Brookfield Renewable Partners L.P.

our operations

We operate our facilities through operating platforms in North America, Brazil, Colombia, and Europe which are designed to maintain and enhance the value of our assets, while cultivating positive relations with local stakeholders. We own and manage 215 hydroelectric generating stations, 37 wind facilities, three biomass facilities and three natural gas-fired (“Co-gen”) plants. Overall, the assets we own or manage have 10,367 megawatts (“MW”) of generating capacity and annual generation of 28,252 gigawatts (“GWh”) based on long-term averages. The table below outlines our portfolio as at March 31, 2016:

⁽¹⁾            Includes 100% of capacity and generation from equity-accounted investments. 

⁽²⁾            Long-term average (“LTA”) is calculated on an annualized basis from the beginning of the year, regardless of the acquisition or commercial operation date.

⁽³⁾            North America hydroelectric LTA is the expected average level of generation, as obtained from the results of a simulation based on historical inflow data performed over a period of typically 30 years.

⁽⁴⁾            Hydroelectric assets located in Brazil benefit from a market framework which levelizes generation risk across producers.

⁽⁵⁾            Hydroelectric LTA is the expected average level of generation, as obtained from the results of a simulation based on historical inflow data performed over a minimum period of 20 years.  The Colombian segment reflects Brookfield Renewable’s proportionate share (16%) in the portfolio; long-term average generation attributable to non-controlling interests is 12,203 GWh.

⁽⁶⁾            Wind LTA is the expected average level of generation, as obtained from the results based on simulated historical wind speed data performed over a period of typically 10 years. 

⁽⁷⁾            Includes one Co-gen plant in Colombia (300 MW), two Co-gen plants in North America (215 MW), and three biomass facilities in Brazil (120 MW).

The following table presents the annualized long-term average generation of our portfolio as at March 31, 2016 on a quarterly basis:

⁽¹⁾            Includes 100% of generation from equity-accounted investments.

⁽²⁾            LTA is calculated on an annualized basis from the beginning of the year, regardless of the acquisition or commercial operation date.

⁽³⁾            Hydroelectric LTA is the expected average level of generation, as obtained from the results of a simulation based on historical inflow data performed over a period of typically 30 years.

⁽⁴⁾            Hydroelectric assets in Brazil benefit from a market framework which levelizes generation risk across producers.

⁽⁵⁾            Colombia LTA is the expected average level of generation based on historical data over a minimum period of 20 years. The Colombian segment reflects Brookfield Renewable’s proportionate share (16%) in the portfolio; long-term average generation attributable to non-controlling interests is 12,203 GWh.

⁽⁶⁾            Wind LTA is the expected average level of generation, as obtained from the results based on simulated historical wind speed data performed over a period of typically 10 years. 

⁽⁷⁾            Includes one Co-gen plant in Colombia (300 MW), two Co-gen plants in North America (215 MW), and three biomass facilities in Brazil (120 MW).

Statement Regarding Forward-Looking Statements and Use of Non-IFRS Measures

This Interim Report contains  forward-looking information within the meaning of U.S. and Canadian securities laws. We may make such statements in this Interim Report, in other filings with the U.S. Securities and Exchange Commission (“SEC”) or in other communications with Canadian regulators - see “Cautionary Statement Regarding Forward-Looking Statements”. We make use of non-IFRS measures in this Interim Report  - see “Cautionary Statement Regarding Use Of Non-IFRS Measures”. This Interim Report, our Form 20-F  and additional information filed with the SEC and with securities regulators in Canada are available on our website at www.brookfieldrenewable.com, on the SEC’s website at www.sec.gov or on SEDAR’s website at www.sedar.com.

Letter to SHAREHOLDERS

We continue to build Brookfield Renewable into the preeminent global renewable power business by leveraging our long track record of acquiring hydro assets for value and surfacing upside through operational excellence. Our goal continues to be growing our cash flows and value in line with our long-term total return objective of 12%-15% on a per share basis. Looking ahead, we believe the market for renewable investments will only improve.

Current Environment

We currently own over 10,300 megawatts of renewable operating capacity in some of the most attractive markets for renewables, of which nearly 8,200 megawatts are hydro generation. We also have a 7,000 megawatt global development pipeline, making us one of the largest publicly-traded pure-play renewable businesses in the world.  

In North America, we are finding numerous hydro opportunities from owners who are looking to raise capital.  We are also seeing wind and solar assets which for the first time are being priced at attractive returns, as a result of many of the public yieldcos having capital constraints. 

In Europe, we are seeing high quality hydro assets come to market as low commodity and power prices are impacting the balance sheets of a number of industries. We also continue to build out our wind development pipeline, which is a key differentiator for us, as few people have the resources to develop these assets themselves. 

In Brazil, we continue to see a market with little competition for investment opportunities. Many owners of high quality hydro and wind remain in need of liquidity as the recession and lack of capital impact their core businesses. This is creating opportunities for us to potentially acquire assets with contracted cash flows backed by high credit quality at very attractive returns.

The Renewable Power Sector

Globally, the demand for carbon reduction and sustainable, renewable power continues to grow. In addition, volatile capital markets, depressed power prices, and scarcity of capital in certain geographies are creating the best investment environment we have seen in many years.

Over the past decade, we have witnessed unprecedented growth in the renewable power sector. Over $300 billion annually is currently being invested into renewables as governments look to replace aging, carbon-emitting thermal power plants. Much of this investment has been supported by government incentives and/or direct contracts such as feed-in-tariffs. These incentives enhance the cash flows and returns of new-build wind and solar, as the costs of these technologies are still high on a relative basis and thus do not provide investors with appropriate risk-adjusted returns. These incentives have had a significant impact on the power industry, some as follows:   

·         Manufacturers of renewable technologies have been able to invest meaningfully in their production processes and R&D. As a result, the per-megawatt hour cost for wind and solar technology has been rapidly decreasing. Despite the advances, incentives are still needed to generate appropriate returns on capital but some markets are getting closer to economically viable projects. 

·         Wind and solar are by their nature intermittent and are therefore unable to provide reliable bulk base-

load power and on-demand peak power, creating significant challenges to power markets and transmission technologies. This in turn creates opportunities for technologies such as gas and hydro for base-load generation. Longer term, batteries may be able to provide utility-scale storage and capacity services, but this is years away.  

·         With the backdrop of government support for wind and solar, as well as the tremendous global growth potential, many dedicated renewable investment entities, both public and private, have been established to invest into this market. These investment vehicles have largely pursued a strategy of owning contracted, operating wind and solar assets that provide investors with cash returns at a premium to long-term bonds with growth potential largely tied to acquisitions. We have been sellers of assets to these buyers.

In the context of the above, our strategy has been to focus on three areas that we believe will continue to ensure our business has stable cash flows as well as significant upside optionality, both leveraging our operating and development expertise: 

We are acquiring hydro at the bottom of the cycle. We have acquired 1,500 megawatts of high quality hydro in the northeastern United States, investing over $3 billion recently. These assets were acquired during a historically low power price environment, providing stable cash flows today, with significant upside either through price signals or long term contracts which will be needed to incentivize continued investment in utility-scale power technologies.   

