of the hedged items
attributable to the hedged risk.
The hedge ineffectiveness can arise from:
• Different interest rate curves being applied to discount the hedged item and hedging instrument
• Differences in timing of cash flows of the hedged item and hedging instrument
• The counterparties’ credit risk having an asymmetrical impact on the fair value movements of the
hedging instrument and hedged item
At December 31, 2018, agreements with a total notional exposure of $1,444 million were outstanding
(2017: $1,704 million) including $383 million (2017: $780 million) associated with agreements that are not
formally designated as hedging instruments. The weighted-average fixed interest rate resulting from
these agreements is 3.6% (2017: 4.5% and 2016: 2.5%).
For the year ended December 31, 2018, net movements relating to cash flow hedges realized and
reclassified from OCI to interest expense – borrowings in the consolidated statements of income (loss)
were $14 million losses (2017: $20 million and 2016: $16 million).
Based on market prices as of December 31, 2018, unrealized losses of $10 million (2017: $18 million and
2016: $110 million) recorded in AOCI on interest rate swaps are expected to be settled or reclassified into
income in the next twelve months. The actual amount reclassified from AOCI, however, could vary due to
future changes in market rates.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 120
The following table summarizes the interest rate hedges designated as hedging instruments:
Interest rate hedges
Carrying amount (asset/(liability))
Notional amount - $
Notional amount - C$(1)
Notional amount - €(1)
Notional amount - £(1)
Notional amount - COP(1)
Maturity dates
Hedge ratio
Change in discounted spot value of outstanding hedging instruments
Change in value of hedged item used to determine hedge effectiveness
(1)
Dec 31
2018
(25)
178
151
377
99
256
Aug 2019 - Sep 2036
1:1
8
(2)
Notional amounts of foreign currency denominated interest rate hedges are presented at the U.S. dollar equivalent value
based on the December 31, 2018 foreign currency spot rate
The hedge ineffectiveness gain recognized in Unrealized financial instruments loss in the consolidated
statements of income related to interest rate contracts (cash flow hedges) for the year ended December
31, 2018 was $9 million.
(d) Foreign exchange swaps
Brookfield Renewable has entered into foreign exchange swaps to minimize its exposure to currency
fluctuations impacting its investments and earnings in foreign operations, and to fix the exchange rate on
certain anticipated transactions denominated in foreign currencies.
There is an economic relationship between the hedged item and the hedging instrument as the net
investment or anticipated foreign currency transaction creates a translation risk that will match the
respective hedging instrument. Brookfield Renewable established a hedge ratio of 1:1 as the underlying
risk of the hedging instrument is identical to the hedged risk component.
At December 31, 2018, agreements with a total notional exposure of $1,844 million were outstanding
(2017: $2,306 million) including $957 million (2017: $718 million) associated with agreements that are not
formally designated as hedging instruments.
There are no unrealized gains or losses recorded in AOCI on foreign exchange swaps that are expected
to be settled or reclassified into income in the next twelve months (2017: $48 million losses and 2016: $1
million losses). The actual amount reclassified from AOCI, however, could vary due to future changes in
market rates.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 121
The following table summarizes the foreign exchange swaps designated as hedging instruments:
Foreign exchange swaps
Carrying amount (asset/(liability))
Notional amount for hedges of the Canadian dollar(1)
Notional amount for hedges of the Euro(1)
Notional amount for hedges of the British pounds sterling(1)
Maturity date
Hedge ratio
Weighted average hedged rate for the year:
C$/$ foreign exchange forward contracts
€/$ foreign exchange forward contracts
£/$ foreign exchange forward contracts
(1)
Notional amounts expressed in millions of U.S. dollars
Dec 31
2018
23
419
221
247
Jan 2019 - Dec 2019
1:1
1.34
0.82
0.76
The following table presents a reconciliation of the LP unitholder equity reserves impacted by financial
instruments:
(MILLIONS)
Balance, as at December 31, 2017
Effective portion of changes in fair value arising from:
Energy derivative contracts
Interest rate swaps
Foreign exchange swaps
Amount reclassified to profit or loss
Foreign currency revaluation of designated borrowings
Foreign currency revaluation of net foreign operations
Valuation of investments in equity securities designated FVOCI
Tax effect
Other
Cash flow
hedges
Investments
in equity
securities
Foreign
currency
translation
$
(29) $
15 $
(378)
(1)
1
-
7
-
-
-
(2)
(10)
-
-
-
-
-
-
(8)
-
(3)
-
-
42
-
87
(324)
-
(10)
(69)
Balance, as at December 31, 2018
$
(34) $
4 $
(652)
6. SEGMENTED INFORMATION
Brookfield Renewable’s Chief Executive Officer and Chief Financial Officer (collectively, the chief
operating decision maker or “CODM”) review the results of the business, manage operations, and
allocate resources based on the type of technology.
Our operations are segmented by – 1) hydroelectric, 2) wind, 3) solar, 4) storage & other (cogeneration
and biomass), and 5) corporate – with hydroelectric and wind further segmented by geography (i.e., North
America, Colombia, Brazil, Europe and Asia). Our investment in the TerraForm Power and TerraForm
Global businesses led to the creation of the solar segment which is now reviewed on a standalone basis.
Our investment in First Hydro also resulted in the creation of a storage segment which is now reviewed
along with our cogeneration and biomass businesses, on an aggregate basis. The Colombia segment
aggregates the financial results of its hydroelectric and cogeneration facilities. The results of our wind
assets in South Africa that are classified as held for sale have been aggregated in the Asia wind business
segment. The corporate segment represents all activity performed above the individual segments for the
business.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 122
Reporting to the CODM on the measures utilized to assess performance and allocate resources has been
on a proportionate basis since the fourth quarter of 2017. Information on a proportionate basis reflects
Brookfield Renewable’s share from facilities which it accounts for using consolidation and the equity
method whereby Brookfield Renewable either controls or exercises significant influence or joint control
over the investment, respectively. Proportionate information provides a Unitholder (holders of the GP
interest, Redeemable/Exchangeable partnership units, and LP Units) perspective that the CODM
considers important when performing internal analyses and making strategic and operating decisions.
The CODM also believes that providing proportionate information helps investors understand the impacts
of decisions made by management and financial results allocable to Brookfield Renewable’s Unitholders.
Proportionate financial information is not, and is not intended to be, presented in accordance with IFRS.
Tables reconciling IFRS data with data presented on a proportionate consolidation basis have been
disclosed. Segment revenues, other income, direct operating costs, interest expense, depreciation,
current and deferred income taxes, and other are items that will differ from results presented in
accordance with IFRS as these items include Brookfield Renewable’s proportionate share of earnings
from equity-accounted investments attributable to each of the above-noted items, and exclude the
proportionate share of earnings (loss) of consolidated investments not held by us apportioned to each of
the above-noted items.
Brookfield Renewable does not control those entities that have not been consolidated and as such, have
been presented as equity-accounted investments in its financial statements. The presentation of the
assets and liabilities and revenues and expenses does not represent Brookfield Renewable’s legal claim
to such items, and the removal of financial statement amounts that are attributable to non-controlling
interests does not extinguish Brookfield Renewable’s legal claims or exposures to such items.
Brookfield Renewable reports its results in accordance with these segments and presents prior period
segmented information in a consistent manner.
In accordance with IFRS 8, Operating Segments, Brookfield Renewable discloses information about its
reportable segments based upon the measures used by the CODM in assessing performance. Except as
it relates to proportionate financial information discussed above, the accounting policies of the reportable
segments are the same as those described in Note 1 – Basis of preparation and significant accounting
policies. Brookfield Renewable analyzes the performance of its operating segments based on revenues,
Adjusted EBITDA, and Funds From Operations.
Brookfield Renewable uses Adjusted EBITDA to assess the performance of its operations before the
effects of interest expense, income taxes, depreciation, management service costs, non-controlling
interests, unrealized gain or loss on financial instruments, non-cash gain or loss from equity-accounted
investments, distributions to preferred shareholders and preferred limited partners and other typical non-
recurring items.
