Brookfield Renewable (NYSE: BEP)(NYSE: BEPC) sees an incredibly bright future in solar energy. The company, which is currently a global leader in hydropower, has spent the past few years building a solar energy platform. These investments are starting to pay big dividends for the company, as they are expected to drive significant growth in the coming years. Brookfield, therefore, is at the top of my list as the best solar stock to buy for 2021 and beyond.
Shopping on solar energy
Brookfield Renewable has been methodically building a solar energy platform in recent years. His first major foray into solar energy came when he joined his matrix, Brookfield Asset Management (NYSE: BAM), to acquire control stakes in wind and solar producers TerraForm Power and TerraForm Global in 2017. These negotiations allowed her to acquire a stake in major operators at a discounted price after her former bankrupt sponsor.
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Brookfield’s next notable solar business took place in early 2018, when it formed a joint venture with GLP, a leading supplier of modern industrial and logistics facilities. The two companies planned to install 300 megawatts (MW) of solar projects on roofs in China in three years as part of a broader 1 gigawatt (GW) development pipeline.
The company formed another strategic joint venture in 2019, in partnership with the private equity giant KKR (NYSE: KKR) to own X-Elio. This company had 273 MW of solar operational capacity, 1,413 GW under construction and a broader 4.8 GW development pipeline.
Brookfield continued to acquire solar energy assets last year. He bought the rest of TerraForm Power that he did not yet own, invested in a 1.2 GW solar development project in Brazil – one of the largest in the world – and recently agreed to buy the solar business Exelon (NYSE: EXC).
A solar-powered growth plan
As a result of these investments, Brookfield now obtains about 9% of its cash flow from its solar energy portfolio, compared to 64% for hydro and 27% for wind. This percentage is expected to continue to grow in the coming years, as it builds its extensive development pipeline and continues to make acquisitions. The company currently has about 10 GW of solar energy projects under development, part of its broader portfolio of 18.3 GW renewable energy projects. It is a considerable pipeline, considering that the company currently has 19.4 GW of operating assets, one of the largest in the world. renewable energy wallets.
Brookfield is placing such a strong emphasis on solar energy because of what it sees ahead for technology. He wrote in his letter to shareholders in the second quarter:
As a result of advances in technology and reductions in construction costs, solar energy can support itself without subsidies and, most importantly, is now among the lowest cost conventional energy sources worldwide. To put this in perspective, solar energy costs over the past five years – the period in which we built our solar business – have gone from over $ 4 per watt for installation, to less than $ 1 per watt in almost all jurisdictions worldwide. As a result of this favorable economy, as well as the renewable nature and perpetual source of free energy, we believe it is possible that, in ten years’ time, most of Brookfield Renewable’s production capacity will be solar. It is not that we do not believe in wind or hydropower, but the growth of solar energy and the ability to develop and obtain strong risk-adjusted returns should allow us to increase our solar operations at a much greater rate.
To put returns in perspective, Brookfield estimates that it will achieve a return of about 20% on its investment in the large solar energy development project in Brazil. Because of returns like this, Brookfield believes it can increase its cash flow per share at an annual rate of 11% to 16% until the last year of 2025. This should give it a lot of power to fulfill its plan to increase its dividend. by 5% for 9% annual fee.
Expect another year of supercharged returns
Brookfield has done an excellent job of creating shareholder value over the years. It produced a jaw-dropping total return of 66% last year and has generated a total annualized return of 19% since its formation two decades ago. This superior performance seems likely to continue, as its investments in solar energy starting this year will start paying dividends. That’s why Brookfield Renewable is at the top of my list as the best solar stock to buy for 2021.