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. |
| Connor Teskey | Wyatt Hartley |
| Chief Executive Officer | Chief Financial Officer |
| February 26, 2021 |
| | | Page 1 |
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” or “the Partnership”) as of December 31, 2020 and 2019, the related consolidated statements of income (loss), comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board. |
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, 2020, 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 26, 2021 expressed an unqualified opinion thereon. |
Change in Reporting Entity |
As discussed in Note 1(c) iii) to the consolidated financial statements, the Partnership has retrospectively presented the common control transaction with TerraForm Power which occurred on July 31, 2020 that has been accounted for under the pooling of interest method. |
Adoption of New Accounting Standard |
As discussed in Note 1(i) to the consolidated financial statements, Brookfield Renewable changed its method of accounting for Leases in 2019 due to the adoption of IFRS 16, Leases. |
Basis for Opinion |
These consolidated 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. |
| Page 2 |
Critical Audit Matters |
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. |
| Revaluation of power generating assets |
Description of the Matter | The Partnership measures power generating assets (classified as property, plant and equipment) using the revaluation method under IAS 16, Property, Plant and Equipment. As at December 31, 2020, property, plant and equipment on the balance sheet totaled $44,590 million. Revaluations of property, plant and equipment recognized in the statement of other comprehensive income totaled a gain of $4,112 million and a loss in the statement of profit or loss of $(75) million for 2020. As discussed in Notes 1(h), 1(r)(i) and 1(s)(iii) and 13 – Property, Plant and Equipment, at Fair Value to the consolidated financial statements, significant estimation and management judgment are involved in assessing the estimates and assumptions regarding the future performance of the power generating assets. |
| Management applies a dual approach which involves a discounted cash flow model as well as a market evaluation in determining the fair value of the Partnership’s power generating assets. Significant assumptions included within the discounted cash flow models are future electricity prices, discount rates, anticipated long-term average generation and estimated operating and capital expenditures. |
| Auditing the measurement of power generating assets is complex due to the highly judgmental nature of the significant assumptions described above, which required the involvement of specialists. Changes in these assumptions can have a material effect on the fair value of the power generating assets. |
| | Page 3 |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s processes in determining the fair value of power generating assets. We tested controls over management’s review of the valuation models, including the controls over the review and approval of all significant assumptions. |
| To test the fair value of the power generating assets, our audit procedures included, among others, evaluating the Partnership’s valuation methodology, the significant assumptions used, and testing the completeness and accuracy of the underlying data supporting the significant assumptions. For each power generating asset, we analyzed the significant drivers of the change in fair value including the future electricity prices and discount rates. With the support of our valuation specialists, we inspected management’s valuation analysis and assessed the estimates of future electricity prices by reference to shorter-term broker price quotes and management’s longer-term market forecasts specific to each region and power generating asset. We also involved our valuation specialists in the evaluation of the discount rates which included consideration of benchmark interest rates, geographic location, contracted versus uncontracted assets and type of technology. |
| For a sample of power generating assets, we performed audit procedures that included, among others, agreeing contracted power prices to executed power purchase agreements and assessing the anticipated long-term average generation through corroboration with third party engineering reports and historical trends. Further, we assessed the estimated operating and capital expenditures by comparison to historical data and to third party data for a selection of assets and tested the computational accuracy of the fair value model. With the assistance of our valuation specialists for the same samples, we also performed a sensitivity analysis over the future electricity prices and discount rates to evaluate the fair value of power generating assets. We also evaluated the fair values using other market-based evidence by comparing the portfolio as a whole to recent similar transactions and by calculating the revenue and EBITDA multiples of a sample of power generating assets and comparing them to multiples of comparable public companies. |
| Furthermore, we evaluated the adequacy of the Partnership’s disclosures regarding the significant assumptions and sensitivity analysis around the fair value of power generating assets. |
| | Page 4 |
Significant acquisition |
| Description of the Matter | During 2020, the Partnership completed the acquisition of the Spanish CSP Portfolio, for total consideration of $121 million. As described in Notes 1(o) and 3, this business combination is accounted for using the acquisition method, and the results of operations have been included in the consolidated financial statements since the date of acquisition. |
Auditing the above noted acquisition is complex given that significant estimation is required in determining the fair value of the power generating assets acquired. The significant assumptions include replacement cost per megawatt, discount rates, future power pricing in the regulated market and estimated future generation volume. These assumptions are forward looking and could be affected by future economic and market conditions. |
| How We Addressed the Matter in Our Audit | To test the fair value of the power generating assets, our audit procedures included, among others, assessing the significant assumptions described above and testing the completeness and accuracy of the underlying data. For example, we evaluated the estimated cash flows by comparing the estimated generation volume to third party engineering reports and to generation assumptions used for other assets within the Partnership’s portfolio in the region, as well as comparing the forward power pricing to regulatory rates. We involved our valuation specialists to assist in evaluating the valuation methodologies and the significant assumptions, including replacement cost and discount rates, used in the Partnership’s models. |
| We have served as Brookfield Renewable’s auditor since 2011. |
| Toronto, CanadaFebruary 26, 2021 |
| | Page 5 |
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, 2020, based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management concludes that, as of December 31, 2020, 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 2020, which include the 100 MW concentrated solar portfolio in Spain, whose total assets and net assets on a combined basis constitute approximately 2% and 1%, respectively, of the consolidated financial statement amounts as of December 31, 2020 and 2% and 3% of revenues and net loss, respectively, for the year then ended. |
| | Brookfield Renewable’s internal control over financial reporting as of December 31, 2020, 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, 2020. 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, 2020. |
| | Connor Teskey | Wyatt Hartley |
| | Chief Executive Officer | Chief Financial Officer |
| | February 26, 2021 |
| | | | Page 6 |
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.’s (“Brookfield Renewable”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, Brookfield Renewable maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, 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 100 MW concentrated solar portfolio in Spain acquired in 2020, which is included in the 2020 consolidated financial statements of Brookfield Renewable and constituted approximately 2% and 1% of total and net assets, respectively, as of December 31, 2020 and 2% and 3% of revenues and net loss, respectively, 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 100 MW concentrated solar portfolio in Spain acquired in 2020. |
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the 2020 consolidated financial statements of Brookfield Renewable and our report dated February 26, 2021 expressed an unqualified opinion thereon. |
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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. |
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 generally accepted accounting principles. 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 generally accepted accounting principles, 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. |
| Page 7 |
BROOKFIELD RENEWABLE PARTNERS L.P.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
AS AT DECEMBER 31(MILLIONS) |
| 2020 | 2019 |
AssetsCurrent assets |
Cash and cash equivalents................................................................................................................ | 22 | | | 431 $ | 352 |
Restricted cash.................................................................................................................................. | 23 | | | 208 | 189 |
Trade receivables and other current assets....................................................................................... | 24 | | | 928 | 979 |
Financial instrument assets............................................................................................................... | 6 | | | 62 | 88 |
Due from related parties................................................................................................................... | 30 | | | 56 | 60 |
Assets held for sale........................................................................................................................... | 5 | | | 57 | 352 |
| | | | 1,742 | 2,020 |
Financial instrument assets.................................................................................................................. | 6 | | | 407 | 225 |
Equity-accounted investments............................................................................................................. | 21 | | | 971 | 937 |
Property, plant and equipment, at fair value........................................................................................ | 13 | | | 44,590 | 41,055 |
Intangible assets................................................................................................................................... | 14 | | | 232 | 241 |
Goodwill.............................................................................................................................................. | 19 | | | 970 | 949 |
Deferred income tax assets.................................................................................................................. | 12 | | | 205 | 166 |
Other long-term assets......................................................................................................................... | 25 | | | 605 | 603 |
| | | | 49,722 $ | 46,196 |
LiabilitiesCurrent liabilities |
Accounts payable and accrued liabilities......................................................................................... | 26 | | | 625 $ | 687 |
Financial instrument liabilities......................................................................................................... | 6 | | | 283 | 246 |
Due to related parties........................................................................................................................ | 30 | | | 506 | 139 |
Corporate borrowings....................................................................................................................... | 15 | | | 3 | — |
Non-recourse borrowings................................................................................................................. | 15 | | | 1,141 | 1,133 |
Provisions......................................................................................................................................... | 29 | | | 304 | 81 |
Liabilities directly associated with assets held for sale.................................................................... | 5 | | | 14 | 137 |
| | | | 2,876 | 2,423 |
Financial instrument liabilities............................................................................................................. | 6 | | | 668 | 480 |
Corporate borrowings.......................................................................................................................... | 15 | | | 2,132 | 2,100 |
Non-recourse borrowings.................................................................................................................... | 15 | | | 14,806 | 14,067 |
Deferred income tax liabilities............................................................................................................. | 12 | | | 5,515 | 4,855 |
Provisions............................................................................................................................................ | 27, 29 | | | 712 | 590 |
Other long-term liabilities.................................................................................................................... | 28 | | | 1,246 | 1,201 |
EquityNon-controlling interests |
Participating non-controlling interests – in operating subsidiaries................................................... | 16 | | | 11,100 | 11,086 |
General partnership interest in a holding subsidiary held by Brookfield......................................... | 16 | | | 56 | 68 |
Participating non-controlling interests – in a holding subsidiary – Redeemable/Exchangeable |
units held by Brookfield................................................................................................................ | 16 | | | 2,721 | 3,317 |
Class A shares of Brookfield Renewable Corporation..................................................................... | 16 | | | 2,408 | — |
Preferred equity................................................................................................................................. | 16 | | | 609 | 597 |
Preferred limited partners’ equity........................................................................................................ | 17 | | | 1,028 | 833 |
Limited partners’ equity....................................................................................................................... | 18 | | | 3,845 | 4,579 |
| | | | 21,767 $ | 20,480 |
| | | | 49,722 $ | 46,196 |
The accompanying notes are an integral part of these consolidated financial statements.Approved on behalf of Brookfield Renewable Partners L.P.: |
| | | | | Patricia Zuccotti | David Mann |
| | | | | Director | Director |
| | | | | | | Page 9 |
BROOKFIELD RENEWABLE PARTNERS L.P.CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
YEAR ENDED DECEMBER 31(MILLIONS, EXCEPT AS NOTED) |
| 2020 | 2019 | 2018 |
Revenues.................................................................................................. | 30 | | | | 3,810 $ | 3,971 $ | 3,797 |
Other income........................................................................................... | 8 | | | | 128 | 105 | 75 |
Direct operating costs.............................................................................. | 9 | | | | (1,274) | (1,263) | (1,273) |
Management service costs....................................................................... | 30 | | | | (235) | (135) | (94) |
Interest expense....................................................................................... | 15 | | | | (976) | (1,001) | (973) |
Share of earnings from equity-accounted investments............................ | 21 | | | | 27 | 29 | 28 |
Foreign exchange and financial instruments gain (loss)......................... | 6 | | | | 127 | (36) | 37 |
Depreciation............................................................................................. | 13 | | | | (1,367) | (1,271) | (1,151) |
Other........................................................................................................ | 10 | | | | (432) | (276) | (206) |
Income tax (expense) recovery |
Current.................................................................................................. | 12 | | | | (66) | (70) | (32) |
Deferred................................................................................................ | 12 | | | | 213 | 27 | 375 |
| | | | | 147 | (43) | 343 |
Net (loss) income..................................................................................... | | | | | (45) $ | 80 $ | 583 |
Net (loss) income attributable to: |
Non-controlling interests |
Participating non-controlling interests – in operating subsidiaries....... | 16 | | | | 180 $ | 113 $ | 439 |
General partnership interest in a holding subsidiary held by |
Brookfield......................................................................................... | 16 | | | | 62 | 50 | 41 |
Participating non-controlling interests – in a holding subsidiary – |
Redeemable/Exchangeable units held by Brookfield....................... | 16 | | | | (133) | (65) | 16 |
Class A shares of Brookfield Renewable Corporation......................... | | | | | (49) | — | — |
Preferred equity..................................................................................... | 16 | | | | 25 | 26 | 26 |
Preferred limited partners’ equity............................................................ | 17 | | | | 54 | 44 | 38 |
Limited partners’ equity.......................................................................... | 18 | | | | (184) | (88) | 23 |
| | | | | (45) $ | 80 $ | 583 |
Basic and diluted (loss) earnings per LP unit(1)....................................... | | | | | (0.61) $ | (0.26) $ | 0.07 |
(1) | Basic and diluted (loss) earnings per LP unit has been retroactively adjusted to reflect the impact of the three-for-two Unit Split on December 11, 2020. Refer to Note 1(b) – Basis of preparation for further details. |
The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | | Page 10 |
BROOKFIELD RENEWABLE PARTNERS L.P.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
YEAR ENDED DECEMBER 31(MILLIONS) |
| 2020 | 2019 | 2018 |
Net (loss) income..................................................................................... | | | | | (45) $ | 80 $ | 583 |
Other comprehensive income that will not be reclassified to net |
income |
Revaluations of property, plant and equipment.................................. | 13 | | | | 4,112 | 2,413 | 5,722 |
Actuarial gain (loss) on defined benefit plans.................................... | | | | | (1) | (14) | 9 |
Deferred income taxes on above items............................................... | 12 | | | | (934) | (488) | (1,240) |
Unrealized (loss) gain on investments in equity securities................. | 6 | | | | (1) | 35 | (16) |
Equity-accounted investments............................................................ | 21 | | | | 12 | 81 | 168 |
Total items that will not be reclassified to net income............................ | | | | | 3,188 | 2,027 | 4,643 |
Other comprehensive income that will be reclassified to net income |
Foreign currency translation................................................................. | 11 | | | | (840) | (91) | (844) |
Gains (losses) arising during the year on financial instruments |
designated as cash-flow hedges........................................................ | 6 | | | | (27) | (18) | (7) |
Unrealized gain (loss) on foreign exchange swaps – net investment |
hedge................................................................................................. | 6 | | | | (35) | 14 | 102 |
Reclassification adjustments for amounts recognized in net income... | 6 | | | | (39) | 7 | 18 |
Deferred income taxes on above items................................................. | 12 | | | | 10 | 6 | (21) |
Equity-accounted investments.............................................................. | 21 | | | | 17 | — | — |
Total items that may be reclassified subsequently to net income............ | | | | | (914) | (82) | (752) |
Other comprehensive income.................................................................. | | | | | 2,274 | 1,945 | 3,891 |
Comprehensive income........................................................................... | | | | | 2,229 $ | 2,025 $ | 4,474 |
Comprehensive income attributable to:Non-controlling interests |
Participating non-controlling interests – in operating subsidiaries...... | 16 | | | | 1,292 $ | 1,117 $ | 2,742 |
General partnership interest in a holding subsidiary held by |
Brookfield......................................................................................... | 16 | | | | 70 | 57 | 54 |
Participating non-controlling interests – in a holding subsidiary – |
Redeemable/Exchangeable units held by Brookfield....................... | 16 | | | | 280 | 316 | 695 |
Class A shares of Brookfield Renewable Corporation......................... | | | | | 103 | — | — |
Preferred equity.................................................................................... | 16 | | | | 37 | 54 | (22) |
Preferred limited partners’ equity............................................................ | 17 | | | | 54 | 44 | 38 |
Limited partners’ equity.......................................................................... | 18 | | | | 393 | 437 | 967 |
| | | | | 2,229 $ | 2,025 $ | 4,474 |
The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | | Page 11 |
BROOKFIELD RENEWABLE PARTNERS L.P.CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| Accumulated other comprehensive income (loss) | Non-controlling interests |
| | | | | | | | | | | | | | | Participating |
| | | | | | | | | | | | | | | non-controlling |
| | | | | | Actuarial | | | | | | | | General | interests – in a |
| | | | | | gains | Participating | | | | | | | | | | | | partnership | holding |
| | | | | | (losses) | | | | | | | non- | interest in a | subsidiary – |
| | | | | | on | | | Total | Preferred | | Class A | controlling | | | | | | | | | | | | holding | Redeemable/ |
| | | Limited | Foreign | | | | | defined | Cash | Investments | limited | limited | | shares | interests – in | | | | | | | | | | | | subsidiary | Exchangeable |
YEAR ENDED DECEMBER 31(MILLIONS) | | | partners’ | currency | Revaluation | | | | | benefit | flow | in equity | partners’ | partners’ | Preferred | of | operating | | | | | | | | | | | | held by | units held by | Total |
| | | equity | translation | surplus | plans | hedges | securities | equity | equity | equity | BEPC | subsidiaries | | | | | | | | | | | | Brookfield | Brookfield | equity |
Balance, as at December 31, 2019.... $ (1,114) $ | (700) $ | | | | 6,422 $ | (9) $ (32) $ | | | | | | | | | | | 12 $ 4,579 $ | 833 $ | 597 $ | — $ | 11,086 $ | | | | | | | | | | | | 68 $ | 3,317 $ 20,480 |
Net income (loss).............................. | | | (184) | — | | | | — | — | — | | | | | | | | | | — | (184) | 54 | 25 | (49) | | | | | | | | | | | 180 | 62 | | | | (133) | (45) |
Other comprehensive income (loss).. | | | — | (249) | | | | 827 | — | (6) | | | | | | | | | | 5 | 577 | — | 12 | 152 | | | | | | | | | | | 1,112 | 8 | | | | 413 | 2,274 |
Preferred Units issued (Note 17)....... | | | — | — | | | | — | — | — | | | | | | | | | | — | — | 195 | — | — | | | | | | | | | | | — | — | | | | — | 195 |
Capital contributions (Note 16)......... | | | — | — | | | | — | — | — | | | | | | | | | | — | — | — | — | — | | | | | | | | | | | 520 | — | | | | — | 520 |
Return of capital................................ | | | — | — | | | | — | — | — | | | | | | | | | | — | — | — | — | — | | | | | | | | | | | (147) | — | | | | — | (147) |
Disposal (Note 4).............................. | | | 17 | — | | | | (17) | — | — | | | | | | | | | | — | — | — | — | — | | | | | | | | | | | (15) | — | | | | — | (15) |
Distributions or dividends declared.. | | | (349) | — | | | | — | — | — | | | | | | | | | | — | (349) | (54) | (25) | (116) | (551) | (70) | | | | (250) (1,415) |
Distribution reinvestment plan.......... | | | 6 | — | | | | — | — | — | | | | | | | | | | — | 6 | — | — | — | | | | | | | | | | | — | — | | | | — | 6 |
Special distribution/TerraForm |
Power acquisition......................... | | | 634 | 280 | | | | (1,465) | | 2 | 1 | | | | | | | | | | (13) | (561) | — | — 2,134 | | (1,101) | (10) | | | | (462) | — |
Other.................................................. | | | 2 | (51) | | | | (172) | | 1 | (2) | | | | | | | | | | (1) | (223) | — | — | 287 | | | | | | | | | | | 16 | (2) | | | | (164) | (86) |
Change in year.................................. | | | 126 | (20) | | | | (827) | | 3 | (7) | | | | | | | | | | (9) | (734) | 195 | 12 2,408 | | 14 | (12) | | | | (596) | 1,287 |
Balance, as at December 31, 2020.... $ | | | (988) $ | (720) $ | | | | 5,595 $ | (6) $ (39) $ | | | | | | | | | | | 3 $ 3,845 $ 1,028 $ | 609 $ 2,408 $ | 11,100 $ | | | | | | | | | | | | 56 $ | 2,721 $ 21,767 |
Balance, as at December 31, 2018.... $ | | | (927) $ | (652) $ | | | | 6,120 $ | (6) $ (34) $ | | | | | | | | | | | 4 $ 4,505 $ | 707 $ | 568 $ | — $ | 10,289 $ | | | | | | | | | | | | 67 $ | 3,266 $ 19,402 |
Net income (loss).............................. | | | (88) | — | | | | — | — | — | | | | | | | | | | — | (88) | 44 | 26 | — | | | | | | | | | | | 113 | 50 | | | | (65) | 80 |
Other comprehensive income (loss).. | | | — | (35) | | | | 544 | (4) | 1 | | | | | | | | | | 19 | 525 | — | 28 | — | | | | | | | | | | | 1,004 | 7 | | | | 381 | 1,945 |
Preferred Units issued....................... | | | — | — | | | | — | — | — | | | | | | | | | | — | — | 126 | — | — | | | | | | | | | | | — | — | | | | — | 126 |
Capital contributions......................... | | | — | — | | | | — | — | — | | | | | | | | | | — | — | — | — | — | | | | | | | | | | | 674 | — | | | | — | 674 |
Disposals........................................... | | | — | — | | | | — | — | — | | | | | | | | | | — | — | — | — | — | | | | | | | | | | | (172) | — | | | | — | (172) |
Distributions or dividends declared.. | | | (370) | — | | | | — | — | — | | | | | | | | | | — | (370) | (44) | (26) | — | | | | | | | | | | | (844) | (55) | | | | (268) (1,607) |
Distribution reinvestment plan.......... | | | 6 | — | | | | — | — | — | | | | | | | | | | — | 6 | — | — | — | | | | | | | | | | | — | — | | | | — | 6 |
Other.................................................. | | | 265 | (13) | | | | (242) | | 1 | 1 | | | | | | | | | | (11) | 1 | — | | 1 | — | | | | | | | | | | | 22 | (1) | | | | 3 | 26 |
Change in year.................................. | | | (187) | (48) | | | | 302 | (3) | 2 | | | | | | | | | | 8 | 74 | 126 | 29 | — | | | | | | | | | | | 797 | 1 | | | | 51 | 1,078 |
Balance, as at December 31, 2019.... $ (1,114) $ | (700) $ | | | | 6,422 $ | (9) $ (32) $ | | | | | | | | | | | 12 $ 4,579 $ | 833 $ | 597 $ | — $ | 11,086 $ | | | | | | | | | | | | 68 $ | 3,317 $ 20,480 |
The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | | | | | | | | | | | | Page 12 |
BROOKFIELD RENEWABLE PARTNERS L.P.CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| Accumulated other comprehensive income (loss) | Non-controlling interests |
| | | | | | | | | | | | | Participating |
| | | | | | | | | | | | | non-controlling |
| | | | | | | | | | | | General | interests – in a |
| | Participating | | | | | | | | | | partnership | holding |
| | | | | | Actuarial | non- | | | | | | | | | | interest in a | subsidiary – |
| | | | | | losses on | | | Total | Preferred | controlling | | | | | | | | | | holding | Redeemable/ |
| | | Limited | Foreign | | | | | defined | Cash | Investments | limited | limited | interests – in | | | | | | | | | | subsidiary | Exchangeable |
YEAR ENDED DECEMBER 31(MILLIONS) | | | partners’ | currency | Revaluation | | | | | benefit | flow | in equity | partners’ | partners’ | Preferred | operating | | | | | | | | | | held by | units held by |
| | | equity | translation | surplus | plans | hedges | securities | equity | equity | equity | subsidiaries | | | | | | | | | | Brookfield | Brookfield | Total equity |
Balance, as at December 31, 2017.... $ | | | (259) $ | (378) $ | | | | 4,616 $ | (9) $ (29) $ | | | | | | | | | 15 $ | 3,956 $ | 511 $ | 616 $ | 7,578 $ | | | | | | | | | | 58 $ | 2,843 $ | 15,562 |
Net income........................................ | | | 23 | — | | | | — | — | — | | | | | | | | — | 23 | 38 | 26 | 439 | | | | | | | | | | 41 | | 16 | | 583 |
Other comprehensive income (loss).. | | | — | (205) | | | | 1,149 | | 3 | 5 | | | | | | | | (8) | 944 | — | (48) | 2,303 | | | | | | | | | | 13 | | | | | 679 | 3,891 |
Preferred units issued........................ | | | — | — | | | | — | — | — | | | | | | | | — | — | 196 | — | — | | | | | | | | | | — | | — | | 196 |
LP units purchased for cancellation.. | | | (51) | — | | | | — | — | — | | | | | | | | — | (51) | — | — | — | | | | | | | | | | — | | — | | (51) |
Capital contributions......................... | | | — | — | | | | — | — | — | | | | | | | | — | — | — | — | 537 | | | | | | | | | | — | | — | | 537 |
Acquisition........................................ | | | — | — | | | | — | — | — | | | | | | | | — | — | — | — | 21 | | | | | | | | | | — | | — | | 21 |
Distributions or dividends declared.. | | | (355) | — | | | | — | — | — | | | | | | | | — | (355) | (38) | (26) | (664) | | | | | | | | | | (45) | | | | | (255) | (1,383) |
Distribution reinvestment plan.......... | | | 8 | — | | | | — | — | — | | | | | | | | — | 8 | — | — | — | | | | | | | | | | — | | — | | 8 |
Other.................................................. | | | (293) | (69) | | | | 355 | — | (10) | | | | | | | | (3) | (20) | — | — | 75 | | | | | | | | | | — | | (17) | | 38 |
Change in year.................................. | | | (668) | (274) | | | | 1,504 | | 3 | (5) | | | | | | | | (11) | 549 | 196 | (48) | 2,711 | | | | | | | | | | 9 | | | | | 423 | 3,840 |
Balance, as at December 31, 2018.... $ | | | (927) $ | (652) $ | | | | 6,120 $ | (6) $ (34) $ | | | | | | | | | 4 $ | 4,505 $ | 707 $ | 568 $ | 10,289 $ | | | | | | | | | | 67 $ | 3,266 $ | 19,402 |
The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | | | | | | | | | | Page 13 |
BROOKFIELD RENEWABLE PARTNERS L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS |
YEAR ENDED DECEMBER 31(MILLIONS) |
| 2020 | 2019 | 2018 |
Operating activitiesNet income............................................................................................................. |
| | | | | (45) $ | 80 $ | 583 |
Adjustments for the following non-cash items: |
