NextEra Continues to Renew its Portfolio

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The nation’s top renewable power generator, NextEra Energy (NYSE: NEE) announced it was selling its equity interests in White Pine Hydro Investments to Brookfield Renewable Energy Partners (NASDAQOTH: BRPFF). The $760 million deal consists of 19 hydroelectric facilities and 8 upstream storage reservoir dams.  In total these assets, which are located in Maine and New Hampshire, have an aggregate capacity of 351 megawatts. 

NextEra is the nation’s largest generator of renewable wind and solar power and has the third largest nuclear generating fleet. As CEO Armando Pimentel noted in the press release, that “while this is an attractive portfolio in many respects, this transaction enables us to further optimize our power generation portfolio and concentrate our resources on areas with greater growth potential for our business." Hydro simply isn’t a core business for the company, and this sale frees up cash that can be reinvested in the company’s other renewable growth projects. While the transaction will result in a gain, it’s not expected to have a material impact on the company’s financial results. 

For Brookfield these assets will complement the company’s existing hydro fleet. It already had 103 MW of existing operating capacity on the river systems of the newly acquired assets. Further, the transaction increases the company’s total footprint in the region to nearly 1,000 MW of installed capacity. According to CEP Richard Legault the transaction provides a “unique opportunity to leverage our operating platform while positioning us to participate in rising electricity prices over time.”

The company was created by Brookfield Asset Management (NYSE: BAM) to be a pure-play investment in the ownership and operations of hydro and wind assets. Under Brookfield's management the company has amassed $18 billion worth of renewable assets under management in North and South America.  Those assets consist of over 180 generating facilities and about 5,000 MW of installed capacity. For perspective, that puts it at about 60% of the renewable capacity of NextEra. Bolt-on acquisitions like this one from NextEra continue to build value for the company's investors.

Unfortunatley, Brookfield Renewable isn’t an investment that’s easily accessible to most investors.  It mainly trades on the Toronto stock exchange or over the counter (OTC).  Its parent company, Brookfield Asset Management, on the other hand, is much more accessible and offers investors not just access to renewable power but infrastructure and real estate.  It’s also trading at a compelling 15% discount to its intrinsic value

On the power generation side, NextEra has a very robust renewable generation portfolio, although its valuation isn’t quite as compelling as some of its utility peers. Both top nuclear power generator Exelon (NYSE: EXC) and gas focused Dominion (NYSE: D) trade at discounts  to NextEra. Each pays a higher dividend and while Exelon’s isn’t likely to grow anytime soon, Dominion is committed to growing it each year.  Of the group, Exelon offers the biggest long term upside despite the possible dividend cut.


latimerburned owns shares of Brookfield Asset Management and has the following options: Exelon. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Dominion Resources and Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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