Earnings Call Transcript
Brookfield Renewable Partners L.P. (BEP)
Earnings Call Transcript - BEP Q2 2023
Operator, Operator
Good day and thank you for standing by. Welcome to the BEP Second Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Connor Teskey, CEO. Please go ahead.
Connor Teskey, CEO
Thank you, operator. Good morning everyone and thank you for joining us for our second quarter 2023 conference call. Before we begin, we would like to remind you that a copy of our news release, investor supplement, and letter to unitholders can be found on our website. We also want to remind you that we may make forward-looking statements on this call. These statements are subject to known and unknown risks, and our future results may differ materially. For more information, you are encouraged to review our regulatory filings available on SEDAR, EDGAR, and on our website. On today's call, we will provide an update on the business and our development activities. Then Jeh Vevaina, our Managing Partner and our Chief Investment Officer, will highlight the recently announced acquisition of Duke Energy Renewables. Lastly, Wyatt will conclude the call by discussing our operating results and financial position. Following our prepared remarks, we look forward to taking your questions. Our business performed well this quarter, building on the strong start to the year as we achieved 10% annual FFO per unit growth year-to-date. We were also successful in our development activities and growth initiatives, including our repowering activities where we have seen a strong uplift in performance at recently repowered assets, and are evaluating a growing pipeline of attractive opportunities within our portfolio. We continue to see the benefits of our geographically and technologically diverse operating platform. As we have said previously, we have purposely built our business by acquiring and developing a variety of clean energy assets in attractive power markets across the globe, where we are able to sign long-term PPAs with high-quality off-takers. In periods of volatile resources like this past quarter, the benefits of this strategy are especially pronounced as our scale and diversity enables us to consistently deliver on our targets. On our development initiatives, we have commissioned approximately 1,500 megawatts of new capacity so far this year, including the final phase of one of the largest-ever solar projects in the Americas, and we are on track to commission almost 5,000 megawatts in 2023, which is up from 3,500 megawatts commissioned in 2022 and 1,000 megawatts commissioned in 2021. Looking out over the next three years, we expect to deliver nearly 18,000 megawatts of new capacity, most of which has been materially derisked already, meaning we generally have permitting and interconnection largely in hand, and PPAs, matched financing, and construction contracts in place. Our approach to development has always been predicated on matching costs with future cash flows, mitigating the impact of cost escalation that many renewable power developers are experiencing in the current market, thereby securing the economics of our projects and not exposing our business to undue risk. With the scale of our broader 134,000-megawatt global development pipeline and the depth of our development and operating capabilities, we are well-positioned to capture the increasing corporate demand for contracted renewable energy at attractive prices. As an example, we expect annual demand from large technology companies to accelerate meaningfully, increasing by more than three times by the mid to latter part of this decade on the back of growth in expected Generative AI computing demand. These technology companies are already the largest corporate procurers of Green Power globally. To put this growth into context, we could see the energy load from just one of these large global technology companies with a 100% renewable power target, equal the current load demand of the entirety of the United Kingdom. We have longstanding global relationships with firms facing these needs and are currently engaged with a number of them around strategic partnerships, where we are well positioned to be a trusted partner given our capability and credibility to provide large scale clean energy solutions on a global basis. Today, demand for clean energy and energy transition is much more a corporate pull than a government push. We expect this dynamic, which will continue to accelerate, help drive higher returns through the sector and will increasingly differentiate market participants and favor businesses like ours that have the ability to provide a wide set of scale, green power, and decarbonization solutions with the ability to execute across the development spectrum and across all major power markets. We continue to scale our business in line with the growth in the sector as shown through our growth in commissioned capacity, our repowering projects, and through acquisition. We were successful this quarter signing transactions for almost $1.3 billion of equity investment alongside our institutional partners. Over the past 18 months, we have meaningfully outperformed our growth targets, closing transactions or agreeing to invest up to $21 billion or $4 billion net to Brookfield Renewable. On the back of this significant outperformance compared with our targets, we executed a bought deal and concurrent private placement raising aggregate equity proceeds to Brookfield Renewable of $650 million, our first equity issuance in seven years. While we have always focused on financing our growth via asset recycling, up financing, and with a measured amount of corporate debt or preferred equity, our step change in run rate growth, which we expect to continue, and our ability to acquire assets at attractive and highly accretive valuations resulted in us electing to issue equity capital to supplement these sources of financing. Going forward, we will continue to focus on execution of a self-funding model and selectively use equity when we see outsized highly accretive growth opportunities. Following this offering, we have over $4.5 billion of available liquidity and are well positioned to continue to fund our long-term growth targets through a mix of normal course funding sources. With that, we will turn the call over to Jeh to highlight our Duke Energy Renewables investment and some of our recent success with repowering projects.
