Shares of giant U.S. utility NextEra Energy (NYSE:NEE) fell roughly 5% in the first hour of trading on Sept. 30. Although the loss was pared somewhat over the next hour, the stock was still down by roughly 2% at 12 p.m. EDT. The big story of the day came from The Wall Street Journal.
A massive utility with renewable power and regulated utility businesses, NextEra's primary regulated operations are located in Florida. In 2019, in an attempt to augment growth on the regulated side of the business, it acquired Gulf Power, a relatively small Florida utility, from peer The Southern Company. Although NextEra has only owned Gulf Power for a short period of time, it has already started to improve the utility's performance. It believes there are more gains to be had as well, as it continues to bring Gulf Power's metrics in line with its own.
That's a bit of background to provide context for the report from The Wall Street Journal, released after the market closed yesterday, that NextEra had been rebuffed in an effort to buy peer Duke Energy (NYSE:DUK). Duke has material operations in Florida, but would also help expand NextEra's reach outside of its home state. Moreover, adding this utility to the mix would likely have provided years' worth of business improvement opportunities, perhaps similar to what NextEra has achieved with Gulf Power. It could have been a very interesting combination. That said, buying Duke Energy, which has a nearly $65 billion market cap, would have been a massive financial undertaking, even for $135 billion market cap NextEra. Still, The Journal suggests that NextEra isn't ready to give up just yet. Duke may be playing hard to get so it can achieve a better deal for its shareholders.
It's worth noting that Duke Energy's stock rose 8% on the same news that drove NextEra lower, suggesting that some on Wall Street do believe a better offer is likely. With regard to NextEra, it's not clear if investors are worried that NextEra is likely to try again (and perhaps succeed at an even higher cost) or if investors are upset that NextEra's efforts to create a pipeline for growth have failed again. Indeed, Duke is not the first utility NextEra has tried to acquire over the past few years. What the news does suggest, however, is that NextEra is still hunting for ways to expand. Whether that's a good thing or a bad thing remains to be seen.