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April 25-29


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April 25-29

A brief lookback at successes and setbacks in the energy industry.


DYNEGY — Dynegy Inc.applauded FERC'sdecision on April 27 to revokewaivers of affiliate power sales restrictions granted to and utilities in Ohio, and to require that controversial power purchase agreementsto subsidize generation must be approved by FERC before they can beimplemented. Ohio regulators approvedthe subsidy plans for AEP and FirstEnergy March 31 over . "FERC agreed that customers are indeedcaptive to the out-of-market and exorbitantly priced PPA proposals that wereaccepted by the Public Utilities Commission of Ohio, and has now ensured atransparent and thorough review for the benefit of Ohio residents andbusinesses," Dynegy President and CEO Robert Flexon said.

NEXTERA — NextEra EnergyInc. on April 28 toppedconsensus earnings estimates, reporting first-quarter2016 adjusted earnings of $715 million, or $1.55 per share, compared to $631million, or $1.41 per share, in the first quarter of 2015. The S&P GlobalMarket Intelligence normalized EPS consensus estimate was $1.39 per share.Discussing strategy on NextEra's earnings call that same day, management saidthe company is acceleratingits renewable generation development pipeline at . NextEra Energy Resources' first-quarter2016 adjusted earnings rose to $306 million, or 66 cents per share, compared to$262 million, or 58 cents per share, in the first quarter of 2015.

AVANGRID — Avangrid Inc.on April 26 posted first-quarter2016 earnings that were up about 13%, helped by and revenuedecoupling that blunted the effects of a warm weather on utilities. Avangridreported net income of $195million, or 63 cents per share, up from $171.6 million, or 56 cents per share,a year before. That performancetopped the first-quarter 2016 consensus estimate of 56 cents per share. Thecompany also increased its full-year earnings guidance. It is nowtargeting 2016 consolidated EPS of $2.10 to $2.20, up from $2.00. Avangridsubsidiary Central Maine PowerCo. on April 26 and flagged its other utilities for possibleupgrade.

EMPIRE DISTRICT — EmpireDistrict Electric Co. on April28 reported first-quarter2016 consolidated earnings of $16.6 million, or 38 cents per share, upfrom adjusted earnings of $14.6 million, or 34 cents per share, in the 2015first quarter. Those results beat the S&P Capital IQ consensus normalizedEPS estimate for first-quarter 2016 earnings of 30 cents. Empire's resultsexcluded the costs of its pending acquisition by That deal also cleared a hurdle. The administrative law judge presiding overthe merger hearings in Oklahoma has recommendedapproval of the deal, with an order expected within 60 days. A FERCruling is also expected any day, Empire District President and CEO BradleyBeecher said during the company's April 29 earnings call.


AEP — The impact of FERC's decision to review the Ohio PPA programs isnot expected to have as great an impact on AEP. In response, AEP said itintends to begin another strategic review of generation assets and, more unexpectedly,pursue re-regulation through the Ohio Legislature. AEP Chairman,President and CEO Nicholas Akins saidApril 28 that the company has "no interest in getting involvedin a protracted FERC-state jurisdictional debate." Akins later added that the company may be ableto prevail at FERC but is "not waiting" to find out.


FIRSTENERGY — FERC'sdecision to review the Ohio PPAs is expected to have a much bigger financialimpact on FirstEnergy, and Jefferies LLC and RBC Capital Markets bothdowngraded the company's stock April 28. Moody's and Standard & Poor'sRatings Services revised their outlooks for FirstEnergy to negative from stableon the same day. With the PPA,Morgan Stanley on April 28 said it estimates FirstEnergy's EPS at $2.70 in 2017and $2.96 in 2018. Without the PPA, the brokerage estimates 2017 EPS of $2.28and 2018 EPS of $2.27, and FirstEnergy could need up to $2 billion of equity toreduce debt and improve its credit metrics. Earlier in the week,FirstEnergy executives said they expected FERC to .

SPECTRA — SpectraEnergy Corp was responding last week to in Pennsylvania thatseverely burned one person and destroyed a home. The rupture occurred April 29about 30 miles from Pittsburgh on the TexasEastern Transmission LP natural gas pipeline system. Spectra Energy declared a force majeure.It alerted shippers that "Texas Eastern has limited operationalflexibility to manage imbalances," and gas deliveries on the system wouldhave to stick to scheduled amounts. "Our first concern is for thesafety of the community, our employees and any others who may be affected,"the company said. "We have activated our emergency response plan. We arecooperating with authorities in our response." June natural gas futuressurged 4.8% on thenews.

GAS HEDGING — Colorado regulators voted a proposal byBlack Hills Colorado Gas UtilityCo LP to procure 50% of its forecast annual firm gas demand from anaffiliate, with the expenses recovered from ratepayers. The Colorado PublicUtilities Commission called the plan a, "serious risk to [taxpayers]," and asserted theBlack Hills Corp.subsidiary had failed to provide sufficient information about the gas hedgingprogram's short- and long-term costs. Meanwhile in Florida, the state's fourmajor investor-owned utilities have volunteeredto reduce their fuel hedging programs by 25% because low gas pricesin recent years have not produced much in the way of savings for customers,resulting in calls for suspension of the programs. NextEra subsidiaryFlorida Power & Light Co.,Southern Co.subsidiary Gulf Power Co.,Duke Energy Corp.subsidiary Duke Energy FloridaLLC and TECO EnergyInc. subsidiary TampaElectric Co. maintained, however, the programs have providedcustomer benefits and will continue to do so as utilities rely more heavily ongas in their generation mix.

CLOUD PEAK — Powder River Basin coal producerCloud Peak Energy Inc.on April 28 reported its first-quarternet loss widened to $36.4 million and that it was reducingits full-year coal shipment guidance given the slow start to the year.The company's adjusted earnings per share excluding gains and losses onderivatives and other items was a loss of 53 cents a share. The S&P CapitalIQ normalized consensus estimate for the period was a loss of 17 cents pershare. President and CEO Colin Marshall said on Cloud Peak's earnings call that in the foreseeablefuture, coal will now compete with natural gas on marginal power demand "ratherthan providing reliable low cost base load power as historically done."The company also plans to moveaway from the controversial practice of self-bonding its coalmining reclamation liabilities.

S&P Capital IQ andS&P Global Market Intelligence are owned by S&P Global Inc.