NextEra Energy Inc.
recently approached Duke Energy Corp.’s takeover approach, according to people familiar with the matter, testing the water for a combination of two southern utilities with more than $ 60 billion.
Duke rejected the approach, but NextEra is still interested in making a deal, some people said. There is no guarantee that NextEra will do it and if it does, it will lead to a deal.
If there was one, it would be big. Duke, based in Charlotte, North Carolina, has a market value of about $ 61 billion after a 14% drop in its share price this year, and the acquisition of the company could be the largest utility deal ever and the largest merger ever this year.
Pulling one will not be easy. First, NextEra will have to overcome any resistance from Duke and its leaders, and hostile deals in the utilities industry are rare. Each agreed deal will have to come together with a number of government officials in a highly regulated industry.
With a market value of about $ 1
It owns Florida Power & Light Co., which has more than 5 million customers in Florida and is the largest regulated rate of electricity in the United States from retail electricity, according to the company’s website. It also owns Gulf Power Co., which serves more than 470,000 customers in eight counties in northwest Florida.
Utility investors see Florida as a particularly desirable market given the constant need for air conditioning and a growing population.
NextEra also has a clean energy business, which together with its subsidiaries is the world’s largest generator of renewable wind and solar energy. It also operates zero-emission electricity from plants in Florida, New Hampshire, Iowa and Wisconsin.
Duke provides electricity to approximately 7.7 million retail customers in six states, including Carolinas, some states in the Midwest and Florida, according to its website, and distributes natural gas to more than 1.6 million customers in Ohio, Kentucky, Tennessee and Carolinas. It has a trading business with energy assets in North America, including a portfolio of renewables.
NextEra has been an active acquirer of smaller assets in recent years and has also looked at larger deals, taking advantage of most and the share price, which is better than that of its peers. On Tuesday, it announced a deal to buy an independent transmission company for $ 660 million, including debt.
NextEra, run by James Robo, has become a goliath for renewable energy, using tax subsidies to help finance wind and solar projects across the country and avoid debt. It sells its products to utilities, many of whom have to source energy from green sources to meet state mandates. It went from the 30th largest energy company in the United States in 2001 to the largest today. But it has faced challenges in its attempts to expand, including regulatory repulsion and the phasing out of some tax credits. Texas regulators rejected his offer in 2017 to buy a large transmission company, and Hawaiian regulators rejected his offer for the country’s largest utility company in 2016.
Duke is run by Lynn Good and was founded in 1904. It grew through a series of deals, including a $ 5 billion, no debt, deal to buy Piedmont Natural Gas Co., which ended in 2016.
As the coronavirus pandemic has not allowed many people to leave offices and work from home since mid-March, utilities are coping with rising retail energy consumption – as large sections of the population work from home – and declining commercial demand. Duke, for example, said in its second quarter that electricity volumes for commercial and industrial customers fell 13 percent and 15 percent, respectively, even though most of its larger business customers resumed operations. While retail use usually offers higher profit margins, it is not clear how long large sections of the population will continue to use its large size, as workers are expected to gradually return to their offices.
Several other utility companies have recently flirted with deals, sometimes commissioned by investor activists. Evergia Inc.,
an approximately $ 11 billion electricity company based in Kansas City, Missouri, was called by Elliott Management Corp. to consider your sale. Evergy undertook a strategic review, but ultimately did not continue to sell. Its CEO announced plans to retire in August.
CenterPoint Energy Inc.,
where Elliott also participated, formed a strategic review committee in May, which plans to make recommendations to the board by October. The company said it would update investors by early next year.
The biggest deal announced so far this year is Nvidia Corp.’s
Acquisition of SoftBank Group worth $ 40 billion Corp.
owner of chip designer Arm Ltd. Mergers and acquisitions are down 22 percent worldwide and 43 percent in the United States from a year earlier, largely because executives have shifted the focus from making deals to responding to the impact of the coronavirus pandemic. Recently, however, the market for mergers and acquisitions is beginning to show signs of life as companies begin to return and seek to make strategic plans for the post-pandemic era.
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