We have maintained discipline in a highly competitive wind and solar market.  We grew our global wind business to 1,500 megawatts across 6 countries and added over 1,600 megawatts of wind development sites to our portfolio.  Almost all of our growth came through development as the returns on a risk-adjusted basis were far greater than acquisitions. As for solar, we continue to monitor the market and will eventually invest, but are still being patient until the market moves in our favor.

We continue to use our operating expertise to expand into new markets where capital is scarce. We entered Europe during the credit crisis and now have 600 megawatts of operating wind facilities with 200 megawatts under development. We expanded in Brazil, acquiring 600 megawatts of hydro, wind and biomass assets in this recent recessionary downturn, and have another 120 megawatts of hydro and biomass currently under construction.  Finally, with partners we acquired 3,000 megawatts of very high quality, utility-scale hydro in Colombia, a growth market where power is in undersupply and low global oil prices have provided an attractive entry point from a currency perspective.  

Recent Transactions

In January, we acquired a 58% controlling interest in Isagen along with our institutional partners. Isagen is Colombia’s third-largest power generation company with a 3,032 megawatt predominantly hydroelectric portfolio. Our consortium acquired the Isagen shares at the reserve price established by the Colombian government. During the quarter, we launched the first of two mandatory tender offers to remaining shareholders at the same price paid to the government.  When these tender offers are concluded in the late summer of 2016, we expect to own close to 100% of the company (our share being approximately 25%). 

Subsequent to quarter end, we also completed the acquisition of a 296 megawatt hydroelectric portfolio in Pennsylvania which complements our existing hydro fleet in the northeastern U.S. In Brazil, we completed the acquisition of two small hydro facilities totaling 51 megawatts, which we have since integrated into our platform. 

Operations

The business continues to perform well. In the first quarter, we achieved $455 million in Adjusted EBITDA

and $187 million in Funds From Operations. Inflows in North America were above long-term average while the traditional rainy season in Brazil led to improved hydrology and rising reservoir levels following two years of drought conditions. In North America, we ended the quarter with reservoirs approximately 30% above average which should provide the business with positive momentum entering the spring months. Globally, our wind portfolio also performed in line with expectations, reflecting strong asset availability and wind resource. 

Our development program continues to advance on scope, schedule and budget. In Europe, we began construction on a 15 megawatt wind project in Northern Ireland and advanced our first wind project in Scotland, a 20 megawatt facility, towards construction. In Brazil, we continue to advance the construction of 72 megawatts of hydroelectric facilities and recently completed the expansion work at a 55 megawatt biomass site in Sao Paulo. 

Our liquidity position at quarter-end remained strong with $1.3 billion of cash and bank lines. Combined with the free cash flow generated from our asset base and our access to capital with our investment-grade balance sheet, we are well positioned to fund ongoing growth initiatives. 

In light of the attractive growth opportunities we are seeing, we are also advancing an additional $800 million to $1 billion of capital-raising initiatives. These include up-financings of approximately $200-$300 million, which will extend maturities and maintain current low interest costs. We expect the balance to be realized through capital recycling initiatives.  

We look forward to reporting on our progress next quarter and are grateful for your continued support.

Sincerely,

Sachin Shah

Chief Executive Officer

May 4, 2016

Our Competitive Strengths

Brookfield Renewable Partners L.P. ("Brookfield Renewable") is the owner and operator of a diversified portfolio of high quality assets that produce electricity from renewable resources.

Our business model is to utilize our global reach to identify and acquire high quality renewable power generating assets at favorable valuations, finance them on a long-term, low-risk basis, and enhance the cash flows and values of these assets using our experienced operating teams to earn reliable, attractive, long-term total returns for the benefit of our shareholders.

Largest publicly-traded pure play renewable business.We own the world’s largest publicly traded, pure-play renewable business with approximately $27 billion in assets under management and 10,367 MW of installed capacity.  Long-term average generation from operating assets on a proportionate basis is 21,982 GWh. Our portfolio includes 215 hydroelectric generating stations on 81 river systems, 37 wind facilities and three biomass facilities, diversified across 15 power markets in North America, Brazil, Colombia, and Europe.

The following charts illustrate annualized long-term average generation on a proportionate basis, while adjusting for the share from facilities in which we own less than a 100% interest.

Focus on attractive hydroelectric asset class.  Our assets are predominantly hydroelectric and represent one of the longest life, lowest-cost and most environmentally-preferred forms of power generation. Our North American assets have the ability to store water in reservoirs approximating 29% of their annualized long-term average generation. Our assets in Brazil benefit from a framework that levelizes generation risk across hydroelectric producers. The ability to store water in reservoirs in North America as well as benefit from levelized generation in Brazil provides partial protection against short-term changes in water supply. As a result of our scale and the quality of our assets, we are competitively positioned compared to other listed renewable power platforms, providing significant scarcity value to investors.

Well positioned for global growth mandate. We have strong organic growth potential with an approximate 6,800 MW development pipeline spread across all of our operating platforms, combined with the ability to capture operating efficiencies and the value of rising power prices for the market-based portion of our portfolio. Our organic growth is complemented by our strong acquisition ability. Over the last ten years, we have acquired or commissioned 83 hydroelectric facilities totaling approximately 4,800

MW, 38 wind facilities totaling approximately 1,680 MW, three biomass facilities totaling 120 MW and one Co-gen plant of 300 MW. For the three months ended March 31, 2016, we acquired or commissioned hydroelectric facilities and Co-gen facilities that have an installed capacity of 2,783 MW and 300 MW, respectively. Our ability to develop and acquire assets is strengthened by our established operating and project development teams, strategic relationship with Brookfield Asset Management, and our liquidity and capitalization profile. We have, in the past, and may continue in the future to pursue the acquisition or development of assets through arrangements with institutional investors in Brookfield Asset Management sponsored or co-sponsored partnerships. 

Attractive distribution profile.  We pursue a strategy which we expect will provide for highly stable, predictable cash flows sourced from predominantly long-life hydroelectric assets ensuring an attractive distribution yield. We target a long-term distribution payout ratio of approximately 70% of Funds From Operations and a long-term distribution growth rate in a range of 5% to 9% annually.

Stable, high quality cash flows with attractive long-term value for limited partnership unitholders.  We intend to maintain a highly stable, predictable cash flow profile sourced from a diversified portfolio of low operating cost, long-life hydroelectric and wind assets that sell electricity under long-term, fixed price contracts with creditworthy counterparties. Approximately 91% (on a proportionate basis) of our 2016 generation output is contracted to public power authorities, load-serving utilities, industrial users or to affiliates of Brookfield Asset Management. The power purchase agreements for our assets have a weighted-average remaining duration of 16 years (on a proportionate basis), providing long-term cash flow stability.

