Brookfield Renewable (BEPC -9.37%) (BEP -8.55%) operates one of the world's largest publicly traded renewable energy and decarbonization platforms. It has a diversified portfolio of hydroelectric, wind, solar, energy storage, and sustainable solutions across five continents. That puts it in a strong position to benefit from the growing demand for clean energy and other sustainable solutions.
The company has three notable catalysts that give it increasing visibility into delivering double-digit earnings growth well into the next decade. That high-powered growth makes it a great stock to buy and hold for the long haul.
NYSE: BEPC
Key Data Points
Rising power prices
Brookfield Renewable signs long-term power purchase agreements (PPAs) with utilities and large corporate customers for the bulk of its power production. It has currently contracted about 90% of its capacity for a weighted average remaining term of 13 years. Most of those contracts, accounting for about 70% of its revenue, index power rates to inflation. The company expects that inflation-driven rate increases will grow its funds from operations (FFO) by 2% to 3% per share each year. Brookfield figures that these inflation-linked power price increases will add $150 million to its annual FFO by 2029, from its baseline of $1.2 billion last year. That number should continue rising well into the 2030s, given the length of its PPAs.
Meanwhile, market power prices will probably continue rising faster than inflation because of the expected surge in electricity demand from data centers and other drivers. Brookfield will therefore benefit as legacy PPAs expire and it can sign new ones at higher market rates. The company currently has 6,000 gigawatt hours (GWh) of capacity contracts expiring over the next five years. It estimates that signing new contracts at higher market prices will add up to $100 million of additional incremental FFO over that period, or about 2% per year. It has another 4,800 GWh of contracts expiring in the 2029-to-2034 period, adding the potential for meaningful additional incremental FFO as it recontracts that capacity at higher market rates.
Growing power demand
Brookfield Renewable currently operates 37 GW of renewable energy capacity around the world. The company expects its capacity to increase significantly in the coming years as it commissions additional projects to support surging clean power demand. The company commissioned about 7 GW last year.
It expects to ramp up its development commissioning over the next few years, targeting to reach 10 GW annually by around 2027. It currently has 65 GW of projects in its advanced-stage pipeline, which is part of its massive 200 GW development pipeline. Brookfield has signed several deals with companies to support its development pipeline, including an enormous 10.5 GW PPA with Microsoft to support projects in the 2026 to 2030 timeframe. The company expects development projects will add 4% to 6% to its FFO per share each year through at least the end of the decade.
Accretive M&A
Brookfield has plenty of power to grow at a solid organic rate through the end of the decade and beyond. It expects a combination of inflation-driven rate increases, margin enhancement activities such as securing higher market prices as legacy PPAs expire, and its development pipeline to fuel 8% to 13% annual FFO per share growth over the next decade. That growth is highly visible and secured through 2029.
On top of that, the company expects to continue making accretive acquisitions funded by its capital recycling strategy of selling mature assets to fund higher-returning new investments. Last year, Brookfield and its partners agreed to or committed to deploy a record $12.5 billion -- $1.8 billion of which Brookfield will fund -- across several transactions, including e-fuels maker Infinium, offshore windfarms operated by Orsted, and in taking European renewable energy development company Neoen private. Those deals will add significant incremental FFO in 2025 and beyond.
The company is currently evaluating about $100 billion of potential M&A opportunities. Securing additional transactions would add to its growth profile. Brookfield believes that continued M&A will help push its FFO-per-share growth rate above 10% annually in the coming years.
Powerful total return potential
Brookfield Renewable believes these three growth catalysts can help it deliver double-digit annual FFO per share growth over the next decade. On top of that, the company pays a high-yielding and steadily growing dividend, which currently stands at more than 5%. Add it up, and it could have the power to produce total annualized returns in the mid-teens in the coming years. That high return potential makes it a great stock to buy and hold for the long term.
