How NextEra became America’s most valuable energy company

NextEra became America’s most valuable energy firm by making a big bet on renewables.


October 28, 2020

John D. Rockefeller must be rolling in his grave.

Even after Standard Oil was broken up in 1911, the offshoots of Rockerfeller’s oil empire — such as ExxonMobil — were the giants of American energy.

Today, America’s top energy player is a different animal entirely: NextEra, the world’s largest generator of sun and wind power, per The Economist.

The utility business is boring but crucial

While oil folk get to do the exciting work of offshore drilling, fracking, and wearing 10-gallon hats, NextEra does the unexciting work of delivering electricity to end users.

Its 2 main businesses operations are:

  • Florida Power & Light, a utility that provides energy to 5m+ Florida residents.
  • NextEra Energy Resources, which primarily builds and operates wind farms but is also active with solar power, nuclear energy, gas pipelines, and transmission lines projects.

To add to this capacity, NextEra is ramping up spending — it plans to invest a total of $60B between 2019 and 2022.

A big bet on renewables has paid off

In the early 2000s, NextEra started transitioning from coal to natural gas and renewables as an input for its energy production.

According to The Economist, the move to renewables was catalyzed by “generous tax credits.” Over the past decade, NextEra’s renewables bet looks as prescient as ever:

  • Costs are down: The unsubsidized cost of wind and solar farms has fallen, respectively, by ~70% and ~90% since 2009
  • Government mandates: Over 50% of US states require some portion of the energy mix to come from renewable sources

The pandemic has thrown the oil industry into disarray

ExxonMobil’s market cap is now $139B, about half its value 12 months ago.

Amid this new reality of struggling oil companies, there has been a recent wave of consolidation in the industry:

  • ConocoPhillips – Concho (a $9.7B deal)
  • Pioneer – Parsley ($4.5B)
  • Cenovus – Husky ($2.9B)

Rockefeller allegedly said, “If you want to succeed, you should strike out new paths.” NextEra did and — at a value of $148B today — it’s America’s most valuable energy firm.

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