NextEra’s capital expenditures
NextEra Energy (NEE) has committed to $10.6 billion in capital expenditures over the next two years. In fiscal 2014 alone, NextEra will be spending a total of $7.0 billion.
High capital expenditures, or capex, can propel a company’s earnings growth along an upward trajectory, provided the rate of return exceeds the cost of capital.
As you can see in the above chart, NextEra’s planned capex slows down in 2015–2016. This suggests NextEra’s earnings growth may also taper down in the coming years.
Where is the capex targeted?
NextEra’s regulated business headed by FPL (Florida Power & Light) is set to consume most of the company’s planned expenditures. NextEra will invest $3.0 billion in fiscal 2015 and $2.9 billion in fiscal 2016 in FPL capex.
The rest of the capital will go toward NextEra’s unregulated business and other operations.
Since the majority of NextEra’s capex is committed to its regulated operations, FPL’s revenue share should rise even further. Currently, FPL accounts for more than 70% of NextEra’s total revenues.
Among the companies that are part of the Select Sector Utilities Select Sector Fund (XLU), Exelon Corporation (EXC), Duke Energy (DUK), and Southern Company (SO) have had the highest capital expenditures in the last year.
Additional opportunities to invest
Aside from its existing capex committments, NextEra has identified other potential investment opportunities. The company is considering investing an additional $1.0 billion in FPL and $4.1 billion in its unregulated segment in the next two years. Investments in what are incremental opportunities within these two segments are subject to the approval of NextEra’s board members and regulatory agencies.