NEXTERA ENERGY INC Q3 FY2024 earnings call

Management Statement and Operational Highlights

• FPL and Hurricanes: Addressed the impacts of Hurricanes Helene and Milton, restoring power quickly with over 30,000 workers. Smart grid investments avoided 185,000 outages during Helene and 554,000 outages during Milton. Solar panels sustained minimal damage despite exposure to storm conditions.
• Industry Demand: Forecasts a 6x increase in power demand over the next 20 years. Renewables and storage are low-cost, fast-to-deploy solutions. Added approximately 3 gigawatts of renewables and storage to the backlog for the second quarter in a row, with a total of 11 gigawatts over the past year. Framework agreements with Fortune 50 and Entergy for up to 15 gigawatts potential.
• Nuclear and Gas: Nuclear has practical limitations with only a few plants economically recommissionable. Gas needed for capacity, but storage pairs well with renewables and has no permitting hurdles.

Segment Performance

• FPL: Third quarter earnings per share increased by $0.05 year-over-year. Regulatory capital employed grew approximately 9.5% year-over-year. Retail sales increased 1% from the prior year comparable period, with a 1.6% weather normalized growth. Restoration costs are estimated at approximately $1.2 billion to be recovered via a surcharge. Reported ROE for regulatory purposes for the 12 months ending September 2024 is ~11.8%, with expected ROE of 11.4% for the 12 months ending December 2024 and 2025.
• Energy Resources: Adjusted earnings grew approximately 11% year-over-year. Adjusted EPS increased by $0.04 year-over-year. New renewables and storage origination added approximately 3 gigawatts to the backlog, with the backlog now over 24 gigawatts. Contributions from new investments increased $0.15 per share year-over-year, while customer supply and trading decreased $0.10 per share year-over-year due to normalization of origination activity and margins.
• NextEra Energy Partners: Third quarter adjusted EBITDA was $453 million and cash available for distribution was $155 million, both down year-over-year due to divestiture and debt payments. The run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 is expected to be in the range of $1.9 billion to $2.1 billion. The partnership is evaluating alternatives for its convertible equity portfolio and capital structure.

Guidance

• FPL expects approximately 10% average annual growth in regulatory capital employed over the current 4-year rate agreement (through 2025).
• Energy Resources expects backlog additions to go into service over the next several years.
• NextEra Energy Partners expects the run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 to be in the range of $1.9 billion to $2.1 billion. Plans to provide updated distribution and cash available for distribution expectations by the fourth quarter 2024 call.

Risks

• Uncertainties in regulatory approvals for storm restoration costs.
• Potential changes in the YieldCo model and capital allocation strategies affecting NextEra Energy Partners.
• Supply chain issues and delays impacting project timelines.
• Fluctuations in gas prices and market conditions affecting customer supply and trading business.

Question and Answer

Q: Maybe if it's possible, I would love to get more color on the framework agreements.

A: John Ketchum and Rebecca Kujawa discuss flexibility in allocating assets, close partnership with counterparties, and broad-based demand from non-tech Fortune 50 companies.

Q: Just on the Duane Arnold. Is there any milestones or key steps that we should be watching out for on that opportunity?

A: John Ketchum mentions ongoing assessments, working with NRC and stakeholders, with interest from data center customers.

Q: Just on the NEP side, I mean, obviously, there's been a subtle change in language around timing, obviously, concluding the financial review by the year-end call.

A: John Ketchum discusses review of capital allocation, considering deploying more capital towards cash flow growth, with preference to remain owner of NextEra Energy Partners.

Q: How do you frame the discussion on safe harboring assets heading into the election outcome, whatever it may be?

A: John Ketchum states they have fully derisked their safe harbor program through 2029 and are forward-looking on supply chain issues.

Q: Just want to turn to the near backlog additions. It looks like 3 gigs has been added the past few quarters here, and it looks like about 11 over the past year.

A: Rebecca Kujawa talks about non-linear backlog additions, positive tailwind, and continuing to optimize market share with high-return projects.

Q: Just a quick couple of follow-ups actually. So first on Duane Arnold, I don't want to get too bogged down on the details, but one question I had is about transmission constraints.

A: John Ketchum mentions having a large pipeline allows converting queue positions to different technologies, not concerned about transmission.

Q: Just a subtle question about the quarterly results. Customer supply was a negative $0.10 year-over-year drag.

A: John Ketchum discusses gas price volatility and normalization affecting customer supply and trading business