Why would NextEra Energy, Inc., one of the oldest, third largest, and arguably one of the most solid power companies in the world, need $1.852 billion in U.S. Department of Energy loan guarantees for two of its sustainable energy projects?
According to Judson Berger’s FOXNews.com article today, these loans create a “conflict of interest,” because the Chairman and CEO of NextEra Energy, Lewis Hays III, has sat on the President’s Council on Jobs and Competitiveness since February 2009–the same Jobs Council that pushes for more “government-backed” investment in renewable energy.
“NextEra Energy, Inc.”, which, until a name change in 2008 operated as FPL Group, Inc., is a private company, whose stock has long been traded on the New York Stock Exchange (NEE), and is headquartered in Juno Beach, Florida.
NextEra recently declared a quarterly dividend of $0.55 per share–whose shares closed on the day at $55.35.
Its two primary subsidiaries are Florida Power & Light, the third largest electricity producer in the U.S. and NextEra Energy Resources, the largest generator of energy from sun and wind resources in North America. The company is also has the third largest fleet (8) of Nuclear powered electricity generating plants in the United States.
The company employs 43,000 people in 28 states and Canada, and last year produced $15 million in gross revenue, and net earnings of $580 million for the second quarter of 2011, and increase over the same period last year.
Born as EBASCO (Electric Bond and Share Company) in 1925, as a subsidiary of American Power and Light Company, which owned many of the electric power companies in the western hemisphere at the time, itself started by Thomas Edison and his General Electric (GE).
Today, GE is “heavily invested” in the green energy industry, and is a partner in a project with NextEra Energy. Its Chairman and CEO is Jeffrey Immelt, who also happens to be the Chairman of the President’s Council on Jobs and Competitiveness–the same which has Lewis Hays III as a member, as mentioned above.
The specific NextEra projects that received partial guarantees were the Genesis Solar and Desert Sunlight solar plants in Riverside County, California, and according to the article, the highlights are as follows.
The first [Genesis Solar] received a partial guarantee of $852 million, with the government’s share about $682 million. The project is projected to create 800 construction jobs and 47 permanent jobs, while producing enough electricity for more than 48,000 homes, according to the Department of Energy. It is sponsored by NextEra Energy Resources.
The Desert Sunlight project received a $1.46 billion partial guarantee, with the government’s share about $1.17 billion. The project is backed in part by the government, though the loans themselves are coming from private investors. That operation is tied to the projected creation of 550 construction jobs and 15 permanent jobs. According to the Department of Energy, it will be one of the biggest solar photovoltaic plants in the world, and will help power more than 110,000 homes.
The loan guarantee for Desert Sunlight was finalized one day before solar company First Solar announced the sale of the project to affiliates of NextEra Energy Resources and GE Energy Financial Services. A NextEra affiliate will manage the project.
According to “Planned Capital Expenditures from 2011 – 2015” figures, and notes to the table, from the 2010 Annual Report for NextEra, the cost per Mw (Megawatt) for Wind generation facilities, which represent 44 percent of the “green energy” production portfolio, is $2,000,000, and they plan to add 3,500 to 5,000 Mw of capacity during this period.
The cost per Mw of Solar generation facilities, which represent less than 1 percent of just the “green energy” production portfolio, is $7,000,000, and they plan to add just 400 to 600 Mw of capacity during this period.
Also found in this same annual report, was a cautionary note regarding future expansion of the wind and solar power generation capacity by the company … “Wind and Solar expansions are subject to … continued public policy support … “
The answer to the initial question of why such a large company as NextEra and, at least in the case of the Desert Sunlight project, one of the world’s largest companies, GE [Energy Financial Services], would need a loan guarantee from the Department of Energy to acquire a project, is best illustrated by the “architecture” of the deal.
First Solar “closed” on the loan and government guarantee (taking responsibility for it), the day before they announced the sale of the project to NextEra and GE affiliates, via a loan from “private investors”–and, it would be managed by an affiliate of NextEra.
It could easily be inferred that this project is isolated in a brand new, separate “expendable” entity, co-owned by both NextEra and GE affiliates, which could also be brand new “expendable” entities as well, which utilize a loan from “private” investors (versus some financial institution like GE Capital), who required a loan guarantee–that neither NextEra or GE were willing to give, or would only supply to a very limited degree, such as 20 percent.
So, if this is indeed the case, it would mean that the U.S. government (taxpayers) would be responsible for 80 percent of the ultimate financial risk for this project.
Unless the U.S. Treasury has an equity stake of some type–this seems like an unusually well-hedged “bet” for NextEra and GE.
The other observation is that for a total government loan guarantee of $1.852 billion, resulting in the creation of just 62 permanent jobs, it appears that the Jobs Council is much better at creating green energy facilities, which in this case ultimately favor two large public companies, rather than achieving its primary directive–to create new, good paying, permanent jobs for Americans.
Finally, where will all of these solar panels (covering an area the size of 1,650 football fields) be manufactured–the real “motherload”of good paying jobs?
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