NextEra Energy announces sale of equity units

Rhea-AI Summary

NextEra Energy (NYSE: NEE) announced the sale of $2 billion in equity units to Wells Fargo Securities and BofA Securities, expected to close on June 20, 2024. Each unit, valued at $50, includes a contract to buy NEE common stock and a 5% interest in a debenture due 2029. The annual distribution rate is 7.299%. In three years, holders must purchase NEE stock at prices between $72.31 and $90.38. The net proceeds of $1.94 billion will fund energy projects and other corporate purposes.

Positive

• NextEra Energy will raise approximately $2 billion through the sale of equity units.
• The transaction is expected to generate $1.94 billion in net proceeds after underwriting discounts and expenses.
• Proceeds will fund investments in energy and power projects, enhancing business growth and sustainability.
• The sale includes a 7.299% annual distribution rate, which might attract income-focused investors.
• The stock purchase contracts include a premium of up to 25% over the recent closing price, indicating positive future valuation expectations.

Negative

• The issuance of equity units could lead to shareholder dilution as holders will be required to purchase common stock in the future.
• There are obligations tied to the stock purchase contracts, potentially impacting future cash flows.

Insights

Financial Analyst

NextEra Energy's announcement of selling $2.0 billion of equity units is a notable event for retail investors. Equity units are hybrid securities that combine characteristics of both debt and equity. For retail investors, this means these units offer a steady income in the form of interest from debentures plus potential future equity upside when the contract converts to common stock.

The annual distribution rate of 7.299% is quite attractive compared to current market interest rates, making it a compelling option for income-focused investors. However, it's essential to consider the fixed price range for purchasing NextEra's common stock in the future (between $72.31 and $90.38). As the purchase price is pegged to a future date, it introduces an element of market risk.

From a financial perspective, the infusion of $1.94 billion (post-expenses) into NextEra's funds will likely be used for capital investments in energy projects, which aligns with their growth strategy. However, diluting equity could impact the earnings-per-share (EPS) in the short term, potentially affecting stock prices.

Investors should weigh the attractive yields against potential stock price volatility. Moreover, the fact that the debentures are guaranteed by NextEra Energy Capital Holdings adds a layer of security, but the inherent risks of market fluctuations remain.

Market Research Analyst

The sale of equity units by NextEra Energy signals a strategic move to strengthen their financial position for future investments, particularly in the clean energy sector. This decision aligns well with NextEra's reputation as a leader in renewable energy. Issuing such equity units can attract a different class of investors who are looking for both fixed income and potential equity upside.

From a market research perspective, the specified price range for the stock purchase contract suggests that NextEra is confident in its future valuation growth. The premium of 25% over the current stock price indicates management's bullish outlook on future performance. Additionally, the interest in debentures highlights a strategic use of debt instruments to raise capital while leveraging their stable credit rating.

For retail investors, this move could be seen as a positive indicator of NextEra's growth trajectory and commitment to expanding its clean energy projects. However, potential dilution and market conditions could impact stock price appreciation and investors should consider their risk tolerance and investment horizon before participating.

JUNO BEACH, Fla., June 18, 2024 /PRNewswire/ -- NextEra Energy, Inc. (NYSE: NEE) announced today that it has agreed to sell $2.0 billion of equity units to Wells Fargo Securities and BofA Securities. The transaction is expected to close on June 20, 2024.

Each equity unit will be issued in a stated amount of $50. Each equity unit will consist of a contract to purchase NextEra Energy common stock in the future and a 5% undivided beneficial ownership interest in a NextEra Energy Capital Holdings, Inc. debenture due June 1, 2029, to be issued in the principal amount of $1,000. The debentures will be guaranteed by NextEra Energy Capital Holdings' parent company, NextEra Energy, Inc. Total annual distributions on the equity units will be at the rate of 7.299%, consisting of interest on the debentures and payments under the stock purchase contracts.

In approximately three years, each stock purchase contract will require the holder to purchase NextEra Energy common stock for cash, based on a per-share price range of $72.31 to $90.38. The higher end of this price range reflects a premium of 25% over the New York Stock Exchange closing price of NextEra Energy common stock on June 17, 2024, which was $72.31. The required purchase price will be determined based on NextEra Energy's common stock over the 20 consecutive trading day period ending on May 26, 2027, and the holders must complete the stock purchase by no later than June 1, 2027. The holders may satisfy their purchase obligations with proceeds raised from remarketing the debentures that comprise part of their equity units.

