U.S. power companies NextEra Energy and Dominion Energy announced a plan to merge in a $66.8 billion deal that will form one of the world's largest electric utilities during an expansion of energy-intensive data centers to support artificial intelligence.
The all-stock transaction, which is pending regulatory approvals, is one of the largest-ever energy mergers. It will create the third-biggest U.S. energy company behind oil majors Exxon and Chevron, and a company with an enterprise value topping the next two U.S. largest power companies combined.
The purchase of Dominion by NextEra, which is already one of the world's largest energy developers, is the latest in a wave of consolidations of U.S. power companies as the build-out of server warehouses across the country opens up lucrative new revenue streams.
This year, AES Corp agreed to be acquired by a consortium led by Global Infrastructure Partners and Swedish private-equity firm EQT AB for $33.4 billion. That followed Constellation Energy's $16 billion deal with Calpine and Blackstone's $11.5 billion deal for TXNM Energy last year.
Scaling up
The enterprise value of the combined NextEra and Dominion company is roughly $420 billion with a market cap of about $249 billion, NextEra CEO John Ketchum said on a call with investors.
"The country needs more energy infrastructure built faster, more efficiently, and more affordably than ever before," Ketchum said. "Combining two great American companies can better achieve the speed and scale this moment demands."
The combined company would deliver electricity to much of the U.S. Southeast, a region with a fast-growing population and the world's biggest data center hub in Virginia.
The deal will enable a swifter build-out of power infrastructure to deliver electricity to data centers proposing to connect to NextEra and Dominion, which total about 130 gigawatts of electricity demand, the companies' executives said.
One gigawatt can power about 750,000 homes.
NextEra will gain access to Dominion's portfolio, enabling it to expand into the PJM Interconnection region, the largest U.S. power grid operator spanning 13 states.
Florida-based NextEra said it would exchange 0.8138 of its stock for each outstanding share of Dominion, valuing Dominion at $75.97 per share, a premium of about 23% to its last close, according to Reuters calculations.
As of March 31, Dominion had $44.11 billion in total long-term debt.
NextEra shares fell 5%, while Dominion stock jumped 10%, touching its highest since November 2022.
The merger builds on NextEra's efforts to tap into surging demand for supplying electricity to data centers developed by Big Tech, largely for training and rolling out AI technologies. Over the last year, the company signed an agreement with Alphabet's Google to reopen a nuclear power plant in Iowa. It has also been announced as the developer of two Japan-backed, natural-gas-fired data center hubs in Texas and Pennsylvania.
Virginia-based Dominion has nearly 51 gigawatts of contracted data-center capacity and counts Alphabet, Amazon, Microsoft, Meta, Equinix, CoreWeave and CyrusOne as customers.
Dominion's service territory includes Northern Virginia's "Data Center Alley," the world's largest concentration of data centers and one of the fastest-growing electricity markets.
Through its regulated utility in Florida, NextEra provides electricity to more than 12 million people. Dominion provides electricity to 3.6 million customers in Virginia, North Carolina and South Carolina.
Scrutiny ahead
The transaction is expected to close in 12 to 18 months, subject to antitrust review, shareholder approval and regulatory approvals from the Federal Energy Regulatory Commission, Nuclear Regulatory Commission, and state utility regulators in Virginia, North Carolina and South Carolina.
Constellation Energy's deal with Calpine faced increased regulatory scrutiny, with the power company agreeing to divest three natural-gas-fired power plants in Pennsylvania and Texas. As part of the agreement, Calpine will also divest four of its generating assets in the Mid-Atlantic region.
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U.S. power prices have risen by about 40% over the past five years, according to the U.S. Energy Information Administration, with double-digit increases over the past year in data-center hotspots Virginia, Maryland, and Pennsylvania.
The utility is offering $2.25 billion in bill credits to Dominion's customers in Virginia, North Carolina and South Carolina, spread over two years post-close.
Upon completion, Ketchum will serve as CEO of the combined company, which will continue to operate as NextEra Energy.