Jeh Vevaina, Chief Investment Officer
Thank you, Connor, and good morning, everyone. As Connor mentioned earlier, we're continuing to scale our business in line with the growing demand for green power, the development in acquisition initiatives, including repowerings. This quarter, for approximately $1 billion in equity, we agreed to acquire Duke Energy Renewables, a fully integrated developer and operator of renewable power assets in the U.S. with 5,900 megawatts of operating and under-construction assets and a 6,100 megawatts development pipeline. With the closing of the Duke acquisition, we will have 14,000 megawatts of operating and 76,000 megawatts of development capacity in the U.S. across all major renewable technologies, making us one of the largest clean energy providers in the country and making it our largest market globally. With this acquisition, where the purchase price is to be paid over two equal installments with 50% in closing and 50% 18 months post-closing, we're adding a scale operating renewable platform that is 90% contracted, generating strong going-in cash flows, which are immediately accretive with significant upside from potential operating and commercial synergies, repowering, and development projects. With the incorporation of this portfolio in our business, we see potential to add value in several ways. The first is by leveraging our global procurement capabilities and operating expertise to take costs out of the business. We expect to be able to reduce corporate G&A costs and realize meaningful savings across the wind and solar fleet given our operating experience. These cost savings were not factored into our purchase price multiple and we are well positioned to execute these initiatives given our experience acquiring and integrating assets. We also see potential to increase the revenue profile of merchant and hub contracted assets through our power marketing capabilities and by signing new PPAs for uncontracted assets, leveraging our relationships with large buyers of green power. Given the potential benefit from investment in production tax credits, Duke's portfolio also has significant repowering potential. We see the opportunity to repower at least 1.5 gigawatts of wind assets over the next several years given advancements in technology, the age of these assets, and a strong wind resource at project locations. We believe with our recent experience in U.S. repowerings, we are uniquely capable of executing on these projects. This quarter, we advanced the repowering of our 200-megawatt Bishop Hill wind farm in Illinois, which we expect to complete in 2024 and will increase generation by approximately 15%. This is following other successful repowering projects we completed, including the first wind repowering project in the State of New York, which boosted generation across those assets by nearly 30%, and the repowering of our Shepherds Flat wind assets, the largest repowering project in the world, where we have seen excellent results thus far. Duke’s assets are located in some of the best resource locations in the U.S., and therefore, the benefit from enhancing productivity and extending the asset life is especially attractive. While we ascribe minimal value for the development pipeline when we underwrote this deal, there remains significant potential to advance these projects. The development portfolio has a large amount of secured interconnection and land, which will be built over time at good returns. Our financial strength, credibility as a counterparty, and capacity to review, underwrite, and execute a large investment quickly were integral to reaching an agreement with Duke. A key competitive advantage we have is our capabilities around executing large deals, given our expansive team of dedicated investment professionals and access to scaled partner capital. We also benefited as we were able to gain comfort around the integration of the business and our ability to carve out a large renewable power platform spread across multiple markets in the U.S. We believe our purchase price represents attractive risk-adjusted returns. In this market, we believe we will be able to see more opportunities to acquire large operating portfolios of renewable assets. There's a growing group of sellers looking to monetize for various reasons and limited buyers, who have the scale and ability to acquire and integrate these businesses. We look at all deals that come to market and expect to remain active.
