With a strong track record of success, management at Brookfield Renewable (BEP 0.16%) (BEPC -0.02%) has shown that it's skilled at capital allocation. In this Motley Fool Live segment from "The High Energy Show," recorded on June 28, Fool.com contributor Jason Hall explains why this stock is his highest-conviction investment in the energy space.
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Jason Hall: And that's Brookfield Renewable. Again, number 1, you look at the track records of business, 1a, you look at the trends, and then you look at the management of this business and how good they are at capital allocation, and I think it has to be for me my highest conviction investment.
Again, what is Brookfield Renewable do? Their core of their business is still hydroelectric power generation, they generate the power, they sell it on long-term contracts, utilities, they have substantially moved all of their new investment capital or substantially all of their new investment capital for the past five or six years into wind and solar. Not just utility-scale, which they've done incredibly well with, but they've also moved into commercial, help me out, the word just fell out of...
Travis Hoium: Commercial solar distributed.
Jason Hall: Commercial distributed solar.
Travis Hoium: Distributed is like a bucket that covers renewable, residential solar and assets that go along with that and then also the commercial business.
Jason Hall: Think about like the rooftop solar that's on top of a big box retailer or a parking structure or something like that. Or rooftop solar that's on a house. I think all of the solar that they manage is commercial. I don't think any of it's residential, but they found that that is an area that they can make money. It's higher costs and you don't have the benefits of, with a solar farm, all the solar panels are together. It's all right there. So maintaining it and keeping and maximizing uptime is far simpler than distributed solar, where you have assets that can be scattered over dozens of assets that are not necessarily close to one another. The point is that when they made that move into it a couple of years ago, I'm like, what are these guys doing?
Essentially they're doing the same thing they did when they bought all of the SunEdison assets, TerraForm Power and TerraForm Global, is they said, looking at the math, understanding the numbers, we can make money in this market, and they've done it again and they've shown they can do it. That tells me they're incredible capital allocators. They've had multiple CEOs that have come from Brookfield Asset Management, the parent company, and they just have a great culture. You put all those things together, they're in the right part of the value chain. It's where the growth is, it's where the cash flows are, it's where the incentives are very well aligned with how they do business, so that's my number 1.
