NextEra Energy, Inc. (NYSE: NEE) announced today that it has agreed to sell $1.5 billion of equity units to J.P. Morgan, Mizuho and Goldman Sachs & Co. LLC. The transaction is expected to close on Oct. 31, 2024.
The net proceeds from the sale of the equity units, which are expected to be approximately $1.45 billion (after deducting the underwriting discount and other offering expenses), will be added to the general funds of NextEra Energy Capital Holdings. NextEra Energy Capital Holdings expects to use its general funds to fund investments in energy and power projects and for other general corporate purposes, including the repayment of a portion of its outstanding commercial paper obligations.
Each equity unit will be issued in a stated amount of $50. Each equity unit will consist of a contract to purchase NextEra Energy common stock in the future and a 5% undivided beneficial ownership interest in a NextEra Energy Capital Holdings, Inc. debenture due Nov. 1, 2029, to be issued in the principal amount of $1,000. The debentures will be guaranteed by NextEra Energy Capital Holdings' parent company, NextEra Energy, Inc. Total annual distributions on the equity units will be at the rate of 7.234%, consisting of interest on the debentures and payments under the stock purchase contracts.
In approximately three years, each stock purchase contract will require the holder to purchase NextEra Energy common stock for cash, based on a per-share price range of $82.87 to $103.58. 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 Oct. 28, 2024, which was $82.87. The holders of the equity units must complete the stock purchase by no later than Nov. 1, 2027, with the required purchase price of stock purchased on that date determined based on NextEra Energy's common stock over the 20 consecutive trading day period ending on Oct. 27, 2027. The holders may satisfy their purchase obligations with proceeds raised from remarketing the debentures that comprise part of their equity units.
Upon settlement of the purchase contract, NextEra Energy will receive cash and will issue the requisite number of shares of its common stock. Before the issuance of NextEra Energy common stock upon settlement of the purchase contracts, the purchase contracts will be reflected in NextEra Energy's diluted earnings per share calculations using the treasury stock method.