HomeMarket NewsSmall CapsNextEra Energy Sells Florida City Gas To Chesapeake Utilities: Here's Details

NextEra Energy Sells Florida City Gas To Chesapeake Utilities: Here's Details

Actionable Trade Ideas

always free

nee

NextEra Energy Inc has reached an agreement to sell its subsidiary, Florida City Gas (FCG), to Chesapeake Utilities Corp. The deal, valued at $923 million in cash, involves FCG’s natural gas system that serves approximately 120,000 residential and commercial customers in Florida. FCG’s network consists of 3,800 miles of distribution main and 80 miles of transmission pipe.

Following the completion of the transaction, FCG will become a wholly owned subsidiary of Chesapeake Utilities.

The deal is expected to close during the fourth quarter of the 2023 fiscal year, pending the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. The transaction also includes intercompany debt of $145 million.

Outlook for NextEra Energy: NextEra Energy anticipates the transaction to immediately enhance its earnings. The company has reaffirmed its guidance for adjusted earnings per share (EPS) at $2.98 to $3.13 for 2023, and $3.23 to $3.43 for 2024. However, any gain from the sale of assets will be excluded from the adjusted earnings calculation.

For 2025 and 2026, NextEra Energy continues to project a 6% to 8% growth in adjusted EPS compared to 2024, with expected ranges of $3.45 to $3.70 and $3.63 to $4.00, respectively. The company has also reiterated its commitment to delivering financial results at or near the top end of its adjusted EPS ranges through 2026.

NextEra Energy maintains its expectation of approximately 10% annual growth in dividends per share through at least 2024, based on the 2022 base.

Synergy and Outlook for Chesapeake Utilities: Following the acquisition, Chesapeake Utilities expects its Florida portfolio to account for approximately 60% of its total utility net plant and operating income, compared to 45% for its standalone business at the end of 2022.

The deal will result in a 50% increase in Chesapeake Utilities’ regulated utility customers and a 30% increase in net plant, with the regulated business mix rising to 87%. The transaction also offers investment opportunities of about $500 million related to FCG over the next five years.

Chesapeake Utilities anticipates exceeding its current capital expenditure outlook of $900 million to $1.1 billion for the five years ending in 2025, achieving this two years earlier than expected. The company has provided an EPS guidance range of $7.75 to $8.00 for 2028, implying a growth rate of approximately 8% compared to the 2025 EPS guidance range or 8.5% since 2018. Capital expenditure for the five years ending in 2028 is expected to range from $1.5 billion to $1.8 billion.

Price Action: On Tuesday, NextEra Energy shares closed down 3.16% at $65.34, while Chesapeake Utilities shares closed down 1.48% at $105.90.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.