By Rich Heidorn Jr.
The second quarter wasn’t a great one for most companies in the RTO Insider Top 30, as revenues declined 2% compared with 2015 while profits dropped 15%.
Twelve companies reported increases in revenue, while 15 reported reductions and three were unchanged. The outliers were WEC Energy Group and Avangrid, which saw revenues soar because of acquisitions.
Eleven companies reported an increase in profits while 19 showed declines. FirstEnergy, NRG Energy, Centerpoint Energy and Calpine reported quarterly losses.
It was a really bad quarter for FirstEnergy, which reported a $1.1 billion loss, much of it related to the pending closure of five coal-fired units. The company said it plans to rid itself of its merchant generation and transition to a “fully regulated company.” (See FirstEnergy Posts $1.1B Loss, Eyes Exit from Merchant Generation.)
NRG said most of its second-quarter net loss of $276 million ($0.61/share) — worse than its $9 million loss a year ago — resulted from impairments and losses on asset sales. (See NRG Continues to Pare Down Businesses, Affirms Guidance.)
Centerpoint, which has utilities in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas, reported a net loss of $2 million ($0.01/share), compared with a profit of $77 million ($0.18/share) in 2015. The company said its results were dampened by a $16 million drop in income from Enable Midstream Partners, a gas gathering and processing limited partnership with OGE Energy. The company has offered to sell its 55.4% stake to OGE. (See CenterPoint Abandons REIT Plan; Offers Stake in Gas Partnership to OGE.)
Calpine showed a net loss of $29 million ($0.08/share) versus a profit of $19 million ($0.05/share) a year earlier. The company blamed mark-to-market losses resulting from increases in forward power and natural gas prices. It also said increased hydroelectric generation in the West contributed to lower energy margins for its gas-fired fleet, although this was partially offset by an increase in generation in Texas.
The companies showing the biggest revenue declines in the quarter were Calpine, NRG, NextEra Energy and Public Service Enterprise Group, each of which was down more than 10%.
| Company | Market Cap. ($ billions) | Revenue Q2 2016 ($ billions) | % change vs. 2015 | Net income Q2 2016 ($ millions) | % change vs. 2015 |
|---|---|---|---|---|---|
| NextEra | 58.47 | $3.82 | -12.4% | $540 | -24.6% |
| Duke Energy | 57.23 | $5.48 | -2.0% | $509 | -6.3% |
| Dominion Resources | 47.89 | $2.60 | -5.5% | $452 | 9.4% |
| American Electric Power | 33.13 | $3.89 | 1.6% | $502 | 16.7% |
| Exelon | 32.37 | $6.91 | 6.1% | $267 | -58.2% |
| PG&E | 32.20 | $4.17 | -1.2% | $210 | -48.3% |
| Berkshire Hathaway Energy | NA | $4.12 | -7.4% | $545 | -3.9% |
| Sempra Energy | 26.78 | $2.18 | -7.6% | $17 | -94.3% |
| PPL | 24.84 | $1.79 | 0.6% | $483 | -163.8% |
| Edison International | 24.82 | $2.78 | -4.5% | $307 | -24.6% |
| Consolidated Edison | 24.11 | $2.79 | 0.0% | $232 | 5.9% |
| Public Service Enterprise Group | 22.31 | $1.91 | -17.3% | $187 | -45.8% |
| Xcel Energy | 21.75 | $2.50 | -0.8% | $197 | -0.1% |
| WEC Energy Group | 19.75 | $1.60 | 61.6% | $182 | 124.6% |
| Eversource Energy | 18.19 | $1.77 | -2.7% | $204 | -1.8% |
| DTE Energy | 17.38 | $2.26 | -0.4% | $152 | 39.4% |
| Entergy | 14.26 | $2.46 | -9.2% | $573 | 284.7% |
| FirstEnergy | 14.19 | $3.40 | -2.0% | $(1,089) | -682.4% |
| Avangrid | 13.58 | $1.44 | 53.4% | $102 | 827.3% |
| Ameren | 12.39 | $1.43 | 2.1% | $147 | -2.0% |
| CMS Energy | 12.31 | $1.37 | 1.5% | $124 | 85.1% |
| Centerpoint Energy | 9.66 | $1.57 | 2.6% | $(2) | -102.6% |
| Alliant Energy | 9.02 | $0.75 | 4.2% | $86 | 23.3% |
| Pinnacle West Capital | 8.68 | $0.92 | 3.4% | $121 | -1.3% |
| NiSource | 8.05 | $0.89 | 0.0% | $29 | -203.2% |
| Westar Energy | 7.57 | $0.62 | 5.1% | $72 | 13.5% |
| OGE Energy | 6.21 | $0.55 | 0.0% | $72 | -18.3% |
| Calpine | 4.61 | $1.16 | -19.4% | $(29) | -252.6% |
| Great Plains Energy | 4.38 | $0.67 | 9.8% | $32 | -27.9% |
| NRG Energy | 3.93 | $2.64 | -22.4% | $(276) | 2966.7% |
| TOTAL | $70.44 | -2.1% | $4,947 | -15.4% |
NextEra
NextEra said revenues dropped to $3.82 billion in the quarter, a 12% reduction from a year earlier. Its Florida Power & Light saw a 2.5% drop in retail sales, despite adding 65,000 more customers, due to mild weather.