Depreciation........................................................................................................ | 13 | | | | 1,367 | 1,271 | 1,151 |
Unrealized foreign exchange and financial instrument (gain) loss..................... | 6 | | | | (134) | 32 | (88) |
Share of earnings from equity-accounted investments....................................... | 21 | | | | (27) | (29) | (28) |
Deferred income tax recovery............................................................................. | 12 | | | | (213) | (27) | (375) |
Other non-cash items.......................................................................................... | | | | | 388 | 231 | 135 |
Dividends received from equity-accounted investments.................................... | 21 | | | | 56 | 16 | 9 |
Changes in due to or from related parties.............................................................. | | | | | 59 | 33 | (7) |
Net change in working capital balances................................................................. | 31 | | | | (155) | (53) | (94) |
| | | | | 1,296 | 1,554 | 1,286 |
Financing activitiesProceeds from medium term notes......................................................................... |
| 15 | | | | 570 | 449 | 231 |
Repayment of medium term notes......................................................................... | 15 | | | | (304) | (341) | (152) |
Corporate credit facilities, net................................................................................ | | | | | (296) | (422) | 36 |
Proceeds from non-recourse borrowings............................................................... | | | | | 3,205 | 4,318 | 3,275 |
Repayment of non-recourse borrowings................................................................ | | | | | (3,380) | (3,495) | (3,378) |
Repayment of lease liabilities................................................................................ | 16 | | | | (28) | (31) | — |
Capital contributions from participating non-controlling interests – in operating |
subsidiaries........................................................................................................ | 16 | | | | 514 | 705 | 535 |
Capital repaid to participating non-controlling interests – in operating |
subsidiaries........................................................................................................ | 16 | | | | (147) | (113) | — |
Issuance of preferred limited partnership units...................................................... | 17 | | | | 195 | 126 | 196 |
Issuance costs of special distribution/reorganization............................................. | | | | | (44) | — | — |
Repurchase of LP units.......................................................................................... | 18 | | | | — | (1) | (51) |
Distributions paid: |
To participating non-controlling interests – in operating subsidiaries............... | 16 | | | | (551) | (844) | (670) |
To preferred shareholders................................................................................... | 16 | | | | (25) | (26) | (26) |
To preferred limited partners’ unitholders.......................................................... | 17 | | | | (52) | (43) | (37) |
To unitholders of Brookfield Renewable or BRELP.......................................... 16, 18 | | | | | (769) | (684) | (643) |
Borrowings from related party............................................................................... | 15 | | | | 320 | 936 | 200 |
Repayments to related party................................................................................... | 15 | | | | — | (936) | (200) |
| | | | | (792) | (402) | (684) |
Investing activitiesAcquisitions net of cash and cash equivalents in acquired entity.......................... |
| 3 | | | | (105) | (983) | (970) |
Investment in equity-accounted investments......................................................... | 21 | | | | (23) | (144) | — |
Investment in property, plant and equipment......................................................... | 13 | | | | (447) | (460) | (271) |
Proceeds from disposal of assets............................................................................ | | | | | 269 | 291 | 23 |
Purchase of financial assets.................................................................................... | | | | | (445) | (138) | (97) |
Proceeds from financial assets............................................................................... | 6 | | | | 257 | 145 | 125 |
Restricted cash and other....................................................................................... | | | | | 68 | 78 | 113 |
| | | | | (426) | (1,211) | (1,077) |
Foreign exchange (loss) gain on cash.................................................................... | | | | | 13 | (6) | (22) |
Cash and cash equivalents (decrease) increase...................................................... | | | | | 91 | (65) | (497) |
Net change in cash classified within assets held for sale.................................... | 5 | | | | (12) | (5) | (8) |
Balance, beginning of year................................................................................. | | | | | 352 | 422 | 927 |
Balance, end of year............................................................................................ | | | | | 431 $ | 352 $ | 422 |
Supplemental cash flow information: |
Interest paid......................................................................................................... | | | | | 872 $ | 930 $ | 916 |
Interest received.................................................................................................. | | | | | 28 $ | 19 $ | 22 |
Income taxes paid............................................................................................... | | | | | 70 $ | 72 $ | 79 |
The accompanying notes are an integral part of these consolidated financial statements. |
| | | | Page 14 |
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. | | | | | Notes to consolidated financial statements | Page |
| | | | | 1. | | Basis of preparation and significant | 16 |
| | | | | | | accounting policies |
| | | | | 2. | | Principal subsidiaries | 32 |
Unless the context indicates or requires otherwise, the term “Brookfield Renewable” means Brookfield Renewable Partners L.P. and its controlled entities, including Brookfield Renewable Corporation (“BEPC”). Unless the context indicates or requires otherwise, the term “the partnership” means Brookfield Renewable Partners L.P. and its controlled entities, excluding BEPC. | | | | | 3. | | Acquisitions | 33 |
| | | | | 4. | | Disposal of assets | 35 |
| | | | | 5. | | Assets held for sale | 36 |
| | | | | 6. | | Risk management and financial instruments | 37 |
| | | | | 7. | | Segmented information | 48 |
| | | | | 8. | | Other income | 54 |
| | | | | 9. | | Direct operating costs | 55 |
Brookfield Renewable’s consolidated equity interests include the non-voting publicly traded limited partnership units (“LP units”) held by public unitholders and Brookfield, class A exchangeable subordinate voting shares (“BEPC exchangeable shares”) of Brookfield Renewable Corporation (“BEPC”) held by public shareholders and Brookfield, redeemable/exchangeable partnership units |
| | | | | 10. | | Other | 55 |
| | | | | 11. | | Foreign currency translation | 55 |
| | | | | 12. | | Income taxes | 56 |
| | | | | 13. | | Property, plant and equipment, at fair value | 58 |
| | | | | 14. | | Intangible assets | 60 |
| | | | | 15. | | Borrowings | 61 |
| (“Redeemable/Exchangeable | partnership | units”) | in |
| | | | | 16. | | Non-controlling interests | 65 |
Brookfield Renewable Energy L.P. (“BRELP”), a holding subsidiary of Brookfield Renewable, held by Brookfield, and general partnership interest (“GP interest”) in BRELP held by Brookfield. Holders of the LP units, Redeemable/Exchangeable partnership units, GP interest, and BEPC exchangeable shares will be collectively referred to throughout as “Unitholders” unless the context indicates or requires otherwise. LP units, Redeemable/Exchangeable partnership units, GP interest, and BEPC exchangeable shares will be collectively referred to throughout as "Units", or as "per Unit", unless the context indicates or requires otherwise. |
| | | | | 17. | | Preferred limited partners’ equity | 71 |
| | | | | 18. | | Limited partners’ equity | 72 |
| | | | | 19. | | Goodwill | 73 |
| | | | | 20. | | Capital management | 74 |
| | | | | 21. | | Equity-accounted investments | 75 |
| | | | | 22. | | Cash and cash equivalents | 75 |
| | | | | 23. | | Restricted cash | 75 |
| | | | | 24. | | Trade receivables and other current assets | 75 |
| | | | | 25. | | Other long-term assets | 76 |
| | | | | 26. | | Accounts payable and accrued liabilities | 76 |
| | | | | 27. | | Provisions | 77 |
Brookfield Renewable is a publicly traded limited partnership established under the laws of Bermuda pursuant to an amended and restated limited partnership agreement dated November 20, 2011 as thereafter amended from time to time. | | | | | 28. | | Other long-term liabilities | 77 |
| | | | | 29. | | Commitments, contingencies and guarantees | 77 |
| | | | | 30. | | Related party transactions | 80 |
| | | | | 31. | | Supplemental information | 87 |
| | | | | 32. | | Subsidiary public issuers | 88 |
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 Inc. (”Brookfield Asset Management”). Brookfield Asset Management and its subsidiaries, other than Brookfield Renewable, are also individually and collectively referred to as “Brookfield” in these financial statements. |
The BEPC exchangeable shares are traded under the symbol “BEPC” on the New York Stock Exchange and the Toronto Stock Exchange. |
The 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 9, Series 11, Series 13, and Series 15 preferred limited partners’ equity are traded under the symbols “BEP.PR.E”, “BEP.PR.G”, “BEP.PR.I”, “BEP.PR.K”, “BEP.PR.M” and “BEP.PR.O” respectively, on the Toronto Stock Exchange. Brookfield Renewable's Class A Series 17 preferred limited partners’ equity is traded under the symbol “BEP.PR.A” on the New York Stock Exchange. |
| | | | | | Page 15 |
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, 2020, 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 26, 2021. |
Certain comparative figures have been reclassified to conform to the current year’s presentation. |
References to $, C$, €, R$, COP, ZAR, THB, INR and CNY are to United States (“U.S.”) dollars, Canadian dollars, euros, Brazilian reais, Colombian pesos, South African rand, Thai baht, Indian rupees and Chinese yuan, 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. |
On December 11, 2020, Brookfield Renewable completed a three-for-two split of Units by way of a subdivision of Units (the “Unit Split”), whereby Unitholders received an additional one-half of a Unit for each Unit held, resulting in the issuance of an approximately 215.2 million additional Units. Brookfield Renewable's preferred units and preferred partners’ equity were not affected by the Unit Split. All Unit count and per Unit disclosures are presented on a post-split basis. |
(c) Brookfield Renewable Corporation |
On September 9, 2019, BEPC was established by the partnership. On July 29, 2020, Brookfield Renewable contributed its renewable power assets in the United States, Brazil and Colombia (excluding a 10% interest in certain Brazilian and Colombian operations, which will continue to be held indirectly by the partnership) to BEPC. On July 30, 2020, Brookfield Renewable completed a special distribution (the “special distribution”) whereby unitholders of record as of July 27, 2020 (the “Record Date”) received one BEPC exchangeable share for every four Units held. Immediately prior to the special distribution, Brookfield Renewable received BEPC exchangeable shares through a distribution by BRELP (the “BRELP distribution”) of the BEPC exchangeable shares to all of its Unitholders. As a result of the BRELP Distribution, (i) Brookfield and its subsidiaries received approximately 49.6 million BEPC exchangeable shares and (ii) Brookfield Renewable received approximately 67.1 million class A shares, which it subsequently distributed to Unitholders, including Brookfield, pursuant to the special distribution. Upon completion of the special distribution, (i) holders of Units held approximately 42.8% of the issued and outstanding BEPC exchangeable shares (ii) Brookfield and its affiliates held approximately 57.2% of the issued and outstanding BEPC exchangeable shares, and (iii) a subsidiary of Brookfield Renewable owned all of the issued and outstanding class B multiple voting shares, or class B shares, which represent a 75.0% voting interest in BEPC, and all of the issued and outstanding class C non-voting shares, or class C shares, of BEPC, which entitle Brookfield Renewable to the residual value in BEPC after payment in full of the amount due to holders of BEPC exchangeable shares and class B shares. Brookfield Renewable directly and indirectly controlled BEPC prior to the special distribution and continues to control BEPC subsequent to the special distribution through its interests in Brookfield Renewable. The BEPC exchangeable shares are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “BEPC”. |
| Page 16 |
i) BEPC exchangeable shares |
At any time, holders of BEPC exchangeable shares shall have the right to exchange all or a portion of their shares for one LP unit per BEPC exchangeable share held or its cash equivalent based on the NYSE closing price of one LP unit on the date that the request for exchange is received, on a fixed-for-fixed basis. The partnership has the ability to elect to satisfy the exchange of the BEPC exchangeable shares for LP units or its cash equivalent when the exchange is requested by the shareholder. Additionally, BEPC and the partnership have the ability to redeem all BEPC exchangeable shares for LP units at our election, on a fixed-for-fixed basis. |
As a result of the share characteristics, BEPC exchangeable shares are classified as non-controlling interests in the consolidated financial statements of Brookfield Renewable for the periods after the special distribution. |
ii) Basic and diluted income per LP unit |
The special distribution resulted in the issuance of approximately 116.8 million BEPC exchangeable shares. All historical per LP unit disclosures have been retroactively adjusted for the impact of the special distribution. Refer to Note 16 – Non-controlling interests for more information on the BEPC exchangeable shares issued in special distribution. |
iii) Acquisition of TerraForm Power |
On July 31, 2020, Brookfield Renewable completed the acquisition of TerraForm Power, Inc. (“TerraForm Power”) pursuant to which Brookfield Renewable acquired all of the Class A common stock of TerraForm Power not owned by Brookfield Renewable or its affiliates (“public TerraForm Power shares”), representing a 38% interest in TerraForm Power (the “TerraForm Power acquisition”). Pursuant to the TerraForm Power acquisition, each holder of public TerraForm Power shares received 0.47625 of an exchangeable share of BEPC or of an LP unit for each public TerraForm Power share held by such holder. The TerraForm Power acquisition was completed in exchange for 55,552,862 BEPC exchangeable shares and 6,051,704 LP units. |
Simultaneously with the completion of the TerraForm Power acquisition, Brookfield Renewable entered into voting agreements with certain indirect subsidiaries of Brookfield to transfer the power to vote their respective shares held in TerraForm Power to Brookfield Renewable. As a result, Brookfield Renewable controls and consolidates TerraForm Power. The transfer of control of TerraForm Power to Brookfield Renewable is considered to be a transaction between entities under common control and was valued based on Brookfield’s carrying value in TerraForm Power. The portion of TerraForm Power that was not owned by Brookfield Renewable has been presented as non-controlling interests to Brookfield Renewable retrospectively to October 17, 2017, corresponding to all historical periods that TerraForm Power was under common control. |
(d) 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. |
Brookfield Renewable has entered into a voting agreement with Brookfield, which provides Brookfield Renewable with control of the general partner of BRELP. Accordingly, Brookfield Renewable consolidates the accounts of BRELP and its subsidiaries. In addition, BRELP issued redeemable/exchangeable limited partnership units 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”). |
| Page 17 |
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 also entered into a voting agreement with its consortium partners in respect of its 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 30 – 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(s)(ii) – Critical judgments in applying accounting policies – Common control transactions for Brookfield Renewable’s policy on accounting for transactions under common control. |
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 (“FVOCI”), distributions by the equity-accounted investment and other adjustments to Brookfield Renewable’s proportionate interest in the investee. |
(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 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. |
In preparing the consolidated financial statements of Brookfield Renewable, 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 and liabilities 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. |
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(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, Brookfield Renewable initially measures the assets at fair value on the acquisition date, consistent with the policy described in Note 1(o) – Business combinations, with no revaluation at year-end in the year of acquisition unless there is external evidence specific to those assets that would indicate the carrying value of the asset has either increased or decreased materially. |
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. When the carrying amount of an asset decreases, the decrease is recognized in OCI to the extent that a balance exists in revaluation surplus with respect to the asset, with the remainder of the decrease recognized in income. |
Depreciation on power generating assets is calculated on a straight-line basis over the estimated service lives of the assets, which are as follows: |
| Estimated service lives |
Dams.................................................................................................................................................... | | Up to 115 years |
Penstocks.............................................................................................................................................. | | Up to 60 years |
Powerhouses........................................................................................................................................ | | Up to 115 years |
Hydroelectric generating units............................................................................................................. | | Up to 115 years |
Wind generating units.......................................................................................................................... | | Up to 30 years |
Solar generating units.......................................................................................................................... | | Up to 35 years |
Gas-fired cogenerating (“Cogeneration”) units................................................................................... | | Up to 40 years |
Other assets.......................................................................................................................................... | | 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. |
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Depreciation is calculated based on the fair value 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, 2020 is 32 years (2019: 32 years). Since land rights are part of the concession or authorization, this cost is also subject to depreciation. |
Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is applied to the revalued amount of the asset. |
Gains and losses on disposal of an item of property, plant and equipment are recognized in Other income in the consolidated statements of income (loss). The revaluation surplus is reclassified within the respective components of equity and not reclassified to net income when the assets are disposed. |
(i) Leases |
At inception of a contract, Brookfield Renewable assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, Brookfield Renewable assesses whether: |
• | the contract specified explicitly or implicitly the use of an identified asset, and that is physically distinct or represents substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; |
• | Brookfield Renewable has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and Brookfield Renewable has the right to direct the use of the asset. Brookfield Renewable has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decisions about how and for what purpose the asset is used are predetermined, Brookfield Renewable has the right to direct the use of the asset if either: |
| ◦ | Brookfield Renewable has the right to operate the asset (or to direct others to operate the asset in a manner that it determines) throughout the period of use, without the supplier having the right to change those operating instructions; or |
| ◦ | Brookfield Renewable designed the asset in a way that predetermines how and for what purpose it will be used. |
At inception or on reassessment of a contract that contains a lease component, Brookfield Renewable allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, Brookfield Renewable has elected not to separate non-lease components and, therefore, accounts for the lease and non-lease components as a single lease component. |
Brookfield Renewable recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. |
The right-of use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful lives of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. |
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The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Brookfield Renewable’s incremental borrowing rate. Generally, Brookfield Renewable uses its incremental borrowing rate as the discount rate. |
Lease payments included in the measurement of the lease liability comprise the following: |
• | Fixed payments, including in-substance fixed payments; |
• | Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
• | Amounts expected to be payable under a residual value guarantee; and |
• | The exercise price under a purchase option that Brookfield Renewable is reasonably certain to exercise, lease payments in an optional renewable period if Brookfield Renewable is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless Brookfield Renewable is reasonably certain not to terminate early |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in Brookfield Renewable’s estimate of the amount expected to be payable under a residual value guarantee, or if Brookfield Renewable changes its assessment of whether it will exercise a purchase, extension or termination option. |
When the lease liability is remeasured in this way, a corresponding adjustment is made either to the carrying amount of the right-of-use asset or, when the adjustment is a reduction to the right-of-use asset, is recorded in the consolidated statements of income (loss) if the carrying amount of the right-of-use asset has been reduced to nil. |
Brookfield Renewable presents right-of-use assets in property, plant and equipment and lease liabilities in other long-term liabilities in the consolidated statements of financial position. |
Brookfield Renewable has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of twelve months or less and leases of low-value assets. Brookfield Renewable recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. |
On January 1, 2019 Brookfield Renewable adopted IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 – Leases (“IAS 17”) and IFRIC 4 – Determining Whether an Arrangement Contains a Lease (“IFRIC 4”). |
(j) 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 amount, and the carrying amount that would have been recorded had no impairment loss been recognized previously. |
(k) 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. |
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(l) Financial instruments |
Initial recognition |
Under IFRS 9 – Financial Instruments (“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 fair value through profit and loss (“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 income. |
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 income 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 fair value through other comprehensive income (“FVOCI”). For equity instruments designated at FVOCI, there is no recycling of gains or losses through income. 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. Gains or losses on these types of assets are recognized in income. |
Brookfield Renewable assesses on a forward-looking basis the expected credit losses (“ECL”) associated with its assets carried at amortized cost and FVOCI. For trade receivables and contract assets, Brookfield Renewable applied the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the asset. 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 asset. |
Evidence of impairment may include: |
• | Indications that a debtor or group of debtors is experiencing significant financial difficulty; |
• | A default or 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 and contract assets 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. |
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, due to related party balances, and tax equity. Financial liabilities are initially measured at fair value, with subsequent measurement determined based on their classification as follows: |
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FVPL – Financial liabilities held for trading, such as those acquired for the purpose of selling in the near term, derivative financial instruments entered into by Brookfield Renewable that do not meet hedge accounting criteria, and tax equity are classified as fair value through profit and loss. Gains or losses on these types of liabilities are recognized in income. |
Brookfield Renewable owns and operates certain projects in the U.S. under tax equity structures to finance the construction of solar and wind projects. Such structures are designed to allocate renewable tax incentives, such as investment tax credits (“ITCs”), production tax credits (“PTCs”) and accelerated tax depreciation, to tax equity investors. Generally, tax equity structures grant the tax equity investors the majority of the project's U.S. taxable earnings and renewable tax incentives, along with a smaller portion of the projects’ cash flows, until a contractually determined point at which the allocations are adjusted (the “Flip Point”). Subsequent to the Flip Point the majority of the project’s U.S. taxable earnings, renewable tax incentives and cash flows are allocated to the sponsor. The Flip Point dates are generally dependent on the underlying projects’ reaching an agreed upon after tax investment return, however, from time to time, the Flip Point dates may be dates specified within the contract. At all times, both before and after the projects’ Flip Point, Brookfield Renewable retains control over the projects financed with a tax equity structure. In accordance with the substance of the contractual agreements, the amounts paid by the tax equity investors for their equity stakes are classified as financial instrument liabilities on the consolidated statements of financial position and at each reporting date are remeasured to their fair value in accordance with IFRS 9. |
The fair value of the tax equity financing is generally comprised of the following elements: |
Elements affecting the fair value of the tax equity financing | Description |
| | Allocation of PTCs to the tax equity investor are derived |
| | from the power generated during the period. The PTCs are |
Production tax credits (PTCs) | | recognized in foreign exchange and financial instrument |
| | gain (loss) with a corresponding reduction to the tax equity |
| | liability. |
| | Under the terms of the tax equity agreements, Brookfield |
| | Renewable is required to allocate specified percentages of |
| | taxable losses to the tax equity investor. As amounts are |
Taxable loss, including tax attributes such as accelerated tax | | allocated, the obligation to deliver them is satisfied and a |
depreciation | | reduction to the tax equity liability is recorded with a |
| | corresponding amount recorded within foreign exchange |
| | and financial instrument gain (loss) on the consolidated |
| | statements of income (loss). |
| | Certain of the contracts contain annual production |
| | thresholds. When the thresholds are exceeded, the tax |
Pay-go contributions | | equity investor is required to contribute additional cash |
| | amounts. The cash amounts paid increase the value of the |
| | tax equity liability. |
| | Certain of the contracts also require cash distributions to the |
Cash distributions | | tax equity investor. Upon payment, the tax equity liability is |
| | reduced in the amount of the cash distribution. |
Amortized cost – All other financial liabilities are classified as amortized cost using the effective interest rate method. Gains and losses are recognized in income when the liabilities are derecognized as well as through the amortization process. Remeasurement gains and losses on financial liabilities classified as amortized cost are presented in the consolidated statements of income (loss). 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. |
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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 highly probable payments of debts (cash flow hedges). |
At the inception of a hedge relationship, Brookfield Renewable formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. |
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; and |
• | 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. |
The fair values of various derivative financial instruments used for hedging purposes and movements in the hedge reserve within equity are shown in Note 6 – 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 income. |
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 income 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 income, within foreign exchange and financial instruments gain (loss). |
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 income. |
(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 income within foreign exchange and financial instruments gain (loss). Gains and losses accumulated in equity will be reclassified to income when the foreign operation is partially disposed of or sold. |
