NEE: Was It Something We Said on Our D NDR? NEE-D Merger Deep-Dive: EPS Accretion Is Easy, Strategic Value Could Be Home Run

Research evidence excerpt

NEE: Was It Something We Said on Our D NDR? NEE-D Merger Deep-Dive: EPS Accretion Is Easy, Strategic Value Could Be Home Run

Diversified Electric Utilities Equity Research

Top level thoughts – we were blindsided by the FT article (WSJ reported later; companies have

not commented) on news of a potential NEE-D acquisition, along with client feedback over the

weekend. While the deal points to accretion at the headline stock valuations, we note that the timing

is opportune as D is going through an inflection that could be accelerated and augmented by the

NEE deal. Our recent NDR (last week!) has highlighted the opportunity for D (noted HERE), but one of

the key unlocks for the D story is timing of new capex. If NEE can shift capex to the left and between

D-VA and NEER, the ROIC uplift could be material enough to move NEE’s consolidated trajectory to

top decile. The long shot? – D was reported to look at NOVEC (public owned co-op) integration; in

the case NEER can access the sales channel, even more demand opens up. Accretion looks like 7% in

the Base Case (20% premium, modest synergies), not including the strategic value upside or capex

unlock, which could be another 3-8% – see more thoughts below.

NEE’s 26% premium to peers makes accretion math constructive, but we look for incremental

strategic value with a name like D (supported by our view of the coming inflection for D). It has

been a cyclical exercise of spreadsheet accretion for proposed / reported NEE regulated acquisitions

which always yields positive results given NEE’s valuation has fluctuated from as high as 50% to

~26% currently (on 2028E P/E vs. utility group) – i.e., a 20-25% acquisition premium always

results in EPS accretion. Prior reported/contemplated transactions include DUK, Jacksonville JEA