NextEra Energy Resources, the company’s competitive energy unit, saw operating revenue drop to $970 million from $1.27 billion, due in part to hedging losses and the sale of 3,000 MW of natural gas generation in Texas. It also reported lower revenues from wind assets, which it attributed to lower output and reduced state and federal tax credits.
The company said it expects to add about 2,500 MW of contracted renewable generation in 2016, which would boost its renewable portfolio to 16,000 MW.
Last month, the company, which was rebuffed in its effort to buy Hawaiian Electric, reached an agreement to purchase Dallas-based Oncor in an $18.4 billion deal. (See NextEra Reaches Deal for Oncor.)
PSEG
PSEG reported second-quarter net income of $187 million ($0.37/share), a 46% drop from a year earlier. Operating earnings — which exclude the nuclear decommissioning trust, mark-to-market accounting and material one-time items — were flat year-over-year at $289 million ($0.57/share).
Public Service Electric and Gas’ expanded capital investment program goosed its net income of $179 million ($0.35/share), an increase from the $167 million ($0.33/share) for 2015.
Weather-normalized electric sales for the 12 months ending June 30 were down 0.2% versus a year earlier, despite an increase in the number of customers, because of increased energy efficiency and reduced industrial demand.
PSEG’s wholesale power unit, which earned $166 million ($0.33/share) a year ago, had a net loss of $11 million ($0.02/share) as output dropped 6% because of mild weather, low gas prices and a decline in PJM capacity revenues.
PSEG Power also took a hit from an extended refueling outage at the Salem 1 nuclear unit for repairs. The outage dropped the average capacity factor for the company’s nuclear fleet to 83% for the quarter, down from 86% a year earlier.
PSEG’s Peach Bottom nuclear plant, however, increased its output following modifications that increased its capacity by 130 MW.
Output from its combined cycle fleet declined to 4.4 TWh from 4.6 TWh due to mild weather, while low gas prices reduced the dispatch of its coal-fired units, which saw production drop to 0.9 TWh from 1.3 TWh.
CEO Ralph Izzo said the company was maintaining its operating earnings guidance for the year 2016 ($2.80 to $3/share). “However, reaching the upper end of guidance will be difficult even with improvements seen in the power markets, expectations for warm summer weather, normal operations and management of O&M for the remainder of the year,” he said.
Entergy
Entergy had a big earnings surprise, reporting second-quarter net income of $572.6 million ($3.11/share), almost tripling analysts’ expectations of $1.05/share, as polled by Thomson Reuters.
“We continue to make progress toward meeting our objective of steady, predictable growth at the utility while reducing our [Entergy Wholesale Commodities] footprint,” Entergy CEO Leo Denault said.
One step to shrinking that footprint came earlier this month, when the company agreed to sell its FitzPatrick nuclear plant in New York to Exelon for $110 million. The plant, which Entergy had planned to close, had a net book value $143 million. (See Entergy Sells FitzPatrick to Exelon.)
Net revenue was boosted by the company’s acquisition of the 1,980-MW Union Power combined cycle plant in Arkansas, Entergy Arkansas’ rate increase and higher industrial sales. The company cited strong demand from petroleum refiners who “continued to operate at high capacity levels compared to last year.”
Looking forward, the company also noted that it awarded itself contracts to build generation following competitive solicitations for Entergy Louisiana and Entergy Texas.
Methodology
The RTO Insider Top 30 includes the largest companies (by market capitalization) with significant presence in the seven RTOs and ISOs in the U.S. Since initiating the Top 30 in the first quarter, we have added Great Plains Energy and eliminated National Grid, a U.K.-based company that does not report its results quarterly. Expect more shuffling if Great Plains wins regulatory approval for its proposed acquisition of #26 Westar Energy.
