FPL parent NextEra Energy admits solar and wind far better investments than pipelines 2018-01-26

Even Sabal Trail partner NextEra Energy’s earnings call has far more about record solar and wind deployment and earnings (“added $0.67 per share”) than about pipeline declining earnings (“added $0.10 per share”) and misinformation, claiming Sabal Trail is operational and on schedule when it isn’t.

Which is better, NextEra, $0.67 or $0.10 per share? Oh, wait, effectively you answered that: “As the world’s current leader in wind, solar, and storage development….”.

Solar, NextEra Energy
Solar, NextEra Energy

One sentence is NextEra’s only mention of Sabal Trail; nothing about the Sierra Club lawsuit against FERC that less than a week later saw the DC Circuit Court reject all requests for rehearing, meaning as early as next week the court may mandate shutting down Sabal Trail. NextEra company FPL is the sole remaining customer listed in Sabal Trail’s custoner index. Maybe it’s time to bail out and get on with solar power in the Sunshine State.

NextEra Energy, via Motley Fool, 26 January 2018, NEE earnings call for the period ending December 31, 2017,

CEO and Chairman James L. Robo:

Fourth, we’re advancing our renewable product offerings as we prepare for the next phase of renewable development. As a result, our prospects for new renewables growth has never been stronger. As expected, congress did not make any retroactive changes to the PTC or ITC, which were each extended under a five-year phasedown at the end of 2015. With incentives, wind is the cheapest form of energy at 1.2-1.8 cents per kilowatt hour at high wind sites while solar continues to be priced at a discount to other forms of generation at 2.5-3.5 cents per kilowatt hour. Taken together, we continue to be in the best renewables environment in our history as evidenced by our 2017 results.

The ongoing cost declines in renewables are leading to increased economic demand from customers. Wind turbine technology continues to improve through a combination of taller towers and wider rotor diameters. Today, we’re installing 127-meter rotor diameter turbines. By 2021, we expect manufacturers to be selling approximately 150-meter rotor diameter turbines in the US market, further increasing net capacity factors and helping reduce installed wind costs on a $1.00 per kilowatt basis.

Over the past year, we’ve seen an approximate 30% reduction in turbine costs. Through the end of the decade, we expect another 10% decline per year on average. As a result, we continue to expect that, without incentives early in the next decade, wind is going to be a 2.0-2.5 cent per kilowatt hour product.

For solar, we continue to see rapid price declines and efficiency improvements and we’re well positioned to mitigate any impacts of the recently announced tariffs from the ITC 201 proceeding. As we previously discussed, before any tariffs were put in place, we purchased modules for our 2017 and 2018 build. We recently completed an additional order that covers our module needs for 2019 and a significant portion of our 2020 build.

Ultimately, we expect that by 2020, as the tariff steps down, the market will have adjusted to these new dynamics. By early in the next decade, as further cost declines are realized and module efficiencies continue to improve, we expect that without incentives, solar will be a 3.0-4.0 cent per kilowatt hour product, below the variable cost required to operate an existing coal or nuclear generating facility of 3.5-5.0 cents per kilowatt hour.

As the world’s current leader in wind, solar, and storage development, we are uniquely positioned for the next phase renewables deployment that pairs low cost wind and solar energy with a low cost battery storage solution to provide a product that can be dispatched with enough certainty to meet customer needs for a firm generation resource. We believe no other company has our expertise in all three products — wind, solar, and battery storage — to leverage the combined technologies at the low cost we can achieve. In fact, we recently submitted a bid at a very competitive price for a combined wind, solar, and battery storage product, that is able to provide an around the clock, nearly firm, shaped product specifically designed to meet the customers’ needs.

By leveraging Energy Resources’ competitive advantages, including our development skills, purchasing power, best in class construction expertise, resource assessment capabilities, strong access to and cost of capital advantages, and the ability to combine wind, solar, and battery storage solutions together, we remain well positioned to capture a meaningful and growing share of the renewables market going forward.

But what about natural gas? Oh, they’re selling that off:

Finally, in addition to increasing and extending our financial expectations, and having what I believe to be the best opportunity set in our industry, we continue to maintain one of the strongest balance sheets in our sector. Through the sale of noncore assets over the last two years, including fibernet and our Forney, Lamar, and Marcus Hook gas generation assets, we’ve recycled almost $4 billion of capital while advancing our strategy to become more long-term contracted and rate regulated.

