Clean energy group NextEra surpasses ExxonMobil in market cap

By Gregory Meyer in New York

The world’s largest solar and wind power generator has surpassed ExxonMobil in stock market value, reflecting investors’ bets on a changing energy system and an uncertain outlook for oil demand. 

NextEra Energy, a Florida-based utility and power producer, had a market capitalisation of $138.6bn in intraday trading on Friday, having gained more than two-thirds in the past two years, according to S&P Global Market Intelligence. 

ExxonMobil, a byword for Big Oil that was once the world’s biggest public company, has lost more than half its value since the start of the year. The supermajor’s market capitalisation was $137.9bn, down from a peak of more than $500bn in 2007. 

NextEra’s ascent and ExxonMobil’s decline reflect a collapse in oil consumption in the pandemic, the rise of renewable resources on the electric grid and investors’ desire for steady returns at a time of low interest rates.

“We’re seeing just enormous demand for renewables right now,” Jim Robo, NextEra’s chief executive, said on Wednesday during an interview with a Wolfe Research analyst.

The two companies function in different segments of the energy system. About 70 per cent of NextEra’s revenue comes from electric utilities in Florida whose returns are approved by regulators. The remainder flows from a division that sells power in competitive wholesale markets and is the top generator of electricity from the wind and the sun, according to the company. 

ExxonMobil is an oil and gas producer that has been stung by the crash in the price of crude. The Texas-based company lost $1.7bn in the first half of the year and was recently removed from the Dow Jones Industrial Average, the blue-chip stock barometer. Its shares fell 2 per cent on Friday as Brent crude slipped beneath $40 a barrel to a four-month low.

ExxonMobil, with roots in John D Rockefeller’s Standard Oil, has a workforce of 74,000 and activities on every continent but Antarctica. NextEra, founded during the 1920s Florida land boom, has fewer than 15,000 employees and operates in the US and Canada.

The US majors, for them to get into the renewables business, I think you need some kind of tectonic shift in their thinking. I can’t imagine it, honestly

Jim Robo, NextEra chief executive

Investors have flocked to NextEra mainly for its involvement in renewable energy, said Paul Patterson, analyst at Glenrock Associates. 

“People are excited about renewables and the transformation happening in the energy sector, and they feel that this is probably one of the better-positioned companies in the United States to exploit that opportunity,” Mr Patterson said.

NextEra reported net profit of $1.7bn in the first half of this year and said that wholesale customers had signed up for 14.4 gigawatts’ worth of renewable capacity, almost triple the amount of two years ago. It increased earnings guidance and announced a four-for-one stock split in September. 

It is not a pure play on renewables, however, on either its wholesale power generation or utilities side. The company’s utility subsidies are heavily dependent on fossil fuels for power — Florida Power & Light generated 74 per cent of its electricity from natural gas — and have benefited because producers such as ExxonMobil have unearthed a glut of gas from shale formations, cutting fuel prices for electricity generators such as NextEra.

Federal tax credits for wind and solar projects have also increased NextEra’s bottom line, as the company has been able to offset them against tax liabilities on both the utility business and the wholesale power business, said Michael Weinstein, analyst at Credit Suisse. 

In an investor presentation NextEra pointed to a tougher future for gas. Including the cost of batteries for electricity storage, solar power was set to be as cheap as gas-fired generation by the middle of the decade at $30-$40 a megawatt-hour, and wind plus storage was set to cost $20-$30 a MWh. 

NextEra has also announced a pilot programme to use solar electricity to produce hydrogen. “It is a replacement fuel for diesel,” Mr Robo said.

Asked whether big oil companies were potential competitors or acquirers in the renewables industry, Mr Robo said European majors’ fitful investments had resulted in “some of the worst projects that I’ve seen” in the sector.

“I don’t worry about the oil majors at all,” Mr Robo said. “The US majors, for them to get into the renewables business, I think you need some kind of tectonic shift in their thinking. I can’t imagine it, honestly. I think time would stand still for the US oil majors to get into the renewable business.”

According to a person with direct knowledge of the matter, NextEra has approached Duke Energy, a $66bn utility based in North Carolina, with a merger proposition. Duke has rejected the offer but left the door open for further discussions. 

NextEra and ExxonMobil did not respond to requests for comment, while Duke declined to comment.

Additional reporting by James Fontanella-Khan in New York

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