Brookfield Renewable Energy (New York Stock Exchange: BEP)(New York Stock Exchange: BEPC) See a bright future Solar energy. The company is currently a global leader in hydropower and has been building solar platforms for the past few years. These investments are beginning to bring great returns to the company, as they will provide the impetus for significant growth in the coming years. As a result, Brookfield ranks first among the best solar stocks to buy in 2021
In the past few years, Brookfield Renewable Energy has been building solar platforms in an orderly manner. When it joined the parent company, it made its first major attempt in the solar field. Brookfield Asset Management (New York Stock Exchange: BAM)In 2017, it acquired controlling stakes in wind and solar producers TerraForm Power and TerraForm Global. These transactions allow it to purchase the rights of powerful operators at discounted prices after the former sponsor before bankruptcy.
Brookfield’s next noteworthy solar transaction occurred in early 2018, when it formed a joint venture with leading modern logistics and industrial facility provider GLP. The two companies plan to install a 300 megawatt (MW) rooftop solar project in China within three years as part of a broader 1 gigawatt (GW) development pipeline.
The company formed another strategic joint venture with the private equity giant in 2019 KKR (New York Stock Exchange: KKR) Own X-Elio. The company’s solar power generation capacity is 273 MW, 1.413 GW is under construction, and the broader 4.8 GW development pipeline.
Last year, Brookfield continued to acquire solar assets.It bought the rest of TerraForm Power it does not already own, invested in a 1.2 GW solar development project in Brazil, one of the largest projects in the world, and recently agreed Purchase solar business for utilities Exelon (New York Stock Exchange: EXC).
Solar Growth Plan
As a result of these investments, Brookfield now has approximately 9% of the cash flow from the solar portfolio, while hydropower and wind energy have cash flows of 64% and 27%, respectively. With the establishment of extensive development channels and continued acquisitions, this percentage will continue to grow in the coming years. The company is currently developing about 10 gigawatts of solar projects, which are part of its broader 18.3 gigawatts of renewable energy project reserves.Considering that the company currently has 19.4 GW of operating assets, which is one of the largest operating assets in the world, this is a huge pipeline Renewable Energy portfolio.
Brookfield places so much emphasis on solar energy because the technology has a promising future. It wrote in its shareholder letter for the second quarter:
Due to technological advancement and reduction in construction costs, solar energy can be developed independently without subsidies. More importantly, it has become one of the lowest conventional energy sources in the world. From this perspective, the cost of solar energy in the past five years (the period when we established our solar business) has dropped from an installation cost of more than US$4 per watt to less than US$1 per watt in almost all jurisdictions around the world. Due to these favorable economic factors and the result of renewable nature and permanent free energy, we believe that within ten years from now, most of Brookfield’s renewable energy production capacity will be solar. It’s not that we don’t believe in wind or hydropower, but the growth of solar energy and our ability to develop and obtain strong risk-adjusted returns should enable us to develop the solar business at a greater rate.
In order to view the benefits in a correct way, Brookfield estimates that in Brazil’s large-scale solar development projects, its investment returns will reach about 20%. Because of this return, Brookfield believes that by the end of 2025, its cash flow per share can grow at an annual rate of 11% to 16%. This should enable it to have enough capacity to increase its dividend by 5% to an annual interest rate of 9%.
Looking forward to another year of excess returns
Over the years, Brookfield has done a great job in creating shareholder value. In the past year, the company’s total return rate reached an astonishing 66%, and since its establishment twenty years ago, its annualized total return rate has reached 19%. With the start of this year’s solar energy investment began to pay dividends, this performance seems likely to continue. This is why Brookfield Renewable ranks first in my list of the most worth buying solar stocks in 2021.