Dive Brief:

• NextEra Energy will continue to pursue its proposed acquisition of Oncor Electric, company officials said yesterday during a first quarter earnings conference call.
• But NextEra CEO Jim Robo also said the company would not alter its position on some key issues, including dividend disbursement and utility board independence, which Texas regulators cited in their rejection earlier this month.
• Regardless of the merger, NextEra expects strong performance from its renewable energy development subsidiary as baseload plant retirements open more opportunity for wind and solar growth. NextEra reported first-quarter income of $1.5 billion, or $3.37/share. On an adjusted basis, earnings were up more than 10% from Q1 2016.

Dive Insight:

NextEra officials say they believe they are the right company to own Oncor — but they won't buy the utility unless they can control it. 

"We think we would be a terrific owner of Oncor for the state and for its customers. I think we would add enormous value to customers in Texas from how we would operate the utility." Robo told analysts. But he added, "obviously we can't pay $18.7 billion for utility that we can't run. And we can't control the board and we can't have access to dividends."

Accepting those conditions, he said, would be "bad business."

That leaves the rehearing bid in a precarious position, because the Public Utilities Commission of Texas rejected the deal for just those reasons. But Robo was unequivocal, continuing "we will not be accepting any conditions that would not allow us to appoint the majority of the board or have access to the dividends."

The company's bid for Oncor is the second failed attempt to purchase the utility out of the bankruptcy proceeding of its parent, Energy Future Holdings. Regulators rejected an acquisition proposal from real estate firm Hunt Consolidated last year, opening the door for NextEra.

NextEra officials seemed to signal that there are limits to how long it will continue the pursuit.

John Ketchum, NextEra executive vice president and CFO, said during the call that "Oncor has always been an opportunistic transaction."

NextEra will file for rehearing in the next few weeks, but Ketchum said if the company is "ultimately unsuccessful with the transactions we continue to believe that we have one of the best growth opportunity sets in our industry."

The company is aiming to deliver adjusted earnings per share growth from 6% to 8% through 2020, from a 2016 base.

Earnings up at FPL

Florida Power & Light, the company's primary regulated utility subsidiary, posted Q1 earnings of $445 million, or $0.95/share, compared to $393 million in Q1 2016. The utility's customer base grew 1.3% from the prior year, adding about 65,000 customers.

NextEra said FPL continues to make progress on the construction of the 1,750 MW Okeechobee Clean Energy Center, with commercial operation of the gas plant expected in mid-2019. 

The company has also secured sites that could support more than 3 GW of solar for FPL.

Renewables to pressure inefficient power plants

NextEra Energy Resources, the company's competitive energy unit, contributed $1.01/share on a GAAP basis to the NextEra earnings, compared to $0.48/share in 2016 Q1.

Ketchum said that while state renewable portfolio standards continue to provide strong support for wind and solar growth, "customer origination activity continues to be largely driven by economics," and that equipment efficiency improvements and cost declines mean the company can offer wind power purchase agreements "at very competitive prices."

The same trend is happening across the country with solar energy as well, he said.

"We anticipate that improved wind and solar economics and low natural gas prices will continue to lead to additional retirements of coal, nuclear and less fuel-efficient oil and gas-fired generation units, creating significant opportunities for renewables growth going forward," Ketchum told analysts.

Battery costs are also expected to decline, allowing them to support more renewables projects. 

"We believe the size of the market potential for new renewables is larger than it has ever been, helping to drive growth well into the next decade," said Ketchum. Since the company's last earnings call, NextEra signed contracts for more than 400 MW of new wind projects and more than 200 MW of new solar.