Shares of NextEra Energy (NEE +0.17%) slipped 4.6% in early trading Tuesday morning as investors reacted to the latest announcement from the clean energy giant.
NextEra Energy needs funds to grow
NextEra Energy has announced plans to sell equity units worth $2 billion to investment banks Wells Fargo Securities and BofA Securities priced at $50 per unit. Since equity unit offerings combine debt and common stock, each equity unit will serve as a contract for the buyers to purchase shares of NextEra Energy no later than June 1, 2027, and an interest on a debenture.
Without getting into the technicalities, investors understand that NextEra Energy will eventually sell shares worth billions of dollars. Since a stock issue typically dilutes the wealth of existing shareholders, the clean energy stock is falling today.
NYSE: NEE
Key Data Points
Should investors really be worried though? I'd say no, because the company also reminded investors today why it needs to raise funds, and it's for a good reason.
Why you should buy NextEra Energy stock's price drop today
At its Europe investor presentation released this morning, NextEra Energy emphasized the massive growth opportunities ahead. For example, it quoted an industry report projecting 38% growth in the demand for power in the U.S. over the next two decades, with greater reliance on renewable energy. NextEra Energy not only owns the largest electric utility in the U.S., Florida Power & Light company, but is also the world's largest producer of wind and solar energy and a leader in battery storage.
NextEra Energy could develop 36.5 to 46.5 gigawatts (GW) of new renewables and storage capacity through 2027 and plans to invest a whopping $65 billion to $70 billion in its renewables business alone during the period. That's massive and will require a lot of money.
The good part is that NextEra Energy expects to fund the bulk of its projects with the cash it generates internally. So some amount of debt and equity shouldn't harm the company as long as its investments pay off and earnings and dividends continue to grow. NextEra Energy has a rock-solid earnings and dividend growth history, and I stick by my conviction that NextEra Energy is one of the two magnificent S&P 500 stocks that are down now and top picks to buy and hold forever.