And more, from CFO and Exec. VP Finance John Ketchum:

All of our major capital initiatives, including one of the largest solar expansions ever in the eastern US, remain on track. In 2017, FPL continued executing on its outstanding customer value proposition, delivering its best ever service relatability performance while maintaining a typical customer bill that is more than 25% below the national average and the lowest among the top ten investor owned utilities by market cap.

As Jim mentioned earlier, 2017 was the best period for new wind and solar origination in our history. The Energy Resources team added more than 2,700 megawatts of new renewables projects to our backlog, including the largest combined solar and storage facility in the United States announced to date, and roughly 700 megawatts of additional wind repowering to our backlog.

Over the course of the year, we commissioned roughly 2,150 megawatts of wind and solar projects in the US, including the first approximately 1,600 megawatts of our repowering program. All in all, 2017 was a terrific year of execution at FPL and Energy Resources….

Each of our ongoing capital deployment initiatives continues to progress well. We were pleased to completed construction of the first four 74.5 megawatt solar energy centers governed by the solar based rate adjustment, or SoBRA, mechanism of the rate case settlement agreement, on schedule and under budget. An additional four solar site totaling nearly 300 megawatts are currently on track to being providing cost effective energy to FPL customers later this quarter.

We also continue to advance the development of the additional 1,600 megawatts of solar projects that are planned for beyond 2018 and have secured potential sites that could support more than five gigawatts for FPL’s ongoing solar expansion.

But what about natural gas?

This month, we completed the early retirement of the St. John’s River Power Park, an approximately 1,300 megawatt coal fire plant co owned with JEA. Construction on the approximately 1,750-megawatt Okeechobee Clean Energy Center remains on schedule and on budget. Additionally, progress on the Dania Beach Clean Energy Center continues to advance through the regulatory approval process.

None of that requires Sabal Trail, which isn’t shipping any gas anyway.

And back to solar and wind power:

In total, new renewables investments added $0.67 per share. Contributions from new natural gas pipeline investments added $0.10 per share.

But what about natural gas?

Partially offsetting new investment growth was a decline of $0.11 per share, and contributions from our existing generation assets, the majority of which is attributable to sales of Lamar, Forney, and Marcus Hook natural gas fire generating assets in 2016.

Contributions from our gas infrastructure business declined by $0.19 per share, $0.16 of which is attributable to the absence of the earn out adjustment that was recognized for the Texas pipelines in 2016. All of the other effects had a negative impact of $0.19 per share, mostly driven by a year-over-year increase in interest expense. Additional details are shown on the accompanying slide.

Nevermind failing pipelines, up with the sun!

In 2017, Energy Resources advanced its position as the leading developer and operator of wind, solar, and battery storage projects. Since the last call, we have signed contracts for 736 megawatts of new renewables projects, including 512 megawatts of wind and 224 megawatts of solar. With today’s announced contracts, our 2017 and 2018 wind backlog is now nearly 2,000 megawatts. With visibility to several hundred megawatts of additional projects for 2018, we continue to believe that we can achieve the range of expectations that we have previously provided for 2017 and 2018.

For 2019 and 2020, we are already just below the range of expectations that we have provided for solar. And, for US wind, our current backlog is already almost half of the low end of our expected range. Additionally, our total current backlog of almost 7,000 megawatts, including repowering for 2017-2020, is the largest for a four-year period in Energy Resource’s history. The accompanying slide provides additional detail on where our renewables development program now stands.

And look what finally gets mentioned, and mis-spelled:

Beyond renewables, 2017 was an excellent year for Energy Resources’ natural gas pipeline activities. During the year, both the Sable Trail transmission and Florida Southeast connection natural gas pipeline projects successfully achieved commercial operation on budget and on schedule. The Mountain Valley pipeline also made excellent progress over the year, receiving its first limited notice to proceed from FERC earlier this week. We remain on track to achieve a year-end 2018 commercial operations date.

Wait, there’s more about wind:

Wind resource returned to normal after a week third quarter, as overall wind resource was 102% of the long-term average during the fourth quarter. The appendix of today’s presentation includes a slide with additional details regarding 2017 wind resource for the NEP portfolio. For full-year 2017, adjusted EBITDA and CAFD were $743 million and $246 million, up 16% and 11% respectively, driven primarily by growth of the underlying portfolio. Additional details are shown on the accompanying slide.

So one sentence about Sabal Trail, a few paragraphs about pipelines, and many about how great solar and wind are and how NextEra is a “world leader” and positioned to win in renewable energy. Cut your losses and eject some more stranded investments, NextEra: ditch Sabal Trail.


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