Category Archives: Energy

NextEra has received almost $2 billion in federal subsidies

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A new report by Good Jobs First has tracked federal subsidies to U.S. corporations since 2000.

Six parent companies have received $1 billion or more in federal grants and allocated tax credits (those awarded to specific companies) since 2000; 21 have received $500 million or more; and 98 have received $100 million or more. A group of 582 large companies account for 67 percent of the $68 billion total. ?

And NextEra, the Florida company currently trying to acquire Hawaiian Electric, ranks #2 on the list, with $1,938,811,949 in federal grants and allocated tax credits during the period.

According to the report, 90% of NextEra’s federal grants were the result of “a provision in the 2009 American Recovery and Reinvestment Act (Section 1603) that allows companies to receive cash payments in lieu of tax credits for the installation of renewable energy properties. Section 1603 has awarded more than $23 billion to companies with U.S. and foreign parents.”

See: “Uncle Sam’s Favorite Corporations/Identifying the Large Companies that Dominate Federal Subsidies.”

Lower gas prices are nice, but geopolitics behind them suggest dangers

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I’ll say it up front–I don’t understand the complicated economics and geopolitics behind the rapid slide in the international price of oil.

But its clear that the there’s a lot going on, and a lot that we should be paying attention to, beyond the pleasant relief we feel at the gas pumps.

I searched for something like “geopolitics of oil price drop” and found lots of competing theories, some very disquieting if you worry at all about issues of war and peace.

NY Times columnist Tom Friedman has suggested the decline in oil prices could be part of a U.S. effort to undermine the economies of Russia and Iran (“A Pump War?“).

Friedman isn’t alone. For example, check this recent column from OilPrice.com (“Did The Saudis And The US Collude In Dropping Oil Prices?“).

Another theory is that Saudi Arabia is pushing prices lower, and not compensating by lowering production, in order to undermine the boom in U.S. shale oil production. The U.S. has increased its domestic oil production, but the boom relies on high oil prices to sustain the high-cost production techniques.

Here are some articles reflecting this perspective.

Financial Timnes, “Falling oil price raises questions on viability of shale.”

OilPrice.com, “Low Oil Prices Hurting U.S. Shale Operations.”

Business Insider, “The Pace At Which US Rig Counts Are Tumbling Is Unusually Intense.”

Then it starts getting complicated.

Reuters, “Saudi Arabia is playing chicken with its oil.”

The kingdom has two targets in its latest oil war: it is trying to squeeze U.S. shale oil—which requires higher prices to remain competitive with conventional production—out of the market. More broadly, the Saudis are also punishing two rivals, Russia and Iran, for their support of Bashar al-Assad’s regime in the Syrian civil war. Since the Syrian uprising began in 2011, regional and world powers have played out a series of proxy battles there.

While Saudi Arabia and Qatar have been arming many of the Syrian rebels, the Iranian regime—and to a lesser extent, Russia—have provided the weapons and funding to keep Assad in power.

Since the U.S. invasion of Iraq in 2003, the traditional centers of power in the Arab world—Egypt, Saudi Arabia and other Gulf states—have been nervous about the growing influence of Iran: its nuclear ambitions, its sway over the Iraqi government, its support for the militant groups Hezbollah and Hamas, and its alliance with Syria.

The conflict is now a full-blown proxy war between Iran and Saudi Arabia, which is playing out across the region. Both sides increasingly see their rivalry as a winner-take-all conflict: if the Shi’ite Hezbollah gains an upper hand in Lebanon, then the Sunnis of Lebanon—and by extension, their Saudi patrons—lose a round to Iran. If a Shi’ite-led government solidifies its control of Iraq, then Iran will have won another round.

Today, the House of Saud rushes to shore up its allies in Bahrain, Yemen, Syria and wherever else it fears Iran’s nefarious influence. And the kingdom is striking back at Iran, and Russia, with its most effective weapon.

Center for Geopolitical Analysis, “It’s dangerous to corner Russia too much.”

In any case, oil politics is complicated, interesting, and potentially dangerous.

Please share any good explanations or analyses if/when you find them.

NextEra politics, Kealoha poll, and PAR workshops on the Big Island

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The proposed takeover of Hawaiian Electric Industries by Florida-based NextEra is likely to result in the loss of many well-paid positions within the local utility as the company is integrated into the much larger mainland energy conglomerate. This might include outside consultants and lawyers who HEI has relied on in the past. But there’s another thing at work. The takeover would mark a major change in political orientation. In recent decades, HEI has leaned Democratic, while NextEra is well known of its major support of the Republican Party.

For example, NextEra contributed $1,158,933 to the National Governors Association during the 2014 election cycle and ranked at #7 among the largest corporate contributors, according to OpenSecrets.org. And if you missed it, yesterday’s New York Times reported that the National Governors Association has been secretly working with energy companies to attack and roll back federal regulation (“Energy Firms in Secretive Alliance With Attorneys General“).

During 2014, Florida Power and Light, NextEra’s major energy subsidiary, made contributions from its PAC that went to Republicans by a 2-1 margin, again according to OpenSecrets.org (69% to Republicans, 31% to Democrats).

NextEra Energy Resources followed a similar pattern, with $1,865,644 going to Republicans, compared to $816,715 to Democrats in recent elections, as compiled by FollowtheMoney.org.

Bottom line: This corporate merger could reverberate through the state in many different ways. It some respects, this shift of power could be something like what happened in the decade or two after statehood, as power of the Big Five was largely dismantled by the takeover of international corporate interests.

The Star-Advertiser is running one of their informal polls this morning. The Question: “Does Police Chief Louis Kealoha’s testimony in causing a mistrial in a family federal trial change your view of him?“.

I think you can vote without being a subscriber. After voting, you’ll see the results displayed. In initial results, the public has a dim view of the chief’s action.

For folks over on the Big Island, staff of the legislature’s Public Access Room will be over there next week to present a series of workshops to help people learn how to participate effectively in the legislative process. The workshops are being offered ahead of the 2015 legislative session, which begins January 21, if I’m not mistaken.

PAR’s workshops are between an hour to one-and-a-half hours in length, and are designed to be useful to both newcomers and veterans of the legislative process. Covered topics will include understanding the legislative process, delivering effective testimony, making sense of the calendar and deadlines, and an overview of the Legislature’s website. Renewed inspiration to be part of the solution will be the overriding theme.

You can find more information on the PAR website, or by calling 808/587-0478 (toll free from Hawaii Island = 974-4000, x 7-0478). It’s possible that additional workshops could be organized on request for interested community groups.

Hawaiian Electric deal begging for deeper reporting

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I’ve been hoping for better local coverage of the surprise announcement of the proposed sale of HEI to Florida-based NextEra Energy. So far, even much of the Day 2 reporting has been based on the news releases and slide presentations made yesterday.

This is, after all, the largest (or one of the largest) companies in the state, and this would undoubtedly be a major change in politics and economics. For example, how will Hawaii banks be impacted by the shift of control from Honolulu to the Florida-based NextEra? What do the HECO unions have to say?

But there are some nuggets available.

MarketWatch is reporting this morning that a law firm is investigating whether HEI shareholders are getting a fair deal.

NEW YORK, Dec 04, 2014 (BUSINESS WIRE) — Juan E. Monteverde, a partner at Faruqi & Faruqi, LLP, a leading national securities firm headquartered in New York City, is investigating the Board of Directors of Hawaiian Electric Industries, Inc. (“Hawaiian Electric” or the “Company”) HE, +14.93% for potential breaches of fiduciary duties in connection with the sale of the Company to NextEra Energy, Inc. (“NextEra”) NEE, -1.13% for approximately $2.6 billion in a cash and stock transaction. The Company’s stockholders will receive 0.2413 NextEra shares, and a one-time cash dividend payment of $0.50 for each share of Hawaiian Electric common stock they own.

The investigation focuses on whether Hawaiian Electric’s Board of Directors breached their fiduciary duties to the Company’s stockholders by failing to conduct a fair sales process and whether and by how much this proposed transaction undervalues the Company to the detriment of Hawaiian Electric’s shareholders.

Pacific Business News reported that HEI was not soliciting offers for the company and instead was approached directly by NextEra.

According to PBN’s Duane Shimogawa, Connie Lau, HEI’s CEO, said “there were no other companies engaged in discussions regarding a sale.”

Very interesting. Then how did the company value itself? Would a more competitive process have brought additional suitors? Would a local group have been able to play at this level?

According to the Miami Herald blog:

The merger raises lots of questions about what this means for the Juno Beach-based company. Hawaiian law requires utilities to meet get 70 percent of their supply from clean energy by 2030 and, in Florida, NextEra’s largest subsidiary, FPL, has aggressively fought off attempts to establish a similar clean energy goal here.

NextEra has also effectively blocked the emergence of competitive distributive energy generation in Florida with a dominant, take-no-prisoners approach to regulation and politics, while Hawaii has merged as one of the nation’s top one of the markets where competitive distributive generation is becoming a reality.

Forbes contributor William Pentland points out that “Hawaii has become a flash point in the battle over the future architecture of the electric grid. The relentless rise of power prices in the state has accelerated customers’ adoption of distributed generation.”

That’s in stark contrast to Florida where FPL and its parent, NextEra, has kept wholesale competitors out by controlling access to the transmission grid except for incumbent utilities.

“NextEra’s expansion into Hawaii is likely a mixed blessing for the distributed generation business,” Pentland wrote.

According to the Star-Advertiser:

The sale would move control of Hawaii’s leading electric company to the mainland for the first time since it was founded in 1891 by King David Kalakaua.

Reaction was mostly cautious or skeptical among Hawaii renewable energy advocates and political leaders who voiced concern over the shift of HEI’s leadership to a state 5,000 miles away.

According to the South Florida Business Journal: “NextEra Energy is South Florida’s fourth-largest public company, according to Business Journal research. The company reported $15.1 billion in 2013 revenue, up from $14.3 billion the year before.”

Meanwhile, keep a close watch on what Henry Curtis comes up with on his Ililani Media.

I wonder what the local group that was exploring a bid for the company thinks about the price the current merger proposal is based on?