Deindustrialization Long Trend
Since the end of WW2, a very long-term and structural tendency of the US economy has been deindustrialization. This is a term that can cover two distinct phenomena: the reduction of total industrial output of the US economy, or the reduction of manufacturing jobs in the overall economy.
Source: Kyle Chan
While initially, it can be seen as the natural result of a world economy rebuilding from the ashes of the World War, the trend has continued after that. So, even if this is a popular narrative from a political point of view, blaming first Japan in the 1980s and China after that may not provide a solid explanation.
Among more serious contenders to the motor of deindustrialization can be mentioned:
- A willing shift to a service-focused economy, with dirty & dangerous activities, or labor-intensive production of low-cost goods shifted to poorer countries.
- The structural deficit of the US trade balance, a natural phenomenon stemming from the US dollar reserve currency status, also known as the “Triffin Dilemma”.
- Automation and technological improvement lead to less employment in the industrial sector for the same output.
No matter the root cause of this phenomenon, this has had important consequences for the US and the world’s economy. The first one was the appearance of the “Rust Belt”, a formerly industrial region of the USA that turned a lot poorer, and which is today the core of the opioid crisis and of the MAGA movement.
This has also accelerated the trade deficit of the US versus the rest of the world, with the US economy a massive net exporter of services but with an ever-increasing deficit in goods, reaching $1.2T in 2024.
Source: Voronoi
Overall, this trend seems to be coming to an end, or at least becoming the top priority of US policymakers under the Trump administration.
There is no better expression of this dangerous state of affairs than America’s large and persistent trade deficit in goods, which soared to $1.2 trillion in 2024. Emerging from a tenuous geopolitical landscape in the previous four years, the United States cannot approach international economic and industrial policy issues with malaise.
Report to the President on the America First Trade Policy Executive Summary
Tariffs & Reindustrialization
Tariffs Shock
Nowhere is this change in the macroeconomic winds as visible as with the recent massive tariffs imposed by the White House on most of the world. These tariffs have been presented as retaliation to nefarious and intentionally unfair tariffs and non-tariff barriers limiting US exports.
The need for an America First Trade Policy is self-evident. For decades, the United States has shed jobs, innovation, wealth, and security to foreign countries that have used a myriad of unfair, non-reciprocal, and distortive practices to gain advantage over our domestic producers.
Report to the President on the America First Trade Policy Executive Summary
But in practice, it is the trade imbalance itself that is the target. For example, Lesotho, a poor and under-developed African country, landlocked inside South Africa, got slapped with 50% tariffs, the world’s highest tariffs.
The small southern African nation has become the poster child for the African Growth and Opportunity Act (Agoa) – a 25-year-old piece of US legislation guaranteeing duty-free access to American consumers for certain goods from Africa.
The reason is that while it buys very little from the US, in large part due to its limited wealth, it exports textiles and, more importantly, diamonds worth $237M, leading to a proportionally large trade deficit.
The same happened to Madagascar due to its export of natural vanilla. Similarly, US-allies Taiwan and Japan received tariffs of 32% and 24% respectively.
Source: BBC
So it is truly the trade deficits themselves that are targeted, with the most unbalanced trade relations resulting automatically in punitive tariffs, irrespective of the underlying reason, total size of the trade relation, or diplomatic relations with the target country.
The Path To Reindustrialization
This increase in country-based tariffs is one piece of policy to bring back industries to the US, following, for example, the move to relocate TSMC (TSM -2.24%) semiconductor production in the US or 25% tariffs on imported steel, aluminum, and automotive.
(You can also read more about tariffs in our dedicated explainer “What is a Tariff, and How Do They Work?”)
Overall, this determination to rebuild the US industrial base will require a lot more energy to build and then operate these foundries, steel mills, railroads, machine tools, assembly lines, etc. And it will take a lot of electricity generation to at least catch up with China.
Source: Chris Giles
It will happen in parallel to the trend of decarbonizing the electric grid, with currently most of the US industrial output powered by fossil fuels, with only coal finally on its way out.
Source: EIA
Utility companies are well positioned to grow with the increased energy demand, with one very large company in particular, NextEra Energy, whose motto is “Enabling American Energy Dominance”.
NextEra Energy, Inc. (NEE -2.19%)
NextEra Energy
NextEra Activity
NextEra is a massive utility company, having no less than 72 GW of power generation capacity, of which more than half is renewables, as well as some low-carbon nuclear power from seven nuclear power units in Florida, New Hampshire, and Wisconsin.
Source: NextEra
Besides power generation, NextEra is also active in power transmission, engineering & construction, energy trading, and management of the whole supply chain associated with the company.
FPL (Florida Power & Light Company) is the most important of NextEra’s subsidiaries, and the largest utility company in the US, with 6 million customers. NextEra Energy is also the leading North American clean energy company.
Source: NextEra
Overall, the company is very active in Florida, Texas, California, and the Midwest, with a smaller (but usually growing) presence in many other US states.
Source: NextEra
We’re leading the charge in transforming the future of energy by producing more electricity and dedicating more resources to U.S. energy infrastructure than any other company in America.
NextEra By The Numbers
NextEra is an old and established US utility, starting just a century ago in 1925 as the Florida Power & Light Company (FLP). It is currently valued at $237B in enterprise value.
