One of the things that NextEra Energy is most proud of is they are producing above average growth, while still maintaining one of the strongest balance sheets and credit positions in the utility industry. All ratings agencies rate NextEra bonds as investment grade. S&P and Fitch rate NextEra debt at upper medium grade, while Moody's rates NextEra debt at lower medium grade. Corporate Credit ratings are explained here.
NextEra Energy's annualized Debt-to-EBITDA for Q4 2021 was 4.78. This is considered high but not excessively high for a utility. Debt/EBITDA ratio can be used to compare the liquidity position of one company to the liquidity position of another company within the same industry. An example of a utility that is considered to have good leverage is Alliant Energy (NYSE: LNT) with a Debt/EBITDA ratio of 3.92. Examples of excessively leveraged utilities are PG&E (NYSE: PCG) and Edison International (NYSE: EIX), which have a Debt-to-EBITDA level of 8.95 and 13.33, respectively.
NextEra Energy's Q4 2021 Debt to Equity was 1.47. Generally, debt to equity levels between 1.0 and 1.5 are considered good levels for a utility. NextEra Energy's interest coverage for Q4 2021 was 2.33. Generally, an interest coverage ratio of at least two is considered the minimum acceptable amount for a company. All of these numbers indicate that NextEra carries a high debt level, however, it is not unusual for utilities to be heavily leveraged as infrastructure requirements can make large, periodic capital expenditures necessary.
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