Brookfield Renewable uses Funds From Operations to assess the performance of its operations and is
defined as Adjusted EBITDA less management service costs, interest and current income taxes, which is
then adjusted for the cash portion of non-controlling interests and distributions to preferred shareholders
and preferred limited partners.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 123
The following table provides each segment’s results in the format that management organizes its segments to make operating decisions and
assess performance and reconciles Brookfield Renewable’s proportionate results to the consolidated statements of income on a line by line basis
by aggregating the components comprising the earnings from Brookfield Renewable’s investments in associates and reflecting the portion of each
line item attributable to non-controlling interests for the year ended December 31, 2018:
Contribution
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instrument loss
Deferred income tax recovery
Other
Share of earnings from
equity accounted investments
Net income attributable to
non-controlling interests
Net income (loss) attributable
to Unitholders(2)
Hydroelectric
North
Wind
North
Attributable to Unitholders
America Brazil Colombia America Europe Brazil
42
-
(9)
219
2
(64)
73
11
(27)
216
4
(94)
(286) (76)
244
5
893
12
Asia
12
-
Solar Storage Corporate
and
Other
85
-
(36)
146
5
-
7
Total
1,930
46
from Attributable
equity
to non-
accounted controlling
interests
1,338
11
(469)
investments
(286)
(7)
86
As per
IFRS
financials(1)
2,982
50
(1,036)
(4) (34)
(23) (653)
-
-
619 173
-
-
(172) (22)
(9)
(4)
-
126
-
(38)
(2)
-
157
-
(63)
(1)
-
57
-
(17)
(2)
-
33
-
(9)
-
-
8
-
-
117
-
(4) (45)
1
-
-
49
-
(17)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(16) 1,323
(80)
(80)
(99) (486)
(17)
-
(38)
(26)
(38)
(26)
207
-
-
82
3
-
-
20
900
-
(301)
(16)
-
-
227
-
(80)
(705)
(30)
(38)
(26)
-
-
(85)
(12)
(97)
-
142
-
443
(231) (136)
-
86
(18)
-
93
(122)
-
-
24
38
(43) (13)
-
-
72
5
(2) (40)
-
32
(23)
-
-
(259) 676
(2) (630)
(1)
(1)
(21)
(1)
1
(3)
-
-
189
-
-
3
7
18
(6)
-
-
2
20
(11)
9
2
(1)
(10)
-
-
3
-
(9)
21
(2) (11)
(2)
-
(9)
-
24
(23)
(2)
85
(87)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87
(18)
5
1
4
33
(2)
(260)
42
-
-
96
(3)
(50)
19
(62)
-
-
(571)
-
(285)
(29)
54
(14)
-
274
-
(571)
-
(819)
(34)
89
(82)
(62)
274
42
(1)
(2)
Share of earnings from equity-accounted investments of $68 million is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and share
of earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $297 million is comprised of amounts found on Share of Funds
From Operations attributable to non-controlling interests and Net Income attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 124
The following table provides each segment’s results in the format that management organizes its segments to make operating decisions and
assess performance and reconciles Brookfield Renewable’s proportionate results to the consolidated statements of income on a line by line basis
by aggregating the components comprising the earnings from Brookfield Renewable’s investments in associates and reflecting the portion of each
line item attributable to non-controlling interests for the year ended December 31, 2017:
Contribution
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instrument loss
Deferred income tax expense
Other
Share of earnings from
equity accounted investments
Attributable to Unitholders
Hydroelectric
North
Wind
North
America Brazil Colombia America Europe Brazil
26
-
(4)
161
-
(42)
46
-
(20)
191
2
(94)
(281) (77)
243
12
945
1
and
Other
59
6
(32)
8
-
(2)
from Attributable
equity
to non-
accounted controlling
interests
investments
1,020
18
(429)
(74)
(11)
28
As per
IFRS
financials(1)
2,625
47
(978)
- 1,679
40
19
(25) (577)
Solar Storage Corporate Total
-
-
665 178
-
-
(180) (18)
(12)
1
-
-
-
-
-
-
-
148
-
486
(220) (142)
(12)
(67)
(17)
(3)
2
(8)
-
99
-
(42)
(5)
-
-
-
-
52
(26)
(3)
(10)
6
-
119
-
(45)
-
-
26
-
(10)
(1)
-
22
-
(6)
-
-
-
-
-
74
(90)
-
-
-
-
-
-
-
16
-
15
(25)
1
28
(4)
(14)
5
4
(7)
-
-
2
-
6
-
(3)
(1)
-
-
2
(4)
(1)
1
(3)
-
-
33
-
(14)
-
-
-
-
-
-
(6) 1,142
(82)
(82)
(89) (407)
(18)
-
(28)
(26)
(28)
(26)
57
-
-
21
1
-
-
-
-
(22)
-
609
-
(246)
(22)
-
-
-
-
19
(25)
-
-
(231) 581
- (539)
(15)
16
(6)
(47)
(25)
(26)
-
-
-
-
-
-
22
2
(3)
12
(341)
-
(265)
(1)
(21)
(1)
57
-
(82)
(632)
(39)
(28)
(26)
(22)
(341)
-
(782)
(46)
(49)
(15)
(33)
-
-
-
-
-
-
-
(33)
-
Net income attributable to
non-controlling interests
Net income (loss) attributable to Unitholders(2)
(1)
288
(56)
Share of earnings from equity-accounted investments of $2 million is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and share
of earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $53 million is comprised of amounts found on Share of Funds
From Operations attributable to non-controlling interests and Net Income attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
-
(15) 11
-
(236)
-
(56)
-
(5)
-
(3)
-
(6)
-
19
-
170
288
-
-
9
-
-
(2)
-
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 125
The following table provides each segment’s results in the format that management organizes its segments to make operating decisions and
assess performance and reconciles Brookfield Renewable’s proportionate results to our consolidated statements of income on a line by line basis
by aggregating the components comprising the earnings from Brookfield Renewable’s investments in associates and reflecting the portion of each
line item attributable to non-controlling interests for the year ended December 31, 2016:
Contribution
($ MILLIONS)
Revenues
Other income
Direct operating costs
Share of Adjusted EBITDA from
equity accounted investments
Adjusted EBITDA
Management service costs
Interest expense - borrowings
Current income taxes
Distributions attributable to
Preferred limited partners equity
Preferred equity
Share of interest and cash taxes from
equity accounted investments
Share of Funds From Operations
attributable to non-controlling interests
Funds From Operations
Depreciation
Foreign exchange and
unrealized financial instrument loss
Deferred income tax expense (recovery)
Other
Share of earnings from
equity accounted investments
819
24
187
13
(295) (70)
-
548
-
-
130
-
(177) (24)
(9)
(4)
-
-
-
-
-
-
Hydroelectric
Attributable to Unitholders
Wind
Storage Corporate Total
North
and
America Brazil Colombia America Europe Brazil Other
58
North
192
3
(107)
151
-
(36)
17
-
56
-
(24)
(1)
(4) (26)
from Attributable
equity
to non-
accounted controlling
interests
investments
1,008
17
(468)
(37)
-
16
As per
IFRS
financials(1)
2,452
64
(1,038)
1
8
1,481
47
(24) (586)
-
88
-
(36)
(6)
-
-
-
-
13
-
-
31
-
-
115
-
(41)
-
-
32
-
(14)
-
(7) (12)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(15) 942
(62)
(62)
(91) (402)
(19)
-
(15)
(25)
(15)
(25)
21
-
-
12
-
-
-
-
-
(12)
-
97
-
367
(244) (125)
-
46
(31)
-
74
(80)
-
18
(38)
-
-
6
19
(4) (18)
-
-
(208) 419
-
(540)
1
31
(27)
-
7
(5)
-
-
1
6
3
-
-
49
4
-
-
6
6
-
-
-
(1)
2
-
(2)
-
(21)
(4)
4
78
(26)
-
-
-
-
-
-
11
-
-
(2)
(9)
-
557
-
(216)
(25)
-
-
-
(316)
-
(252)
-
19
(18)
-
21
-
(62)
(606)
(44)
(15)
(25)
(12)
(316)
-
(781)
4
97
(46)
(9)
Net income attributable to
non-controlling interests
Net income (loss) attributable to Unitholders(2)
(1)
251
-
(65)
47
Share of earnings from equity-accounted investments of $nil is comprised of amounts found on the share of Adjusted EBITDA, share of interest and cash taxes and share of
earnings lines. Net income attributable to participating non-controlling interests – in operating subsidiaries of $65 million is comprised of amounts found on Share of Funds From
Operations attributable to non-controlling interests and Net Income attributable to non-controlling interests.
Net income (loss) attributable to Unitholders includes net income (loss) attributable to GP interest, Redeemable/Exchangeable partnership units and LP Units. Total net income
(loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity.
-
(26)
-
(233)
-
(65)
-
(8)
-
25
-
128
251
-
-
-
-
1
-
1
(2)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 126
The following table presents information on a segmented basis about certain items in Brookfield Renewable’s statement of financial position:
(MILLIONS)
As at December 31, 2018:
Cash and cash equivalents
Attributable to Unitholders
Hydroelectric
Wind
North
North
America Colombia Brazil America Europe Brazil Asia
Solar Storage Corporate
and
Other
Contribution
from Attributable
Total
equity
accounted controlling
investments
to non- As per
IFRS
interests financials
$
6 $
7 $
37 $
30 $
29 $
5 $
2 $
41 $
9 $
3 $
169 $
(81) $
85 $
173
Property, plant and equipment, at fair value
11,498
1,609
1,907
2,480
819
348
36
1,354
686
(9) 20,728
(3,529) 11,826
29,025
Total assets
Total borrowings
Other liabilities
For the year ended December 31, 2018:
Additions to property, plant and equipment
96
7
30
11
10
12,125
1,868
2,105
2,554
939
379
56
1,650
746
161 22,583
(2,483)
14,003
34,103
419
198
1,204
463
75
31
1,021
249
2,334
8,989
(1,972)
3,701
10,718
2,995
2,764
434
150
536
124
7
-
3
255
31
211
4,515
(511)
2,175
6,179
-
9
3
6
172
(16)
145
301
As at December 31, 2017:
Cash and cash equivalents
$
21 $
14 $
40 $
18 $
19 $
7 $ 103 $
90 $
11 $
7
330 $
(30) $
499 $
799
Property, plant and equipment, at fair value
11,396
1,303
1,908
1,798
482
304
11
602
625
- 18,429
(1,451) 10,118
27,096
11,709
1,574
2,149
1,888
532
443
31
765
691
180 19,962
(1,040)
11,982
30,904
Total assets
Total borrowings
Other liabilities
For the year ended December 31, 2017:
Additions to property, plant and equipment
90
8
59
6
34
-
3,049
447
200
1,005
233
192
2,188
354
180
333
101
16
9
9
-
499
253
2,552
8,439
74
51
234
3,540
(848)
(191)
4,175
11,766
1,507
4,856
-
13
10
220
(10)
144
354
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 127
Geographical Information
The following table presents consolidated revenue split by geographical region for the year ended
December 31:
(MILLIONS)
United States
Colombia
Canada
Brazil
Europe
Asia
2018
926 $
896
428
429
126
177
2,982 $
2017
871 $
797
480
366
111
-
2,625 $
2016
786
819
442
269
136
-
2,452
$
$
The following table presents consolidated property, plant and equipment and equity-accounted
investments split by geographical region:
(MILLIONS)
United States
Colombia
Canada
Brazil
Europe
Asia
7. OTHER INCOME
Dec 31
2018
Dec 31
2017
$ 12,705 $ 11,131
5,401
5,810
3,479
1,332
664
$ 30,594 $ 27,817
6,665
5,705
3,553
1,624
342
Brookfield Renewable’s other income for the year ended December 31 is comprised of the following:
(MILLIONS)
Interest income and other
Gain on available for sale investments
Gains on settlement of foreign currency contracts
Notes
2018
2017
$
$
22 $
-
28
50 $
32 $
15
-
47 $
2016
41
-
23
64
8. DIRECT OPERATING COSTS
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(1)
Energy marketing fees
Notes
$
27
$
(1) Fuel and power purchases are primarily attributable to our portfolio in Colombia.
2018
581 $
142
289
24
1,036 $
2017
567 $
161
226
24
978 $
2016
553
149
313
23
1,038
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 128
9. OTHER
Brookfield Renewable’s other for the year ended December 31 is comprised of the following:
(MILLIONS)
Transaction costs
Change in fair value of property, plant and equipment
Other
2018
2017
2 $
44
36
82 $
9 $
33
(27)
15 $
2016
22
36
(12)
46
$
$
10. FOREIGN CURRENCY TRANSLATION
Brookfield Renewable’s foreign currency translation for the year ended December 31 shown in the
consolidated statements of comprehensive income is comprised of the following:
(MILLIONS)
Foreign currency translation on
Property, plant and equipment, at fair value
Borrowings
Deferred income tax liabilities and assets
Other assets and liabilities
11. INCOME TAXES
Notes
2018
2017
2016
12
13
11
$
$
(1,512) $
537
184
(34)
(825) $
506 $
(282)
(82)
48
190 $
1,186
(244)
(157)
201
986
The major components of income tax recovery (expense) for the year ended December 31 are as follows:
(MILLIONS)
Income tax recovery (expense) 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 recovery (expense)
$
$
2018
2017
2016
(30) $
(39) $
(44)
2 $
95
(8)
89 $
59 $
8 $
(42)
(15)
(49) $
(88) $
71
35
(9)
97
53
The major components of deferred income tax recovery (expense) 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
Other
Revaluation surplus
Origination and reversal of temporary differences
Relating to changes in tax rates / imposition of new tax laws
2018
2017
2016
$
$
(2) $
(20)
(4) $
15
(1,117)
54
(1,085) $
(248)
586
349 $
2
(7)
(55)
19
(41)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 129
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:
2018
2017
$
(100) $
(50) $
Increase in tax assets not recognized
Differences between statutory rate and future tax rate
Subsidiaries' income taxed at different rates
Other
(15)
(37)
14
-
Effective income tax recovery (expense)
(88) $
(1) Statutory income tax expense is calculated at the domestic rates applicable to the profits in the country concerned.
