Brookfield Renewable (BEP) has increased its ownership position in TerraForm Power (TERP-US) to 30% from 15% following a private placement common equity issuance related to the Saeta Yield (SAY-Spain) acquisition. Brookfield sees the transaction being US$80m accretive to funds from operations (US$0.26 per share). That said, our FFO estimates increase US$0.04-US$0.07 per share, as they only include dividends received from TERP, rather than its proportionate share of FFO (plus other minor estimate revisions). We believe this better represents the cash available to BEP unitholders, given that TERP is equity accounted for, has significant debt amortizations, and is a separate public entity. In addition, we already had $0.02 of accretion in our estimates from when the acquisition was initially proposed earlier this year. Nevertheless, we see TERP and Saeta as a good long-term investment opportunity for BEP, though acquiring shares of a publicly-traded entity does not materially move our valuation. At recent levels, we believe BEP could be attractive to longer-term, income-oriented investors.
I’m not easily shocked.
But I don’t believe I’ve ever seen anything that surprised me more than the performance data encapsulated in the chart below:
Equities outperform real estate?
After all I’m a seasoned Wealth Advisor who has weathered the storms of – occasionally apocalyptic – market movements. And I have seen performance statistics – relating to individual stocks and even entire investment categories – that have taken my breath away.
Even taking into account the extreme anomalies of the Vancouver real estate market in recent years, the above numbers are astonishing. So much so, that were it not for the sources – Bloomberg and The Economist – I might have treated them with a healthy degree of skepticism.