NextEra Energy Inc.
) core business arm, Florida Power & Light Company (FPL)
unveiled its long-term plan to invest in natural gas supplies to
lower its fuel cost and save customers money.
To accelerate the plan, NextEra Energy has announced that it
will enter into a joint venture with
PetroQuest Energy Inc.
) to develop 38 gas production wells in the Woodford Shale region
located in southeast Oklahoma. PetroQuest, an oil and gas player,
will supervise and operate the wells while NextEra Energy will
receive a portion of the output produced from each well.
NextEra Energy, in general, purchases nearly 2 billion cubic
feet of gas per day for its gas-fired power plants at prices that
are subject to market volatilities. Currently, the company cushions
its customers from price variations by hedging a portion of its
fuel through a FPSC-regulated program. This program, however,
offers benefits to consumers only for short-run agreements.
So, NextEra Energy will invest in natural gas production at the
source, which will enable the company to obtain gas at a
comparatively lower cost. The wells typically have a life-cycle of
around more than 30 years. By directly investing at the source,
NextEra Energy estimates to save approximately $107 million for
customers over the life of the first project.
NextEra Energy has been aggressively investing to expand its
generation and transmission operations. The latest initiative is a
big leap for the company and will prove beneficial in the coming
Natural gas is fast becoming a popular energy source for power
generation among utility producers thanks to its abundance
availability in the U.S. The pro-environment policies adopted by
the U.S. government are also acting as a stimulant for companies
undertaking natural gas expansion initiatives like NextEra
The increasing usage of natural gas a fuel source in electric
generation in the U.S. will help gas to overtake coal in the long
term. Per a report from Energy Information Administration, by 2035,
natural gas will have the largest share in power production in
U.S., dislodging coal from the top.
FPL's generation mix is ruled by natural gas, which accounts for
67% in 2013, makes the company poised for stable growth. In
addition, the new plan will make gas prices more competitive, which
in turn will lead to customer retention and add to NextEra Energy's
Currently, NextEra Energy carries a Zacks Rank #3 (Hold). Some
better-ranked utility stocks that warrant a look include
Black Hills Corp.
NRG Energy Inc.
) These stocks sport a Zacks Rank #1 (Strong Buy).
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NEXTERA ENERGY (NEE): Free Stock Analysis
BLACK HILLS COR (BKH): Free Stock Analysis
NRG ENERGY INC (NRG): Free Stock Analysis
PETROQUEST ENGY (PQ): Free Stock Analysis
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