Strong financial profile. With approximately $27 billion of assets under management, our debt to total capitalization is 39% and approximately 77% of our borrowings are non-recourse to Brookfield Renewable. Corporate borrowings and subsidiary borrowings have weighted-average terms of approximately six and nine years, respectively. Our available liquidity at quarter end included approximately $1.3 billion of cash and cash equivalents and the available portions of credit facilities.

Management’s Discussion and Analysis

HIGHLIGHTS FOR THREE MONTHS ENDED MARCH 31, 2016

Operating Results

We benefitted from above long-term average generation levels in our North American hydroelectric portfolio, a return to long-term average generation across our wind portfolio and the growth in our portfolio.

Hydroelectric generation was 1,757 GWh higher compared to the prior period driven by above average inflows in North America and improving hydrology conditions in Brazil. Reservoirs in North America ended the quarter 33% above long-term average. The incremental generation from assets in Colombia and Brazil acquired during the quarter and a full period’s contribution from assets acquired in early 2015 was 474 GWh.

Wind generation was 170 GWh higher compared to the prior period as wind resources improved across the portfolio. Generation from the prior year included 37 GWh related to the 102 MW wind facility in California sold in 2015.

Higher generation across our portfolio and stronger capacity pricing and ancillary revenues increased revenues by $118 million. This was partially offset by a continued low energy pricing environment in the northeastern United States and relatively lower market prices in Brazil.  The appreciation of the U.S. dollar resulted in a reduction of $30 million to revenues and a net impact of $20 million to Funds From Operations. The growth in our portfolio contributed revenues of $208 million.

Growth and Development

Acquisitions

On January 22, 2016 (the “Acquisition Date”), a consortium comprising of Brookfield Renewable and its institutional partners (the “consortium”) acquired an initial 57.6% interest in Isagen S.A. E.S.P. (“Isagen”) from the Colombian government (the “Isagen Acquisition”).  Isagen is Colombia’s third-largest power generation company which owns and operates a 3,032 MW portfolio, consisting predominantly of six, largely reservoir-based, hydroelectric facilities.  Annual generation is expected to approximate 15,000 GWh.  See “Acquisition of Initial Interest in Isagen”.

On January 29, 2016, we acquired and will retain a 100% in a 51 MW portfolio in Brazil comprised of two operating hydroelectric facilities which are expected to generate 293 GWh annually.

On April 1, 2016, we closed our previously announced acquisition of a 296 MW portfolio of operating hydroelectric facilities in Pennsylvania. The portfolio is expected to generate 1,109 GWh annually. This

portfolio was acquired with our institutional partners and we will retain an approximate 30% controlling interest. 

Construction and development

We continue to advance the construction, on scope, schedule and budget, of 127 MW of hydroelectric and biomass development projects in Brazil and 29 MW wind projects in Northern Ireland. Collectively, these projects are expected to generate 708 GWh annually with commissioning expected between 2016 and 2018.

Liquidity and Capital Resources

Our available liquidity at quarter end included approximately $1.3 billion of cash and cash equivalents and the available portions of credit facilities. Our debt to total capitalization is 39% and approximately 77% of our borrowings are non-recourse to Brookfield Renewable. Corporate borrowings and subsidiary borrowings have weighted-average terms of approximately 6 and 9 years, respectively.

Long-term debt and credit facilities

Credit facilities and corporate borrowings

·         Secured, independently of our institutional partners, a $500 million acquisition facility to support our investment in the 3,032 MW portfolio of operating facilities in Colombia

Subsidiary borrowings

·         Secured, with our institutional partners, $750 million of non-recourse financing of which $510 million was drawn to partially fund the initial 57.6% interest in the 3,032 MW portfolio of operating facilities in Colombia

·         On April 1, 2016, we completed a $315 million financing associated with the 296 MW hydroelectric portfolio in Pennsylvania acquired on the same date

Raised approximately $170 million of incremental capital from the following financing initiatives:

·         Completed a C$150 million ($112 million) financing associated with a 488 MW hydroelectric portfolio in Ontario

·         Completed a C$50 million ($38 million) financing associated with a 349 MW hydroelectric portfolio in Ontario 

·         Completed a €88 million ($98 million) refinancing associated with a 123 MW wind portfolio in Portugal

Equity transactions

·          Completed an exchange of Class A, Series 5 Preference Shares for newly issued Class A, Series 5 Preferred LP Units.  A total of 2,885,496 Class A, Series 5 Preference Shares were tendered and exchanged for an equal number of Class A, Series 5 Preferred LP Units

Distribution increase

·          Increased LP Unitholder distributions to $1.78 per LP Unit on an annualized basis, an increase of 12 cents per LP Unit, which took effect with the distribution payable on March 31, 2016

HISTORICAL OPERATIONAL AND FINANCIAL INFORMATION

⁽¹⁾       Includes 100% of capacity for all assets.

⁽²⁾       For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or commercial operation date and is not annualized.

⁽³⁾       The Colombian segment reflects Brookfield Renewable’s proportionate share (16%) of generation in the portfolio; long-term average and actual generation attributable to non-controlling interests is 1,899 GWh and 1,369 GWh, respectively.

⁽⁴⁾       Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”, “Generation and Financial Review by Segments for the Three Months Ended March 31, 2016”.

⁽⁵⁾       For the three months ended March 31, 2016, weighted average LP Units, Redeemable/Exchangeable units and General Partnership units totaled 275.5 million (2015: 275.7 million).

⁽⁶⁾       Represents distributions per unit to holders of LP Units, Redeemable/Exchangeable partnership units and GP interest.

⁽⁷⁾       Total capitalization is calculated as total debt plus deferred income tax liabilities, net of deferred income tax assets, and equity.

This Management’s Discussion and Analysis for the three months ended March 31, 2016 is provided as of May 4, 2016. Unless the context indicates or requires otherwise, the terms “Brookfield Renewable”, “we”, “us”, and “our” mean Brookfield Renewable Partners L.P. and its controlled entities. Brookfield Renewable changed its name from Brookfield Renewable Energy Partners L.P. to Brookfield Renewable Partners L.P. on May 3, 2016.

Brookfield Renewable’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), which require estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the amounts of revenue and expense during the reporting periods.

Certain comparative figures have been reclassified to conform to the current year’s presentation.

Figures presented in $ are in United States (“U.S.”) dollars, C$ are in Canadian dollars, € are in Euros, R$ are in Brazilian Real and COP are in Colombian pesos.

Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars.

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 this Management’s Discussion and Analysis.

PRESENTATION TO PUBLIC STAKEHOLDERS

Brookfield Renewable’s consolidated equity interests include the non-voting limited partnership units ("LP Units") held by public unitholders and Brookfield, Redeemable/Exchangeable limited partnership units in Brookfield Renewable Energy L.P. (“BRELP”), a holding subsidiary of Brookfield Renewable, held by Brookfield (“Redeemable/Exchangeable partnership units”), and a general partnership interest in BRELP held by Brookfield (“GP interest”). The LP Units and the Redeemable/Exchangeable partnership units have the same economic attributes in all respects, except that the Redeemable/Exchangeable partnership units provide Brookfield the right to request that their units be redeemed for cash consideration. In the event that Brookfield exercises this right, Brookfield Renewable has the right, at its sole discretion, to satisfy the redemption request with LP Units, rather than cash, on a one-for-one basis. Brookfield, as holder of Redeemable/Exchangeable partnership units, participates in earnings and distributions on a per unit basis equivalent to the per unit participation of the LP Units. As Brookfield Renewable, at its sole discretion, has the right to settle the obligation with LP Units, the Redeemable/Exchangeable partnership units are classified under equity, and not as a liability. 

