NEXTERA ENERGY INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• John Ketchum's remarks: NextEra Energy had strong operational and financial performance in 2024, with adjusted earnings per share of $3.43, up over 8% from 2023. FPL and Energy Resources have executed well. FPL has been investing in a stronger, smarter and more storm - resilient grid, avoiding more than 2.7 million outages in 2024. Energy Resources had another record year of new renewables and storage origination, adding more than 12 gigawatts to its backlog. NextEra Energy announced a framework agreement with GE Vernova to build natural gas - powered generation solutions.
• Brian Bolster's remarks: For FPL, 2024 full year adjusted earnings per share increased $0.12 versus 2023, with regulatory capital employed growth of approximately 10%. FPL is preparing to file a base rate case proposal covering 2026 - 2029. For Energy Resources, it reported full year adjusted earnings growth of more than 13% year - over - year, with contributions from various business segments, and had a record year in origination with over 12 gigawatts added to the backlog.

Segment Performance

• FPL: For the full year 2024, FPL's adjusted earnings per share increased $0.12 versus 2023. The principal driver was regulatory capital employed growth of approximately 10%. In the fourth quarter of 2024, FPL's retail sales increased 1.1% from the prior year on a weather normalized basis, and for the full year, it increased 1.9%. FPL's capital expenditures were approximately $1.8 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $8.2 billion. FPL placed into service more than 2.2 gigawatts of new cost - effective solar in 2024 and expects to add more than 15 gigawatts by 2033, saving customers over $16 billion since 2001. Its non - fuel O&M cost per customer is best - in - class.
• Energy Resources: Full year adjusted earnings growth of more than 13% year - over - year. Contributions from new investments increased by $0.48 per share, existing clean energy assets by $0.03 per share, gas infrastructure business decreased by $0.08 per share, customer supply and trading business decreased by $0.04 per share, and other impacts decreased by $0.24 per share year - over - year. Energy Resources added more than 12 gigawatts of new renewables and battery storage projects to its backlog in 2024, with its renewables backlog now standing at more than 25 gigawatts.
• Consolidated: For the full year, adjusted earnings per share from the Corporate and Other segment decreased by $0.01 per share year - over - year. Cash flow from operations grew by more than 17% in 2024. NextEra Energy has $28.5 billion of interest rate hedges in place. Funding plans for 2024 through 2027 remain consistent, and it has met or exceeded financial expectations for each of the last 15 years.

Guidance

• FPL is expected to have an average annual growth in regulatory capital employed of roughly 10% over the four year term of its current rate agreement running through 2025.
• NextEra Energy's funding plans for 2024 through 2027 remain consistent. It expects to deliver financial results at or near the top end of its adjusted EPS expectation ranges in 2025, 2026 and 2027. From 2023 to 2027, it continues to expect that its average annual growth in operating cash flow will be at or above its adjusted EPS compound annual growth rate range, and it will continue to expect to grow its dividends per share at roughly 10% per year through at least 2026 off a 2024 base.

Risks

• Actual results could differ materially from forward - looking statements if key assumptions are incorrect, subject to risks and uncertainties discussed in the earnings news release, conference call, Risk Factors section of the presentation or latest reports and filings with the Securities and Exchange Commission. Risks include interest rate environment changes, project development and permitting risks, and power demand change risks.

Question and Answer

Q: On the GEV framework agreement announcement, could you maybe give a little more color on, would you co - own projects with them and also just would you only be doing contracted projects, long - term contracts or would you consider doing kind of new build merchant like in ERCOT or PJM?

A: Steve, thanks for the question. First of all, we're very excited about this framework agreement with GE Vernova. The idea would be to go after and target large load customers and do it in an integrated way where we can combine gas - fired generation with renewable battery storage solutions. In terms of the ownership, yes, they would be co - owned as part of a 50 - 50 joint venture. These would be long - term contracted assets as well. We could contemplate in the right situation with the right customer, also potentially a build on transfer on gas - fired generation as well if it was part of a larger transaction that included renewables and other growth opportunities.

Q: Just the new administration and just the kind of, I guess, the announcement on the wind -- limits on wind leases on federal lands and then also on kind of where things stand on IRA risks?

A: Sure, Steve. Let me go ahead and take that. First of all, with the executive orders as a whole, very consistent with our beliefs that we need electrons. We need electrons right now and we need to unleash the American energy industry and achieve energy dominance. And as part of achieving energy dominance, we're going to need all of the above solutions. We can't afford to take any options off the table. We're going to need gas. We're going to need nuclear. We're going to need renewables. We're going to need storage as well. But we can't wait because that demand is here today. On IRA, it's all about electrons and needing electrons right now. The power demand is here today. We need to serve it. Renewables play a very important role in all forms of energy solution. We're going to need gas to back up renewables. We'll have nuclear, later next decade. But right now, if we need solutions that are going to deliver electrons to the grid, so we don't have a power crisis. And that is the thing that is not being overlooked at all by folks that we are meeting with in Congress. And then there's the other factor that, look, this is a terrific American industry. We are creating a substantial number of jobs right here in our backyard and 80% of those jobs are -- and investments are incurring in Republican states. Take our own CapEx. We've been top five infrastructure investor over the last five years, fully expect that to be the case over the next four years. NextEra is going to invest $120 billion over the next four years. That's our expectation. And again, 80% of those dollars is going into Republican states, that’s a lot of manufacturing, a lot of job creation, a lot of property taxes, a lot of economic benefits. So those are the messages that we're trying to make sure we get across in Washington around the IRA discussion.

