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    NEE
    Earnings call· Mar 2025(Q1 FY25)

    NEXTERA ENERGY Q1 FY25 earnings call NEE

    Apr 23, 2025 Source

    Executive summary

    NextEra Energy Q1 FY25 — Strong Start with Strategic Tariff and Financing Management

    NextEra Energy delivered solid Q1 FY25 results, driven by strong performance across FPL and Energy Resources. The company emphasized an 'energy realism and pragmatism' approach to meet unprecedented electricity demand, leveraging low-cost renewables and storage as a critical bridge. Strategic supply chain management and contractual protections have significantly mitigated tariff exposure, while a robust hedging program addresses interest rate risks. Management expressed confidence in achieving the higher end of its adjusted EPS expectations, highlighting its unique position to navigate market complexities and capitalize on growth opportunities.

    Highlights

    5

    • Adjusted earnings per share increased by nearly 9% year-over-year.

    • FPL placed 894 megawatts of new solar into service, contributing to 7.9 GW of utility-owned solar.

    • Energy Resources originated approximately 3.2 gigawatts of new renewables and storage projects, marking the fifth time over the past 7 quarters exceeding 3 GW.

    • NextEra Energy estimates less than $150 million in tariff exposure through 2028 on over $75 billion in expected capital spend, with potential to reduce to $0.

    • The company has nearly $37 billion of interest rate hedges in place, with programmatic hedging at a risk-free rate of roughly 3.9%.

    Concerns

    4

    • The cost to build a gas-fired plant has tripled in the last few years and is poised to increase further due to tariff exposure, now estimated at $2,600-$2,800 per kW.

    • SMR technology is still 10 years away at scale in the best of scenarios and at a much higher price point than gas-fired generation.

    • Energy Resources' existing clean energy portfolio declined $0.03 per share during the quarter.

    • Higher interest costs decreased Energy Resources' contributions by $0.06 per share, leading to a $0.05 per share decrease in 'all other impacts'.

    Guidance & targets

    10
    CategoryTargetConfidence
    Adjusted EPS
    at or near the top end of expectation ranges
    high materiality
    High
    Operating Cash Flow Growth
    at or above our adjusted EPS compound annual growth rate range
    medium materiality
    High
    Dividends per Share Growth Rate
    roughly 10% rate per year
    high materiality
    High
    FPL Regulatory Capital Employed Growth
    more than 10% average annual growth
    high materiality
    High
    FPL Full Year Capital Investments
    between $8 billion and $8.8 billion
    high materiality
    High
    FPL Customer Accounts Added
    roughly 335,000 new customer accounts
    medium materiality
    High
    FPL Investment Plan
    nearly $50 billion
    high materiality
    High
    FPL New Generation and Battery Storage
    more than 25 gigawatts
    high materiality
    High
    FPL Typical Residential Customer Bill Growth
    about 2.5%
    medium materiality
    High
    Energy Resources Generation Storage Portfolio
    more than 70 gigawatt
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Florida Power & Light Company (FPL)
    FPL's performance was primarily driven by regulatory capital employed growth. The utility continues to expand its solar portfolio and experience strong customer growth, contributing to retail sales increases.
    EPS increase: $0.07 year-over-yearRegulatory capital employed growth: 8.1% year-over-yearCapital expenditures (Q1): $2.4 billionReturn on equity (regulatory, 12 months ending March 2025): 11.6%Reserve amortization utilized (Q1): $622 millionReserve amortization balance: $274 millionNew solar placed into service (Q1): 894 megawattsOwned and operated solar portfolio: 7.9 gigawattsAverage number of customers increase: nearly 108,000 from comparable prior year periodRetail sales increase (reported): 1.8% year-over-yearRetail sales increase (weather-normalized): 0.6% year-over-year
    		————
    NextEra Energy Resources
    Energy Resources saw strong adjusted earnings growth, largely from new investments. The segment continued to add significant renewables and storage to its backlog, reflecting diverse demand. Higher interest costs impacted overall contributions.
    Adjusted earnings growth: nearly 10% year-over-yearContributions from new investments increase: $0.12 per share year-over-yearExisting clean energy portfolio decline: $0.03 per shareCustomer supply business decrease: $0.01 per shareNextEra Energy Transmission contributions increase: $0.01 per share year-over-yearAll other impacts decrease: $0.05 per share (driven by $0.06 higher interest costs)Gas pipelines decline: $0.01 per shareUpstream gas infrastructure decline: $0.01 per shareNew renewables and storage originated: 3.2 gigawattsBacklog: 28 gigawatts (after 0.7 GW placed in service)Backlog additions from commercial and industrial customers: 40%Backlog additions from power companies: 60%Battery storage additions: nearly 1 gigawatt
    		————

    Operational metrics

    19
    Cumulative Demand for New Generation (US)
    450 gigawatts
    between now and 2030

    Expected cumulative demand across all sectors of the U.S. economy.

    New Gas Generation Online (US)
    75 gigawatts
    between now and 2030

    Expected new gas capacity to come online, significant but insufficient to meet total demand.