(8)
95
75
(3)
59 $
$
2016
5
(9)
43
14
-
53
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.
Brookfield Renewable’s effective income tax rate was (17.15)% for the year ended December 31, 2018
(2017: 63.31% and 2016: 384.03%). The effective tax rate is less than the statutory rate primarily due to
rate differentials, legislative changes in tax rates during the year, and non-controlling interests’ income not
subject to tax.
The following table details the expiry date, if applicable, of the unrecognized deferred tax assets as at
December 31:
(MILLIONS)
2019 to 2023
2024 and thereafter
2018
2017
3 $
85
88 $
8 $
108
116 $
2016
-
98
98
$
$
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:
Difference
Net deferred
(MILLIONS)
As at January 1, 2016
Recognized in Net income (loss)
Recognized in equity
Business combination
Foreign exchange
As at December 31, 2016
Recognized in Net income (loss)
Recognized in equity
Business combination
Foreign exchange
As at December 31, 2017
Recognized in Net income (loss)
Recognized in equity
Business combination
Foreign exchange
As at December 31, 2018
Non-capital between tax and
carrying value
losses
458 $
$
(2,996) $
73
(48)
(1,020)
(160)
(4,151)
48
341
(63)
(94)
(3,919)
149
(985)
73
204
tax (liabilities)
assets
(2,538)
97
(31)
(1,020)
(160)
(3,652)
(49)
354
16
(80)
(3,411)
89
(984)
73
184
(4,049)
24
17
-
-
499
(97)
13
79
14
508
(60)
1
-
(20)
$
429 $
(4,478) $
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 130
The deferred income tax liabilities include $3,685 million (2017: $2,561 million and 2016: $2,948 million)
of liabilities which relate to property, plant and equipment revaluations included in equity.
The taxable temporary difference attributable to Brookfield Renewable’s interest in its subsidiaries,
branches, associates, and joint ventures is $3,398 million (2017: $1,549 million and 2016: $1,380 million).
No deferred income tax liability has been recognized in the financial statements in respect of this taxable
temporary difference.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 131
12. PROPERTY, PLANT AND EQUIPMENT, AT FAIR VALUE
The following table presents a reconciliation of property, plant and equipment at fair value:
(MILLIONS)
Notes
Hydro
Wind
Solar
Other(1)
Total(2)
As at December 31, 2015
$
14,847 $
3,233
- $
278 $
18,358
Additions
Acquisitions through business combinations
3
Items recognized through OCI
Change in fair value
Foreign exchange
Items recognized through net income
Change in fair value
Depreciation
269
5,731
190
1,114
71
10
187
21
(17)
(565)
(10)
(199)
-
-
-
-
-
-
18
-
54
51
358
5,741
431
1,186
(9)
(17)
(36)
(781)
As at December 31, 2016
$
21,569 $
3,313
- $
375 $
25,257
Additions
Acquisitions through business combinations
3
Disposal
Items recognized through OCI
Change in fair value
Foreign exchange
Items recognized through net income
Change in fair value
Depreciation
253
-
-
828
332
(20)
(563)
95
670
(338)
91
177
(8)
(197)
-
575
-
-
-
-
-
6
-
-
(32)
(3)
(5)
(22)
354
1,245
(338)
887
506
(33)
(782)
As at December 31, 2017
$
22,399 $
3,803 $
575 $
319 $
27,096
3
4
Additions
Acquisitions through business combinations
Transfer to assets held for sale
Items recognized through OCI
Change in fair value
Foreign exchange
Items recognized through net income
Change in fair value
Depreciation
212
-
-
3,775
(1,138)
(33)
(536)
36
125
(58)
466
(256)
(20)
(236)
47
86
(691)
313
(77)
-
(25)
6
-
-
4
301
211
(749)
4,558
(41)
(1,512)
(8)
(22)
(61)
(819)
As at December 31, 2018
(1) Includes biomass and cogeneration.
(2) Includes intangible assets of $11 million (2017: $13 million and 2016: $14 million) and assets under construction of $388 million
24,679 $
3,860 $
228 $
258 $
29,025
$
(2017: $601 million and 2016: $663 million).
The fair value of Brookfield Renewable’s property, plant and equipment is calculated as described in
Notes 1(h) – Property, plant and equipment and revaluation method and 1(q)(i) – Critical estimates –
property, plant and equipment. Judgment is involved in determining the appropriate estimates and
assumptions in the valuation of Brookfield Renewable’s property, plant and equipment. See Note 1(r)(iii) -
Critical judgments in applying accounting policies – Property, plant and equipment. Brookfield Renewable
has classified its property, plant and equipment under level 3 of the fair value hierarchy.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 132
Discount rates, terminal capitalization rates and exit dates used in the valuation methodology are
provided in the following table
North America
Colombia
Brazil
Europe
2018
2017
2018
2017
2018
2017
2018
2017
Discount rate(1)
Contracted
4.8% - 5.6% 4.9% - 6.0%
9.6%
11.3%
9.0%
8.9%
4.0% - 4.3% 4.1% - 4.5%
Uncontracted
6.4% - 7.2% 6.5% - 7.6%
10.9%
12.6%
10.3%
10.2%
5.8% - 6.1% 5.9% - 6.3%
Terminal
capitalization rate(2)
6.1% - 7.1% 6.2% - 7.5%
10.4%
12.6%
N/A
N/A
N/A
N/A
2038
2038
Discount rates are not adjusted for asset specific risks.
The terminal capitalization rate applies only to hydroelectric assets in the United States, Canada and Colombia.
Exit date
(1)
(2)
The following table summarizes the impact of a change in discount rates, electricity prices and terminal
capitalization rates on the fair value of property, plant and equipment:
2033
2037
2031
2032
2037
2047
Total
(1,050)
1,130
1,360
(1,360)
(240)
260
Total
(910)
970
1,080
(1,080)
(200)
210
(MILLIONS)
25 bps increase in discount rates
25 bps decrease in discount rates
5% increase in future energy prices
5% decrease in future energy prices
25 bps increase in terminal capitalization rate(1)
25 bps decrease in terminal capitalization rate(1)
North
2018
America Colombia
Brazil
Europe
$
(770) $
840
800
(800)
(210)
230
North
(180) $
190
440
(440)
(30)
30
(80) $
80
100
(100)
-
-
2017
(20) $
20
20
(20)
-
-
America Colombia
Brazil
Europe
(MILLIONS)
25 bps increase in discount rates
25 bps decrease in discount rates
5% increase in future energy prices
5% decrease in future energy prices
25 bps increase in terminal capitalization rate(1)
25 bps decrease in terminal capitalization rate(1)
( 1 )
(20) $
20
20
(20)
-
-
The terminal capitalization rate applies only to hydroelectric assets in the United States, Canada and Colombia.
(710) $
770
620
(620)
(180)
190
(130) $
130
370
(370)
(20)
20
(50) $
50
70
(70)
-
-
$
Terminal values are included in the valuation of hydroelectric assets in the United States, Canada and
Colombia. 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 plus a one-time 30-year renewal term for the majority
of our hydroelectric assets. In November 2016, the Brazilian federal government published a new law
which allowed a one-time extension of authorization licenses of hydroelectric facilities with installed
capacities in the range of 5 MW to 50 MW. Only after the Brazilian federal government clarified the
technical and cost requirements associated with the authorization extension in June of 2018 did
Brookfield Renewable include the one-time 30-year extension in the valuation of the relevant
hydroelectric assets in Brazil. The weighted-average remaining duration of the authorization or useful life
of a concession asset at December 31, 2018, including a one-time 30-year renewal for applicable
hydroelectric assets, is 29 years (2017: 15 years). Consequently, there is no terminal value attributed to
the hydroelectric assets in Brazil at the end of the authorization term.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 133
Per MWh(1)
1 - 10 years
Per MWh(1)
1 - 10 years
The following table summarizes the percentage of total generation contracted under power purchase
agreements as at December 31, 2018:
1 - 10 years
11 - 20 years
North America
Colombia
57%
34%
22%
0%
Brazil
69%
35%
Europe
72%
25%
The following table summarizes power prices from long-term power purchase agreements that are linked
specifically to the related power generating assets:
11 - 20 years
(1)
80
Assumes nominal prices based on weighted-average generation.
-
The following table summarizes the estimates of future electricity prices:
North America
Colombia
Brazil
Europe
$
83 COP 201,000 R$
€
286
397
93
111
11 - 20 years
(1)
116
Assumes nominal prices based on weighted-average generation.
354,000
North America
Colombia
Brazil
Europe
$
68 COP 252,000 R$
€
287
452
79
92
Brookfield Renewable’s long-term view is anchored to the cost of securing new energy from renewable
sources to meet future demand growth between 2022 and 2025. A further one year change would
increase or decrease the fair value of property, plant and equipment by approximately $150 million (2017:
$160 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
Solar
Other(1)
(1)
Includes biomass and cogeneration.
2018
2017
$ 11,888 $ 12,740
3,030
621
2,753
260
246
312
$ 15,147 $ 16,703
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 134
13. BORROWINGS
Corporate Borrowings
The composition of corporate borrowings as at December 31 is presented in the following table:
2018
2017
(MILLIONS EXCEPT AS NOTED)
Credit facilities
Medium Term Notes:
Series 3 (C$200)
Series 4 (C$150)
Series 7 (C$450)
Series 8 (C$400)
Series 9 (C$400)
Series 10 (C$500)
Series 11 (C$300)
Weighted-average
Term
(years)
Interest
rate (%)
3.3
4.4 $
Carrying
value
727 $
Estimated Weighted-average
Term
(years)
fair
value
727
Interest
rate (%)
2.6
4.5 $
Carrying
value
887 $
Estimated
fair
value
887
-
5.8
5.1
4.8
3.8
3.6
4.3
4.4
- $
- $
17.9
1.8
3.1
6.4
8.0
10.0
110
330
293
293
367
220
-
124
342
309
288
357
220
6.5 $ 1,613 $ 1,640
5.3
5.8
5.1
4.8
3.8
3.6
-
4.5
0.8 $
159 $
18.9
2.8
4.1
7.4
9.0
-
119
358
318
318
398
-
163
144
382
344
321
400
-
6.4 $ 1,670 $ 1,754
Total corporate borrowings
2,340
2,367
2,557
2,641
Less: Unamortized financing fees(1)
Less: Current portion
(6)
(6)
$ 2,328
(5)
(159)
$ 2,393
(1) Unamortized premiums and unamortized financing fees are amortized over the terms of the borrowing.
The following table outlines the change in the unamortized financing fees of corporate borrowings for the
year ended December 31:
(MILLIONS)
Corporate borrowings
Unamortized financing fees, beginning of year
Additional financing fees
Amortization of financing fees
Unamortized financing fees, end of year
Credit facilities
2018
2017
2016
$
$
5 $
6 $
2
(1)
-
(1)
6 $
5 $
5
2
(1)
6
In June 2018, Brookfield Renewable extended the maturity of $1.7 billion of its corporate credit facilities
by one year to June 30, 2023. The credit facilities are used for general working capital purposes and
issuing letters of credit. The credit facilities bear interest at the applicable rate plus an applicable margin.
