What happened
Shares of Brookfield Renewable Corporation (BEPC +0.00%) surged 25.5% in March, according to data provided by S&P Global Market Intelligence. Meanwhile, units of its partnership sibling, Brookfield Renewable Partners (BEP 1.48%), jumped more than 20%.
Powering their surge was a deal to acquire Australian energy company Origin Energy. That highly strategic transaction led an analyst to boost their price target on the partnership's units last month.
NYSE: BEPC
Key Data Points
So what
After much effort, Brookfield Renewable and its partners finally agreed to a deal to acquire Origin Energy last month. The complex transaction will see Brookfield, its institutional partners, and investors GIC and Temasek acquire Origin Energy's energy markets business. Meanwhile, MidOcean Energy, a liquefied natural gas (LNG) company formed by GIC, will acquire Origin Energy's integrated gas business.
Brookfield Renewable is pursuing the acquisition through its Brookfield Global Transition Fund I, the world's largest private equity fund focused on the transition to net zero emissions. The company will invest about $750 million into the deal.
The highly strategic acquisition represents an opportunity to lead a large-scale decarbonization effort in Australia. Brookfield and its partners expect to invest billions of dollars in the coming years to build out renewable energy generation and storage capacity. That will enable them to retire Origin's large-scale coal-fired power plant and significantly reduce emissions. These investments should supply Brookfield with steadily rising cash flow.
BMO Capital analyst Ben Pham liked the deal. He raised his price target on Brookfield Renewable Partners from $33 to $34 per unit following the transaction while keeping an outperform rating on the company. The analyst noted that the deal would likely be modestly accretive to Brookfield cash flow per share in the near term. In addition, it's highly strategic as it expands the company's growth platform to Australia. It also has built-in upside potential by providing decarbonization services to Origin's customers, like electric vehicle chargers, heat pumps, and rooftop solar.
Now what
Brookfield Renewable is helping lead the global charge to lower carbon emissions. The Origin Energy deal is the next step in that strategy. It's acquiring control of a large carbon emitter, enabling it to lead its decarbonization by building additional renewable energy capacity.
That investment should pay dividends for shareholders and the planet. It's the first of what could be many direct decarbonization investments the company makes through its Global Transition Fund platform. These investments could drive faster growth, potentially enabling Brookfield Renewable to produce powerful total returns.