Wyatt Hartley, CFO
Thank you, Jeh. As Connor spoke to in his earlier remarks, we continued to build on our strong start to the year in the second quarter. Operating results reflect robust realized pricing, the benefits of our organic development, and contributions from acquisitions and repowerings. We generated FFO of $312 million or $0.91 per unit so far this year, which is a 10% increase compared to the prior year. Our business continues to demonstrate the benefits of operating across diverse technologies and geographies with strong resources in one region offsetting weaker resources in others. Our North American hydro assets were impacted by a drier-than-normal June. However, we have seen significant precipitation in July, meaning reservoirs across our fleet are in good shape, setting us up well to capture strong summer pricing this quarter. We had solid performance in our wind and solar segment, benefiting from our inflation-linked long-duration contracts at favorable prices, which helped to offset an adjustment to the regulated price earned by our Spanish assets. The adjustment will reduce the revenue generated by these assets this year but will have a very positive impact on cash flows in the future, resulting in a slightly net positive overall impact to our returns given their regulated nature. As Connor mentioned, our balance sheet is in an excellent position and our available liquidity remains robust at over $4.5 billion, providing significant flexibility to fund growth and be opportunistic. Following our first equity issuance in seven years, we are well positioned to deliver on our growth targets, utilizing our normal sources of funding and our advancing non-recourse financing initiatives and our asset recycling program. Thus far this year, we have generated over $600 million of proceeds from our asset recycling program, achieving our dual goals of generating strong risk-adjusted returns on our invested capital and helping fund our growth internally through the derisking and sale of assets. As an example, this quarter, we signed the sale of our operating renewable portfolio in Uruguay, generating a 20% return and over two times our capital during our six years of investment in the country. Despite a tighter market for capital, we continue to see strong demand for high-quality renewable assets given accelerating corporate demand and increasing focus on energy security and government-supported electrification and decarbonization targets. We also remain in an excellent position to be patient across our processes given our strong balance sheet, unique access to partner capital, and a scale operating business that delivers consistent cash from operations. In closing, we remain focused on delivering 12% to 15% long-term total returns for our investors. To do this, we will continue to leverage our differentiated growth capabilities, advancing our significantly derisked pipeline of projects, being opportunistic in the current market, and investing in our operations to add value. On behalf of the Board and Management, we thank all our unitholders and shareholders for the ongoing support. We are excited about Brookfield's renewables future and look forward to updating you on our progress throughout the remainder of the year. That concludes our formal remarks for today's call. Thank you for joining us this morning. With that, I’ll pass it back to our operator for questions.
Operator, Operator
Our first question comes from Sean Stewart with TD Securities. Sean, your line is now open.
Sean Stewart, Analyst
Thank you. Good morning. A couple of questions, interested in your thoughts on continued asset recycling plans. You've advanced a lot so far this year, it feels like this is more a buyer's market. Connor, can you speak to, I guess, mid-term intentions with respect to asset recycling and technologies or regions that maybe offer better valuation terms on a relative basis?
Connor Teskey, CEO
Sean, thank you. What we would say we are seeing in the market is given a higher level of uncertainty around financing for a number of players, you certainly are seeing situations where it is a buyer's market. An example of that would be something like Duke Energy Renewables. However, that certainly is not the whole story, and there is still overwhelming demand for derisked high-quality renewable assets. This really goes to our strategy; we want to be investing where there is uncertainty and scarcity of capital and the need to improve, simplify, and enhance businesses. Then we want to be selling assets that are very simple, very derisked, and can attract lower cost of capital buyers. We're seeing opportunities to do both. We bought Duke this last quarter and we sold Uruguay at what we think is a very attractive valuation. We see both those trends continuing going forward. We do have a very robust capital recycling program throughout the remainder of 2023 and into 2024. To put some color around that, I would say the key focus of that asset recycling program is primarily concentrated on wind and solar assets in the Americas and Europe; that's certainly where we're seeing the greatest amount of demand.
