Key Points
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NextEra Energy is one of the world’s largest utilities and one of the largest providers of contracted solar and wind power.
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The company’s clean-energy business is broadening out, highlighted by a growing battery backlog.
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NextEra Energy (NYSE: NEE) is leaning into the huge growth in electricity demand it expects over the next 20 years or so. To put a number on that, demand grew by 10% between 2005 and 2025, but is expected to increase by 60% between 2025 and 2045. That’s a step change in demand, and the giant U.S. utility is looking to benefit in more than one way. Here’s why batteries are an important example of the company’s strong execution toward that goal.
NextEra Energy’s big move isn’t its only move
NextEra Energy is one of the world’s largest utilities, but it is looking to get even bigger with its proposed acquisition of peer Dominion Energy (NYSE: D). Dominion has a monopoly in one of the world’s most important data center markets, and buying the company would push NextEra Energy into the number two spot in nuclear power. It is a very big deal and could position NextEra Energy well on the growth front if it is consummated as expected (it is facing some pushback from regulators and utility customers).
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But for a long time, NextEra Energy’s growth was mostly driven by its clean energy business. This division builds solar and wind power assets and sells the power produced under long-term contracts. It isn’t regulated, but the long-term nature of the contracts allows the division to produce reliable cash flows. That said, the clean energy industry is evolving, and batteries are an increasingly important part of the picture.
NextEra Energy doesn’t plan on being left behind. And proof of that came in the company’s second-quarter earnings. The utility added 3.7 gigawatts of clean energy to its backlog, expanding its overall backlog to 36.7 gigawatts. However, of that 3.7 gigawatts of new power, 2.4 gigawatts were batteries. That’s roughly two-thirds of what was added during the quarter, proving that NextEra Energy can pivot as needed to keep growing this business.
NextEra Energy is still a solid dividend growth story
For years, NextEra Energy grew its dividend at around 10% a year. It disappointed Wall Street when it announced that future dividend growth would be closer to 6% a year for the foreseeable future. A big part of that change related to lowered expectations for the company’s clean energy business. But the battery pivot shows that investors shouldn’t be too alarmed: that division’s growth may not be as fast, but it hasn’t suddenly ended. Indeed, the company’s battery success suggests that long-term dividend growth investors should still find NextEra Energy of interest.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.