The net proceeds from the sale of the equity units, which are expected to be approximately $1.94 billion (after deducting the underwriting discount and other offering expenses), will be added to the general funds of NextEra Energy Capital Holdings. NextEra Energy Capital Holdings expects to use its general funds to fund investments in energy and power projects and for other general corporate purposes, including the repayment of a portion of its outstanding commercial paper obligations.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities to which this communication relates in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The offering may be made only by means of a prospectus and the related prospectus supplement, copies of which may be obtained from Wells Fargo Securities, 90 South 7th Street, 5th Floor, Minneapolis, MN 55402, or by calling 800-645-3751 (option #5) or emailing a request to WFScustomerservice@wellsfargo.com.

NextEra Energy, Inc.
NextEra Energy, Inc. (NYSE: NEE) is a leading clean energy company headquartered in Juno Beach, Florida. NextEra Energy owns Florida Power & Light Company, which is America's largest electric utility that sells more power than any other utility, providing clean, affordable, reliable electricity to approximately 5.9 million customer accounts, or more than 12 million people across Florida. NextEra Energy also owns a competitive clean energy business, NextEra Energy Resources, LLC, which, together with its affiliated entities, is the world's largest generator of renewable energy from the wind and sun and a world leader in battery storage. Through its subsidiaries, NextEra Energy generates clean, emissions-free electricity from seven commercial nuclear power units in Florida, New Hampshire and Wisconsin. A Fortune 200 company, NextEra Energy has been recognized often by third parties for its efforts in sustainability, corporate responsibility, ethics and compliance, and diversity.