The applicable margin is tiered on the basis of Brookfield Renewable’s unsecured senior long-term debt
rating and is currently 1.20%.
In May 2018, Brookfield Renewable entered into an agreement for a $300 million export credit agency
guaranteed letter of credit facility. As at December 31, 2018, $201 million is utilized on the facility
replacing the previous utilization on Brookfield Renewable’s revolving credit facility.
In December 2018, Brookfield Renewable extended the maturity of the $400 million committed unsecured
credit facility provided by Brookfield Asset Management by one year to December 2019. The interest rate
is LIBOR plus up to 2%. Brookfield Renewable repaid all outstanding draws and accrued interest from the
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 135
$400 million unsecured revolving credit facility as of December 31, 2018. During the year, Brookfield
Asset Management had also placed funds on deposit with Brookfield Renewable in the amount of $200
million, which have since been paid back in full including any interest that had been accrued. The interest
expense on the deposit and draws from the credit facility for the year ended December 31, 2018 totaled
$8 million (2017: $1 million). Subsequent to December 31, 2018, Brookfield Asset Management placed
funds on deposit with Brookfield Renewable in the amount of $251 million.
Brookfield Renewable issues letters of credit from its corporate credit facilities for general corporate
purposes which include, but are not limited to, security deposits, performance bonds and guarantees for
debt service reserve accounts.
The following table summarizes the available portion of corporate credit facilities as at December 31:
(MILLIONS)
Authorized corporate credit facilities(1)
Draws on corporate credit facilities(1)
Issued letters of credit
2018
2017
$
2,100 $
2,090
(721)
(8)
(685)
(193)
Available portion of corporate credit facilities
1,212
(1) Amounts are guaranteed by Brookfield Renewable. Excludes $6 million (2017: $202 million) borrowed under a subscription
1,371
facility of a Brookfield sponsored private fund.
Medium term notes
Corporate borrowings are obligations of a finance subsidiary of Brookfield Renewable, Brookfield
Renewable Partners ULC (“Finco”) (Note 30 - Subsidiary Public Issuers). Finco 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. The term notes payable by Finco
are unconditionally guaranteed by Brookfield Renewable, Brookfield Renewable Energy L.P. (“BRELP”)
and certain other subsidiaries.
On September 20, 2018, Brookfield Renewable completed the issuance of C$300 million ($231 million)
Series 11 medium-term notes which carry a fixed interest rate of 4.25% and mature in January 2029. The
financing was Brookfield Renewable’s inaugural corporate-level green bond.
In November 2018, Brookfield Renewable repaid C$200 million ($153 million) of medium-term notes upon
maturity.
Non-recourse borrowings
Non-recourse borrowings are typically asset-specific, long-term, non-recourse borrowings denominated in
the domestic currency of the subsidiary. Non-recourse borrowings in North America and Europe consist of
both fixed and floating interest rate debt indexed to the London Interbank Offered Rate (“LIBOR”) and the
Canadian Dollar Offered Rate (“CDOR”). Brookfield Renewable uses interest rate swap agreements in
North America and Europe to minimize its exposure to floating interest rates. Non-recourse borrowings in
Brazil consist of floating interest rates of Taxa de Juros de Longo Prazo (“TJLP”), the Brazil National Bank
for Economic Development’s long-term interest rate, or Interbank Deposit Certificate rate (“CDI”), plus a
margin. Non-recourse borrowings in Colombia include floating interest rates of Indicador Bancario de
Referencia rate (“IBR”), the Banco Central de Colombia short-term interest rate, or Colombian Consumer
Price Index (“IPC”), the Banco Central de Colombia inflation rate, plus a margin. Non-recourse borrowings
in India consist of fixed interest rate U.S. dollar denominated debt.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 136
The composition of non-recourse borrowings as at December 31 is presented in the following table:
2018
2017
(MILLIONS EXCEPT AS NOTED)
Non-recourse borrowings
Hydroelectric
Wind
Solar
Storage and other
Total
Weighted-average
Term
(years)
Interest
rate (%)
Carrying
value
Estimated Weighted-average
Term
(years)
Interest
rate (%)
fair
value
Carrying
value
Estimated
fair
value
6.1
4.7
6.0
4.0
5.7
9.2 $ 6,318 $ 6,517
10.8
1,908
1,951
7.1
4.9
142
91
133
95
9.5 $ 8,459 $ 8,696
6.3
5.8
11.1
8.4
6.5
8.8 $ 6,392 $ 6,813
9.7
7.6
17.8
2,211
2,343
643
39
643
39
9.0 $ 9,285 $ 9,838
Add: Unamortized premiums(1)
Less: Unamortized financing fees(1)
Less: Current portion
1
(76)
(489)
$ 7,895
1
(72)
(1,517)
$ 7,697
(1) Unamortized premiums and unamortized financing fees are amortized over the terms of the borrowing.
Future repayments of Brookfield Renewable’s non-recourse borrowings for each of the next five years
and thereafter are as follows:
(MILLIONS)
Non-recourse borrowings
Hydro
Wind
Solar
Storage and other
2019
2020
2021
2022
2023 Thereafter
Total
306
169
13
1
446
119
-
1
164
129
4
77
491
128
-
1
1,084
161
-
1
3,827
1,202
125
10
6,318
1,908
142
91
$
489 $
566 $
374 $
620 $ 1,246 $ 5,164 $ 8,459
The following table outlines the change in the unamortized financing fees of non-recourse borrowings for
the year ended December 31:
(MILLIONS)
Non-recourse borrowings
2018
2017
2016
Unamortized financing fees, beginning of year
$
72 $
74 $
Additional financing fees
Amortization of financing fees
Foreign exchange translation and other
Unamortized financing fees, end of year
21
(12)
(5)
16
(14)
(4)
$
76 $
72 $
54
41
(17)
(4)
74
On January 19, 2018, Brookfield Renewable completed financing associated with its equity-accounted 2.1
GW pumped storage facility in the United Kingdom by securing £60 million ($83 million) of non-recourse
borrowings and £90 million ($125 million) letter of credit facility. The non-recourse borrowings mature in
2021 and bear interest at LIBOR plus a margin of 2.75%.
On January 29, 2018, Brookfield Renewable completed R$130 million ($40 million) of financing with
respect to a 19 MW hydroelectric facility currently under construction in Brazil. The loan bears interest at
a rate of TJLP plus 2.15% and matures in 2038.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 137
On February 15, 2018, Brookfield Renewable completed a refinancing associated with a 296 MW
hydroelectric facility in the United States. The financing was a $350 million interest only green bond
bearing interest at 4.5%, maturing in 2033. Proceeds were used to repay the existing principal amount of
$315 million and the excess was distributed to investors.
On February 22, 2018, TerraForm Global issued $400 million of senior notes at 6.13%, maturing in March
2026. Along with cash on the balance sheet, proceeds were used to repay the existing $760 million of
9.75% senior notes due in 2022. Additionally, TerraForm Global secured a $45 million revolving credit
facility, maturing in February 2021.
On February 27, 2018, Brookfield Renewable completed bond financing associated with the Colombian
business. The financing was a COP 750 billion ($262 million) in senior unsecured bonds with maturities of
7, 12 and 30 years at rates of 7.12%, IPC + 3.56% and IPC + 3.99%, respectively.
On April 20, 2018, Brookfield Renewable completed a R$160 million ($47 million) refinancing associated
with a 120 MW hydroelectric facility in Brazil. The loan bears an interest rate of CDI + 2.00%, maturing in
October 2023.
In the second quarter of 2018, Brookfield Renewable completed a refinancing of COP 1,762 billion ($634
million) of bank debt associated with the Colombian business. The new loans mature between 2025 and
2030 years at rates ranging of IBR + 2.97% to IBR + 3.70%.
On August 31, 2018, Brookfield Renewable completed a refinancing of COP 338 billion ($111 million) of
debt associated with the Colombian business. The amortizing loan bears a fixed interest rate of 7.48%
and matures in August 2025.
On September 14, 2018, Brookfield Renewable completed a R$250 million ($60 million) financing
associated with the Brazilian hydroelectric business. The debenture bears interest at 113% of CDI and
matures in September 2023.
On September 28, 2018, Brookfield Renewable increased indebtedness associated with a 166 MW wind
portfolio in Ontario through a C$60 million ($46 million) private placement. The debt bears a fixed rate of
4.86% and matures in August 2031.
On October 26, 2018, Brookfield Renewable completed a £29 million ($37 million) financing associated
with the acquisition of a 23 MW Northern Ireland wind facility. The debt matures in September 2036 and
bears interest at GBP LIBOR plus a margin of 1.85%.
On November 26, 2018, Brookfield Renewable completed a commercial paper issuance of COP 250
billion ($77 million) associated with the Colombian business. The issuance bears interest at IBR + 0.70%
and has a term of 330 days.
On December 11, 2018, Brookfield Renewable extended the maturity of COP 593 billion ($186 million) of
local bank debt and $196 million of bank debt associated with the Colombian business by 2 years to
January 2023. The COP tranche bears interest at IBR + 3.50% and the USD tranche bears interest at
LIBOR + 2.50%.
On December 12, 2018, Brookfield Renewable completed a $190 million refinancing associated with a
377 MW hydroelectric portfolio in the United States. The loan bears interest at LIBOR plus a margin of
3.00% and matures in December 2022.
On December 20, 2018, Brookfield Renewable completed a C$150 million ($111 million) financing
associated with a 488 MW hydroelectric portfolio in Canada. The loan bears interest at CDOR plus a
margin of 1.40% and matures in November 2020.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 138
On December 20, 2018, Brookfield Renewable completed a C$160 million ($119 million) financing
associated with a 351 MW hydroelectric portfolio in Canada. The loan bears interest at CDOR plus a
margin of 1.60% and matures in June 2023.
Supplemental Information
The following table outlines changes in Brookfield Renewable’s borrowings for the year ended December
31:
(MILLIONS)
2018
Net cash flows
from
Non-cash
Jan 1 financing activities Acquisition Held for sale Disposal Other(1)
Dec 31
Corporate borrowings
Non-recourse borrowings
$ 2,552
$ 9,214
(88)
(178)
-
90
-
(360)
-
-
(130) $ 2,334
(382) $ 8,384
2017
Corporate borrowings
Non-recourse borrowings
-
-
Includes foreign exchange and amortization of unamortized premium and financing fees.
