For years, oil supermajors like ExxonMobil (XOM 0.23%) dominated the energy sector. With globally diversified operations and strong balance sheets, they were well-designed to weather the sector's ups and downs. However, with the future of oil uncertain given the rising dangers of climate change, ExxonMobil's period of dominance might be heading to a close.
In its place, a new energy supermajor is emerging. Brookfield Renewable (BEPC 1.63%) (BEP 2.08%) is replicating the strategy of having globally diversified operations and a strong financial profile within the clean energy sector. Because of that, it could become a powerful force in the energy sector in the coming years.
The ExxonMobil approach to clean energy
Brookfield Renewable took a page out of the oil supermajor playbook by building its business with the following characteristics:
- Global scale and reach: Brookfield Renewable currently has operations in North and South America, Europe, India, and China.
- Leadership in all major renewable energy technologies: The company is one of the world's largest producers of hydroelectric power. It also has extensive onshore wind energy operations, a growing offshore wind project backlog, and utility-scale solar and distributed generation platforms (i.e., energy produced near end-users via systems such as rooftop solar).
- Leading operating and development capabilities: It has one of the largest operating platforms with roughly 21 gigawatts (GW) of capacity. It also has one of the biggest development pipelines with 69 GW of projects.
- Investment-grade balance sheet: Brookfield's BBB+ credit rating is one of the highest in the clean energy space.
- Best-in-class capabilities: The company has fully integrated development and operating capabilities in all major markets, including strong relationships with manufacturers, power marketing capabilities, centralized control centers, and regulatory expertise.
These features follow the blueprint laid out by ExxonMobil. The oil giant's operations span the globe, it leads across energy technologies (oil, natural gas, LNG, refining, and chemicals), and it has operating and development capabilities. It also has a top-tier balance sheet and a fully integrated business model.
Those features have enabled ExxonMobil to deliver steady growth over the decades. The oil giant has increased its dividend payout annually for 39 straight years, qualifying it as a Dividend Aristocrat. It's one of only a handful of energy stocks in that elite group.
Brookfield Renewable is beginning to follow in its shareholder-friendly footsteps. The renewable energy giant delivered its 11th consecutive dividend increase earlier this year.
Becoming a sought-after partner
ExxonMobil's global scale, expertise, and financial strength have made it a partner of choice in the energy sector. Companies routinely link up with it on key energy projects because they can leverage its expertise to help turn their plans into reality.
Now, Brookfield's size and expertise are making it a partner of choice for companies seeking to achieve their carbon footprint reduction goals. For example, it signed a strategic collaboration agreement with e-commerce and cloud computing giant Amazon (AMZN -0.58%) last year. Brookfield is developing new renewable energy projects to help Amazon achieve its climate-related goals and transition the power grid to greener energy. It has also invested alongside tech giant Apple to help that company and its suppliers transition to a net-zero emissions model in China.
Meanwhile, Brookfield recently joined forces with GROK Ventures -- a fund formed by climate change activist Mike Cannon-Brookes, the billionaire co-founder and co-CEO of software company Atlassian. The partners wanted to privatize Australian utility AGL Energy and pour billions of dollars into the company to accelerate its transition to clean energy. While AGL rejected the deal, Brookfield sees great opportunities to partner with others and lead the transition to cleaner energy alternatives.
A new leader is emerging
Brookfield Renewable is on track to become a clean energy supermajor. Its global scale, diversification, and financial strength are turning it into a dominant force in its space. That should open the door to even more opportunities to leverage its scale and expertise to create value for its investors.