NextEra builds 2.5 GW of wind and solar in 2016

The Florida power company’s results call indicate very rapid activity over the last year, and expects a similar rate for future development, along with dividend growth.

January 30, 2017 Christian Roselund

A NextEra solar project in Oregon.

Image: NextEra

NextEra Energy has released results for the fourth quarter and full year 2016, which indicate that its power generation subsidiary may have become the largest wind and solar developer in the United States.

NextEra Energy Resources built a total of around 2.5 GW of wind and solar over the course of the year. And while the company did not disaggregate the two resources, solar successes during the year included putting online 485 MW in two California mega-projects, a 250 MW-AC project in Nevada and the largest solar projects in New Mexico and Alabama.

All of these projects were commissioned during the fourth quarter, which by all preliminary accounts is estimated to be a record-breaker for utility-scale solar in the United States.

Eventually many if not all of these projects are destined for NextEra’s yieldco, NextEra Partners (NYSE: NEP), which acquired more than 700 MW of NextEra projects during the year to bring it to around 2.8 GW of renewables, which add to its gas pipeline holdings.

NEP also had a strong quarter, with revenue growing 20% to $176 million, a 33% operating margin and a net income of $50 million. Of particular interest to investors, the company reported Q4 cash available for distribution (CAFD) of $122 million, which fell to $68 million after debt service payments, and announced a quarterly dividend of $0.3525.

And while dividends have grown to the upper end of estimates, NEP notes that much of the available distribution is still going back to NextEra. Incentive distribution rights (IDRs) rose by $34 million last year, and there is concern that these could be taking up too much of NEP’s cash flows, which could put pressure on the company to borrow more money at a time when capital markets are constrained.

During the quarterly earnings call NextEra announced that it had reached a deal with NEP under which only 25% of IDR fees for amounts higher than the current annualized dividend will go to the parent company, and the rest to NextEra, which will also make more money available for dividends.

NextEra appears significantly optimistic about the future of both solar and wind. And while the company does not expect a repeal of the solar investment tax credit (ITC), CEO Jim Robo also says that such incentives will be needed less in the future.

“As the PTC and ITC phase-down, we believe that the economic impact on customer pricing can be absorbed by continued technology and efficiency advancements,” said NextEra CEO Jim Robo on the company’s quarterly call.

“So even if I am wrong about continued federal incentives for renewables, as we near the end of this decade I would expect that in 2020 wind without PTCs will be a 2 to 3 cent per kilowatt-hour product and solar without an ITC will be in the range of 3 to 4 cents per kilowatt-hour.”

During the next few years NextEra expects development at about the same pace as 2016. While the company’s development arm added 3.5 GW of renewable energy projects to its backlog over the course of 2016, it expects to deliver 400 MW to 1.3 GW of solar in 2017 and 2018, along with 2.4-3.8 GW of wind.

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