NextEra Energy Inc "NEE & D, Maybe?" (Buy) Appicelli

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NextEra Energy Inc "NEE & D, Maybe?" (Buy) Appicelli

long sought pursuit of a UBS Cons.

mega merger following prior efforts to combined with Oncor and Duke Energy. Q1 1.09 1.09

Reset the earnings mix. A transaction with Dominion Energy would reset earnings Q2E 1.15 1.09

balance (NEER would decline to 25-30% from 38% of EPS based on '28E EPS) and Q3E 1.25 1.24

Q4E 0.60 0.68

it would extend the runway for non-regulated growth.

12/26E 4.07 4.04

Utilize the strong currency to scale up. NEE trades at a ~23% premium to peers on 12/27E 4.47 4.39

'28E earnings and nearly a 30% premium to D's current valuation. NEE could scale 12/28E 4.74 4.77

up even more (pro-forma would be $250bn market cap), amid multiple paths William Appicelli, CFA

forward on servicing the demand boom. Analyst

william.appicelli@ubs.com

Concerns. Credit in terms of how much credit flexibility with rating agencies is

+1-212-713 1414

there? The deal looks accretive initially, but what are synergies or longer term

accretion potential as D wasn’t growing as quickly as NEE. Gregg Orrill

Analyst

What Would a Deal Accomplish for D? Improved Earnings Growth and gregg.orrill@ubs.com

Valuation +1-212-713 1064

For D it has been a long road going back to from the earnings reset and dividend cut Steve Ludwick

form Berkshire deal from July ‘21 and then a 16 month business review ("Review Brings Analyst

steve.ludwick@ubs.comUncertainty""Refreshing Our Outlook" and "Examining CVOW Schedule"). That review

+1-212-713 5073

reset resulted in a simplified business model but did cut earnings 30% ($4.96 in 11/2022

versus $3.42 actual). D currently trades at a 7% discount to peers and is facing the

execution risks around delivering the $11.4bn, 2600 MW Coastal Virginia Offshore