NextEra Energy Inc. (NEE, Financial)(4.4%) (NEE – $97.55 – NYSE) is the holding company for Florida Power & Light (FP&L), the largest electric utility in Florida, and NextEra Energy Resources (NER), a leading wholesale power generator. We regard NEE as one of the better positioned electric companies to grow earnings and dividends over the next several years. FP&L operates one of the premier utility franchises in the nation, with favorable long term demographics and above average rate base growth potential, due to the power plant rate adjustments, flexible amortization, and other regulatory mechanisms. FP&L operates under a four year plan (2013-2016), premised on an allowed ROE of 10.5% (+/-100-basis points). Importantly, FP&L can raise rates to recognize $3.5 billion of power plant modernization projects. NEE also agreed to purchase Hawaiian Electric Industries (HE) on December 3, 2014, while spinning off American Savings Bank to shareholders. NEE will finance the deal with 0.2413 shares of NEE per HE share and the assumption of tax liabilities related to the spin off. Additionally, NER owns and operates the nation’s largest renewable power portfolio, with a significant pipeline of future growth opportunities. In mid-2014, NEE IPO’d 20% of a new publicly traded yieldco (NextEra Energy Partners-NEP (less than 0.1%)), to help drive non-regulated renewable generation growth. Many of these projects and opportunities are likely to be “dropped down” into NEP. In addition, NEE entered into a Joint Venture with Spectra Energy on a 465 mile, $3 billion (NEE to fund $1 billion) intrastate pipeline from Alabama through Georgia to southern Florida. The project includes an associated $550 million 126 mile expansion to FPL’s Martin Energy Center
From Mario Gabelli (Trades, Portfolio)'s Gabelli Industrials Fund shareholder commentary for third quarter 2015.
