College of Charleston Investment Program January 2017 NextEra Energy (NEE) Brandon Blackwell Utilities Sector Analyst Nick Windham Utilities Sector Analyst 1
Agenda Investment Thesis Utilities Sector Overview NextEra Background Fundamental Analysis Technical Analysis DCF Valuation Review and Proposal Questions 2 SCHOOL OF BUSINESS INVESTMENT PROGRAM
Investment Thesis ● Portfolio Diversification ● Strong and steady dividend yield ● Diversified utility portfolio ● Unfairly priced with potential of reduced emphasis on renewables ● Interest rates and political environment favors utility sector College of Charleston Investment Program ● Strong Revenue Growth and EPS 3
Clarifications ● Megawatts ● Regulated Utilities College of Charleston Investment Program ● Wholesale Utilities 4
Industry Overview ● What does Utilities consist of? ● Utility Sector Transformation Trends ○ Upgrading aging infrastructure ○ Generation, Environmental, Renewables ○ Natural Gas pipelines, storage, and distribution College of Charleston Investment Program 5
College of Charleston Investment Program Industry Performance and Indicators 6
Political Environment/Tax Rate “Risk” ● Shares fall after Trump inauguration ● Investors are flocking to Utilities with volatility in market ● The “scare” of renewables College of Charleston Investment Program ● Company keeps guidance strong amidst tax rate changes ● Rising Tax Rate ○ Two Recovery Scenarios 7
About NextEra ● Founded as Florida Power & Light in 1925 ● 14,700 employees in 30 US states and Canada ● Headquarters located in Juno Beach, Florida. ● Two Principal subsidiaries included: College of Charleston Investment Program ○ Florida Power & Light Company ○ Nextera Energy Resources LLC ○ NextEra Energy - one of the largest operators of commercial nuclear power units in the United States. ● Ranked No. 1 in the electric and gas utilities industry in Fortune's 2016 list of "World's Most Admired Companies” 8
Business Model ● Employees ○ Best Employers for Healthy Lifestyles Award ○ Continuous Learning and Training Programs. ● Sustaining Communities College of Charleston Investment Program ○ Employees volunteers 70,200 hours in 2015 ○ Raised 3.9 million for the community ● Outstanding Customer Value ○ affordable, reliable, and clean energy. ○ Care to Share Program ● Respect for the Environment ○ Produce more solar and wind energy than any company in the world. ○ In 2015 NextEra Energy avoided 66.1 Million tons of CO2 emissions. ○ 52% Lower CO2 emission rate than US electric sector. ○ Programs to protect wildlife species and habitats. 9
Company Structure ● Consolidated Revenues: $16.2 billion ● Two streams of revenue ○ Regulated Utility College of Charleston Investment Program ○ Wholesale Power Generation ● Price Insensitive Customers ● Growth outside of US 10
College of Charleston Investment Program Utilities Portfolio 11
College of Charleston Investment Program The Network 12
About NextEra: Leadership College of Charleston Investment Program James L. Robo Eric Sigaly Armando Pimentel Chairman and CEO President and CEO President and CEO NextEra Energy NextEra Energy Resources, LLC Resources, LLC 13
NEE Outlook ● Wisconsin's largest Solar Energy Facility ● Sale of Fibernet to Crown Castle ● Oncor Acquisition College of Charleston Investment Program ● Greenfield Gas Infrastructure Projects 14
College of Charleston Investment Program 1 Year 15
College of Charleston Investment Program 3 Year - NEE 16
College of Charleston Investment Program Financials - Revenue Growth 17
College of Charleston Investment Program Financials - ROE 18
College of Charleston Investment Program Forward Looking P/E 19
College of Charleston Investment Program Forward Looking Earnings Growth 20
College of Charleston Investment Program Forward Looking EPS 21
College of Charleston Investment Program Growth of $10,000 22
College of Charleston Investment Program Industry Peers 23
College of Charleston Investment Program 1 Year - NEE vs DUK vs SO 24
College of Charleston Investment Program NEE Inputs 25
College of Charleston Investment Program NEE Inputs 26
College of Charleston Investment Program Valuation of NEE 27
College of Charleston Investment Program Valuation of NEE 28
Overview Strengths: Weaknesses: ● Diversified Utility Company ● Price/Book ● Two Separate Revenue Streams ● Price/Sales ● High Revenue Growth ● Missing Earnings Q4 ● High EPS College of Charleston Investment Program Opportunities: Threats: ● Renewable Projects ● Fluctuations to commodity prices ● Strong Forward Looking Financials ● Trump ● Acquisition of Oncor ● Tax Rates 29
Proposal ● Buy 125 of NEE at $123.80 for a total of $15,475 College of Charleston Investment Program 30
College of Charleston Investment Program Portfolio 31
College of Charleston Investment Program Questions? 32
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