8. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Investors In Q2 2024: 73
UBS’ Sector Rating: Attractive
Sector: Utilities
NextEra Energy, Inc. (NYSE:NEE) is a stock that is an unsurprising addition to UBS’ list of the top US stocks to buy. This is because the firm is one of the biggest clean energy utilities in America courtesy of its 33GW of power generation capacity. The firm further benefits from the fact that its power generation portfolio is diverse and factors in several clean sources such as wind, nuclear, and solar. This is key for firms like NextEra Energy, Inc. (NYSE:NEE) due to the unique nature of renewable energy generation which often means that sources like solar are unable to provide power during dark hours. Despite the fact that clean energy stocks tend to struggle when rates are high, NextEra Energy, Inc.’s (NYSE:NEE) shares have gained 28.5% year to date. The optimism is driven in part by Wall Street and Silicon Valley’s renewed interest in nuclear power to meet COP28 goals and power up massive AI data centers. However, NextEra Energy, Inc.’s (NYSE:NEE) massive backlog of 24GW of renewable power generation capacity is also proving to be costly. The firm aims to raise equity to fund expansion, and the shares dropped by 4% in October after it announced a $1.5 billion raise.
NextEra Energy, Inc.’s (NYSE:NEE) management commented on its nuclear capacity expansion plans during the Q3 2024 earnings call. Here is what they said:
“We’ve added another approximately 3 gigawatts of renewables and storage this quarter, our second quarter in a row. As a top operator of all forms of power generation, we often get asked about nuclear and gas. Let me start with nuclear. Nuclear will play a role, but there are some practical limitations. Remember, on a national level, we expect we are going to need to add 900 gigawatts of new generation to the grid by 2040. There are only a few nuclear plants that can be recommissioned in an economic way. We are currently evaluating the recommissioning of our Duane Arnold nuclear plant in Iowa as one example. But even with a 100% success rate on those recommissionings, we would still only meet less than 1% of that demand. Existing merchant nuclear generation is also limited in its ability to meet that demand, given there are only approximately 20 merchant nuclear plants in this country.
That nuclear capacity is also not evenly spread across the U.S. And is not in many places. We know hyperscalers are looking to develop data centers or manufacturing — manufacturers are looking to expand their footprint. For example, there are only two merchant nuclear plants west of the Mississippi. Nuclear plants across the country are already serving existing demand. So even if they are contracted by specific customers, new resources need to be built to meet new demand. And alternatives such as new utility scale nuclear and SMRs are unproven, expensive and again, not expected to be commercially viable at scale until the latter part of the next decade.”
