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Top Performer NextEra Energy Ready For New Challenges

Mar. 03, 2021 4:51 AM ETNextEra Energy, Inc. (NEE)51 Comments


  • Low-beta (0.19), $150 billion-market cap NextEra continues to attract investor interest for its country-largest renewables portfolio as well as its growing Florida utility.
  • Blackouts from the Texas arctic freeze and California 2020 summer 2020 require all utilities to consider stress-testing transmission durability and generation capacity, both baseload and intermediate.
  • While a high-performing company, NextEra faces exposure from its 3300 MW of Texas renewable generation capacity and the sector-wide concerns of potentially higher interest rates.
  • Looking for more investing ideas like this one? Get them exclusively at Econ-Based Energy Investing. Get started today »

Investors flock to NextEra (NYSE:NEE) for its globally-largest renewable unregulated power generation but stay for its healthy, growing Florida utility operation. These is why I have in the past and continue to recommend NextEra Energy.

NextEra Energy is a holding company for two (now merged into one) regulated retail utilities and an unregulated generation subsidiary. For 2020, the three operating segments were Florida Power & Light (FPL), a regulated utility serving 5.6 million customer accounts and the largest US rate-regulated retail electric utility; Gulf Power, a regulated utility serving 470,000 customers in eight counties in northwest Florida; and NextEra Energy Resources (NEER), an unregulated subsidiary that generates clean energy from solar, wind, and nuclear power.

On January 1, 2021, NextEra’s Gulf Power division merged into the FPL division, with the FPL division as the continuing entity. However, Gulf Power’s financial results are reported separately for 2020.

At a market capitalization of $148.8 billion and a beta of 0.19, NextEra Energy is less volatile than the overall stock market, a plus for investors seeking stability.

Risks include those of rising interest rates and an exposure as a power supplier to Texas during its forced, involuntary electric blackouts.

Implications of the Texas Arctic Blackouts

Texas, through the Electric Reliability Council of Texas (ERCOT) operates its own electrical grid. Starting in early February, the weather became worse and worse with over a week of sub-freezing and single-digit temperatures. Severe long-lasting cold led to high gas and electricity demand. However, the cold also froze machinery, pipes, water inlets and outlets, causing between a third and a half of Texas’ 83,000 megawatts of electric capacity to fail. All types of generation were affected--wind, solar, but also baseload natural gas, coal, and even one of the state’s two nuclear plants.

Natural gas is an even more

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ChartData by YCharts

ChartData by YCharts

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This article was written by

Laura Starks profile picture
Long ideas for energy investors

Do you want to understand and invest in volatile energy markets? We bring fundamentals-based insights to oil, gas, utilities, renewables, and gasoline companies for real-world investors.

Analyst’s Disclosure: I am/we are long NEE, VST, SRE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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