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NextEra last Friday briefly replaced Exxon as the most valuable energy company in the United States, according to data from UBS cited by CNN. Although the supermajor had regained the crown by Monday, the Friday incident is indicative of the changing fortunes of fossil fuel companies.
The market cap fluctuations also highlight growing investor optimism about renewable energy companies as climate change and tackling it remains center stage on the public agenda thanks to government efforts in this respect as well as a rush among financial institutions to become more environmentally responsible, which includes reducing their exposure to the oil and gas industry while expanding lending to solar, wind, and other sustainable energy projects.
But NextEra has also had other reasons to enjoy stronger interest from investors. The company recently acquired GridLiance, an independent power transmission company that operates some 700 miles of high-voltage transmission lines across six states. The company also approached Duke Energy with a merger proposal that would have created a superutility worth $60 billion. Although the target company rejected the proposal, NextEra is still interested in a tie-up.
What all this suggests is that the renewables major is firmly on a growth path and it is staying on despite the pandemic and any fallout from it. This fallout, in fact, has been much smaller for the renewable energy industry and much shorter: demand for all energy fell during the lockdowns but began to rebound after those were lifted.
The share price of NextEra tells the same story. After a sharp but brief dip in late March, the stock has risen more or less steadily. Exxon, on the other hand, started the year strongly but has been on a relatively steady decline since late March.
After the brief Friday change, Exxon is once again the most valuable energy company in the United States. But that has a lot to do with size and revenues, too, and Exxon generates more of these than NextEra. For now.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com