$ 2,229
$ 7,953
-
1,188
191
76
(1)
-
(173)
132 $ 2,552
170 $ 9,214
14. NON-CONTROLLING INTERESTS
Brookfield Renewable’s non-controlling interests are comprised of the following as at December 31:
(MILLIONS)
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
Preferred equity
2018
8,129 $
66
3,252
568
$
12,015 $
2017
6,298
58
2,843
616
9,815
On October 31, 2018, Brookfield Renewable completed the sale of a 25% non-controlling interest in a
portfolio of select Canadian hydroelectric assets. Cash consideration of C$390 million was received from
the non-controlling shareholders. A revaluation of the associated property, plant and equipment was
performed immediately prior to the sale in accordance with our accounting policy election to apply the
revaluation method. Upon completion of the sale, Brookfield Renewable recognized an $11 million gain
directly in equity.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 139
Participating non-controlling interests – in operating subsidiaries
The net change in participating non-controlling interests – in operating subsidiaries is as follows:
(MILLIONS)
Brookfield
Americas
Infrastructure
Fund
Brookfield
Infrastructure
Fund II
As at December 31, 2015
$
958 $
1,441 $
Net income
OCI
Capital contributions
Acquisition
Distributions
MTO adjustments
(18)
46
-
-
(23)
-
(16)
228
74
-
(73)
-
Brookfield
Canadian
Infrastructure Hydroelectric
Portfolio
Fund III
The
Catalyst
Group
Isagen
institu-
tional
investors
Isagen public
non-con
-trolling
interests
Other
Total
- $
15
-
1,074
-
(7)
3
- $
121 $
- $
- $
67 $
2,587
-
-
-
-
-
-
16
2
-
-
(12)
-
47
148
1,473
-
-
7
19
205
-
1,417
-
(1,627)
2
6
-
-
(4)
-
65
635
2,621
1,417
(119)
(1,617)
As at December 31, 2016
$
963 $
1,654 $
1,085 $
- $
127 $
1,675 $
14 $
71 $
5,589
Net (loss) income
OCI
Capital contributions
Acquisition
Distributions
Purchase of Isagen shares
Other
(29)
(76)
-
-
(8)
-
-
(13)
269
89
-
(317)
-
-
33
111
186
525
(88)
(1)
1
-
-
-
-
-
-
-
12
2
-
-
(7)
-
-
47
78
19
-
(115)
(5)
2
-
(1)
-
-
-
5
(9)
3
-
-
-
(4)
-
-
53
383
294
525
(539)
(1)
(6)
As at December 31, 2017
$
850 $
1,682 $
1,852 $
- $
134 $
1,701 $
9 $
70 $
6,298
Net income
OCI
Capital contributions
Acquisition
Distributions
Other
1
66
-
-
(17)
-
9
298
9
-
(81)
12
86
805
5
-
(276)
(3)
4
(11)
293
-
-
(10)
14
(18)
-
-
(6)
-
174
504
-
-
(167)
-
1
5
-
-
-
-
8
58
-
21
(6)
53
297
1,707
307
21
(553)
52
As at December 31, 2018
$
900 $
1,929 $
2,469 $
276 $
124 $
2,212 $
15 $
204 $
8,129
Interests held by third parties
75-80%
43-60%
23-71%
25-44%
25%
53%
0.5%
20-50%
-
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 140
The following tables summarize certain financial information of operating subsidiaries that have non-controlling interests that are material to
Brookfield Renewable:
(MILLIONS)
Interests held by third parties
Place of business
Brookfield
Americas
Brookfield
Canadian
Infrastructure Infrastructure Infrastructure Hydroelectric
Portfolio
25-44%
Fund
75-80%
Fund II
43-60%
Brookfield
The
Catalyst
Group
25%
Isagen(2)
76%
Other
20-50%
Total
United States,
Brazil
United States,
Brazil,
Europe
Canada
United
States
Colombia
United States,
Brazil,
Canada
Fund III(1)
69-71%
United States,
Brazil,
India,
China
Year ended December 31, 2016:
Revenue
Net income
Total comprehensive income (loss)
Net income allocated to non-controlling interests
Year ended December 31, 2017:
Revenue
Net (loss) income
Total comprehensive income (loss)
Net (loss) income allocated to non-controlling interests
As at December 31, 2017:
Property, plant and equipment, at fair value
Total assets
Total borrowings
Total liabilities
Carrying value of non-controlling interests
Year ended December 31, 2018:
Revenue
Net income
Total comprehensive income (loss)
Net income allocated to non-controlling interests
As at December 31, 2018:
Property, plant and equipment, at fair value
Total assets
Total borrowings
Total liabilities
$
$
$
$
$
$
118 $
(22)
37
(18)
123 $
(34)
(133)
(29)
1,667 $
1,718
556
628
850 $
157 $
2
95
1
394 $
(23)
356
(16)
430 $
(20)
529
(13)
5,153 $
5,430
2,040
2,422
1,682 $
447 $
17
544
9
28 $
(8)
(8)
(5)
53 $
18
126
13
2,149 $
3,294
1,502
1,678
1,138 $
311 $
19
898
15
1,687 $
1,737
536
582
900 $
5,553 $
5,831
1,979
2,395
1,929 $
2,322 $
3,725
838
1,441
1,641 $
- $
-
-
-
- $
-
-
-
- $
-
-
-
- $
38 $
15
25
6
1,679 $
1,975
924
1,933
164 $
62
70
16
135 $
47
57
12
964 $
1,066
413
432
134 $
142 $
56
(16)
14
819 $
110
502
86
797 $
89
236
67
5,401 $
6,526
1,858
3,336
2,424 $
896 $
331
1,290
251
27 $
5
31
2
32 $
7
-
3
411 $
426
42
63
70 $
21 $
2
16
1
1,550
124
988
65
1,570
107
815
53
15,745
18,460
6,411
8,559
6,298
2,012
442
2,852
297
875 $
982
369
387
124 $
6,665 $
7,717
1,744
3,548
3,169 $
253 $
293
70
88
52 $
19,034
22,260
6,460
10,374
8,129
Carrying value of non-controlling interests
(1)
(2)
$
Excludes information relating to Isagen which is presented separately.
The total third parties ownership interest in Isagen as of December 31, 2018 was 75.9% and comprised of Brookfield Infrastructure Fund III: 22.9%, Isagen Institutional investors 52.5% and other non-
controlling interests: 0.5%.
314 $
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 141
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 held by Brookfield (“GP
interest”), 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 LP Unit distributions exceed
$0.375 per LP Unit per quarter, the incentive is 15% of distributions above this threshold. To the extent
that quarterly LP Unit distributions exceed $0.4225 per LP Unit, the incentive distribution is equal to 25%
of distributions above this threshold.
Consolidated equity includes Redeemable/Exchangeable partnership units and the GP interest. The
Redeemable/Exchangeable partnership units are held 100% by Brookfield, 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 on a
one for one basis, the Redeemable/Exchangeable partnership units are classified as equity in accordance
with IAS 32, Financial Instruments: Presentation. The Redeemable/Exchangeable partnership units and
GP interest are presented as non-controlling interests since they provide Brookfield the direct economic
benefits and exposures to the underlying performance of BRELP. 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 and the GP interest participate in earnings and distributions
on a per unit basis equivalent to the per unit participation of the LP Units of Brookfield Renewable.
As at December 31, 2018, general partnership units and Redeemable/Exchangeable partnership units
outstanding were 2,651,506 (December 31, 2017: 2,651,506) and 129,658,623 (December 31, 2017:
129,658,623), respectively.
Distributions
The composition of the distributions are presented in the following table:
(MILLIONS)
General partnership interest in a holding
subsidiary held by Brookfield
Incentive distribution
Participating non-controlling interests - in a
holding subsidiary - Redeemable/
Exchangeable units held by Brookfield
2018
2017
5 $
40
45 $
5
30
35
255 $
300 $
243
278
$
$
$
$
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 142
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
Comprehensive income
Net income allocated to(1):
GP interest
Redeemable/Exchangeable partnership units
As at December 31:
Property, plant and equipment, at fair value
Total assets
Total borrowings
Total liabilities
Carrying value of(2):
GP interest
Redeemable/Exchangeable partnership units
(1)
2018
2017
2016
$
2,982 $
403
3,667
2,625 $
51
1,401
2,452
40
1,369
1
17
(1)
(23)
-
(29)
$ 29,025 $ 27,096
30,904
11,766
16,622
34,103
10,718
16,897
66
3,252
58
2,843
Allocated based on weighted-average GP interest, Redeemable/Exchangeable partnership units and LP Units of 2.7 million, 129.7 million, and
180.2 million, respectively (2017: 2.7 million, 129.7 million, and 173.5 million, respectively and 2016: 2.7 million, 129.7 million, and 156.4 million,
respectively).
Allocated based on outstanding GP interest, Redeemable/Exchangeable partnership units and LP Units of 2.7 million, 129.7 million, and 178.8
million, respectively (2017: 2.7 million, 129.7 million, and 180.4 million, respectively).
(2)
Preferred equity
Brookfield Renewable’s preferred equity as at December 31 consists of Class A Preference Shares of
Brookfield Renewable Power Preferred Equity Inc. (“BRP Equity”) as follows:
(MILLIONS, EXCEPT
AS NOTED)
Series 1 (C$136)
Series 2 (C$113)(1)
Series 3 (C$249)
Series 5 (C$103)
Series 6 (C$175)
Shares
outstanding
Cumulative
dividend
rate (%)
Earliest
permitted
redemption
date
Dividends declared for
the year ended
December 31
2017
2018
Carrying value as at
2018
5.45
4.51
9.96
4.11
7.00
31.03
3.36
4.29
4.40
5.00
5.00
Apr 2020 $
4 $
4 $
100 $
Apr 2020
Jul 2019
Apr 2018
Jul 2018
3
8
4
7
3
8
4
7
83
182
75
128
$
26 $
26 $
568 $
2017
108
90
197
82
139
616
(1) Dividend rate represents annualized distribution based on the most recent quarterly floating rate.
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, 2018, none of the issued Class A Preference Shares have been
redeemed by BRP Equity.
Class A Preference Shares – Normal Course Issuer Bid
In June 2018, the TSX accepted notice of BRP Equity’s intention to renew the normal course issuer bid in
connection with its outstanding Class A Preference Shares for another year to June 26, 2019, or earlier
should the repurchases be completed prior to such date. Under this normal course issuer bid, it is
permitted to repurchase up to 10% of the total public float for each respective series of the Class A
Preference Shares. Unitholders may receive a copy of the notice, free of charge, by contacting Brookfield
Renewable. No shares have been repurchased as of December 31, 2018.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 143
15. PREFERRED LIMITED PARTNERS’ EQUITY
Brookfield Renewable’s preferred limited partners’ equity comprises of Class A Preferred Units as follows:
(MILLIONS, EXCEPT
AS NOTED)
Series 5 (C$72)
Series 7 (C$175)
Series 9 (C$200)
Series 11 (C$250)
Series 13 (C$250)
Cumulative
Shares distribution
rate (%)
outstanding
Earliest Distributions declared for
the year ended
December 31
2017
permitted
redemption
date
2018
Carrying value as at
Dec 31
Dec 31
2017
2018
2.89
7.00
8.00
10.00
10.00
37.89
5.59
5.50
5.75
5.00
5.00
Apr 2018 $
4 $
4 $
49 $
Jan 2021
Jul 2021
Apr 2022
Apr 2023
7
9
9
9
8
8
8
-
128
147
187
196
49
128
147
187
-
$
38 $
28 $
707 $
511
On January 16, 2018, Brookfield Renewable issued 10,000,000 Class A Preferred Limited Partnership
Units, Series 13 (the “Series 13 Preferred Units”) at a price of C$25 per unit for gross proceeds of C$250
million ($201 million). Brookfield Renewable incurred C$7 million ($5 million) in related transaction costs
inclusive of fees paid to underwriters. The holders of the Series 13 Preferred Units are entitled to receive
a cumulative quarterly fixed distribution yielding 5.0% for the initial period ending April 30, 2023.
Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of: (i) the 5-year
Government of Canada bond yield plus 3.00%, and (ii) 5.00%.
The holders of the Series 13 Preferred Units will have the right, at their option, to convert their Series 13
Preferred Units into Class A Preferred Limited Partnership Units, Series 14 (the “Series 14 Preferred
Units”), subject to certain conditions, on April 30, 2023 and on April 30 every five years thereafter. The
holders of Series 14 Preferred Units will be entitled to receive floating rate cumulative preferential cash
distributions equal to the sum of the three month Government of Canada Treasury Bill rate plus 3.00%.
As at December 31, 2018, none of the Class A, Series 5 Preferred Limited Partnership Units have been
redeemed.
16. LIMITED PARTNERS’ EQUITY
Limited partners’ equity
As at December 31, 2018, 178,821,204 LP Units were outstanding (December 31, 2017: 180,388,361)
including 56,068,944 (December 31, 2017: 56,068,944) held by Brookfield. Brookfield owns all general
partnership interests in Brookfield Renewable representing a 0.01% interest.
During the year ended December 31, 2018, 289,641 LP Units (2017: 302,037 LP Units) were issued
under the distribution reinvestment plan at a total cost of 8 million (2017: $10 million).
As at December 31, 2018, Brookfield Asset Management’s direct and indirect interest of 185,727,567 LP
Units and Redeemable/Exchangeable partnership units represents approximately 60% of Brookfield
Renewable on a fully-exchanged basis and the remaining approximate 40% is held by public investors.
On an unexchanged basis, Brookfield holds a 31% direct limited partnership interest in Brookfield
Renewable, a 42% direct interest in BRELP through the ownership of Redeemable/Exchangeable
partnership units and a direct 1% GP interest in BRELP as at December 31, 2018.
In December 2018, Brookfield Renewable renewed its normal course issuer bid in connection with its LP
Units. Under this normal course issuer bid Brookfield Renewable is permitted to repurchase up to 8.9
million LP Units, representing approximately 5% of the issued and outstanding LP Units, for capital
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 144
management purposes. The bid will expire on December 30, 2019, or earlier should Brookfield
Renewable complete its repurchases prior to such date. Under the prior normal course issuer bid that
expired on December 28, 2018, Brookfield Renewable had repurchased 1,856,798 LP Units, on the
Toronto Stock Exchange and the New York Stock Exchange, at a total cost of $51 million (2017: $nil). An
additional 20,000 LP Units were repurchased on December 28, 2018 but not cancelled as at December
31, 2018.
Distributions
The composition of the distributions are presented in the following table:
(MILLIONS)
Brookfield
External LP Unitholders
2018
110 $
245
355 $
2017
101
227
328
$
$
In February 2019, unitholder distributions were increased to $2.06 per LP Unit on an annualized basis, an
increase of $0.10 per LP Unit, which will take effect on the distribution payable in March 2019.
17. GOODWILL
The following table provides a reconciliation of goodwill:
(MILLIONS)
Balance, as at December 31, 2016
Foreign exchange
Balance, as at December 31, 2017
Acquired through acquisition
Transfer to Assets held for sale
Foreign exchange
Balance, as at December 31, 2018
Notes
$
$
$
3
4
Total
896
5
901
27
(22)
(78)
828
The purchase price allocation for Biotherm (Note 3 – Acquisitions) includes a deferred tax liability of $35
million. The deferred tax liability arises because the tax basis of the Biotherm net assets are significantly
lower than their acquisition date fair value. As required by IFRS 3, this deferred tax liability is calculated in
accordance with IAS 12, and is not measured at fair value. IAS 12 requires provisions to be made for all
differences between the carrying value of assets and liabilities other than goodwill acquired in a business
combination and their tax base at their nominal amount, irrespective of whether or not this will result in
additional (or less) tax being paid or when any tax cash flows may occur. The fair value of the deferred
tax liability would be lower than its nominal amount and Brookfield Renewable has determined that
goodwill of $27 million arises primarily from such difference.
18. 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 LP Unitholders. Brookfield Renewable’s capital is monitored through
debt to total capitalization ratio on a consolidated and corporate basis, as at December 31, 2018 these
ratios were 34% and 20%, respectively (2017: 40% and 24%, respectively).
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
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 145
non-recourse borrowings. These covenants vary from one credit 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.
As part of the TerraForm Global transaction, Brookfield Renewable acquired assets with non-recourse
financings that were in default prior to the acquisition. As at December 31, 2018, the loans had
outstanding principal amounts totaling $183 million, and mature between 2026 and 2031. These loans
have remained not in compliance with certain covenants due to conditions that existed prior to the
acquisition of TerraForm Global, including issues with contractors under engineering, procurement and
construction contracts. The loan balances relating to the South African Portfolio have been classified as
Liabilities directly associated with assets held for sale. See Note 4 – Assets held for sale. The remaining
balances have been classified as current as at December 31, 2018 in the annual audited consolidated
financial statements. These loans have a total outstanding balance as at December 31, 2018 of $13
million. Brookfield Renewable is currently working with all the lenders to cure such defaults and release
the restrictions placed on the projects. Except for the aforementioned defaults, Brookfield Renewable
complied with all material financial covenants as of December 31, 2018.
Brookfield Renewable’s strategy during 2018, which was unchanged from 2017, was to maintain the
measures set out in the following schedule as at December 31:
Corporate
Consolidated
(MILLIONS)
Corporate borrowings
Non-recourse borrowings
Deferred income tax liabilities, net(1)
Equity
Participating non-controlling interest -
in operating subsidiaries
Preferred equity
Preferred limted partners' equity
Unitholders' equity(2)
Total capitalization
Debt to total capitalization
(1)
(2)
$
2018
2,334 $
-
2,334
-
2017
2,552 $
-
2,552
-
2018
2,334 $
8,384
10,718
4,049
2017
2,552
9,214
11,766
3,411
-
568
707
7,802
6,298
616
511
6,857
$ 11,411 $ 10,536 $ 31,973 $ 29,459
40%
8,129
568
707
7,802
-
616
511
6,857
34%
24%
20%
Deferred income tax liabilities less deferred income tax assets.
Unitholders’ equity includes equity attributable to Limited partner’s equity, Redeemable/Exchangeable partnership units, and
GP interest.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 146
19. EQUITY-ACCOUNTED INVESTMENTS
The following table outlines the changes in Brookfield Renewable’s equity-accounted investments:
(MILLIONS)
Balance, beginning of year
Investment
Share of net income
Share of other comprehensive income
Dividends received
Foreign exchange translation and other
Balance, end of year
2018
721 $
420
68
426
(42)
(24)
1,569 $
$
$
2017
206 $
469
2
56
(31)
19
721 $
2016
197
-
-
8
(6)
7
206
The following tables summarize gross revenues, net income, assets and liabilities of equity-accounted
investments in aggregate:
(MILLIONS)
For the year ended December 31
Revenue
Net income (loss)
Share of net income(1)
(1) Brookfield Renewable's ownership interest in these entities ranges from 14-50%.
2018
2017
2016
$
1,305
310 $
223
68
(24)
2
74
-
-
(MILLIONS)
As at December 31:
Current assets
Property, plant and equipment, at fair value
Other assets
Current liabilities
Non-recourse borrowings
Other liabilities
2018
2017
$
682 $
11,999
608
1,080
6,078
1,197
477
8,098
213
687
4,294
822
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 147
20. CASH AND CASH EQUIVALENTS
Brookfield Renewable’s cash and cash equivalents as at December 31 are as follows:
(MILLIONS)
Cash
Short-term deposits
21. RESTRICTED CASH
Brookfield Renewable’s restricted cash as at December 31 is as follows:
(MILLIONS)
Operations
Credit obligations
Capital expenditures and development projects
Total
Less: non-current
Current
Note
23
$
$
$
2018
127 $
46
173 $
2017
790
9
799
2018
119 $
60
2
181
(45)
2017
195
85
4
284
(103)
181
$
136 $
22. 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 others
Other short-term receivables
Current portion of contract asset
2018
339 $
114
109
45
607 $
2017
360
112
82
-
554
$
$
As at December 31, 2018, 74% (2017: 99%) of trade receivables were current. The decrease in current
receivables is due to timing of settlement. Brookfield Renewable does not expect issues with collectability
of these amounts. Accordingly, as at December 31, 2018 and 2017 an allowance for doubtful accounts for
trade receivables was not deemed necessary. 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.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 148
23. OTHER LONG-TERM ASSETS
The composition of Brookfield Renewable’s other long-term assets as at December 31 is presented in the
following table:
(MILLIONS)
Contract asset
Restricted cash
Acquisition downpayment
Other
Note
2018
$
402 $
21
45
-
58
$
505 $
2017
-
103
46
81
230
At December 31, 2018 and 2017, restricted cash was held primarily to satisfy lease payments and credit
agreements.
Contract assets are the result of contract amendments made during the year to Brookfield Renewable’s
long-term power purchase agreements with Brookfield associated with generating assets in Ontario held
by Great Lakes Power Limited and Mississagi Power Trust. The net impact of these changes were offset
by changes to Brookfield Renewable’s long-term energy revenue agreement with Brookfield associated
with several entities owned by Brookfield Renewable in the United States, however the changes resulted
in a difference in timing of cash flows. As a result, the amendments were accounted for in reflection of
their substance, with the recognition of contract asset and liability balances and net financing charges to
be recognized over the remainder of the term of the agreements. There are no material provisions for
expected credit losses on contract assets. See Note 27 – Related party transactions, for additional details
regarding Brookfield Renewable’s revenue agreements with Brookfield.
24. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Brookfield Renewable’s accounts payable and accrued liabilities as at December 31 are as follows:
(MILLIONS)
Operating accrued liabilities
Accounts payable
Interest payable on corporate and non-recourse borrowings
Deferred consideration
LP Unitholders’ distributions, preferred limited partnership unit
distributions and preferred dividends payable(1)
Other
2018
2017
$
263 $
76
76
30
30
58
271
117
64
35
29
26
(1)
542
Includes amounts payable only to external LP Unitholders. Amounts payable to Brookfield are included in due to related
parties.
533 $
$
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 149
25. OTHER LONG-TERM LIABILITIES
Brookfield Renewable’s other long-term liabilities as at December 31 are comprised of the following:
(MILLIONS)
Contract liabilities
Pension obligations
Acquisition related provisions
Decommissioning retirement obligations
Concession payment liability
Commitments for power purchase agreement
Contingent considerations
Other
Notes
2018
2017
$
29
479 $
80
69
67
7
6
3
23
$
734 $
9
89
80
85
9
13
18
41
344
Brookfield Renewable has recorded decommissioning retirement obligations associated with certain
power generating assets. The decommissioning retirement obligation has been established for
hydroelectric, wind and solar operation sites that are expected to be restored between the years 2031 to
2138. The estimated cost of decommissioning activities is based on a third-party assessment.
Contract liabilities are the result of the amendment to the energy revenue agreement between Brookfield
and several entities owned by Brookfield Renewable in the United States. See Note 23 – Other long-term
assets, for additional details regarding Brookfield Renewable’s contract balances. See Note 27 – Related
party transactions, for additional details regarding Brookfield Renewable’s revenue agreements with
Brookfield.
