It will cost huge sums to fight climate change. Estimates suggest we need to invest $150 trillion by 2050 to decarbonize energy systems and the global economy. This represents a huge opportunity for Brookfield Power (NYSE:BEP)(NYSE: BEPC) leverage its access to capital and expertise to help companies decarbonize their operations.
Many companies are already partnering with Brookfield to help them achieve their climate goals. Meanwhile, Brookfield is actively targeting others who would benefit from his expertise. He recently unveiled his first target by proposing to privatize the Australian electricity company AGL Energy (ASX: AGL). Here’s why Brookfield wants to take control and help companies like AGL Energy clean up their emissions profiles.
Make public its offer to accelerate the cleaning of AGL
Brookfield Renewable partners with GROK Ventures (controlled by Mike Cannon-Brookes, a billionaire climate activist who co-founded a software company Atlassian) to privatize AGL Energy. They offered 7.5 Australian dollars ($5.41) per share, valuing AGL’s equity at 5 billion Australian dollars ($3.6 billion). That’s about a 5% premium to AGL’s closing price on Friday. However, this is only a fraction of the energy company’s former peak, as it has lost 75% of its value in the past five years.
Brookfield and its partners want to privatize AGL Energy to execute a plan to decarbonize the company. They intend to invest A$20 billion ($14.5 billion) to build at least eight gigawatts (GW) of clean energy and storage assets, replacing its existing electricity generation portfolio. coal-fired electricity of seven GW. The plan would transform AGL from one of Australia’s worst carbon emitters – it accounts for 8% of the country’s emissions, more than all the cars currently on the road in the country – into a vertically integrated energy company with net zero emissions. 2035.
This is significantly faster than AGL’s current plan. The company unveiled its new strategy last year, which would see it split into two entities: one focused on power generation and the other on energy retail. This plan would see both companies slowly shift to cleaner energy, with the goal of reaching net zero by around 2050.
While AGL rejected Brookfield’s offer, saying the price is too low, Brookfield and GROK plan to continue negotiations. Commenting on the rejection, Cannon-Brookes said their initial offer was “just the starting shot”. They want to continue explaining the value of their offer to AGL shareholders in hopes of closing a deal.
Accelerate the transition
Brookfield Renewable estimates that the financing required to replace AGL’s coal-fired power plants with renewable energies is more than he can get in public markets. That’s why he wants to privatize the company to take advantage of his access to capital. This capital would come from the Brookfield Global Transition Fund I, the world’s largest fund focused on accelerating the economy’s transition to net-zero emissions. Brookfield Renewable is the largest investor in the $12 billion fund raised by its parent company, Brookfield Asset Management (NYSE:BAM).
In addition to having the financing to help accelerate AGL’s transition, Brookfield has the expertise and scale to help it efficiently generate the clean power needed to replace its old coal-fired operations. The company operates 21 GW of renewable energy assets globally and has a development pipeline of 62 GW. His experience in operating and developing renewable energy assets enables him to help other companies develop their renewable energy capacity. At the same time, its global reach gives it purchasing power, which helps reduce costs and improve returns on investment.
Brookfield’s expertise increasingly makes it the partner of choice for companies seeking to achieve their climate goals. For example, last year it signed a strategic collaboration agreement with the tech giant Amazon (NASDAQ: AMZN) to develop new renewable energy projects. This agreement will help Amazon achieve its goals weather objectives and contribute to the transition of the global energy industry towards cleaner energy sources. She has also invested alongside Appleit’s (NASDAQ:AAPL) China Renewable Energy Fund will acquire a portfolio of wind energy active in this country. The fund, raised by Apple and its suppliers, helps advance the transition to net-zero emissions in China.
lead the charge
Brookfield Renewable wants to take a more active role in leading the energy transition to renewable energy. This led her to become the largest investor in the Brookfield Global Transition Fund, which she wants to use to accelerate AGL Energy’s transition from a major carbon emitter to a net-zero company. Although AGL rejected its initial offer, Brookfield plans to continue negotiations.
In the meantime, it should have plenty of opportunities to help other companies accelerate their decarbonization plans in the future, given the huge amount of capital needed to reach net zero globally. This ability to lead such a critical mission makes Brookfield a top long-term investment.
10 stocks we like better than Brookfield Renewable Partners LP
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*
They just revealed what they believe are the ten best stocks investors can buy right now…and Brookfield Renewable Partners LP wasn’t one of them! That’s right – they think these 10 stocks are even better buys.
View all 10 stocks
* Portfolio Advisor Returns as of January 20, 2022
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Matthew DiLallo owns Amazon, Apple, Atlassian, Brookfield Asset Management, Brookfield Renewable Corporation Inc. and Brookfield Renewable Partners LP and has the following options: $120 long calls in March 2023 on Apple and $130 short calls in March 2023 on Apple. The Motley Fool owns and recommends Amazon, Apple, Atlassian, Brookfield Asset Management and Brookfield Renewable Corporation Inc. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV and recommends the following options: Long March 2023 $120 Apple Calls and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.