Given the exchange feature referenced above, we are presenting LP Units, Redeemable/Exchangeable partnership units, and the GP interest as separate components of consolidated equity. This presentation does not impact the total income (loss), per unit or share information, or total consolidated equity.

As at the date of this report, Brookfield owns an approximate 62% LP Unit interest, on a fully-exchanged basis, and all general partnership interests in Brookfield Renewable, representing a 0.01% interest, while the remaining  approximately 38% is held by the public.

Performance Measurement

Our operations are segmented by the type of power generation (Hydroelectric, Wind, and Other, which includes Co-gen and Biomass) with Hydroelectric and Wind further segmented by geography (North America, which is comprised of the United States and Canada segments, Brazil, Colombia, and Europe), as that is how Brookfield Renewable’s Chief Executive Officer and Chief Financial Officer (collectively, the chief operating decision maker, or “CODM”) review our results, manage operations and allocate

resources. Accordingly, we report our results in accordance with these segments. See Note 19 – Segmented information in our unaudited interim consolidated financial statements.

The Isagen Acquisition resulted in a change in presentation of the segmented information in so far as it relates to the “Latin America” segment and the aggregation by the type of power generation. Effective as of the Acquisition Date, information regarding Isagen is provided to the CODM separately.  The CODM looks at the business separately as it is managed separately as a whole.  Accordingly, Isagen will be classified under the “Colombia” segment with generation and financial results aggregated for its hydroelectric and Co-gen facilities.  Furthermore, “Latin America” has been renamed “Brazil”.

One of our primary business objectives is to generate reliable and growing cash flows while minimizing risk for the benefit of all stakeholders. We monitor our performance in this regard through four key metrics — i) Net Income (Loss), ii) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), iii) Funds From Operations, and iv) Adjusted Funds From Operations.

It is important to highlight that Adjusted EBITDA, Funds From Operations, and Adjusted Funds From Operations do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. We provide additional information below on how we determine Adjusted EBITDA, Funds From Operations, and Adjusted Funds From Operations, as well as reconciliations to net income (loss) and cash flows from operating activities. See “Generation and Financial Review by Segments for the Three Months Ended March 31, 2016”.

Net Income (Loss)

Net income (loss) is calculated in accordance with IFRS.

Adjusted EBITDA

Adjusted EBITDA means revenues, other income, and our share of cash earnings from equity-accounted investments less direct costs (including energy marketing costs), before interest, income taxes, depreciation, management service costs and the cash portion of non-controlling interests.

Funds From Operations

Funds From Operations is defined as Adjusted EBITDA less interest, current income taxes and management service costs, which is then adjusted for the cash portion of non-controlling interests and distributions to preferred limited partners.

Our payout ratio is defined as distributions to Redeemable/Exchangeable partnership units, LP Units and the GP interest, including general partnership incentive distributions, divided by Funds From Operations.

Adjusted Funds From Operations

Adjusted Funds From Operations is defined as Funds From Operations less Brookfield Renewable’s share of adjusted sustaining capital expenditures (based on long-term sustaining capital expenditure plans).

GENERATION AND FINANCIAL REVIEW FOR THE THREE MONTHS ENDED MARCH 31, 2016

The following table reflects the actual and long-term average generation for the three months ended March 31:

⁽¹⁾         For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or commercial operation date and is not annualized.

⁽²⁾         Includes generation from both hydroelectric and Co-gen facilities. See “Performance Measurement”.

⁽³⁾         Includes 100% of generation from equity-accounted investments. The Colombian segment reflects Brookfield Renewable’s proportionate share (16%) in the portfolio.

We compare actual generation levels against the long-term average to highlight the impact of one of the important factors that affect the variability of our business results. In the short-term, we recognize that hydrology and wind conditions will vary from one period to the next; over time however, we expect our facilities will continue to produce in line with their long-term averages, which have proven to be reliable indicators of performance.

Our risk of a generation shortfall in Brazil continues to be minimized by participation in a hydrological balancing pool administered by the government of Brazil. This program mitigates hydrology risk by assuring that all participants receive, at any particular point in time, an assured energy amount, irrespective of the actual volume of energy generated. The program reallocates energy, transferring surplus energy from those who generated an excess to those who generate less than their assured energy, up to the total generation within the pool. Periodically, low precipitation across the entire country’s system could result in a temporary reduction of generation available for sale. During these periods, we expect that a higher proportion of thermal generation would be needed to balance supply and demand in the country potentially leading to higher overall spot market prices.

Generation for the three months ended March 31, 2016 totaled 7,659 GWh, above with the long-term average of 7,145 GWh and an increase of 1,836 GWh compared to the prior year. The contribution from the growth in the portfolio was 589 GWh.

The hydroelectric portfolio generated 6,533 GWh, above the long-term average of 5,981 GWh and an increase of 1,757 GWh compared to the prior year. In our North American portfolio, strong inflows and active reservoir management contributed to higher than prior year and above long-term average generation. Generation in Brazil continued to improve following the drought conditions affecting prior periods. Generation from the growth in our Brazilian portfolio was 219 GWh and the proportionate generation from the recently acquired facilities in Colombia was 255 GWh.

The wind portfolio generated 1,105 GWh, consistent with the long-term average of 1,108 GWh and an increase of 170 GWh compared to the prior year. Generation from the prior year includes 37 GWh related to our 102 MW wind facility in California sold in the third quarter of 2015. Generation at our North American portfolio was ahead of the prior year due to improved wind resource. The European portfolio generation was higher than in the prior year and was in line with long-term average. Contributions from our facilities acquired in Brazil in the prior year were 113 GWh which was above the long-term average of 81 GWh.

The following table reflects Adjusted EBITDA, Funds From Operations, Adjusted Funds From Operations, and provides a reconciliation to net income for the three months ended March 31:

⁽¹⁾       Non-IFRS measures.  See “Cautionary Statement Regarding Use of Non-IFRS Measures” and “Financial Review by Segments for the Three Months Ended March 31, 2016”.

⁽²⁾       Based on long-term sustaining capital expenditure plans.

⁽³⁾       Average LP Units outstanding during the period totaled 143.2 million (2015: 143.4 million).

Net income is an important measure of profitability, in particular because it has a standardized meaning under IFRS. The presentation of net income on an IFRS basis for our business will often lead to the recognition of a loss or a year-over-year decrease in income even though the underlying cash flows generated by the assets are supported by strong margins and stable, long-term power purchase agreements. The primary reason for this is that accounting rules require us to recognize a significantly higher level of depreciation for our assets than we are required to reinvest in the business as sustaining capital expenditures.

