After decades of embracing fossil fuels, Wall Street appears to be shifting its allegiance to renewable energy, a sharp turn apparent in the contrasting fortunes of NextEra Energy Inc and Exxon Mobil Corp.
Florida-based NextEra, a big player in wind and solar energy, has overtaken the global oil giant as the most valuable US energy company by market value.
NextEra’s market capitalization has surged to US$145 billion compared with Exxon Mobil’s US$142 billion, another emblem of the Texas giant’s diminished status after it was in August bumped from the prestigious Dow Jones index after more than 90 years.
The ascendance of NextEra and other renewable-oriented firms is not merely a passing trend, said Peter McNally, an energy expert at research firm Third Bridge.
“I’ve seen fads in alternative energy come and go over the last decade, and I’m sure that people would debate the multiple investors are paying for the earnings generated,” McNally said. “They’re in the right place at the right time.”
Founded in 1925 in Florida where it continues to supply power to 5 million households, NextEra has invested in solar and wind energy since the 1990s. Those investments are now paying off with technological leaps in renewable energy.
“Alternative power is now getting competitive with traditional forms of electricity, coal and natural gas fired generation,” McNally said. “If some of those investments had been made 10 years ago, they would likely have had a different outcome, because the cost of generating power from wind and solar has gotten a lot cheaper.”
NextEra is the biggest producer of wind energy in North America and among the biggest solar producers in the US.
Investors have also become more focused on climate change and increasingly sympathetic to companies that embrace the idea that renewables will become a bigger part of the energy equation.
A similar sentiment also made Tesla Inc the most valuable auto company in terms of market value, outstripping General Motors Co and Ford Motor Co, even though the they sell many more cars.
Last year, NextEra reported US$3.8 billion in profits on US$19 billion in revenues. During the same period, Exxon Mobil garnered US$14.3 billion in profits on revenues of US$265 billion.
With the crash in oil prices in the wake of the COVID-19 pandemic, Exxon Mobil has slashed its capital budget this year.
By contrast, NextEra has benefited from regulated electricity prices and stable use. About two-thirds of its revenues are tied to supplying electricity.
Between this consistent source of revenues and its expertise in wind, solar and energy storage, NextEra is “very well positioned for this transition to renewable generation and emission-free type world,”said Andrew Bischof, an analyst at Morningstar Inc.
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