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(iii) Hedge ineffectiveness |
Brookfield Renewable’s hedging policy only allows for the use of derivative instruments that form effective hedge relationships. Sources of hedge effectiveness are determined at the inception of the hedge relationship and measured 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. |
(m) 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 and technology are included in Note 7 – Segmented information. |
Where available, Brookfield Renewable has elected the practical expedient available under IFRS 15 – Revenue from contracts with customers (“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 recognized 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 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, 2020, revenues recognized at a point in time corresponding to the sale of renewable credits were $164 million (2019: $114 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. |
Revenues recognized that are outside the scope of IFRS 15 include realized gains and losses from derivatives used in the risk management of Brookfield Renewable's generation activities related to commodity prices. From time to time, Brookfield Renewable also enters into commodity contracts to hedge all or a portion of its estimated revenue stream when selling electricity to an independent system operated market and there is no PPA available. These commodity contracts require periodic settlements in which Brookfield Renewable receives a fixed-price based on specified quantities of electricity and pays the counterparty a variable market price based on the same specified quantity of electricity. As these derivatives are accounted for under hedge accounting, the changes in fair value are recorded in revenues in the consolidated statements of income (loss). Financial transactions included in revenues for the year ended December 31, 2020 increased revenues by $55 million (2019: increased revenues by $9 million and 2018: decreased revenue by $13 million). |
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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. |
(n) 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 basis 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. |
Current and deferred income taxes relating to items recognized directly in OCI are also recognized directly in OCI. |
(o) Business combinations |
The acquisition of a business is accounted for using the acquisition method. The consideration for an acquisition is measured at the aggregate of the fair values, at the date of exchange, of the assets transferred, the liabilities incurred to former owners of the acquired business, and equity instruments issued by the acquirer in exchange for control of the acquired business. The acquired business’ identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 – Business combinations (“IFRS 3”), are recognized at their fair values at the acquisition date, except for income taxes which are measured in accordance with IAS 12 – Income taxes (“IAS 12”), 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. |
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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 (loss), whereas changes in the fair values of contingent consideration classified within equity are not subsequently re-measured. |
(p) 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 and are classified as current. |
Once classified as held for sale, property, plant and equipment and intangible assets are not depreciated or amortized. |
(q) Other items |
(i) Capitalized costs |
Capitalized costs related to CWIP include all eligible expenditures incurred in connection with 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. Interest and borrowing costs related to CWIP 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. |
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(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 projected unit credit method, using the length of service and management’s best estimate assumptions, is used to value 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 (loss). |
Re-measurements, comprising of actuarial gains or losses, the effect of the asset ceiling, and the return on plan assets (excluding net interest), are recognized immediately in the consolidated statements of financial position with a corresponding debit or credit to OCI in the period in which they occur. Re-measurements are not reclassified to income 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 settled 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) 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. |
(v) Interest income |
Interest income is earned with the passage of time and is recorded on an accrual basis. |
(vi) 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. |
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(r) 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 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 13 – 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(s)(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, the timing of energy delivery and the elements affecting fair value of the tax equity financings. 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 6 – 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 based on future taxable income. |
(iv) Decommissioning liabilities |
Decommissioning costs will be incurred at the end of the operating life of some of Brookfield Renewable’s assets. These obligations are typically many years in the future and require judgment to estimate. The estimate of decommissioning costs can vary in response to many factors including changes in relevant legal, regulatory, and environmental requirements, the emergence of new restoration techniques or experience at other power generating facilities. Inherent in the calculations of these costs are assumptions and estimates including the ultimate settlement amounts, inflation factors, discount rates, and timing of settlements. |
(s) 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 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 judgment 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. |
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(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 by considering other relevant accounting guidance that is within the framework of principles in IFRS and that reflects the economic reality of the transactions. Brookfield Renewable’s policy is to record assets and liabilities recognized as a result of transactions between entities under common control at the carrying value on the transferor’s financial statements, and to have the consolidated statements of income (loss), consolidated statements of comprehensive income, consolidated statements of financial position, consolidated statements of changes in equity and consolidated statements of cash flows reflect the results of the combined entities for all periods presented for which the entities were under the transferor’s common control, irrespective of when the combination takes place. 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 that are expensed when incurred. 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 for hydroelectric assets is generally a twenty-year discounted cash flow model. Twenty years is the period considered reasonable as Brookfield Renewable has twenty-year capital plans and it believes a reasonable third party would be indifferent between extending the cash flows further in the model versus using a discounted terminal value. The methodology for wind, solar and storage & other assets is to align the model length with the expected remaining useful life of the subject assets. |
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 generation 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 a new renewable resource with a similar generation profile to the asset being valued 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 years 2026 to 2035 in North America, 2028 in Colombia, 2023 in Europe and 2024 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 renewable asset prices to determine renewable electricity prices for hydroelectric, solar 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 thirty-year renewal on qualifying hydroelectric assets. |
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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 twenty-year capital plan that it follows to ensure the maximum life of its assets is achieved. Foreign exchange rates are forecasted by using the spot rates and the available forward rates, extrapolated beyond the period available. The inputs described above to the discounted cash flow model require management to consider facts, trends and plans in making its judgments as to what derives a reasonable fair value of its property, plant and equipment. |
(iv) Financial instruments |
The accounting policy relating to Brookfield Renewable’s financial instruments is described in Note 1(l) – Financial instruments. In applying the policy, judgments are made in applying the criteria set out in IFRS 9 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(n) – Income taxes. In applying this policy, judgments are made in determining the probability of whether deductions, tax credits and tax losses can be utilized. |
(t) Future changes in accounting policies |
Amendments to IFRS 9 and IFRS 7: Disclosures |
Interbank offered rates (“IBOR”) reform refers to the global reform of interest reference rates, which includes the replacement of specified IBORs with alternative benchmark rates. It is currently expected that Secured Overnight Financing Rate (“SOFR”) will replace US$ LIBOR, Sterling Overnight Index Average (“SONIA”) will replace £ LIBOR, and Euro Short-term Rate (“€STR”) will replace € EURIBOR. Brookfield Renewable adopted Interest Rate Benchmark Reform – Amendments to IFRS 9, and IFRS 7, issued by the IASB in September 2019 (“Phase I Amendments”), effective October 1, 2019 in advance of its mandatory effective date. The Phase I Amendments provided clarity where uncertainty could arise in the lead-up to transition. The IBOR Phase I Amendments have been applied retrospectively to hedging relationships existing at the start of the reporting period or designated subsequently, and to the amount accumulated in the cash flow hedge reserve at that date. |
The IBOR Phase I Amendments provide temporary relief from applying specific hedge accounting requirements to Brookfield Renewable’s hedging relationships that are directly affected by IBOR reform, which primarily include US$ LIBOR, £ LIBOR, and € EURIBOR. The relief provided has the effect that Brookfield Renewable should not have to discontinue hedging relationships solely due to the uncertainty arising from IBOR reform. In assessing whether a hedge is expected to be highly effective on a forward-looking basis, Brookfield Renewable assumes the interest rate benchmarks associated with Brookfield Renewable’s hedges are generally not altered by IBOR reform. These reliefs cease to apply to a hedged item or hedging instrument, as applicable, at the earlier of (i) when the uncertainty arising from IBOR reform is no longer present with respect to the timing and amount of the interest rate benchmark based future cash flows, and (ii) when the hedging relationship is discontinued. The Phase I Amendments had no impact on Brookfield Renewable since these amendments enable Brookfield Renewable to continue hedge accounting for hedging relationships which have been previously designated. |
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Disclosures |
On August 27, 2020, the IASB published Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (“Phase II Amendments”), effective January 1, 2021, with early adoption permitted. The Phase II Amendments provide additional guidance to address issues that will arise during the transition of benchmark interest rates. The Phase II Amendments primarily relate to the modification of financial assets, financial liabilities and lease liabilities where the basis for determining the contractual cash flows changes as a result of IBOR reform, allowing for prospective application of the applicable benchmark interest rate and to the application of hedge accounting, providing an exception such that changes in the formal designation and documentation of hedge accounting relationships that are needed to reflect the changes required by IBOR reform do not result in the discontinuation of hedge accounting or the designation of new hedging relationships. |
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Brookfield Renewable has completed an assessment and implemented its transition plan to address the impact and effect changes as a result of amendments to the contractual terms of IBOR referenced floating-rate borrowings, interest rate swaps, and updating hedge designations. The adoption is not expected to have a significant impact on Brookfield Renewable’s financial reporting. |
Amendments to IAS 1 – Presentation of Financial Statements (“IAS 1”) |
The amendments clarify how to classify debt and other liabilities as current or non-current. The amendments to IAS 1 apply to annual reporting periods beginning on or after January 1, 2023. Brookfield Renewable is currently assessing the impact of these amendments. |
There are currently no other future changes to IFRS with potential impact on Brookfield Renewable. |
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, 2020: |
| | Percentage of |
| Jurisdiction of | voting securities |
| Incorporation or | owned or |
| Organization | controlled (%) |
BP Brazil US Subco LLC............................................................................................... | Delaware | 100 |
Brookfield BRP Canada Corp........................................................................................ | Alberta | 100 |
Brookfield BRP Europe Holdings (Bermuda) Limited.................................................. | Bermuda | 100 |
Brookfield Power US Holding America Co................................................................... | Delaware | 100 |
Isagen S.A. E.S.P.(1)....................................................................................................... | Colombia | 99.67 |
TerraForm Power NY Holdings, Inc.(1).......................................................................... | New York | 100 |
(1) | Voting control held through voting agreements with Brookfield. |
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3. ACQUISITIONS |
Spanish CSP Portfolio |
On February 11, 2020, Brookfield Renewable, through its investment in TerraForm Power, completed the acquisition of 100% of a portfolio of two concentrated solar power facilities (together, “Spanish CSP Portfolio”) located in Spain with a combined nameplate capacity of approximately 100 MW. The purchase price of this acquisition, including working capital adjustments, was €111 million ($121 million). The total acquisition costs of $1 million were expensed as incurred and have been classified under other in the consolidated statement of income (loss). |
This investment was accounted for using the acquisition method, and the results of operations have been included in the consolidated financial statements since the date of the acquisition. If the acquisition had taken place at the beginning of the year, the revenue from the Spanish CSP Portfolio would have been $99 million for the year ended December 31, 2020. |
The purchase price allocation, at fair value, with respect to the acquisition is as follows: |
| Spanish CSP Portfolio |
(MILLIONS) |
Cash and cash equivalents.......................................................................................................................... $ | | 22 |
Restricted cash............................................................................................................................................ | | 27 |
Trade receivables and other current assets................................................................................................. | | 33 |
Property, plant and equipment, at fair value.............................................................................................. | | 661 |
Deferred tax assets..................................................................................................................................... | | 14 |
Other non-current assets............................................................................................................................. | | 8 |
Current liabilities........................................................................................................................................ | | (17) |
Financial instruments................................................................................................................................. | | (148) |
Non-recourse borrowings........................................................................................................................... | | (475) |
Decommissioning liabilities....................................................................................................................... | | (23) |
Other long-term liabilities.......................................................................................................................... | | (22) |
Fair value of identifiable net assets acquired............................................................................................. | | 80 |
Goodwill..................................................................................................................................................... | | 41 |
Purchase price............................................................................................................................................ $ | | 121 |
Completed in 2019 |
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. |
India Wind Portfolio |
Brookfield Renewable, along with its institutional partners, completed a transaction in India to acquire a 105 MW operating wind facility on June 7, 2019 and a 105 MW operating wind facility on July 8, 2019 (collectively, the “India Wind Portfolio”). |
Brookfield Renewable, along with institutional partners, acquired the India Wind Portfolio for a total consideration of INR 4.6 billion ($67 million), plus a contingent payment expected to be INR 0.8 billion ($12 million). Brookfield Renewable holds a 25% economic interest and 100% voting 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). |
If the acquisition had taken place at the beginning of the year, the revenue from the India Wind Portfolio would have been $37 million for the year ended December 31, 2019. |
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China Wind Facility |
On September 30, 2019, Brookfield Renewable, along with its institutional partners, completed the acquisition of a 200 MW operating wind facility in China (“China Wind Facility”) for a total consideration of CNY 1,140 million ($160 million). Brookfield Renewable holds a 25% economic interest and 100% voting 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). |
If the acquisition had taken place at the beginning of the year, the revenue from the China Wind Facility would have been $44 million for the year ended December 31, 2019. |
United States Distributed Generation Portfolio (“DG Portfolio”) |
On September 26, 2019, Brookfield Renewable, through its investment in TerraForm Power, acquired a 100% interest in a 320 MW distributed generation portfolio of renewable energy facilities in the United States, for total consideration of $735 million. The total acquisition costs of $5 million were expensed as incurred and have been classified under other in the consolidated statement of income (loss). |
If the acquisition had taken place at the beginning of the year, the revenue from the DG Portfolio would have been $67 million for the year ended December 31, 2019. |
The purchase price allocations, at fair value, with respect to the acquisitions are as follows: |
| India Wind | China Wind |
| Portfolio | Facility | DG Portfolio | Total |
(MILLIONS) |
Cash................................................................................... $ | | | | | — $ | — $ | 3 $ | 3 |
Restricted cash ................................................................. | | | | | 14 | 2 | — | 16 |
Trade receivables and other current assets........................ | | | | | 14 | 51 | 47 | 112 |
Property, plant and equipment, at fair value..................... | | | | | 243 | 307 | 753 | 1,303 |
Current liabilities.............................................................. | | | | | (1) | (23) | (8) | (32) |
Current portion of non-recourse borrowings.................... | | | | | (12) | (18) | — | (30) |
Financial instruments........................................................ | | | | | (4) | — | — | (4) |
Non-recourse borrowings.................................................. | | | | | (158) | (131) | — | (289) |
Deferred income tax liabilities.......................................... | | | | | (8) | (28) | — | (36) |
Decommissioning liabilities.............................................. | | | | | (5) | — | (33) | (38) |
Other long-term liabilities................................................. | | | | | (4) | — | (27) | (31) |
Fair value of identifiable net assets acquired.................... $ | | | | | 79 $ | 160 $ | 735 $ | 974 |
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. |
X-Elio |
In December 2019, Brookfield Renewable, along with its institutional partners, completed a 50-50 joint venture in respect of X-Elio. Headquartered in Spain, X-Elio's portfolio includes approximately 972 MW of operating solar, approximately 1,000 MW of assets under construction and a 5,000 MW development pipeline with a focus in Spain, Mexico, U.S. and Japan. Brookfield Renewable retains an approximate 12.5% economic interest in the joint venture. Brookfield Renewable's consideration was €124 million ($138 million). |
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4. DISPOSAL OF ASSETS |
In March 2020, Brookfield Renewable, along with its institutional partners, completed the sale of a 39 MW portfolio of solar assets in Thailand. The total consideration was THB 3,079 million ($94 million) and Brookfield Renewable’s interest in the portfolio was approximately 31%. This resulted in a loss on disposition of $12 million ($4 million net to Brookfield Renewable) recognized in the consolidated statement of income (loss) under other. Immediately prior to the classification of the portfolio as held for sale in 2018, Brookfield Renewable performed a revaluation of the property, plant & equipment, in line with its election to apply the revaluation method and recorded a fair value uplift of $42 million. |
In September 2020, Brookfield Renewable, along with its institutional partners, sold its interest in a 33 MW solar facility in South Africa to a third party for gross cash consideration of ZAR 300 million ($18 million), resulting in a loss on disposition of $4 million recognized in the consolidated statement of income (loss) under other. The total proceeds, net of foreign exchange contract settlements, was $25 million ($8 million net to Brookfield Renewable). Immediately prior to the classification of the portfolio as held for sale in 2018, Brookfield Renewable performed a revaluation of the property, plant & equipment, in line with its election to apply the revaluation method and recorded a fair value uplift of $22 million as a result. Brookfield Renewable’s interest was approximately 31%. |
In November 2020, Brookfield Renewable, along with institutional partners, sold its interest in a 47 MW wind portfolio in Ireland for proceeds, net of transaction costs of €119 million ($142 million), resulting in a loss on disposition of $2 million recognized in the consolidated statement of income (loss) under other. Immediately prior to the classification of the portfolio as held for sale in the third quarter of 2020, Brookfield Renewable performed a revaluation of the property, plant & equipment, in line with its election to apply the revaluation method and recorded a fair value uplift of $1 million as a result. Brookfield Renewable’s interest was approximately 39.6%. |
Summarized financial information relating to the disposals are shown below: |
| Total |
(MILLIONS) |
Proceeds, net of transaction costs............................................................................................................................ $ | 254 |
Carrying value of net assets held for sale |
Assets................................................................................................................................................................... | 397 |
Liabilities.............................................................................................................................................................. | (110) |
Non-controlling interests...................................................................................................................................... | (15) |
| | | 272 |
Loss on disposal, net of transaction costs............................................................................................................... $ | (18) |
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5. ASSETS HELD FOR SALE |
As at December 31, 2020, assets held for sale within Brookfield Renewable's operating segments include solar assets in Asia. |
The following is a summary of the major items of assets and liabilities classified as held for sale as at December 31: |
| 2020 | 2019 |
(MILLIONS) |
Assets |
Cash and cash equivalents............................................................................................................. $ | 4 $ | 14 |
Restricted cash............................................................................................................................... | 1 | 22 |
Trade receivables and other current assets..................................................................................... | 1 | 13 |
Property, plant and equipment, at fair value.................................................................................. | 51 | 303 |
Goodwill........................................................................................................................................ | — | — |
Other long-term assets................................................................................................................... | — | — |
Assets held for sale........................................................................................................................... $ | 57 $ | 352 |
Liabilities |
Current liabilities........................................................................................................................... $ | — $ | 18 |
Non-recourse borrowings............................................................................................................... | 4 | 73 |
Other long-term liabilities.............................................................................................................. | 10 | 46 |
Liabilities directly associated with assets held for sale.................................................................... $ | 14 $ | 137 |
Brookfield Renewable continues to consolidate and recognize the revenues, expenses and cash flows associated with assets held for sale in the consolidated statements of income (loss), consolidated statements of comprehensive income, and the consolidated statements of cash flows, respectively. Non-current assets classified as held for sale are not depreciated. |
In 2020, Brookfield Renewable completed the sale of its non-core assets from the TerraForm Global portfolio in South Africa and Thailand, corresponding to 72 MW of solar assets, and the sale of a 47 MW portfolio of wind assets in Ireland. See Note 4 – Disposal of assets. |
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6. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS |
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 |
Brookfield Renewable aims to sell electricity under long-term contracts to secure stable prices and mitigate its exposure to wholesale markets. Electricity price risk arises from the sale of Brookfield Renewable’s uncontracted generation and is mitigated by entering into short-term energy derivative contracts. 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. |
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: |
| Effect on net income(1) | Effect on OCI(1) |
| 2020 | | 2019 | 2018 | 2020 | 2019 | 2018 |
(MILLIONS) |
5% increase................................. $ | (13) $ | | (21) $ | (16) $ | (16) $ | | | | (12) $ | (15) |
5% decrease................................. | 14 | | 8 | 6 | 16 | | | | 12 | 15 |
(1) | Amounts represent the potential annual net pretax impact. |
(ii) Foreign currency risk |
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, euro, Brazilian real, Colombian peso, British pound sterling, Indian rupee, Malaysian ringgit and Chinese yuan through its investments in foreign operations. Consequently, fluctuations in the U.S. dollar exchange rate 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. |
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Impact of a 5% change in U.S. dollar exchange rates, on outstanding foreign exchange swaps, for the year ended December 31: |
| Effect on net income(1) | Effect on OCI(1) |
| 2020 | | 2019 | 2018 | 2020 | 2019 | 2018 |
(MILLIONS) |
5% increase.............................. $ | 10 $ | | 49 $ | 66 $ | 73 $ | | | | 41 $ | 64 |
5% decrease............................. | (7) | | (40) | (66) | (72) | | | | (41) | (65) |
(1) | Amounts represent the potential annual net pretax impact. |
(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 variable-rate debt that has been swapped to fixed rates with interest rate financial instruments. Other than tax equity, all other 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 $5,960 million (2019: $6,127 million). Of this principal value, $3,465 million (2019: $3,122 million) has been fixed through the use of interest rate contracts. 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 1% with all other variables held constant. |
Impact of a 1% change in interest rates, on outstanding interest rate swaps, variable-rate debt and tax equity, for the year ended December 31: |
| Effect on net income(1) | Effect on OCI(1) |
| 2020 | | 2019 | 2018 | 2020 | 2019 | 2018 |
(MILLIONS) |
1% increase.............................. $ | 37 $ | | 37 $ | 27 $ | 122 $ | | | | 69 $ | 65 |
1% decrease............................. | (38) | | (38) | (22) | (129) | (69) | (68) |
(1) | Amounts represent the potential annual net pretax impact. |
(b) Credit risk |
Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual obligations. Brookfield Renewable’s exposure to credit risk in respect of financial instruments relates primarily to counterparty obligations regarding energy contracts, interest rate swaps, forward foreign exchange contracts and physical electricity 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 the majority are with customers having long standing credit histories or investment grade ratings, which limit the risk of non-collection. See Note 24 – Trade receivables and other current assets, for additional details regarding Brookfield Renewable’s trade receivables balance. |
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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, 2020(MILLIONS) |
| < 1 year | 2-5 years | > 5 years | Total |
Accounts payable and accrued liabilities...................................... $ | 625 $ | | | | — $ | — $ | 625 |
Financial instrument liabilities(1)(2)............................................... | 283 | 513 | 155 | 951 |
Due to related parties.................................................................... | 506 | | | | 11 | — | 517 |
Other long-term liabilities | | | | | | | – concession payments...................... | 1 | 5 | 12 | 18 |
Lease liabilities(1).......................................................................... | | | | | | | | 33 | 112 | 294 | 439 |
Corporate borrowings(1)................................................................ | | | | | | | | 3 | 314 | 1,826 | 2,143 |
Non-recourse borrowings(1).......................................................... | 1,141 | 5,214 | 9,651 | 16,006 |
Interest payable on borrowings(3).................................................. | 824 | 2,682 | 2,827 | 6,333 |
Total.............................................................................................. $ | 3,416 $ | 8,851 $ | 14,765 $ | 27,032 |
AS AT DECEMBER 31, 2019(MILLIONS) |
| < 1 year | 2-5 years | > 5 years | Total |
Accounts payable and accrued liabilities...................................... $ | 768 $ | | | | — $ | — $ | 768 |
Financial instrument liabilities(1)(2)............................................... | 246 | 331 | 149 | 726 |
Due to related parties.................................................................... | 139 | | | | 7 | — | 146 |
Other long-term liabilities | | | | | | | – concession payments...................... | 1 | 6 | 15 | 22 |
Lease liabilities(1).......................................................................... | | | | | | | | 34 | 115 | 337 | 486 |
Corporate borrowings(1)................................................................ | | | | | | | | — | 607 | 1,500 | 2,107 |
Non-recourse borrowings(1).......................................................... | 1,133 | 4,878 | 9,216 | 15,227 |
Interest payable on borrowings(3).................................................. | 751 | 2,887 | 2,940 | 6,578 |
Total.............................................................................................. $ | 3,072 $ | 8,831 $ | 14,157 $ | 26,060 |
(1) | Includes both the current and long-term amounts. |
(2) | Includes tax equity liabilities that will be partially settled by the delivery of non-cash tax attributes. |
(3) | 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. |
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; |
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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: |
| Level 1 | Level 2 | Level 3 | 2020 | 2019 |
(MILLIONS) |
Assets measured at fair value: |
Cash and cash equivalents.................................. $ | 431 $ | — $ | — $ | 431 $ | 352 |
Restricted cash(1)................................................. | 283 | — | — | 283 | 293 |
Financial instrument assets(2) |
Energy derivative contracts............................. | — | 62 | 73 | 135 | 141 |
Foreign exchange swaps.................................. | — | | | | | 4 | — | 4 | 12 |
Investments in equity securities(3)................... | — | 81 | 94 | 175 | 160 |
Property, plant and equipment........................... | — | — | 44,590 | 44,590 | 41,055 |
Liabilities measured at fair value: |
Financial instrument liabilities(2) |
Energy derivative contracts............................. | — | (33) | — | (33) | (8) |
Interest rate swaps........................................... | — | (422) | — | (422) | (265) |
Foreign exchange swaps.................................. | — | (94) | — | (94) | (41) |
Tax equity........................................................ | — | — | (402) | (402) | (412) |
Contingent consideration(4)................................ | — | — | (1) | (1) | (11) |
Liabilities for which fair value is disclosed: |
Corporate borrowings......................................... | (2,445) | (3) | — | (2,448) | (2,204) |
Non-recourse borrowings................................... | (2,478) | (15,513) | — | (17,991) | (16,060) |
Total................................................................... $ | (4,209) $ | (15,918) $ | 44,354 $ | 24,227 $ | 23,012 |
(1) | Includes both the current amount and long-term amount included in Other long-term assets. |
(2) | Includes both current and long-term amounts. |
(3) | Excludes $155 million of investments in debt securities that are measured at amortized cost. |
(4) | Amount relates to business combinations with obligations lapsing in 2022. |
There were no transfers between levels during the year ended December 31, 2020. |
| | | | | Page 41 |
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: |
| 2020 | 2019 |
(MILLIONS) |
Balance, beginning of year.................................................................................................. | | | | (413) $ | (426) |
Increases (decreases) in the net financial instrument liability position: |
Unrealized (loss) gain through income on tax equity...................................................... | (a) | | | (12) | 26 |
Unrealized (loss) gain through OCI on investments in equity securities......................... | (b) | | | (1) | 35 |
Unrealized (loss) through income on energy derivative contracts................................... | (c) | | | (28) | 1 |
Unrealized (loss) through OCI on energy derivative contracts........................................ | (c) | | | (4) | 25 |
Unrealized gain (loss) through income on interest rate swaps......................................... | (d) | | | (28) | (51) |
Unrealized gain (loss) through OCI on interest rate swaps.............................................. | (d) | | | (57) | (36) |
Unrealized gain (loss) through income on foreign exchange swaps................................ | (e) | | | 126 | 4 |
Unrealized gain (loss) through OCI on foreign exchange swaps..................................... | (e) | | | (40) | 14 |
Acquisitions, settlements and other.................................................................................. | | | | (25) | (5) |
Balance, end of year............................................................................................................ | | | | (482) $ | (413) |
Financial instrument liabilities designated at fair value through profit and loss |
Tax equity........................................................................................................................ | (a) | | | (402) $ | (412) |
Financial instrument assets designated at fair value through OCI |
Investments in equity securities....................................................................................... | (b) | | | 175 $ | 160 |
Financial instrument assets designated at amortized cost |
Investments in debt securities.......................................................................................... | (b) | | | 155 $ | — |
Derivative assets not designated as hedging instruments: |
Energy derivative contracts.............................................................................................. | (c) | | | 78 $ | 84 |
Foreign exchange swaps................................................................................................... | (e) | | | 4 | 12 |
| | | | 82 $ | 96 |
Derivative assets designated as hedging instruments: |
Energy derivative contracts.............................................................................................. | (c) | | | 57 $ | 57 |
| | | | 57 $ | 57 |
Derivative liabilities not designated as hedging instruments: |
Energy derivative contracts.............................................................................................. | (c) | | | (32) $ | (8) |
Interest rate swaps............................................................................................................ | (d) | | | (183) | (200) |
Foreign exchange swaps................................................................................................... | (e) | | | (23) | (18) |
| | | | (238) $ | (226) |
Derivative liabilities designated as hedging instruments: |
Energy derivative contracts.............................................................................................. | (c) | | | (1) $ | — |
Interest rate swaps............................................................................................................ | (d) | | | (239) | (65) |
Foreign exchange swaps................................................................................................... | (e) | | | (71) | (23) |
| | | | (311) $ | (88) |
Total financial instruments, net........................................................................................... | | | | (482) $ | (413) |
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(a) Tax equity |
Brookfield Renewable owns and operates certain projects in the United States under tax equity structures to finance the construction of solar and wind projects. In accordance with the substance of the contractual agreements, the amounts paid by the tax equity investors for their equity stakes are classified as financial instrument liabilities on the consolidated statements of financial position. |
Gains or losses on the tax equity liabilities are recognized within foreign exchange and financial instruments gain (loss) in the consolidated statements of income (loss). |
(b) Investments in debt and equity securities |
Brookfield Renewable's investments in debt and equity securities are classified as FVOCI and amortized cost. Refer to Note 1(l) – Basis of preparation and significant accounting policies – Financial instruments. |
(c) 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. To measure 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, 2020, gains of $55 million relating to energy derivative contracts were realized and reclassified from OCI to revenues in the consolidated statements of income (loss) (2019: $9 million gains and 2018: $13 million losses). |
Based on market prices as of December 31, 2020, unrealized gains of $19 million (2019: $22 million gains and 2018: $15 million losses) recorded in accumulated other comprehensive income (“AOCI”) on energy derivative contracts are expected to be settled or reclassified into income in the next twelve months. The actual amount reclassified from AOCI, however, could vary due to future changes in market prices. |
The following table summarizes the energy derivative contracts designated as hedging instruments: |
Energy derivative contracts | December 31, 2020 | December 31, 2019 |
Carrying amount (asset/(liability))......................................................................... | | | 56 | 57 |
Notional amount – millions of U.S. dollars........................................................... | | | 376 | 328 |
Notional amount – GWh........................................................................................ | | | 11,478 | 10,010 |
Weighted average hedged rate for the year ($/MWh)............................................ | | | 33 | 33 |
Maturity dates......................................................................................................... | | | | | 2021 - 2027 | 2020 - 2027 |
Hedge ratio............................................................................................................. | | | 1:1 | 1:1 |
Change in discounted spot value of outstanding hedging instruments.................. | | | 17 | 21 |
Change in value of hedged item used to determine hedge effectiveness............... | | | (19) | (22) |
There is $2 million of hedge ineffectiveness losses recognized within foreign exchange and financial instruments gain (loss) in the consolidated statements of income (loss) related to energy derivative contracts (cash flow hedges) for the year ended December 31, 2020 (2019: nil and 2018: $2 million gain). |
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(d) 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 debt (i.e., notional amount, maturity, payment and reset dates). Brookfield Renewable established a hedge ratio of 1:1 for the hedging relationships. To measure 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, 2020, agreements with a total notional exposure of $3,748 million were outstanding (2019: $3,043 million) including $962 million (2019: $1,567 million) associated with agreements that are not formally designated as hedging instruments. The weighted-average fixed interest rate resulting from these agreements is 3.0% (2019: 3.0%). |
For the year ended December 31, 2020, net movements relating to cash flow hedges realized and reclassified from OCI to interest expense in the consolidated statements of income (loss) were $12 million losses (2019: $22 million losses and 2018: $14 million losses). |
Based on market prices as of December 31, 2020, unrealized losses of $34 million (2019: $15 million and 2018: $9 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. |
The following table summarizes the interest rate hedges designated as hedging instruments: |
Interest rate hedges | | December 31, 2020 | December 31, 2019 |
Carrying amount (asset/(liability))......................................................................... | | | | (239) | (65) |
Notional amount – $............................................................................................... | | | | 546 | 566 |
Notional amount – C$(1)......................................................................................... | | | | 342 | 334 |
Notional amount – €(1)............................................................................................ | | | | 1,279 | 349 |
Notional amount – COP(1)...................................................................................... | | | | 619 | 227 |
Maturity dates......................................................................................................... | | | | | | 2021 - 2039 | 2021 - 2039 |
Hedge ratio............................................................................................................. | | | | 1:1 | 1:1 |
Change in discounted spot value of outstanding hedging instruments.................. | | | | (56) | (28) |
Change in value of hedged item used to determine hedge effectiveness............... | | | | 59 | 33 |
(1) | Notional amounts of foreign currency denominated interest rate hedges are presented at the U.S. dollar equivalent value based on the December 31, 2020 foreign currency spot rate. |
The hedge ineffectiveness loss recognized within foreign exchange and financial instruments gain (loss) in the consolidated statements of income (loss) related to interest rate contracts (cash flow hedges) for the year ended December 31, 2020 was $2 million (2019: $1 million). |
(e) 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. |
| | | | | Page 45 |
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. |
Certain Brookfield subsidiaries that Brookfield Renewable controls, through a voting agreement, have entered into Master Hedge Agreements appointing Brookfield as their agent in entering into certain derivative transactions with external counterparties to hedge against fluctuations in foreign exchange. Pursuant to each Agreement, Brookfield was entitled to be reimbursed for any third party costs incurred in connection with the these derivative transactions. Substantially all of Brookfield Renewable’s foreign exchange swaps are entered into pursuant to a Master Hedge Agreement. |
At December 31, 2020, agreements with a total notional exposure of $1,355 million were outstanding (2019: $2,306 million) including $104 million (2019: $1,388 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 (2019: nil and 2018: $1 million gain). The actual amount reclassified from AOCI, however, could vary due to future changes in market rates. |
The following table summarizes the foreign exchange swaps designated as hedging instruments: |
Foreign exchange swaps | December 31, 2020 | December 31, 2019 |
Carrying amount (asset/(liability))......................................................................... | | | (71) | (23) |
Notional amount for hedges of the Canadian dollar(1)........................................... | | | — | 72 |
Notional amount for hedges of the euro(1).............................................................. | | | 412 | 380 |
Notional amount for hedges of the British pounds sterling(1)................................ | | | 212 | 170 |
Notional amount for hedges of the Chinese yuan(1)............................................... | | | 294 | 195 |
Notional amount for hedges of the Indian rupee(1)................................................. | | | 230 | 47 |
Notional amount for hedges of the Brazilian real(1)............................................... | | | 73 | — |
Notional amount for hedges of other currencies(1)................................................. | | | 30 | 54 |
Maturity date.......................................................................................................... | | | | | 2021 - 2022 | 2020 - 2022 |
Hedge ratio............................................................................................................. | | | 1:1 | 1:1 |
Weighted average hedged rate for the year: |
C$/$ foreign exchange forward contracts......................................................... | | | — | 1.30 |
€/$ foreign exchange forward contracts............................................................ | | | 0.87 | 0.87 |
£/$ foreign exchange forward contracts............................................................ | | | 0.81 | 0.82 |
CNY/$ foreign exchange forward contracts...................................................... | | | 7.14 | 7.22 |
INR/$ foreign exchange forward contracts....................................................... | | | 76.39 | 74.48 |
BRL/$ foreign exchange forward contracts...................................................... | | | 5.38 | — |
(1) | Notional amounts expressed in millions of U.S. dollars |
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The following table presents a reconciliation of the limited partners’ equity reserves impacted by financial instruments: |
| | Investments | Foreign |
| Cash flow | in equity | currency |
(MILLIONS)hedgessecuritiestranslation |
Balance, as at December 31, 2018.................................................................... $ | (34) $ | | | 4 $ | (652) |
Effective portion of changes in fair value arising from: |
Interest rate swaps.......................................................................................... | | | | | (1) | — | — |
Amount reclassified to profit or loss................................................................. | | | | | 2 | — | — |
Foreign currency revaluation of designated borrowings................................... | | | | | — | — | (49) |
Foreign currency revaluation of net foreign operations.................................... | | | | | — | — | 14 |
Valuation of investments in equity securities designated FVOCI.................... | | | | | — | 19 | — |
Tax effect........................................................................................................... | | | | | — | — | — |
Other.................................................................................................................. | | | | | 1 | (11) | (13) |
Balance, as at December 31, 2019.................................................................... $ | (32) $ | | | 12 $ | (700) |
Effective portion of changes in fair value arising from: |
Energy derivative contracts............................................................................ | | | | | 1 | — | — |
Interest rate swaps.......................................................................................... | | | | | (3) | — | — |
Foreign exchange swaps................................................................................. | | | | | — | — | (6) |
Amount reclassified to profit or loss................................................................. | | | | | (7) | — | — |
Foreign currency revaluation of designated borrowings................................... | | | | | — | — | (34) |
Foreign currency revaluation of net foreign operations.................................... | | | | | — | — | (208) |
Valuation of investments in equity securities designated FVOCI.................... | | | | | — | 4 | — |
Tax effect........................................................................................................... | | | | | 3 | 1 | (1) |
Special distribution/TERP acquisition.............................................................. | | | | | 1 | (13) | 280 |
Other.................................................................................................................. | | | | | (2) | (1) | (51) |
Balance, as at December 31, 2020.................................................................... $ | (39) $ | | | 3 $ | (720) |
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7. 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. |
The reporting to the CODM was revised during the year to incorporate the energy transition business of Brookfield Renewable. The energy transition business corresponds to a portfolio of multi-technology assets and investments that support the broader strategy of decarbonization of electricity grids around the world. The financial information of operating segments in the prior periods has been restated to present the corresponding results of the energy transition business. |
Our operations are segmented by – 1) hydroelectric, 2) wind, 3) solar, 4) energy transition (distributed |
generation, pumped storage, 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 of our company. |
Reporting to the CODM on the measures utilized to assess performance and allocate resources is provided on a proportionate basis. 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, BEPC exchangeable shares 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 consolidated 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. |
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. Adjusted EBITDA and Funds From Operations are not generally accepted accounting measures under IFRS and therefore may differ from definitions of Adjusted EBITDA and Funds From Operations used by other entities. |
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 includes realized disposition gains and losses on assets that we did not intend to hold over the long-term within Adjusted EBITDA in order to provide additional insight regarding the performance of investments on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in equity and not otherwise reflected in current period Adjusted EBITDA. |
| Page 48 |
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 (loss) 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, 2020: |
| Attributable to Unitholders |
| | Contribution | Attributable |
| | | | | Hydroelectric | Wind |
| | from equity- | to non- |
| | accounted | controlling | As per IFRS | | | Energy | North | | | | | | | North |
| | investments | interests | financials(1) | | Solar | transition | Corporate | Total | (MILLIONS) | | | | | | | | | | America | Brazil | | | | | | Colombia | America | Europe | | | | | | | | | | | | Brazil | Asia |
Revenues.............................................................. $ | | | | | 824 $ 175 $ | | | | | | 211 $ | 263 $ | 105 $ | | | | | | | | | | | | 27 $ | 28 $ 245 $ | 169 $ | | | | | | | | — $ 2,047 $ | (72) $ | 1,835 $ | 3,810 |
Other income....................................................... | | | | | 39 | | | | | | 54 | 12 | 11 | 26 | | | | | | | | | | | | 3 | 3 | 50 | 22 | | | | | | | | 64 284 | (29) | (127) | | | | | | | | | | | | | 128 |
Direct operating costs.......................................... | | | | | (301) | | | | | | | | | | | | (52) | (92) | (78) | (35) | | | | | | | | | | | | (6) | (6) | (63) | (61) | (23) (717) | 34 | (591) | (1,274) |
Share of Adjusted EBITDA from equity- |
accounted investments.................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | 67 | 31 | | | | | | | | | | | | 98 |
Adjusted EBITDA............................................... | | | | | 562 | 177 | | | | | | 131 | 196 | 96 | | | | | | | | | | | | 24 | 25 | 232 | 130 | | | | | | | | 41 1,614 | — | 1,148 |
Management service costs................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | (217) (217) | — | (18) | | | | | | | | | | | | (235) |
Interest expense................................................... | | | | | (143) | | | | | | | | | | | | (18) | (30) | (73) | (15) | | | | | | | | | | | | (6) | (6) | (90) | (25) | (79) (485) | 20 | (511) | | | | | | | | | | | | | (976) |
Current income taxes........................................... | | | | | 1 | | | | | | (7) | (11) | — | (2) | | | | | | | | | | | | (1) | (1) | (3) | (2) | | | | | | | | — | (26) | 4 | (44) | | | | | | | | | | | | (66) |
Distributions attributable to |
Preferred limited partners equity..................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | (54) | (54) | — | — | | | | | | | | | | | | (54) |
Preferred equity............................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | (25) | (25) | — | — | | | | | | | | | | | | (25) |
Share of interest and cash taxes from equity- |
accounted investments.................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | (24) | (13) | | | | | | | | | | | | (37) |
Share of Funds From Operations attributable to |
non-controlling interests................................. | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | — | (562) | | | | | | | | | | | | | (562) |
Funds From Operations....................................... | | | | | 420 | 152 | | | | | | 90 | 123 | 79 | | | | | | | | | | | | 17 | 18 | 139 | 103 | (334) 807 | — | — |
Depreciation........................................................ | | | | | (246) | | | | | | | | | | | | (66) | (21) | (180) | (70) | | | | | | | | | | | | (14) | (9) | (84) | (62) | | (4) (756) | 21 | (632) | (1,367) |
Foreign exchange and financial instrument loss. | | | | | (47) | | | | | | 3 | | | | | | | (2) | 47 | (17) | | | | | | | | | | | | — | (1) | (3) | (9) | | (6) | (35) | 8 | | | | | | | | | | | | | | | | 154 | 127 |
Deferred income tax recovery............................. | | | | | 36 | | | | | | 5 | | | | | | | (3) | 28 | | | | | | | | | | | | 7 | — | 2 | 20 | 5 | | | | | | | | 75 175 | (6) | 44 | | | | | | | | | | | | 213 |
Other.................................................................... | | | | | (95) | | | | | | 1 | | | | | | | 4 | (22) | (26) | | | | | | | | | | | | — | (6) | (23) | (36) | (292) (495) | 11 | 52 | | | | | | | | | | | | (432) |
Share of earnings from equity-accounted |
investments..................................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | (34) | — | | | | | | | | | | | | (34) |
Net income attributable to non-controlling |
interests........................................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | — | | | | | | | | | | | | | | | | 382 | 382 |
Net income (loss) attributable to Unitholders(2).. $ | | | | | 68 $ | | | | | | 95 $ | 68 $ | (4) $ | (27) $ | | | | | | | | | | | | 3 $ | 4 $ | 49 $ | 1 $ | (561) $ (304) $ | — $ | — $ | | | | | | | | | | | | (304) |
(1) | Share of earnings from equity-accounted investments of $27 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 $180 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, BEPC exchangeable shares and LP units. Total net income (loss) includes amounts attributable to Unitholders, non-controlling interests, preferred limited partners equity and preferred equity. |
| | | | Page 50 |
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 (loss) 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, 2019: |
| Attributable to Unitholders |
| | Contribution | Attributable |
| | | | | Hydroelectric | Wind |
| | from equity- | to non- |
| | accounted | controlling | As per IFRS | | | Energy | North | | | | | | | North |
| | investments | interests | financials(1) | | Solar | transition | Corporate | Total | (MILLIONS) | | | | | | | | | | America | Brazil | | | | | | Colombia | America | Europe | | | | | | | | | | | | Brazil | Asia |
Revenues.............................................................. $ | | | | | 905 $ 234 $ | | | | | | 237 $ | 223 $ | 95 $ | | | | | | | | | | | | 37 $ | 20 $ 138 $ | 132 $ | | | | | | | | — $ 2,021 $ | (79) $ | 2,029 | 3,971 |
Other income....................................................... | | | | | 3 | | | | | | 19 | — | 2 | 4 | | | | | | | | | | | | — | — | 16 | 11 | | | | | | | | 33 | 88 | (8) | 25 | | | | | | | | | | | | 105 |
Direct operating costs.......................................... | | | | | (286) | | | | | | | | | | | | (72) | (93) | (62) | (32) | | | | | | | | | | | | (9) | (4) | (28) | (56) | (23) (665) | 34 | (632) | (1,263) |
Share of Adjusted EBITDA from equity- |
accounted investments.................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | 53 | 27 | | | | | | | | | | | | 80 |
Adjusted EBITDA............................................... | | | | | 622 | 181 | | | | | | 144 | 163 | 67 | | | | | | | | | | | | 28 | 16 | 126 | 87 | | | | | | | | 10 1,444 | — | 1,449 |
Management service costs................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | (116) (116) | — | (19) | | | | | | | | | | | | (135) |
Interest expense................................................... | | | | | (156) | | | | | | | | | | | | (20) | (34) | (66) | (17) | | | | | | | | | | | | (8) | (5) | (52) | (16) | (92) (466) | 13 | (548) | (1,001) |
Current income taxes........................................... | | | | | (7) | | | | | | | | | | | | (11) | (9) | 1 | (2) | | | | | | | | | | | | (1) | (1) | — | (1) | | | | | | | | — | (31) | 2 | (41) | | | | | | | | | | | | (70) |
Distributions attributable to |
Preferred limited partners equity..................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | (44) | (44) | — | — | | | | | | | | | | | | (44) |
Preferred equity............................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | (26) | (26) | — | — | | | | | | | | | | | | (26) |
Share of interest and cash taxes from equity- |