As a result, we also measure our financial results based on Adjusted EBITDA, Funds From Operations, and Adjusted Funds From Operations to provide readers with an assessment of the cash flow generated by our assets and the residual cash flow retained to fund distributions and growth initiatives.

Revenues totaling $674 million represent an increase of $233 million. 

Revenues from our hydroelectric portfolio increased $55 million. In North America, contributions from higher generation across our portfolio, and increased capacity pricing and ancillary revenues totaled $93

million. A relatively lower power pricing environment in the northeastern United States impacted revenues by $44 million.  While we are continuing to experience near cyclical lows in energy market prices, we also continue to benefit from strengthening capacity prices which are securing material cash flow contributions for future years. Therefore, our merchant facilities continue to perform above our expectations.  Revenues from our Brazilian hydroelectric portfolio increased by $6 million primarily due to higher generation with a partial offset from reduced energy prices in the short-term market.

Improved conditions across our North American and European wind portfolios resulted in a $9 million increase in revenues.  As the 102 MW wind facility in California was sold at the beginning of the third quarter of 2015, the decrease in contributions to revenues from the prior year amounted to $4 million.

The recent growth across our entire portfolio contributed revenues of $208 million. 

The appreciation of the U.S. dollar, compared to same period of the prior year, resulted in a $30 million reduction in revenues. This also affected operating and borrowing costs and, after taking into account the effect of our ongoing foreign currency hedging program, reduced the net impact on Funds From Operations to $20 million. 

The average total revenue per MWh of $75 decreased by $1 per MWh.  Higher relative energy pricing at certain facilities was partially offset by lower energy prices in North America along with the appreciation of the U.S. dollar impacting our revenues denominated in Canadian dollars, Euros and the Brazilian Real.

Direct operating costs totaling $243 million represent an increase of $109 million, due primarily to the growth in our portfolio.

Interest expense totaling $127 million represents an increase of $22 million, as incremental borrowing costs of $31 million attributable to the growth in our portfolio were partly offset by savings attributable to repayments on certain subsidiary borrowings and transfer of debt from the disposal of the 102 MW wind facility in California that occurred at the beginning of the third quarter of 2015.

Management service costs totaling $15 million represent an increase of $1 million, which was primarily attributable to the appreciation of the U.S. dollar.

The cash portion of non-controlling interests totaling $116 million represent an increase of $55 million which was primarily attributable to the Isagen acquisition.

Funds From Operations totaling $187 million represent an increase of $34 million, reflecting the variances described above. The growth in our portfolio contributed $11 million to Funds From Operations.

Net income totaling $79 million represents an increase of $28 million.

SEGMENTED DISCLOSURES

Segmented information is prepared on the same basis that Brookfield Renewable’s CODM manages the business, evaluates financial results, and makes key operating decisions.  See Note 19 - Segmented information in our unaudited interim consolidated financial statements.

HYDROELECTRIC

The following table reflects the results of our operations for the three months ended March 31:

⁽¹⁾           Includes 100% of generation from equity-accounted investments. The Colombian segment reflects Brookfield Renewable’s proportionate share (16%) in the portfolio; long-term average and actual generation attributable to non-controlling interests is 1,899 GWh and 1,369 GWh, respectively.

⁽²⁾           For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or commercial operation date and is not annualized.

⁽³⁾           As it relates to Colombia only, figures include generation from both hydroelectric and Co-gen facilities. See “Performance Measurement”.

⁽⁴⁾            Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”, and “Generation and Financial Review by Segments for the Three Months Ended March 31, 2016”.

North America

Generation from the portfolio was 5,252 GWh, above the long-term average of 4,434 GWh and also higher than prior year generation of 4,037 GWh. Active management of our reservoirs and high fleet availability resulted in our ability to maximize generation during the quarter. Reservoirs ended the quarter 33% above long-term average continuing to position us well at the beginning of the second quarter.

Revenues totaling $334 million represent an increase of $37 million. Funds From Operations totaling  $181 millionrepresent an increase of $41 million.

United States

Generation from the portfolio was 3,522 GWh, above the long-term average of 3,201 GWh and also higher than prior year generation of 2,535 GWh due to above long-term average inflows in New England, New York, Louisiana, Pennsylvania, Tennessee and North Carolina.

Revenues totaling $227 million represent an increase of $36 million, primarily attributable to the increase in generation, increased capacity pricing and ancillary revenues with a partial offset from relatively lower power prices in New England and Pennsylvania.

Funds From Operations totaling $87 million represent an increase of $33 million primarily attributable to the increase in revenues. 

Canada

Generation from the portfolio was 1,730 GWh, above the long-term average of 1,233 GWh and higher than prior year generation of 1,502 GWh. The variances were primarily attributable to above long-term average inflows at our facilities in Ontario and Quebec. 

Revenues totaling $107 million represent an increase of $1 million. The increase in generation and annual escalations in our power purchase agreements contributed $15 million to revenues. The appreciation of the U.S. dollar, over the same period of the prior year, impacted revenues by $14 million, but operating and borrowing costs were also affected and the net impact was partially offset by the ongoing foreign currency hedging program.

Funds From Operations totaling $94 million represent an increase of $8 million compared to the prior period.

Brazil

Generation from the portfolio was 1,026 GWh, below the long-term average of 1,193 GWh and higher than prior year generation of 739 GWh. Hydrology continued to improve this quarter and generation from our existing facilities increased 68 GWh compared to the prior year where we experienced persistent drought conditions. The assets acquired in the last twelve months generated 219 GWh.

Revenues totaling $48 million represent an increase of $3 million.  Increased generation was partly offset by reduced energy prices in the short-term market primarily due to improved hydrology. The appreciation of the U.S. dollar impacted revenues by $12 million, but also impacted operating and borrowing costs, resulting in a net decrease in Fund From Operations of $6 million.

Funds From Operations totaling $21 million was consistent with the prior year.

WIND

The following table reflects the results of our operations for the three months ended March 31:

⁽¹⁾            Includes 100% of generation from equity-accounted investments.

⁽²⁾           For assets acquired or reaching commercial operation during the year, this figure is calculated from the acquisition or commercial operation date and is not annualized. 

⁽³⁾            Non-IFRS measures. See “Cautionary Statement Regarding Use of Non-IFRS Measures”, and “Generation and Financial Review by Segments for the Three Months Ended March 31, 2016”.

North America

Generation from the portfolio was 521 GWh, below the long-term average of 576 GWh and higher than prior year generation of 484 GWh.

Revenues totaling $51 million were consistent with prior year. Funds From Operations totaling $19 million represent an increase of $3 million.

United States

Generation from the portfolio of 220 GWh was below the long-term average of 252 GWh and higher than prior year generation of 176 GWh primarily attributable to stronger wind conditions in California. The 102 MW wind facility in California was sold at the beginning of the third quarter of 2015, and the decrease in contributions amounted to 37 GWh in generation and $4 million in revenues.

