Brookfield Renewable (BEP +1.02%)(BEPC +0.00%) toiled for years in building one of the world's largest renewable energy platforms. That strategy is paying off these days as it's benefiting from the race to decarbonize the global economy that's driving demand for green energy and other cleaner alternatives. That was evident during the second quarter as Brookfield generated strong financial results while making excellent progress on its strategic initiatives.
Here's a closer look at the quarter and what's ahead for Brookfield.
Image source: Getty Images.
Digging into the quarter
Brookfield Renewable posted excellent second-quarter earnings. The company generated $268 million, or $0.42 per unit, of funds from operations (FFO). That's up 23% year over year, powered by the solid performance of its existing assets and the growth from new acquisitions and development projects that it has completed over the past year.
The company benefited from higher realized prices across most of its markets. It captured higher rates on inflation escalators on existing contracts and by signing new contracts at higher market rates as existing ones expired. In addition, Brookfield benefited from purchasing an 845-megawatt (MW) wind farm in Oregon and increased ownership in TerraForm Power, which it acquired last year. Those positives more than offset lower power generation at its hydroelectric facilities in North America due to drier conditions.
Brookfield's growing scale is paying strategic dividends
Brookfield's strong financial performance wasn't the only highlight in the second quarter. The company also made progress on several key strategic initiatives during the quarter. These included:
- Starting to repower the recently acquired 845-MW Shepherds Flat wind project. Brookfield is replacing the turbine hardware with longer rotors and more efficient equipment. This will boost its production by 25% while generating attractive investment returns in the mid- to high teens.
- Signing a strategic collaboration agreement with e-commerce giant Amazon (AMZN 3.89%) to develop new renewable energy projects. Amazon, already the largest corporate buyer of renewable power, will purchase more from the company, supporting the construction of additional renewable energy capacity in North America, Europe, Brazil, and Asia.
- Securing a 25-year contract to support the build-out of nearly 1.5 gigawatts (GW) of offshore wind projects at its Polish renewable energy business. The company aims to deliver the facilities starting in 2025.
- Making progress on a nearly 2-GW pipeline of solar developments in Brazil, including recently completing a 300-MW project. It's on track to deliver an additional 900 MW in 2022.
- Investing alongside Apple's (AAPL 1.45%) China Renewable Energy Fund to acquire a 55% stake in a 213-MW wind portfolio in China.
- Agreeing to invest $130 million along with its partners in two transactions in India. It's acquiring one 450-MW ready-to-build solar project and the option to purchase another similarly sized one a year after its completion.
- Joining forces with Trane Technologies (TT +0.76%) to pursue and offer decarbonization-as-a-service. The companies would work together to leverage Brookfield's expertise in distributed generation (e.g., rooftop solar) and energy storage with Trane's leading energy efficiency products to help customers meet their sustainability targets.
Two recurring themes stand out from Brookfield's strategic initiatives. First, thanks to its scale and expertise, it's becoming a key global partner for companies looking to decarbonize their operations. Second, it's continuing to expand its operations through development projects.
Overall, Brookfield ended the second quarter with a 31 GW global pipeline of development opportunities. To put that into perspective, the company's current operating portfolio stands at 21 GW. That shows how much growth the company has ahead as it works toward decarbonizing the global economy.
A powerful growth program
Brookfield Renewable delivered robust growth in the second quarter as it continues to benefit from its strategy of acquiring and developing renewable energy assets. The company further advanced its plan during the quarter by making progress on a long list of strategic initiatives. That has the company on track to continue growing at a brisk pace, which should give it the power to generate attractive total returns for its investors in the coming years.
