NextEra CEO Addresses Concerns About Renewable Tax Incentives

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Researched by Industrial Info Resources (Sugar Land, Texas)--NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida) on Friday reported fourth-quarter 2016 net income of $966 million, compared to $507 million in fourth-quarter 2015. In a conference call regarding the earnings, executives discussed the company's capital spending for both the recently passed year and the future. Chief Executive Officer Jim Robo also touched on changes that the new administration in Washington may have on future renewable energy tax incentives. Industrial Info is tracking $15.6 billion of projects involving NextEra.

Discussing the company's major subsidiary, Florida Power & Light (FPL) (Juno Beach), Chief Financial Officer John Ketchum said, "During (2016), the Port Everglades Next Generation Clean Energy Center was completed on budget and two months ahead of schedule. Roughly 1,600 megawatts (MW) of peaking capacity was upgraded with more efficient advanced combustion turbines." Construction of the project involved demolishing the existing 1,200-MW fuel oil-fired plant and replacing it with a new natural gas-fired, combined-cycle facility. The project kicked off in late 2013 and was completed early last year.

Ketchum also noted that FPL's solar capacity roughly tripled last year with the addition of about 225 MW of capacity. For more information on FPL's solar developments, see January 9, 2017, article - Florida Power & Light Swaps Out Coal-Fired Plant for Three New Solar Facilities.

"Since the last [quarterly] call, we signed additional contracts for roughly 640 megawatts of new projects, including roughly 540 MW for wind for 2017 and 2018 delivery, and 100 MW of solar for post-2018 delivery," said Ketchum. "We also continue to aggressively pursue repowering opportunities on the balance of our portfolio to add to the 1,600 MW of repowering that we previously announced, and continue to see the opportunity being between $2.0 billion to $2.5 billion through 2020."

In the call, Robo spoke of investor concern about the new Trump administration potentially rolling back tax credits for wind and solar development. The U.S. wind production tax credit (PTC) and solar investment tax credit (ITC) provide tax incentives for development of renewable energy over the next four to five years, as the credits are gradually stepped down. "Since the November election, our stock performance has been adversely affected by investor concerns regarding the outlook for renewable tax incentives, and its impact on new renewables development in particular, and potential tax reform," said Robo, who noted that the day after the election, NextEra's stock performance relative to the Standard & Poor's 500 was the worst in eight years.

"With regard to concerns over renewable tax incentives, I believe it is unlikely that either the PTC or ITC, which were extended under a five-year phase-down by a Republican Congress at the end of 2015, will be retroactively changed," said Robo. "A major driver behind bipartisan support for the five-year phase-down is jobs, with the tremendous growth in renewables responsible for rapid employment gains in the wind and solar industries. Both wind and solar are largely made in America, with more than 80% of typical wind projects and 65% of typical solar projects made in the USA."

"Given how rare it is for our government to retroactively change laws, particularly where parties have relied on them to make long-term investment decisions, I believe our safe-harbored projects are well positioned to receive the 100% production tax credit through 2020."

Among the active NextEra projects being tracked by Industrial Info are two natural gas-fired projects in Florida. The $1.2 billion Okeechobee Clean Energy Center in Okeechobee, Florida, will kick off construction this quarter. Zachry Construction Corporation (San Antonio, Texas) is acting as engineering, procurement and construction (EPC) contractor on the project. The 479-MW project is planned for completion in mid-2019.

A $1 billion, natural gas-fired peaking unit addition is under construction in Fort Lauderdale, Florida. The project includes adding five 241-MW General Electric (NYSE:GE) combustion turbine-generators to the existing power plant to provide power at high-demand times. The project began construction in early 2016 and is expected to be completed in the fourth quarter of this year. Overland Contracting Incorporated (Garner, North Carolina) is acting as contractor on the project.

On the renewables side, one of the largest projects NextEra has planned is a 478-MW windfarm in Hale County, Texas. The $950 million project is in the late engineering stage and is planned to kick off during the first quarter of this year. The project will include the construction of 239 2-MW wind turbine-generators and will likely include expansions once the initial project is completed later this year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.