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Microsoft to Buy Wind Energy, Focus on Renewables Continue

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Microsoft (MSFT - Free Report) continues to aggressively invest in renewable energy for its operations. The company recently inked two power purchase agreements (PPA) with EDP Renewables North America LLC to work on a wind energy project based out of Paulding County, OH.

The two new deals, each spread over 15-years, bring in a total 125-megawatt (MW) of wind energy to Microsoft’s renewable portfolio, which is now estimated to have reached 1.4 gigawatts.

The Timber Road IV Wind Farm project is anticipated to commence operations in 2019. The facility is estimated to create around 200 jobs in the course of construction. The wind farm is also expected to generate local state economic income of $1.1 million annually.

EDP Renewables North America LLC, a subsidiary of EDP Renewables SA (EDPR) is primarily engaged in developing sustainable energy solutions which involves operating wind farms and solar parks across North America. Notably, the latest Timber Road IV Wind Farm marks EDPR's fourth wind farm project based in Ohio.

Strength in EDPR’s sustainable energy solutions favors the prospects of the deal. The latest contracts are in sync with Microsoft’s strategy to promote the usage of renewable energy in a bid to keep operating expenses under control and reduce carbon emission.

In fact, Microsoft intends to achieve early 60% dependency on renewable energy for its power requirements by the end of 2020. 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.

Coming to price performance, shares of Microsoft have returned 16.3% in the past year outperforming the industry’s rally of 14.2%.

Utilizing Green Energy to Fuel Data Centers Bode Well

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%. Per the report, public cloud services’ spending is expected to reach $210 billion in 2019, up 23.8% over 2018.

In order to operate a cloud infrastructure, data centers are required, which in turn need steady and unwavering power supply to function properly.

Given the growing demand for cloud, 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 and Microsoft is no exception to the trend.

Investments in Renewables Gain Steam

Microsoft is one of the many notable companies that are undertaking significant investments in renewable energy. In fact, reports suggest that Microsoft’s cloud platform Azure “has been carbon-neutral since 2012.”

Moreover, the company has completed quite a few large-scale corporate PPAs to buy renewable energy. Notably, the Timber Road IV Wind Farm marks the company’s fifth green energy focused venture in the larger PJM region in the United States.

Further, the company recently entered into a 15-year PPA with Invenergy, by which it will be the single off-taker of the solar energy produced by Wilkinson Solar Energy Center.

We note that dependence on renewable resources to cut down on operating costs is just another way to be more competitive and profitable, and Microsoft’s decision to do so augurs well for the company in the long run.

Other companies like Apple, Alphabet, Amazon 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 in January 2018, and has plans to hit the target of 100% in the longer haul.

Wrapping Up

Going green initiatives by the big companies are expected to benefit overall environment with reduced global warming and fossil fuel consumption. Furthermore, the renewable project aids economic development of the states involved, which is like a cherry on the cake.

Zacks Rank & Key Picks

Currently, Microsoft carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Cadence Design Systems, Inc (CDNS - Free Report) , Synopsys, Inc. (SNPS - Free Report) and Symantec Corporation (SYMC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cadence Design, Synopsys and Symantec have a long-term earnings growth rate of 12%, 10% and 7.9%, respectively.

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