NextEra Sees a Golden Age for Power Demand—and Exxon Stock Could Gain

Drone photos of Pinal Battery Storage site in Casa Grande, Arizona on April 24, 2018. (Courtesy NextEra Energy)

Key Points

• NextEra Energy projects U.S. electricity demand to grow six times faster over the next 20 years, with a nearly 60% increase by 2045.
• AI data centers are expected to drive over 40% of the anticipated electricity demand growth, leading to new generation strategies.
• NextEra plans to develop 15 gigawatts of data center hubs by 2035 and anticipates 8% annual earnings growth for the next decade.

Electricity provider NextEra Energy says the U.S. is entering a golden age of power demand.

That should mean faster earnings growth for NextEra and new business opportunities for a host of companies, including the unlikely pairing of Tesla and Exxon Mobil.

NextEra on Monday hosted an investor conference outlining its view of the U.S. power generation market. The company expects electricity demand to grow six times faster over the coming 20 years than it did over the prior two decades. Americans will be using nearly 60% more power by 2045—about 6,800 terawatt hours—up from 4,300 terawatt hours in 2025. Artificial-intelligence data centers will account for more than 40% of that growth.

NextEra has coined an acronym for data centers: BYOG, or bring your own generation. “The large load market demand from hyperscalers [can be] satisfied through data center hubs, which will be powered at least partly by natural gas-fired generation,” wrote Baird analyst Ben Kallo in a Monday report. NextEra plans to develop 15 gigawatts of data-center hubs by 2035, with an upside case of 30 gigawatts.

That could mean new business for the likes of power-generation equipment maker GE Vernova and for Tesla, which has a utility-scale battery storage business, Kallo added.

It could also benefit oil companies such as Exxon. Exxon and NextEra are collaborating on carbon-abated, gas-fired power generation projects designed to serve hyperscalers. “Exxon Mobil is an excellent partner for NextEra Energy for multiple key reasons,” UBS analyst Manav Gupta wrote Monday. For starters, Exxon produces natural gas. It also has one of the strongest offerings when it comes to capturing and sequestering carbon.

Electricity demand growth might be good for Exxon and Tesla, but it is also a boon for NextEra. The company expects to grow earnings about 8% annually over the next decade—roughly in line with its long-term record of near-double-digit growth. NextEra also issued initial earnings-per-share guidance for 2026 of about $3.97 a share, compared with Wall Street projections of $4.01.

That 4-cent gap likely explains why shares fell 3.1% on Monday. The overall outlook remains bright, but companies rarely get away with below-Street guidance.

At the end of Tuesday’s session, NextEra shares were up 11% this year. The stock fell 1.1% to $79.64, while the S&P 500 and Dow Jones Industrial Average dropped 0.1% and 0.4%, respectively.

Write to Al Root at allen.root@dowjones.com