I Got the NEE-D for a Mega Utility – Initial Thoughts on a NEE/D Tie Up

Research evidence excerpt

I Got the NEE-D for a Mega Utility – Initial Thoughts on a NEE/D Tie Up

I Got the NEE-D for a Mega Utility

On Friday evening, the Financial Times reported that NextEra and Dominion were in talks to

combine, creating a nearly ~$250bn market cap utility. The article did not have any additional

information on terms or structure, but it did suggest a deal could come as soon as next week and would

likely be structured as "mostly stock." That said, given the size of the potential deal, we would expect

it to likely be a stock-for-stock merger, with NEE acquiring D. We outline our high-level accretion

analysis below, which we believe, even after offering Dominion shareholders a 20-25% premium,

could still be 2-3% accretive to NEE in its first full year (2028), rising to 3% accretive by 2030 as

the combined company is able to realize run-rate synergies of ~5% of total O&M or ~$450mm pre-

tax before considering incremental financing efficiencies. While it remains to be seen whether

such a deal will ultimately come to fruition, we believe a potential deal would make a significant

amount of strategic sense for NEE and D shareholders.

Specifically, we see the following strategic advantages/potential opportunities to unlock value

through the combination: 1) the expansion of NEE’s footprint would give it a significant presence in

the PJM market, which should strengthen its position as a leader in the BYOG initiative. The combination

could provide NEE with a stronger foothold in the region facing a supply shortfall, in addition to the

larger consolidated balance sheet enabling the funding of additional regulated infrastructure investment

in the region including transmission, which would also be incremental to the combined entity; 2) NEE