- NextEra Energy achieves strong 2016 results: extends outlook through 2020
- Florida Power & Light Company executes on growth and regulatory initiatives, grows regulatory capital by 8.3 percent and continues delivering outstanding customer value
- NextEra Energy Resources has record year, delivering approximately 2.5GW of new contracted renewables in 2016
NextEra Energy, Inc. today reported 2016 fourth-quarter net income attributable to NextEra Energy on a GAAP basis of $966 million, or $2.06 per share, compared to $507 million, or $1.10 per share, in the fourth quarter of 2015. On an adjusted basis, NextEra Energy's 2016 fourth-quarter earnings were $566 million, or $1.21 per share, compared to $539 million, or $1.17 per share, in the fourth quarter of 2015.
For the full year 2016, NextEra Energy reported net income attributable to NextEra Energy on a GAAP basis of $2.912 billion, or $6.25 per share, compared to $2.752 billion, or $6.06 per share, in 2015. On an adjusted basis, NextEra Energy's full-year 2016 earnings were $2.884 billion, or $6.19 per share, compared to $2.599 billion, or $5.71 per share, in 2015, which represents year-over-year growth in adjusted earnings per share of 8.4 percent.
Adjusted earnings for these periods exclude the mark-to-market effects of non-qualifying hedges, the net effect of other than temporary impairments (OTTI) on certain investments, operating results from the Spain solar project and merger-related expenses. Adjusted earnings for 2016 also exclude the gains on the sale of natural gas generation facilities.
NextEra Energy's management uses adjusted earnings, which is a non-GAAP financial measure, internally for financial planning, analysis of performance, reporting of results to the board of directors and as an input in determining performance-based compensation under the company's employee incentive compensation plans. NextEra Energy also uses earnings expressed in this fashion when communicating its financial results and earnings outlook to analysts and investors. NextEra Energy's management believes that adjusted earnings provide a more meaningful representation of NextEra Energy's fundamental earnings power. A reconciliation of historical adjusted earnings to net income attributable to NextEra Energy, which is the most directly comparable GAAP measure, is included in the attachments to this news release.
"Our performance during 2016 was strong both financially and operationally, highlighted by outstanding execution on our initiatives all across the board," said Jim Robo, chairman and chief executive officer of NextEra Energy. "We grew 2016 adjusted earnings per share by 8.4 percent and delivered total shareholder return of 18.4 percent that not only beat the S&P Utility Index, but also the S&P 500. That continues a trend since 2005 during which we've delivered compounded annual growth in adjusted earnings per share of more than 8 percent. At FPL, we were pleased to reach a fair and balanced outcome related to our base rate case, while continuing to deliver on what we believe is one of the best customer value propositions in the nation. NextEra Energy Resources also had a very successful year, expanding its renewables portfolio through the addition of approximately 2,500MW of new wind and solar projects. This was not only a record year for the business, but we also believe was the most wind and solar megawatts ever added in North America in one year by one company. We are extremely proud of our long-term track record of providing growth and value creation opportunities for our shareholders and are committed to continuing that track record going forward. With this in mind, we are extending our financial expectations out through 2020, based on the overall strength and diversity of our growth prospects."
Florida Power & Light Company
NextEra Energy's principal rate-regulated utility subsidiary, Florida Power & Light Company (FPL), reported fourth-quarter 2016 net income of $371 million, or $0.79 per share, compared to $365 million, or $0.79 per share, for the prior-year quarter. For the full year 2016, net income was $1.7 billion, or $3.71 per share, compared to $1.6 billion, or $3.63 per share, in 2015.
FPL's growth was driven by continued investments in clean, efficient, modernized generation, as well as a stronger and smarter grid, to further improve the already outstanding efficiency and reliability of its system. FPL's capital expenditures were approximately $837 million in the fourth quarter of 2016, bringing full-year capital investments to approximately $3.9 billion. Regulatory capital employed in 2016 grew 8.3 percent, compared to the prior year.
During the fourth quarter of 2016, milder weather had a negative year-over-year impact on usage per customer of approximately 5.1 percent and Hurricane Matthew had a comparable negative impact of 0.8 percent. Excluding these factors, fourth-quarter 2016 retail sales increased 0.4 percent on a weather-normalized basis, which reflects continued customer growth, partially offset by lower underlying usage per customer. During the fourth quarter of 2016, FPL averaged approximately 64,000 more customer accounts on an annualized basis.
For the full year 2016, retail sales reflect negative year-over-year impacts of 2.1 percent from weather and 0.2 percent from Hurricane Matthew. FPL's 2016 retail sales growth on a weather-normalized basis was 1.5 percent, primarily driven by the impact of continued customer growth.
