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Guggenheim Securities upgrades Brookfield Renewable on Colombian expansion

GuggenheimSecurities LLC upgraded BrookfieldRenewable Partners LP shares to "buy," highlightingupside from Brookfield's expansion into the Colombian power market via itspartial ownership ofIsagen SA.

Guggenheimanalysts assigned a $33 price target to Brookfield, which closed at $30.83 onJuly 20, and further projects that the company could see a 6% dividend yieldover the next year, shaking out to about a 14% return overall.

"Ourupgrade and price target are based on revised run-rate [funds from operations]following the accretive and fully financed Isagen acquisition, which we don'tthink is adequately priced in at this stage," Guggenheim analyst SophieKarp said in a July 20 note.

Guggenheimestimates that additional funds from operations at current levels could mean$541 million of added accretion, taken together with separate acquisitions inBrazil and Pennsylvania.

Brookfield,along with its partners, acquired a partial 57% stake in Isagen for an initialroughly $2 billion purse and is expected to close on subsequent tender offersfor the remaining Isagen shares this quarter, bringing the total price tag paidby the consortium to about $3.4 billion, Guggenheim said.

Ofthat, Brookfield will have contributed enough to own about 25% of Isagen'sroughly 3,000 MW of hydroelectric assets, which have generated about $300million to $370 million in EBITDA historically.

Thataccretion might not be adequately reflected in Brookfield Renewable's currentshare price, Guggenheim said, especially given that Isagen supplies about 17%of Colombia's electric power, according to the analysts' estimates.

"Weview the Colombian market as a good strategic fit for BEP," Karp said."We note that with its heavy reliance on hydro power, which supplies over70% of the country's electricity, Colombia is a naturally good strategic fitfor BEP given its expertise in running hydro portfolios and its experiencethroughout Latin America."