Companies continue to embrace the back-to-basics strategy, and investors seem to think that it is paying off.
The Ultimate CEOs: Lewis Hay III, FPL Group
The CEO Power Forum: Not all utility CEOs are created equal...
nuclear plants went through, where they never were built or partially built. Because of anti-nuclear interests, construction was halted, or the plants never got to run and then the capital costs kept compounding. A plant that should have been $1 [billion] or $2 billion ended up costing between $5 [billion] and $7 billion. No CEO wants their shareholders to have to suffer through that again. So there are not a lot of good alternatives at this point.
Fortnightly Which is the lesser evil as far as fuel mix? Which of the limited options do you choose from?
Hay We have a natural-gas plant at out Turkey Point site that is under construction. I'd have to say that is still something that we favor because it is something that we know. But what I'm trying to do is improve our fuel diversity in our mix. Even though there is some uncertainty associated with coal, we have filed with the public service commission plans to build some clean coal plants going forward. I think the key is to keep a balanced portfolio so if any one fuel becomes disfavored for one reason or another, you have other fuels to offset that.
Fortnightly Are you hopeful that LNG will lower natural gas prices through more supply? When do you hope to have your LNG project online?
Hay Yes I do. I am very hopeful about LNG. We have an LNG project that we are working on with several partners that would definitely involve a re-gasifier in the Bahamas and then a pipeline underwater that would connect with the existing natural gas pipeline infrastructure in South Florida. But we have had one regulatory hoop after another to jump through, and the projects turned out to be much more difficult than I think anyone envisioned.
To the extent that we can bring liquefied natural gas into Florida, that would improve the reliability of gas supply into Florida [and] help the supply-demand balance. ... Since we don't have all our permits at this point, there is no timeline. But we are shooting for the 2009, 2010 timeframe.
Fortnightly Private equity groups have in the last few years purchased an unprecedented number of generation power plants (see "Business & Money"). How do you view this new subset or this new constituency in the energy industry?
Hay I have mixed views about it. Given some of the prices that have been paid, they must have a lower cost of capital than companies such as ours. But I don't know that for a fact. Obviously, it creates more competition for assets, and since part of our strategy is to grow our portfolio through asset acquisition, at the end of the day it creates more competition. I guess I would prefer, all things being equal, not to have that extra competition, but that's the nature of the business we're in. If it weren't private equity it would be somebody else bidding on the plants.