Utility major NextEra Energy Inc.’s (NEE) business arm Florida Power & Light Company ("FPL") issued a request for proposal (“RFP”) for the construction of a natural gas pipeline to supply more power to its Florida customers.
The proposed pipeline project is anticipated to deliver 400,000 million British thermal units per day (MMBtu/d) of natural gas, which roughly translates into 400 million cubic feet per day (MMcf/d), to FPL at the start of 2017. The capacity supplied could further increase in the future.
This is the third key pipeline initiative undertaken by NextEra Energy with two other natural gas pipelines already operational and running at full capacity in the Florida peninsula. The Southeast Pipeline will be built to meet the growing demand for electricity for which the state requires new natural gas transportation facilities by 2017.
These projects will lower NextEra Energy’s dependence on crude oil source especially from the offshore Gulf of Mexico. This would cushion its business to a certain extent from the impacts of tropical weather variations that leads to interruptions in service.
Furthermore, the pipeline will expand the state’s accessibility to onshore prospects. It will not only ensure reliability but also deliver higher gas volumes.
Next to Texas, Florida leads the table in terms of consumption of electricity generated from natural gas. Natural gas occupies 60% share in the total power provided to the customers. With the existing shortage of transporting and storage facilities in Florida, this pipeline will be a significant infrastructural gain for the company.
NextEra Energy is furthering its natural gas business goals and plans to upgrade three of its previous oil and gas-fired facility into a high-efficiency gas-based complex which will be nearly 33% more productive and 90% cleaner.
Given the current popularity of natural gas as a source for utility-scale generation in the U.S, we believe this pipeline project will complement the company’s future growth.
However, volatility in power prices and pending rate case outcome for FPL’s new rates could hurt NextEra’s near-term opportunities. The company presently retains a short-term Zacks #3 Rank (Hold rating).
Another Zacks #3 Ranked utility provider, FirstEnergy Corporation (FE) is also stepping up its natural gas business. Recently, FirstEnergy plans to build a high-tech and eco-friendly transmission control facility in its Akron operational base in Ohio.
For NextEra Energy, the Zacks Consensus Estimate for the fourth quarter and full year 2012 currently stand at 96 cents per share and $4.50 per share, respectively. For 2012, NextEra Energy reiterated its earnings expectation in the range of $4.35−$4.65 per share.
With a market capitalization of $29.87 billion, the Juno Beach based electric generation, transmission and distribution company has 14,500 total employees.
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