accounted investments.................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | (15) | (12) | | | | | | | | | | | | (27) |
Share of Funds From Operations attributable to |
non-controlling interests................................. | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | — | (829) | | | | | | | | | | | | | (829) |
Funds From Operations....................................... | | | | | 459 | 150 | | | | | | 101 | 98 | 48 | | | | | | | | | | | | 19 | 10 | 74 | 70 | (268) | 761 | — | — |
Depreciation........................................................ | | | | | (227) | | | | | | | | | | | | (84) | (21) | (150) | (47) | | | | | | | | | | | | (17) | (5) | (65) | (23) | | | | | | | | (4) (643) | 13 | (641) | (1,271) |
Foreign exchange and financial instrument loss. | | | | | 11 | | | | | | (5) | | | | | | | (2) | (2) | (10) | | | | | | | | | | | | (3) | 1 | 1 | (3) | (18) | (30) | (2) | (4) | | | | | | | | | | | | (36) |
Deferred income tax expense.............................. | | | | | (27) | | | | | | 4 | | | | | | | (4) | — | 10 | | | | | | | | | | | | — | — | 1 | — | | | | | | | | 46 | 30 | — | (3) | | | | | | | | | | | | 27 |
Other.................................................................... | | | | | (74) | | | | | | (6) | | | | | | | (2) | (33) | (12) | | | | | | | | | | | | 2 | — | (48) | (2) | (46) (221) | 9 | (64) | | | | | | | | | | | | (276) |
Share of earnings from equity-accounted |
investments..................................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | (20) | (4) | | | | | | | | | | | | (24) |
Net income attributable to non-controlling |
interests........................................................... | | | | | — | | | | | | — | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | — | | | | | | | | | | | | | | | | 716 | 716 |
Net income (loss) attributable to Unitholders(2).. $ | | | | | 142 $ | | | | | | 59 $ | 72 $ | (87) $ | (11) $ | | | | | | | | | | | | 1 $ | 6 $ (37) $ | 42 $ | (290) $ (103) $ | — $ | — $ | | | | | | | | | | | | (103) |
(1) | Share of earnings from equity-accounted investments of $29 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 $113 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. |
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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 (loss) 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: |
| Attributable to Unitholders |
| | Contribution | Attributable |
| | | | | Hydroelectric | Wind |
| | from equity- | to non- |
| | accounted | controlling | As per IFRS | | | Energy | North | | | | | | | North |
| | investments | interests | financials(1) | | Solar | transition | Corporate | Total | (MILLIONS) | | | | | | | | | | America | Brazil | | | | | | Colombia | America | Europe | | | | | | | | | | | | Brazil | Asia |
Revenues.............................................................. $ | | | | | 893 $ 244 $ | | | | | | 216 $ | 219 $ | 73 $ | | | | | | | | | | | | 42 $ | 12 $ 116 $ | 115 $ | | | | | | | | — $ 1,930 $ | (76) $ | 1,943 | 3,797 |
Other income....................................................... | | | | | 12 | | | | | | 5 | | | | | | 4 | 2 | 11 | | | | | | | | | | | | — | — | 4 | 1 | | 7 | 46 | — | 29 | | | | | | | | | | | | | | 75 |
Direct operating costs.......................................... | | | | | (286) (76) | | | | | | (94) | (64) | (27) | | | | | | | | | | | | (9) | (4) | (28) | (42) | (23) (653) | 27 | | | | | | | | | | | | | | | | (647) | (1,273) |
Share of Adjusted EBITDA from equity- |
accounted investments.................................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | 49 | 22 | | | | | | | | | | | | | | 71 |
Adjusted EBITDA............................................... | | | | | 619 173 | | | | | | 126 | 157 | 57 | | | | | | | | | | | | 33 | 8 | 92 | 74 | (16) 1,323 | — | 1,347 |
Management service costs................................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | (84) | (84) | — | (10) | | | | | | | | | | | | | | (94) |
Interest expense................................................... | | | | | (172) (22) | | | | | | (38) | (63) | (17) | | | | | | | | | | | | (9) | (4) | (40) | (22) | (99) (486) | 14 | | | | | | | | | | | | | | | | (501) | (973) |
Current income taxes........................................... | | | | | (4) | | | | | | (9) | | | | | | (2) | 2 | (2) | | | | | | | | | | | | — | 1 | 1 | — | | | | | | | | — | (13) | 1 | (20) | | | | | | | | | | | | | | (32) |
Distributions attributable to |
Preferred limited partners equity..................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | (38) | (38) | — | — | | | | | | | | | | | | | | (38) |
Preferred equity............................................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | (26) | (26) | — | — | | | | | | | | | | | | | | (26) |
Share of interest and cash taxes from equity- |
accounted investments.................................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | | | | | | | | | | | | | | (15) | (10) | | | | | | | | | | | | | | (25) |
Share of Funds From Operations attributable to |
non-controlling interests................................. | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | — | | | | | | | | | | | | | | | | (806) | (806) |
Funds From Operations....................................... | | | | | 443 142 | | | | | | | | | | | | 86 | 96 | 38 | | | | | | | | | | | | 24 | 5 | 53 | 52 | (263) | 676 | — | — |
Depreciation........................................................ | | | | | (231) (136) | | | | | | (18) | (124) | (43) | | | | | | | | | | | | (13) | (2) | (32) | (30) | | | | | | | | (2) (631) | 13 | | | | | | | | | | | | | | | | (533) | (1,151) |
Foreign exchange and financial instrument loss. | | | | | (1) | | | | | | (1) | | | | | | 7 | 30 | 9 | | | | | | | | | | | | (10) | 3 | (16) | (1) | | | | | | | | — | 20 | (1) | 18 | | | | | | | | | | | | | | 37 |
Deferred income tax expense.............................. | | | | | (1) | | | | | | 1 | | | | | | 18 | 43 | 2 | | | | | | | | | | | | — | — | 24 | 12 | | | | | | | | 24 | 123 | — | | | | | | | | | | | | | | | | 252 | 375 |
Other.................................................................... | | | | | (21) | | | | | | (3) | | | | | | (6) | (30) | 2 | | | | | | | | | | | | — | (2) | (13) | (12) | (23) (108) | 1 | (99) | | | | | | | | | | | | | | (206) |
Share of earnings from equity-accounted |
investments..................................................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | | | | | | | | | | | | | | (13) | (5) | | | | | | | | | | | | | | (18) |
Net income attributable to non-controlling |
interests........................................................... | | | | | — | | | | | | — | | | | | | — | — | — | | | | | | | | | | | | — | — | — | — | | | | | | | | — | — | — | | | | | | | | | | | | | | | | 367 | 367 |
Net income (loss) attributable to Unitholders(2).. $ | | | | | 189 $ | | | | | | 3 $ | | | | | | 87 $ | 15 $ | 8 $ | | | | | | | | | | | | 1 $ | 4 $ | 16 $ | 21 $ | (264) $ | 80 $ | — $ | — $ | | | | | | | | | | | | | | 80 |
(1) | Share of earnings from equity-accounted investments of $28 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 $439 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. |
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The following table presents information on a segmented basis about certain items in our company’s consolidated statements of financial position and reconciles our proportionate balances to the consolidated statements of financial position basis by aggregating the components comprising Brookfield Renewable's investments in associates and reflecting the portion of each line item attributable to non-controlling interests: |
| Attributable to Unitholders |
| | Contribution | Attributable |
| | | | | Hydroelectric | Wind |
| | from equity- | to non- |
| | accounted | controlling | As per IFRS | | | Energy | North | | | | | | | North |
| | investments | interests | financials | | Solar | transition | Corporate | Total | (MILLIONS) | | | | | | | | | | America | Brazil | | | | | | Colombia | America | Europe | | | | | | | | | | | | Brazil | Asia |
As at December 31, 2020 |
Cash and cash equivalents................................... $ | | | | | 38 $ | | | | | | 6 $ | | | | 6 $ | 36 $ | 60 $ | | | | | | | | | | | | 1 $ 3 $ 86 $ | 48 $ | | | | | | | | | 7 $ | 291 $ | | | | | | | | (20) $ | 160 $ | 431 |
Property, plant and equipment, at fair value........ | | | | | 12,983 1,544 | | | | | | 1,965 | 3,606 1,095 | 274 175 3,548 | 1,880 | | | | | | | | | — 27,070 | (940) | 18,460 | 44,590 |
Total assets.......................................................... | | | | | 13,628 1,751 | | | | | | 2,201 | 3,801 1,267 | 292 272 3,985 | 2,101 | 100 29,398 | | | | | | | | | (387) | 20,711 | 49,722 |
Total borrowings................................................. | | | | | 3,439 245 | | | | | | 439 | 1,680 | 669 | | | | | | | | | | | | 66 125 2,534 | 864 | 2,143 12,204 | | | | | | | | | (332) | 6,210 | 18,082 |
Other liabilities.................................................... | | | | | 3,232 153 | | | | | | 556 | 773 | 220 | | | | | | | | | | | | 8 22 568 | 211 | 784 6,527 | | | | | | | | | (55) | 3,401 | 9,873 |
For the year ended December 31, 2020 |
Additions to property, plant and equipment(1). | | | | | 307 | | | | | | 65 | | | | 5 | 70 | 29 | | | | | | | | | | | | 1 — 146 | 48 | | | | | | | | | 4 | 675 | | | | | | | | (17) | 310 | 968 |
As at December 31, 2019 |
Cash and cash equivalents................................... $ | | | | | 9 $ | | | | | | 7 $ | | | | 10 $ | 18 $ | 21 $ | | | | | | | | | | | | 2 $ 5 $ 52 $ | 18 $ | | | | | | | | | 1 $ | 143 $ | | | | | | | | (19) $ | 228 $ | 352 |
Property, plant and equipment, at fair value........ | | | | | 11,488 1,938 | | | | | | 1,773 | 2,458 | 628 | | | | | | | | | | | | 368 187 1,674 | 1,076 | | | | | | | | | — 21,590 | (1,142) | 20,607 | 41,055 |
Total assets.......................................................... | | | | | 12,153 2,126 | | | | | | 2,027 | 2,705 | 692 | | | | | | | | | | | | 391 233 1,906 | 1,205 | 103 23,541 | | | | | | | | | (520) | 23,175 | 46,196 |
Total borrowings................................................. | | | | | 3,070 208 | | | | | | 449 | 1,221 | 326 | | | | | | | | | | | | 71 124 1,266 | 439 | 2,107 9,281 | | | | | | | | | (431) | 8,450 | 17,300 |
Other liabilities.................................................... | | | | | 2,877 148 | | | | | | 499 | 597 | 100 | | | | | | | | | | | | 10 28 240 | 126 | 248 4,873 | | | | | | | | | (483) | 4,026 | 8,416 |
For the year ended December 31, 2019 |
Additions to property, plant and equipment.... | | | | | 77 | | | | | | 32 | | | | 7 | 112 | 9 | | | | | | | | | | | | 3 — | — | 21 | | | | | | | | | 3 | 264 | | | | | | | | (19) | 252 | 497 |
(1) | Brookfield Renewable exercised the option to buyout the lease on its 192 MW hydroelectric facility in Louisiana and recognized a $247 million adjustment ($185 million net to Brookfield Renewable) to its corresponding right-of-use asset. |
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Geographical Information |
The following table presents consolidated revenue split by reportable segment for the year ended December 31: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Hydroelectric |
North America.............................................................................................. | | | | $ | 1,030 $ | 1,123 $ | 1,152 |
Brazil............................................................................................................. | 201 | 259 | 285 |
Colombia....................................................................................................... | 874 | 979 | 896 |
| | | | | 2,105 | 2,361 | 2,333 |
Wind |
North America.............................................................................................. | | | | | 494 | 474 | 478 |
Europe........................................................................................................... | | | | | 237 | 273 | 206 |
Brazil............................................................................................................. | 79 | 110 | 142 |
Asia............................................................................................................... | | | | | 105 | 71 | 38 |
| | | | | 915 | 928 | 864 |
Solar................................................................................................................. | | | | | 761 | 646 | 572 |
Energy transition............................................................................................ | | | | | 29 | 36 | 28 |
Total................................................................................................................. | | | | $ | 3,810 $ | 3,971 $ | 3,797 |
The following table presents consolidated property, plant and equipment and equity-accounted investments split by geography: |
| December 31, 2020 | December 31, 2019 |
(MILLIONS) |
United States...................................................................................................................... $ | | | | | 22,955 $ | 21,166 |
Colombia............................................................................................................................ | | 8,150 | 7,353 |
Canada................................................................................................................................ | | 4,880 | 4,680 |
Brazil.................................................................................................................................. | | 3,308 | 3,621 |
Europe................................................................................................................................ | | 5,417 | 4,312 |
Asia..................................................................................................................................... | | 851 | 860 |
| $ | | | | 45,561 $ | 41,992 |
8. OTHER INCOME |
Brookfield Renewable’s other income for the year ended December 31 is comprised of the following: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Interest and other investment income.................................................................. $ | 47 $ | 32 $ | 22 |
Gain on regulatory settlement.............................................................................. | 61 | 14 | — |
Other.................................................................................................................... | 20 | 59 | 53 |
| | | | $ | 128 $ | 105 $ | 75 |
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9. DIRECT OPERATING COSTS |
Brookfield Renewable’s direct operating costs for the year ended December 31 are comprised of the following: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Operations, maintenance and administration....................................... | | | | | (730) $ | (741) $ | (792) |
Water royalties, property taxes and other............................................ | | | | | (192) | (186) | (163) |
Fuel and power purchases(1)................................................................. | | | | | (348) | (316) | (294) |
Energy marketing & other services..................................................... | 30 | | | | (4) | (20) | (24) |
| | | | | (1,274) $ | (1,263) $ | (1,273) |
(1) | Fuel and power purchases are primarily attributable to our portfolio in Colombia. |
10. OTHER |
Brookfield Renewable’s other for the year ended December 31 is comprised of the following: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Transaction costs................................................................................. | | | | | (13) $ | (5) $ | (17) |
Change in fair value of property, plant and equipment....................... | | | | | (101) | (65) | (64) |
Loss on debt extinguishment............................................................... | | | | | (12) | (35) | (27) |
Amortization of service concession assets.......................................... | | | | | (9) | (20) | (9) |
Legal provisions.................................................................................. | 29 | | | | (231) | — | — |
Other.................................................................................................... | | | | | (66) | (151) | (89) |
| | | | | (432) $ | (276) $ | (206) |
11. 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: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Foreign currency translation on |
Property, plant and equipment, at fair value.................................... | 13 | | | | (604) $ | 49 $ | (1,592) |
Borrowings....................................................................................... | 15 | | | | (219) | (133) | 607 |
Deferred income tax liabilities and assets........................................ | 12 | | | | 35 | (32) | 180 |
Other assets and liabilities................................................................ | | | | | (52) | 25 | (39) |
| | | | | (840) $ | (91) $ | (844) |
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12. INCOME TAXES |
The major components of income tax recovery (expense) for the year ended December 31 are as follows: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Income tax recovery (expense) applicable to:Current taxes |
Attributed to the current period.......................................................................... $ | (66) $ | (70) $ | (32) |
Deferred taxes |
Income taxes – origination and reversal of temporary differences.................... | 185 | 78 | 50 |
Relating to change in tax rates / imposition of new tax laws............................. | (7) | 1 | 95 |
Relating to unrecognized temporary differences and tax losses........................ | 35 | (52) | 230 |
| | | | | 213 | 27 | 375 |
Total income tax recovery (expense).................................................................... $ | 147 $ | (43) $ | 343 |
The major components of deferred income tax (expense) recovery for the year ended December 31 recorded directly to other comprehensive income are as follows: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Deferred income taxes attributed to: |
Financial instruments designated as cash flow hedges...................................... $ | 13 $ | 4 $ | (4) |
Other................................................................................................................... | (3) | 5 | (20) |
Revaluation surplus |
Origination and reversal of temporary differences............................................ | (934) | (432) | (1,291) |
Relating to changes in tax rates / imposition of new tax laws........................... | — | (59) | 54 |
| | | | $ | (924) $ | (482) $ | (1,261) |
Brookfield Renewable’s effective income tax recovery (expense) for the year ended December 31 is different from its recovery at its statutory income tax rate due to the differences below: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Statutory income tax recovery (expense)(1)....................................................... $ | 53 $ | (34) $ | (69) |
Reduction (increase) resulting from: |
Decrease (increase) in tax assets not recognized............................................ | 34 | (52) | 230 |
Differences between statutory rate and future tax rate.................................... | (7) | 1 | 95 |
Subsidiaries’ income taxed at different rates.................................................. | 68 | 38 | 87 |
Other................................................................................................................ | (1) | 4 | — |
Effective income tax recovery (expense)........................................................... $ | 147 $ | (43) $ | 343 |
(1) | Statutory income tax expense is calculated using domestic rates applicable to the profits in the relevant country. |
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 76.6% for the year ended December 31, 2020 (2019: 35.0% and 2018: (142.9)%). The effective tax rate is different than the statutory rate primarily due to rate differentials, legislative changes in tax rates during the year, changes in tax assets not recognized and non-controlling interests’ income not subject to tax. |
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The following table details the expiry date, if applicable, of the unrecognized deferred tax assets as at December 31: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Less than four years........................................................................................... $ | 5 $ | 3 $ | — |
Thereafter.......................................................................................................... | 149 | 431 | 200 |
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 |
| Non-capital | | | between tax and | tax (liabilities) |
(MILLIONS)losses | | | carrying value | assets |
As at January 1, 2018........................................................................................ $ | 622 $ | (4,052) $ | (3,430) |
Recognized in net income (loss)....................................................................... | 232 | 143 | 375 |
Recognized in equity......................................................................................... | 1 | (1,252) | (1,251) |
Business combination........................................................................................ | — | (99) | (99) |
Foreign exchange.............................................................................................. | (20) | 200 | 180 |
As at December 31, 2018.................................................................................. | 835 | (5,060) | (4,225) |
Recognized in net income (loss)....................................................................... | 23 | 4 | 27 |
Recognized in equity......................................................................................... | 11 | (491) | (480) |
Business combination........................................................................................ | 7 | 14 | 21 |
Foreign exchange.............................................................................................. | 9 | (41) | (32) |
As at December 31, 2019.................................................................................. | 885 | (5,574) | (4,689) |
Recognized in net income (loss)....................................................................... | 273 | (60) | 213 |
Recognized in equity......................................................................................... | (52) | (865) | (917) |
Business combination........................................................................................ | 30 | 18 | 48 |
Foreign exchange.............................................................................................. | 4 | 31 | 35 |
As at December 31, 2020.................................................................................. $ | 1,140 $ | (6,450) $ | (5,310) |
The deferred income tax liabilities include $5,145 million (2019: $4,293 million and 2018: $3,864 million) of liabilities which relate to property, plant and equipment revaluations included in equity. |
The unrecognized taxable temporary difference attributable to Brookfield Renewable’s interest in its subsidiaries, branches, associates, and joint ventures is $5,405 million (2019: $3,633 million and 2018: $3,434 million). |
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13. PROPERTY, PLANT AND EQUIPMENT, AT FAIR VALUE |
The following table presents a reconciliation of property, plant and equipment at fair value: |
| Hydroelectric | Wind | Solar | Other(1) | Total(2) |
(MILLIONS) |
As at December 31, 2018.............................. | | $ | | | | | 24,666 $ | 8,796 $ | 4,457 $ | 258 $ | 38,177 |
IFRS 16 adoption.......................................... | | | | | | | 79 | 224 | | | | 4 | 407 |
Additions....................................................... | | | | | | | 172 | 26 | | | | 4 | 464 |
Disposals....................................................... | | | | | | | — | (440) | — | — | (440) |
Acquisitions through business combinations | 5 | | | | | | — | 550 | 753 | — | 1,303 |
Items recognized through OCI: |
Change in fair value................................... | | | | | | | 1,537 | 649 | 230 | (3) | 2,413 |
Foreign exchange....................................... | | | | | | | 98 | (33) | (8) | (8) | 49 |
Items recognized through net income: |
Change in fair value................................... | | | | | | | (17) | (11) | (18) | (1) | (47) |
Depreciation............................................... | | | | | | | (520) | (461) | (271) | (19) | (1,271) |
As at December 31, 2019.............................. | | | | | | | 26,015 | 9,300 | 5,505 | 235 | 41,055 |
Additions....................................................... | | | | | | | 474 | 191 | | | | 1 | 968 |
Disposals....................................................... | 4 | | | | | | — | (160) | — | — | (160) |
Acquisitions through business combinations | 3 | | | | | | — | — | 661 | — | 661 |
Items recognized through OCI: |
Change in fair value................................... | | | | | | | 3,139 | 421 | 573 | (21) | 4,112 |
Foreign exchange....................................... | | | | | | | (708) | (167) | 315 | (44) | (604) |
Items recognized through net income: |
Change in fair value................................... | | | | | | | 12 | (25) | (54) | (8) | (75) |
Depreciation............................................... | | | | | | | (514) | (550) | (290) | (13) | (1,367) |
As at December 31, 2020(3)........................... | | $ | | | | | 28,418 $ | 9,010 $ | 7,012 $ | 150 $ | 44,590 |
(1) | Includes biomass and cogeneration. |
(2) | Includes assets under construction of $598 million (2019: $340 million). |
(3) | Includes right-of-use assets not subject to revaluation of $74 million (2019: $71 million) in hydroelectric, $185 million (2019: $208 million) in wind, $152 million (2019: $131 million) in solar and $3 million (2019: $3 million) in other. |
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(r)(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(s)(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. |
Discount rates, terminal capitalization rates and exit dates used in the valuation methodology are provided in the following table: |
| | | | | | | | | Colombia | | | Brazil | Europe |
| | | | | | | | | 2020 | 2019 | 2020 | | | | | | | | | 2019 | 2020 | 2019 | 2020 | 2019 |
Discount rate(1) |
Contracted.......................... 4.1% - 4.5% | 4.6% - 4.9% | | | | | | 8.1 % | | | | 9.0 % | 7.3 % | 8.2 % | 3.0% - 3.6% | 3.5% - 4.0% |
Uncontracted...................... 5.6% - 6.0% | 6.1% - 6.4% | | | | | | 9.4 % | | | | 10.3 % | 8.6 % | 9.5 % | 3.6% - 4.7% | 4.0% - 5.3% |
Terminal capitalization rate(2) 5.8% - 6.2% | 6.2% - 6.7% | | | | | | 8.9 % | | | | 9.8 % | N/A | N/A | N/A | N/A |
Exit date(3)............................. | | | | | | | | | 2041 | 2040 | | | | | | 2040 | | | | 2039 | 2048 | 2047 | 2035 | 2035 |
(1) | Discount rates are not adjusted for asset specific risks. |
(2) | The terminal capitalization rate applies only to hydroelectric assets in the United States, Canada and Colombia. |
(3) | For hydroelectric assets, exit date refers to the valuation date of the terminal value. |
| | | | | | Page 58 |
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: |
| 2020 |
| | North |
| | America | Colombia | Brazil | | | Europe | Total |
(MILLIONS) |
25 bps increase in discount rates.......................... $ | | (1,190) $ | (230) $ | (60) $ | | | (80) $ | (1,560) |
25 bps decrease in discount rates.......................... | | 1,300 | | | | 310 | 60 | 80 | 1,750 |
5% increase in future energy prices...................... | | 1,020 | | | | 430 | 80 | 10 | 1,540 |
5% decrease in future energy prices..................... | | (1,020) | (430) | (80) | | | (10) | (1,540) |
25 bps increase in terminal capitalization rate...... | | (280) | | | | (60) | — | — | (340) |
25 bps decrease in terminal capitalization rate..... | | 310 | | | | 60 | — | — | 370 |
| 2019 |
| | North |
| | America | Colombia | Brazil | | | Europe | Total |
(MILLIONS) |
25 bps increase in discount rates.......................... $ | | (1,030) $ | (190) $ | | | | (90) $ | (60) $ | (1,370) |
25 bps decrease in discount rates.......................... | | 1,060 | | | | 250 | 70 | 60 | 1,440 |
5% increase in future energy prices...................... | | 920 | | | | 400 | 80 | 10 | 1,410 |
5% decrease in future energy prices..................... | | (920) | (400) | | | | (80) | (10) | (1,410) |
25 bps increase in terminal capitalization rate...... | | (210) | | | | (40) | — | — | (250) |
25 bps decrease in terminal capitalization rate..... | | 220 | | | | 40 | — | — | 260 |
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 the hydroelectric assets. The weighted-average remaining duration of the authorization or useful life of a concession asset at December 31, 2020, including a one-time 30-year renewal for applicable hydroelectric assets, is 32 years (2019: 32 years). Consequently, there is no terminal value attributed to the hydroelectric assets in Brazil at the end of the authorization term. |
The following table summarizes the percentage of total generation contracted under power purchase agreements as at December 31, 2020: |
| | North America | | | | Colombia | Brazil | Europe |
1 - 5 years................................................................... | | | 64 % | 49 % | | | 77 % | 95 % |
6 - 10 years................................................................. | | | 55 % | 5 % | | | 62 % | 78 % |
11 - 20 years............................................................... | | | 26 % | 0 % | | | 30 % | 56 % |
The following table summarizes average power prices from long-term power purchase agreements that are linked specifically to the related power generating assets: |
Per MWh(1) | | North America | | | | Colombia | Brazil | Europe |
1 - 10 years................................................................. $ | | | 90 COP 220,000 R$ | 306 € | 167 |
11 - 20 years............................................................... | | | 81 | N/A | | | 396 | 255 |
(1) | Assumes nominal prices based on weighted-average generation. |
| | | | | Page 59 |
The following table summarizes the estimates of future electricity prices: |
Per MWh(1) | North America | Colombia | Brazil | Europe |
1 - 10 years................................................................. $ | | | | | 67 COP 265,000 R$ | 245 € | 68 |
11 - 20 years............................................................... | | | | | 113 | 384,000 | 328 | 54 |
(1) | Assumes | | | | | | nominal prices based on weighted-average generation. |
Brookfield Renewable’s long-term view is anchored to the cost of securing new energy from renewable sources to meet future demand growth between 2023 and 2035. A further one year change would increase or decrease the fair value of property, plant and equipment by approximately $236 million (2019: $210 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: |
