Virginia got more from NextEra. What about SC?

Back in May, NextEra Energy (NEE) – already the largest utility by market cap – and Dominion Energy (D) agreed to merge into the world’s largest electric utility business (also by market cap).

So it naturally generated some attention.

Dominion, for its part, operates in 20 states in various capacities, including by providing electricity to Virginia and the Carolinas. So the proposal is of double interest to me since I live in South Carolina.

I’ve spent most of my life here, raised my family here, built a business here, and watched it become an economic engine in the Southeast. As such, I’ll admit to being envious when I saw how Virginia was negotiating more benefits for its utility customers.

Why isn’t South Carolina doing the same?

As an investor, I can see the beauty of the upcoming (likely) blend. NextEra will gain regulated franchises in the South, and Dominion will get better scale, financing opportunities, and development platforms.

The combined company would serve some 10 million regulated utility customer accounts across Florida, Virginia, North Carolina and South Carolina. In fact, over 80% of its operations would be regulated.

And its roughly $138 billion combined rate base – the total value of its property and infrastructure that directly serves the public and earns a set rate of return – is expected to grow 11% annually through 2032. Again, this is if the merger is finalized, which we won’t know until next year.

If it is, the larger company would have quite the power of scale and wide moat to work with. There’s no denying that.

But as an investor who just so happens to be a paying customer as well… I do have to add a “final” thought to the deal. Because a regulated moat comes with the obligation to let customers share in the value.

So if Virginia can negotiate additional benefits as we move toward the merger, then South Carolina should also examine what its customers can receive before approving the deal.

The original merger proposal looked pretty good for Southern-state Dominion customers. It listed $2.25 billion in shareholder-funded bill credits for electric and gas users in Virginia, North Carolina, and South Carolina over the first two years after closing.

South Carolina’s proposed share is approximately $382 million. And both companies say none of the states will bear merger-related costs.

Those are worthwhile commitments in and of themselves. But then Virginia asked for more – and got it.

In September, the two companies said they’d extend Virginia residential customers’ $10 monthly bill credits to four years instead. They also proposed:

Now, I’m not saying South Carolina should get the same exact package. We have different customers with different needs and negotiating priorities, after all.

And we do already have a guarantee that Dominion Energy will keep its South Carolina operating headquarters in Cayce, complete with employee and community commitments. All the same, we can clearly tailor the package further in our favor.

I spent decades negotiating leases, loans, construction contracts, and development agreements. So I know that deals are negotiable – and that you can revisit their terms when the economics change.

I certainly hope that South Carolina’s Public Service Commission realizes it has an open docket to work with. Customer hearings are scheduled both next month and in December. And there’s a merits hearing that should happen before the end of the year as well.

The state should reach a final decision by January 29, 2027, which means there’s still time to ask questions like:

That might all mean less initial profits for the combined company. But happy customers are continuing customers.

And I do believe that businesses truly thrive when they make themselves attractive to those they serve.

By itself, NextEra is a noteworthy company. It reaffirmed its 2026 adjusted earnings per share (EPS) guidance last month of $3.92–$4.02.

And, for the record, it’s targeting the high end.

NextEra expects adjusted 2026 EPS growth of at least 8% annually from 2025 (where it made $3.71) through 2032. And if the Dominion transaction closes next year, management believes it will achieve immediate annual adjusted earnings accretion and growth of 9% – or more – annually through 2032.

Again, these are management’s expectations. So nothing is guaranteed. But those expectations look reasonable from where I’m sitting.

Besides, NextEra is a worthwhile company even without the merger. Its Florida Power & Light segment and energy development business alone provide substantial growth platforms.

If anything, while Dominion could – and should – easily improve that outlook, it will also add integration work and more regulatory negotiations.

NEE closed at $75.49 on September 28. That means shares were trading at about 19x the high end of their full-year adjusted earnings guidance. This compares with its historical normal multiple of 24x.

Meanwhile, its last quarterly dividend was $0.6232, or nearly $2.49 annually, with a 3.3% yield. And management expects its dividend to grow 6% annually from year-end 2026 through 2028.

As an income investor seeking safety and growth, that combination gets my attention. The yield provides income today, while the earnings and dividend outlook offer longer-term higher income possibilities.

As for NextEra’s valuation framework, if we apply management’s minimum growth expectation of 8% to its 2025 adjusted earnings base, that produces roughly $4.67 per share in 2028. At 20x that figure, I get approximately $93 per share.

Now, that’s my calculation, not a company price target. But a purchase at around $75, including two years of dividends, would imply roughly 30% total returns under these assumptions.

I’ve also factored in risks here, because they do exist. Investors need to consider how:

Knowing all that, I believe NextEra is worth buying below $80 with a two-year, fair-value target of $90–$95. And you don’t have to buy up a position all at once. I’d do it gradually while the regulatory process plays out.

If costs climb materially or management’s earnings outlook weakens, I’ll revisit that call.

And as a South Carolinian, I’ll be revisiting what more NextEra’s merger can do for its clientele. I’m confident that, if handled right, this merger can pay off for everyone involved.

Happy SWAN investing,

Brad Thomas
Editor, Wide Moat Daily