NextEra Energy (NYSE: NEE) is already a very large company, with a market cap of $185 billion. With its planned acquisition of Dominion Energy (NYSE: D), a $60 billion market cap competitor, NextEra is looking to get even bigger. The increased scale should help NextEra compete as electricity demand rises, thanks to new technologies such as artificial intelligence, data centers, and electric cars. Here's why the combined company's $59 billion in capital spending will be a big growth driver.
Between 2005 and 2025, electricity demand increased by 10%. Between 2025 and 2045, however, demand is expected to increase by 60%. That's a step change in an industry historically known for slow growth. NextEra, already one of the world's largest utilities, sees an opportunity to leverage scale.
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Acquiring Dominion will give it greater access to capital markets and provide a more diverse set of investment opportunities by expanding NextEra's regulated utility reach well beyond its home state of Florida. Dominion operates in North Carolina, South Carolina, and Virginia. Notably, Virginia is home to one of the world's most important data center markets, allowing NextEra to lean into this key growth sector.
NextEra's regulated utilities must have their capital spending plans and rates approved by the government. So slow and steady is the norm, but given the expected increase in electricity demand, growth is likely to speed up. Meanwhile, NextEra also operates one of the world's largest contract solar and wind power businesses. That business sells power at market rates, providing an additional growth boost and operating outside the regulated framework. Dominion will increase the company's scale on both sides of the equation, with capital spending across the entire business expected to hit a massive $59 billion per year.
That spending is expected to support annualized earnings growth of around 9% or more. Without the transaction, NextEra was projecting earnings growth of 8%. A one percentage point increase in growth may not seem material, but it represents an over 12% increase in the growth rate. That's a notable uptick.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
