NextEra Energy Subsidiary Cuts Its Distribution Growth Outlook and Shares of Both Sink

NextEra Energy (NEE) was the worst-performing stock in the S&P 500 on Wednesday with shares tumbling over 8% after the renewable energy provider’s subsidiary, NextEra Energy Partners, LP (NEP), significantly reduced its distribution growth outlook, blaming Federal Reserve moves to fight inflation. NextEra Energy Partners shares plunged 20%.

NextEra Energy Partners said it was slashing its distribution per unit growth rate to 5% to 8% through at least 2026, with a target rate of 6%. That would be half of what the company had previously anticipated.

John Ketchum, CEO of both companies, indicated that “tighter monetary policy and higher interest rates obviously affect the financing need to grow distributions at 12%.” He added that trying to maintain the 12% threshold “has had an impact on NextEra Energy Partners’ unit price and yield.”

Ketchum argued that by reducing growth expectations, the company will be able to focus on higher-yielding growth opportunities, and reduce new capital requirements. 

Shares of both NextEra Energy and NextEar Energy Partners fell to their lowest level in more than three years following the news.