News Column

NextEra Energy spinoff posts winning day on Wall Street

June 27, 2014

By Jeff Ostrowski, The Palm Beach Post, Fla.

June 27--JUNO BEACH -- In a better-than-expected showing for NextEra Energy's spinoff, shares of NextEra Energy Partners soared in their first day of trading.

Reflecting investors' drive for dividends, shares in NextEra Energy Partners (NYSE: NEP) opened Friday at $25 and soared 29 percent to close at $32.25.

And the $25 opening price was higher than anticipated. Last week, NextEra said shares likely would be priced at $19 to $21. At that price, NextEra would have raised about $325 million in the initial public offering. But strong demand let NextEra boost the price and raised $406 million.

The soaring price reflects investors' demand for dividends. As a so-called yieldco, NextEra Energy Partners is attractive to investors seeking dividends in a market where interest rates on savings are at historic lows.

"I can't think of any other reason for the frenzied interest," said Edward Jones analyst Andy Smith.

In a paradox for dividend-chasing investors, the higher they bid the price of shares, the lower the yield. NextEra Energy Partners is expected to pay an annual dividend of about 60 cents a share. At $20 a share, that's a 3 percent yield. But at $32 a share, the 60-cent dividend falls to a 1.9 percent yield.

The Juno Beach-based energy company created NextEra Energy Partners this year to run 10 green power plants in Arizona, California, Colorado, Michigan and Ontario. The plants, which produce energy from the wind and the sun, generated revenue of $142 million in 2013.

Yieldcos have gained popularity. Last year, NRG Energy (NYSE: NRG) of Princeton, N.J., created NRG Yield (NYSE: NYLD).


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Source: Palm Beach Post (FL)

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