Disruptor Alert: These 2 Companies Are Changing the Energy Sector

The energy sector is broad and diverse, and changing faster than ever. Some companies, like ExxonMobil, are focusing their efforts on core competencies. Others are taking a different approach, reaching well beyond their historical roots to expand into new areas. Two stocks you should keep a close eye on today are NextEra Energy, Inc. (NYSE: NEE) and Total S.A. (NYSE: TOT).

1. Two companies in one

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NextEra Energy is a U.S. utility company. However, under that veneer are two very different entities. The first is a regulated utility, Florida Power & Light, that is among the largest in the nation. The second, with the rather nondescript name NextEra Energy Resources, is one of the largest owners of solar and wind power in the world. The numbers can vary greatly from year to year, but in 2016 and 2017 NextEra Energy Resources contributed around 40% and 55% of the parent company's earnings, respectively. To put it simply, renewable power is not a small business.

And NextEra is keenly focused on growing its renewable footprint. Between 2017 and 2020, the company plans to spend as much as $44 billion on capital projects. Of that total, between $17.5 billion and $19 billion is earmarked for its regulated assets. That means that $25 billion or more is going to go toward expanding NextEra Energy Resources. Renewable power is not a fad for NextEra, and the company is very serious about growing this business so that it plays a key role in the shift to clean power that is taking place today.

While NextEra is not forgetting about its regulated assets -- in fact, it just expanded its reach in Florida by acquiring a utility from competitor Southern Company -- the growth plans on the renewable power side are notable. The company currently has around 20 gigawatts of renewable capacity, but has a pipeline of projects with a capacity of 22 gigawatts. It wants to expand its project pipeline to 40 gigawatts by 2020.

So as you look at the energy space and note the shift toward renewable power, keep NextEra in mind -- it is helping to lead the charge toward renewables. That said, NextEra isn't exactly cheap today, but its spending plans (on both sides of the business) are expected to push earnings higher by 6% to 8% a year through 2020, with dividends expanding as much as 14% a year, as the utility lets its payout ratio inch higher. For growth-minded investors, it's worth a close look.

2. Cleaning up its act

Another company to watch in the energy space is France's Total, an integrated energy giant. To be clear, Total generates almost all of its revenue and earnings from carbon-based energy sources. That includes everything from drilling for oil and natural gas to processing them to selling the end products. This is not going to change anytime soon, partly because it is a very profitable business when oil and gas prices are high.

But, and this is a big but, there's something going on that investors need to consider. While peers like Exxon are doubling down on oil and gas drilling, Total has started to shift gears. It's beginning to look at energy with a broader lens, and recently purchased European utility Direct Energie for roughly $1.6 billion.

This move isn't taking the company too far afield, as Direct Energie's main markets are France and Belgium. And compared to the company's capital budget for 2018 of $14 billion, the investment in Direct Energie is hardly make-or-break. So it's not like Total is trying to switch from oil to electricity overnight. That, however, is part of the allure. The global transition from oil and natural gas is likely to be a long one and Total is trying to use the profits from the cash cow oil business to reach into a new one that appears to have a brighter long-term future. In fact, Direct Energie isn't the first move Total has made: The oil giant bought a controlling stake in SunPower Corporation in 2011 and it's made other purchases outside of oil and gas, as well.

So you need to think of Total as an oil and gas company today, but don't overlook the changes it's making. It's leading the oil industry toward a cleaner future that may no longer include oil. While Total's top and bottom lines will fluctuate along with the price of oil, it's performing well right now as oil prices have risen well off the lows reached during the last downturn. And, just as important, it's generating ample cash to support the shift it's making toward electricity. Like NextEra, it is worth a deep dive today.

Agents of change, in unusual places

When you look at the energy industry you'll find plenty of pure-play renewable power companies. They are, indeed, pushing the industry toward a cleaner future. But don't ignore the old guard thinking that they are sure to be casualties of the industry shift. Not every energy company is willing to accept that fate. NextEra Energy and Total are two agents of industry change that you might miss if you aren't willing to dig just a little deeper.

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Reuben Gregg Brewer owns shares of ExxonMobil. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.