A Billion-Dollar Sustainable Energy Company I Invest In
Credit to Author: Frugal Moogal| Date: Thu, 10 Oct 2019 23:47:18 +0000
Published on October 10th, 2019 | by Frugal Moogal
October 10th, 2019 by Frugal Moogal
Are you interested in investing your money in a billion-dollar company helping to accelerate the world’s transition to sustainable energy?
I can see the comment section already: Why is CleanTechnica, a website purporting to be all about advancements in clean technology, featuring another article written about a company’s stock?
To me, you can have all of the neatest advancements in the technology, but if companies aren’t able to make money and sustain their investors, I personally believe that it will be harder to have that technology proliferate. If you are just looking for the latest innovation, my articles probably aren’t for you. I look at innovations to see what they mean for the underlying company, and the money that will enable their expansion.
Having said all of that, if you read my other articles, you may be surprised to know that Tesla is the polar opposite of all of my other investments. My stock-buying rule for years has been that I would only invest in companies that have a solid history behind them, whose share price is inelastic, and that pay out a large dividend — three things that Tesla most definitely is not.
If you’re looking for a sustainable energy company that meets those criteria, I’d like to introduce you to one of my favorite stocks in my portfolio: Brookfield Renewable Partners (BEP).
Before going on, the usual caveat here: If you are interested in investing and you’re using only my input, you’re doing it wrong. Please look up further analysis of the company from other voices, and see if this works for you. Especially when you are reading articles from people under a pseudonym, you should read the article as a skeptic and try to determine if they wrote that article to prop up their own stock position, are purposely trying to lower stock prices, or whatever. We do not provide stock-buying advice here.
Brookfield Renewable Partners (from here on out, when I type it, I’m going to use the stock symbol, BEP) describe themselves in their overview on their investor’s website at https://bep.brookfield.com/ like this:
“Brookfield Renewable Partners operates one of the world’s largest publicly-traded renewable power platforms. Its portfolio consists of over 17,500 MW of capacity and 882 generating facilities in North America, South America, Europe and Asia. Its investment objective is to deliver long-term annualized total returns of 12%–15%, including annual distribution increases of 5–9% from organic cash flow growth and project development. It has an established track record of creating value by prudently acquiring, building and financing assets, and actively managing its operations.
“The company is a global leader in hydroelectric power, which comprises approximately 75% of its portfolio. It is also an experienced owner, operator and investor of global wind, solar, distributed generation, and storage facilities.”
Put into simplified terms, BEP generates power using renewable sources, sells that power to customers from around the world, and uses the profits to provide returns to shareholders and grow their investment portfolio.
The largest source of BEP’s power comes from hydroelectric sources, which is important because hydro power runs at a significantly higher capacity factor than solar or wind does. Additionally, hydroelectric power can fill in for the intermittency of other forms of renewable energy, and can ramp up and down quickly.
To put BEP’s capacity into perspective, according to the World Energy Resources in 2017, there were 1,064 GWh of installed global hydroelectric capacity. Using the figure above about hydropower being 75% its portfolio, BEP controls approximately 13.125 GW of hydroelectric generation capacity, or about 1.2% of the global hydroelectric fleet. Considering that hydroelectricity generates about 16% of the world’s total energy use, this is a huge portfolio of hydroelectricity for a single company to have. The company claims $47 billion of assets under management, and it has 940 different generating facilities, broken down as over 200 hydroelectric plants, 100 wind farms, 550 solar facilities, and 4 storage facilities.
I like to invest in established companies, and BEP is definitely that. It is controlled by Brookfield Asset Management (which manages other huge investment segments, like railroads, ports, and even malls — in other divisions that I don’t invest in), and while the stock has existed by itself for only just over 10 years, they claim to have over 100 years of experience as an owner, operator, and developer of hydroelectric power facilities.
The company uses its power facilities to return a quarterly dividend that has averaged 4–5% a year for the past 5 years, and it’s been doing that while growing at a huge rate. As recently as 2017, BEP claimed to have $30.9 billion of assets under management. In two years, it has added significantly to that portfolio, including purchasing a controlling interest in TerraForm Power (TERP), which is where its $47 billion of assets under management come in. The company’s stock price has been on an absolute tear this year, starting the year at $26.32 a share, and closing yesterday, October 8th, at $42.15 per share.
BEP’s recent run is actually a bit surprising to me, as I didn’t purchase the stock expecting the share price itself to change much, just to collect the dividends happily and reinvest them. I don’t know if the share price will remain as high as it is, but the dividend reliably pays more than the interest rate on my mortgage, so I’m happy with that. I’m going to write a whole article on my investment strategy at some point in the near future (and make some readers’ heads explode, as that’s even further out than my usual articles examining Tesla FUD in the media!), but I think first it’s important to explain how easy investing in a company like this really can be today.
BEP may be growing at a huge rate, but you don’t hear too much about the company, for two reasons.
First, BEP is operating in a standard, relatively boring segment of the market. The market has been selling stock in utilities for years, and BEP is more or less a giant utility that only deals in renewable generation.
Secondly, BEP has focused the majority of its portfolio on hydroelectric power, a source of power that has literally been used since ancient times to grind flour, and was first used to generate electric power in 1880 in Grand Rapids, Michigan, and then in 1881 in Niagara Falls, New York. It’s not nearly as exciting as electric supercars that keep breaking new records.
Which makes BEP a perfect stock for my style of investing, and a group that I believe in for the future. I find BEP a way to invest in the future of sustainable energy with very low risk. It also makes BEP a pretty boring stock to cover, as the company just sort of does its thing quietly. If there seems to be interest in this article, when BEP does new things in the future, I’ll be glad to try to report on them.
There are other renewable companies out there you may also want to look at if you’re thinking of investing. NextEra Energy Partners (NEP) is another option that you may want to look into — although, NextEra has used some of its money to invest in natural gas pipelines and generation. Ormat Technologies focuses on geothermal generation, waste heat generation, and energy storage — but has a tiny dividend. Maybe you have some others that are worth a look.
I don’t know if Brookfield Energy Partners is a great stock to invest in at current prices, mostly because I haven’t spent a ton of time examining the full reasons behind the approximately 25% increase in value the company has had over the past 6 months.
I do feel that the company pays a great dividend, and has a solid portfolio of energy-generating resources. As clean technology continues to proliferate in the future, I expect there to be many other BEPs out there.
And, while it is great to examine a company like Tesla that is very publicly pushing the world forward, it’s sometimes nice to find companies doing the same thing while making solid returns year after year, even if they aren’t as interesting or exciting.
Frugal Moogal A businessman first, the Frugal Moogal looks at EVs from the perspective of a business. Having worked in multiple industries and in roles that managed significant money, he believes that the way to convince people that the EV revolution is here is by looking at the vehicles like a business would.