Summary
On September 16, 2015, NextEra Energy, Inc. (NEE) announced the successful sale of $700 million in equity units. These units are structured to facilitate the future purchase of NEE common stock by the unit holders, with a purchase obligation set to occur by September 1, 2018. The structure includes a component of debentures issued by NextEra Energy Capital Holdings, Inc. (NEECH), which are guaranteed by NEE. This offering provides NEE with significant capital while offering investors a mechanism to acquire NEE stock at a predetermined price range.
Key Highlights
- 1NextEra Energy (NEE) raised $700 million through the sale of equity units.
- 2The equity units are comprised of a stock purchase contract and a beneficial ownership interest in NEECH debentures.
- 3Holders are obligated to purchase NEE common stock by September 1, 2018, within a price range of $95.35 to $114.42 per share.
- 4The debentures component can be remarketed to fund the stock purchase obligation.
- 5The NEECH debentures are guaranteed by NextEra Energy, Inc.
- 6The equity units offer a total annual distribution rate of 6.371%.
- 7The offering was registered under the Securities Act of 1933.
Frequently Asked Questions
The primary purpose for NextEra Energy is to raise capital ($700 million) and to secure future investment in its common stock. The structure allows investors to commit to purchasing NEE stock at a future date, effectively locking in a price within a defined range.
Investors can fund the purchase of NEE common stock using cash. Alternatively, the debentures that are part of the equity units can be remarketed by the holder. If this remarketing is successful, the proceeds can be used to satisfy the stock purchase obligation.
The main risks for investors include the stock price at the purchase date being below the predetermined price range, meaning they would buy shares at a higher price than the market. There's also the risk that the remarketing of the debentures may not be successful, limiting their funding option. The annual distribution rate is fixed, so if market interest rates rise significantly, the relative attractiveness of this rate could diminish.
NEECH is the issuer of the Series H Debentures that form a component of the equity units. These debentures are guaranteed by the parent company, NextEra Energy, Inc., providing credit support to the debenture holders.