Sean Stewart, Analyst
Okay. That's useful context. Thanks for that. Question on Westinghouse, are you sticking with the second-half closing for that transaction? Do you have any comments on the U.K. regulator process here and any other context on other approvals that will be needed to get that one across the line?
Connor Teskey, CEO
The only context we would provide is this is all very normal course. We needed upwards of 35 different regulatory approvals as it pertained to the Westinghouse transaction. We have received almost all of them at this point. There are a few outstanding that we are working through in the normal course. I would say none of this is unexpected or unusual. We are simply going through the typical process for a transaction of this nature. Your question highlights an exciting point for our business. We have four relatively scaled transactions that have been signed, that are working through to closing, being the remaining 50% acquisition of X-Elio, Duke Energy Renewables, Westinghouse, and Origin. I would say we probably expect those to close in that order with the first three coming this year and the Origin coming early next year, if not sooner. That gives our business a lot of growth trajectory for several quarters.
Operator, Operator
Our next question comes from the line of Rupert Merer with National Bank Financial.
Rupert Merer, Analyst
Hi, good morning, everyone. Connor, you mentioned the potential for strategic partnerships with large customers for renewable power. With an attractive PPA market, do you see any potential to optimize your revenues in your North American hydro portfolio and evolve away from a hedge strategy?
Connor Teskey, CEO
Rupert, thank you for the question. It's a great question. Taking a step back, this is something that we have been saying for a little while now, but it is really coming to light in the current environment. The demand for energy transition and decarbonization—there's a narrative out there that this is being driven by governments. We could not disagree more. This is being driven by corporate, and it is being driven by the largest, most profit-seeking corporations around the world. Those are the ones with a seemingly insatiable demand for green power and other decarbonization solutions. Because these are the businesses that are not only the largest, but are growing the fastest, they will continue to drive enhanced demand for green power solutions. While the bulk of that is going to be driven through PPAs tied to new build wind and solar projects, when we have conversations with these counterparties, our ability to offer them solutions across different green energy asset classes is one of the things that really differentiates us. You mentioned our hydros; our ability to offer contracting solutions 24/7 by mixing wind and solar with hydro is something that really differentiates us for these leading corporates that not only want green power but want uninterrupted all-day green power. Therefore, while the bulk of it is going to be PPAs tied to wind and solar, we're seeing opportunities across all our asset classes, including hydro. The tailwinds are quite broad-based here.
Rupert Merer, Analyst
So could we expect to see some PPAs on those hydros as well in the next few years?
Connor Teskey, CEO
PPAs or other long-term contracts. We're relatively indifferent to the form of those contracts, but I can tell you with confidence given the more constructive pricing environment we're seeing today relative to, let's say, 12 to 48-months ago, this is certainly an environment where we will look to contract those assets out on a medium or long-term basis and lock in some of these benefits for many years to come.
Rupert Merer, Analyst
Great. Thanks. And then as a follow-up to the conversation you had with Sean on the M&A market. So it’s a buyer's market. You see more demand for wind and solar in the Americas and Europe from competitors. Has that shifted your view on where you can get the best returns today? And then in M&A, I know we've seen you buying assets in North America, but is there going to be a higher return opportunity outside of North America and Europe?
Connor Teskey, CEO
I wouldn't say that. We're always cautious in painting the market in one way or everything's a buyer's market or everything's a seller's market. What is unique about this market is that relative to, let's say, 18 months ago, capital is a little higher cost and a little more uncertain for many market participants. This can create very attractive buying opportunities for us literally anywhere in the world or across any asset class, subject to the discrete dynamics of the counterparty on the other side. When we look at things like the European market right now, we do have a robust pipeline and expect to be active there in the back half of the year, seeing very attractive risk-adjusted returns. At the same time, we might also sell assets in the European market where we think we're going to get a very good outcome as well. What I'm observing is the slight increases in uncertainty around funding and the slight increases in uncertainty around things like supply chains that are difficult for some market participants to manage through create a more diversified set of opportunities, allowing us to buy and sell at attractive outcomes in the same markets at the same time. We love these market dynamics; it allows us to be playing positively in both directions.
