I’m Zack Fuss and today we’re breaking down NextEra Energy. NextEra is America’s most valuable energy firm and consists primarily of two businesses; a high-quality regulated utility and a renewables business that is the world’s largest generator of wind and solar energy. To help break down the business, I’m joined by Mark Tomasovic, an investor at Energize VC. In our conversation, we discuss the structure of the energy market, what’s changed in the renewables space over the past twenty years, and how NextEra takes advantage of its cost of capital advantage. Please enjoy this breakdown of NextEra Energy.   For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.   -----   Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss   Show Notes [00:03:16] - [First question] - Mark’s background and how he thinks about the energy markets  [00:03:46] - A broad overview of the electricity market and how it’s structured [00:05:22] - The value chain and production line of energy from facility to customer [00:06:59] - What informs how much an energy company is allowed to earn [00:09:16] - Unregulated versus regulated markets and the risks and benefits of both [00:11:29] - How the retail electric market looks today and alternative production methods [00:12:40] - NextEra’s business fundamentals and their current scope and scale [00:14:45] - The two business arms of NextEra [00:16:00] - Inputs and costs of the low cost regulated utility side of NextEra [00:18:33] - NEER being the world’s largest generator of wind and solar [00:19:43] - How they’re able to get contracts and how they work  [00:20:03] - Comparison of revenue generated between their different branches [00:21:26] - How the regulated and unregulated arms work together for NextEra vs its competitors [00:22:30] - What their most important benchmark is and thoughts on gross margin and profits  [00:24:33] - Natural cost of capital advantage given the growing focus on ESG  [00:25:33] - How COVID impacted the energy space, specifically in electricity  [00:28:20] - Conventional energy production becoming more expensive in the near future  [00:30:10] - How reliant NextEra is on government subsidies   [00:31:20] - Where they spend all their revenue, the price of projects, and ROI [00:33:01] - How they evaluate projects  [00:34:19] - Structural differences in renewable energy business models today [00:36:18] - What could happen that could negatively impact NextEra’s growth [00:38:22] - Considering risks when underwriting turbines  [00:39:15] - Is nuclear power a potential tail risk? [00:40:05] - Being forward-leaning when adopting digital technology and innovation [00:41:23] - Lessons that can be learned from NextEra for builders and investors

I’m Zack Fuss, and today we’re breaking down AutoZone, the leading retailer and distributor of auto parts in the Americas. From the outside, AutoZone might look like a dull business in a mature industry, but once you dive into the details, you quickly realize it’s a hidden gem that echoes the best of Walmart and Costco, earns some of the highest returns on capital in retail, and has a long history of outsized shareholder returns.   To help break down the business, I’m joined by Freddie Lait, founder and CIO at London-based Latitude Investment Management. Please enjoy this fascinating breakdown of AutoZone.   For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.   -----   Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss   Show Notes [00:02:58] - [First question] - The general state of the auto part industry and its key players [00:06:14] - Similar and differing characteristics of AutoZone, O'Reilly, and Advanced Autoparts   [00:08:04] - The history of AutoZone and how they got to where they are today [00:12:11] - ESLs involvement with AutoZone and notable moments from that partnership [00:13:29] - Unit economics, sales per store, how much a store costs, and general features [00:16:32] - Other retail businesses that rank close to the unit economics of AutoZone [00:17:43] - How a customer interacts with their business [00:19:40] - What is being sold that allows them to earn such high gross profits [00:20:57] - Ways AutoZone has kept their competitors at bay [00:23:05] - Additional opportunities in their systems that offer competitive advantages [00:24:18] - Low inventory turnover working in specialty retail merchandise [00:26:14] - How they manage their stock locally and regionally to ensure a reliable supply [00:27:36] - Supplier finance mechanics overview for retailers [00:29:12] - Some of the private label programs they’ve had success with [00:31:40] - Failure oriented parts and what products inhabit this category [00:32:58] - How management and integrated culture find opportunities in DIFM [00:36:08] - Moving up and down the call list and gaining favor as a retailer [00:38:45] - The threat electric vehicles might pose to Autozone [00:37:48] - Whether or not an eCommerce giant may penetrate and disrupt this sector [00:44:58] - Paths AutoZone has taken to return capital to its shareholders [00:49:21] - COVID’s impacts and detriments to the business [00:53:04] - What we can learn as builders and investors from studying AutoZone’s story