Deloitte, a global professional services firm, said clean energy demand outpaces supply. However, because of the accelerating shift towards a sustainable future and abundant sources to replace fossil fuels, renewable energy is a must-watch sector in 2025.
Another positive factor is that many on the demand side want to have a large share of renewables to meet their infrastructural load growth needs or requirements. For investors wishing to take early positions and ride the rising tide, the TSX has two outstanding choices in the renewable energy space.
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First option
Brookfield Renewable Partners (TSX:BEP.UN) owns and operates renewable power assets such as hydroelectric, wind, and solar. The $9.8 billion company is present on five continents and provides distributed energy and sustainable solutions. This green stock trades at $33.90 per share (+3.04% year-to-date) and pays a generous 5.9% dividend.
Management’s growth strategy is simple: leverage the extensive operating experience across the business to maintain and enhance asset value. The result should be growing cash flows annually and deep relationships with local stakeholders.
In Q3 2024, revenue increased 24.7% to $1.5 billion compared to Q3 2023, although net loss ballooned 182.8% year-over-year to $181 million. Nevertheless, its CEO, Connor Teskey, said it was another successful quarter because of the strong operational results.
Brookfield’s funds from operations (FFO) increased 9.9% to $278 million from a year ago. Teskey added that the continued growth and advancement of the development pipeline (200,000 megawatts with 65,000 at the advanced stage) are tailwinds. He maintains a positive outlook due to a strong growth outlook, given the company’s industry position and strong power demand.
Management believes the business model is a competitive strength. Brookfield Renewable Partners has a global reach and can acquire and develop high-quality clean energy assets. The company’s conservative financing strategy enables long-term but low-risk investment-grade basis funding.
Brookfield’s diverse portfolio, including premium hydroelectric assets, can mitigate resource variability. Moreover, the large pipeline and differentiated capabilities provide significant scarcity value, an investment takeaway for investors.
Next-best alternative
TransAlta (TSX:TA) is the next-best alternative to Brookfield Renewable Partners. Besides the lower price, current investors enjoy a 77%-plus year-to-date gain. At $19.09 per share, the dividend offer is 1.3%. The $5.6 billion clean energy solutions company generates and markets electric power.
Its diversified asset base of renewable energy facilities include wind, solar, and hydro. Coal-fired generation is still happening, but operations will cease by the end of 2025. According to management, TransAlta is undergoing a massive clean energy expansion to meet the needs of industrial customers and the communities it serves.
In Q3 2024, net loss reached $36 million compared to the $372 million net income in Q3 2023. Despite the loss, its President and CEO, John Kousinioris, said, “We are tracking toward the upper end of our 2024 guidance given our portfolio position and performance during the first nine months of the year.”
Notably, the business is capital-intensive with a long cycle that requires significant capital expenditures. TransAlta must sustain its CAPEX to ensure the facilities’ reliable and safe operations.
Renewables race
Deloitte expects the renewables race to fill the resource gaps and address clean energy demand. Brookfield Renewable Partners and TransAlta would be in the race to attract clean energy investors.
