Microsoft MSFT recently inked a deal with Eneco to purchase wind energy from Borssele III/IV project based out of the Netherlands.
The latest deal, spread over 15-years, will bring in a total 90-megawatt (MW) of wind energy to Microsoft’s renewable portfolio, which is now estimated to have exceeded 1.5-gigawatt (GW).
The Borssele III/IV project is anticipated to commence commercial operations in early 2021, with construction work beginning in fourth-quarter 2019. The facility is estimated to generate 731.5 MW of wind energy.
Edeco is primarily engaged in developing sustainable energy solutions and owns 10% stake in Borssele III/IV wind farms project. Further, Eneco Group has entered into Power Purchase Agreement (PPA) by which it will purchase 50% of power produced by the wind farms.
Notably, per a three-year deal inked in 2018, Microsoft Azure is Edeco’s preferred cloud services partner. Improved collaboration between the two companies favors the prospects of the deal.
Coming to price performance, shares of Microsoft have returned 30.3% in the past year outperforming the industry’s growth of 24.3%.
Utilizing Green Energy to Fuel Data Centers Hold Key
Cloud computing is gradually gaining traction among the masses, given the convenience and security features it provides to the end user. Per an IDC report, global public cloud services’ spending is estimated to reach $370 billion by 2022 at a CAGR of 22.5%.
In order to operate cloud infrastructure services, data centers are required, which in turn need steady and unwavering power supply to function properly. Given the growing popularity of cloud services, demand for datacenters and power is likely to increase in the future.
To meet the power requirements, many major cloud players are turning to renewable sources of energy. The Edeco deal marks Microsoft’s second wind energy focused venture in the Netherlands and 14th renewable PPA in general.
Currently, Microsoft has 54 Azure regions worldwide, with the Netherlands being one of them. Microsoft’s wind energy portfolio, now totaling 270 MW in the Netherlands, is expected to aid the company in sustaining the Azure region in the country.
We note that dependence on renewable resources to cut down on operating costs is a smart way to be more competitive and profitable, which favors Microsoft’s prospects.
Microsoft intends to achieve early 60% dependency on renewable energy for its power requirements and has been operating “100% carbon-neutral” since 2012.
Notably, the company has set an ambitious target to fuel 100% of its global energy needs through renewable resources like solar, geothermal & wind power, biogas and hydro power. We believe the ongoing initiatives will aid Microsoft to realize its green goals.
Companies like Apple AAPL, Alphabet GOOGL, Amazon AMZN and Walmart, among others, are also seeking greater use of renewable energy in their operations. Notably, Apple and Alphabet owned Google have achieved 100% renewables target and are powered by green energy. Amazon Web Services (“AWS”) attained 50% dependency on renewable energy, and has plans to hit the target of 100% in the longer haul.
Currently, Microsoft carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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