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NextEra Energy, AT&T Ink Deal to Deliver 300MW Wind Power

Zacks Equity Research
Updated

NextEra Energy, Inc’s NEE subsidiary, NextEra Energy Resources, recently announced a renewable energy partnership program with AT&T Inc T. Per the power purchase agreement (PPA), the partnership will acquire 300 megawatts (MW) of wind energy from two new wind farms in Wilbarger and Hardeman Counties, TX.

Notably, in the month of Feb, 2018, the partnership struck a similar PPA worth 520 MW from two wind farms located in Texas and Oklahoma. Cumulatively, these two consecutive PPAs will deliver 820 MW of wind power, which will supply electricity to more than 372,000 homes per year.

Economic Benefits of the PPAs

Per management, these wind projects will bolster the overall economic growth of the states by boosting the employment rate. In particular, these projects will boost construction jobs by 1,000.

Along with creating job opportunities, these projects are estimated to generate property tax revenues worth $190 million for local communities and lease payments of more than $167 million to landowners.

Transition in Utility Space to Renewables

The utility sector is currently undergoing a notable transition as the primary fuel source — coal — is gradually being replaced by natural gas and clean energy. Considering the need for a cleaner environment, consumers have rapidly increased the adoption of alternative energy sources nay renewables, over the last decade.

Consequently, the outlook for the renewable energy industry is favorable. Evidently renewable energy sources are set to represent almost three quarters of the $10.2 trillion investment made worldwide  in new power-generating technology by 2040 (according to Bloomberg New Energy Outlook). To benefit from this rapidly expanding industry, utilities are increasingly shifting to renewables. NextEra Energy, being no exception, is following a similar trend.

The company’s current renewal energy development program aims to bring 10,100-16,500 MW of new renewable projects (including wind repowering) online in the 2017-2020 period. Other electric utilities like NRG Energy Inc NRG and Dominion Energy Inc D are also focusing on cleaner sources to produce electricity.

Why Wind?

An EIA report shows that wind power generation will surpass hydroelectricity in 2018. Although changes in weather patterns affect wind generation, the forecast for wind power output is more dependent on the capacity and timing of new wind turbines coming online. In this line, the EIA expects wind capacity to increase  by 8.3 GW in 2018 and 8 GW in 2019.

According to the Renewable Energy: United States report of December 2017, demand for wind energy is likely to rise 7.2% by 2021. Meanwhile, the cost of wind turbines is the single largest component which makes up for 70% or more of the entire cost of a land-based wind project.

Notably, wind turbine prices have fallen by around half since 2010. This has made the construction of wind power projects cheaper, thereby setting the stage for utility providers like NextEra Energy to make valuable investments in wind projects like the last one.   

Zacks Rank & Price Movement

NextEra Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


NextEra Energy’s shares have returned 12% in the past 12 months against the industry’s decline of 8.4%. The outperformance can be attributed to regular capital investment plans made by the company and strong economic conditions.

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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
 
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