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NextEra Energy Sheds Hydro Assets - Analyst Blog

Posted
3/4/2013 4:40:00 PM
By: Zacks.com
Referenced Stocks:AES;NEE;OTTR;PIKE

NextEra Energy Inc. 's ( NEE ) business wing NextEra Energy Resources LLC concluded the sale of its entire equity interest in White Pine Hydro Investments LLC to a subsidiary of Brookfield Renewable Energy Partners L.P.

NextEra Energy will receive approximately $760.0 million as proceeds from this transaction, subject to closing adjustments, which also includes the current $700 million of non-recourse debt. The agreement for the divestiture of interests was previously announced on Dec 21, 2012.

The White Pine asset portfolio comprised of a total of 351 megawatts ("MW") of hydroelectric generation properties in Maine and New Hampshire and is licensed to NextEra Energy Resources' ancillary, FPL Energy Maine Hydro, LLC. Annually the generation capacity from these units totals 1.6 million megawatt-hours.

Although the company is disposing all of its hydropower plants in Maine, NextEra will still be left with roughly 800 MW of oil-fired production capacity in the region.

The hydroelectric assets are situated across three major river systems -- the Kennebec River System, the Saco River System and the Androscoggin River System. The resources at Maine include hydroelectric generation facilities along with interests in eight storage reservoirs in New Hampshire as well as in Maine. A project is also located in the Presumpscot River System.

The purpose behind the asset sale is to focus on power generation in areas which have higher prospects. The company intends to utilize the gains from this transaction to plough back in renewable programs of wind and solar as well as in expanding its natural gas midstream businesses.

We believe the company's sizeable renewable basket will lend significant upside to returns, going forward. The expected rise in renewable consumption in the coming years on account of increasing preference for clean energy generation in the U.S. will further complement NextEra's growth trajectory.

However, the company's recent plan for upgrading its power infrastructures in Florida might lead to cost pressure, going forward. Currently, NextEra Energy carries a Zacks Rank #3 (Hold).

We presently prefer Zacks Ranked #1 (Strong Buy) utility players Otter Tail Corporation ( OTTR ) and Pike Electric Corporation ( PIKE ) and Zacks Ranked #2 (Buy) The AES Corporation ( AES ).

Headquartered in Juno Beach, FL, NextEra Energy together with its subsidiaries is engaged in the generation, transmission, distribution, and sale of electric energy in the United States and Canada.



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