Oil price fall dims NextEra view of Texas power

OREANDA-NEWS. Falling oil and gas prices may limit prospects for growth in Texas' \\$34bn power market, generation holding company NextEra said.

"On the commodity front [for] oil, gas and power, nothing much good has happened recently," chief financial officer Moray Dewhurst said yesterday. "And that definitely includes Texas."

NextEra owns two combined-cycle plants in the Electric Reliability Council of Texas (ERCOT) with output of nearly 2,800MW. It is also the state's largest owner of wind generation with 2,400MW.

The Florida company also owns GEXA, which sells retail power in Texas. GEXA does not disclose the size of its customer base.

NextEra last year hedged output from its gas plants through 2016 and has been adding to those hedges when possible despite limited liquidity for deals beyond 2016, chief executive Armando Pimentel said.

NextEra has also hedged about 1,800MW of wind generation and has about 400MW of wind sold under long-term contracts. Wind hedges will begin ending in 2020.

Hedging should protect short-term NextEra earnings in Texas, but Pimentel said he is concerned about long-term economic prospects for the state. "I am certainly not as bullish as I was couple of years ago," he said.

Unlike Florida, where NextEra owns the state's largest utility Florida Power & Light, electric demand in Texas grew after the 2008 recession.

Last year, power use in ERCOT rose by 2.5pc from the year earlier period, driven, in large part, by increased oil and gas production activity. But peak demand fell by 1pc as mild summer weather and two new power plants limited price volatility.

Calendar 2019 round-the-clock assessments at ERCOT's Houston hub average \\$35.30/MWh, down by 11pc from their value two months ago. Forward power assessments at ERCOT moved lower in line with natural gas forward values in Texas.