EUR 850.00 For Business Accounts Only

Morningstar | NextEra Energy's Numerous Capital Investment Opportunities Drive Outlook

NextEra Energy investors must be comfortable with Florida regulation and the outlook for U.S. renewable energy growth.The Florida regulatory environment is especially constructive. FP&L serves a historically fast-growing territory encompassing the coastal areas of Florida. FP&L's recent rate agreement calls for $811 million of base-rate adjustments from 2017-20 and an industry-high midpoint 10.6% allowed return on equity, supporting our long-term positive outlook for the constructive Florida regulatory environment. Recently, NextEra Energy announced plans to acquire Southern Company's Florida operations for $6.475 billion, increasing its exposure to the highly constructive state. The transaction is expected to close in mid-2019.Key to NextEra's capital growth plans are solar additions in Florida. We believe there is a long runway of growth opportunities in a state where less than 1% of total generation came from solar in 2017. In FP&L's 10-Year Site Plan filed with regulators, management included plans for more than 3.2 GW of new solar. Management also says they have identified potential sites for up to 6 GW of additional solar generation.The competitive energy business, NextEra Energy Resources, contributes the remaining consolidated earnings. NextEra is the largest wind power producer in the United States, proving to be a best-in-class renewable energy operator and developer. Management enters into long-term PPAs, significantly mitigating cash flow volatility than if these assets were exposed to volatile commodity prices.Management expects to develop 5.4 to 7.8 gigawatts of wind generation; 1.4 GW to 3.8 GW of solar generation; and 3.3 GW to 4.3 GW of repowered wind generation in 2017-20. NextEra Energy Resources has a backlog of 9.1 GW as of late October. Given management's execution of its prior development plans, we have high confidence that management can reach the higher end of that range. We think battery storage will be the next major growth area for NextEra Energy Resources beginning in early next decade.