Shane Parrish with Connor Teskey
A power project can look profitable until rates or construction costs change. Brookfield locks in those variables before committing capital, making the investment depend more on execution than market forecasts.
Brookfield's principle is to underwrite the absolute worst-case scenario, ensuring that if you protect the downside, the upside will take care of itself.
Brookfield's four-contract rule locks in construction costs, revenue prices, engineering work and financing before capital is committed, leaving execution and operating risk to manage.
Utilizing long-term, fixed-rate, non-recourse financing at the individual asset level protects the broader portfolio from being tainted by a single underperforming project.