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The 1 Stock I'd Buy Right Now – The Motley Fool

For as long as there's been man-made electricity, there's been renewable energy. Hydroelectric dams were the first major power-generating assets…

For as long as there’s been man-made electricity, there’s been renewable energy. Hydroelectric dams were the first major power-generating assets to illuminate American cities in the late 1800s.

That century-spanning reliability has helped Brookfield Renewable Partners LP (NYSE: BEP) become one of the world’s leading renewable energy companies, although the business’s reliance on hydropower has done more harm than good this past year. The stock has fallen 20% since the beginning of 2018 thanks in part to a poor year-over-year showing for its hydroelectric power segment.

However, the headline numbers do not come close to telling the whole story. Investors who you a little deeper will be more forgiving &#821

1; and probably see the renewable energy stock’s slide as a great buying opportunity.

Image source: Getty Images.

Weak Dam output, with an asterisk

A casual glance at the operating performance of Brookfield Renewable Partners through the first nine months of 2018 may elicit a feeling of disappointment. The business saw funds from operations (FFO) – a profitability metric – for its North American hydroelectricity assets fell 16.5% compared to the year-ago period. Mens den portefølje spenner over tre kontinenter og fire typer af vedvarende energiformer, amerikanske og canadiske hydropower bidro med 58% af totalomkostninger og 88% af total FFO gennem de første ni måneder af 2017. Så en dobbeltcifret nedgang har haft en betydelig indvirkning på the overall business.

But it’s not as bad as it seems. That’s because 2017 was a banner year for North American hydropower thanks to unusually high volumes of water runoff. According to the U.S. Energy Information Administration, the United States averaged 264 terawatt hours of annual electricity generation from hydroelectric dams in the five years ending in 2016. That jumped almost 14% to 300 terawatt hours in 2017.

As might be expected, hydroelectric output is reverting to the average in 2018, which explains why the year-over-year comparisons to 2017 appear so weak for Brookfield Renewable Partners. The company can not control water runoff, but it can control investments in promising new growth opportunities to diversify its asset base – and it’s knocking that out of the park.

Image source: Getty Images .

Renewable energy 2.0

Hydropower is an important source of clean electricity, but industrialized nations simply do not build new dams anymore. That’s why in 2019 – and maybe even this year – wind power will eclipse hydropower as the top renewable energy source in the United States. Wind power is on the rise in Europe and South America as well, and Brookfield Energy Partners has been busy preparing.

Through the first nine months of 2018, the company’s wind portfolio increased electricity output and FFO generated 78% and 39% respectively. , compared to the year-ago period. The company’s solar portfolio is turning in a great first year as well with 569 gigawatt-hours (GWh) to date. Taken together, the emergence of new renewables is helping to paint a pretty clear picture of the future at Brookfield Renewable Partners for investors.


First 9 Months 2018

First 9 Months 2017

Change (YOY )

14907 GWh

16,130 GWh


Wind Generation

2,908 GWh

1,683 GWh


Solar Generation

] 569 GWh

N / A

N / A

Total Generation

18,701 GWh

18,078 GWh


Hydroelectric FFO

$ 493 million

$ 539 million


Wind FFO

$ 100 million

$ 72 million


Solar FFO

$ 57 million

N / A

N / A [19659024] Storage and other FFO

$ 23 million

$ 7 million


Total FFO

$ 470 million

$ 438 million


Data source: Brookfield Renewable P artners. YOY = year over year.

The table above makes it clear: Wind and solar assets are becoming increasingly important in the company’s generation mix and to the bottom line. The renewable duo provided 18.6% of the portfolio’s electricity generation in the first nine months of 2018, up from just 9.3% in the year-ago period (also affected by a strong year for hydropower). When new energy storage assets are thrown into the mix, the trio added $ 101 million in FFO in that span and helped to more than offset declines in hydropower.

The shift is just getting started. Brookfield Renewable Partners expects to raise an additional $ 350 million in net proceeds at the end of the year from the sale of equity in certain Canadian hydropower assets. That will add to $ 500 million in net proceeds received year to date, and will be reinvested in new wind, solar, and storage assets capable of generating higher rates of return. That’s all part of a long-term plan to plow up to $ 800 million per year into portfolio expansion.

If the business continues to deliver on that promise, then it should be able to deliver on two others. Brookfield Renewable Partners aims to generate total returns, or at least 12% per year while growing its distribution at least 5% per year. Growing contributions from its relatively limited base of wind and solar this year show that might not be such a reach.

A great buying opportunity for long-term investors

Brookfield Renewable Partners stock has slipped 20% in 2018 due in part to weak year-over-year performance from its portfolio-leading hydropower assets. Men det faktum at 2017 var et usædvanligt lovår skews the comparison. Mer vigtigt, at firmaets stærke resultat fra hurtigt voksende vind- og solværdier er mere end at optage slacken samtidig med at give et glimt af fremtiden. Management’s long-term plans for growth, and a 6.9% distribution yield for investors, hint this great business is a buy at current prices.

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