Rupert Merer, Analyst
Great, thanks for the color. I'll leave it there.
Operator, Operator
Our next question comes from the line of Robert Hope with Scotiabank.
Robert Hope, Analyst
Good morning, everyone. I was hoping you could add some color on how you're thinking about how your development pipeline overlays with the expected increase in demand from technology companies? Could you potentially look to augment or reorder your projects such that they align better with the geographies where we could see the largest increase in technology demand or, more broadly, how do you stack up your development pipeline versus the areas where you expect to see growth?
Connor Teskey, CEO
Sure. Thanks, Rob. Taking a step back, what we are seeing in the market today is a pretty strong supply-demand imbalance. If you have economic, ready-to-build projects near load centers, you have multiple potential buyers for that power. There is more demand for that power than there are ready-to-build projects to supply it. This allows us to attract more constructive pricing and transmit some of the cost increases of CapEx and interest to the end customer, preserving our developed margin. Additionally, because we see such strong demand, we are doing everything in our power to pull forward projects within our development pipeline to get them out of the ground faster. The benefits of programs like IRA and the step change increase in demand will allow us to continue that dynamic of trying to pull forward development projects in the short to medium term. There is sufficient visibility on this. In terms of augmenting our development pipeline, we have 135,000 megawatts around the world. We're going to keep adding to that. This demand is broad-based across all major geographies around the world. We'll continue to work to keep our pipeline robust and strong and then pull projects forward within that pipeline. It’s unlikely that you could buy a ready-to-build project simply to recontract it with a tech company; the market is more efficient than that, and it's probably priced in already.
Robert Hope, Analyst
I appreciate that. And then maybe another broad question. How are you seeing system operators or have you seen any changes in system operators or transmission interconnection rules given the significant increase in renewable projects across the globe? Just kind of referencing the Alberta announcement from you yesterday and whether or not we could see some system operators pause to put a more orderly investment of renewables in the system?
Connor Teskey, CEO
Certainly. We'll make three comments on that. First, there seems to be a lot of heightened interest in grid interconnection timing and how that impacts development in the last six, 12, or 18 months. We would respectfully suggest that securing grid connection has been a critical component of developing renewables for the last 10 years. Well, it might be getting more airtime in the news recently, project identification and how they fit in the grid queue has always been part of our development process and something we take into account when buying development pipeline. The second point I would make is that every project around the world, in order to get built, needs permits, grid connection, land. Once you have those three things, it requires financing, offtake, equipment, and EPC construction. We encourage anything around the world that expedites the bringing forward of any of these necessary requirements for development to bring projects faster. We greatly support some of the initiatives we are seeing globally to make interconnection processes more efficient and connect more projects quickly; we think we would be a net beneficiary of that and able to move quickly to take advantage of any changes.
Robert Hope, Analyst
Thank you.
Operator, Operator
Our next question comes from the line of David Quezada with Raymond James.
David Quezada, Analyst
Thanks. Good morning, everyone. Maybe just starting with a question related to M&A, I guess, and the commentary around that. It certainly feels like a good environment for you guys in terms of there being potentially some attractive targets. I'm just wondering with the three transactions that you've got in the queue so far, do you need to see those close before you could pursue anything else, or do you still feel like you'd be open to an attractive deal if it arose?
Connor Teskey, CEO
I want to be abundantly clear. We would not wait for those transactions to close. If we saw an attractive deal today, we would do it without hesitation. Part of our motivation around some of the significant up-financing activity we've done year-to-date and our first equity offering is to position ourselves to be opportunistic in this market, and we think that's something that has proven beneficial for us recently and will continue to play out going forward. We see this as a robust market where we can make accretive transactions. To be more helpful, I'll split it into two buckets. Given the significant demand we're seeing for corporate contracts for green power PPAs, we continue to see very attractive risk-return dynamics in developers. Therefore, we are not going to reduce our growth pursuits in that segment, as the investments we've made thus far are performing well and if not ahead of our underwriting expectations; we believe the tailwinds will strengthen. The second area, where our access to capital, and our ability to be opportunistic will be helpful is in looking at opportunities to buy either operating assets or consider public to privates. These are both areas of the market where we've been quieter over the last two to three years, but we see them increasingly coming into our strike zone. If we see attractive opportunities, we won't hesitate to execute.
