Surprisingly enough, renewable energy stocks are not part of the energy sector; they are considered as utilities. It is no secret, renewable energy stocks are becoming more popular due to the environmental concerns around the globe. Today, I discuss the four stocks I consider as the most interesting picks!
Brookfield Renewable Partners (BEP.UN.TO) (BEP)
Brookfield Renewable Partners LP is a renewable power generating company. It owns a portfolio of renewable power generating facilities which are spread across North America, Latin America, and Europe. It operates renewable power generating assets, which include conventional hydroelectric facilities and wind facilities located in North America, Latin America, and Europe. Its operations are segmented by the type of power generation Hydroelectric, Wind, Solar, Storage and Other, which includes Biomass and Co-gen with Hydroelectric and Wind further segmented by geography North America, Colombia, Brazil, Europe and Other.
The future of energy will be found across hydroelectric, solar, and wind power. 80% of BEP’s portfolio is focused on hydroelectric power. The company has power plants across North America, South America, Europe, and Asia. BEP enjoys large scale capital and expertise to manage its projects across the world. Management aims at a 5-9% annual distribution increase for years to come. What will happen in the upcoming years is more money going toward those projects. Investors are following the green trend and BEP is well-positioned to attract them. BEP now offers shares under both REIT and corporation structures.
Boralex Inc is an electric utility company involved in the development, construction, and operation of renewable energy power facilities. The company controls a portfolio of electricity producing plants that utilize wind, hydroelectric, thermal, and solar fuel sources. Most of Boralex’s plants rely on wind power, while a significant number also employ hydroelectric power. The company generates the vast majority of its revenue from the sale of energy through long-term contracts to customers in Canada, France, and the United States. Boralex’s wind and hydroelectric power stations, located in Canada and France, account for most of this revenue. BLX facilities in Canada and France are responsible for most of its total power production.
Boralex is investing massively in its future and aims at producing over 2,800 MW of green energy by 2023. With 167MW in secured projects and another 535MW in its pipeline, you can expect BLX to reach their goal. Considering that 98% of BLX’s revenue comes from signed contracts with an average term of 14 years, management has a solid base for growing in the future. We see BLX as a long-term player in the green energy business. There are lots of interest toward those new sources of energy, and BLX will continue to be a strong player. The fact that BLX is backed by La Caisse de Dépôt et Placement du Québec and FTQ will help them get the financing it needs.
Innergex Renewable Energy (INE.TO)
Founded in 1990, Innergex Renewable Energy Inc. develops, owns, and operates renewable power-generating facilities, essentially focused on the hydroelectric and wind power sectors and solar photovoltaic sectors. INE conducts operations in Canada (53%), France (8.1%), the United States (3.4%), and Chile (5.5%). The company is well-established, with 2,866 MW of capacity. INE employs over 300 workers across 34 hydro facilities, 25 wind farms, 3 solar farms, and 2 geothermal facilities. The company’s wind farms also generate substantial amounts of energy and revenue.
Innergex has a strong appetite for growth by acquisitions. The company aims at increasing their cash flow through those transactions, while improving their production capacity. INE doesn’t own 100% of all facilities and is used to make partnerships. This strategy helped INE grow very fast in the past 5 years. Income-seeking investors will be pleased with a relatively high yield and a cautious management team aiming at a maximum payout ratio of 80% (currently 86% with non-GAAAP measures). INE has a great reputation for delivering their projects on budget. We also like the private investment from Hydro-Quebec.
Polaris Infrastructure (PIF.TO)
Polaris Infrastructure Inc is a renewable energy company. It is engaged in the operation, acquisition, and development of renewable energy projects in Latin America. In fact, Polaris owns and operates San Jacinto Geothermal power plant in Nicaragua. PIF has a contractual price per MWh (Power Purchase Agreement or PPA) with the government including an annual escalator through 2029.
The investment thesis around Polaris Infrastructure is a risky play that could pay off a lot. While management has proven its ability to increase its revenue and cash flow consistently since 2014, the stock is subject to strong fluctuations. The stock recovered from political concerns around Nicaragua only to plunge again amid the COVID-19 impact on the economy. PIF shows a solid contract and great execution providing an increasing cash flow and allowing management to pay off debts. Geothermal energy is a part of the future for many countries, and it is a reliable & green source of power. The company also diversified its activities through two key construction projects in Peru.
There’s is More About These Picks!
I’ve covered more details about each stock of this Top 4 is the video below. Before diving into your own due diligence, I suggest you watch it to learn more about their business model and their growth perspectives. For example, US electricity generation is down 5% in the last months due to the pandemic. During the same period, fossil fuel generation is down 10%. However, renewable energy generation is up by 14%! We are not done hearing about those, I’m telling you!