|
FPL
counting on merchant power
for big growth this year
Gexa
wasn't properly hedging sales
FPL rode strong
wholesale power markets and hedging gains to a fourth quarter profit
of $206 million.
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That's
up 19% from $173 million in 2004, with $27 million coming from good
hedging.
What
about Gexa?
It
hasn't lived up to FPL's expectations.
But
FPL expects it to be profitable this year and still likes the business
model.
FPL
blamed Gexa's risk management for lackluster performance.
"They
had a pretty poor control structure," claimed FPL CFO Moray
Dewhurst on a conference call.
Hedgers didn't have up-to-the minute data on sales, he told investors.
Thus,
Gexa would make deals without immediately hedging supply, exposing
the firm to big losses when prices spiked, Moray said.
FPL
sees earnings for FPL Energy, its merchant power unit, growing 28%
this year, reflecting a big boost in Texas and New England spark
spreads since March.
FPL
expects spark spreads of $27.48 in New England and $24.76 in Texas
this year, nearly double March levels.
The
firm's growing wind and nuclear generation should help earnings
too, it said.
FPL
plans to add 1,200-1,500 mw of wind power by the end of next year,
buoyed by the extension of federal tax credits.
It
completed its buying of Alliant Energy's 70% stake in the Duane
Arnold nuclear plant near Cedar Rapids, Iowa.
FPL
Energy posted a fourth-quarter profit of $86 million -- up from
a loss of $11 million in the fourth quarter of 2004.
The
merchant unit earned $187 million last year compared with $172 million
in 2004.
Yearly
earnings for the parent firm fell slightly from hedging and hurricane-related
losses, dipping $2 million to $885 million.
FPL
lost about $112 million via hedging last year, compared with a loss
of $3 million in 2004.
Originally
published in Restructuring
Today on January 30, 2006
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