Over the course of 2016, FPL continued to strengthen and deliver a customer value proposition that includes high reliability, award-winning customer service, a clean emissions profile and a typical residential customer bill that is among the lowest in Florida and the nation. In 2016, FPL achieved its best-ever service reliability performance. Additionally, FPL was recognized as having the best comprehensive reliability in the U.S. by PA Consulting Group, Inc., marking the second consecutive year the company has received the national award. FPL also received the top ranking for residential customer satisfaction among large electric providers in the southern U.S., and second-highest in the nation among all large electric providers, according to the J.D. Power 2016 Electric Utility Residential Customer Satisfaction StudySM. In addition, the Edison Electric Institute awarded FPL its "Emergency Recovery" and "Emergency Assistance" awards for the company's outstanding restoration efforts after Hurricanes Hermine and Matthew and for assisting neighbor utility, Jacksonville Electric Authority, in its recovery efforts after Matthew.
In 2016, FPL continued to make solid progress on its major capital projects, including the construction of the Port Everglades Clean Energy Center, which was completed on budget and two months ahead of schedule. The new clean energy center, capable of producing 1,237MW of electricity, was commissioned in April 2016. In addition, FPL roughly tripled its solar capacity during the year, installing more than 1 million solar panels that make up three new universal solar energy centers, which together represent approximately 225MW of generating capacity. The newly completed solar plants - the FPL Babcock Ranch Solar Energy Center, the FPL Citrus Solar Energy Center and the FPL Manatee Solar Energy Center - were all built on time, under budget and cost-effectively. The three new solar energy centers began generating power for FPL customers in late December, consistent with its strategy of making smart investments that generate affordable clean energy for customers and add to the fuel diversity of its fleet.
In December, FPL retired the Cedar Bay Generating Plant, a 250MW coal-fired facility located in Jacksonville, Florida. The plant's closure will save FPL customers more than $70 million and prevent nearly 1 million tons of carbon emissions annually. FPL purchased the plant in 2015 with the intention of phasing it out of service as a part of the company's ongoing strategy of modernizing its system by investing in clean, highly fuel-efficient power generation, while retiring older, less fuel-efficient plants that use coal and oil.
Last fall, the Florida Public Service Commission (PSC) approved FPL's plan to purchase and phase out another coal-fired power plant, the Indiantown Cogeneration facility. The purchase, which was completed earlier this month, is projected to save FPL customers an estimated $129 million and prevent more than 657,000 tons of carbon dioxide emissions annually, further expanding upon FPL's position as the clean energy leader in Florida and among the leading clean energy companies nationwide. The company's innovative approach to clean, fuel-efficient generation has saved FPL customers more than $8 billion in fuel costs and prevented 95 million tons of carbon emissions since 2001.
In November, the Florida PSC unanimously approved a comprehensive four-year base rate settlement agreement that is expected to keep FPL's typical customer bills lower than they were in 2006 through at least the end of 2020. The settlement agreement, which went into effect in January 2017 and positions FPL to continue executing on its strategy of continuously improving its customer value proposition, supports ongoing investments in FPL's infrastructure. These investments include the implementation of innovative technologies that help reduce and shorten outages, generate power more efficiently, improve fuel efficiency and reduce air emissions. One example is the construction of the 1,748MW Okeechobee Clean Energy Center that is expected to achieve commercial operation in 2019. The forward-looking agreement also positions Florida for a significant expansion of solar energy, enabling FPL to adjust base rates to accommodate up to 300MW of new solar capacity annually during the agreement’s four-year term. In 2017, FPL plans to build four new universal solar power plants and install several innovative solar energy systems in local communities, extending its position as the leader in solar generation in Florida.
NextEra Energy Resources
NextEra Energy Resources, the competitive energy business of NextEra Energy, reported a fourth-quarter 2016 contribution to net income attributable to NextEra Energy on a GAAP basis of $360 million, or $0.77 per share, compared to $156 million, or $0.34 per share, in the prior-year quarter. On an adjusted basis, NextEra Energy Resources' earnings for the fourth quarter of 2016 were $191 million, or $0.41 per share, compared to $185 million, or $0.40 per share, for the fourth quarter of 2015. For the full year 2016, NextEra Energy Resources reported net income attributable to NextEra Energy on a GAAP basis of $1.125 billion, or $2.41 per share, compared to $1.092 billion, or $2.41 per share, in 2015. On an adjusted basis, NextEra Energy Resources' earnings for the full year 2016 were $1.090 billion, or $2.33 per share, compared to $926 million, or $2.04 per share, for the full year 2015.
NextEra Energy Resources' contribution to adjusted earnings per share in the fourth quarter of 2016 was roughly flat, compared to the comparable prior-year quarter, primarily reflecting contributions from new investments being offset by lower results from existing generation assets, as well as higher corporate and interest expenses.
For the full year 2016, NextEra Energy Resources' contribution to adjusted earnings per share increased $0.29 year-over-year. Growth was driven by strong benefits from continued new additions to the renewables portfolio, which added $0.47 per share, and positive contributions of $0.16 per share from new natural gas pipeline projects.
Partially offsetting the growth in the business was a decline of $0.12 per share in contributions from existing generation assets, primarily reflecting the ongoing impact of the roll-off of production tax credits. Contributions from upstream gas infrastructure activities declined by $0.16 cents per share, primarily driven by the full-year impact of increased depreciation expense reflecting higher depletion rates. This essentially offset the positive impact of $0.17 per share from the elimination of the Texas Pipelines' contingent earn-out liability. All other effects had a negative impact of $0.23 per share, mostly driven by a year-over-year increase in interest expense, reflecting continued growth in the business, and the effects of share dilution.