David Quezada, Analyst
That's great color. Thanks, Connor. Appreciate that. And maybe just one more for me, any comment that you would make on what you're seeing in the supply chain, be it for solar panels or turbines or key equipment components?
Connor Teskey, CEO
Yes, great question. There's not an easy answer for that, because I would say the direction of different equipment is quite varied. I would say that the solar panel supply chain around the world is improving dramatically. The cost for solar panels is going down significantly around the world. There is increased global capacity that has come online, which is not only reducing prices but also decreasing shipping and lead times. There is one caveat to that, which is in the U.S., where some ongoing investigations and tariff discussions have muted some of these dynamics. However, even in the U.S., we've seen panel prices decline substantially year-to-date. In wind, the wind OEM market is challenging right now. We are experiencing some shortages across the global supply chain similar to what we saw in solar about two years ago. I think this market favors those who can leverage their scale and operating expertise to manage through these dynamics, as wind equipment procurement is becoming more expensive with extended lead times. Lastly, another key area of focus for us, which we are factoring into all our development underwriting and business plans, is transformers. Transformers are increasingly becoming one of the longer lead time items. However, we are addressing that within our development plans.
David Quezada, Analyst
Excellent. Appreciate that, Connor. I'll turn it over.
Operator, Operator
Our next question comes from the line of Andrew Kuske with Credit Suisse.
Andrew Kuske, Analyst
Thanks, good morning. I guess the question focuses on the building versus buying. Historically, you've done a lot of buying, perhaps less building. In fairness, you have built. Have the conditions changed? I think this came in the prepared remarks of the 18 gigs over the next three years you plan on building. Are you really seeing a step function change on the building side versus the buying, but still looking opportunistically to buy?
Connor Teskey, CEO
Great question. Historically, if we look back, we were probably about 90% operating and 10% development. We are seeing increasing opportunities to secure very attractive risk-adjusted returns on the development side that could see that percentage increase, but to be clear, it's not going to become the majority of our business. Even with a significant increase in our development activities, the vast majority of our recurring cash flows and profits—probably north of 80%—are going to continue to come from operating assets. That being said, we appreciate you highlighting it. We are seeing significant growth in our development activities – 1,000 megawatts in 2021, 3,500 megawatts in 2022, 5,000 megawatts this year, and 18,000 megawatts over the next three years. This level of activity is what we're very comfortable with, given the growth of our business and the number of development portfolio companies we've acquired over the last three to five years. Development is becoming an increasing portion of our business, but our operating portfolio will still constitute the bulk of our business for the foreseeable future.
Andrew Kuske, Analyst
I appreciate that. And then maybe just dovetailing with those comments. The return profile you’ve discussed of 12% to 15% on a longer-term basis remains unchanged. But is there maybe a greater tilt to that? Like going in might be more modest, but then in the back end there's more robust or just any thoughts you have on additional color you can provide?
Connor Teskey, CEO
The 12% to 15% range is one we feel very comfortable with; we expect to be in that range on a blended basis. At certain points in time when markets were robust, we would have suggested long-term contracted operating assets would be in the 10% to 12% range, construction assets at 12% to 15%, and development assets in the high teens returns. In today's market, where you can be opportunistic, we’re finding opportunities to buy operating contracted renewables in that 12% to 15% range, which presents fantastic risk-adjusted returns. While the spectrum may not be changing, I think we can say that the floor is rising.
Operator, Operator
Our next question comes from Naji Baydoun with iA Capital Markets.
Naji Baydoun, Analyst
Hi, good morning. I just wanted to go back to the corporate power market dynamics. I think you mentioned in your letter that there are potentially higher returns in some of the corporate backed projects or contracts. Can you maybe talk about the trade-offs between corporate versus government contracts and how you see that evolving over time?
