NextEra prepared to stop new wind development without extended PTC

Investors could see share buyback in 2014 instead

Bill Opalka | Apr 25, 2012

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Failure of Congress to extend the production tax credit (PTC) this year could mean the leading wind energy company in the U.S. would return cash to shareholders in the form of a stock buyback instead of investing in more projects.

NextEra Energy, Inc. (NYSE: NEE) CFO Moray Dewhurst discussed that possibility in an April 25 conference call with investment analysts that reviewed the company’s first-quarter results.

With more than 8,700 MW of existing wind projects in its portfolio and the expectation to complete an additional 1,300 MW this year, unit NextEra Energy Resources owns and operates the largest wind fleet in the U.S.

NextEra has a project backlog that it would complete, but, "we have no expectations for (new) U.S. wind beyond 2012,” Dewhurst said.

In financial guidance for 2014, potential income from new wind projects was not included, but a share repurchase was broached. “I want to emphasize that is by no means a commitment, but whether or not we are in a position to find make good, attractive investments. If we are not, we would be in a position to return cash to shareholders,” he added.

“While we continue to be optimistic that federal policy support for renewable development will be maintained, at least to some degree, beyond the expiration of the production tax credit at the end of the year, we are not counting on that. We hope to be able to add additional projects to our backlog in due course, but if we do not, we would expect to be in a position to return some cash to investors in 2014,” Dewhurst said.

“New wind investments added to the portfolio since the first quarter of last year contributed 7 cents, reflecting both higher convertible investment tax credit, or CITC, elections as well as on-going operating earnings. We continue to expect to elect CITCs on roughly 450 MW of new projects that are expected to be placed into service in 2012,” according to NextEra’s earning statement.

CITC is more commonly known as “cash grants” that projects are eligible to receive if they met certain construction requirements during 2011, as the economic stimulus-created program expired on Dec. 31.

Overall, wind income was flat, as existing wind assets decreased 7 cents per share in adjusted EPS relative to last year’s comparable quarter due to a combination of favorable state tax credits recorded last year as well as lower federal production tax credits, lower energy prices, and higher operating expenses.

NextEra said it brought 177 MW of wind capacity and completed the acquisition of 40 MW of solar capacity in Canada. In addition to its new wind capacity in the U.S., it has 600 MW of contracted wind capacity in Canada in 2012 through 2015, and roughly 900 MW of contracted solar capacity between 2012 and 2016.

Overall, NextEra Energy, which includes its regulated Florida Power & Light unit, reported 2012 first quarter net income on a GAAP basis of $461 million, or $1.11 per share, compared with $268 million, or $0.64 per share, in the first quarter of 2011.

For 2012, NextEra Energy currently expects full-year adjusted earnings per share to be in the range of $4.35 to $4.65. It also continues to expect that adjusted earnings per share in 2014 will be in the range of $5.05 to $5.65.

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Comments

Not so quick with the criticisms of wind!

While wind is NEAR grid parity in some locations, it's still got a way to go before it can compete head to head with fossil fuels (which are heavily subsidized themselves).

When you factor in the external costs of fossil fuels that tally up to about 120,000,000,000 dollars per year...yeah, that’s 120 BILLION dollars per year… wind smacks the hell out of fossil fuels.  That's according to the National Academy of Science (http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=12794).  So, if you like, why don't we drop the subsidies for all forms of energy and include their external costs and then see what form of energy is actually the most expensive?

Wind is intermittent and it does tend to blow when loads at their lowest.  That much of the comments so far were true, however, the commenter neglected to mention that intermittency can be compensated for through a number of means including better and updated grid management (other countries such as Denmark manage with a lot more wind in their utility mix), by expanding the grid and improving the ability to connect between areas of the grid (which needs to be done anyway!), by various utility scale storage mediums that are coming on line in the near future and in the meantime by the utilization of natural gas "peaker plants".

Expanding the grid would also serve to expand the time period where wind is it's most effective by allowing electrons to generated in the east to be utilized in the west while loads are peaking.  Yes, there will be transmission losses, but since the "fuel" is free, these losses will be inconsequential. 

@Mr. Wooldridge; the era of "cheap" energy is coming to an end.  While, as I pointed out above, energy has never really been "cheap",  because huge external costs have been paid by people that includes increased cancer rates, mercury and even uranium poisoning, increased pre-mature mortality, not to mention increased military expenditures (though this has mostly been to secure our oil supply which isn't a major factor in electricity generation).

But to your point about sabotaging the US economy, you couldn't be further from the truth. By switching to renewable energy now, we are going to save a lot of economic pain later.  Even natural gas, which many believe to be our knight in shining armor riding to our emotional rescue, is going to go right back up in costs as soon as portions of the transportation fleet are switched to natural gas, any significant base load is generated by it and when we start to export it to a energy hungry world. 

While I'm speaking of natural gas, please consider why the price of natural gas has dropped so much.  It's because of the advent of "fracking" which is very much open to debate as to if it's safe enough to be allowed.  Even without considering the safety concerns (water contamination and increased seismic activity near fracking operations being two of the biggies), fracking has some major issues such as a low EROEI (energy return on energy invested) factor AND the process itself takes millions of gallons of water per well (not to mention 10's of thousands of gallons of nasty chemicals).  So, in all, I wouldn't count on it long term!

Didn't mean to write a book, but I've studied wind energy for over two years now and even though I'm actually in the solar business, I've grown tired of seeing these not very well thought out arguments against wind energy.  It's time to accept reality as it is, not as you might want it to be and to accept that wind energy is going to be part of the mix as we wean ourselves off of fossil fuels. 

If you care to debate the issue, please feel free to bring up any arguments against wind that you would like and as long as you site objective, and honest sources, I will be happen to address any of your concerns.

 

Bob "The Clean Energy Guy" Mitchell

Agreed

Wind Pitch:

Mature, proven technology. At grid parity.  Renewable, affordable higher capacity values.  Employs people.  Yea wind.

 

Reality

No subsidies=unaffordable.  Intermittent, higher O&M, less generation than modeled, provides max power when load is the smallest.

So, does this mean wind power does not have grid parity?

AWEA and various other wind proponents have been repeatedly saying that wind is an economical power generation technology while simultaneously calling loudly for extension of the PTCs to prevent wind development from collapsing.  If wind power has reached grid parity, which I take to mean equal cost per MWh, then why do they need to siphon money from taxpayers to support the technology.

NextEra's plan to stop or development beyond 2012 puts the lie to claims of wind's economics.  The only other way they can be economical is to make the cost of electricity from nuclear, coal, and gas generation higher which the EPA and other federal regulatory agencies are working diligently to do no matter the cost to the American economy.  In fact, when I look at the actions of many of these federal agencies, I am becoming more and more convinced the present administration is intent on deliberately destroying the economy of the United States.

Mark Wooldridge