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."