    Gas-Fired Plant Construction Cost Increase
    tripled
    last few years

    Cost increase due to short supply of gas turbines, high demand, and difficulty re-establishing skilled workforce.

    Coal Plant Deferral Capacity
    40 gigawatts
    potential

    Maximum additional capacity if every coal plant slated to retire was kept online, still far short of total demand.

    FPL New Customer Accounts (20 years)
    1.3 million30% larger than 2005
    last 20 years

    Reflects Florida's population growth and FPL's expansion.

    FPL Solar and Battery Installed Capacity
    8.4 gigawatts
    current

    Total solar and batteries installed across Florida by FPL.

    FPL Customer Savings from Generation Strategy
    $16 billion
    since 2001

    Savings from avoided fuel costs due to FPL's generation strategy.

    Energy Resources Tariff Exposure
    $150 millionless than 0.2% of $75B capital spend
    through 2028

    Estimated tariff exposure after supplier contractual protections, before exercising customer contractual protections.

    Interest Rate Hedges
    $37 billion
    current

    Hedges in place to manage interest rate exposure, including programmatic hedging after reciprocal tariffs were announced.

    FPL Solar Mix
    9% to 35%
    2024 to 2034

    Expected increase in FPL's solar generation mix based on the 10-year site plan.

    FPL Residential Bill vs. National Average
    25% below
    projected

    Expected bill level compared to the projected national average.

    FPL Residential Bill vs. 20 Years Ago (Inflation Adjusted)
    20% lower
    projected

    Expected bill level compared to 20 years ago, adjusted for inflation.

    Gas Plant Cost per kW (Analyst Proxy)
    $2,400
    Development Day

    Analyst proxy for gas plant cost at Development Day, now estimated higher.

    Gas Plant Cost per kW (Current Estimate)
    $2,600 to $2,800
    today

    Current estimated cost, factoring in tariffs, for gas-fired plants.

    45x Investments in Republican Jurisdictions
    80%
    current

    Share of 45x investments going into Republican jurisdictions, highlighting political support for tax credits.

    Household Income Increase from Transferability
    12%
    potential

    Calculated benefit to utility customers from the ability to transfer tax credits.

    Tax Equity Providers
    doubling
    last 2 years

    Increase in tax equity providers looking to work with NextEra Energy, indicating a 'flight to quality'.

    Combined Cycle Unit Build Time
    4.5 years to 6 or longer
    current

    Increased timeline for building combined cycle gas units.

    Energy Resources Other Impacts Decrease
    $0.05year-over-year
    Q1 FY25

    Decrease in 'all other impacts' for Energy Resources, primarily due to increased interest expenses.

    Industry KPIs

    9
    MetricValueDetails
    Retail sales growth1.8%%
    Adjusted operating EPSnearly 9%%
    Dividend per share growthroughly 10%%
    New gas generation capacity75 gigawattsGW
    Regulatory rate base growth8.1%%
    Battery storage capacity pipeline7.6 gigawattsGW
    Large load data center demand pipeline—
    Renewables storage development backlog28 gigawattsGW
    CAPEX multi year capital investment plan$50 billionUSD

    Orderbook & backlog

    3
    Energy Resources Renewables and Storage Backlog28 gigawattsQ1 FY25

    3.2 GW added, 0.7 GW placed in service

    Includes 40% from commercial and industrial customers and 60% from power companies. Nearly 1 GW of additions were battery storage.

    FPL 10-Year Site Plan Solar Generation Need17 gigawattsApril 2025

    Projected need for cost-effective solar generation across FPL's service territory over the next decade.

    FPL 10-Year Site Plan Battery Storage Deployment7.6 gigawattsApril 2025

    Planned deployment of battery storage to provide cost-effective capacity, complementing solar additions.

    Deals & partnerships

    1
    GE VernovaFramework agreement for customer origination, particularly around large-scale load

    Ongoing work on customer origination, including hosting joint events for companies across various sectors to advance opportunities, especially for hyperscalers.

    Capital programs

    2
    FPL 2025-2029 Investment Planunderway$50 billion
    Start: 2025

    Benefit: Meet growth, enhance reliability, add >25 GW new generation/storage by 2034

    Plan to invest in generation, transmission, and distribution infrastructure to meet Florida's long-term growth and reliably serve customers.

    FPL Full Year Capital Investmentsunderway
    Period spend: $8 billion to $8.8 billion
    Spent to date: $2.4 billion (Q1 FY25)
    Start: FY25

    Expected capital investments for FPL for the current fiscal year.

    Risks & headwinds

    5
    Gas-Fired Plant Construction Costs and Tariffscurrent and near-term

    Cost to build a gas-fired plant has tripled in recent years, now estimated at $2,600-$2,800 per kW, poised to increase further due to tariff exposure.

    Mitigation: NextEra's strategy focuses on renewables and storage as a bridge; diversification of supply chain and contractual protections for its own projects.

