Acquisitions are a core aspect of Brookfield Renewable's (NYSE: BEPC)(NYSE: BEP) growth strategy. The company's ability to make accretive deals has helped give it the power to increase its dividend. It has done a magnificent job over the years, growing its payout at a 6% compound annual rate during the past 20 years.
However, buying assets is only one aspect of Brookfield's strategy. It also routinely sells investments to recycle that capital into higher-returning new opportunities. That smart strategy has helped enhance its growth rate over the years.
Cashing in
Brookfield Renewable and its partners executed over $400 million of asset sales during the first half of this year ($250 million net to Brookfield). Those sales locked in a profit of two times its invested capital. Meanwhile, they helped bolster the company's liquidity. It ended the second quarter with $4.4 billion of available liquidity on its balance sheet. That gives it additional financial flexibility to make accretive acquisitions as opportunities arise.
The renewable energy company recently revealed two more capital recycling transactions. In the first deal, Brookfield Renewable, its parent company Brookfield Asset Management, and their institutional partners agreed to sell their 25% stake in First Hydro Company to global investment group CDPQ. First Hydro is a critical electricity generation and storage company in the UK, where it's a leader in pumped hydro storage. The sale will enable Brookfield Renewable to cash in on its minority interest in that company.
The second transaction will see Brookfield Renewable and its institutional partners sell Saeta to Masdar, a clean energy company owned by the United Arab Emirates, for $1.4 billion. Brookfield acquired the company in 2018 through its investment in Terraform Power. Brookfield has helped Saeta grow its operations in Spain and Portugal. This sale is part of the company's asset rotation strategy to recycle capital to fund new growth initiatives.
Quickly putting the capital back to work
Those sales will help Brookfield achieve its goal of generating about $3 billion in total proceeds this year, with $1.3 billion net to Brookfield. That will further enhance its liquidity to support its investment strategy.
Brookfield is redeploying capital almost as fast as it's coming in the door. The company, its parent, and an institutional partner agreed to buy a majority stake in French renewable power company Neoen at a $6.7 billion valuation in May. They plan to close the 53% majority interest purchase and then offer to acquire the rest of the company from its other shareholders. Brookfield Renewable expects to invest about $540 million into this deal.
Neoen is a highly strategic acquisition for Brookfield. Its three core markets -- France, Australia, and the Nordics -- are some of the fastest-growing markets for renewables, with strong corporate demand. That will put Brookfield in an even better position to support corporate power buyers, like megacap technology companies. Those companies need a tremendous amount of electricity to support their data center developments for cloud and AI applications. The company recently signed the largest-ever power purchase agreement with Microsoft to help support its growth in the U.S. and Europe.
Brookfield Renewable has also enhanced its growth capabilities in other key global renewable energy markets. For example, the company and its partners acquired Leap Green, a leading wind energy-focused company in India, for $200 million, with $40 million net to Brookfield. With that deal, it now operates one of the largest renewable energy businesses in India.
The company and its partners also recently made their first investment in South Korea. They agreed to invest up to $500 million -- $100 million net to Brookfield Renewable -- in Hanmaeum Energy to acquire and expand that company's operations.
Supercharging its growth
Brookfield Renewable's organic growth drivers (inflation-driven rate increases, margin enhancement activities, and development projects) should power 7% to 12% annual funds from operations (FFO) per share growth through 2028. The company believes its capital recycling strategy can help drive its FFO growth rate above 10% annually, so it should have plenty of power to achieve its plan of increasing its dividend, which yields 4.5%, by 5% to 9% annually. Add that income to its growth rate, and Brookfield could produce total returns in the mid-teens. That makes it look like a fantastic stock to buy and hold long-term.
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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 recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
