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NextEra Unit Completes 3 Solar Plants, Plans to Add More

Zacks Equity Research

NextEra Energy, Inc.’s NEE affiliate, Florida Power & Light Company (“FPL”) announced the completion of three solar power plants, and unveiled plans to connect another four plants to the grid, and develop urban and community-based solar installations in 2017.

Details of the Announcement

FPL has connected three solar power plants – the FPL Babcock Ranch Solar Energy Center, the FPL Citrus Solar Energy Center and the FPL Manatee Solar Energy Center; each with a capacity of 74.5 megawatts (“MW”) – to the grid on Dec 31, 2016. Further, it plans to begin the construction of four additional 74.5 MW solar energy plants across Florida in the first quarter of 2017. Development of other large-scale solar facilities is also underway and may be disclosed in forthcoming months.

Additionally, FPL is installing several innovative solar systems in local communities. In 2016, it built a 1.4 MW commercial-scale solar array at Florida International University's College of Engineering & Computing, which supplies power to the grid and provides real-time data for students and professors conducting advanced energy research. Further, the 50-kilowatt solar canopy in the Palmetto Estuary Nature Preserve’s parking area generates energy in addition to offering shaded spots to visitors.

FPL intends to reveal further enhancements in its innovative community solar offerings in the upcoming months.

Focus on Clean Energy

FPL has been the forerunner of cost-effective solar expansion in Florida since 2009. Through strategic investments in clean energy, FPL strives to improve the efficiency of its system, reduce fuel consumption, lower emissions and cut long-term costs for customers.

The three completed solar plants were built well within budget and customers will not incur any net costs, thanks to savings from fuel and other generation-related expenses.

FPL's innovative approach to clean, fuel-efficient generation, which includes phasing out fossil fuel-fired plants, has saved its customers over $8 billion in fuel costs and prevented 95 million tons of carbon emissions since 2001.

FPL has already achieved the carbon emissions goal set by the U.S. Environmental Protection Agency's Clean Power Plan for Florida. Moreover, it boasts one of the lowest residential customer bills in the nation.

As of Dec 31, 2016, FPL operated over 335 MW of solar generating capacity.

Price Movement

Shares of NextEra Energy gained 13.1% over the past 12 months, outperforming the Zacks categorized Utility – Electric Power industry gain of 7.9%.

This outperformance can be attributed to NextEra Energy’s strategy of divesting non-core assets to focus on core areas and deploying the divestment proceeds for acquisitions that are in sync with its long-term growth policy and will strengthen its balance sheet. The company has inked agreements to sell its ownership interest in the Marcus Hook Energy Center, PA to a unit of Connecticut-based Starwood Energy Group Global, LLC for a consideration of $760 million and to sell bandwidth infrastructure services FiberNet to Crown Castle International Corp. for $1.5 billion.

Moreover, NextEra Energy, through its affiliates, has filed a proposal with the Public Utility Commission of Texas to acquire a 100% stake in Texas-based Oncor Electric Delivery Company for a consideration of approximately $18.7 billion.

Utility Industry Outlook

Primarily, three factors — historically low interest rates, public policies that promote the use of cleaner sources of energy and innovative drilling technologies — have led many companies in the utility space to venture into new areas of growth.

However, the Federal rate hike in Dec 2016, to some extent, dampened the enthusiasm for traditionally high-yielding utility stocks, as other income-oriented investments, such as bonds, became more attractive in comparison.

The Fed’s hawkish stance on interest rate hikes exposes utilities with high valuations and limited growth prospects to major risk.

As per an Energy Information Administration report, annual U.S. electricity produced from natural gas (34%) surpassed coal-fired generation (30%) in 2016. However, natural gas prices have recently begun to rise, again encouraging electricity generation from coal-fired power plants — this indicates a trend that is likely to continue through 2017. As a result, the share of natural gas in the generation mix in 2017 is expected to fall to 32.3%, while coal rises to 32.5%.

In addition, Donald Trump’s unexpected victory offered a ray of hope to utilities as his campaign had publicly advocated his support for fossil fuels. His policies may call for the rollback of the Clean Power Plan and other decarbonization regulations, which have been hurting utilities for quite some time now.

Zacks Rank & Other Key Picks

NextEra Energy carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the same space include Spark Energy, Inc. SPKE, DTE Energy Company DTE and Exelon Corporation EXC.

Spark Energy's 2016 earnings estimates increased from $2.20 to $2.23 over the last 60 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DTE Energy’s 2016 earnings estimates increased from $5.26 to $5.27 over the last 60 days. DTE Energy carries a Zacks Rank #2.

Exelon’s 2016 earnings estimates increased from $2.66 to $2.68 over the last 60 days. The company carries a Zacks Rank #2 as well.

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