Brookfield Renewable Just Made a Groundbreaking Move. Here’s What You Need to Know.

Brookfield Renewables (BEPC 2.87%) (BEP 3.38%) is no stranger to making acquisitions. The leading global renewable energy producer has made several acquisitions in the past several years. With these transactions, the company is well on track to generate significant earnings growth again in 2024.

The company just made another game-changing move. It’s buying French renewable energy developer Newlyweds in a deal valued at $6.5 billion. The two-step transaction will strengthen the company’s already solid long-term growth prospects.

Adding an accelerator

Brookfield Renewable and certain partners (its parent company, Brookfield Asset Managementand Singapore’s state investment company Temasek) recently struck a deal to acquire a majority stake in Neoen from some of its largest shareholders. The company will initially buy a roughly 53% stake in the French renewable energy developer in a deal that values ​​the company at $6.5 billion. That’s a 27% premium to its pre-market trading price there were rumors that Brookfield intended to buy the company in May.

Brookfield Renewable expects to close on this majority investment by the fourth quarter. It then plans to launch a tender offer early next year to buy the remaining shares at the same valuation. That would give Brookfield and its partners full control over Neoen.

Brookfield is buying Neoen to strengthen its exposure to renewable energy and battery storage technology and accelerate the company’s growth. Neoen currently has 8.3 gigawatts (GW) of assets in operation or under construction. It also has 20 GW of development projects in advanced stages in Australia, France and the Nordic countries.

The addition of Neoen would significantly expand Brookfield’s renewable energy portfolio. The company has about 34 GW With operating assets and a massive 157 GW development pipeline. The acquisition of Neoen will allow Brookfield to scale its portfolio and accelerate its development pipeline.

Brookfield sees more and more opportunities to develop new renewable energy projects. For example, it recently agreed to build more than 10.5 GW of renewable energy projects Microsoftlargest-ever corporate power supply contract. This transaction could enhance its ability to meet Microsoft’s needs and the growing power requirements of other companies.

Acquisition accelerator

Brookfield Renewable has huge built-in growth drivers. The company believes it can deliver 4% to 7% annual funds from operations (FFO) growth per share from the existing portfolio by 2028 through a combination of inflation-linked interest rate increases and margin-enhancing actions, such as providing additional services to existing customers.

Meanwhile, the company’s massive growth potential should enable it to add another 3% to 5% to FFO per share each year as new projects come online. This 7% to 12% annual organic growth rate easily supports the company’s plan to increase its dividend by 5% to 9% annually.

Brookfield believes accretive acquisitions will boost its already strong organic growth rate. It expects to allocate at least $7 billion of its own balance sheet capital over the next five years, allocating it to new growth opportunities.

It will finance these transactions through recycling capital and leveraging its financial partners and global transition fund strategy. The company believes that strategic acquisitions should increase its annual FFO per share growth rate above 10%.

Neoen is the latest in a series of deals by Brookfield that aims to expand its ability to capitalize on renewable energy megatrends. The company agreed to invest a record $9 billion of capital last year ($2 billion of which it will fund on its balance sheet) in a series of strategic deals. Notable deals include increasing its stake in renewable energy developer X-Elio, purchasing Duke Energy‘S commercial renewable energy activities and an investment in Westinghouse, a nuclear energy services company.

These transactions enable the company to achieve 10%+ FFO per share growth this year. Meanwhile, Neoen will be secured by Brookfield many momentum heading towards 2025 enhances the company’s ability to deliver double-digit FFO per share growth next year and beyond. It can leverage its scale and customer base to accelerate Neoen’s development pipeline to continue to grow rapidly in the coming years.

Strengthening the investment thesis

Brookfield Renewable has a unique path record of growing shareholder value over the years. The company has grown its FFO share at a rate of 12% per year since 2016 and increased its dividend at a rate of 6% per year over the past two decades.

The company already had enough power to continue to grow his earnings and dividend at a rapid pace. The acquisition of Neoen will increase its ability to grow in the future. It increases Brookfield’s appeal as one of the best stocks to buy to benefit from the renewable energy megatrend.

Matt DiLallo has positions in Brookfield Asset Management, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Brookfield Asset Management, Brookfield Renewable, and Microsoft. The Motley Fool recommends Brookfield Renewable Partners and Duke Energy and recommends the following options: long January 2026 $395 call options on Microsoft and short January 2026 $405 call options on Microsoft. The Motley Fool has a disclosure policy.