Brookfield Renewable Partners (TSX: BEP.UN) and TC Energy (TSX: TRP) are two of Canada’s most important energy companies. BEP is a renewable energy company that invests in solar, wind, and hydro projects. TC Energy is a diversified energy company involved in pipelines, power, and storage. The two companies seem very different on the surface, but when you think about it, they’re both basically in the business of supplying power. The difference is that one is involved in “green energy” while the other is a more conventional fossil fuels company. Therefore, these companies represent two completely different takes on the future of power. In this article, I will explore both of these stocks side by side so you can decide which one is right for you.
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The case for Brookfield Renewable Partners
One big advantage that Brookfield Renewable Partners has over TC Energy is the fact that its assets are more “future proof.” Whereas TC Energy operates oil and gas assets that are on the receiving end of climate change regulations and taxes, Brookfield Renewable operates assets that in many cases enjoy tax-favoured status. Some of the company’s biggest segments include:
- Hydroelectric: $1.5 billion in revenue, $626 million in funds from operations (both figures for the 12-month period)
- Wind: $511 million in revenue, $382 million in funds from operations
- Storage and other: $241 million in revenue, $133 million in funds from operations
As you can see, all of BEP’s major segments were FFO-profitable over the last 12 months. For the most part, revenue and earnings were down from 2022 levels last year, but that’s to be expected with the large increase in interest rates that occurred in 2022 and early 2023. If inflation keeps trending downward, then interest rates will likely start to trend downward too, and that will help Brookfield Renewable on the earnings front.
The case for TC Energy
The main advantage that TC Energy has over Brookfield Renewable is the fact that it has a more established and proven business model. TC Energy is mainly involved in storing and transporting oil and gas. It also owns power generating facilities that supply local utility companies. Midstream energy and utilities are both very well established business models. Utilities in general are protected from competition, too.
Unfortunately, TC Energy’s most recent results were not very good. In the third quarter, the company delivered:
- A $0.19 per share loss.
- A $1 billion decline in net income (which swung from a positive sum in the base period to a negative one last quarter).
- A $799 million loss from Canadian liquids pipelines.
- A very slight increase in cash flow from operations.
- A 3.33% dividend increase.
There were some good metrics in there, namely cash from operations and the dividend. On the whole, though, there were many red flags in the release too – chiefly the large decline in net income.
The final verdict
Taking everything into account, I’d rather invest in Brookfield Renewables than TC Energy. Although Brookfield’s earnings trended very slightly downward last year, the company’s long-term growth and expansion speak for themselves. Brookfield Renewables is backed by one of the most successful teams of capital allocators in the world. I don’t own any BEP, but I own related stocks that are performing well for me. I’d feel comfortable holding BEP, too.