In 2016, NextEra Energy Resources had an excellent year for its development and construction programs. Its 2015-2016 renewables development program of approximately 4,000MW marked the most successful two year period for renewables development in the company's history. Last year, NextEra Energy Resources added approximately 2,500MW of new wind and solar projects, which was a record year for the business and what the company believes to be the most wind and solar megawatts ever added in North America in one year by one company. In addition, the team delivered a strong origination performance, adding approximately 3,500MW of new renewables projects, including roughly 1,600MW of repowering opportunities within NextEra Energy Resources' existing U.S. wind portfolio.
The development activities of NextEra Energy Resources' natural gas pipeline projects remain on track. The Sabal Trail Transmission and Florida Southeast Connection pipeline projects commenced full construction activities in 2016, with operations expected to begin in mid-2017. The Mountain Valley Pipeline joint venture continues to progress through the permitting process with the Federal Energy Regulatory Commission, with commercial operations expected to commence by year-end 2018.
Corporate and Other
In the fourth quarter of 2016 on a GAAP basis, Corporate and Other earnings increased $0.53 per share, compared to the comparable prior-year quarter. On an adjusted basis, Corporate and Other earnings for the fourth quarter of 2016 increased $0.03 per share, compared to the prior-year quarter. For the full year 2016, Corporate and Other earnings increased $0.11 per share on a GAAP basis, compared to 2015. On an adjusted basis, full-year 2016 Corporate and Other earnings increased $0.11 per share year-over-year.
During the year, NextEra Energy announced proposed transactions which, if approved, would result in NextEra Energy owning 100 percent of Oncor Electric Delivery Company LLC (Oncor). On July 29, 2016, NextEra Energy announced its proposed acquisition of the approximately 80 percent interest in Oncor, which is indirectly held by Energy Future Holdings Corp. (EFH). On Oct. 31, 2016, NextEra Energy announced the proposed merger of a NextEra Energy affiliate with Texas Transmission Holdings Corporation (TTHC), including TTHC's approximately 20 percent indirect interest in Oncor. The proposed transactions have a combined enterprise value of approximately $18.7 billion, assuming a 100 percent ownership interest in Oncor by NextEra Energy.
Bringing together two of the most experienced and well-respected utility leaders in North America, the proposed combination would provide Oncor with a financially strong, utility-focused owner that shares Oncor's commitment to affordable, reliable service and has demonstrated the ability to serve Texas in an efficient and cost-effective manner. In addition, NextEra Energy's partnership with Oncor would further its long-term and already-significant commitment to the state of Texas.
Together with Oncor, NextEra Energy filed a joint application with the Public Utility Commission of Texas (PUC) on Oct. 31, 2016, seeking approval of the proposed transactions. The proposed combination is subject to approval by the Texas PUC, bankruptcy court confirmation of EFH's plan of reorganization, receipt of a supplemental Private Letter Ruling from the IRS and other specified conditions. NextEra Energy continues to expect the transactions to close in the first half of 2017.
NextEra Energy and NextEra Energy Partners' agreement to modify incentive distribution rights fees
NextEra Energy and NextEra Energy Partners announced a structural modification to the incentive distribution rights fees. Benefiting both NextEra Energy shareholders and NextEra Energy Partners common unitholders, the agreement is expected to reduce the partnership's equity needs and extend NextEra Energy Partners' distribution growth runway.
NextEra Energy expects adjusted earnings per share to be in the range of $6.35 to $6.85 for 2017 and is increasing its previously announced range for 2018 from $6.60 to $7.10 to $6.80 to $7.30.
In addition, based on the strength and diversity of its growth prospects, NextEra Energy is extending its financial expectations by two years, from 2018 to 2020. NextEra Energy expects a compound annual growth rate in adjusted earnings per share to be in a range of 6 to 8 percent through 2020, off a 2016 base.
NextEra Energy's expectations are subject to the usual caveats, including but not limited to normal weather and operating conditions.
NextEra Energy's adjusted earnings expectations exclude the cumulative effect of adopting new accounting standards, the unrealized mark-to-market effect of non-qualifying hedges, as well as net OTTI losses on securities held in NextEra Energy Resources' nuclear decommissioning funds, none of which can be determined at this time. Adjusted earnings expectations also exclude the operating results from the Spain solar project, merger-related expenses and the gain on the sale of FPL FiberNet in 2017. In addition, adjusted earnings expectations assume, among other things: normal weather and operating conditions; continued recovery of the national and the Florida economy; supportive commodity markets; current forward curves; public policy support for wind and solar development and construction; market demand and transmission expansion to support wind and solar development; market demand for pipeline capacity; access to capital at reasonable cost and terms; no divestitures other than to NextEra Energy Partners, LP or acquisitions; no adverse litigation decisions; and no changes to governmental tax policy or incentives. Please see the accompanying cautionary statements for a list of the risk factors that may affect future results.