Renewable power is the focus of many long-term energy investors today. And for a good reason. ESG investing isn’t just a fad. It’s here to stay.
For investors who agree, here’s why Northland Power (TSX: NPI) is a great long-term pick right now.
Eyes on global offshore expansion
Recently, Northland acquired an operating portfolio of renewable projects based in Spain for a whopping $1.6 billion. Simultaneously, it also raised equity worth $990 million.
Bill Cabell, an analyst from Desjardins Securities, thinks such a deal is the perfect launch pad for Northland in Europe. Similarly, analysts believe that the acquisition will boost Northland’s cash flow and place it in a favourable position to tap into its growth position in a transitioning market.
In fact, the analysts were quick to predict a pop of renewable growth that would decarbonize this generation. The altruistic element here is hard to ignore. However, as we’ve seen play out in financial markets of late, what’s good for the environment has also turned out to be good for investors as well.
Accordingly, I think it’s important that investors consider how bullish analysts are on this stock right now. The company’s growing renewables portfolio is one that has struck a chord with the market. And I don’t expect that will change.
A diverse, growth-based business is hard to come by
ESG-friendly plays like Northland certainly have a cachet with investors today. Capital inflows remain strong into renewables plays in general.
However, most renewables companies are heavily tilted toward one specific renewable power type. Northland’s business model is one which is highly diversified across a variety of power types. Accordingly, investors get some nice diversification within this sector by owning Northland.
In addition to being highly diversified, Northland’s assets are among the best in the sector. These high-quality, renewable energy-generating assets provide extremely stable cash flows and growth potential other parts of the energy sector is likely to envy.
Given the momentum ESG investing has right now, I’d expect to see more capital inflows into the sector. Among renewables stocks, Northland remains a top pick of most retail and institutional investors. Accordingly, there’s a strong backdrop for capital appreciation for those holding this stock long term.
Bottom line
Northland is currently among the top independent clean energy producers in Canada. Investors who wish to park money into clean energy with substantial growth prospects should certainly consider this stock today.
Northland Power is not a cheap stock compared to its sector. However, I think it’s reasonably priced given its positioning and long-term growth potential.
