NextEra Energy, Inc. (NEE)
December 10th, 2013
Ms. Jenna Ecker
Ms Ashley Boecker
Subindustry: Electric Utilities
Investment Objective: Outperform
Investment Horizon: 12-24Months
Earnings per Share
Book Value Per Share
Est. 1-Yr EPS Growth
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12 month ROE(ttm)
*Numbers based on close 12/9/2013
Leader in Renewable Energy
NextEra Energy is nationally recognized as a leading clean energy provider. Approximately 95%
of NEE’s electricity is derived from clean or renewable sources, including wind, solar, natural
gas and nuclear energy. With 116 renewable projects NextEra is the largest generator of wind
and solar power in North America. To date, NextEra Energy Resources has invested more than
$15 billion in its wind business. NextEra Energy Resources plans to invest approximately $6
billion in new wind and solar projects by the end of 2014, which is expected to expand the
company’s position as the country’s renewables leader.
Expanding Capital Investments
NextEra Energy is putting an aggressive emphasis on increasing their capital investments over the
next four years in all of their business segments. Florida Power & Light has projected baseline capital
expenditures to total $9.2 billion from 2013 to 2016 with an additional $4 billion to $5 billion of
incremental capital expenditures over the same amount of time. These planned expenditures include
upgrades of current assets, infrastructure investments, natural gas pipeline expansion, solar
investments and improvements to the incremental storm hardening program. NEER also has a
promising outlook in capital expenditures with a strong backlog of wind and solar projects as well as a
near-term pipeline of contracted renewable projects. As the competitive environment in the
transmission area grows, NextEra has also planned to deploy $4 billion to expand and renovate their
transmission lines. Taking all the segments into account, NextEra Energy plans to spend an
estimated $23 billion in capital expenditures through 2016.
NextEra Energy has a well-diversified portfolio with a fuel mix consisting of wind, natural gas,
nuclear energy, solar and other energies. Wind energy is very attractive right now because it is
quick to market, has a low and competitive price and has regulatory initiatives. NextEra Energy
has also incorporated the cleanest burning fossil fuel with natural gas facilities currently in five
states. NEE’s Nuclear Energy plants produce virtually no air emissions and the facilities have
excellent safety records. By 2016, NextEra Energy plans to bring roughly 900MW of new solar
projects into service.
NextEra Energy, Inc., through its subsidiaries, engages in the generation, transmission, distribution, and sale of electric
energy in the United States and Canada. The company is involved in the generation of renewable energy from wind
and solar projects making up 27% of revenue. It also generates electricity through natural gas, nuclear, oil and coal,
and hydro power plants. The company serves approximately 8.9 million people through approximately 4.6 million
customer accounts in the east and lower west coasts of Florida accounting for 71% of revenue. In addition, it leases
wholesale fiber-optic network capacity and dark fiber to telephone, wireless, Internet, and other telecommunications
companies contributing to less than 2% of revenue. As of December 31, 2011, NextEra Energy, Inc. had approximately
41,000 megawatts of generating capacity. The company was formerly known as FPL Group, Inc. and changed its name
to NextEra Energy, Inc. in May 2008. NextEra Energy, Inc. was founded in 1925 and is headquartered in Juno Beach,
Additional information is available on request.
The analyst’s opinion of the securities featured is conveyed using a Stock Rating (Buy, Hold, Sell) and a Risk Profile (Low, High,
Moderate). Definitions of ratings and profiles can be found on the last page of this report.
The information and opinions presented in this report were prepared by the Bulldog Research Group, the research arm of the LSBE
Financial Markets Program at the University of Minnesota Duluth. Much of the content was obtained through Reuters’ Bridge
financial software. The analyst making the above recommendation may also manage discretionary accounts holding the above
referenced security or securities. Compensation for the analyst is partially based on the performance of the underlying assets in their
discretionary accounts. If you have questions concerning this report, please contact Ashley Boecker at (952)388-4332 or Jenna
Ecker at (651)792-5259. Important disclosures continue on the last page.
NYSE: NEE $84.11 (12/09/2013)
Risk Profile: Low
Target Price: $95.00
Phasing Out Coal Plants: In 1970, the U.S. Congress passed the Clean Air Act, which regulated the emission of sulfur dioxide (SO2), among other forms
of pollution. SO2 contributes strongly to acid rain, and causes or exacerbates respiratory illnesses. However, the legislation allowed for exemptions for
older power plants. This legislation has been strengthened since then: in 1977, the New Source Review increased compliance by states, while the EPA's
Clean Air Interstate Rule, passed in 2005, requires a 57% cut in U.S. SO2emissions by 2015.For the twelve months ending in March 2013, United States'
coal plants produced 1,517,203 gigawatt hours of electricity, or 37.4% of total U.S. electricity production. At the peak year of coal's contribution to U.S.
power production, 1988, coal produced 57% of U.S. power. Coal's share in power production has fallen due to major increases in production from natural
gas and smaller increases from nuclear and wind.
