Essay Sample: NextEra Energy Company

NextEra Energy, Inc is an electricity service provider in the US that sources its power through renewable energy options (solar and wind). The company operates through two subsidiaries: Florida Power & Light Company (FPL) that serves 4.7 million customer accounts and the NextEra Energy Resources (NEER) which operates in 25 states in the US as well as four provinces in Canada. The company is headquartered in Juno Beach, Florida with 13, 800 employees as of 2014 (NextEra Energy, 2018). The company was established in 1925, and to date has been realizing improvements in its financial performance.

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Organizational Analysis

Since the establishment of the company in 1925, it has been acquiring and selling subsidiaries until it successfully acquired FPL and NEER that control a large market portion in electricity services which have stabilized incomes for the company. The company has a strong establishment in the US and Canada (major markets) with strong financial performance over the years (NextEra Energy, 2018). In the financial year that ended December 2014, NextEra Energy recorded revenues of $17,021 million which was a 12.5% increase from the previous financial year and a $5.3 per share which was an improvement 6.6% from the previous year (NextEra Energy, 2018). The net profit was $2, 465 which was 29% higher than the previous year. In 2018, the company posted the strongest full-year results which it attributed to contributions from new projects it has been actively investing in since 2014 (NextEra Energy, 2019). The company has a strong leadership led by a board of directors led by chief executive James L. Robo assisted by other 17 non-executive and senior management members (NextEra Energy, 2019). NextEra Energy Company deals in electricity and renewable energy wherein its operations involve electricity generation, transmission, distribution, the sale of electricity energy, risk management services and buying and selling of energy commodities (NextEra Energy, 2019). In 2018, the company continued its focus on growing regulated long-term contracted businesses with Florida acquisitions of FERC regulated by Trans Bay (NextEra Energy, 2019). This is in a bid to increase energy services to generate more income. The company, however, is exposed to regulatory risks by the state and federal government regarding rates and cost structures, the operation of power nuclear facilities, and construction and operation of electricity generation. Nonetheless, its focus on renewable energy is a positive factor given that the government is pro-clean and sustainable energy options. NextEra Energy is one of America's best-regulated Utilities with an annualized return in excess of 12% since 1995 (Seekingalpha, 2017).

Critical Incidents

One of the critical challenges NextEra Energy Company has ever experienced is fierce competition from rivals towards the acquisition of power purchase agreements with utilities and large consumers. However, it has overcome the challenge over the years and emerged vigorously successful in 2018 when it had signed 22% of power purchase agreements making it the largest player in the renewable energy market with overall market share of 20%. Its close competitor claims a quarter of NextEra's market share (Utility Dive, 2019). The secret to the enormous success for the company has been building the scale for a long time such that it is now able to engage in aggressive underbidding strategies to be at the forefront as the cheapest clean energy provider in the nation (Erzurumlu & Yu, 2018). That then wins the company many customers which convert to growth in revenues.

Investment Potential

NextEra Energy is currently pursuing strategies to strengthen its market presence. In March 2018, the company through FPL opened 4 new solar power plants. These new energy plants are part of the company's plan to continue providing clean and affordable energy with economic and environmental benefits for the customers. The company is also aiming at increasing investment in natural gas to meet the rising demand for the product and increase the company's growth in the future (NextEra Energy, 2018).

Recommendation

NextEra Energy demonstrates healthy growth and a lucrative investment opportunity for the client. First, NextEra Energy provides regulated utilities to investors. Research shows that regulated Utilities have for a long time provided staple dividend portfolios for investors and have been ranged best high dividend stocks (Marshall et al., 2018). This is because of the highly stable business models adopted by companies providing regulated utilities. This is evident in NextEra Energy which is pursuing opportunities in the provision of renewable energy to Americans at a critical time when the world is pro-renewable energy sources. It has entered in a prime investment option that is in line with government and global environmental policies hence likely to allow the company prospers in the future. Besides that, NextEra Energy has demonstrated growth in both revenues and profits with continued additions to its portfolio of products and services through aggressive acquisition and expansion in energy investment. It is recommended that the client grabs the investment opportunity by acquiring shares offered by NextEra Energy Company. NextEra Energy began issuing 2,437,500 common units at its initial public offering price in 2014 (Utility Dive, 2019). This shows that there is an opportunity to acquire a substantial amount of share units to grow the company's investment in a less risk-utility choice. With a $5.3 annual return per share, the company will enhance income flow and be able to expand its investments for growth.

References

Erzurumlu, S., & Yu, W. (2018). Development and deployment dynamics of sustainability-driven innovations in the electric and energy utility industry. The Journal of High Technology Management Research.

Marshall, R., Ho, T., Petrova, R., Natal, A., Grubbs, J., Musumeci, J., ... & Kim, M. S. (2018). Crummer SunTrust Portfolio Recommendations: Crummer Investment Management [2018].

NextEra Energy, Inc. (2018). Company profile (pp. 3-26). Marketline.com.NextEra Energy. (2018). Company Profile: SWOT analysis. Marketline.com. Retrieved from http://web.a.ebscohost.com.proxy.cecybrary.com/ehost/detail/detail?vid=0&sid=5755609c-c988-4eb5-8db3-a8e55dcdb6fa%40sessionmgr4008&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#AN=132827068&db=bth NextEra SWOT Analysis.pdf

NextEra Energy. (2019). Earnings conference call: fourth quarter and full year 2018. Retrieved from http://www.investor.nexteraenergy.com/reports-and-filings/quarterly-earnings/2018

SeekingAlpha. (2017). NextEra Energy: A Fast-Growing, High-Yielding Utility Stock. Retrieved from https://seekingalpha.com/article/4072959-nextera-energy-fast-growing-high-yielding-utility-stock

Utility Dive. (2019). CEO of the Year: Jim Robo, NextEra Energy. Retrieved from https://www.utilitydive.com/news/ceo-of-the-year-jim-robo-nextera-energy/541305/