NextEra Energy Inc. (NEE) announced that its subsidiary Florida Power & Light Company (“FPL”) will sell $600 million of first mortgage bonds yielding 4.125% interest per year and maturing on February 1, 2042. The offer price of the bonds is $99.753 (per $100.00 principal) and is supposed to yield 4.139% at the end of the maturity period.
The NextEra unit will use the proceeds to repay a portion of its outstanding commercial paper obligations and for other general corporate purposes. The previous June 2011 issue of $250 million 5.125% first mortgage bonds also served a similar purpose.
NextEra Energy’s long-term debts as of September 30, 2011, were $20 billion versus $18 billion as of December 31, 2010. The debt-to-equity ratio at the end of the third quarter 2011 was 47%, deteriorating from 44% at the end of 2010, mainly due to the issue of new debts. With the issue of new bonds the debt-to-equity ratio of the company will increase further to 48.3%
Interest expenses in the third quarter 2011 swelled 7.3% to $265 million from $247 million at the end of the third quarter of 2010 mainly due to a higher debt level. We expect interest expenses to increase a notch higher in the coming quarters with the issue of new debts. We believe the strong cash generation capacity will enable the company to meet its interest obligation. NextEra Energy’s cash balance as of September 30, 2011, was $640 million.
We believe NextEra is in urgent need of funds because of its aggressive long-term growth strategy. The FPL business wing has planned to invest in the range of $10.5 billion to $11.5 billion over the 2011 to 2014 timeframe. The capital raised will be used to modernize plants and augment the smart grid initiative of the company. Another company unit, NextEra Energy Resources is also investing heavily to increase its renewable energy generation form solar and wind resources.
NextEra Energy expects 2011 earnings per share on the lower end of the $4.35 to $4.65 range. However, it expects new investments to increase the per-share figure by 5% to 7% annually through 2014 from the present level. Our expectation for fourth-quarter 2011, fiscal year 2011 and fiscal year 2012 are 93 cents per share, $4.40 per share and $4.59 per share, respectively.
NextEra Energy currently retains a Zacks #3 Rank which translates into a short-term Hold rating. The company competes with Progress Energy Inc. (PGN) and Southern Company (SO).
Based in Juno Beach, Florida, NextEra Energy Inc., through its subsidiaries, engages in the generation, transmission, distribution and sale of electric energy in Florida.
