Brookfield Renewable Partners L.P. Limited Partnership Units

Good day, ladies and gentlemen, and welcome to Brookfield Renewable Partners' fourth quarter and year-end 2018 results conference call and webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchtone telephone. As a reminder, this conference is being recorded. Thank you. I would now like to introduce your host for today's conference, Chief Executive Officer Session Shaw. You may begin.

Thank you, Operator. Good morning, everyone, and thank you for joining us for our fourth quarter 2018 conference call. Before we begin, I'd like to remind you that a copy of our news release, investor supplement, and letter to unit holders can be found on our website. I also want to remind you that we may make forward-looking statements on this call. These statements are subject to known and unknown risks, and our future results may differ materially. For more information, you're encouraged to review our regulatory filings available on CDAR, EDGAR, and on our website. 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 in 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 unit holders, and we remain focused on delivering long-term stable returns as we build the business. Of note, in 2018, our FFO increased 14% on a per unit basis over the prior year, as all of our businesses performed in line with expectations. Key operating priorities included cost reduction initiatives in North America and Colombia, which should improve our margins by approximately $20 million annually in the future. We continue to build out our operating teams in the U.S., Europe, India, and China over the year and continue to support our longer-term plans in these markets. From a growth perspective, we commissioned approximately 60 megawatts of new wind and hydro development, advanced over 350 megawatts of development in our pipeline, and and maintained our opportunistic approach to development, which minimizes funding obligations and ongoing costs. We invested $550 million into growth during the year, including acquisitions and share buybacks. Accordingly, we repurchased approximately 2 million BEP units, primarily in the fourth quarter, at $27 per share. Our balance sheet and funding capabilities are strong. 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 also maintain our investment-grade balance sheet, increased available liquidity to a which should exceed $2.2 billion once previously disclosed asset sales are closed. And finally, we continue to improve our distribution payout ratio, which ended the year at 95% of FFO on an actual basis and 90% of FFO on an annualized basis. With that, I'll now turn the call over to Wyatt to discuss our operating and financial results.

Thank you, Sachin, and good morning, everyone. In 2018, we generated FFO 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 five years. These assets contributed $671 million to FFO in 2018. Hydroelectric assets benefit from long, useful lives, often over 100 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 agreements 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 PPAs 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 plus or minus $5 million. Beyond these contracts, we do not have any material PPA maturities in North America until 2029. Our wind assets delivered $160 million of FFO 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 10 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 FFO in 2018 as we benefited from large-scale acquisitions in 2017 and 2018. Today, we have nearly 1,800 megawatts of PV, concentrated thermal, 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 PPA term of 17 years. Our storage facilities continue to provide critical grid stabilizing and solar services and backup storage capacity. products that are becoming increasingly valuable given the intermittency of wind and solar. With regards to our 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 interest rates. We are well protected from foreign exchange volatility as we hedge all of 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, both developed or emerging currencies, would have an overall 4% impact to our FFO. 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 UK, 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 to capital buyers in the sales 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 relying on access in this market to fund our growth. 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 our quarterly distribution, bringing our annual distribution to $2.06 per unit. On a final note, and on behalf of our employees and directors, we would like to express our sincerest appreciation to our unit holders and many business partners for your contribution to our success. Thank you for your continued support, and we look forward to updating you on our progress in 2019. That concludes our formal remarks. Thank you for joining us this morning. We'd be pleased to take your questions at this time. Operator?