Revenues totaling $22 million represent an increase of $2 million primarily due to increased generation. Funds from Operations totaling $1 million represent an increase of $3 million.  

Canada

Generation from the portfolio was 301 GWh, below the long-term average of 324 GWh and higher than prior year generation of 281 GWh primarily attributable to stronger wind conditions across the portfolio.

Revenues totaling $29 million represent a decrease of $2 million. Increased generation was partly offset by the appreciation of the U.S. dollar which impacted revenues by $3 million, but also affected operating and borrowing costs, resulting in a net decrease in Fund From Operations of $2 million.  Funds From Operations totaling $18 million was consistent with the prior year.

Europe

Generation of 471 GWh was above the long-term average of 451 GWh, and higher than prior year generation of 451 GWh due to above average wind conditions.   

Revenues totaling $42  million represent an increase of $1 million. Increased generation was partly offset by the appreciation of the U.S. dollar which impacted revenues by $1 million.  Funds From Operations totaling $8  million represent a decrease of $9  million. The decrease is primarily attributable to our ongoing foreign currency hedging program from which we benefited $8 million in the same period of the prior year.

Brazil

Generation of 113  GWh from the wind portfolio acquired in 2015 was above the long-term average of 81  GWh.

Revenues and Funds From Operations totaled $5  million and $1 million, respectively.

Analysis Of Consolidated Financial Statements and Other Information

Property, Plant and Equipment

In accordance with IFRS, Brookfield Renewable has elected to revalue its property, plant and equipment at a minimum on an annual basis, as at December 31^st of each year. Substantially all of Brookfield Renewable’s property, plant and equipment, are carried at fair value as opposed to historical cost, using a 20-year discounted cash flow model. 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, estimates of operating and capital expenditures, and assumptions about future inflation rates and discount rates by geographical location. For power generating assets acquired through business combinations during the year, Brookfield Renewable initially measures the assets at fair value consistent with the policy described in Note 2(l) – Business combinations in our December 31, 2015 audited consolidated financial statements. Accordingly, in the year of acquisition, power generating assets are not revalued at year-end unless there is an indication that assets are impaired.

Property, plant and equipment, at fair value totaled $24.3 billion as at March 31, 2016 as compared to $18.4 billion as at December 31, 2015. During the three months ended March 31, 2016, the Isagen Acquisition and acquisition of 51 MW hydroelectric portfolio in Brazil totaled $4,853 million reflecting the preliminary purchase price allocations at fair values. The development and construction of power generating assets totaled $59 million. Property, plant and equipment were impacted by foreign currency changes related to the weakening of the U.S. dollar in the amount of $1,226 million. We also recognized depreciation expense of $179 million which is significantly higher than what we are required to reinvest in the business as sustaining capital expenditures. 

Fair value of property, plant and equipment can vary with discount and terminal capitalization rates. Excluding power generating assets acquired during the year ended December 31, 2015, 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 as at December 31:

⁽¹⁾            The terminal capitalization rate applies only to hydroelectric assets in North America.

Terminal values are included in the valuation of hydroelectric assets in North America. 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 without consideration of potential renewal value. The weighted-average remaining duration of the authorization or useful life of a concession asset at December 31, 2015, was 18 years (2014: 15 years). Consequently, there is no terminal value attributed to the hydroelectric assets in Brazil. If an additional 20 years of cash flows were included in Brazil, the fair value of property, plant and equipment would increase by approximately $1 billion. See Note 12 - Property, plant and equipment, at fair value in our December 31, 2015 audited consolidated financial statements.

liquidity and capital Resources

Capitalization

A key element of our financing strategy is to raise the majority of our debt in the form of asset-specific, non-recourse borrowings at our subsidiaries on an investment-grade basis. As at March 31, 2016, long-term indebtedness increased from December 31, 2015 as a result of portfolio growth and the relative strengthening of our local currency denominated debt against the U.S. dollar. The debt to total capitalization ratio remained unchanged from December 31, 2015.

The following table summarizes the total capitalization and debt to total capitalization using book values as at March 31, 2016:

⁽¹⁾            Issued by a subsidiary of Brookfield Renewable and guaranteed by Brookfield Renewable. The amounts are unsecured.

⁽²⁾            Issued by subsidiaries of Brookfield Renewable and secured against their respective assets. The amounts are not guaranteed by Brookfield Renewable.

During the three months ended March 31, 2016 we completed the following financings:

Credit facilities

In January 2016, we secured, independently of our institutional partners, a $500 million acquisition facility. See “Acquisition of Initial Interest in Isagen”.

Subsidiary borrowings

In January 2016, we and our institutional partners secured non-recourse financing in the amount of $750 million with respect to the Isagen Acquisition.  In addition, the consortium assumed loans with principal balances totaling COP 3,850 billion ($1,143 million). See “Acquisition of Initial Interest in Isagen”.

In March 2016, we up-financed indebtedness associated with a 488 MW hydroelectric portfolio in Ontario through the issuance of C$150 million ($112 million) of notes. The notes bear interest at 3.41% and mature in November 2020.

In March 2016, we up-financed indebtedness associated with a 349 MW hydroelectric portfolio in Ontario through the issuance of C$50 million ($38 million) of bonds. The bonds bear interest at 3.24% and mature in June 2023.

In March 2016, we re-financed the loan associated with our 123 MW wind portfolio in Portugal by securing €88 million ($98 million) of long-term debt, a €5 million ($6 million) working capital facility and a €7 million ($8 million) debt reserve facility and simultaneously retired existing indebtedness of €70 million ($78 million). The long-term debt bears interest at the Euro Interbank Offered Rate plus a margin of 2.75% to 3.00% between now and its November 2028 maturity.  

Available liquidity

We operate with sufficient liquidity to enable us to fund growth initiatives, capital expenditures, distributions, withstand sudden adverse changes in economic circumstances or short-term fluctuations in generation, and to finance the business on an investment-grade basis. Principal sources of liquidity are cash flows from operations, our credit facilities, and proceeds from the issuance of securities through public markets and private capital.

The following table summarizes the available liquidity:  

⁽¹⁾    The cash and cash equivalents balances are shown on a proportionate basis and adjusted to reflect non-controlling interests of our partners. The cash and cash equivalents attributable to non-controlling interests as of March 31, 2016 and December 31, 2015 were $140 million and $23 million respectively.

⁽²⁾    Amounts are unsecured and revolving. Interest rate is at the U.S. dollar London Interbank Offered Rate (“LIBOR”) plus 1.20% (December 31, 2015: 1.20%).

Long-term debt and credit facilities

The following table summarizes our undiscounted principal repayments as at March 31, 2016:

⁽¹⁾            Subsidiary borrowings and corporate borrowings and credit facilities include $20 million and $65 million of unamortized premiums and deferred financing fees, respectively.

