Brookfield Renewable Partners (NYSE:BEP) has been having an amazing year. The renewable-energy company's stock has already skyrocketed a market-pulverizing 78% on the year. Add in its high-yielding dividend, and the total return for investors is approaching 87%.
Several factors helped power Brookfield's strong gains this year. One of the biggest has been its excellent financial performance as its cash flow is up more than 25% year over year. That's due to several things, including its expansion-related initiatives and the actions it has taken to improve the underlying profitability of its existing assets.
The company's success this year has it well-positioned to continue generating strong growth in 2020. That was evident from the three growth-focused investment themes the company's management team discussed on its third-quarter conference call.
1. We've been slowly boosting our presence in China
The first growth theme that Brookfield Renewable's CEO, Sachin Shah, discussed was its activities in China:
During the quarter, we acquired a 200-megawatt recently constructed, fully contracted wind farm in China for $45 million net to BEP. We also continued to advance our distributed generation joint venture in the country, commissioning 8 megawatts of rooftop solar and advancing an additional 12 megawatts that we expect to be online by the end of the year. We continue to remain disciplined and measured on growth in China by looking for high value, low-risk investment opportunities.
Shah later said the company is being careful in China. While he noted that it's a "great country to invest in" because of its support for renewables, it's cautious because of the current environment we're in as a result of that country's trade dispute with the United States.
The company's recent investments in the country, while small, will still provide some incremental cash flow in the coming year, helping boost its results.
2. We see a bright future in solar
Next, Shah noted:
We also advanced the build-out of our development projects globally. We remain on track to close our acquisition of a 50% interest in X-Elio, a premier global solar developer in the fourth quarter, which will significantly enhance our solar development capabilities. We also progressed construction of 150 megawatts (MW) of capacity, 960 MW of advanced stage projects globally, including 60 MW of wind repowering projects in the United States.
The company's investment in X-Elio will do two things. First, it will provide an immediate boost to its results from the cash flow of its operating solar projects. In addition to that, the company will benefit from the solar projects it develops in the coming years, which enhances its already healthy development pipeline. Shah noted that X-Elio could build between 500 and 800 MW of new capacity each year, which is a significant amount for a company that currently has 150 MW of new renewables under construction.
3. We topped off our investment in TerraForm Powe
Finally, Shah pointed out:
Subsequent to the quarter end, we invested an incremental $50 million into TerraForm Power (NASDAQ:TERP) as an investor in its recent $300 million equity issuance. Following this issuance, our proportionate interest in TerraForm Power is largely unchanged, which for BEP is approximately 30%. TerraForm Power recently closed its acquisition of a 322 MW distributed generation portfolio in the U.S., making it one of the largest owners and operators of distributed generation across the United States.
Brookfield also put a little bit more capital into its sibling TerraForm Power to help that company complete another acquisition. That deal will provide a modest boost to TerraForm's cash flow next year, which will help support its dividend growth plan. As a major shareholder, Brookfield Renewable will be a key beneficiary of this growth.
Plenty of power to deliver another excellent year in 2020
Brookfield Renewable Partners already had enough embedded growth within its existing portfolio to generate a 6% to 11% annual growth rate in its cash flow per share. However, it has enhanced its prospects by making these investments. In the company's view, acquisitions and other outside investments like those it has unveiled in recent months could add another 3% to 5% to its annual growth rate. The company appears poised to deliver more high-powered growth in 2020.