Connor Teskey, CEO
Hi, Naji. So I might take an extra minute to explain this from a higher level. Going back six or seven years, we decided we wanted to build best-in-class corporate power marketing capability within Brookfield Renewable. We wanted to avoid chasing government tariffs that could potentially be removed with a change in government or policy. We believed that the corporate demand dynamics would increase and be more enduring over time. With hindsight, we may have been a bit early. What this has led to, now four or five years later, is that we have one of the best corporate power marketing capacities globally. The trend for green power procurement is being driven predominantly by corporates. The largest and fastest-growing corporates around the world are driving this momentum, and we are seeing an increasing number of corporations looking to procure green power. So if corporate demand is setting the trend line, government policy is determining the ebb and flow around that trend line. Currently, both are positively influencing our favor. Corporate demand is accelerating, and government policies like the IRA are providing additional support. Building renewables with long-term corporate offtakes is more complex but generates higher returns. Corporate demand is also more resilient, being driven by the long-term strategic visions of these companies as opposed to government cycles. Thus, we see the shift towards corporate pull as beneficial for our industry in terms of demand and maintaining attractive returns medium to long-term.
Naji Baydoun, Analyst
I guess you're seeing a better trade-off with corporations and governments, because historically, some of the puts and takes were that with government-backed contracts, you would have sort of a higher counterparty, higher credit quality counterparty, longer-term contracts. But you're saying maybe some of that now flows into the corporate market, and because of that complexity that you mentioned, potentially better returns?
Connor Teskey, CEO
Yes. We would be very quick to suggest we haven't given anything away in terms of credit counterparty risk; our biggest customers worldwide are the largest, strongest credit entities you could have. Many of these companies have higher ratings than some government backed contracts globally.
Naji Baydoun, Analyst
That's very helpful. Just a couple of other follow-up questions. On the new transition fund, just wondering if you can discuss what some of the target opportunities you think the second transition fund could be pursuing? If it's similar to the first one, would you be looking more towards newer forms of decarbonization, for example, carbon capture, etc.?
Connor Teskey, CEO
Certainly. Brookfield Asset Management launched fundraising for its second global transitions fund in Q2. The reception has been very positive, and the strategy resonates well with investors. This fund will continue to provide large-scale institutional capital for us to pursue the biggest and most attractive opportunities where we see less competition. We view BGTF 2 as a huge benefit going forward. In terms of what the fund will target, it is 100% consistent with what BGTF 1 targeted. The largest component of BGTF 1 was clean energy renewables developers, the second was power transformation, building out renewables within existing utilities, and the third was investments in other clean energy technologies, like nuclear. Only about 20% of the fund was directed towards new decarbonization solutions, and I would say that we expect a similar balance going forward.
Naji Baydoun, Analyst
Okay, that's great. And maybe one last quick question, similar to the Duke transaction, we're seeing a number of utilities looking to simplify their structures and separate some assets. I guess this would play very well into your capabilities on the M&A side. Are you sort of looking at more of these more complex deals in the Americas?
Connor Teskey, CEO
Absolutely. One benefit of our platform today is given our scale and, particularly, our growth over the last two to three years, we are fortunate to see almost every opportunity in the market. This allows us to focus our time and resources on the ones where we see the best risk-adjusted returns and where we can bring something differentiated that facilitates success and generates above-average returns. There’s a dynamic globally where some sellers, for various reasons, are seeking to exit high-quality assets. We are looking at several of these and will aim to execute the ones we are positioned to succeed with.
Naji Baydoun, Analyst
Thank you.
Operator, Operator
That concludes today's question-and-answer session. I'd like to turn the call back to Connor Teskey for closing remarks.
Connor Teskey, CEO
Thank you, everyone, for joining today's call and for your ongoing interest and support in Brookfield Renewable. We look forward to speaking with everyone at our Investor Day on September 21st and then updating on our results throughout the remainder of the year. Thank you and have a great day.
Operator, Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.