| | | 2020 | 2019 |
(MILLIONS) |
Hydroelectric................................................................................................................................. $ | | | 11,330 $ | 11,816 |
Wind.............................................................................................................................................. | | | 6,625 | 6,863 |
Solar.............................................................................................................................................. | | | 5,583 | 4,761 |
Other(1)........................................................................................................................................... | | | 175 | 234 |
| | | | | | | $ | 23,713 $ | 23,674 |
(1) | Includes biomass and cogeneration. |
14. INTANGIBLE ASSETS |
The following table provides a reconciliation of intangible assets: |
(MILLIONS)Total |
Balance, as at December 31, 2018.......................................................................................................... $ | | | | 261 |
Amortization(1)......................................................................................................................................... | | | | (20) |
Balance, as at December 31, 2019.......................................................................................................... | | | | 241 |
Amortization(1)......................................................................................................................................... | | | | (9) |
Balance, as at December 31, 2020.......................................................................................................... $ | | | | 232 |
(1) | Included in Other within the consolidated statements of income (loss). |
Intangible assets relate to certain of our power generating facilities that operate under service concession arrangements in Latin America. We primarily benefit from a government promoted concession agreement and a long-term PPA with UTE - Administracion Nacional de Usinas y Transmisiones Electricas, the Republic of Uruguay’s state-owned electricity company. Under this PPA, we are required to deliver power at a fixed rate for the contract period, in all cases inflation adjusted. |
Brookfield Renewable's service concession assets operate as authorizations that expire between 2031 and 2038. The remaining intangible assets are amortized straight-line over 17 to 20 years. |
Under these arrangements, Brookfield Renewable recognized $35 million of revenue for the year ended December 31, 2020 (2019: $36 million and 2018: $23 million) |
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15. BORROWINGS |
Corporate Borrowings |
The composition of corporate borrowings as at December 31 is presented in the following table: |
| December 31, 2020 | December 31, 2019 |
| | | Weighted- | | | Weighted- |
| | | average | | | average |
| | | Interest | Term | | | Carrying | Estimated | Interest | Term | | | | | Carrying | Estimated |
(MILLIONS EXCEPT AS NOTED) | | | rate (%) | (years) | | | value | fair value | rate (%) | (years) | | | | | value | fair value |
Credit facilities............... | | | N/A | 4 $ | | | | | — $ | — | 2.9 | 5 $ | 299 $ | 299 |
Commercial paper.......... | | | | | | | | | | | | | 0.4 | < 1 | | | | | | | | 3 | 3 | N/A | N/A | | | | | N/A | N/A |
Medium Term Notes: |
Series 4 (C$150).......... | | | | | | | | | | | | | 5.8 | 16 | | | 118 | 160 | | | | | | 5.8 | 17 | | | | | 115 | 142 |
Series 8 (C$400).......... | | | | | | | | | | | | | — | — | | | | | | | | — | — | 4.8 | 2 | 308 | 324 |
Series 9 (C$400).......... | | | | | | | | | | | | | 3.8 | 4 | 314 | 348 | | | | | | 3.8 | 5 | 308 | 322 |
Series 10 (C$500)........ | | | | | | | | | | | | | 3.6 | 6 | 392 | 441 | | | | | | 3.6 | 7 | 384 | 400 |
Series 11 (C$475)........ | | | | | | | | | | | | | 4.3 | 8 | 373 | 442 | | | | | | 4.3 | 9 | 231 | 248 |
Series 12 (C$475)........ | | | | | | | | | | | | | 3.4 | 9 | 373 | 420 | | | | | | 3.4 | 10 | | | | | 231 | 232 |
Series 13 (C$300)........ | | | | | | | | | | | | | 4.3 | 29 | | | 236 | 287 | | | | | | 4.3 | 30 | | | | | 231 | 237 |
Series 14 (C$425)........ | | | | | | | | | | | | | 3.3 | 30 | | | 334 | 347 | | | | | | — | — | | | | | — | | | | | | | — |
| | | | | | | | | | | | | 3.9 | 14 | | | 2,140 | 2,445 | | | | | | 4.1 | 10 | | | | | 1,808 | 1,905 |
Total corporate borrowings................................... | | | | | 2,143 $ | 2,448 | | | 2,107 $ 2,204 |
Add: Unamortized premiums(1).......................... | | | | | | | | | 3 | | — |
Less: Unamortized financing fees(1)................... | | | | | (11) | | | | (7) |
Less: Current portion.......................................... | | | | | | | | | (3) | | — |
| | | | $ 2,132 | | | $ 2,100 |
(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) | | | | | | | 2020 | 2019 |
Corporate borrowings |
Unamortized financing fees, beginning of year.............................................................................. | | $ | | | | | (7) $ | | | | | | | (6) |
Additional financing fees................................................................................................................ | | | | | | | (5) | | | | | | | (2) |
Amortization of financing fees....................................................................................................... | | | | | | | 1 | | | | | | | 1 |
Unamortized financing fees, end of year........................................................................................ $ | | | | | | | (11) $ | | | | | | | (7) |
Credit facilities |
Brookfield Renewable had $3 million commercial paper outstanding as at December 31, 2020 (2019: nil). The commercial paper program is supplemented by our $1.75 billion corporate credit facilities. |
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. See Note 29 – Commitments, contingencies and guarantees for letters of credit issued by subsidiaries. |
| | | | | | | | Page 61 |
The following table summarizes the available portion of corporate credit facilities as at December 31: |
| 2020 | 2019 |
(MILLIONS) |
Authorized corporate credit facilities(1)............................................................................................. $ | 2,150 $ | 2,150 |
Draws on corporate credit facilities(1)............................................................................................... | — | (299) |
Authorized letter of credit facility..................................................................................................... | 400 | 400 |
Issued letters of credit....................................................................................................................... | (300) | (266) |
Available portion of corporate credit facilities................................................................................. $ | 2,250 $ | 1,985 |
(1) | Amounts are guaranteed by Brookfield Renewable. |
Medium term notes |
Corporate borrowings are obligations of a finance subsidiary of Brookfield Renewable, Brookfield Renewable Partners ULC (“Finco”) (Note 32 – 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 April 3, 2020, Brookfield Renewable completed the issuance of C$175 million ($124 million) Series 11 medium term notes and C$175 million ($124 million) Series 12 medium term notes. The medium term notes were issued as a re-opening on identical terms, other than issue date and the price to the public, to the 4.25% Series 11 medium term notes and the 3.38% Series 12 medium term notes that were issued in September 2018 and 2019, respectively. |
On August 11, 2020, Brookfield Renewable completed the issuance of C$425 million ($319 million) Series 14 medium term notes. The medium term notes have a fixed interest rate of 3.33% and a maturity date of August 2050. The series 14 medium term notes are corporate-level green bonds. |
On September 14, 2020, Brookfield Renewable repaid C$400 million ($304 million) of Series 8 medium term notes prior to maturity. |
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Non-recourse borrowings |
Non-recourse borrowings are typically asset-specific, long-term, non-recourse borrowings denominated in the domestic currency of the subsidiary. Non-recourse borrowings in North America and Europe consist of both fixed and floating interest rate debt indexed to the London Interbank Offered Rate (“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”) and the Canadian Dollar Offered Rate (“CDOR”). Brookfield Renewable uses interest rate swap agreements in North America and Europe to minimize its exposure to floating interest rates. Non-recourse borrowings in Brazil consist of floating interest rates of Taxa de Juros de Longo Prazo (“TJLP”), the Brazil National Bank for Economic Development’s long-term interest rate, or Interbank Deposit Certificate rate (“CDI”), plus a margin. Non-recourse borrowings in Colombia consist of both fixed and floating interest rates indexed to Indicador Bancario de Referencia rate (IBR), the Banco Central de Colombia short-term interest rate, and Colombian Consumer Price Index (IPC), Colombia inflation rate, plus a margin.Non-Recourse borrowings in India consist of both fixed and floating interest indexed to Prime lending rate of lender (“MCLR”) |
| . Non-recourse borrowings in China consist of floating interest rates |
of People's Bank of China (“PBOC”). |
It is currently expected that Secured Overnight Financing Rate (“SOFR”) will replace US$ LIBOR, Sterling Overnight Index Average (“SONIA”) will replace £ LIBOR, and Euro Short-term Rate (“€STR”) will replace € LIBOR. £ LIBOR and € LIBOR replacement is expected to be effective prior to December 31, 2021. US$ LIBOR replacement is expected to become effective prior to June 30, 2023. As at December 31, 2020, none of Brookfield Renewable’s floating rate borrowings have been impacted by these reforms. |
The composition of non-recourse borrowings as at December 31 is presented in the following table: |
| | December 31, 2020 | December 31, 2019 |
| | | | Weighted-average | Weighted-average |
| | | | Weighted- | Weighted- |
| | | | average | average |
| | | | interest | Term | Carrying | | | | | Estimated | interest | Term | | | | Carrying | Estimated |
(MILLIONS EXCEPT AS NOTED) | | | | rate (%) | (years) | value | | | | | fair value | rate (%) | (years) | | | | value | fair value |
Non-recourse borrowings(1) |
Hydroelectric............... | | | | 4.8 | 9 $ 6,989 $ | | | | | 7,853 | 5.9 | 10 $ 6,616 $ 7,106 |
Wind............................ | | | | 4.3 | 10 | 4,324 | | | | | 4,785 | 4.4 | 10 | | | | 4,351 | 4,523 |
Solar............................ | | | | 3.6 | 12 | 3,684 | | | | | 4,247 | 5.0 | 11 | | | | 3,168 | 3,316 |
Energy transition......... | | | | 3.8 | 11 | 1,009 | | | | | 1,106 | 3.9 | | | | 5 | 1,092 | 1,115 |
Total............................... | | | | 4.3 | 10 16,006 $ 17,991 | | | 5.1 | 10 15,227 $ 16,060 |
Add: Unamortized premiums(2).......................... | | | | | | | | | | 63 | | 92 |
Less: Unamortized financing fees(2)................... | | (122) | | | | | | | (119) |
Less: Current portion.......................................... | (1,141) | | | | | | | (1,133) |
| $ 14,806 | | | | | | $ 14,067 |
(1) | Includes $15 million (2019: $142 million) borrowed under a subscription facility of a Brookfield sponsored private fund. |
(2) | 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: |
| | 2021 | 2022 | | | | | 2023 | 2024 | 2025 | | | | Thereafter | Total |
(MILLIONS) |
Non-recourse borrowings |
Hydroelectric........................... $ | | 244 $ | 564 $ | | | | | 932 $ | 410 $ | 697 $ | | | | 4,142 $ | 6,989 |
Wind........................................ | | 343 | 285 | | | | | 517 | 268 | 274 | | | | 2,637 | 4,324 |
Solar........................................ | | 402 | 166 | | | | | 472 | 167 | 173 | | | | 2,304 | 3,684 |
Energy transition..................... | | 152 | 63 | | | | | 146 | 43 | 37 | | | | 568 | 1,009 |
| | | | $ | 1,141 $ | 1,078 $ | | | | | 2,067 $ | 888 $ | 1,181 $ | | | | 9,651 $ 16,006 |
| | | | | | | | Page 63 |
The following table outlines the change in the unamortized financing fees of non-recourse borrowings for the year ended December 31: |
| 2020 | 2019 |
(MILLIONS) |
Non-recourse borrowings |
Unamortized financing fees, beginning of year............................................................................. $ | (119) | | $ | (102) |
Additional financing fees............................................................................................................... | (17) | (43) |
Amortization of financing fees....................................................................................................... | 9 | 12 |
Foreign exchange translation and other......................................................................................... | 5 | 14 |
Unamortized financing fees, end of year....................................................................................... $ | (122) $ | (119) |
In March 2020, Brookfield Renewable completed a refinancing of COP 200 billion ($50 million). The debt, drawn in two tranches, bears interest at the applicable base rate plus an average margin of 2.36% and matures in March 2027. |
In March 2020, Brookfield Renewable completed a refinancing totaling INR 1,460 million ($20 million) associated with a solar portfolio in India. A portion of the loan bears interest at the applicable base rate plus a margin of 1.45% and the remaining portion bears a fixed rate of 9.75%. The loans mature between 2032 to 2037. |
In March 2020, Brookfield Renewable completed a financing totaling $246 million associated with a wind portfolio in the United States. The debt bears interest at a fixed rate of 3.28% and matures in 2037. |
In May 2020, Brookfield Renewable completed a bridge financing totaling R$250 million ($46 million) associated with a solar development project in Brazil. The loan bears a variable interest at the applicable rate plus 3.15% and matures in 2021. |
In June 2020, Brookfield Renewable completed a financing totaling C$23 million ($17 million) associated with a hydroelectric facility in Canada. The loan bears interest at a fixed rate of 3.5% and matures in 2044. |
In June 2020, Brookfield Renewable completed a refinancing of €463 million ($517 million) associated with a solar portfolio in Spain. The debt is comprised both fixed and variable interest rate tranches and bears an average interest rate of 2.66%. The debt matures in 2037. |
In August 2020, Brookfield Renewable completed a bond financing associated with the Colombian business totaling COP 450 billion ($120 million). The bonds are comprised of a fixed rate bond bearing interest at 6.26% and matures in 2028 and a variable rate bond bearing interest at the applicable base plus 3.9% and matures in 2045. |
In September 2020, Brookfield Renewable completed a refinancing of $296 million associated with a solar portfolio in the United States. The debt bears interest at a fixed rate of 3.38% of the applicable base rate and matures in 2043. |
In November 2020, Brookfield Renewable completed a financing of $560 million associated with a lease buyout in the United States. The debt bears interest at a fixed rate of 4% and matures in 2029. |
In November 2020, Brookfield Renewable completed a financing of $189 million associated with a solar portfolio in the United States. The loan bears a variable interest at the applicable rate plus 1.60% and matures in 2027. |
In December 2020, Brookfield Renewable completed an up-financing of R$120 million ($23 million) associated with a mixed technology portfolio in Brazil. The loan bears a variable interest at the applicable rate plus 3.60% and mature in 2023. |
In December 2020, Brookfield Renewable completed a financing of $43.5 million associated with a repowering project in the United States. The loan bears a variable interest at the applicable rate plus 1.4% and matures in 2023. |
In December 2020, Brookfield Renewable completed a refinancing of R$330 million ($65 million) associated with a hydroelectric facility in Brazil. The loan bears a variable interest at the applicable rate plus 2.9% and matures in 2027. |
In December 2020, Brookfield Renewable completed an up-financing of €110 million ($132 million) associated with a Solar portfolio in Spain. The loan bears 2.1% fixed interest and matures in 2040. |
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In December 2020, Brookfield Renewable completed an up-financing of C$125 million ($98 million) associated with a portfolio of hydroelectric facilities in Canada. The loan bears variable interest at the applicable rate plus 1.6% and matures in 2023. |
Supplemental Information |
The following table outlines changes in Brookfield Renewable’s borrowings for the year ended December 31: |
| | Net cash | Non-cash |
| | flows from |
| | financing |
| January 1 | activities | | Acquisition | Disposal | | Other(1)(2) | December 31 |
(MILLIONS) |
2020 |
Corporate borrowings....... $ | 2,100 | (30) | | | | | — | — | 65 $ | 2,135 |
Non-recourse borrowings. $ | 15,200 | (175) | | | | | 475 | — | 447 $ | | | | | 15,947 |
2019 |
Corporate borrowings....... $ | 2,328 | (314) | | | | | — | — | 86 $ | 2,100 |
Non-recourse borrowings. $ | 14,218 | 823 | | | | | 319 | (196) | 36 $ | 15,200 |
(1) | Includes foreign exchange and amortization of unamortized premium and financing fees. |
(2) | Includes a $247 million adjustment related to the buyout of the lease on a 192 MW hydroelectric facility in Louisiana. |
16. NON-CONTROLLING INTERESTS |
Brookfield Renewable’s non-controlling interests are comprised of the following as at December 31: |
| | | | | 2020 | | | | | 2019 |
(MILLIONS) |
Participating non-controlling interests | – in operating subsidiaries................................................... $ | | | | 11,100 $ | | | | | 11,086 |
General partnership interest in a holding subsidiary held by Brookfield......................................... | | | | | | | | | 56 | 68 |
Participating non-controlling interests | – in a holding subsidiary – Redeemable/Exchangeable |
| | | | | | | | | | | units held by Brookfield............................................................................................................ | 2,721 | | | | | 3,317 |
Class A exchangeable shares of Brookfield Renewable Corporation.............................................. | | | | | 2,408 | | | | | — |
Preferred equity................................................................................................................................. | | | | | | | | | 609 | 597 |
| | | | | $ | 16,894 $ | | | | | 15,068 |
| | | | | | | | | | Page 65 |
Participating non-controlling interests – in operating subsidiaries |
The net change in participating non-controlling interests – in operating subsidiaries is as follows: |
| | | | | | | | | TerraForm |
| Brookfield | | | | | | | | Power public |
| Americas | Brookfield | Brookfield | Brookfield | Canadian | The | Isagen | Isagen public | non- |
| Infrastructure | Infrastructure | Infrastructure | Infrastructure | Hydroelectric | Catalyst | institutional | non-controlling | controlling |
(MILLIONS)Fund | Fund II | Fund III | Fund IV | Portfolio | Group | investors | interests | interests | Other | Total |
As at December 31, 2017.......... $ | 850 | $ | 1,682 $ | 2,332 $ | — | $ | — | | | | | | | $ | 134 | $ | 1,701 | $ | | | | | 9 | $ | 665 | | | | | $ | 205 $ | 7,578 |
Net income................................ | | | | | | | | | | | | | | | 1 | | | | | | | | | | | | | | | 9 | 164 | — | | 4 | | | | | | | | 14 | | 174 | | | | | | 1 | | 59 | | | | | | 13 | 439 |
OCI............................................ | | | | | | | | | | | | | | | 66 | | 298 | 1,107 | — | | (11) | | | | | | | | (18) | | 504 | | | | | | 5 | | 294 | | | | | | 58 | 2,303 |
Capital contributions................. | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | 9 | 235 | — | | 293 | | | | | | | | — | | — | | | | | | — | | — | | | | | | — | 537 |
Acquisition................................ | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | — | — | — | | — | | | | | | | | — | | — | | | | | | — | | — | | | | | | 21 | 21 |
Distributions.............................. | (17) | | | | | | | | | | | | | | | (81) | (324) | — | | — | | | | | | | | (6) | | (167) | | | | | | — | | (55) | | | | | | (14) | (664) |
Other.......................................... | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | 12 | (18) | — | | (10) | | | | | | | | — | | — | | | | | | — | | 39 | | | | | | 52 | 75 |
As at December 31, 2018.......... | 900 | | 1,929 | 3,496 | — | | 276 | | | | | | | | 124 | | 2,212 | | | | | | 15 | | 1,002 | | | | | | 335 | 10,289 |
Net income (loss)....................... | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | (13) | 6 | 6 | | 19 | | | | | | | | 17 | | 154 | | | | | | 1 | | (79) | | | | | | 2 | 113 |
OCI............................................ | | | | | | | | | | | | | | | 46 | | 134 | 427 | (3) | | 61 | | | | | | | | (41) | | 266 | | | | | | 2 | | 112 | | | | | | — | 1,004 |
Capital contributions................. | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | — | 2 | 159 | | 268 | | | | | | | | — | | — | | | | | | (2) | | 244 | | | | | | 3 | 674 |
Disposals................................... | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | (87) | — | — | | — | | | | | | | | — | | — | | | | | | — | | — | | | | | | (85) | (172) |
Distributions.............................. | (24) | (120) | (332) | — | | (1) | | | | | | | | (11) | | (259) | | | | | | (1) | | (66) | | | | | | (30) | (844) |
Other.......................................... | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | 8 | 20 | 1 | | (5) | | | | | | | | — | | 2 | | | | | | (2) | | (5) | | | | | | 3 | 22 |
As at December 31, 2019.......... | 922 | | 1,851 | 3,619 | 163 | | 618 | | | | | | | | 89 | | 2,375 | | | | | | 13 | | 1,208 | | | | | | 228 | 11,086 |
Net income (loss)....................... | (13) | | | | | | | | | | | | | | | (21) | (52) | 15 | | 35 | | | | | | | | 16 | | 130 | | | | | | — | | (31) | | | | | | 101 | 180 |
OCI............................................ | 100 | | 196 | 413 | — | | 11 | | | | | | | | 27 | | 325 | | | | | | 2 | | | | | | 2 | | 36 | 1,112 |
Capital contributions................. | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | 9 | 23 | 246 | | — | | | | | | | | — | | — | | | | | | — | | — | | | | | | 242 | 520 |
Return of capital........................ | | — | | | | | | | | | | | | | | | (3) | (109) | — | | (35) | | | | | | | | — | | — | | | | | | — | | — | | | | | | — | (147) |
Disposals................................... | | — | | | | | | | | | | | | | | | — | — | — | | — | | | | | | | | — | | — | | | | | | — | | — | | | | | | (15) | (15) |
Distributions.............................. | | | | | | | | | | | | | | | (8) | (38) | (204) | (13) | | (1) | | | | | | | | (34) | | (180) | | | | | | — | | (35) | | | | | | (38) | (551) |
Special distribution/TerraForm |
Power acquisition................. | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | — | — | — | | — | | | | | | | | — | | — | | | | | | — | | (1,101) | | | | | | — | (1,101) |
Other.......................................... | | | | | | | | | | | | | | | 1 | | | | | | | | | | | | | | | — | (67) | (1) | | (1) | | | | | | | | (1) | | 1 | | | | | | (1) | | (43) | | | | | | 128 | 16 |
As at December 31, 2020.......... $ | 1,002 | $ | 1,994 $ | 3,623 $ | 410 | $ | 627 | | | | | | | $ | 97 | $ | 2,651 | $ | | | | | 14 | $ | — | | | | | $ | 682 $ | 11,100 |
Interests held by third parties.... | 75%-80% | 43%-60 | 23%-71% | 75 % | 50 % | 25 % | 53 % | | | | | | 0.3 % | — % | 20%-50% |
| | | | | | | | | | | Page 66 |
On June 11, 2018, a subsidiary of Brookfield Renewable purchased 60,975,609 shares of TerraForm Power's common stock at a price per share of $10.66 in a private placement (“2018 Private Placement”). Immediately upon completion of the 2018 Private Placement, Brookfield and its institutional partners held an approximately 65% interest in TerraForm Power. The remaining approximately 35% ownership interest was held by TerraForm Power’s public shareholders. |
On August 3, 2018, TerraForm Power issued 80,084 shares of its common stock to a controlled affiliate of Brookfield Renewable and shareholder of Terraform Power in connection with the net losses incurred as a result of the final resolution of a securities class action under federal securities law. Immediately upon completion of this issuance, Brookfield Renewable and its institutional partners held an approximately 65% interest in TerraForm Power. The remaining approximately 35% ownership interest was held by TerraForm Power’s public shareholders. |
On October 8, 2019, a subsidiary of Brookfield Renewable purchased 2,981,514 shares of TerraForm Power's common stock at a price per share of $16.77 in a private placement (“2019 Private Placement”). This was completed concurrent with TerraForm Power registered public offering of $250 million. Upon completion of the public offering and the 2019 Private Placement, as at December 31, 2019, Brookfield Renewable and its institutional partners held an approximately 61.5% interest in TerraForm Power. The remaining approximately 38.5% ownership interest was held by TerraForm Power’s public shareholders. |
On July 31, 2020, Brookfield Renewable acquired all of the public TerraForm Power shares, representing a 38% interest in TerraForm Power. See Note 1(c)(iii) for more details. As at December 31, 2020, TerraForm Power is 100% owned by Brookfield Renewable and its institutional partners. |
| Page 67 |
The following tables summarize certain financial information of operating subsidiaries that have non-controlling interests that are material to Brookfield Renewable: |
| Brookfield |
| Americas | Brookfield | Brookfield | Brookfield | Canadian | The |
| Infrastructure | Infrastructure | Infrastructure | Infrastructure | Hydroelectric | Catalyst | | TerraForm |
(MILLIONS)Fund | Fund II | Fund III(1) | Fund IV | Portfolio | Group | Isagen (2) | Power | Other | Total |
Interests held by third parties........................................... | 75%-80% | 43%-60% | 69%-71% | 75 % | 50 % | 25 % | 76 % | 33 % | 20%-50% |
| | United | United States, | | | | | | | | United States, |
| United | States, | Brazil, | Brazil, | | | | North America, | Brazil, |
| States, | Brazil, | Europe, | India, | | United | | South America, | Canada, |
Place of business.............................................................. | Brazil | Europe | India, China | China | Canada | States | Colombia | Europe | Colombia |
Year ended December 31, 2018: |
Revenue......................................................................... $ | 157 $ | 447 $ | 311 $ | — | $ | 38 | | | | | | | $ 142 | $ 896 | | $ | 815 | | | $ | 21 $ 2,827 |
Net income.................................................................... | | | | | | | | | | | | | 2 | 17 | 19 | — | | 15 | | | | | | | | 56 | | 331 | | 213 | | | | 2 | 655 |
Total comprehensive income (loss).............................. | | | | | | | | | | | | | 95 | 544 | 898 | — | | 25 | | | | | | | | (16) | 1,290 | | | 1,063 | | | | 16 | 3,915 |
Net income allocated to non-controlling interests............ | | | | | | | | | | | | | 1 | 9 | 15 | — | | 6 | | | | | | | | 14 | | 251 | | 142 | | | | 1 | 439 |
Year ended December 31, 2019: |
Revenue......................................................................... $ | 155 $ | 451 $ | 255 $ | 39 | $ | 96 | | | | | | | $ 145 | $ 971 | | $ | 991 | | | $ | 29 $ 3,132 |
Net income (loss).......................................................... | | | | | | | | | | | | | 2 | (20) | | | | | | | | | | | | | 10 | 9 | | 42 | | | | | | | | 67 | | 293 | | (207) | | | | 6 | 202 |
Total comprehensive income (loss).............................. | | | | | | | | | | | | | 61 | 294 | 359 | 4 | | 138 | | | | | | | | (99) | 1,007 | | | 90 | | | | 17 | 1,871 |
Net income (loss) allocated to non-controlling interests.. | | | | | | | | | | | | | — | (13) | | | | | | | | | | | | | 8 | 6 | | 19 | | | | | | | | 17 | | 220 | | (149) | | | | 5 | 113 |
As at December 31, 2019: |
Property, plant and equipment, at fair value................. $ | 1,713 $ | 5,240 $ | 2,508 $ | 538 | $ 1,849 | | | | | | | $ 696 | $ 7,352 | | $ | 10,350 | | | $ | 261 $ 30,507 |
Total assets.................................................................... | 1,754 | 5,455 | 3,371 | 662 | | 3,486 | | | | | | | | 794 | 8,403 | | | 11,420 | | | | 268 35,613 |
Total borrowings........................................................... | 509 | 1,756 | 850 | 331 | | 1,651 | | | | | | | | 325 | 1,865 | | | 6,297 | | | | 93 13,677 |
Total liabilities.............................................................. | 569 | 2,116 | 1,089 | 439 | | 2,045 | | | | | | | | 342 | 3,928 | | | 8,155 | | | | 114 18,797 |
Carrying value of non-controlling interests..................... | 922 | 1,852 | 1,622 | 162 | | 651 | | | | | | | | 88 | 3,395 | | | 2,344 | | | | 50 11,086 |
Year ended December 31, 2020: |
Revenue......................................................................... $ | 137 $ | 346 $ | 189 $ | 85 | $ | 123 | | | | | | | $ 141 | $ 874 | | $ | 1,161 | | | $ | 20 $ 3,076 |
Net income (loss).......................................................... | (15) | (34) | | | | | | | | | | | | | (2) | 20 | | 73 | | | | | | | | 65 | | 247 | | (360) | | | | 173 | 167 |
Total comprehensive income (loss).............................. | 109 | 345 | 160 | 19 | | 108 | | | | | | | | 173 | | 866 | | 238 | | | | 176 | 2,194 |
Net income allocated to non-controlling interests............ | (13) | (21) | | | | | | | | | | | | | (4) | 15 | | 38 | | | | | | | | 16 | | 187 | | (158) | | | | 120 | 180 |
As at December 31, 2020: |
Property, plant and equipment, at fair value................. $ | 1,785 $ | 5,314 $ | 2,609 $ | 724 | $ 1,877 | | | | | | | $ 1,037 | $ 8,150 | | $ | 11,606 | | | $ | 276 $ 33,378 |
Total assets.................................................................... | 1,833 | 5,562 | 3,101 | 1,129 | | 3,579 | | | | | | | 1,045 | 9,130 | | | 12,767 | | | | 440 38,586 |
Total borrowings........................................................... | 483 | 1,629 | 832 | 427 | | 1,672 | | | | | | | | 549 | 1,822 | | | 6,890 | | | | 94 14,398 |
Total liabilities.............................................................. | 550 | 1,950 | 926 | 581 | | 2,067 | | | | | | | | 557 | 4,131 | | | 9,365 | | | | 127 20,254 |
Carrying value of non-controlling interests..................... | 1,002 | 1,994 | 1,545 | 410 | | 675 | | | | | | | | 97 | 3,794 | | | 1,434 | | | | 149 11,100 |
(1) | Excludes information relating to Isagen and TerraForm Power which are presented separately. |
(2) | The total third party ownership interest in Isagen as of December 31, 2020 was 75.9% and comprised of Brookfield Infrastructure Fund III: 23.0%, Isagen Institutional investors 52.6% and other non-controlling interests: 0.3%. |
| | | | | | | | | | Page 68 |