NextEra Energy’s (including FLP) total current power generation fleet is 40GW of wind, solar & storage, 6GW of nuclear, and 27GW of fossil fuel power plants.
NextEra Resource (so excluding FLP) has a total of 37GW of capacity in these renewable capacities; more than half come from wind, followed by solar.
Source: NextEra
40% of this production is currently going to commercial and industrial uses. The position in wind is a well-established one, from the building of the Stateline Wind Energy Center in Umatilla County, Oregon, and Walla Walla County, Washington, at the time the world’s largest wind farm.
So while the company is a leader in green energy and planning to mostly focus on this in the future (see below), it is also currently one of the largest gas fleets for power generation in the USA. Its nuclear fleet is also in the top decile regarding capacity factor, meaning it has extremely low downtimes.
To keep growing, the company is building no less than 330 different renewable energy projects, all associated with an A average credit rating, reducing the associated capital costs.
FPL is a very efficient utility company with very low costs (70% lower than the US average. On average, NextEra customers pay an energy bill 30% below the national average.
Source: NextEra
This higher efficiency has converted into a much greater financial performance of NextEra than its peers, no matter the time frame of reference.
Source: NextEra
Future Power Production
Future Demand
Even before the shock triggered by Trump’s tariffs, NextEra forecasted a growing need for power in the US, up 55% from 2020’s number by 2040, with the expected demand becoming bigger and bigger every year.
In part, this was driven by a growing demand from data centers. Now that heavy industry might also make a comeback, including mining, smelting, metallurgy, and industrial production, this is likely to become even higher.
Source: NextEra
Future Production Growth
NextEra is on an ongoing spending spree to keep up with growing energy demand, especially for decarbonized energy and plans to spend $120B in American energy infrastructure over the next four years.
In 2024, the company added 6GW of renewable and storage capacity and also expanded smart grid technology to 2.7 million customers in Florida. The backlog of future projects also increased by 12GW in 2024.
Historically, NextEra also pursued growth through a series of acquisitions consolidating its position in key markets, notably:
- Gulf Power (460,000 customers in Florida).
- Florida City Gas (110,000 customers and 3,700 miles of pipelines).
- Trans Bay Cable (underwater power transmission supplying 40% of San Francisco consumption).
- Landfill gas-to-electric facilities from Energy Power Partners Fund I LP and North American Sustainable Energy Fund LP for $1.1B.
Meanwhile, the company is also exiting some legacy businesses related to fossil fuel production, like for example the sale for $1.8B of high-pressure natural gas pipeline systems connecting the Eagle Ford basin to key growing Mexico and Gulf Coast to midstream company Kinder Morgan (KMI -0.45%).
Batteries
A key part of NextEra’s growth plans is to rely on renewables, despite their intermittence. This is because the company considers that batteries have reached the tipping point where they are more efficient at handling spikes in electricity consumption than gas peaker plants, at least for most of the cases.
Source: NextEra
Building them is also a lot quicker, with equipment available in less than 12 months, while it takes around 4 years for a gas peaker plant, which would also need a new gas supply and gas line, increasing costs further for gas-based power generation.
In the long run, the company is betting to fully rely on renewables for all new power supply, as they are expected to cost 1/2 to 1/3 of new natural gas, even when considering half of the cost being the associated battery parks.
Source: NextEra
Maybe more controversially, NextEra does not seem to see a future in nuclear SMRs (Small Modular Reactors), assuming the initial cost of the first 2030 prototype for its long-term projection.
NextEra Financials
The continuous growth in power generation, together with acquisitions, has been the driving force of a steady 6-8% growth of earnings per share at least since 2003. The same direction is expected to persist until 2027, and likely beyond that date.
Source: NextEra
Growing earnings, as well as the power of leverage thanks to utilities’ access to low-cost capital, has allowed the company to also grow its dividends regularly.It has grown by 9.1% CAGR between 2003 and 2018, and should still grow around 10% annually until 2027.
This level of dividend growth seems sustainable, as the company has achieved around 11% CAGR on capital employed in the past year.
Conclusion
NextEra is a leading utility company with a solid history of rising earnings and dividends, making it a good match for conservative investors. Like most utility companies, it should be expected to be “boring”, with slow and steady growth more than spectacular and volatile price action for its shares.
For now, it is still tightly linked to Florida, so the economic success of the state will likely directly correlate to the company’s fortunes.
In the medium term, the quick growth of wind and solar generation, together with the growth of battery storage capacity, will speed up the evolution of NextEra into the country’s largest electric company.
This is an enviable position for industrial companies looking to benefit from President Trump’s strategy of refocusing the US economy on heavy industry and manufacturing, which represents a definitive break from more than 40 years of past policies.
In the midst of trade wars, geopolitical tensions, and internal politics, it can be difficult for investors to understand what form such reindustrialization will take. However, what is absolutely certain is that such structural change will require a lot of energy.
Green steel (using hydrogen from green energy) and other technologies to decarbonize industrial processes advance further, as well as the electrification of transport and heating systems are guaranteeing that the demand for electricity in the USA will explode upward.
In that respect, the very aggressive $120B investment planned by NextEra in just 4 years might even be conservative, and the company is likely to keep adapting its plans to the evolution of demand, as it previously did when facing the growing demand from existing and planned AI data centers.