NextEra Powers the Sunshine State

10/31/2013 8:00 am EST

Focus: STOCKS

David Dittman

Chief Investment Strategist, Australian Edge, Canadian Edge, & Utility Forecaster

The latest addition to the core holding section of our model growth portfolio is the largest generator of renewable wind and solar power in North America, says David Dittman, editor of Utility Forecaster.

NextEra Energy (NEE) has about 43,000 megawatts of generating capacity in 28 states and Canada. Its principal subsidiaries are NextEra Energy Resources and Florida Power & Light, which serves 4.5 million customers in Florida. It also operates the third-largest nuclear fleet in the US.

Management reported second-quarter earnings of $620 million, or $1.46 per share, compared with $527 million, or $1.26 per share, in the second quarter of 2012.

NextEra Energy Resources generated second-quarter earnings of $238 million, or $0.56 per share, up from $173 million, or $0.41 per share, a year ago.

FP&L posted a second-quarter profit of $391 million, or $0.92 per share, up from $353 million, or $0.85 per share, a year ago.

Earnings growth from NextEra's wind energy portfolio is sensitive to federal policy decisions, including the treatment of the wind production tax credit.

And that portion of the company's revenue, and earnings derived from wholesale power sales in deregulated markets, are subject to changes in the price of natural gas and the price of electricity.

Changes in the price of fuel or fuel transportation, such as uranium and rail services could hit gross margin.

But NextEra has produced one of the strongest records of earnings growth among US electric utilities, driven by its large and expanding portfolio of renewable generation at its unregulated unit and load growth at regulated utility FP&L.

FP&L's favorable regulatory environment and the highly hedged, clean, and well-positioned wholesale generation portfolio, establish a solid platform for continued earnings outperformance versus NextEra's peers. NextEra Energy is a buy for consistent growth under $85.

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