My books about NextEra Energy
It is recommended to read my book “The Rules of Super Growth Stocks Investing“:
- Sections 1-2, pp. 32-35.
And the book “The Rules of 10 Baggers“:
- Sections 3-7, pp. 168-169.
- Sections 3-8, 179 pages.
Introduction
Short description
As the largest renewable energy company in the world, NextEra Energy is a time-tested company with deep roots. Founded in 1925, with governments around the world supporting green energy policies, it should continue to grow along with the growth of renewable energy and Florida’s population.
Company profile
The company is the largest wind and solar energy generator in the world. It owns and operates around 48GW (FPL + NEER, 2018) of generating capacity throughout the US.
It uses natural gas, nuclear, solar, and wind as generating fuels, especially wind. It has 8 commercial nuclear power units in Florida, New Hampshire, Iowa, and Wisconsin.
In 2017, NEE generated 55% of its total net income from NextEra Energy Resources. NextEra Energy Resources uses no-carbon sources for 94% of its installed generation capacity.
Subsidiaries
FPL (Florida Power & Light Co)
It contributed 1/7 of company net income. The largest energy company in the United States as measured by retail electricity produced and sold. The largest electric utility in Florida, electricity provider for more than 10 million people in Florida.
It is one of the largest electric utilities in US. At the end of 2021, FPL has 5.6 million customer accounts (11 million people).
NEECH (NextEra Energy Capital Holdings Inc.)
It contributed 6/7 of company net income. NEECH held all of their renewable assets in an LLC named NEP (NextEra Energy Partners). NEP (ticker: NEP) was deconsolidated from NEE on January 1, 2018.
NEECH is the world’s largest operator of wind and solar projects.
WATER and Wastewater
It recently made another water deal, acquiring a wastewater system in Pennsylvania. In October, the company entered the U.S. water and wastewater utility industry via an acquisition of several regulated systems in Texas.
The company’s continued expansion into water is part of its strategy to have a dozen $100 million businesses by 2025, up from seven last year.
Business performance and valuation
Business performance
| Year 2021 | NextEra Energy | American Water Works |
| Annual revenue and growth rate (million) | 17,069 -5.16% | 3,930 +4.05% |
| Annual operating income and growth rate (million) | 3,121 -39.35% | 1,274 -1.77% |
| Annual net income and growth rate (million) | 3,573 +22.4% | 1,263 +78.14% |
| Operating margin | 18.28% | 32.42% |
| Net margin | 20.93% | 32.14% |
Stock valuation
| 7/23/2022 | NextEra Energy | American Water Works |
| Market capitalization ($ billion) | 156.87 | 27.03 |
| Share price | 79.85 | 148.71 |
| P/E | 108.40 | 20.01 |
| Dividend yield | 2.13% | 1.76% |
| Stock performance in past 10 years (S&P 500 was＋232%) | +449% | +232% |
Long term investment metrics
Stock performance vs. S&P 500
| Company | Market Cap | Dividend Yield | Projected Annualized EPS Growth Over Next 5 Years | Stock’s 10-Year Total Return |
|---|---|---|---|---|
| NextEra Energy | $139 billion | 2.4% | 8.9% | 449% |
| American Water Works | $23.8 billion | 2% | 8.3% | 378% |
| S&P 500 | N/A | 1.47% | N/A | 232% |
Dividends
NextEra has raised its dividend for 28 consecutive years, , which is a rare achievement. In February, the company not only announced an approximately 10% dividend increase, but also said that it expects to hike its dividend roughly 10% a year through at least 2024.
Carbon Zero by 2045
FPL, its electric utility in Florida, the company expects the country’s largest solar expansion to get even bigger. It anticipates deploying hundreds of millions of solar panels by 2045 to produce more than 90 gigawatts (GW) of energy, up from 15 million panels producing 4 GW of power today.
The company expects to deploy 50 GW of battery storage capacity, up from 500 megawatts (MW) today, to supply power when the sun isn’t shining. In addition, NextEra Energy plans to replace natural gas as a fuel in its power plants with green hydrogen and renewable natural gas.
Outlook
The goal by 2025
The management of the company has declared:
- To operate more than ten new businesses by 2025.
- Annual earning of at least $100 million generated by these new business.
Renewable Energy Capacity Expansion Plan
NextEra Energy is looking to expand its solar and wind business from a nameplate capacity of 24 gigawatts in 2021 to between 46 gigawatts and 53 gigawatts in 2025. That’s, roughly speaking, doubling the size of the company’s nameplate production capacity.
Expansion of new revenue streams
In order to achieve the company’s strategy of operating more than ten businesses with at least $100 million in annual revenue by 2025, the company has established new sources of revenue growth through various investments, while taking a cautious approach to business expansion. These new businesses and investments include:
- RNG
- Water: See the Wastewater section discussed earlier in this article.
- Power transmission
- Hydrogen
- Battery storage
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