    Skilled Workforce Shortage for Gas Plantscurrent and ongoing

    Difficulty re-establishing the highly skilled workforce (1,000 workers across dozens of niche trades) required to build complex gas power plants, leading to high washout rates and upward pressure on prices and build times.

    Mitigation: Not explicitly stated for the industry, but NextEra emphasizes its own diverse energy capabilities.

    SMR Technology Availability and Costlong-term (10+ years)

    SMR technology is still 10 years away at scale in the best of scenarios and at a much higher price point than gas-fired generation.

    Mitigation: NextEra is evaluating limited opportunities like restarting Duane Arnold, but acknowledges the long-term nature and cost of SMRs.

    Higher Power Prices from Electricity Demandcurrent and future

    Enormous electricity demand in the United States creates challenges, and 'not getting this right risks higher power prices'.

    Mitigation: NextEra's 'energy realism and pragmatism' approach, leveraging low-cost renewables and storage, and advocating for balanced energy policy.

    Uncertainty around Tax Credit Transferabilitynear-term legislative cycle

    Potential for legislative changes to tax credit transferability, which is crucial for monetizing credits and passing benefits to customers.

    Mitigation: NextEra has a contingency plan to use tax equity financing, noting a 'flight to quality' from tax equity providers, and actively advocates in Washington for transferability.

    What to watch in Q2 FY25

    5

    FPL Rate Case Outcome

    Q4 FY25
    CurrentTestimony submitted Feb 28, quality of service hearings in May, technical hearings in mid-August.
    TargetCommission rulings on revenue requirements and rates, potential settlement.

    Why it matters

    The outcome of the rate case will determine FPL's revenue requirements and rates for 2026-2029, significantly impacting its financial performance and investment capacity.

    The proceedings would likely conclude in the fourth quarter, with staff recommendation and commission rulings on revenue requirements and rates.

    Q&A highlights

    5

    Clarification on whether domestic battery contracts include domestic cells and confidence in suppliers meeting commitments despite tariffs.

    John Ketchum confirmed domestic battery contracts involve U.S. assembly and qualify for domestic content, with contractual protections for tariff exposure. He expressed high confidence in suppliers due to NextEra's buying power, strong credit protections, and the U.S. market's attractiveness.

    “The way the contract works, we get certain components -- Steve, sorry. I cut off there for a minute. Let me start over. So with the battery -- the domestic battery contract that we have entered into, it is assembled here in the United States. There are certain components that come in from outside the United States, but because it's assembled here and it has enough concentration here in the U.S., it qualifies for domestic content.”

    asked by Steven Fleishman · answered by John Ketchum

    2 min read5 chapters

    Detailed Narrative

    01

    Energy Realism and Pragmatism

    NextEra Energy highlighted the need for 'energy realism' and 'energy pragmatism' to address an expected 450 gigawatts of cumulative demand for new generation in the U.S. by 2030. Management emphasized that while renewables and battery storage are the lowest cost and quickest to deploy (12-18 months), other technologies like new gas-fired plants (75 GW expected by 2030) are becoming significantly more expensive and take longer to build (4.5 to 6+ years). Nuclear and coal deferrals offer limited capacity, underscoring the need for a diverse energy portfolio and pragmatic policy.

    02

    Strategic Tariff Management and Supply Chain Diversification

    The company detailed its proactive strategy to manage tariff exposure, having diversified and domesticated its supply chains over the past three years. NextEra Energy does not source solar panels from countries impacted by recent anti-dumping tariffs and sources wind turbines domestically. Contractual protections with suppliers and trade measure protection provisions in customer contracts are expected to reduce the estimated $150 million tariff exposure through 2028 to potentially zero. The company also secured domestic battery supply contracts, positioning it favorably against competitors.

    03

    Leadership Transition

    NextEra Energy announced a planned leadership transition, with Rebecca Kujawa retiring after 18 years. Brian Bolster will succeed her as President and CEO of NextEra Energy Resources, bringing extensive experience. Mike Dunne, previously Treasurer, has been promoted to succeed Brian Bolster as CFO of NextEra Energy. The company expressed confidence in the new leadership team's ability to navigate current market dynamics.

    04

    FPL's 100-Year Anniversary and Customer Value Proposition

    FPL is celebrating its 100-year anniversary, reaffirming its vision to deliver high reliability and low customer bills. Despite adding over 1.3 million new customer accounts in the last 20 years, FPL's customer bills remain significantly below the national average. The utility's strategy includes deploying cost-effective solar and storage, which has saved customers over $16 billion in avoided fuel costs since 2001. FPL's 2025 base rate proceeding aims to support continued smart investments while maintaining customer value.

    05

    Importance of Tax Credit Transferability

    Management strongly advocated for the continued transferability of tax credits, arguing it is essential for monetizing credits and passing benefits to customers, especially for utilities and nuclear projects where traditional tax equity financing is challenging. They noted that 80% of 45x investments are in Republican jurisdictions, and transferability stimulates manufacturing. The company believes that tax credits and transferability are inextricably linked, a message being understood in Washington, despite potential legislative 'bumpy rides'.

    AI-generated summary of the company’s earnings call. Not investment advice.