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NextEra Unit to Buy GridLiance, Expand Transmission Network

Zacks Equity Research
·3 min read

NextEra Energy NEE recently announced that its subsidiary, NextEra Energy Transmission, LLC will acquire GridLiance Holdco, LP and GridLiance GP, LLC (GridLiance) for nearly $660 million, including the assumption of debt from The Blackstone Group. Through this acquisition, NextEra’s unit will be able to have control over 700 miles of high-voltage transmission lines and related equipment with utility rates set by the Federal Energy Regulatory Commission.

GridLiance, whose assets are spread across six states, will help NextEra to further expand its existing operations. The decision of acquiring transmission assets is in sync with NextEra’s strategy of adding high-quality regulated assets to its portfolio. A portion of the net proceeds from the company's recent equity units’ issuance will be utilized to finance the transaction. This acquisition, subject to regulatory approval, is expected to close in 2021. 

Importance of Transmission Lines

Transmission lines play an important role in transferring the electricity produced in the generation units to end users. Any disruption in the transmission lines could bring the electric system to a standstill and can result in blackouts.

NextEra has an expertise in operating and maintaining complex transmission and distribution lines to ensure safe and reliable operations, as well as uninterrupted and efficient electric service. Through its subsidiary, the company currently controls more than 7,300 miles of transmission lines between 69 kilovolts and 500 kilovolts, along with nearly 800 substations. Hence, the acquisition of GridLiance’s assets will increase this tally to more than 8,000 miles.

NextEra aims to invest in the range of $50-$55 billion in the 2019-2022 time period, and a significant amount for strengthening its transmission as well as distribution network.

Focus on Clean Energy

In addition to expanding and strengthening its electric supply infrastructure, NextEra is also gradually increasing electric generation from clean energy sources and lowering emissions. It aims to produce more electricity from clean sources and lower carbon emissions from the production process. These initiatives will help the company achieve the plan of reducing carbon dioxide emissions rate to 67% by 2025 from a 2005 base.

A gradual transition in the energy space is quite evident, with utility operators moving away from coal and concentrating on clean energy sources to generate electricity. Abundance of natural gas, lower cost of installation of utility scale renewable power units on account of research and development work, along with development of the battery storage system are contributing toward the transition. Utilities like Xcel Energy XEL, Duke Energy DUK and DTE Energy DTE, among others, have decided to reduce 100% carbon emission in the electricity generation process within 2050.

Zacks Rank

NextEra currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Year to date, shares of NextEra have outperformed the industry.

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