NEW YORK (
is seeing higher than average volume on Wednesday after announcing plans for an equity issuance with Credit Suisse that could reach $402.5 million, including over-allotment of equity units.
NextEra Energy, the wind and solar energy company affiliated with
Florida Power & Light
, was down by more than 2% in early trading. More notable was NextEra Energy share volume nearing its average daily volume of 1.7 million shares within the first hour of the market open on Wednesday.
An analyst who covers NextEra Energy buy hadn't been able to speak with the company about the equity plans on Wednesday, said the level of the equity being issued was significantly higher than the analyst has expected. The analyst stressed that equity issuance has been in the long-term plans of NextEra Energy and taken into account in Street earnings models, and even though the $350 million -- with over-allotment taking the deal up to $402.5 million -- is larger than anticipated for a one-time transaction, it is within the range expected for NextEra Energy.
The analyst said that rating agencies have a stable outlook on the company, and so it is possible that the amount of the NextEra Energy raise was dictated by a good climate right now for an equity issuance. "They weren't under pressure to issue any specific amount now," the analyst said.
The NextEra Energy deal is not a typical secondary offering of common shares.
Each $50 equity unit consists of a contract to purchase NextEra Energy common stock in the future and a 1/20th, or 5% undivided beneficial ownership interest in an FPL Group Capital debt note due Sept. 1, 2015, in the principal amount of $1,000.
Holders will be required to purchase NextEra Energy common stock for cash, based on a per share price range of $55.02 to $68.78. The higher end of this price range reflects a premium of 25% over the New York Stock Exchange closing price of NextEra Energy common stock on Sept. 14. Total annual distributions on the equity units will be at the rate of 7%. The purchases must be concluded by Sept. 13, 2013.
With the timeframe for the equity and debt spanning the next four years, the analyst said the long-term plan can still accommodate more of the equity issuance being transacted now, and it should change the 2014 earnings guidance from the company.
The unknown, however, was whether the larger-than-expected equity issuance right now indicated that NextEra Energy may be looking to raise the overall amount of equity it issues over the next five years. There is an existing five-year plan for equity issuance, but it would have suggested smaller chunks of equity issuance throughout the years.
"We won't know for sure until we get confirmation from the company regarding the overall equity issuance plans, but at the end of the day, it may just be the timing that is different, and not the model," the analyst surmised.
--Written by Eric Rosenbaum in New York.
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