NextEra Energy (NYSE:NEE) closed Friday's session at $86.92, down 1.15% on the day and 3.2% over the past five sessions. The decline comes as the company's ambitious Paducah AI power project remains in limbo, awaiting final documentation and approvals.
Despite the pullback, NextEra outperformed the broader utilities sector, with the State Street Utilities Select Sector SPDR ETF (NYSEARCA:XLU) slipping 4.19% over the same period. Southern Company (NYSE:SO) fell 2.79%, Duke Energy (NYSE:DUK) dropped 3.90%, and American Electric Power (NASDAQ:AEP) slid 5.67%. The S&P 500 advanced 1.0%.
The selloff in utilities was driven by a sharp rise in Treasury yields. The Federal Reserve held its benchmark rate unchanged at 3.5%-3.75% on Wednesday, but the 10-year Treasury yield jumped to 4.747% by Friday, its highest level since January 2025. Higher yields make dividend-paying utilities less attractive.
Paducah Project: A Potential Game-Changer
The Paducah project, announced last Wednesday, could add up to 4.6 gigawatts of dedicated power assets, including 2.0 GW of natural-gas generation and 2.6 GW of battery storage. That represents 13.1% of NextEra's current development backlog of 35.1 GW. The gas block alone would be 25%-50% of the company's 2030-2032 target, while the storage block is 1.3 times the 2.0 GW added in the second quarter.
However, the project is still in its early stages. No anchor tenant has been named, and NextEra has not disclosed expected returns. Formal agreements are pending, and final documentation has yet to be completed. CEO John Ketchum called it "a proof point for how AI infrastructure should be built in America," emphasizing that the dedicated power assets would not be funded by current customers.
Earnings and Valuation
NextEra's second-quarter adjusted earnings per share rose 9.5% to $1.15, beating consensus. Energy Resources posted an 18% increase in adjusted profit, while FPL saw a 9.3% rise in regulatory capital employed. The company reaffirmed its 2026 adjusted EPS outlook of $3.92-$4.02, with a long-term growth target of at least 8% annually through 2032.
At Friday's close, NextEra trades at roughly 21.9 times its 2026 guidance midpoint. The dividend yield stands at 2.87%, well below the 10-year Treasury yield of 4.747%. The board approved a quarterly dividend of $0.6232, payable September 15 to shareholders of record by August 28.
Merger and Risks
NextEra continues to pursue its proposed merger with Dominion Energy (NYSE:D), with applications filed for state and federal approvals in July. Completion is expected in the second half of 2027. Risks include potential delays or scope changes at Paducah, rising yields compressing valuation, and integration uncertainties from the Dominion deal.
Investors will watch Duke Energy's second-quarter earnings on Tuesday and U.S. July payroll data on Friday for further clues on rate direction. NextEra's valuation hinges on its growth narrative, and securing contractual commitments for Paducah will be crucial for a rerating. Until then, the project remains an option value rather than a certainty.
