NEW YORK (TheStreet) -- NextEra Energy's (NEE - Get Report) spinoff of NextEra Energy Partners (NEP) was a success on its IPO on Friday, rising 28% from the $25 per unit pricing (the top of the $23-$25 projected range). The operator of wind and solar generation assets raised $406.25 million on the 16.25 million-unit offering.
By shedding assets in a hot initial public offering market, NextEra Energy is able to pursue earnings accretive acquisitions such as Energy Future Holdings Corp.'s Oncor unit or other shareholder friendly initiatives like a dividend raise (10% annual increase since 2011).
While Oncor, a profitable electricity business of the bankrupt Energy Future Holdings, would fit perfectly in NextEra's established Texas business, Energy Future Holdings (Dallas-based) rejected the company's $2.3 billion loan offer last week. Despite the rejection NextEra will still seek to attain the Oncor unit along with its creditors at Morgan Stanley (MS). Of the $2.3 billion offer, NextEra would contribute $1 billion to the current restructuring plan.
However, based on valuation NextEra Energy is the more attractive investment compared to Sempra Energy's P/E ratio of 21.45x (2015 estimates). A gain of 12% from current levels ($101.60 to $114.00) would still have the stock trading at a forward P/E ratio under 20x. NextEra currently only has an average analyst price target of $104.50. Call Buyers Expect New Highs This Summer On June 27, someone rolled out 1,935 July $100 calls into 3,970 July $105 calls. This trade involves selling the July $100 calls for $2.60 and buying the July $105 calls for 57 cents at the same time. Two days prior to this trade someone purchased 5,000 Aug $105 calls for $1.15-$1.25 each. Both of these traders are positioning for a 4%+ move higher over the next 3-7 weeks. Total call open interest is 63,511 contracts vs. the total put open interest of 28,291 contracts.