Key Takeaways

• Brookfield Renewable, a leader in renewable energy, anticipates annual double-digit earnings growth due to strong power demand and strategic acquisitions.
• Rising power prices and inflation-indexed contracts are expected to significantly enhance the company’s funds from operations over the next decade.
• The company has a robust development pipeline and aims to increase its operational capacity while pursuing accretive mergers and acquisitions.

Strong Growth Outlook for Brookfield Renewable

Brookfield Renewable operates one of the world’s largest renewable energy platforms, boasting a wide array of hydroelectric, wind, solar, and energy storage assets across five continents. This diversified portfolio positions the company favorably to meet the increasing demand for sustainable energy solutions.

Three pivotal catalysts are expected to drive Brookfield’s growth and enhance earnings visibility through the 2020s. The company is well-poised for long-term success as it capitalizes on these opportunities.

**Rising Power Prices**
Brookfield Renewable has long-term power purchase agreements (PPAs) with utilities and corporate clients that cover about 90% of its energy production. These agreements have a weighted average remaining term of roughly 13 years, with about 70% of associated revenue indexed to inflation. Consequently, the company anticipates increased funds from operations (FFO) of 2% to 3% per share annually, estimating an additional $150 million in annual FFO by 2029, based on a last year’s baseline of $1.2 billion. As legacy contracts roll off, new contracts at higher market rates will also contribute to this growth.

**Growing Power Demand**
With 37 GW of renewable energy capacity, Brookfield aims to ramp up its operations to meet soaring global demand for renewable energy. The company delivered around 7 GW last year and targets 10 GW of annual capacity by 2027. Its extensive project pipeline includes 65 GW of advanced projects, supported by significant PPAs, including a notable 10.5 GW deal with Microsoft scheduled between 2026 and 2030. This development should drive an FFO growth of approximately 4% to 6% per share each year through the end of the decade.

**Accretive Mergers and Acquisitions**
Brookfield is also committed to a strong organic growth strategy augmented by strategic acquisitions. By selling mature assets and investing in higher-return projects, the company expects to deploy over $12.5 billion in M&A activities, including investments in e-fuels and offshore wind projects. It is currently assessing $100 billion in potential M&A opportunities, which could significantly enhance its growth trajectory, pushing FFO-per-share growth rates above 10% in the coming years.

With these initiatives, Brookfield Renewable projects to deliver double-digit FFO growth over the next decade while providing a sustainable dividend yield exceeding 5%. This combination of growth and income makes it a compelling investment for long-term holders.

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