What does a new 10-year renewable energy deal mean for the Coles (ASX: COL) share price in 2020? We take a look at the implications.
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The Coles Group Ltd (ASX: COL) share price is one to watch after the Aussie supermarket group announced a new 10-year renewable energy deal.
What’s this renewable energy deal all about?
Coles has signed a new deal that will see more than 90% of its electricity needs in Queensland come from clean energy sources. The deal, announced with CleanCo yesterday, comes into play from July 2022.
Coles will purchase 400 gigawatt hours (GWh) of electricity generated from wind and solar farms across Queensland. That includes power from the Western Downs Green Power Hub which is set to become Australia’s largest solar farm once completed.
The announcement, made by Coles yesterday, will reduce Coles’ electricity carbon dioxide emissions nationally by an estimated 20%, or 240,000 tonnes per year.
Crucially, Coles’ involvement will also secure the development of these key energy projects and create 800 local jobs in Queensland.
This follows similar renewable energy commitments from rivals Woolworths Group Ltd (ASX: WOW) and Aldi.
Woolworths raised $400 million to install solar panels across its stores in 2019 with more than 140 stores getting their energy from those panels.
Aldi announced in August 2020 that it plans to use 100% renewable energy in its Australian operations by the end of 2021.
What does this mean for the Coles share price?
I think there are a couple of potential implications for the Coles share price.
For one thing, the Aussie company looks like a genuine environmental, sustainability and governance (ESG) investment. The more that Coles invests in renewable energy and cuts CO2 emissions, the more ESG investors could look to buy.
That would be a good thing for the Coles share price with more potential demand. There’s also the potential for the supermarket giant to slash its electricity costs and reduce operating expenses.
That could flow through to the company’s earnings and its bottom line. Higher net income could see higher earnings per share which is also a good thing for investors.
Apart from being a great outcome for environmental reasons, yesterday’s announcement could have some important implications for the Coles share price.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.