Morningstar | NextEra Energy Poised for Significant Renewable and Regulated Growth
NextEra Energy investors must be comfortable with Florida regulation and the outlook for U.S. renewable energy growth.The Florida regulatory environment is especially constructive. FP&L serves a historically fast-growing territory encompassing the coastal areas of Florida. FP&L's recent rate agreement calls for $811 million of base-rate adjustments from 2017-20 and an industry-high midpoint 10.6% allowed return on equity, supporting our long-term positive outlook for the constructive Florida regulatory environment. NextEra Energy recently increased its Florida exposure by acquiring Southern Company's Florida operations for $6.475 billion.Key to NextEra's capital growth plans are solar additions in Florida, where we believe there is a long runway of growth opportunities. FP&L's recently announced its 30-by-30 plan, which aims to install 30 million solar panels by 2030. Management notes it has identified numerous potential sites for this investment. If completed, the program would increase solar energy in FPL's service territory to 20%, up from roughly 1% today. The competitive energy business, NextEra Energy Resources, contributes the remaining consolidated earnings. NextEra is the largest wind power producer in the United States, proving to be a best-in-class renewable energy operator and developer. Management enters into long-term PPAs, significantly mitigating cash flow volatility than if these assets were exposed to volatile commodity prices.Management's continued execution on its Energy Resources development program leaves us confident that NextEra will deliver at the high end of its 10.1 gigawatt to 16.5 GW planned development expectations from 2017 to 2020. During 2018, the subsidiary added roughly 6,500 MW of renewable projects to its backlog. Favorable IRS start-of-construction guidance on the solar investment tax credit positions NextEra well for solar development beyond 2020. NextEra's early entry into battery storage will further enhance its competitive positioning in the market.NextEra Energy is a holding company, engaged in electric power and energy infrastructure. The company has two principal businesses, Florida Power & Light Company (FPL) and NextEra Energy Resources, LLC (NEER). FPL is a rate-regulated electric utility engaged primarily in the generation, transmission, distribution and sale of electric energy in Florida. FPL provides service to its electric customers through a transmission and distribution system that links its generation facilities to its customers. NEER, through its subsidiaries, owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets primarily in the United States and Canada.
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