The global race to build data centres is creating one of the most urgent power demands in modern history. Artificial intelligence needs a ton of electricity. And right now, the companies building AI infrastructure are struggling to find enough clean, reliable power to keep the lights on.
That gap between supply and demand is creating a massive opportunity. And one Canadian company is sitting right at the centre of this megatrend.
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Why the data centre power crisis is getting worse
Tech giants like Microsoft and Google are spending hundreds of billions of dollars to build out AI data centres. But a data centre without power is just an expensive building. These hyperscalers need several gigawatts of clean and contracted electricity.
Brookfield Renewable Partners (TSX:BEP.UN) CEO Connor Teskey said it plainly on the company’s Q1 earnings call: “Demand continues to go up. It is higher today than it was last quarter. It’s higher today than it was last year, and we expect it to be higher next year than it is today.”
New capacity
Brookfield holds a renewable energy framework agreement with Microsoft covering more than 10.5 gigawatts of capacity, as well as a 3-gigawatt hydro framework agreement with Google. These are contracted, long-term arrangements with two of the wealthiest companies on earth.
- Brookfield operates roughly 47 gigawatts of clean power capacity across about 25 countries, spanning hydro, wind, solar, battery storage, and nuclear services through its Westinghouse subsidiary. Its development pipeline exceeds 200 gigawatts, one of the largest in the world.
- In Q1, the company brought 1.8 gigawatts of new capacity online and contracted another 1.7 gigawatts from its advanced development pipeline.
- Management is on track to hit a 10-gigawatt annual commissioning run rate by 2027, nearly double what it was delivering just two years ago.
Hyperscalers like Microsoft and Google want a single partner who can deliver across technologies and geographies. Brookfield is essentially the only company that can offer that.
“Our scale and diversity continue to differentiate us in our ability to serve the largest corporate consumers of electricity,” Teskey said on the earnings call.
Battery storage costs have fallen 65% to 70% over the past two years, making storage projects increasingly attractive. Brookfield described battery storage as its fastest-growing technology, and management sees stand-alone energy storage as a major opportunity going forward.
This Canadian stock is a financial powerhouse
Brookfield Renewable posted record FFO (funds from operations) of US$375 million in Q1, an increase of 19% year over year. On a per unit basis, FFO rose by 15% to US$0.55. Over the trailing 12 months, FFO rose by 13% to US$1.394 billion, or US$2.08 per unit.
Management targets 10% or more annual FFO per unit growth, with distribution growth of 5% to 9% per year. The current annual distribution sits at $1.568 per unit, implying a yield of roughly 4.5% at recent prices and a payout ratio of 75%.
Analysts tracking the Canadian dividend stock forecast FFO per share to increase to US$3.16 per share by 2030. If the stock is priced at 15 times forward FFO, it could surge close to 60% within the next four years, after adjusting for dividends.
Brookfield ended Q1 with over US$4.7 billion of available liquidity and a BBB+ credit rating. Its average corporate debt maturity now stands at 14 years, the longest in the company’s history.
Brookfield agreed to sell its assets, expected to generate about US$2.8 billion in proceeds, or US$820 million net to the partnership, in Q1.
Moreover, Brookfield is exploring whether to consolidate its dual-listed structures for BEP and BEPC into a single corporate security, which could improve liquidity and expand index inclusion.