26. 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 can be renewed and are extendable up to 2091.
In the normal course of business, Brookfield Renewable will enter into capital expenditure commitments
which primarily relate to contracted project costs for various growth initiatives. As at December 31, 2018,
Brookfield Renewable had $71 million (2017: $44 million) of capital expenditure commitments
outstanding, of which $46 million is payable in less than one year, and $25 million in two years.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 150
As at December 31, 2018, Brookfield Renewable had commitments for future operating lease payments
under non-cancellable leases which fall due as follows:
(MILLIONS)
2019
2020
2021
2022
2023
Thereafter
Total
Contingencies
$
$
31
29
25
22
18
125
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.
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 13 – Borrowings.
Brookfield Renewable, along with institutional investors, has provided letters of credit, which include, but
are not limited to, guarantees for debt service reserves, capital reserves, construction completion and
performance as it relates to interests in the Brookfield Americas Infrastructure Fund, the Brookfield
Infrastructure Fund II, and the Brookfield Infrastructure Fund III. Brookfield Renewable’s subsidiaries have
similarly provided letters of credit, which include, but are not limited to, guarantees for debt service
reserves, capital reserves, construction completion and performance.
Letters of credit issued by Brookfield Renewable along with institutional investors and its subsidiaries
were as at the following dates:
(MILLIONS)
Brookfield Renewable along with institutional investors
Brookfield Renewable's subsidiaries
Guarantees
$
$
2018
51 $
338
389 $
2017
76
468
544
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 Partners L.P.
Annual Report
December 31, 2018
Page 151
27. 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.
Brookfield Renewable and Brookfield have entered into, or amended, the following material agreements:
Principal Agreements
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. 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.
Master Services Agreement
Brookfield Renewable entered into an 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). Total capitalization value as of December 31, 2018 is $16 billion, which against the initial reference
value of $8 billion and factoring in the annual amount of $21 million (as adjusted for inflation), resulted in
a management service fee payment for the year ended December 31, 2018 of $80 million (2017: $82
million and 2016: $62 million).
BRELP Voting Agreement
In 2011, Brookfield Renewable entered into a voting agreement with Brookfield pursuant to which
Brookfield Renewable, through BRPL, 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.
Power Services Agreements
Energy Marketing Internalization
On October 30, 2018, Brookfield Renewable and Brookfield entered into an agreement (the “Power
Marketing Purchase Agreement”) to internalize all energy marketing capabilities in North America into
Brookfield Renewable. The Power Marketing Purchase Agreement provides for the transfer of
Brookfield’s existing marketing business to Brookfield Renewable, which includes the marketing,
purchasing and trading of energy and energy related products in North America, providing energy
marketing services and all matters incidental thereto (the “Energy Marketing Internalization”). The Energy
Marketing Internalization will also include transfer of all third party power purchase agreements and,
subject to certain exceptions, related party power purchase and revenue support agreements as
described in further detail below.
The closing of the Energy Marketing Internalization is targeted to occur in the first half of 2019, subject to
the satisfaction of customary closing conditions. It is anticipated that on closing of the Energy Marketing
Internalization, Brookfield Renewable and Brookfield will enter into an agreement pursuant to which
Brookfield Renewable will provide energy marketing services to Brookfield for a fee.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 152
Also on October 30, 2018, Brookfield Renewable and Brookfield separately amended certain related party
agreements, as described in further detail below.
Power Agency Agreements
Certain Brookfield Renewable subsidiaries have entered into Power Agency Agreements appointing
Brookfield as their exclusive agent in respect of the sales of electricity, including the procurement of
transmission and other additional services. In addition, Brookfield 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, Brookfield 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.
On closing of the Energy Marketing Internalization, all Power Agency Agreements will be transferred by
Brookfield to Brookfield Renewable.
Energy Marketing Agreement
Brookfield 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). See
Note 8 - Direct operating costs.
On closing of the Energy Marketing Internalization, the Energy Marketing Agreement will be transferred
from Brookfield to Brookfield Renewable.
Revenue Agreements
Contract Amendments
In 2018, two long-term power purchase agreements associated with the generating assets in Ontario held
by Great Lakes Power Limited (“GLPL”) and Mississagi Power Trust (“MPT”), were amended.
The amended GLPL power purchase agreement requires Brookfield to purchase the energy generated by
certain facilities in Canada owned by GLPL at an average price of C$100 per MWh subject to an annual
adjustment equal to a 3% fixed rate. The GLPL agreement has an initial term to 2029, and Brookfield
Renewable will have an option to extend a fixed price commitment to GLPL from Brookfield Asset
Management through 2044 at a price of C$60 per MWh.
The amended MPT power purchase agreement requires Brookfield to purchase the energy generated by
certain facilities in Canada owned by MPT at an average price of C$127 per MWh subject to an annual
adjustment equal to a 3% fixed rate. The MPT contract terminates on December 1, 2029.
Energy Revenue Agreement
In 2018, the energy revenue agreement between Brookfield and several entities owned by Brookfield
Renewable was effectively amended.
Brookfield will support the price that Brookfield Renewable 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
until 2021 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 price will be reduced by $3 per MWh per year
from 2021 to 2025 and then further reduced by $5.03 per MWh in 2026. The energy revenue agreement
will terminate in 2046.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 153
Other Revenue Agreements
Pursuant to a 20-year power purchase agreement, Brookfield 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. On closing of the Energy Marketing Internalization, the power purchase agreement with
GLHA will be transferred to Brookfield Renewable.
Pursuant to a 20-year power purchase agreement, Brookfield 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%. On closing of the Energy
Marketing Internalization, the power purchase agreement with Lievre Power will be transferred to
Brookfield Renewable.
Pursuant to a power guarantee agreement, Brookfield 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 third-party power agreements. The agreement with Brookfield has an initial term
to 2029 and automatically renews for successive 20-year period with certain termination provisions. On
closing of the Energy Marketing Internalization, the power guarantee agreement with Hydro Pontiac Inc.
will be transferred to Brookfield Renewable.
Pursuant to a 10-year Wind Levelization agreement expiring in 2019, Brookfield 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 Brookfield, while a shortfall would result in a payment from Brookfield to
Brookfield Renewable.
Voting Agreements
Brookfield Renewable entered into voting agreements with Brookfield whereby Brookfield, as managing
member of entities related to the Brookfield Americas Infrastructure Fund (the “BAIF Entities”) in which
Brookfield Renewable holds investments in power generating operations with institutional investors,
agreed to assign to Brookfield Renewable their voting rights to elect the Boards of 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.
Brookfield Renewable entered into voting agreements with certain Brookfield subsidiaries whereby these
subsidiaries, as managing members of entities related to Brookfield Infrastructure Fund II (the “BIF II
Entities”) in which Brookfield Renewable holds investments in power generating operations with
institutional investors, agreed to provide to Brookfield Renewable the authority to direct the election of the
Boards of Directors of the BIF II Entities. Brookfield Renewable’s economic interests in the BIF II Entities
are between 40% and 50.1%.
Except as set out below in respect to TerraForm Power and Isagen, Brookfield Renewable entered into a
voting agreement with certain Brookfield subsidiaries that form part of Brookfield Infrastructure Fund III
(the “BIF III Entities”) in which Brookfield Renewable holds investments in power generating operations
with institutional investors, Brookfield agreed to provide to Brookfield Renewable the authority to direct
the election of the Boards of Directors of the BIF III Entities. Brookfield Renewable’s economic interests in
the BIF III Entities are between 24% and 31%.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 154
The consortium holds its interest in Isagen through an entity (“Hydro Holdings”) which is entitled to
appoint a majority of the board of directors of Isagen. The general partner of Hydro Holdings is a
controlled subsidiary of Brookfield Renewable. Brookfield Renewable is entitled to appoint a majority of
Hydro Holdings’ board of directors, provided that Brookfield Asset Management and its subsidiaries
(including Brookfield Renewable) collectively are (i) the largest holder of Hydro Holdings’ limited
partnership interests, and (ii) hold over 30% of Hydro Holdings’ limited partnership interests (the
“Ownership Test”). Brookfield Asset Management and its subsidiaries currently meet the Ownership Test.
Brookfield Renewable entered into a voting agreement with the Brookfield subsidiary that ultimately
controls TerraForm Power. Pursuant to this voting agreement, Brookfield Renewable is entitled to direct
the election of one of the four directors of the Brookfield subsidiary, thereby providing Brookfield
Renewable with significant influence over this subsidiary.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 155
The following table reflects the related party agreements and transactions in the consolidated statements
of income, for the year ended December 31:
(MILLIONS)
Revenues
Power purchase and revenue agreements
Wind levelization agreement
Direct operating costs
Energy purchases
Energy marketing fee
Insurance services
Interest (expense) income - borrowings
Management service costs
2018
2017
2016
535 $
601 $
7
6
542 $
607 $
(20) $
(13) $
(24)
(25)
(69) $
(8) $
(80) $
(24)
(19)
(56) $
- $
(82) $
527
8
535
(3)
(23)
(20)
(46)
6
(62)
$
$
$
$
$
$
The following table reflects the impact of the related party agreements and transactions on the
consolidated statements of financial position as at December 31:
(MILLIONS)
Current assets
Contract asset
Due from related parties
Related party
Brookfield
Amounts due from
Brookfield
Equity-accounted investments and other
Non-current assets
Contract asset
Current liabilities
Due to related parties
Amount due to
Brookfield
Brookfield
Equity-accounted investments and other
Accrued distributions payable on
LP Units and Redeemable/
Exchangeable partnership units Brookfield
Non-current liabilities
Contract liability
Current assets
Brookfield
$
$
$
$
$
2018
2017
$
45 $
-
54
6
60
-
48
32
55
10
110 $
402 $
54 $
12
35
101 $
479
32
112
9
Amounts due from Brookfield are non-interest bearing, unsecured and due on demand.
Current liabilities
Amounts due to Brookfield are unsecured, payable on demand and relate to recurring transactions.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 156
28. 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
$
2018
(122) $
32
22
$
(68) $
2017
(40) $
32
(17)
(25) $
2016
30
(160)
(7)
(137)
29. 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 the United States registered plans, actuarial valuations are required annually. For
the Canadian registered plans, actuarial valuations are required on a triennial basis if the funding level of
the plan is above a certain threshold. Currently, all Canadian plans are on a triennial schedule. In the
Colombian business, there are obligations for pension plans and other employee benefits. Actuarial
valuations on these obligations are performed annually by qualified, independent actuaries.
The dates of the most recent actuarial valuations for Brookfield Renewable’s pension and non-pension
benefit plans range from January 2016 to January 2018. 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.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 157
Discount rate
Rate of price inflation
Rate of compensation
increases
Actuarial assumptions as at December 31:
(%)
2018
2017
2016
Defined benefit
pension plans
2.5 -
1.5 -
Non-pension Defined benefit
pension plans
benefit plans
Non-pension Defined benefit
pension plans
benefit plans
7.2 3.9 -
N/A
3.5
7.4 2.4 -
1.5 -
7.3 3.7 -
N/A
3.5
7.1 2.2 -
1.5 -
7.3 4.1 -
N/A
3.5
Non-pension
benefit plans
7.3
Health care trend rate(1)
(1)
Assumed immediate trend rate at year-end.