Subsidiary and corporate borrowings maturing in 2016 are expected to be refinanced at or in advance of maturity. Maturities of borrowings in 2016 include a series of our medium-term corporate notes, subsidiary borrowings on our portfolio of hydroelectric facilities in Colombia, Tennessee, and British Columbia, and debt associated with a portfolio of hydroelectric and wind facilities in the United States held through the Brookfield Americas Infrastructure Fund.

We remain focused on refinancing near-term facilities on acceptable terms and maintaining a manageable maturity ladder. We do not anticipate material issues in addressing our borrowings through 2020 on acceptable terms and will do so opportunistically based on the prevailing interest rate environment.

On April 1, 2016, we completed a $315 million non-recourse financing associated with the 296 MW hydroelectric portfolio in Pennsylvania acquired on the same date. On April 20, 2016, Isagen successfully amended a COP 367 billion ($122 million) loan to extend its maturity to December 2025. See “Subsequent Events”.

The overall maturity profile and average interest rates associated with our borrowings and credit facilities are as follows:

(1)    Given its short-term nature, the Isagen acquisition facility is excluded for the purpose of calculating average term and average interest rate.

CONTRACT PROFILE

We have a largely predictable revenue profile driven by both long-term power purchase agreements with a weighted-average remaining duration of 16 years (on a proportionate basis) combined with a well-diversified portfolio that reduces variability in our generation volumes. We operate the business on a largely contracted basis to ensure a high degree of predictability in Funds From Operations. We do however maintain a long-term view that electricity prices and the demand for electricity from renewable sources will rise due to a growing level of acceptance around climate change and the legislated requirements in some areas to diversify away from fossil fuel based generation.

The following table sets out contracts over the next five years for generation output assuming long-term average:

⁽¹⁾            Assets under construction are included when long-term average and pricing details are available and the commercial operation date is established in a definitive construction contract.

⁽²⁾            Includes generation of 1,865 GWh for 2016 and 2,393 GWh for 2017 secured under financial contracts.

⁽³⁾            Generation includes only Brookfield Renewable’s 16% proportionate share.

⁽⁴⁾            Long-term average on a proportionate basis includes wholly-owned assets, and our share of partially-owned assets and equity-accounted investments.

The following changes were made to the contract profile for the three months ended March 31, 2016 including power purchase agreements associated with the acquisition of:

·         The 3,032 MW hydroelectric and Co-gen portfolio in Colombia; and

·         The 51 MW hydroelectric portfolio in Brazil

We remain focused on re-contracting our generation on acceptable terms, once existing contracts expire, and will do so opportunistically at prices aligned with or above our long-term view. 

The majority of Brookfield Renewable’s long-term power purchase agreements are with investment-grade rated or creditworthy counterparties. The composition of our contracted generation under power purchase agreements is comprised of Brookfield (45%), public power authorities (19%), industrial users (24%) and distribution companies (12%), all on a proportionate basis.

SUMMARY CONSOLIDATED BALANCE SHEETS

The following table provides a summary of the key line items on the unaudited  interim consolidated balance sheets:

Contractual obligations

Development and construction

The remaining development project costs on three Brazilian hydroelectric projects totaling 72 MW, a 55 MW biomass facility in Brazil, and two wind projects totaling 29 MW in Ireland are expected to be $247 million. The biomass facility and a 14 MW wind project are nearing completion and are expected to be fully operational in 2016. Two hydroelectric projects with a combined capacity of 53 MW and the 15 MW wind projects commenced construction and are expected to be fully operational in 2017, and the 19 MW hydroelectric project is expected to be fully operational in 2018.

Commitments and contingencies

In October 2015, we entered into an agreement to acquire two hydroelectric facilities in Pennsylvania with an aggregate capacity of 296 MW. The facilities are expected to generate 1,109 GWh annually. We have pursued this transaction with our institutional partners, and retained an approximate 30% controlling interest in the facilities. The transaction closed on April 1, 2016. See “Subsequent Events”.

Following the closing of the Isagen Acquisition, the consortium is required to conduct two mandatory tender offers.  Brookfield Renewable’s subsidiaries have provided letters of credit for $230 million (December 31, 2015: nil) in connection with the mandatory tender offers.  See “Acquisition of Initial Interest in Isagen”.

Brookfield Renewable, on behalf of its 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. See “Liquidity and Capital Resources” for further details. 

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 and the Brookfield Infrastructure Fund II. As at March 31, 2016, the letters of credit issued were $69 million (December 31, 2015: $71 million).

Brookfield Renewable’s subsidiaries and equity-accounted entities have similarly provided letters of credit, which include, but are not limited to, guarantees for debt service reserves, capital reserves,

construction completion and performance. As at March 31, 2016, letters of credit issued by Brookfield Renewable’s subsidiaries and equity-accounted entities were $93 million and $16 million, respectively (December 31, 2015: nil and $16 million, respectively).

An integral part of our strategy is to participate with institutional investors in Brookfield-sponsored infrastructure funds that target acquisitions that suit Brookfield Renewable’s profile. In the normal course of business, Brookfield Renewable has made commitments to Brookfield-sponsored infrastructure funds to fund these target acquisitions in the future, if and when identified.

Guarantees

In the normal course of operations, we execute agreements that provide for indemnification and guarantees to third parties in transactions such as acquisitions, construction projects, capital projects, and purchases of assets. We have also agreed to indemnify our directors and certain of our officers and employees. The nature of the indemnities prevent us from making a reasonable estimate of the maximum potential amount that could be required to pay third parties, as many of the agreements do not 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, we have made no significant payments under indemnification agreements.

Off-Balance Sheet Arrangements

Brookfield Renewable has no off-balance sheet financing arrangements.

Related Party Transactions

Brookfield Renewable’s related party transactions are in the normal course of business, and are recorded at the exchange amount. Brookfield Renewable’s related party transactions are primarily with Brookfield.

Brookfield Renewable sells electricity to Brookfield through long-term power purchase agreements to provide contracted cash flow and reduce Brookfield Renewable’s exposure to electricity prices in deregulated power markets. Brookfield Renewable also benefits from a wind levelization agreement with Brookfield which reduces the exposure to the fluctuation of wind generation at certain facilities and thus improves the stability of its cash flow.

In addition to these agreements, Brookfield Renewable and Brookfield have executed other agreements that are described in Note 10 - Related Party Transactions in the  December 31, 2015 audited consolidated financial statements.

Brookfield Renewable has also entered into a number of voting agreements with Brookfield whereby Brookfield, as managing member of entities related to Brookfield Americas Infrastructure Fund and Brookfield Infrastructure Fund II, in which Brookfield Renewable holds investments in power generating operations with institutional partners, agreed to provide to Brookfield Renewable the authority to direct the election of the Boards of Directors of such entities.

The following table reflects the related party agreements and transactions on the interim consolidated statements of income for the three months ended March 31:

CONSOLIDATED STATEMENTS OF CASH FLOWS

The following table summarizes the key items on the unaudited  interim consolidated statements of cash flows for the three months ended March 31:

Cash and cash equivalents as at March 31, 2016 totaled $260 million, representing an increase of $197 million since December 31, 2015.

