NextEra Energy Investment Proposal Draft

TO: Professor Clark Hansen, CEO, AMDP

FROM:   Katherine O’Connor, Research and Development

DATE:   March 8, 2019

SUBJECT:   Investment Recommendation - NextEra Energy

As a member of AMDP’s research and development team, it is my job to search for opportunities to invest in profitable organizations that have core values similar to ours. After extensive research, I have concluded that NextEra Energy, a publicly traded energy company, is an optimal investment opportunity due to its impressive history, strong commitment to the community and the environment, and their promising future.

AMDP Standards

AMDP is committed to doing business with socially responsible organizations. Because of this, I would like to reiterate the four principles that we, as a company, consider essential when investing in another company.

Triple Bottom Line

Triple bottom line is a concept that goes beyond the traditional financial measures of profits and return on investment, to include social and environmental considerations as well. It measures a company’s degree of social responsibility, its economic value, and its environmental impact.

Corporate Social Responsibility

Corporate social responsibility is a self regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. Companies that are socially responsible are conscious of the impact they are having on the economic, social, and environmental aspects of society. It addresses a variety of topics including human rights, working conditions, environmental effects, and contribution to economic development.

Social Enterprise

Social enterprise is a commercial organization that seeks to maximize profits while simultaneously maximizing the benefit to society and the environment. Funding to address and solve social and environmental problems often comes from their profits.

Carbon Footprint

Carbon footprint is the amount of emissions produced by a business in the manufacturing of a product or the amount of electricity consumed for its daily operation. Businesses that are environmentally conscious put measures in place to reduce their consumption and invest money into research and development to find ways to minimize pollution.

About NextEra Energy

NextEra Energy is the world’s largest utility company, built and based here in America. Founded in 1925, it has quickly become the leader in its all aspects of the industry, with over 45,900 megawatts of generating capacity, over $17 billion in revenues, and nearly 14,000 employees throughout the United States and Canada. Currently, roughly 70% of NextEra Energy installed capacity is wind, with the rest largely coming from solar and nuclear power. The company is comprised of three main subsidiaries: Florida Power and Light (FPL), NextEra Energy Resources (NEER), and NextEra Energy Partners (NEP). However, although they are clearly a very large company, they are also extremely committed to making the world a better place. In the CEO’s Letter, Jim Robo comments upon the company’s values, stating, “Through investment and innovation, NextEra Energy helps make our country and our world more sustainable and more successful. Our team works hard to advance that vision every day”.

Environment

NextEra Energy is extremely devoted to protecting the environment and has invested heavily in innovation to minimize its emission levels. In fact, in 2017, they achieved their lowest ever emission rates of SO2, NOx, and CO2, at 96%, 76%, and 55% lower than the average U.S. utility sector. Despite being the world leader in generating renewable energy, they continue to find ways to improve and set themselves apart from their competitors. Specifically, although they have reduced their CO2 emissions rate by 52% since 2001, making them have the 7th lowest carbon emissions rate among the nations top 50 power producers, they plan to reduce it to 65% by 2021. Finally, FPL’s “30 by 30” strategy calls for the installation of 30 million new solar panels by 2030, which will add 10,000 MW of solar capacity to Florida, with its already existing 2,195 MW.

Economy  

With a market capitalization of $75 billion, NextEra Energy is a huge presence in the industry, and, still, they continue to grow. Specifically, NextEra Energy plans to invest $40 billion through 2020 to build new solar, wind, and storage capacity, and more natural gas pipelines. With a growth of $19 billion in capital projects to grow its regulated utility operations, this spending will increase the company's overall earnings by 6-8% through 2021. In addition, based on earnings growth and a higher payout ratio, dividends are also expected to increase by 12-15% through 2020. When comparing NextEra Energy to its competitors, it is obvious how much they outperform their peers. Specifically, NextEra Energy stock has a total return of 1,590%, which is significantly higher than the total return of S&P 500 of 175%. Also, currently, they have a compound annual growth in adjusted EPS of over 8.5%, which is the highest of all top 10 power companies. Finally, their lower debt level and higher payout ratio prove to be a strong competitive advantage because it gives them the ability to invest in high return expansion projects without stretching its financing.

Recommendation

I think that NextEra Energy is a good investment opportunity for AMDP because not only is it an industry leader with impressive returns, but it takes pride in being able to provide its customers with affordable, reliable, and clean energy. With the same attention AMDP has with its customers and the environment, NextEra Energy refuses to ignore the impacts it has on the world and constantly plans for a better, more efficient future. With respect to its competitors, NextEra Energy continues to stand out in the market because it is constantly working to alter its business to keep up with the ever evolving energy sector. It is clear that NextEra energy cares about creating value for investors and their growth focused investments continue to pay dividends for shareholders. Because of this, and the fact that wind, solar, and energy storage are only gaining more popularity and importance in our society, AMDP cannot overlook NextEra Energy stock.

Works Cited

Brewer, R. G. (2018, August 13). Is NextEra Energy, Inc. a Buy? Retrieved March 7, 2019, from https://www.fool.com/investing/2018/08/13/is-nextera-energy-inc-a-buy.aspx

DiLallo, M. (2019, February 10). 3 Reasons I Just Bought NextEra Energy Stock. Retrieved March 7, 2019, from https://www.fool.com/investing/2019/02/10/3-reasons-i-just-bought-nextera-energy-stock.aspx

Home. (n.d.). Retrieved from https://www.ferguson.com/content/trade-talk/business-tips/what-is-a-business-carbon-footprint-and-why-does-it-matter

NEE. (n.d.). Retrieved March 7, 2019 from https://money.cnn.com/quote/forecast/forecast.html?symb=NEE

NextEra Energy. (n.d.). Our Work. Retrieved March 7, 2019, from http://www.nexteraenergy.com/company/work.html