The best performing electricity utility in the USA is also the world’s biggest installer of renewables.
Despite the current Presidential regime’s attempts to defend the coal industry, the U.S. is home to a utility breaking world records for renewable energy development.
NextEra Energy Inc. is a major American electricity generator with 47 GW of capacity and is focused on providing long-term shareholder value through investment in clean energy.
The company likes to highlight that it is the world’s largest generator of renewable energy from the wind and sun.
In its recently released fourth-quarter and full-year financial results NextEra announced it commissioned a record 2.15 GW of renewables in 2017, including 1.6 GW from repowering existing projects. 2.15 GW is probably the highest renewable energy install by any company ever in a single year.
Furthermore, NextEra plans to double this rate of install in the next few years, targeting 3-4 GW per annum of new renewables installs over the 2017-2020 period (10.1-16.5 GW in total). 2.7 GW of new projects and 0.7 GW of repowering projects were added to the company’s development backlog during the year.
NextEra did all this whilst increasing net income and earnings per share compared to the prior year and continuing to maintain a strong balance sheet. NextEra’s share price continues to outperform the market.
NextEra Energy Share Performance (Orange) vs. S&P 500 Index (Purple) Over 5 Years
The company’s chief executive, Jim Robo, is unsurprisingly enthusiastic about the future of renewables. In a conference call covering the fourth-quarter results Robo predicted that it will be cheaper to install new renewables than to continue operating existing coal and nuclear plants by the early 2020s.
NextEra was one of two transition champions featured in IEEFA’s recent ‘Global Utilities in Transition’ report alongside Enel of Italy.
The report which presented case studies of 11 major electricity utilities around the world also presented a number of companies such as AGL of Australia and Engie of France which have now begun a belated transition away from coal.
In addition, a number of transition laggards were highlighted including South Africa’s Eskom which also released financial results recently.
Eskom’s predicament couldn’t be more different to NextEra’s position. Its interim results should have been released well before NextEra’s own update but were much delayed, most likely due to concerns over its going concern status.
Eskom’s situation is indeed dire; its cripplingly expensive and huge new coal-fired power plants are driving up interest expenses and wiping out profit and cash at a time when revenue is down on declining electricity demand. Moody’s this week downgraded Eskom once again, citing its poor liquidity position.
In contrast, NextEra upgraded its earnings forecasts and extended its long-term growth outlook.
Corporate PPAs a significant growth area
NextEra is increasingly signing power purchase agreements (PPAs) with corporates to underpin its renewable energy developments. The latest would see Facebook purchase the electricity produced from NextEra’s 50 MW Casa Mesa wind project; part of 216 MW of renewables that Facebook is seeking to contract via PPAs.
CEO Jim Robo has noted that NextEra is now increasing focus on combining renewables with storage. This follows the astonishingly low bids received for combined renewables and storage projects in Colorado. Some of the bids appeared to be lower than the cost of operating existing coal-fired capacity in that state.
The Casa Mesa project is to be paired with 1 MW of storage to be used to store excess generation beyond the capacity of the transmission line. The wind-plus-storage PPA is reportedly priced at below US$30/MWh.
The increasing cost competitiveness of renewables drove a record volume of corporate PPAs in 2017 according to Bloomberg New Energy Finance. Corporations signed up for the offtake of 5.4 GW of renewable energy during the year, surpassing the previous record set in 2015.
Most of this activity was centred on the U.S. which accounted for 2.8 GW of the total. The trend is continuing in 2018 with Budweiser announcing that all U.S. beer brewing is to be run on 100% renewable energy. Meanwhile, Australia’s high wholesale electricity prices helped drive corporate PPAs here.
Global Corporate PPA Volumes
Whether driving renewables growth through corporate PPAs, wholesale sales or within its regulated power utility in Florida, one of the largest in the U.S., NextEra is continuing to demonstrate the future of electricity markets.
Early transition to renewables supports profitable and sustainable electricity generation business models, delivering sustained outperformance for shareholders.
Simon Nicholas is an Energy Finance Analyst at the Institute for Energy Economics and Financial Analysis (@simonjnicholas)