I had to tune into the Enhanced Games last weekend. What would be possible when conventional restrictions on gear and banned substances were removed? In the end we saw unenhanced athletes win events, individual athletes perform personal bests or achieve standards they had not reached in years, and one record fall (but won’t be recognized). Something about it all made me think about the $67 billion NextEra and Dominion merger.
The combined entity becomes the third largest energy company in the United States by market value, behind only ExxonMobil and pushing Chevron for second. Adding Dominion adds scale to NextEra, but will adding bulk (like “The Missile” Magnussen) bring performance (Magnussen finished last in both his events)?
Perhaps. There are clear benefits to balance sheet scale and operational breadth when serving data center concentrated markets. And Dominion serves Northern Virginia, the most concentrated data center market on the planet, with 51 GW of disclosed pipeline. NextEra brings balance sheet, NEER’s development engine, and multi-year relationships with MSFT, GOOGL, AMZN, and META. The bundle is the product. Regulated grid service. Nuclear firm power. NEER solar and storage for 24/7 carbon-free matching. A behind-the-meter bridge during queue waits. Hard to compete with that enhanced offering.
But the Enhanced Games also provide a warning. Kristian Gkolomeev broke a world record, but it won’t be recognized because he used banned substances and a banned suit. How much of the benefit of this combination will be allowed? NEE and D pre-emptively offered $2.25 billion in bill credits across Virginia, South Carolina, and North Carolina. The Virginia SCC will still want more. Will affiliate transaction limits prevent compelling bundles of regulated and unregulated services?
Even if you can outperform your competitors, will you have the opportunity to perform? We have discussed at length the inflated signal of PJM’s load queue. Those risks extend to Dominion’s 51 GW pipeline, 10.4 with ESA and 29.5 GW of which sitting at the riskier substation engineering letter stage. The interconnection backlog has loosened with the move to first-ready first-served, but there is still years of work ahead. And then there are PJM’s capacity markets: under the current cap new gas capacity does not get financed.
The strategic case is the easy one. Whether the enhanced offering converts to performance, like the Games themselves, is what we will be watching.
Comments, questions or things I missed? Send me a note (or hit reply) - I would love to hear from you. Thanks for reading!
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