By Katherine Blunt

NextEra Energy Inc.'s pursuit of Duke Energy Corp. could result in a merger of utility giants that could speed the renewable-energy transition throughout the South and Midwest.

NextEra, the nation's largest renewable-energy company, is seeking to expand its regulated utility business. Duke, meanwhile, recently proposed plans to invest heavily in renewables as it works to cut carbon emissions and reshape a power-generation portfolio largely reliant on fossil fuels.

The Wall Street Journal reported Tuesday that Duke had recently rebuffed a takeover approach from NextEra, which was testing the waters on a deal whose value would likely exceed $60 billion. NextEra remains interested in pursuing a deal, people familiar with the matter said, but there is no guarantee NextEra will continue its pursuit or succeed in closing a deal.

Duke declined to comment. NextEra didn't respond to a request for comment. Duke's shares rose 7.5% Wednesday while NextEra shares closed down 2%.

At an investor conference Wednesday, NextEra Chief Executive James Robo declined to directly address reports of a potential merger but said the company has long sought opportunities that suit its utility "playbook," which involves improving management strategies and cutting costs while investing heavily in the grid. He said NextEra isn't inclined to pursue hostile takeovers, given the constraints of the regulatory environment.

"Anything that we do always has to be mutual, because you can't get state regulatory approval without a mutual approach to going and getting all the stakeholders on board," he said.

Analysts said such a deal could allow NextEra to capitalize on Duke's plans to invest $56 billion over the next five years as it works to replace coal- and gas-fired power plants with new solar and wind farms. Duke late last month filed a 15-year plan with regulators in North Carolina and South Carolina that offered several pathways to halving carbon emissions by 2030, including by accelerating coal plant retirements and investing in energy storage and other technologies.

"Duke is a company that's just getting going on the energy transition," said Vertical Research Partners analyst Jonathan Arnold. "If you're NextEra, you're going to present yourself as someone who can help accelerate that transition and do it more cheaply."

If a merger were to occur, it would be the largest ever completed in the utility space. The combined company would have a market value of roughly $200 billion. That's substantially larger than the next two largest U.S. utility companies, Dominion Energy Inc. and Southern Co., valued at roughly $67 billion and $56.7 billion, respectively, and larger than the biggest U.S. oil companies, Exxon Mobil Corp. and Chevron Corp.

NextEra, based in Juno Beach, Fla., is in a position of strength following years of rapid growth as it built out wind and solar farms nationwide without accruing debt. It went from being the 30th largest U.S. power company in 2001 to the largest today, and its shares trade at a premium to other utilities.

Duke, based in Charlotte, N.C., meanwhile lost roughly 14% of its value this year as coronavirus lockdowns sapped commercial power demand. The company also recently pulled the plug on the $8 billion Atlantic Coast Pipeline, a major natural-gas project it was building in partnership with Dominion that faced environmental opposition.

"If NextEra were trading closer to its peers, this would be a different conversation," said Shelby Tucker, managing director at RBC Capital Markets.

Merging the two companies would face steep regulatory and political hurdles. It would require signoff from state regulators in multiple states, as well as federal regulators. Together, Duke and NextEra serve more than 13 million electricity customers in the Carolinas, Florida, Indiana, Ohio, Tennessee and Kentucky, raising questions about whether federal regulators would allow them to consolidate.

"There could be a Federal Trade Commission problem, or at least very strict scrutiny on an antitrust basis," said Raymond James analyst Pavel Molchanov.

The deal could also face political hurdles, particularly in North Carolina, where Duke has deep roots and has voiced support for clean energy goals put forth by Gov. Roy Cooper, a Democrat.

"North Carolina is proud to be the home of Duke Energy," Mr. Cooper said in a press conference Wednesday.

NextEra has been unsuccessful in recent attempts to expand its regulated utility holdings outside of its home base in Florida.

In 2016, Hawaiian regulators blocked its bid to purchase the state's largest utility. The following year, Texas regulators blocked NextEra's $6.8 billion bid to purchase Oncor Electric Delivery Co., a company that operated most of the state's power grid. Sempra Energy ended up buying Oncor.

NextEra's last substantial acquisition occurred in 2018 with its $5.1 billion to purchase Gulf Power, a Florida utility that serves about 500,000 customers in the state's panhandle counties, from Southern. The acquisition fit well with NextEra's electric utility, Florida Power & Light, which serves a large portion of central and southern Florida.

During Wednesday's investor conference, Mr. Robo said NextEra has learned from the challenges it has faced in completing acquisitions and modified its strategy as a result.

"Everything that we ever look at, we come away with a deeper knowledge and a better understanding of where we can deploy our capabilities," he said.

--Russell Gold contributed to this article.