On December 3, it was announced that Florida-based NextEra Energy agreed to purchase Hawaiian Electric Industries Inc. Since HEI was not for sale, this news came as a surprise and leads us to wonder how the deal will affect HECO customers and rooftop solar.
What We Know About The Deal
- While Hawaiian Electric Industries is estimated to be worth $2.63 billion, the transaction has been valued at a total of $4.3 billion with NextEra assuming $1.7 billion of HEI’s debt.
- The sale must be approved by Hawaiian Electric stockholders, the state Public Utilities Commission, and federal regulators, which is expected to take about a year.
- Hawaiian Electric Co. will continue to operate under its current name and be headquartered in Honolulu. Likewise, Maui Electric Co. and Hawaii Electric Light Co. will keep their names and operate from their existing locations.
- No HEI employees will be laid off until at least two years after the closure of the merger, and all of Hawaiian Electric’s union labor agreements will be honored.
- NextEra Energy plans to maintain HEI’s current amount of corporate giving within the community and said it will establish a HECO advisory board, consisting of 6-12 people with substantial ties to Hawaii, to provide their opinions on local matters.
- Hawaiian Electric Industries shareholders will receive 0.2413 NextEra Energy shares per Hawaiian Electric Industries share and a one-time special cash dividend payment of $0.50 per share.
- The agreement does not include HEI’s banking subsidiary, American Savings Bank. ASB Hawaii will spinoff into an independent, publicly traded company.
What We Know About NextEra Energy
According to its website, “NextEra Energy, Inc. (NYSE: NEE) is a leading clean energy company with consolidated revenues of approximately $15.1 billion, approximately 42,500 megawatts of generating capacity, and approximately 13,900 employees in 26 states and Canada as of year-end 2013.”
NextEra owns two main subsidiaries: NextEra Energy Resources, one of the largest developers and owners of renewable energy in the country, and Florida Power and Light, America’s third-largest electric utility with about 4.7 million customers.
NextEra’s Relationship with Renewable Energy
NextEra Energy, Inc. has a bit of a split personality when it comes to renewable energy. On one hand, Florida Power and Light Company (FPL) has a record of opposing rooftop solar. Only 1,551 out of their 4.7 million customers had solar systems installed from 2011 to 2013, with solar power produced and sold by the utility itself. This means, while solar leaders in the U.S. utility industry are on track to meet 10 percent of their power needs with solar, FPL gets a measly 0.06 percent of its energy mix from solar power. (For the record, about 11 percent of Hawaiian Electric customers have rooftop solar systems, the highest percentage in the U.S.)
As the state’s dominant electricity provider, FPL, along with other Florida utilities Duke Energy Florida and Tampa Electric, are known to get approvals from the Public Service Commission, Florida’s version of Hawaii’s PUC. In November, the Public Service Commission voted 3-2 in support of the utilities’ proposals to terminate the state’s solar rebate program by the end of 2015 and roll back Florida’s energy-efficiency goals by more than 90 percent. It probably doesn’t hurt that FPL has a history of giving to political campaigns, such as in the last election when $1.2 million of company funds were donated to Florida Governor Rick Scott’s re-election and the Republican Party.
FPL does boast customer bills to be approximately 25 percent lower than the national average and the lowest in Florida. However, NextEra is the nation’s largest buyer of natural gas and FPL generates 65 percent of its power from natural gas, a cheap form of energy that is not yet prevalent in Hawaii.
Although it is nicknamed “The Sunshine State,” Florida is the nation’s 5th most coal-dependent state and ranks 29th for overall renewable energy development, most of which is not from solar or wind but wood-burning and landfill gas. This absence of renewables is caused largely by resistance and poor planning by utilities, including FPL.
On the other hand, the NextEra Energy Resources subsidiary is the largest owner and operator of wind-generating facilities in the U.S., with a total wind power capacity of 10,210 MW and 2,000 – 2,500 MW of new contracted wind projects in the United States and an estimated 600 MW in Canada from 2013 through 2015. NextEra Energy Resources is also one of the largest generators of solar power in the country with solar plants throughout California, Nevada, New Jersey and New Mexico, and Canada. About 800 MW of new solar projects are projected to be added from 2014 through 2016.
NextEra Energy has garnered the top spot in the Electric and Gas Utilities category of Fortune magazine’s “Most Admired Companies” for an unprecedented eight years in a row. The award is based on surveys from 15,000 top executives, directors, and financial analysts who judge companies on financial soundness, people management, quality of management, long-term investment, quality of products and/or services, innovation, use of corporate assets, social responsibility, and global competitiveness.
NextEra in Hawaii
Chairman and CEO Jim Robo said, “You can think about Hawaii as a postcard from the future of what’s going to happen in the electric industry in the United States. As renewable generation gets cheaper, as electric storage becomes more efficient and possible, all electric utilities are going to have to face this.”
It’s clear that NextEra has the resources to upgrade the grid, help Hawaii achieve its renewable energy goals, and create a model for the utility of the future. But to be realistic, they are a business who is buying HEI as an investment.
Analysts and energy experts believe NextEra will get a return on their investment by building and therefore controlling the energy sources.
“NextEra is very supportive of renewable energy that they own, they control and they can sell,” said Robert Harris, a Hawaii representative of The Alliance for Solar Choice, a national coalition of solar advocates. “And the difference is whether or not you want to have competition in the market. Do you want to have different sources of power coming on that allow us to get the cheapest price for the customer?”
The company has shown interest in Hawaii through various projects. Through its subsidiary Ka La Nui Solar, they bid on and won a contract with HECO to build a 15-megawatt solar energy farm in Waianae, Oahu. This solar farm is currently being evaluated by the Division of Consumer Advocacy to ensure fairness and appropriate pricing. NextEra is also interested in creating a large solar farm on Dole Food Co.’s land in Central Oahu as part of a public-private partnership with the state.
NextEra is very supportive of the proposed grid-tie undersea cable system that would bring renewable energy produced on the neighbor islands to Oahu, already having spent over $10 million to prepare for the construction as well as planning to purchase an almost 4-acre parcel of land to house the transmission system for the cable project. The sale of the site, which was the former Gasco manufactured-gas facility, is contingent on NextEra Energy getting the $650 – $800 million contract to build the undersea cable.
Many remain optimistic about the potential NextEra can bring to the islands. “I think this is a real exciting development for Hawaii,” said CEO of Blue Planet Foundation Jeff Mikulina. “This is an established mainland utility that’s going to bring some fresh ideas, some new talent and resources to Hawaii.”
Jeff Kissel, the former CEO of Hawaii Gas, agreed saying, “NextEra has a tremendous depth of skill and engineering. The thing we need most is energy-efficient solutions in Hawaii. That is the easiest way to save fuel. NextEra knows what works and doesn’t work.”
Executives from NextEra have said the right things so far. “This is not a case of cookie cutter solutions,” said Eric Gleason, president of NextEra Energy Transmission, who is a heavily involved in the Hawaii utility transaction. “This is a case of Hawaii’s needs requiring Hawaii solutions.”
Only time will tell how NextEra’s purchase of Hawaiian Electric Industries will affect the people, the land, and the future of renewable energy here in Hawaii, but you can be certain that Haleakala Solar will be keeping a close watch.
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