Microsoft (NASDAQ:MSFT) has signed a unique global framework agreement to accelerate the expansion of renewable energy capacity. The five-year contract will help support the development of over 10.5 gigawatts (GW) of new renewable energy capacity. That is a shock Eight times larger than the largest power purchase agreement (PPA) ever signed by a company.
The tech titan co-signed this agreement Brookfield Asset Management and its subsidiary Brookfield Renewables (NYSE:BEPC)(NYSE:BEP). This will significantly expand the long-standing relationship with Microsoft. The deal, which is said to support more than $10 billion in future developments, will do this sensible Improve and expand Brookfield Renewable’s long-term growth prospects.
An exaggerated agreement
The globe renewable energy The framework agreement provides Brookfield with a visible path to build and deploy more than 10.5 GW of new renewable energy capacity in the US and Europe between 2026 and 2030. This will help support Microsoft’s goal of achieving 100% carbon-free energy purchasing by 2030.
This significantly strengthens the relationship between the companies. Microsoft currently has PPAs covering nearly 1 GW of renewable energy from Brookfield.
The deal gives Microsoft access to a Pipeline from new renewable energy capacity to meet growing demand for its cloud services. In addition to wind And solarThe focus of the agreement is on new and effective technologies for carbon-free energy production. The tech giant needs more power to support power-hungry data centers that need to benefit from increasing digitalization and increasing adoption of artificial intelligence (AI). AI applications require significant computing power in return, requires massively more electricity.
While the agreement will initially focus on capacity building in the US and Europe, Microsoft may expand the scope to include Asia Pacific, India and Latin America. The deal incentivizes Brookfield to build a large portfolio of renewable energy projects.
A strong growth driver
Brookfield Renewable is the perfect partner for Microsoft. Only a few companies can do that its global size and development capabilities. The company has one of the world’s largest operating portfolios, with 33 GW of capacity across multiple technologies (hydro, wind, solar and storage) and geographies (North and South America, Europe and Asia Pacific).
Additionally, the company has a leading development pipeline with a whopping 155.4 GW of projects in various phases. Brookfield also has a portfolio of sustainable solutions including nuclear services, renewable natural gas and carbon capture and storage.
The Microsoft deal could enable Brookfield more quickly Forward projects in its development pipeline. The agreement could also open the door to additional growth opportunities for Brookfield in the future. Its broader focus beyond wind and solar could accelerate the development of new zero-carbon generation technologies.
Brookfield Renewable expects to increase its operating capital (FFO) by more than 10% per share per year until 2028. The development pipeline is a significant Energy source that is expected to deliver FFO growth of 3% to 5% per share each year. The Microsoft deal could allow Brookfield Renewable to achieve higher growth from its development pipeline starting in 2026 while extending its growth prospects through 2030.
The agreement should improve Brookfield’s ability to increase its dividend in the future. The company expects to increase its already attractive payout (currently over 6%) by 5 to 9% per year over the long term. The company has delivered average annual dividend growth of 6% over the past two decades and could increase the payout toward the high end of its annual target range in the coming years, in part due to the Microsoft deal.
A win-win-win partnership
Microsoft’s major renewable energy purchase deal with Brookfield will help power the company’s fast-growing cloud business with clean energy. This will help accelerate the energy transition towards cleaner energy Great For the environment.
Additionally, the deal will help accelerate Brookfield’s growth, which could bring high dividends to its shareholders in the coming years. Brookfield Renewable’s combination of income and growth could be the driving force Strong overall result returns for its investors, making it a top renewable energy stock to buy.
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Matt DiLallo holds positions at 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 $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
Microsoft Makes a Massive $10 Billion Bet on Renewable Energy (Which Will Pay Big Dividends for This Top Energy Stock) was originally published by The Motley Fool