General partnership interest in a holding subsidiary held by Brookfield, Participating non-controlling interests – in a holding subsidiary – Redeemable/Exchangeable units held by Brookfield and Class A exchangeable shares of Brookfield Renewable Corporation held by public shareholders and Brookfield |
The BEPC exchangeable shares were issued during the year as part of the special distribution, completed on July 30, 2020 and the TerraForm Power acquisition, completed on July 31, 2020. The distribution resulted in no cash proceeds to the partnership. Refer to Note 1 – Basis of preparation and significant accounting policies for further details. |
On December 11, 2020, Brookfield Renewable completed the Unit Split, resulting in the issuance of 1,325,754 general partnership units, 64,829,316 Redeemable/Exchangeable partnership units and 57,394,811 BEPC exchangeable shares. All Unit count and per Unit disclosures are presented on a post-split basis. |
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 $0.20 per LP unit per quarter, the incentive is 15% of distributions above this threshold. To the extent that quarterly LP unit distributions exceed $0.2253 per LP unit per quarter, the incentive distribution is equal to 25% of distributions above this threshold. |
Consolidated equity includes Redeemable/Exchangeable partnership units, BEPC exchangeable shares and the GP interest. The Redeemable/Exchangeable partnership units and the GP interest are held 100% by Brookfield and the BEPC exchangeable shares are held 34.7% by Brookfield with the remainder held by public shareholders. The Redeemable/Exchangeable partnership units and BEPC exchangeable shares provide the holder, at its discretion, with the right to redeem these units or shares, respectively, 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 and BEPC exchangeable shares are classified as equity in accordance with IAS 32, Financial Instruments: Presentation. |
The Redeemable/Exchangeable partnership units, BEPC exchangeable shares and the GP interest are presented as non-controlling interests since they relate to equity in a subsidiary that is not attributable, directly or indirectly, to Brookfield Renewable. During the year ended December 31, 2020, exchangeable shareholders of BEPC exchanged 136,517 BEPC exchangeable shares for $2 million LP units. No Redeemable/Exchangeable partnership units have been redeemed. |
The Redeemable/Exchangeable partnership units issued by BRELP and the BEPC exchangeable shares issued by BEPC have the same economic attributes in all respects to the LP units issued by Brookfield Renewable, except for the redemption rights described above. The Redeemable/Exchangeable partnership units, BEPC exchangeable shares and the GP interest, excluding incentive distributions, 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, 2020, Redeemable/Exchangeable partnership units, BEPC exchangeable shares and units of GP interest outstanding were 194,487,939 units (December 31, 2019: 194,487,939 units), 172,180,417 shares (December 31, 2019: nil), and 3,977,260 units (December 31, 2019: 3,977,260 units), respectively. |
In December 2020, Brookfield Renewable renewed its normal course issuer bid in connection with its LP units and entered into a normal course issuer bid for its outstanding BEPC exchangeable shares. Brookfield Renewable is authorized to repurchase up to 13,740,072 LP units and 8,609,220 BEPC exchangeable shares, representing 5% of each of its issued and outstanding LP units and BEPC exchangeable shares. The bids will expire on December 15, 2021, or earlier should Brookfield Renewable complete its repurchases prior to such date. There were no LP units or BEPC exchangeable shares repurchased during the year ended December 31, 2020. During the year ended December 31, 2019, there were 30,000 LP units repurchased at a total cost of less than $1 million. |
| Page 69 |
Distributions |
The composition of the distributions are presented in the following table: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
General partnership interest in a holding subsidiary held by Brookfield............. $ | 5 $ | 5 $ | 5 |
Incentive distribution............................................................................................ | 65 | 50 | 40 |
| | | | | 70 | 55 | 45 |
Participating non-controlling interests | | | | | – in a holding subsidiary – |
Redeemable/Exchangeable units held by Brookfield....................................... | 250 | 268 | 255 |
BEPC exchangeable shares held by |
Brookfield.......................................................................................................... | 42 | — | — |
External shareholders........................................................................................ | 74 | — | — |
Total BEPC exchangeable shares......................................................................... | 116 | — | — |
| | | | $ | 436 $ | 323 $ | 300 |
The following table summarizes certain financial information regarding General partnership interest in a holding subsidiary held by Brookfield, Participating non-controlling interests – in a holding subsidiary – Redeemable/Exchangeable units held by Brookfield and Class A exchangeable shares of Brookfield Renewable Corporation held by public shareholders and Brookfield: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
For the year ended December 31: |
Revenue.................................................................................................................. $ | 3,810 $ | 3,971 $ | 3,797 |
Net income.............................................................................................................. | (45) | 80 | 583 |
Comprehensive income.......................................................................................... | 3,068 | 2,025 | 4,474 |
Net income (loss) allocated to(1): |
General partnership interest in a holding subsidiary held by Brookfield........... | 62 | 50 | 41 |
Participating non-controlling interests | | | | | – in a holding subsidiary – |
| | | | | | Redeemable/Exchangeable units held by Brookfield..................................... | (133) | (65) | 16 |
Class A shares of Brookfield Renewable Corporation....................................... | (49) | — | — |
As at December 31: |
Property, plant and equipment, at fair value........................................................... $ | 44,590 $ | 41,055 |
Total assets............................................................................................................. | 49,722 | 46,196 |
Total borrowings..................................................................................................... | 18,082 | 17,300 |
Total liabilities........................................................................................................ | 27,955 | 25,716 |
Carrying value of (2): |
General partnership interest in a holding subsidiary held by Brookfield........... | 56 | 68 |
Participating non-controlling interests | | | | | – in a holding subsidiary – |
| | | | | | Redeemable/Exchangeable units held by Brookfield..................................... | 2,721 | 3,317 |
(1) | Allocated based on weighted-average GP interest, Redeemable/Exchangeable partnership units, BEPC exchangeable shares and LP units of 4.0 million, 194.5 million, 139.9 million and 271.1 million, respectively (2019: 4.0 million, 194.5 million, nil and 268.3 million, respectively and 2018: 4.0 million, 194.5 million, nil and 270.4 million, respectively). |
(2) | Allocated based on outstanding GP interest, Redeemable/Exchangeable partnership units, BEPC exchangeable shares and LP units of 4.0 million, 194.5 million, 172.2 million and 274.8 million, respectively (2019: 4.0 million, 194.5 million, nil and 268.5 million, respectively). |
| | | Page 70 |
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: |
| | | | Dividends declared for |
| | | Earliest | the year ended |
| | Cumulative | permitted | December 31 | Carrying value as at |
| Shares | dividend | redemption |
| outstanding | rate (%) | date | (MILLIONS, EXCEPT AS | | | | 2020 | | 2019 | December 31, 2020 | December 31, 2019 |
NOTED) |
Series 1 (C$136)..... | 6.85 | | | | | | | | 3.36 | April 2025 $ | | | | | | | 3 $ | 3 $ | 134 $ | | | | | | 105 |
Series 2 (C$113)(1).. | 3.11 | | | | | | | | 2.76 | April 2025 | | | | | | | 3 | 4 | | | | | | 62 | 86 |
Series 3 (C$249)..... | 9.96 | | | | | | | | 4.40 | July 2024 | | | | | | | 8 | 8 | 195 | | | | | | 192 |
Series 5 (C$103)..... | 4.11 | | | | | | | | 5.00 | April 2018 | | | | | | | 4 | 4 | | | | | | 81 | 79 |
Series 6 (C$175)..... | 7.00 | | | | | | | | 5.00 | July 2018 | | | | | | | 7 | 7 | 137 | | | | | | 135 |
| | 31.03 | | | $ | | | | | | 25 $ | 26 $ | 609 $ | | | | | | 597 |
(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, 2020, none of the issued Class A Preference Shares have been redeemed by BRP Equity. |
Class A Preference Shares – Normal Course Issuer Bid |
In July 2020, the Toronto Stock Exchange accepted notice of BRP Equity's intention to renew the normal course issuer in connection with its outstanding Class A Preference Shares for another year to July 8, 2021, 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. Shareholders may receive a copy of the notice, free of charge, by contacting Brookfield Renewable. There were no repurchases of Class A Preference Shares during 2020 in connection with the normal course issuer bid. |
17. PREFERRED LIMITED PARTNERS’ EQUITY |
Brookfield Renewable’s preferred limited partners’ equity comprises of Class A Preferred units as follows: |
| | | | Distributions declared |
| | | Earliest |
| | | | for the year ended |
| | Cumulative | permitted |
| | | | | | | | | | December 31 | Carrying value as at |
(MILLIONS, EXCEPT | Shares | distribution | redemption |
| outstanding | rate (%) | | date | | | | | | 2020 | 2019 | December 31, 2020 | December 31, 2019 |
AS NOTED) |
Series 5 (C$72)........ | | 2.89 | | | | | | | | 5.59 | April 2018 $ | | | | | | | 3 $ | 3 $ | | | | | | 49 $ | 49 |
Series 7 (C$175)...... | | 7.00 | | | | | | | | 5.50 January 2021 | 7 | 7 | | | | | | 128 | 128 |
Series 9 (C$200)...... | | 8.00 | | | | | | | | 5.75 | July 2021 | | | | | | | 9 | 9 | | | | | | 147 | 147 |
Series 11 (C$250).... | | 10.00 | | | | | | | | 5.00 | April 2022 | | | | | | | 9 | 9 | | | | | | 187 | 187 |
Series 13 (C$250).... | | 10.00 | | | | | | | | 5.00 | April 2023 | | | | | | | 9 | 10 | | | | | | 196 | 196 |
Series 15 (C$175).... | | 7.00 | | | | | | | | 5.75 | April 2024 | | | | | | | 8 | 6 | | | | | | 126 | 126 |
Series 17 ($200)....... | 8.00 | | | | | | | | 5.25 | March 2025 | | | | | | | 9 | — | | | | | | 195 | — |
| | 52.89 | | | $ | | | | | | 54 $ | 44 $ | 1,028 $ | | | | | | 833 |
On February 24, 2020, Brookfield Renewable issued 8,000,000 Class A Preferred Limited Partnership Units, Series 17 (the “Series 17 Preferred Units”) at a price of $25 per unit for gross proceeds of $200 million. Brookfield Renewable incurred $5 million in related transaction costs inclusive of fees paid to underwriters. The holders of the Series 17 Preferred Units are entitled to receive a cumulative quarterly fixed distribution yielding 5.25%. |
As at December 31, 2020, none of the Class A, Series 5 Preferred Limited Partnership Units have been redeemed. |
| | | | | | | | | | | Page 71 |
In July 2020, the Toronto Stock Exchange accepted notice of Brookfield Renewable's intention to renew the normal course issuer bid in connection with the outstanding Class A Preferred Limited Partnership Units for another year to July 8, 2021, or earlier should the repurchases be completed prior to such date. Under this normal course issuer bid, Brookfield Renewable is permitted to repurchase up to 10% of the total public float for each respective series of its Class A Preference Units. Unitholders may receive a copy of the notice, free of charge, by contacting Brookfield Renewable. No shares were repurchased during 2020. |
18. LIMITED PARTNERS’ EQUITY |
Limited partners’ equity |
On December 11, 2020, Brookfield Renewable completed the three-for-two Unit Split of Brookfield Renewable’s outstanding Units by way of a subdivision of Units, whereby LP unit holders received an additional one-half of an LP unit for each LP unit held, resulting in the issuance of 91,600,487 LP units. Our preferred units and preferred limited partners’ equity were not affected by the split. The Redeemable/Exchangeable partnership units, BEPC exchangeable shares and units of GP interest were concurrently split as part of the Unit Split. All LP unit count and per LP unit disclosures are presented on a post-split basis. |
As at December 31, 2020, 274,837,890 LP units were outstanding (2019: 268,466,704 LP units) including 68,749,416 LP units (2019: 84,103,416 LP units) held by Brookfield. Brookfield owns all general partnership interests in Brookfield Renewable representing a 0.01% interest. |
On July 31, 2020, Brookfield Renewable completed the TerraForm Power Acquisition by issuing 55,552,862 BEPC exchangeable shares and 6,051,704 LP units. Brookfield Asset Management's direct and indirect interest after the TerraForm Power Acquisition represented approximately 51.5% of the company on a fully-exchanged basis. On an unexchanged basis, Brookfield Asset Management holds a 25% direct limited partnership interest in BEPC after the TerraForm Power Acquisition. Refer to Note 1 – Basis of preparation and significant accounting policies for further information on the Terraform Power Acquisition. |
During the year ended December 31, 2020, 182,966 LP units (2019: 264,894 LP units) were issued under the distribution reinvestment plan at a total cost of $6 million (2019: $6 million). |
During the year ended December 31, 2020, exchangeable shareholders of BEPC exchanged 136,517 BEPC exchangeable shares for $2 million LP units. |
As at December 31, 2020, Brookfield Asset Management’s direct and indirect interest of 323,051,190 LP units, Redeemable/Exchangeable partnership units and BEPC exchangeable shares represents approximately 50.4% of Brookfield Renewable on a fully-exchanged basis and the remaining approximate 49.6% is held by public investors. |
On an unexchanged basis, Brookfield holds a 25% direct limited partnership interest in Brookfield Renewable, a 41% direct interest in BRELP through the ownership of Redeemable/Exchangeable partnership units and a direct 1% GP interest in BRELP and a 35% direct interest in the BEPC exchangeable shares of BEPC as at December 31, 2020. |
In December 2020, Brookfield Renewable renewed its normal course issuer bid in connection with its LP units. Brookfield Renewable is authorized to repurchase up to 13,740,072 LP units, representing 5% of its issued and outstanding LP units. The bids will expire on December 15, 2021, or earlier should Brookfield Renewable complete its repurchases prior to such date. There were no LP units repurchased during the year ended December 31, 2020. During the year ended December 31, 2019, there were 30,000 LP units repurchased at a total cost of less than $1 million. |
Distributions |
The composition of the distributions are presented in the following table: |
| 2020 | 2019 |
(MILLIONS) |
Brookfield......................................................................................................................................... $ | 98 $ | 116 |
External LP unitholders.................................................................................................................... | 251 | 254 |
| | | $ | 349 $ | 370 |
| | Page 72 |
In February 2021, distributions to unitholders were increased to $1.215 per LP unit on an annualized basis, an increase of $0.06 per LP unit, which will take effect on the distribution payable in March 2021. |
19. GOODWILL |
The following table provides a reconciliation of goodwill: |
| Total |
(MILLIONS) |
Balance, as at December 31, 2018................................................................................................................ | | | 948 |
Foreign exchange and other(1)....................................................................................................................... | | | 1 |
Balance, as at December 31, 2019................................................................................................................ | | | 949 |
Acquired through acquisition........................................................................................................................ | 3 | | 41 |
Foreign exchange.......................................................................................................................................... | | | (20) |
Balance, as at December 31, 2020(2)............................................................................................................. | | | 970 |
Represents adjustments to the purchase price allocation of the assets acquired and liabilities assumed from the Saeta acquisition. |
Includes goodwill of $784 million (2019: $821 million) in the hydroelectric segment, $72 million (2019: $66 million) in the wind segment and $114 million (2019: $62 million) in the solar segment. |
The goodwill related to the hydroelectric segment was created as a result of recording the deferred tax liabilities assumed in the purchase price allocations of business combinations. The deferred tax liabilities are measured in accordance with IAS 12 in the purchase price allocations rather than at fair value. As a result, the goodwill recorded does not represent ‘core’ goodwill, but rather goodwill created as a result of accounting concepts or ‘non-core’ goodwill. In order to avoid an immediate impairment of this ‘non-core’ goodwill, Brookfield Renewable removed from the carrying value any ‘non-core’ goodwill supported by the existence, as of the impairment testing date, of the original deferred tax liability that created the goodwill. As at December 31, 2020, we performed an impairment test at the level that goodwill is monitored by management. In performing this impairment test, management removed the ‘non-core’ goodwill that continued to be supported by the existence of the original deferred tax liability that gave rise to the goodwill from the carrying value of the applicable assets. The remaining goodwill relating to the wind and solar segments is not significant compared to the total balance as at December 31, 2020 and no impairment of the goodwill was recorded during the year. |
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20. 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 the debt-to-total capitalization ratio on a corporate and consolidated basis. As at December 31, 2020 these ratios were 6% and 27%, respectively (2019: 10% and 34%, 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 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. |
Brookfield Renewable’s strategy during 2020, which was unchanged from 2019, was to maintain the measures set out in the following schedule as at December 31: |
| Corporate | Consolidated |
| 2020 | | 2019 | 2020 | | 2019 |
(MILLIONS) |
Corporate credit facility(1).............................................................. $ | — | | | | $ | 299 | | | $ | — | | | | | $ | 299 |
Commercial paper(1)(2) | | | | | | | | | 3 | | | | | — | | | | 3 | | | | | | — |
Debt |
Medium term notes(3).................................................................. | 2,140 | | | | | 1,808 | | | | 2,140 | | | | | | 1,808 |
Non-recourse borrowings(4)......................................................... | — | | | | | — | | | | 16,006 | | | | | | 15,227 |
| | | | | | | | | 2,140 | | | | | 1,808 | | | | 18,146 | | | | | | 17,035 |
Deferred income tax liabilities, net(5)............................................. | — | | | | | — | | | | 5,310 | | | | | | 4,689 |
Equity |
Non-controlling interest.............................................................. | — | | | | | — | | | | 11,100 | | | | | | 11,086 |
Preferred equity........................................................................... | 609 | | | | | 597 | | | | 609 | | | | | | 597 |
Preferred limited partners’ equity............................................... | 1,028 | | | | | 833 | | | | 1,028 | | | | | | 833 |
Unitholders’ equity...................................................................... | 9,030 | | | | | 7,964 | | | | 9,030 | | | | | | 7,964 |
Total capitalization......................................................................... $ 12,807 | | | | | $ 11,202 | $ 45,223 | $ 42,204 |
Debt-to-total capitalization............................................................. | 17 % | | 16 % | 40 % | | 40 % |
Debt-to-total capitalization (market value)(6)................................. | 6 % | | 10 % | 27 % | | 34 % |
(1) | Draws on corporate credit facilities and commercial paper issuances are excluded from the debt-to-total capitalization ratios as they are not a permanent source of capital. |
(2) | Our commercial paper program is supplemented by our $1.75 billion corporate credit facilities with a weighted-average maturity of four years. |
(3) | Medium term notes are unsecured and guaranteed by Brookfield Renewable and excludes $8 million (2019: $7 million) of deferred financing fees, net of unamortized premiums. |
(4) | Consolidated non-recourse borrowings include $15 million (2019: $142 million) borrowed under a subscription facility of a Brookfield sponsored private fund and excludes $59 million (2019: $27 million) of deferred financing fees, net of unamortized premiums. |
(5) | Deferred income tax liabilities less deferred income tax assets. |
(6) | Based on market values of Preferred equity, Preferred limited partners’ equity and Unitholders’ equity. |
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21. EQUITY-ACCOUNTED INVESTMENTS |
The following table outlines the changes in Brookfield Renewable’s equity-accounted investments: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Balance, beginning of year..................................................................................... $ | 937 $ | 684 $ | 509 |
Investment.............................................................................................................. | 42 | 144 | 13 |
Return of capital..................................................................................................... | (19) | — | — |
Share of net income................................................................................................ | 27 | 29 | 28 |
Share of other comprehensive income.................................................................... | 29 | 81 | 168 |
Dividends received................................................................................................. | (56) | (16) | (9) |
Foreign exchange translation and other.................................................................. | 11 | 15 | (25) |
Balance, end of year............................................................................................... $ | 971 $ | 937 $ | 684 |
22. CASH AND CASH EQUIVALENTS |
Brookfield Renewable’s cash and cash equivalents as at December 31 are as follows: |
| | 2020 | 2019 |
(MILLIONS) |
Cash................................................................................................................................................... $ | | 422 $ | 327 |
Short-term deposits........................................................................................................................... | | 9 | 25 |
| | | | $ | 431 $ | 352 |
23. RESTRICTED CASH |
Brookfield Renewable’s restricted cash as at December 31 is as follows: |
| Note | 2020 | 2019 |
(MILLIONS) |
Operations ......................................................................................................................... | | | | $ | 129 $ | 128 |
Credit obligations............................................................................................................... | | | | | 119 | 143 |
Capital expenditures and development projects................................................................ | | | | | 35 | 22 |
Total................................................................................................................................... | | | | | 283 | 293 |
Less: non-current............................................................................................................... | 25 | | | | (75) | (104) |
Current............................................................................................................................... | | | | $ | 208 $ | 189 |
24. TRADE RECEIVABLES AND OTHER CURRENT ASSETS |
Brookfield Renewable’s trade receivables and other current assets as at December 31 are as follows: |
| | 2020 | 2019 |
(MILLIONS) |
Trade receivables.............................................................................................................................. $ | | 614 $ | 580 |
Prepaids and others........................................................................................................................... | | 64 | 100 |
Inventory........................................................................................................................................... | | 26 | 43 |
Income tax receivables...................................................................................................................... | | 15 | 47 |
Other short-term receivables............................................................................................................. | | 163 | 158 |
Current portion of contract asset....................................................................................................... | | 46 | 51 |
| | | | $ | 928 $ | 979 |
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As at December 31, 2020, 84% (2019: 72%) of trade receivables were current. Brookfield Renewable does not expect issues with collectability of these amounts. Accordingly, as at December 31, 2020 and 2019 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. |
25. OTHER LONG-TERM ASSETS |
Brookfield Renewable’s other long-term assets as at December 31 are as follows: |
| 2020 | 2019 |
(MILLIONS) |
Contract asset..................................................................................................................... | | | | 409 $ | 422 |
Restricted cash.................................................................................................................... | 23 | | | 75 | 104 |
Other................................................................................................................................... | | | | 121 | 77 |
| | | | 605 $ | 603 |
At December 31, 2020 and 2019, restricted cash was held primarily to satisfy operations and maintenance reserve requirements, lease payments and credit agreements. |
Contract assets are the result of contract amendments made 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 30 – Related party transactions, for additional details regarding Brookfield Renewable’s revenue agreements with Brookfield. |
26. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Brookfield Renewable’s accounts payable and accrued liabilities as at December 31 are as follows: |
| | 2020 | 2019 |
(MILLIONS) |
Operating accrued liabilities............................................................................................................. $ | | 270 $ | 309 |
Accounts payable.............................................................................................................................. | | 127 | 152 |
Interest payable on borrowings......................................................................................................... | | 106 | 105 |
LP unitholders’ distributions, preferred limited partnership unit distributions, preferred |
dividends and BEPC exchangeable shares dividends payable(1).................................................. | | 46 | 33 |
Current portion of lease liabilities..................................................................................................... | | 33 | 21 |
Other................................................................................................................................................. | | 43 | 67 |
| | | | 625 $ | 687 |
(1) | Includes amounts payable only to external LP unitholders and BEPC exchangeable shareholders. Amounts payable to Brookfield are included in due to related parties. |
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27. PROVISIONS |
The following table presents the change in the decommissioning liabilities for Brookfield Renewable: |
| 2020 | 2019 |
(MILLIONS) |
Balance, beginning of the year......................................................................................................... $ | 504 $ | 394 |
Acquisitions through business combinations................................................................................... | 23 | 38 |
Reduction arising from payments/derecognition............................................................................. | | | | — | (8) |
Accretion.......................................................................................................................................... | 17 | 17 |
Changes in estimates........................................................................................................................ | 94 | 61 |
Foreign exchange............................................................................................................................. | 7 | 2 |
Balance, end of the year................................................................................................................... $ | 645 $ | 504 |
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 substantially expected to be restored between the years 2031 to 2054. The estimated cost of decommissioning activities is based on a third-party assessment. |
For details on other legal provisions, please refer to Note 29 – Commitments, contingencies and guarantees. |
28. OTHER LONG-TERM LIABILITIES |
Brookfield Renewable’s other long-term liabilities as at December 31 are comprised of the following: |
| 2020 | 2019 |
(MILLIONS) |
Contract liabilities.......................................................................................................................... | | | $ | 602 $ | 562 |
Lease liabilities............................................................................................................................... | 405 | 379 |
Pension obligations........................................................................................................................ | | | | 98 | 99 |
Due to related parties...................................................................................................................... | 11 | 7 |
Concession payment liability......................................................................................................... | | | | 11 | 12 |
Other............................................................................................................................................... | 119 | 142 |
