When fear grips the market, investors have a tendency to tar all stocks with the same brush.

Unfortunately for Brookfield Renewable Energy Partners LP (TSX: BEP-U, NYSE: BEP), on the surface it looks like something that it’s not—in at least three different ways.

Those deceiving looks means investors may miss a great income investment: BEP yields 7%, and is a buy below US$30 in our legacy conservative holdings.

BEP’s image problem starts with the “LP” in its name, which indicates it’s a master limited partnership (MLP). With midstream MLPs crashing hard the past year, some investors are mindlessly pummeling anything with a whiff of MLP.

The term “renewable” suggests that BEP is similar to the foundering YieldCos, a relatively new security created by utilities hoping to make money by capitalizing on the MLP craze.

Lastly, as an independent power producer, BEP is being lumped in with merchant generators suffering from weak wholesale power markets.

So at least some of the stock’s nearly 20% decline in Canadian dollars since its trailing-year high last April is due to mistaken identity.

Not helping is the decline in the Canadian dollar, which has lopped off an extra 10 percentage points of performance in U.S. dollars. That’s likely caused some U.S. investors to incorrectly assume that the drop in the share price they’re seeing suggests the company’s in trouble.

So what exactly is BEP? It’s one of the world’s largest publicly traded pure-play renewable power businesses. But unlike midstream MLPs, whose dependence on the equity market for funding has created a financial crisis in the sector, BEP has greater control over its financial destiny.

For one, it generates significant free cash flow—about US$467 million annually over the past three years—and keeps about US$100 million per year to reinvest in its business. That lets the company finance a big portion of growth internally, in contrast to midstream MLPs, which were accustomed to funding 40% to 60% of growth by issuing new equity. In fact, BEP has made just one secondary offering since it started in 2011.

As a deep-value investor, BEP routinely acquires distressed assets at pennies on the dollar. As these assets appreciate, they give the firm another cheap source of capital through refinancings or sales.

On the latter front, BEP’s geographic diversification—the firm owns more than 7,000 megawatts of assets in the U.S., Canada, Brazil and Europe—allows it to recycle capital by selling assets in overvalued areas and reinvesting the proceeds in undervalued areas. For instance, BEP will likely take advantage of high valuations in the U.S. to reallocate a portion of its portfolio toward Brazil, where economic turmoil has created a buyer’s market.

Although this C$4.8 billion company has about C$4.1 billion in debt, 19.3% of it comes due between now and late 2020. Thereafter, maturities are staggered out to 2053.

With a pipeline of organic growth projects of 1,000 megawatts through 2020, management believes it can grow distributions 5% to 9% annually before resorting to mergers and acquisitions.

In the near term, however, owing to weak power markets and currency headwinds, BEP’s targeted payout ratio will remain elevated, at around 80% of funds from operations, as opposed to its long-term target of 60% to 70%.

Drink Deep

When it comes to renewable energy, these days wind and solar get all the attention. But hydroelectric power dates back to the dawn of the electric utility industry in the late 19th century, and it’s still an important source of power. Indeed, despite all the hoopla over these newer market entrants, hydropower still accounts for about half of all U.S. renewable power.

Unlike wind and solar, hydropower produces power continually. In general, hydropower can be counted on to deliver energy during periods of peak consumption, while wind and solar cannot, at least until storage technology improves.

So it makes sense that with its long-term strategic outlook, BEP would focus on the one area of renewables that’s already proven and has a long life to boot. BEP’s hydro assets generate around 80% of its cash flow, with wind accounting for most of the rest.

Notice something missing? Yep, no solar. That’s on purpose—and that could be about to change. While competitors, including YieldCos, pushed solar assets to unsustainable highs, BEP sat back and patiently waited for a better opportunity.

Management didn’t buy the hype about solar because it recognized solar’s dependence on government subsidies. While BEP operates in places where renewables enjoy significant government support, management knows such support can be fickle.

But as YieldCos suffer setbacks, BEP believes it can buy solar assets at prices that more than compensate for uncertain subsidies.

Strategic Shift

Of course, one of BEP’s chief attractions for income investors is its cash flows are contracted under long-term power purchase agreements with creditworthy counterparties. About 92% of BEP’s generation in 2015 was contracted, with an average remaining duration of 17 years. However, that number is expected to decline to around 82% in 2018.

The rise in merchant power’s share of BEP’s generation does pose some risk to the stability of cash flows. But management didn’t undertake this shift without a plan.

BEP took advantage of sustained weakness in wholesale power markets to acquire merchant hydro assets, particularly in the U.S. Northeast, at a steep discount.

And although the competitive power market continues to face significant challenges, there is at least one near-term growth kicker.

Wholesale power markets will pay a premium to merchants to provide a reliable source of power during periods when regular electricity supply is challenged, such as during a deep freeze in New England. BEP has already added about 5% in incremental funds from operations for 2017 and 2018 by selling this capacity through wholesale auctions.

Location, Location, Location

The one weakness of hydropower relative to other renewables is that it does require very specific geographic attributes, including elevation, precipitation and, of course, a water source.

BEP typically sites assets in regions that have historically provided the best returns, such as the U.S. Northeast. However, weak hydrology due to a historic drought in Brazil and below-average inflows in Canada have led power generation to fall below BEP’s long-term average in recent quarters. As a result, funds from operations per share are projected to decline by 14%, to US$1.86, for full-year 2015.

Fortunately, the company does see some signs that the situation in Brazil is improving, not just in terms of hydrology, but also from new contracts initiated at higher prices. Accordingly, analysts forecast a 24% rebound in funds from operations this year, to US$2.31.