Solar and energy storage projects that NextEra Energy Inc. had planned to build this year could be delayed due to an investigation by the U.S. Commerce Department into allegations that equipment manufacturers have evaded American import tariffs.
NextEra, one of the world's biggest renewable energy companies, said April 21 that between 2.1 GW and 2.8 GW of solar and storage projects could shift to 2023. The development program of NextEra's competitive energy business, NextEra Energy Resources LLC, includes up to 7.6 GW of such projects through 2022.
The potential delays have not changed NextEra's financial outlook, company executives said on an earnings call.
"Luckily, we have enough cushion and enough other things that we can do where it doesn't impact our financial expectations," NextEra President and CEO John Ketchum told analysts, adding that disruptions in the solar market are good for the country's wind power industry.
"We can originate a wind project and have it built in 10 months," Ketchum said. "And so to the extent you might see some solar activity drop off ... you have wind to step in and take its place."
The Commerce Department said in March that it is probing whether solar manufacturers used factories in Southeast Asia to circumvent American tariffs on imports from China. The investigation is focused on producers in Thailand, Vietnam, Malaysia and Cambodia, which accounted for nearly 84% of solar panel shipments delivered to the U.S. by air and sea in January and February, according to an analysis of the latest U.S. Census Bureau data.
American solar companies have reported widespread trade disruptions since the start of the Commerce Department investigation, which could result in tariffs being applied retroactively to past imports. U.S. solar panel imports were down 26% year over year in the first quarter of 2022.
NextEra CFO Kirk Crews said adding tariffs to the bulk of U.S. solar panel imports would go against longstanding trade practice because the Commerce Department has previously ruled that the process performed in Southeast Asian factories of turning Chinese-made silicon wafers into cells is "technologically sophisticated and the most capital-intensive part of the solar panel manufacturing."
"How can you possibly pull the rug out from under the industry?" Ketchum said on the company's earnings call.
Any new taxes on shipments from Southeast Asia would likely lead the U.S. solar industry to source products from China, Ketchum said, because there is typically a delay between when the Commerce Department announces tariffs and sets the duty rate.
"[If] you don't know what the tariff rates are in Southeast Asia, it forces you back to China, where the tariffs are known and have been known for the last 10 years," Ketchum said. "[That's] an unintended consequence that I don't think anybody wants."
NextEra reported first-quarter adjusted earnings of 74 cents per share compared to adjusted earnings of 67 cents per share a year earlier. Analysts had expected adjusted earnings of 72 cents per share, according to the S&P Capital IQ consensus mean estimate.
The adjusted results did not include an after-tax impairment charge of approximately $600 million to write off NextEra Energy Resource's investment in the Mountain Valley Pipeline LLC.
NextEra's stock price was down 4.59% at $77.77 in midday trading April 21.
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.