| | | $ | 1,246 $ | 1,201 |
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 25 – Other long-term assets, for additional details regarding Brookfield Renewable’s contract balances. See Note 30 – Related party transactions, for additional details regarding Brookfield Renewable’s revenue agreements with Brookfield. |
29. 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 2089. |
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, 2020, Brookfield Renewable had $574 million (2019: $36 million) of capital expenditure commitments outstanding, of which $405 million is payable in less than one year, $159 million in two years, and $10 million thereafter. |
An integral part of Brookfield Renewable’s strategy is to participate with institutional investors in Brookfield-sponsored private equity funds that target acquisitions that suit Brookfield Renewable’s profile. In the normal course of business, Brookfield Renewable has made commitments to Brookfield-sponsored private equity funds to participate in these target acquisitions in the future, if and when identified. From time to time, in order to facilitate investment activities in a timely and efficient manner, Brookfield Renewable will fund deposits or incur other costs |
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and expenses (including by use of loan facilities to consummate, support, guarantee or issue letters of credit) in respect of an investment that ultimately will be shared with or made entirely by Brookfield sponsored vehicles, consortiums and/or partnerships (including private funds, joint ventures and similar arrangements), Brookfield Renewable, or by co-investors. |
Brookfield Renewable, alongside institutional partners, entered into a commitment to invest approximately R$54 million ($10 million) to acquire a 270 MW development wind portfolio in Brazil. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, with Brookfield Renewable expected to hold a 25% interest. |
Brookfield Renewable, alongside institutional partners, entered into a commitment to invest $700 million to acquire an 845 wind portfolio in United States. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, with Brookfield Renewable expected to hold a 25% interest. |
Brookfield Renewable, alongside institutional partners, entered into a commitment to invest $810 million to acquire a distributed generation development platform comprising 360 MW of operating and under construction assets across nearly 600 sites throughout the United States and 700 MW of development assets. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, with Brookfield Renewable expected to hold a 25% interest. |
Subsequent to year-end, Brookfield Renewable, together with its institutional partners, closed its purchase of a 23% interest in Polenergia, a large scale renewable business in Poland, in connection with its previously announced tender offer alongside Polenergia’s current majority shareholder, at a cost of approximately $175 million (approximately $44 million net to Brookfield Renewable for a 6% interest). Brookfield Renewable, together with its institutional partners and Polenergia’s current majority shareholder, will collectively hold a 75% interest in the company. |
Subsequent to year-end, Brookfield Renewable, alongside institutional partners, entered into a commitment to invest COP 411 billion ($111 million) to acquire a 40 MW hydroelectric portfolio in Colombia. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, with Brookfield Renewable expected to hold a 24% interest. |
Subsequent to year-end, Brookfield Renewable, alongside institutional partners, entered into a commitment to invest COP 153 billion ($41 million) to acquire a 38 MW portfolio of solar development projects in Colombia. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, with Brookfield Renewable expected to hold a 24% interest. |
Contingencies |
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. |
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On December 22, 2020, our subsidiary, TerraForm Power, received an adverse summary judgment ruling in connection with litigation relating to a historical contractual dispute. This litigation predates the 2017 acquisition of an initial 51% interest in TerraForm Power by Brookfield Renewable and its institutional partners. The dispute relates to an allegation that TerraForm Power was obligated to make earn-out payments in connection with the acquisition of certain development assets by TerraForm Power’s former parent company from a third party. The court’s ruling in favor of the plaintiffs awarded approximately $231 million plus 9% annual non-compounding interest that has accrued at the New York State statutory rate since May 2016, of which a surety bond was posted with the court for the judgment amount plus one year of additional 9% interest on the judgment amount. While TerraForm Power has appealed the ruling, we cannot predict with certainty the ultimate resolution of the appeal or any other proceedings brought in connection with these claims. In connection to this matter, Brookfield Renewable has recognized a provision of $231 million on its consolidated statement of financial position. |
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 15 – 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, Brookfield Infrastructure Fund III and Brookfield Infrastructure Fund IV. 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: |
| 2020 | 2019 |
(MILLIONS) |
Brookfield Renewable along with institutional investors............................................................... $ | 46 $ | 50 |
Brookfield Renewable's subsidiaries............................................................................................... | 670 | 668 |
| | | $ | 716 $ | 718 |
Guarantees |
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. |
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30. RELATED PARTY TRANSACTIONS |
Brookfield Renewable’s related party transactions are recorded at the exchange amount and 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, 2020 is $34 billion, which against the initial reference value of $8 billion and factoring in the annual amount of $23 million (as adjusted for inflation), resulted in a management service fee payment for the year ended December 31, 2020 of $235 million (2019: $135 million and 2018: $94 million). |
Relationship Agreement |
Since inception, Brookfield Renewable has had a Relationship Agreement with Brookfield pursuant to which Brookfield has agreed, subject to certain exceptions, that Brookfield Renewable will serve as its primary vehicle through which it will directly or indirectly, acquire renewable power assets on a global basis. |
TERP Brookfield Master Services Agreement |
TerraForm Power was party to a management agreement (“TERP Brookfield Master Services Agreement”) with Brookfield and certain of its affiliates, dated as of October 16, 2017. Pursuant to the TERP Brookfield Master Services Agreement, TerraForm Power paid management service costs on a quarterly basis calculated as follows: |
• | For each of the first four quarters following October 16, 2017, a fixed component of $2.5 million per quarter (subject to proration for the quarter including October 16, 2017) plus 0.3125% of the market capitalization value increase for such quarter; |
• | For each of the next four quarters, a fixed component of $3.0 million per quarter adjusted annually for inflation plus 0.3125% of the market capitalization value increase for such quarter; and |
• | Thereafter, a fixed component of $3.75 million per quarter adjusted annually for inflation plus 0.3125% of the market capitalization value increase for such quarter. |
For purposes of calculating its management service costs, the term market capitalization value increase meant, for any quarter, the increase in value of TerraForm Power’s market capitalization for such quarter, calculated by multiplying the number of outstanding shares of TerraForm Power’s common stock as of the last trading day of such quarter by the difference between (x) the volume weighted average trading price of a share of common stock for the trading days in such quarter and (y) $9.52. If the difference between (x) and (y) in the market capitalization value increase calculation for a quarter is a negative number, then the market capitalization value increase is deemed to be zero. TerraForm Power’s management service costs have been included in Brookfield Renewable’s consolidated statements of income (loss) based on its historical records. |
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The TERP Brookfield Master Services Agreement was terminated upon the completion of the TerraForm Power acquisition. |
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. |
Governance Agreement |
TerraForm Power was party to a governance agreement, referred to as the Governance Agreement, dated October 16, 2017 with Orion Holdings 1 L.P. (“Orion Holding”), a controlled subsidiary of Brookfield Asset Management, and any other controlled affiliate of Brookfield Asset Management (other than TerraForm Power and its controlled affiliates) that by the terms of the Governance Agreement from time to time becomes a party thereto, collectively referred to as the sponsor group. |
The Governance Agreement established certain rights and obligations of TerraForm Power and controlled affiliates of Brookfield Asset Management that owned voting securities of TerraForm Power relating to the governance of TerraForm Power and the relationship between such affiliates of Brookfield Asset Management and TerraForm Power and its controlled affiliates. |
On June 11, 2018, Orion Holdings, Brookfield BRP Holdings (Canada) Inc (“NA HoldCo”) and TerraForm Power entered into a Joinder Agreement pursuant to which NA HoldCo became a party to the Governance Agreement. On June 29, 2018, a second Joinder Agreement was entered into among Orion Holdings, NA HoldCo, BBHC Orion Holdco L.P. (“BBHC Orion”), a controlled subsidiary of Brookfield Asset Management, and TerraForm Power pursuant to which BBHC Orion became a party to the Governance Agreement. |
The Governance Agreement was terminated upon the completion of the TerraForm Power acquisition. |
Power Services Agreements |
Energy Marketing Internalization |
In 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 also included the 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 Energy Marketing Internalization was completed during the third quarter of 2019. The Power Agency Agreements, Energy Marketing Agreement and certain revenue agreements discussed below were transferred by Brookfield to Brookfield Renewable in connection to the Energy Marketing Internalization. |
Power Agency Agreements |
Certain Brookfield Renewable subsidiaries entered into Power Agency Agreements appointing Brookfield as their exclusive agent in respect of the sale of electricity, including the procurement of transmission and other additional services. In addition, Brookfield scheduled, dispatched and arranged for transmission of the power produced and the power supplied to third-parties in accordance with prudent industry practice. Pursuant to each Agreement, Brookfield was entitled to be reimbursed for any third party costs incurred, and, in certain cases, received 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 were transferred by Brookfield to Brookfield Renewable. |
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Energy Marketing Agreement |
Brookfield had agreed to provide energy marketing services to Brookfield Renewable’s North American businesses. Under this Agreement, Brookfield Renewable paid 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 9 – Direct operating costs. |
On closing of the Energy Marketing Internalization, the Energy Marketing Agreement was 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 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 and provides Brookfield the right to terminate the agreement in 2036. |
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, 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 was transferred to Brookfield Renewable. |
Pursuant to a 20-year power purchase agreement, Brookfield purchased all energy from Lievre Power in Quebec at C$68 per MWh. The energy rates were 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 was transferred to Brookfield Renewable. |
Pursuant to a power guarantee agreement, Brookfield purchased all energy from the two facilities of Hydro Pontiac Inc. at a price of C$68 per MWh, 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 was 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 had an initial term to 2029 and automatically renewed for a successive 20-year period with certain termination provisions. On closing of the Energy Marketing Internalization, the power guarantee agreement with Hydro Pontiac Inc. was transferred to Brookfield Renewable. |
Pursuant to a 10-year Wind Levelization agreement that expired in February 2019, Brookfield mitigated 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 resulted in a payment from Brookfield Renewable to Brookfield, while a shortfall would result in a payment from Brookfield to Brookfield Renewable. |
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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 voting agreements with certain Brookfield subsidiaries as managing members of entities related to 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 holds its interest in its Colombian operations as part of a consortium. The consortium in turn 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. |
Simultaneously with the completion of the TerraForm Power acquisition, Brookfield Renewable entered into voting agreements with a controlled affiliate of Brookfield to transfer the power to vote their respective shares held of TerraForm Power to Brookfield Renewable. As a result, Brookfield Renewable controls and consolidates TerraForm Power. |
Brookfield Renewable entered into voting agreements with certain Brookfield subsidiaries whereby these subsidiaries, as managing members of entities related to Brookfield Infrastructure Fund IV (the “BIF IV 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 IV Entities. Brookfield Renewable’s economic interests in the BIF IV Entities is 25%. |
Other Agreements |
Sponsor Line Agreement |
TerraForm Power entered into the Sponsor Line with Brookfield Asset Management and one of its affiliates (the “Lenders”) on October 16, 2017. The Sponsor Line establishes a $500 million secured revolving credit facility and provides for the Lenders to commit to making LIBOR loans to Brookfield Renewable during a period not to exceed three years from the effective date of the Sponsor Line (subject to acceleration for certain specified events). TerraForm Power may only use the revolving Sponsor Line to fund all or a portion of certain funded acquisitions or growth capital expenditures. The Sponsor Line terminates, and all obligations thereunder become payable, no later than October 16, 2022. Borrowings under the Sponsor Line bear interest at a rate per annum equal to a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus 3% per annum. In addition to paying interest on outstanding principal under the Sponsor Line, Brookfield Renewable is required to pay a standby fee of 0.5% per annum in respect of the unutilized commitments thereunder, payable quarterly in arrears. |
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TerraForm Power is permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the Sponsor Line at any time without premium or penalty, other than customary “breakage” costs. Under certain circumstances, TerraForm Power may be required to prepay amounts outstanding under the Sponsor Line. |
During the year ended December 31, 2018, TerraForm Power made two draws on the Sponsor Line totaling $86 million that were used to fund part of the purchase price of the acquisition of Saeta and repaid such amounts in full. As of December 31, 2019, and December 31, 2018, respectively, there were no amounts drawn under the Sponsor Line. |
The sponsor line was terminated upon the completion of the TerraForm Power acquisition. |
TERP Relationship Agreement |
TerraForm Power entered into a relationship agreement, referred to as the TERP Relationship Agreement, dated October 16, 2017 with Brookfield Asset Management, which governed certain aspects of the relationship between Brookfield Asset Management and TerraForm Power. Pursuant to the TERP Relationship Agreement, Brookfield Asset Management agreed that TerraForm Power will serve as the primary vehicle through which Brookfield Asset Management and certain of its affiliates will own operating wind and solar assets in North America and Western Europe and that Brookfield Asset Management will provide, subject to certain terms and conditions, TerraForm Power with a right of first offer on certain operating wind and solar assets that are located in such countries and developed by persons sponsored by or under the control of Brookfield Asset Management. The rights of TerraForm Power under the TERP Relationship Agreement are subject to certain exceptions and consent rights set out therein. |
TerraForm Power did not acquire any renewable energy facilities pursuant to the TERP Relationship Agreement from Brookfield Asset Management during the years ended December 31, 2020, 2019, and 2018. TERP Relationship Agreement was terminated upon the completion of the TerraForm Power acquisition. |
TERP Registration Rights Agreement |
TerraForm Power entered into a registration rights agreement, referred to as the TERP Registration Rights Agreement, on October 16, 2017 with Orion Holdings. The TERP Registration Rights Agreement governed the rights and obligations of TerraForm Power, on the one hand, and Brookfield Asset Management and its affiliates, on the other hand, with respect to the registration for resale of all or a part of the TERP common stock held by Brookfield Asset Management or any of its affiliates that become party to the TERP Registration Rights Agreement. |
On June 11, 2018, Orion Holdings, NA HoldCo and TerraForm Power entered into a Joinder Agreement pursuant to which NA HoldCo became a party to the TERP Registration Rights Agreement. On June 29, 2018, a second Joinder Agreement was entered into among Orion Holdings, NA HoldCo, BBHC Orion and TerraForm Power pursuant to which BBHC Orion became a party to the TERP Registration Rights Agreement. |
The TERP Registration Rights Agreement was terminated upon the completion of the TerraForm Power acquisition. |
New Terra LLC Agreement |
TerraForm Power and BRE Delaware Inc. entered into an amended and restated limited liability company agreement of TerraForm Power, LLC, referred to as the New Terra LLC Agreement, dated October 16, 2017. The New Terra LLC Agreement, among other things, reset the incentive distribution right, or IDR, thresholds of TerraForm Power, LLC to establish a first distribution threshold of $0.93 per share of TERP common stock and a second distribution threshold of $1.05 per share of TERP common stock. As a result of the New Terra LLC Agreement, amounts distributed from TerraForm Power, LLC were to be distributed on a quarterly basis as follows: |
• | first, to TerraForm Power in an amount equal to TerraForm Power’s outlays and expenses for such quarter; |
• | second, to holders of TerraForm Power, LLC Class A units, referred to as Class A units, until an amount has been distributed to such holders of Class A units that would result, after taking account of all taxes payable by TerraForm Power in respect of the taxable income attributable to such distribution, in a distribution to holders of shares of TERP common stock of $0.93 per share (subject to further adjustment for distributions, combinations or subdivisions of shares of TERP common stock) if such amount were distributed to all holders of shares of TERP common stock; |
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• | third, 15% to the holders of the IDRs pro rata and 85% to the holders of Class A units until a further amount has been distributed to holders of Class A units in such quarter that would result, after taking account of all taxes payable by TerraForm Power in respect of the taxable income attributable to such distribution, in a distribution to holders of shares of TERP common stock of an additional $0.12 per share (subject to further adjustment for distributions, combinations or subdivisions of shares of TERP common stock) if such amount were distributed to all holders of shares of TERP common stock; and |
• | thereafter, 75% to holders of Class A units pro rata and 25% to holders of the IDRs pro rata. |
TerraForm Power made no IDR payments during the years ended December 31, 2019, 2018 and 2017. |
The New Terra LLC Agreement was amended upon the completion of the TERP acquisition to remove TerraForm Power, LLC’s obligations to make IDR payments. |
Credit facilities and funds on deposit |
Brookfield Asset Management has provided a $400 million committed unsecured revolving credit facility maturing in December 2021 and the interest rate applicable on the borrowed amounts is LIBOR plus up to 1.8%. As at December 31, 2020, there were no draws on the committed unsecured revolving credit facility provided by Brookfield Asset Management. Brookfield Asset Management had also placed funds on deposit with Brookfield Renewable in the amounts of $325 million in December 2020 (2019: $600 million which was fully paid back in full prior to December 31, 2019 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, 2020 totaled less than $1 million (2019: $6 million). |
Brookfield Renewable participates with institutional investors in Brookfield Americas Infrastructure Fund, Brookfield Infrastructure Fund II, Brookfield Infrastructure Fund III, Brookfield Infrastructure Fund IV and Brookfield Infrastructure Debt Fund (“Private Funds”), each of which is a Brookfield sponsored fund, and in connection therewith, Brookfield Renewable, together with its institutional investors, has access to short-term financing using the Private Funds’ credit facilities. |
Other Agreements |
In 2011, on formation of Brookfield Renewable, Brookfield transferred certain development projects to Brookfield Renewable for no upfront consideration but is entitled to receive variable consideration on commercial operation or sale of these projects. |
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The following table reflects the related party agreements and transactions in the consolidated statements of income (loss), for the years ended December 31: |
| 2020 | 2019 | 2018 |
(MILLIONS) |
Revenues |
Power purchase and revenue agreements........................................................... $ | 286 $ | 558 $ | 534 |
Wind levelization agreement.............................................................................. | — | 1 | 7 |
| | | | $ | 286 $ | 559 $ | 541 |
Direct operating costs |
Energy purchases................................................................................................ $ | — $ | (22) $ | (20) |
Energy marketing & other services.................................................................... | (4) | (20) | (24) |
Insurance services(1)........................................................................................... | (24) | (23) | (25) |
| | | | $ | (28) $ | (65) $ | (69) |
Interest expense |
Borrowings......................................................................................................... $ | (2) $ | (7) $ | (13) |
Contract balance accretion................................................................................. | (13) | (8) | — |
| | | | $ | (15) $ | (15) $ | (13) |
Management service costs..................................................................................... $ | (235) $ | (135) $ | (94) |
(1) | Insurance services were paid to a subsidiary of Brookfield Asset Management that brokers external insurance providers on behalf of Brookfield Renewable. The fees paid to the subsidiary of Brookfield Asset Management for the year ended December 31, 2020 were nil (2019: $1 million and 2018: less than $1 million). Beginning in 2020, insurance services are paid for directly to external insurance providers. |
The following table reflects the impact of the related party agreements and transactions on the consolidated statements of financial position as at December 31: |
| | | | | Related party | 2020 | 2019 |
(MILLIONS) |
Trade receivables and other current assets | | | | | |
Contract asset | | | | | Brookfield................................................ $ | 46 $ | 51 |
Due from related parties | | | | | |
Amounts due from | | | | | Brookfield................................................ | 36 | 48 |
| | | | | Equity-accounted investments and other. | 20 | 12 |
| | | | | | $ | 56 $ | 60 |
Other long-term assets |
Contract asset | | | | | Brookfield................................................ $ | 409 $ | 422 |
Due to related parties |
Amounts due to | | | | | Brookfield................................................ $ | 455 $ | 93 |
| | | | | Equity-accounted investments and other. | 21 | 10 |
Accrued distributions payable on LP units, BEPC |
exchangeable shares, Redeemable/ |
Exchangeable partnership units and GP interest | | | | | Brookfield................................................ | 30 | 36 |
| | | | | | $ | 506 $ | 139 |
Other long-term liabilities | | | | | |
Amounts due to | | | | | Equity-accounted investments and other. $ | 11 $ | 7 |
Contract liability | | | | | Brookfield................................................ | 602 | 562 |
| | | | | | $ | 613 $ | 569 |
Current assets Amounts due from Brookfield are non-interest bearing, unsecured and due on demand.Current liabilitiesAmounts due to Brookfield are unsecured, payable on demand and relate to recurring transactions. |
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32. SUBSIDIARY PUBLIC ISSUERS |
The following tables provide consolidated summary financial information for Brookfield Renewable, BRP Equity, and Finco: |
| | | | Subsidiary | | | | Brookfield |
| Brookfield | BRP | | Credit | Other | | Consolidating | Renewable |
(MILLIONS) | Renewable(1) | Equity | Finco | Supporters(2) | | Subsidiaries(1)(3) | adjustments(4) | consolidated |
As at December 31, 2020: |
Current assets................................. $ | | | | | | | | | 44 $ 416 $ 2,173 $ | 568 $ | 1,770 $ | | | | | (3,229) $ | 1,742 |
Long-term assets............................. | 4,879 | 256 | 6 | 31,329 | 47,886 | | (36,376) | 47,980 |
Current liabilities............................ | | | | | | | | | 39 | 7 | 39 | 6,535 | 2,391 | | | | | (6,135) | 2,876 |
Long-term liabilities....................... | | | | | | | | | — | — 2,132 | | 214 | 22,736 | | | | | (3) | 25,079 |
Participating non-controlling |
interests – in operating |
subsidiaries.................................. | | | | | | | | | — | — | — | | | — | 11,100 | | | | | — | 11,100 |
Participating non-controlling |
interests – in a holding |
subsidiary – Redeemable/ |
Exchangeable units held by |
Brookfield.................................... | | | | | | | | | — | — | — | 2,721 | — | | | | | — | 2,721 |
Class A shares of BEPC................. | | | | | | | | | — | — | — | | | — | 2,408 | | | | | — | 2,408 |
Preferred equity.............................. | | | | | | | | | — | 609 | — | | | — | — | | | | | — | 609 |
Preferred limited partners’ equity | 1,028 | — | — | 1,039 | — | | | | | (1,039) | 1,028 |
As at December 31, 2019: |
Current assets.................................... $ | | | | | | | | | 32 $ 408 $ 1,832 $ | 133 $ | 3,776 $ | | | | | (4,161) $ | 2,020 |
Long-term assets............................... | 5,428 | 251 | 2 | 25,068 | 44,459 | | (31,032) | 44,176 |
Current liabilities.............................. | | | | | | | | | 40 | 7 | 24 | 3,918 | 2,597 | | | | | (4,163) | 2,423 |
Long-term liabilities......................... | | | | | | | | | — | — 1,801 | | 300 | 21,851 | | | | | (659) | 23,293 |
Participating non-controlling |
interests – in operating |
subsidiaries................................... | | | | | | | | | — | — | — | | | — | 11,086 | | | | | — | 11,086 |
Participating non-controlling |
interests – in a holding subsidiary |
– Redeemable\Exchangeable |
units held by Brookfield............... | | | | | | | | | — | — | — | 3,317 | — | | | | | — | 3,317 |
Preferred equity................................ | | | | | | | | | — | 597 | — | | | — | — | | | | | — | 597 |
Preferred limited partners’ equity..... | | | | | | | | | 833 | — | — | 844 | — | | | | | (844) | 833 |
(1) | Includes investments in subsidiaries under the equity method. |
(2) | Includes BRELP, BRP Bermuda Holdings I Limited, Brookfield BRP Holdings (Canada) Inc., Brookfield BRP Europe Holdings Limited, Brookfield Renewable Investments and BEP Subco Inc., collectively the “Subsidiary Credit Supporters”. |
(3) | Includes subsidiaries of Brookfield Renewable, other than BRP Equity, Finco and the Subsidiary Credit Supporters. |
(4) | Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a consolidated basis. |
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| | | | Subsidiary | | | | Brookfield |
| Brookfield | BRP | | Credit | Other | | Consolidating | Renewable |
(MILLIONS) | Renewable(1) | Equity | Finco | Supporters | | Subsidiaries(1)(2) | adjustments(3) | consolidated |
For the year ended December 31, 2020 |
Revenues............................................... $ | | | | | | | | | — $ — $ — $ | — $ | 3,810 $ | | | | | — $ | 3,810 |
Net income (loss).................................. | (130) | — (10) | | (772) | 1,173 | | | | | (306) | (45) |
For the year ended December 31, 2019 |
Revenues................................................ $ | | | | | | | | | — $ — $ — $ | 2 $ | 3,970 $ | | | | | (1) $ | 3,971 |
Net income (loss)................................... | | | | | | | | | 10 | — (4) | | (156) | 1,997 | | | | | (1,767) | 80 |
For the year ended December 31, 2018 |
Revenues................................................ $ | | | | | | | | | — $ — $ — $ | — $ | 3,798 $ | | | | | (1) $ | 3,797 |
Net income (loss)................................... | | | | | | | | | 62 | 7 (1) | | | | | | | | | | (25) | 1,485 | | | | | (945) | 583 |
(1) | Includes | | | | | | | | | | | | | investments in subsidiaries under the equity method. |
(2) | Includes subsidiaries of Brookfield Renewable, other than BRP Equity, Finco, and the Subsidiary Credit Supporters. |
(3) | Includes elimination of intercompany transactions and balances necessary to present Brookfield Renewable on a consolidated basis. |
See Note 15 – Borrowings for additional details regarding the medium term notes issued by Finco. See Note 16 – Non-controlling interests for additional details regarding Class A Preference Shares issued by BRP Equity. |
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