NextEra Energy, Inc. (NEE) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Financial Performance: NextEra Energy reported a significant increase in earnings, with more than 9% year-over-year growth and a 9.4% increase in adjusted earnings per share over the first six months.
• Capital Investments and Cost Savings: FPL's smart capital investments in solar generation and battery storage, combined with generation modernizations, have saved customers nearly $16 billion since 2001. Project Velocity identified record $460 million of run rate cost savings opportunities through 2027.
• Growth in Florida and Beyond: Florida's rapid population growth has led to a 12% compound annual growth rate in FPL's regulatory capital employed since 2022. Energy Resources added over 3,000 megawatts of new renewables and storage projects to the backlog this quarter, including agreements with Google.
• Transmission and Renewable Energy Positioning: NextEra Energy's strategic focus on delivering low-cost clean energy and storage, along with building new transmission to support new generation, positions the company well for future growth.
• Strong Origination Quarter: Energy Resources had a strong quarter of new renewables and storage origination, adding 3,000 megawatts to the backlog, marking the second-best origination quarter ever.

Pessimistic Highlights

• Increased Expenditures and Reserve Amortization: Due to accelerated growth and capital investments, FPL's reserve amortization mechanism has been utilized faster than expected, leading to a need for recovery of increased expenditures in the next rate case filing.

Company Outlook

• Financial Expectations: NextEra Energy aims to deliver financial results at or near the top of its adjusted earnings per share expectation ranges each year through 2027. The company expects roughly 10% average annual growth in FPL's regulatory capital employed over the current rate agreement's four-year term.
• Renewable Development Program: Energy Resources expects the backlog additions to go into service over the next few years and into 2028, with a 300 gigawatt pipeline ready to respond to customer demand.
• NextEra Energy Partners Growth: NextEra Energy Partners expects 5% to 8% growth per year in LP distributions per unit through at least 2026, with a current target of 6% growth per year.

Q & A Highlights

• Q: Can you provide more color on the increased usage of the reserve amortization and earned ROE? (Steve Fleishman, Wolfe Research)

  A: We've had significant population growth in Florida, leading to a 12% compound annual growth rate in FPL's regulatory capital employed since 2022. This has led to an increased utilization of the reserve amortization mechanism, with a $0.06 EPS impact in 2024 and 2025, already accounted for in our financial expectations. (John Ketchum)

• Q: Could you discuss the Blackstone financing and the size of the portfolio sold? (Steve Fleishman, Wolfe Research)

  A: It was a 1.6 gigawatt portfolio of renewable assets, with Blackstone investing capital alongside us. This demonstrates strong demand for NextEra assets. (John Ketchum)

• Q: On NEP, can you provide a sense of timing and range of options you're thinking about for securing a competitive cost of capital? (Shahriar Pourreza, Guggenheim Partners)

  A: We're exploring all alternatives, including private capital, to address the back-end setups in a constructive way. We have time in 2024 and don't need an acquisition-related financing to meet our 6% target. (Brian Bolster)

• Q: How are you navigating challenges in the renewables space, especially with supply chain bottlenecks? (Shahriar Pourreza, Guggenheim Partners)

  A: We're not impacted by AD/CVD filings or tariffs, thanks to our leverage over suppliers and risk transfer strategies. Our scaled program and relationships with suppliers position us well. (John Ketchum)

• Q: Can you speak to asset recycling and how you're thinking about the strategic positioning of your nuclear portfolio? (Julien Dumoulin-Smith, Jefferies)

  A: We're focused on our core business of wind, solar, battery storage, and transmission. We're looking at targeted capital recycling around our gas infrastructure business and transmission. Duane Arnold's restart is being considered with a focus on risk assessment. (John Ketchum)

• Q: How does the recent political landscape change affect your renewable development plans, especially with potential modifications to the IRA? (Carly Davenport, Goldman Sachs)

  A: We expect the clean energy credits within the IRA to remain in place, given their benefits to republican states, job creation, and energy independence. The incentives favor low-cost renewables, which are crucial for meeting growing power demand. (John Ketchum)

• Q: Is political instability impacting your ability to sign contracts for future projects? (Durgesh Chopra, Evercore ISI)

  A: Political instability is not curtailing demand at all. If anything, concerns about modifications to incentives would only accelerate demand, which we do not believe will happen. (John Ketchum)