Increasing Natural Gas Usage: Among the utility services, natural gas usage is increasing due to its abundance, cheap price and clean-burning nature.
With more than 71 million domestic natural gas customers, the industry has enough room for nearly 1,200 natural gas utilities presently operating in the
country. Natural gas combustion produces almost 45% fewer carbon dioxide emissions than coal, emits lower levels of nitrogen oxides and particulates,
and produces virtually no sulfur dioxide and mercury emissions. The lower levels of these emissions mean that the use of natural gas does not contribute
significantly to smog or acid rain formation. In addition, because natural gas boilers do not need the scrubbers required by coal-fired power plants to
reduce SO2 emissions, natural gas plants create much less toxic sludge.
Continued Growth in Renewable & Alternative Energy: Environmental regulations are mostly related to air quality, including greenhouse gases, but
also cover water quality and land quality. These regulations create a great deal of uncertainty for utility planning and complicate decision-making about the
future operation of existing power plants. Additional capital investment in fossil-fueled power plants is expected to be required.Currently 29 states have the
Renewable Portfolio Standards; this is the percentage amount of each company’s portfolio that must be invested in renewables by a specified future date.
Investment in electricity from the wind, sun, waves and biomass grew to $187 billion last year, compared with $157 billion for natural gas, oil and coal. It is
estimated that renewables will contribute more to a low-carbon energy supply by 2050 than nuclear power or fossil fuels using carbon capture and
Investment in Infrastructure: Replacement of aging infrastructure and construction of new infrastructure is a necessity for public safety and healthy
economic growth. However, there is a big concern whether sufficient capital can be allocated to meet the infrastructure need. It is well acknowledged that
utility infrastructure in the United States is aging and large amount of investments is needed in order to meet the infrastructure demand. It is estimated
that, by 2030, the electric utility industry will need $1.5 trillion to $2 trillion for infrastructure investment.
NextEra Energy participates in the generation, transmission, distribution and sales of electricity in the United States and Canada through its main subsidiaries:
Florida Power & Light(FPL) and NextEra Energy Resources (NEER). Due to the company’s regulatory nature, FPL faces minimal direct competition as a
regulated electric company. However, their presence in Florida does allow customers to have a certain amount of discretion in choosing electricity providers,
but competition and customer switching to alternative suppliers has been limited. The additional competitive pressures resulting from retail access could lead to
a loss of customers further down the road.
The Southern Co.
TECO Energy, Inc.
Leader in Clean Energy
Nationally recognized as a leading clean energy provider, NextEra Energy Resources has a portfolio of facilities, totaling more than 17,770 net megawatts of
generating capacity in the United States and Canada. Approximately 95% of electricity is derived from clean or renewable sources, including wind, solar, natural gas
and nuclear energy. NextEra Energy is the largest generator of wind and solar power in North America with 116 renewable projects currently in operation. Not only
does the company incorporate environmental stewardship into the design, construction, operation and maintenance of facilities, NEE’s leadership is also committed
to ensuring that the growing demand for power is met in the most environmentally responsible manner. As a result, the company has achieved a reduction in carbon
dioxide emissions and other pollutants through the use of renewable energy resources.In 2012, NextEra Energy added roughly 1,500 megawatts of new wind
generation, more than any company had ever accomplished before. In all, NEE now operates more than 10,000 net megawatts of wind capacity in 24 states and four
Canadian provinces. To date, NextEra Energy Resources has invested more than $15 billion in its wind business. NextEra Energy co-owns and operates seven solar
plants in California’s Mojave Desert. In all, the business operates 360 megawatts of solar power, which is capable of meeting the energy needs of more than 230,000
homes at peak production.NextEra Energy was named No. 1 overall among electric and gas utilities on Fortune Magazine’s 2013 list of the World’s Most Admired
Companies. For the fourth straight year, NextEra Energy was named to the Dow Jones Sustainability Index for corporate sustainability. For an industry-record ninth
consecutive year, FLP earned the ServiceOne Award. Lastly for the sixth year, NextEra Energy has been named one of the World’s Most Ethical Companies by the
In summary, NextEra Energy Resources stands for clean energy. NEER has invested - and will continue to invest - in a clean-energy tomorrow for future generations.
NextEra Energy Resources expertise is in wholesale and retail electricity and project development and construction, as well as in offering customers the energy
products and services they need.
