Weaker wind energy production dragged down first-quarter 2019 results for NextEra Energy Inc. and Avangrid Inc. and could prove detrimental for other utilities with large renewable operations.
Rebecca Kujawa, NextEra's executive vice president of finance and CFO, said lower wind resource drove almost the entire 10-cent decline on adjusted earnings per share by NextEra Energy Resources LLC, bringing the competitive generation subsidiary's first quarter EPS to 93 cents.
"First quarter fleet-wide wind resource was one of the worst over the past 30 years" for NextEra Energy Resources' projects in the U.S. and Canada, Kujawa said during the company's April 23 earnings call. The Florida-headquartered company's wind projects in the West were particularly impacted, where wind resource was recorded at 85% of the long-term average during the first three months of 2019 compared with 100% during the same period last year.
Despite the wind impact, NextEra's first-quarter earnings still topped Wall Street estimates by a healthy margin.
NextEra Energy Partners, NextEra's yieldco, also saw its wind resource below normal levels, negatively impacting the company's adjusted EBITDA by $23 million, bringing it to $225 million for the first three months of 2019 compared with $260 million during the same period last year. Cash available for distribution had similar issues, with wind generation dragging the metric down by $22 million.
For Avangrid, generation from the company's wind fleet reached a 10-year low; wind production was 14% lower in the first quarter of 2019 compared to the same period in 2018 and 17% below expectations due to poor wind resources and extreme weather.
The lower wind generation contributed 7 cents to Avangrid Renewables LLC's 13-cent negative impact on Avangrid's first-quarter EPS, which came in at 71 cents for 2019 compared to 78 cents in first-quarter 2018.
Wind resource has been below normal across the U.S., but particularly weak in the West, where production during the first quarter fell 34% compared to last year, Avangrid CEO James Torgerson said during the company's April 25 call. But the second quarter is not shaping up any better with wind production down 8% as of mid-April.
"We fully expect to be able to offset the downside in the first quarter from the wind resource negativity we saw," Torgerson said. "It's going to come into other areas, not necessarily all in renewables."
Other utilities and power companies with a wind fleet could continue to see headwinds in 2019, with El Niño forecasted to stay through summer and possibly continue into the fall. The phenomenon has weakened normally steady winds, according to the National Oceanic and Atmospheric Administration's April 11 update, and that could be trouble for turbines trying to capture the energy.
For now, some analysts are playing the waiting game to see if poor wind conditions continue to hinder companies' 2019 performance. Guggenheim Securities LLC analyst Shahriar Pourreza wrote in an April 23 note that wind resource is an important factor to track for NextEra Energy Partners' financials in upcoming quarters, but his team is "not hitting the panic button yet as we deem the poor wind economics as somewhat anomalistic."
CFRA Equity Research analyst Christopher Muir said while weather in 2019 will be "less favorable" for Avangrid, the Connecticut-headquartered company should counteract negative impacts from wind generation with strong capital spending, additional customers and new clean energy projects entering service.