Cautionary Statements and Risk Factors That May Affect Future Results

This news release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical facts, but instead represent the current expectations of NextEra Energy, Inc. (together with its subsidiaries, NextEra Energy) regarding future operating results and other future events, many of which, by their nature, are inherently uncertain and outside of NextEra Energy's control. In some cases, you can identify the forward-looking statements by words or phrases such as "will," "may result," "expect," "anticipate," "believe," "intend," "plan," "seek," "potential," "projection," "forecast," "predict," "goals," "target," "outlook," "should," "would" or similar words or expressions.  You should not place undue reliance on these forward-looking statements, which are not a guarantee of future performance.  The future results of NextEra Energy and its business and financial condition are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, or may require it to limit or eliminate certain operations.  These risks and uncertainties include, but are not limited to, those discussed in this news release and the following: effects of extensive regulation of NextEra Energy's business operations; inability of NextEra Energy to recover in a timely manner any significant amount of costs, a return on certain assets or a reasonable return on invested capital through base rates, cost recovery clauses, other regulatory mechanisms or otherwise; impact of political, regulatory, operational and economic factors on regulatory decisions important to NextEra Energy; effect of any reductions or modifications to, or elimination of, governmental incentives or policies that support utility scale renewable energy projects or the imposition of additional tax laws, tariffs, duties, policies or assessments on renewable energy or equipment necessary to generate it or deliver it; impact of new or revised laws, regulations, interpretations or constitutional ballot and regulatory initiatives on NextEra Energy; capital expenditures, increased operating costs and various liabilities attributable to environmental laws, regulations and other standards applicable to NextEra Energy; effects on NextEra Energy of federal or state laws or regulations mandating new or additional limits on the production of greenhouse gas emissions; exposure of NextEra Energy to significant and increasing compliance costs and substantial monetary penalties and other sanctions as a result of extensive federal regulation of its operations and businesses; effect on NextEra Energy of changes in tax laws, guidance or policies as well as in judgments and estimates used to determine tax-related asset and liability amounts; impact on NextEra Energy of adverse results of litigation; impacts of NextEra Energy of allegations of violations of law; effect on NextEra Energy of failure to proceed with projects under development or inability to complete the construction of (or capital improvements to) electric generation, transmission and distribution facilities, gas infrastructure facilities or other facilities on schedule or within budget; impact on development and operating activities of NextEra Energy resulting from risks related to project siting, planning, financing, construction, permitting, governmental approvals and the negotiation of project development agreements, as well as supply chain disruptions; risks involved in the operation and maintenance of electric generation, storage, transmission and distribution facilities, gas infrastructure facilities, and other facilities; effect on NextEra Energy of a lack of growth, slower growth or a decline in the number of customers or in customer usage; impact on NextEra Energy of severe weather and other weather conditions; threats of terrorism and catastrophic events that could result from geopolitical factors, terrorism, cyberattacks or other attempts to disrupt NextEra Energy's business or the businesses of third parties; inability to obtain adequate insurance coverage for protection of NextEra Energy against significant losses and risk that insurance coverage does not provide protection against all significant losses; a prolonged period of low gas and oil prices could impact NextEra Energy's gas infrastructure business and cause NextEra Energy to delay or cancel certain gas infrastructure projects and could result in certain projects becoming impaired; risk of increased operating costs resulting from unfavorable supply costs necessary to provide full energy and capacity requirement services; inability or failure to manage properly or hedge effectively the commodity risk within its portfolio; effect of reductions in the liquidity of energy markets on NextEra Energy's ability to manage operational risks; effectiveness of NextEra Energy's risk management tools associated with its hedging and trading procedures to protect against significant losses, including the effect of unforeseen price variances from historical behavior; impact of unavailability or disruption of power transmission or commodity transportation facilities on sale and delivery of power or natural gas; exposure of NextEra Energy to credit and performance risk from customers, hedging counterparties and vendors; failure of counterparties to perform under derivative contracts or of requirement for NextEra Energy to post margin cash collateral under derivative contracts; failure or breach of NextEra Energy's information technology systems; risks to NextEra Energy's retail businesses from compromise of sensitive customer data; losses from volatility in the market values of derivative instruments and limited liquidity in over-the-counter markets; impact of negative publicity; inability to maintain, negotiate or renegotiate acceptable franchise agreements; occurrence of work strikes or stoppages and increasing personnel costs; NextEra Energy's ability to successfully identify, complete and integrate acquisitions, including the effect of increased competition for acquisitions; environmental, health and financial risks associated with ownership and operation of nuclear generation facilities; liability of NextEra Energy for significant retrospective assessments and/or retrospective insurance premiums in the event of an incident at certain nuclear generation facilities; increased operating and capital expenditures and/or reduced revenues at nuclear generation facilities resulting from orders or new regulations of the Nuclear Regulatory Commission; inability to operate any of NextEra Energy's owned nuclear generation units through the end of their respective operating licenses or planned license extensions; effect of disruptions, uncertainty or volatility in the credit and capital markets or actions by third parties in connection with project-specific or other financing arrangements on NextEra Energy's ability to fund its liquidity and capital needs and meet its growth objectives; inability to maintain current credit ratings; impairment of liquidity from inability of credit providers to fund their credit commitments or to maintain their current credit ratings; poor market performance and other economic factors that could affect NextEra Energy's defined benefit pension plan's funded status; poor market performance and other risks to the asset values of nuclear decommissioning funds; changes in market value and other risks to certain of NextEra Energy's investments; effect of inability of NextEra Energy subsidiaries to pay upstream dividends or repay funds to NextEra Energy or of NextEra Energy's performance under guarantees of subsidiary obligations on NextEra Energy's ability to meet its financial obligations and to pay dividends on its common stock; the fact that the amount and timing of dividends payable on NextEra Energy's common stock, as well as the dividend policy approved by NextEra Energy's board of directors from time to time, and changes to that policy, are within the sole discretion of NextEra Energy's board of directors and, if declared and paid, dividends may be in amounts that are less than might be expected by shareholders; NextEra Energy Partners, LP's inability to access sources of capital on commercially reasonable terms could have an effect on its ability to consummate future acquisitions and on the value of NextEra Energy's limited partner interest in NextEra Energy Operating Partners, LP; effects of disruptions, uncertainty or volatility in the credit and capital markets on the market price of NextEra Energy's common stock; and the ultimate severity and duration of public health crises, epidemics and pandemics, and its effects on NextEra Energy's business. NextEra Energy discusses these and other risks and uncertainties in its annual report on Form 10-K for the year ended December 31, 2023 and other Securities and Exchange Commission (SEC) filings, and this news release should be read in conjunction with such SEC filings. The forward-looking statements made in this news release are made only as of the date of this news release and NextEra Energy undertakes no obligation to update any forward-looking statements.

 

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SOURCE NextEra Energy, Inc.

FAQ

What are the details of NextEra Energy's recent equity units sale?

NextEra Energy announced the sale of $2 billion in equity units to Wells Fargo Securities and BofA Securities, expected to close on June 20, 2024. Each unit includes a contract for NEE stock and a 5% interest in a 2029 debenture.

When will the NextEra Energy equity units sale close?

The transaction is expected to close on June 20, 2024.

What is the annual distribution rate for NextEra Energy's equity units?

The annual distribution rate for the equity units is 7.299%.

What is the price range for the mandatory stock purchase in NextEra Energy's equity units?

The price range for the mandatory stock purchase is $72.31 to $90.38.

How will NextEra Energy use the proceeds from the equity units sale?

The net proceeds of $1.94 billion will be used to fund investments in energy and power projects and for other general corporate purposes.