Expanding Capital Investments
Maintaining modern infrastructure is imperative for the United States. To preserve the high-quality, reliable service customers expect and deserve, NextEra Energy
plans to invest up to $26 billion in needed infrastructure projects that will renew and modernize the grid system, meet new environmental standards, as well as add
clean, renewable energy to their fleet.
Florida Power & Light (FPL): FPL has projected baseline capital expenditures to total $9.2 billion with an additional $4 to $5 billion in incremental capital
expenditures between 2013 and 2016. Current modernization of Riviera Beach and Port Everglades are both running on time and on budget to be
completed in mid-2014 and early 2016, respectively. FPL also plans to continue investing in strengthening the grid against storms through additional
incremental storm hardening feeders which will maximize customer benefit. In addition to feeders, FPL aims to improve customer reliability of Automated
Feeder Switches (AFS) which reduces outages. In early November, FPL’s natural gas transportation capacity contracts that support a new pipeline into
the state. The last segment the company has put forward-looking emphasis on is their exploration to invest in solar projects to increase fuel diversity.
Specifically, FPL is interested in three projects: Manatee Solar, Babcock Ranch and DeSoto Solar Expansion. Together these three would offer an
additional 390 MW of new solar power.
NextEra Energy Resources (NEER): Opportunities seem endless for NEER with a strong backlog of solar and wind projects. During 3Q13, NEER
brought into service a Canadian wind project with a capacity of roughly 125 MW and they expect the remaining 475 MW to enter service in 2014 and
2015. NEER also expects 175 MW of new wind and 900 MW of U.S. solar projects to continue into 2014. The team recently signed a PPA for a 200MW
project which is expected to come into service in late 2014, bringing the company’s total contracted wind development portfolio to approximately 1,175
megawatts. Similar to FPL, NEER is working vigorously to grow a presence insolar business. NextEra Energy Resources has recently entered into an
agreement to purchase a development project from First Solar which will have a capacity of approximately 250 MW and operate under a 20-year PPA.
This project still has obstacles to achieve before it can be considered complete, but once it is done the portfolio of NEER’s incremental solar would total
about 1,100MW of U.S. contracted solar projects.
NextEra Energy Transmission (NEET): NEET is expecting increase contributions from their Lone Star Transmission that went into service this past
spring. In addition, NextEra was recently designated by the Ontario Energy Board to develop the East-West Tie Line Transmission project with two other
companies. NEET has also stated a planned contribution of $4 billion for investment opportunities in Alberta, Hawaii, New England, New York and Ontario
which could total $15 to $30 billion through 2020 if executed.
In summary, Florida Power & Light’s baseline capital expenditures and modernization projects combined with NextEra Energy Resources’ strong backlog and
NextEra Energy Transmission’s expanded regional footprint has created a very promising outlook for NEE. The combined future positions of these three segments
offer above average and highly visible growth for NextEra Energy through 2016.
NextEra Energy has a well-diversified portfolio with a fuel mix consisting of wind, natural gas, nuclear energy, solar and other energies.
WIND ENERGY- One of NextEra Energy Resources’ competitive advantage is in wind energy development. While North America’s power demands
continue to grow, so does interest in clean, renewable and affordable wind energy. NextEra Energy Resources is helping develop wind energy
facilities and is the North American leader in wind energy generation. Wind energy is quick to market, from groundbreaking to commercial operation
it usually takes six to nine months. The cost of wind has decreased significantly and the cost is competitive with other forms of power generation. In
addition there is no fuel cost volatility. NextEra Energy is finding that more and more customers are requesting the option of purchasing clean
renewable energy to meet their electricity needs.
NATURAL GAS- NextEra Energy has incorporated the cleanest burning fossil fuel with natural gas facilities currently in five states. Often NEE installs
combined-cycle technology, which uses waste heat to drive an additional power generator for increased energy efficiency and lower emissions than
conventional fossil-fueled units.
NUCLEAR ENERGY- NextEra Energy Resources added clean nuclear energy into the fuel mix through a majority interest in the Seabrook Station in New
Hampshire, a 70% interest in the Duane Arnold Energy Center in Iowa, and full ownership of Point Beach Nuclear Plant in Wisconsin. Nuclear power
plants produce virtually no air emissions during operation, and facilities that have excellent safety records and are focused on reliable operation.
SOLAR/OTHER ENERGY- NextEra Energy Resources also generates solar energy through operations at the Solar Electric Generating Systems (SEGS)
in California’s Mojave Desert as well as at facilities in New Jersey, New Mexico and Canada. In all, the company operates an unprecedented 360 MW,
with ownership of approximately 198 megawatts of solar generation. The company also expects to bring roughly 900 MW of new solar projects into service
from 2012 through 2016. This includes its 50% portion of the Desert Sunlight project and 100% of the Genesis solar thermal project, both in California and
the Termosol Solar Project in Spain.