Brookfield Renewable (BEP -0.40%) (BEPC -0.55%) has agreed to sell its onshore wind operations in the U.K. and Ireland to Danish renewable energy developer Orsted. The deal, which values the business at $683.6 million, is part of Brookfield Renewable's capital recycling program of selling mature assets and redeploying the proceeds into higher-returning opportunities.
Brookfield initially purchased its onshore wind operations in Ireland and the U.K. in 2014. At the time, Europe was experiencing a financial crisis, enabling Brookfield to take advantage of the opportunity to purchase a high-quality wind-farm operating and developing company in the region. It has grown that business via development projects and acquisitions, largely financed by internal capital recycling. The business currently has 389 megawatts (MW) of operating onshore wind farms, 149 MW under construction, and more than 1 gigawatt in its development pipeline.
While the Irish and U.K. onshore wind markets offer attractive returns, Brookfield sees better investment opportunities elsewhere. The company has built up a significant solar energy development pipeline and recently secured the opportunity to invest in a large-scale offshore wind farm platform in Europe. It's incredibly excited about solar energy's return potential, which it believes could become its largest power source within the decade.
Capital recycling is a major aspect of Brookfield Renewable's funding strategy. The company aims to invest $800 million to $1 billion per year on development projects and acquisitions, which it will partly finance through asset sales.
Despite the lost income from asset sales, Brookfield estimates that it can grow its cash flow per share at a more than 10% annual rate through 2025, which should support 5% to 9% yearly growth in its 4.5%-yielding dividend. That should give it the power to continue producing attractive total returns.