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Google Signs Clean Energy Deal

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Google Inc. , the world's most popular Internet search engine provider, has teamed up with private equity stalwart Kohlberg Kravis Roberts & Co. L.P. (KKR - Free Report) and solar specialist, Recurrent Energy, to invest in six photovoltaic power plants.

Reportedly, Google and KKR will provide equity and debt to finance the six projects. The total transaction is expected to be worth $400 million, out of which $80 million will be funded by Google.

The combined production capacity of the six facilities, five of which are located in California and one in Arizona, is expected to be 106 megawatts. Google will be able to deliver clean energy equivalent to power roughly 17,000 homes. Energy generated from them will be distributed to local energy providers under long-term Power Purchase Agreements (PPAs). All six facilities are expected to be operational by Jan 2014

For quite some time, Google has been moving away from fossil fuels and focusing more on clean energy. In Dec 2011, these three companies signed a similar agreement to fund four projects near Sacramento. These projects generate a combined 88 MWs which can power roughly 13,000 homes.

Google has already invested more than $1 billion to solar and wind projects. Since 2010, the company has made 14 investments in renewable-energy projects. Earlier, in Jan 2013, it invested $200 million in a wind farm in west Texas. Later in June, the company announced an investment of $12 million in a 96 MW solar-power project in South Africa. Google has been focusing on renewable energy to power its data centers as well.

Google’s continuous efforts have encouraged many technology companies to increase the use of clean energy to power their data centers. Last year, Apple (AAPL) bought 200 acres of property in Catawba County for $3 million in an effort to run its North Carolina data center using renewable energy. Facebook (FB) has also adopted strategies to use clean and cheap energy to power its data centers.

These efforts are expected to help reduce global warming and fossil fuel consumption.

Google has posted strong third-quarter results, with its earnings exceeding the Zacks Consensus Estimate due to solid growth in the core business, a growing digital business, good cost control and a lower tax rate. However, its ad technology has not kept up, leading to poorer ROI for advertisers, which has affected spending on Google platforms.

Currently, Google retains a Zacks Rank #3 (Hold). Other stocks that are performing well at current levels include Melco Crown Entertainment Ltd , Best Buy Inc. (BBY - Free Report) and Northern Oil And Gas Inc. (NOG - Free Report) . All these stocks carry a Zacks Rank #1 (Strong Buy).

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