Q: Hey, guys. Good morning. Just real quick, John, I know you noted the time to market for nuclear is between the '27 and '30 timeframe. I guess, where does Duane Arnold fall within that timeframe? And also, there's obviously one restart out there and there's a cost estimate. Is there anything you can provide just directionally for Duane Arnold restart versus the comp that's out there? And would you potentially look to expand the site if there's support from a counterparty or the federal government?

A: Yeah. Hey, thanks, Shar, for the question. So, happy to say that we have made our filing with the NRC around the licensing to recommission that facility. We have more work to do. Some of that work includes work with customers. I'm certainly not going to put the cost estimate out there that would hurt our negotiating position in those discussions. And you could rest assured that we are in active discussions with customers today. There's a lot of interest in the plant as we look forward. But my comments around nuclear are really, look as one of the largest nuclear operators in the country, we obviously know a lot about it. I think the near - term opportunities are around the recommissioning with Palisades of Crane (ph) of Duane Arnold as well. And those are really the ones that I think I would confine to the timeframe of being over the next three, four, five years. As you think about next decade, and my comments around next decade, those are really more around the small module reactors, which are still a first of a kind technology have some uncertainty in terms of developing and permitting and the ability of them to be able to be delivered to market on - time and on - schedule. And so as we think about small module reactors and we have a team internally at NextEra Energy that is focusing on nothing, but small modular reactors. We'd love to be able to develop them. But as we get into them, there are some practical limitations. So if we're thinking as a country about their ability to contribute to all the power demand that we see that's here right now, my only comment is that I would think about them more as a next decade solution probably middle of the latter part of the next decade if we're thinking about small modular reactors at scale and cost continues to remain a wildcard.

Q: Hey, good morning. Thanks for all the updates. So hey, just a 2% change to customers for FPL in this upcoming rate case definitely stands out in a positive way. Just wanted to see if you had any updated thoughts on how you're thinking about the surplus reserve mechanism? And then also just how are you kind of thinking about earned ROEs at FPL in '25?

A: Great. Thank you. So we are -- the growth that we saw this last quarter, the growth that we saw in the year was certainly positive. But it's not just this past year, we've been seeing it really since the pandemic. Our expectations going into the next rate case over the next four years is that growth may come down a little bit over the next four years because of what we saw during the pandemic. But we still believe it's going to be fairly strong growth in our service territory. And that's why our expectations for the '26, '29 time period for capital investing in the business would be above the roughly $36 billion that we are going to put in over the four year settlement agreement that ends at the end of '25. So a lot of that detail will come out here in the next -- that's probably about six weeks now because we expect to file our rate case at the end of February. Your question regarding the reserve mechanism. We're sitting at roughly $800 million after using $400 million or so in 2024. So we feel good. We're certainly not going into 2025 believing that all of the risks that we use as the surplus mechanism are behind us. We've had to tap that reserve mechanism for a lot of inflation, higher interest rates, a lot more growth in our area, and therefore, a lot more capex expenses that we expected. So with the 11.4% ROE at the end of 2024, I expect there might be a little bit of upside to that 11.4% in 2025, but it's obviously early. We want to make sure that we get through this year in good shape. And we feel really positive about the case that we are going to present to our regulators in February because we've been doing the right things for our customers. So as long as we do that, I think we'll be okay.

Q: Hey, good morning. Thanks so much for taking the questions. Just wanted to throw in a couple of follow - ups. The first one just on some of the renewables conversation. Is there anything you can share on how this is or is not impacting the conversations that you're having with customers? Are they seeing any concern about the ability to build these projects or the economics of them going forward if you see some change on the policy side?

A: So, Carly, the answer to that question is, no, it hasn't hurt any of our discussions with customers. The only thing customers are concerned about is, making sure that these projects get built because they need them. They have made decisions to already shut down existing generation if these projects were for any reason to be delayed, which we don't believe they will be, that would have a significant impact on their ability to provide power to their own customer base. I'm talking about utilities and co - ops and municipalities who need these electrons right now. And then also with our C&I customers. I mean, these commercial and industrial customers have made investments in manufacturing facilities, semiconductor chip facilities, their chemical companies, I mean, you name it. Across the board, they've invested in infrastructure and are counting on the electrons to show up. So I think it's actually quite the opposite.

Q: Hi, good morning. Just wanted to continue with some of the themes you talked about before, but regarding your conversations with hyperscalers at this point, just wondering if you're seeing any kind of changes in the tone or thoughts as far as the renewables, clearly still carbon - free premiums there, but as far as openness to gas, just wondering if there's any change in tone there or thoughts in your -- from your customers when you're talking about their -- what they're looking to achieve.

A: Yeah. There's -- thanks for the question, Jeremy. I certainly appreciate it. And I think there's a lot of discussion about how do we get the resources that we need in the timeframes in which we need it and matching that with some of the other goals that they may have either at corporate levels or certainly state levels. I think top of mind continues to be what John highlighted, which is speed to market with the resources that are available today at the lowest cost with highest confidence and be able to meet those commitments, including the meet the commitments of those customers. So, we see demand across the board where we've seen a lot of increase in demand for natural gas, it really is to enable that capacity value where energy still can be met in many places, least cost in terms of resource availability from wind and solar resources. So there's a great pairing there that many of our customers are really interested in. So it's a real pragmatic view. I think it can't be underestimated how much this industry has changed in a very short amount of time and really the last 15 months to 18 months realizing that demand is significant. You all are well - versed in knowing that it takes three years to five years to develop resources. And we've talked a lot about demand, but it takes time to build all this back up. So what's available? As John highlighted, the renewables and storage is top of mind. What will be needed longer - term are making sure that the capacity resources are there. And of course, we and others are very interested in seeing continued diverse supply options available to our customers, including small module reactors and other technologies that we hope to be more relevant and at bigger scale in the 2030 mid - timeframe and beyond.