Operating Activities

Cash flows provided by operating activities totaling $225 million for the three months ended March 31, 2016 represent a year-over-year decrease of $7 million.

Financing Activities

Cash flows provided by  financing activities totaled $2,425 million for the three months ended March 31, 2016. Long-term debt – borrowings related to subsidiary borrowings and credit facilities were $1,278 million, and related to the growth in our portfolio. Long-term debt – repayments related to subsidiary borrowings were $108 million. The capital provided by participating non-controlling interests – in operating subsidiaries relates to the Isagen Acquisition and the acquisition of 51 MW hydroelectric portfolio in Brazil, and amounted to $1,403 million.

For the three months ended March 31, 2016, distributions paid to Brookfield Renewable unitholders or BRELP were $126 million (2015: $115 million). We increased our distributions to $1.78 per LP Unit, an increase of 12 cents per LP Unit which took effect in this quarter. The distributions paid to preferred shareholders and participating non-controlling interests - in operating subsidiaries were $21 million (2015: $44 million). See “Dividends and Distributions” for further details.

Investing Activities

Cash flows used in investing activities for the three months ended March 31, 2016 totaled $2,472 million. Our investments were with respect to the acquisition of a 3,032 MW hydroelectric and Co-gen portfolio in Colombia and a 51 MW hydro portfolio in Brazil. When combined, these investments totaled $1,902 million. Our continued investment in the development and construction of power generating assets was $45 million and sustainable capital expenditures totaled $13 million. Restricted cash and other movement totaled $495 million primarily relating to the mandatory tender offers.  See “Acquisition of Initial Interest in Isagen”.

NON-CONTROLLING INTERESTS

Preferred equity

On April 1, 2015, the fixed dividend rate on the Series 1 Preference Shares for the five years commencing May 1, 2015 and ending April 30, 2020 was reset and, if declared, will be paid at an annual rate of 3.355% (C$0.2096875 per share per quarter). The holders of 4,518,289 Series 1 Preference Shares exercised their right to convert their shares into Class A, Series 2 Preference Shares on a one-for-one basis. The holders of the Series 2 Preference Shares will be entitled to receive floating rate

cumulative preferential cash dividends, equal to the T-Bill Rate plus 2.62%. The quarterly dividend in respect of the February 1, 2016 to April 30, 2016 dividend period was paid on May 2, 2016 at an annual rate of 3.117% (C$ 0.192145 per share).

On June 23, 2015, we announced that the Toronto Stock Exchange had accepted a notice of Brookfield Renewable Power Preferred Equity Inc.’s (“BRP Equity”) intention to commence a normal course issuer bid in connection with its outstanding Class A Preference Shares. Under this normal course issuer bid, we are permitted to repurchase up to 10% of the total public float for each respective series of our Class A Preference Shares. Repurchases were authorized to commence on June 26, 2015 and will terminate on June 25, 2016, or earlier should Brookfield Renewable complete its repurchases prior to such date.

Class A, Series 5 Preference Shares – Exchange offer

In November 2015, we announced our offer to exchange (the “Exchange Offer”) each issued and outstanding Class A, Series 5 Preference Share of BRP Equity with an annual dividend rate of 5.0% (the “Series 5 Preference Shares”) for one newly issued Class A, Series 5 Preferred LP Unit of Brookfield Renewable with an annual distribution rate of 5.59%.

The Exchange Offer was open for acceptance until, and completed on, February 8, 2016. On that date, a total of 2,885,496 Class A, Series 5 Preference Shares were tendered and exchanged for an equal number of Class A, Series 5 Preferred LP Units.

Non-controlling interests in Isagen

Non-controlling interests in the amount of $3,163 million reflects the approximate 84% ownership interest in Isagen not held by Brookfield Renewable as at March 31, 2016. See “Acquisition of initial interest in Isagen”.

General partnership interest in a holding subsidiary held by Brookfield

Brookfield, as the owner of the 1% GP interest in BRELP, is entitled to regular distributions plus an incentive distribution based on the amount by which quarterly LP Unit distributions exceed specified target levels. To the extent that LP Unit distributions exceed $0.375 per LP Unit per quarter, the incentive is 15% of distributions above this threshold. To the extent that quarterly distributions exceed $0.4225 per LP Unit, the incentive distribution is equal to 25% of distributions above this threshold. Accordingly, incentive distributions of $6 million were made during the three months ended March 31, 2016 (2015: $2 million).

Participating non-controlling interests - in a holding subsidiary - Redeemable/Exchangeable units held by Brookfield

BRELP has issued Redeemable/Exchangeable partnership units to Brookfield, which may at the request of the holder, require BRELP to redeem these units for cash consideration. The 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 units presented to BRELP that are tendered for redemption in exchange for LP Units. If Brookfield Renewable elects not to exchange the Redeemable/Exchangeable partnership units for LP Units, the Redeemable/Exchangeable partnership units are required to be redeemed for cash. 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, and not as a liability.

PREFERRED LIMITED PARTNERS’ EQUITY

The holders of the Series 7 Preferred LP Units are entitled to receive fixed cumulative quarterly distributions at an annual rate of C$1.375 per unit, a yield of 5.5%, for the initial period ending on January 31, 2021. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of (i)

the 5-year Government of Canada bond yield plus 4.47%, and (ii) 5.5%. The Series 7 Preferred LP Units are redeemable on or after January 31, 2021.

The holders of Series 7 Preferred LP Units will have the right, at their option, to convert their Series 7 Preferred LP Units into Class A, Series 8 Preferred LP Units, subject to certain conditions, on January 31, 2021 and every five years thereafter. The holders of Series 8 Preferred LP Units will be entitled to receive cumulative quarterly floating distributions, as and when declared, at an annual rate equal to the 3-month Government of Canada Treasury Bills yield plus 4.47%.

The Class A Preferred LP Units do not have a fixed maturity date and are not redeemable at the option of the holders. As at December 31, 2015, none of the Class A Preferred LP Units have been redeemed by Brookfield Renewable.

LIMITED PARTNERS’ EQUITY

Brookfield Asset Management owns, directly and indirectly, 169,685,609 LP Units and Redeemable/Exchangeable partnership units, representing approximately 62% of Brookfield Renewable on a fully-exchanged basis.

We commenced a normal course issuer bid on December 29, 2014 to repurchase up to 7.1 million LP Units, representing approximately 5% of the issued and outstanding LP Units, for capital management purposes. In December 2015, we renewed the normal course issuer bid and the authorization to repurchase up to 7.1 million LP Units which will expire on December 28, 2016, or earlier should Brookfield Renewable complete its repurchases prior to such date.

SHARES AND UNITS OUTSTANDING

The shares and units outstanding are presented in the following table:

⁽¹⁾            The fully-exchanged amounts assume the exchange of Redeemable/ Exchangeable partnership units for LP Units at the beginning of the year.

DIVIDENDS AND DISTRIBUTIONS

The composition of the dividends and distributions for the three months ended March 31 are presented in the following table: