Alliant Energy and NextEra Energy to Cease Nuclear Power Plant

Alliant Energy (NYSE:LNT), a public utility company that is engaged in the provision of electricity announced on Friday (July 27) that it is winding down its Duane Arnold Energy Center (DAEC) nuclear plant in 2020 to pursue renewable energy projects.

Together with the majority owner of DAEC, NextEra Energy Resources (NYSE:NEE), the companies have agreed to shorten the terms of their power purchase agreement (PPA) by five years.

Alliant Energy, which has a license to operate Iowa’s only nuclear power plant until 2034, says that the move to retire the plant in favor of wind energy would save customers nearly US$300 million over 21 years.

The transactions between the two companies includes a US$110 million buyout payment to NextEra Energy Resources for covering the cost of shortening the DAEC’s PPA from 2025 to 2020 and repowered wind PPAs.

Patricia Kampling, CEO of Alliant Energy said in the release that DAEC has served Iowa customers for decades.

“Partially replacing energy from Duane Arnold with NextEra’s additional wind investments in Iowa will bring significant economic benefits to our customers,” Kampling said in therelease.

NextEra Energy will supply 340 MW of wind energy to Alliant Energy’s customers from four of its repowered facilities.

It was also noted that NextEra would invest approximately US$650 million in existing and new renewable generation by 2020 which also includes US$250 million to repower the four wind facilities.

NextEra Energy Resources added 300 MW of Wind, 692 MW of Solar and 90 MW of new battery storage projects to its backlog in the second quarter. The company said that 99 MW of wind, 21 MW of solar and 15 MW of storage from the backlogs will be delivered this year.

In its 2017 fourth quarter results, NextEra Energy said that an after-tax impairment of US$25 million were recorded as it believed that DAEC would not operate beyond 2025. The company in late 2017 concluded that the facility’s primary customer will not extend the contract beyond that period and thus reviewed DAEC’s book value and retirement obligation.

Meanwhile, Alliant Energy has been consistent with its focus on renewable energy. In May, the company announced its plans of investing US$2 billion across Iowa and Wisconsin in cost competitive wind energy by 2020. Alliant Energy is planning to reduce its carbon dioxide levels by 40 percent by 2030 from its 2005 levels.

However, the closing of DAEC would result in 500 job losses with NextEra Energy Resources working with Alliant Energy and others to identify opportunities for these employees.

NextEra Energy Resources also said that a comprehensive plan has been laid out for these employees which includes retirement program and placement of these employees in other jobs throughout the company.

“Importantly, as we proceed into the next decade, several hundred jobs will remain at the plant for a number of years as a result of what will be a lengthy decommissioning process, along with the creation of new jobs through our continued investment in Iowa,” Armando Pimentel, president of NextEra Energy said in a release.

Following the announcement, shares of Alliant Energy lost 2.5 percent over the two day trading period. Alliant Energy closed the trading on Monday (July 30) at US$42.31. The stock has a neutral rank on TradingView with eight verticals in favor, eight against and 10 neutral. On TipRanks, Alliant Energy has a analyst target price of US$44.

Meanwhile, the shares of NextEra Energy lost 1.05 percent over the two day trading period. NextEra Energy closed the trading at US$166.23 on Monday. On TipRanks, the stock is over the analyst target price of US$156.60 but still has a strong buy ranking. NextEra Energy has a sell ranking on TradingView with nine verticals against, seven in favor and 10 neutral.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.