Morningstar | NextEra Reports Strong 2018 Results, Little Exposure to PG&E
We are reaffirming our $156 fair value estimate, along with our narrow economic moat and stable moat trend ratings, after NextEra Energy reported full-year operating earnings per share of $7.70, compared with $6.70 in the year-ago period.Management's $8.00-$8.50 EPS target for 2019Â is in line with our estimates. We continue to forecast that NextEra Energy will attain the top end of its 6%-8% growth expectations through 2021, supporting our forecast for an industry-leading 12% annualized dividend growth.
NextEra has completed its acquisition of Southern's Gulf Power, Florida City Gas, and natural gas assets Plant Oleander and Stanton Energy Center (65% ownership interest) for $6.475 billion, including the assumption of $1.4 billion in debt. We continue to view the acquisition favorably. The businesses align well with NextEra's Florida Power & Light and leave opportunities for operating efficiencies and capital investment growth. Regulatory capital at FPL grew 12.4% in 2018, and the 1,750-megawatt Okeechobee Clean Energy Center is on track for completion this year.
Management's continued execution on its Energy Resources development program leaves us confident that NextEra will deliver at the high end of its plan to add 10.1-16.5 gigawatts of renewable energy from 2017 to 2020. During 2018, the subsidiary added roughly 6,500 MW of renewable energy projects to its backlog.
Favorable start-of-construction guidance from the IRS related to solar investment tax credits should bolster NextEra's solar development plan beyond 2020. Regulated solar is also a significant growth opportunity for FPL in Florida. NextEra's early entry into battery storage will further enhance its competitive positioning in the market.
NextEra's exposure to PG&E's pending bankruptcy is pegged at $0.13-$0.15 per share in total earnings contributions. Potential contract renegotiations would not materially affect our fair value estimate.
NextEra Energy is a holding company, engaged in electric power and energy infrastructure. The company has two principal businesses, Florida Power & Light Company (FPL) and NextEra Energy Resources, LLC (NEER). FPL is a rate-regulated electric utility engaged primarily in the generation, transmission, distribution and sale of electric energy in Florida. FPL provides service to its electric customers through a transmission and distribution system that links its generation facilities to its customers. NEER, through its subsidiaries, owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets primarily in the United States and Canada.
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