2.5 -
N/A
4.0 2.5 -
5.3 -
4.0 2.5 -
N/A
6.9
4.0 2.5 -
5.3 -
4.0 2.5 -
N/A
6.9
4.0 2.5 -
5.3 -
4.0
6.9
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, 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.
The discount rate for benefit obligation purposes is determined, as far as possible, by reference to market
yields on high quality corporate bonds. In Colombia deep market in bonds does not exist. Accordingly, the
discount rate is determined by reference to yields on government bonds. 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, 2018, 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 Non-pension
pension plans benefit plans
$
(7) $
8
4
(4)
N/A
N/A
(4)
4
N/A
N/A
3
(3)
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.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 158
The pension expense recognized in the consolidated statements of income and consolidated statements
of comprehensive income for the year ended December 31:
(MILLIONS)
2018
2017
2016
Current service costs
Past service costs (recovery)
Interest expense
Administrative expenses
Recognized in consolidated
statement of income
Remeasurement of 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
Recognized in consolidated
statement of comprehensive
income
Total
$
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
pension plans benefit plans pension plans benefit plans pension plans benefit plans
1
-
3
-
3
(1)
2
1
3
-
2
1
3
-
2
1
1
-
3
-
2
-
3
-
$
$
$
$
$
6
5
(1)
(9)
1
5
-
-
(4)
(1)
(4)
2
$
(5)
-
$
$
5
(8)
1
7
-
-
5
$
4
-
(2)
3
1
2
6
$
6
(2)
(1)
5
-
2
8
$
4
-
(1)
1
-
-
4
The amounts included in the consolidated statements of financial position arising from Brookfield
Renewable’s obligations in respect of its defined benefit plans are as follows:
(MILLIONS)
2018
2017
2016
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
pension plans benefit plans pension plans benefit plans pension plans benefit plans
Present value of defined
benefit obligation
Fair value of plan assets
Net liability
$
$
157
(126)
31
$
$
53
(4)
49
$
$
172
(135)
37
$
$
57
(5)
52
$
$
158
(119)
39
$
$
53
(5)
48
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 159
Defined benefit obligations
The movement of the defined benefit obligation for the year ended December 31 is as follows:
(MILLIONS)
2018
2017
2016
Balance, beginning of year
Current service cost
Past service (recovery) cost
Interest expense
Remeasurement losses (gains)
Actuarial changes arising
from changes in
demographic assumptions
Actuarial changes arising
from changes in
financial assumptions
Experience adjustments
Benefits paid
Business combination
Exchange differences
Balance, end of year
$
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
pension plans benefit plans pension plans benefit plans pension plans benefit plans
35
1
-
3
158
3
(1)
7
124
3
-
7
172
3
-
7
53
1
-
3
57
2
-
3
$
$
$
$
$
(1)
-
1
(2)
(1)
(1)
(9)
1
(9)
-
(7)
157
$
(4)
(1)
(2)
-
(2)
53
$
7
-
(7)
-
4
172
$
3
1
(2)
-
-
57
$
5
-
(8)
25
3
158
$
1
-
(2)
14
2
53
$
Expected employer’s contributions to the defined benefit plans for the year ended December 31, 2019 are
$10 million.
Fair value of plan assets
The movement in the fair value of plan assets for the year ended December 31 is as follows:
(MILLIONS)
2018
2017
2016
Balance, beginning of year
Interest income
Return on plan assets
Employer contributions
Business combination
Benefits paid
Exchange differences
Balance, end of year
$
$
$
$
Defined benefit Non-pension Defined benefit Non-pension Defined benefit Non-pension
pension plans benefit plans pension plans benefit plans pension plans benefit plans
-
-
-
3
4
(2)
-
5
103
5
2
7
9
(8)
1
119
135
5
(5)
5
-
(9)
(5)
126
119
5
8
5
-
(7)
5
135
5
-
-
2
-
(2)
-
5
5
-
(1)
2
-
(2)
-
4
$
$
$
$
$
$
$
$
The composition of plan assets as at December 31 are as follows:
(%)
Asset category:
Cash and cash equivalents
Equity securities
Debt securities
2018
2017
2
47
51
100
2
54
44
100
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 160
(MILLIONS)
As at December 31, 2018:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Participating non-controlling
interests - in operating
subsidiaries
Participating non-controlling
interests -in a holding
subsidiary
- Redeemable/Exchangeable
units held by Brookfield
Preferred equity
30. SUBSIDIARY PUBLIC ISSUERS
The following tables provide consolidated summary financial information for Brookfield Renewable, BRP
Equity, and Finco:
Brookfield
Renewable(1)
BRP
Equity
Brookfield
Other Consolidating Renewable
Finco Entities(1)(2) Subsidiaries(1)(3) adjustments(4) consolidated
Holding
$
32 $ 389 $ 1,631 $
93 $
3,639 $ (3,823) $ 1,961
5,208
239
1
24,078
32,433
(29,817)
32,142
38
-
6
-
21
3,096
2,351
(3,823)
1,689
1,607
798
13,445
(642)
15,208
-
-
-
-
-
568
-
-
-
-
-
-
8,129
-
8,129
3,252
-
718
-
-
-
-
-
(718)
3,252
568
707
Preferred limited partners' equity
707
As at December 31, 2017:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Participating non-controlling
interests - in operating
subsidiaries
Participating non-controlling
interests -in a holding
subsidiary
- Redeemable/Exchangeable
units held by Brookfield
Preferred equity
$
32 $ 412 $ 1,691 $
525 $
2,816 $ (3,810) $ 1,666
4,483
262
-
20,142
29,508
(25,157)
29,238
43
-
7
-
180
3,024
3,071
(3,811)
2,514
1,505
693
12,670
(760)
14,108
-
-
-
-
511
-
616
-
-
-
-
-
-
6,298
-
6,298
2,843
-
516
-
-
-
-
-
(516)
2,843
616
511
Preferred limited partners' equity
(1)
(2)
Includes investments in subsidiaries under the equity method.
Includes BRELP, BRP Bermuda Holdings I Limited, Brookfield BRP Holdings (Canada) Inc. and Brookfield BRP Europe
Holdings Limited, together the “Holding Entities”.
Includes subsidiaries of Brookfield Renewable, other than BRP Equity, Finco and the Holding Entities.
Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a
consolidated basis.
(3)
(4)
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 161
Brookfield
BRP
Renewable(1) Equity
Holding
Other Consolidating Renewable
Finco Entities(1)(2) Subsidiaries(1)(3) adjustments(4) consolidated
Brookfield
$
- $
- $
- $
- $
2,983 $
(1) $
2,982
62
7
(1)
(25)
1,305
(945)
403
(MILLIONS)
For the year ended
December 31, 2018
Revenues
Net income (loss)
For the year ended
December 31, 2017
Revenues
$
- $
- $
- $
- $
2,625 $
- $
2,625
Net income (loss)
For the year ended
December 31, 2016
(4)
10
(1)
(435)
631
(150)
51
Revenues
$
- $
- $
- $
1 $
2,451 $
- $
2,452
Net income (loss)
(1)
(2)
(3)
(4)
(20)
-
(1)
(100)
558
(397)
40
Includes investments in subsidiaries under the equity method.
Includes the Holding Entities.
Includes subsidiaries of Brookfield Renewable, other than BRP Equity, Finco, and the Holding Entities.
Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a
consolidated basis.
See Note 13 – Borrowings for additional details regarding the medium-term corporate notes issued by
Finco. See Note 14 – Non-controlling interests for additional details regarding Class A Preference Shares
issued by BRP Equity.
31. SUBSEQUENT EVENTS
On February 25, 2019, Brookfield Renewable completed a C$70 ($53 million) non-recourse financing
associated with a 20 MW hydroelectric facility in Ontario. The debt bears an interest rate of 4.13% and
matures in 2045.
In February 2019, Brookfield Renewable entered into an agreement to sell an additional 25% non-
controlling, indirect interest in a 413 MW portfolio of select Canadian hydroelectric assets to a consortium
of buyers for the same price, subject to an adjustment for an approximate $45 million dividend
recapitalization completed in the fourth quarter of 2018, as our initial 25% non-controlling, direct interest
sale. The closing of the sale of the additional 25% interest remains subject to the satisfaction of
customary conditions. Following closing, Brookfield Renewable will retain a 50% economic interest in this
portfolio and will continue to manage and operate the assets in the portfolio.
Brookfield Renewable Partners L.P.
Annual Report
December 31, 2018
Page 162
GENERAL INFORMATION
Corporate Office
73 Front Street
Fifth Floor
Hamilton, HM12
Bermuda
Tel: (441) 294-3304
Fax: (441) 516-1988
https://bep.brookfield.com
Officers of Brookfield
Renewable Partners L.P.’s
Service Provider, BRP
Energy Group L.P.
Richard Legault
Group Chairman
Harry Goldgut
Group Chairman
Sachin Shah
Chief Executive Officer
Wyatt Hartley
Chief Financial Officer
Transfer Agent & Registrar
Computershare Trust Company
of Canada
100 University Avenue
9th floor
Toronto, Ontario, M5J 2Y1
Tel Toll Free: (800) 564-6253
Fax Toll Free: (888) 453-0330
www.computershare.com
Directors of the General Partner of
Brookfield Renewable Partners L.P.
Jeffrey Blidner
Eleazar de Carvalho Filho
John Van Egmond
David Mann
Lou Maroun
Patricia Zuccotti
Lars Josefsson
Exchange Listing
NYSE: BEP (LP Units)
TSX: BEP.UN (LP Units)
TSX: BEP.PR.E (Preferred Units – Series 5)
TSX: BEP.PR.G (Preferred Units – Series 7)
TSX: BEP.PR.I (Preferred Units – Series 9)
TSX: BEP.PR.K (Preferred Units – Series 11)
TSX: BEP.PR.M (Preferred Units – Series 13)
TSX: BRF.PR.A (Preference Shares – Series 1)
TSX: BRF.PR.B (Preference Shares – Series 2)
TSX: BRF.PR.C (Preference Shares – Series 3)
TSX: BRF.PR.E (Preference Shares – Series 5)
TSX: BRF.PR.F (Preference Shares – Series 6)
Brookfield
Renewable
Investor Information
Visit
at
https://bep.brookfield.com for more information. The
2018 Annual Report and Form 20-F are also
available online. For detailed and up-to-date news
and information, please visit the News Release
section.
online
Additional financial information is filed electronically
with various securities regulators in United States
and Canada through EDGAR at www.sec.gov and
through SEDAR at www.sedar.com.
Shareholder enquiries should be directed to the
Investor Relations Department at (416) 369-2616 or
enquiries@brookfieldrenewable.com
BROOKFIELD RENEWABLE PARTNERS L.P.
bep.brookfield.com
NYSE: BEP
TSX: BEP.UN