Nextera Energy Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steve Fleishman - Wolfe Research - Analyst : So first, just related to the tariff disclosure you provided, which sounded very good, the battery portion where you're moving a lot domestic, I assume that means you're also getting domestic battery cells as part of that. Is that right? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light 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 in there in the US, it qualifies for domestic content. And we have contractual protections in the agreement in place regarding the qualification for domestic content. And also to the extent that there is any tariff exposure related to any imported parts or components related to those batteries, those are protected as well and backstopped by substantial credit. So that is a domestic contract, and that's the way investors should think about it.

Question: Steve Fleishman - Wolfe Research - Analyst : Yeah. Got it. Makes sense. And then just on the -- switching to a lot of focus these days on IRA obviously, and changes and specifically on transferability. And so maybe just one clarification on transferability. In the event hypothetically, if it were to go away in the future in a bill, do you -- would it still be applicable for existing assets that were done under transferability as well as Safe Harbor assets on transferability. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. So I mean there was a recent piece of legislation that was brought forward, that's basically Fedorchak bill, I use that as an example to answer the question. So on the Fedorchak bill, the way it was structured is that you'd see tech neutral eliminated through a phase down, but with transferability of eventually being phased out there. However, under the non-tech neutral portion, there would be an ability to continue the Safe Harbor for four years and transferability is left in place there. So it all comes down to the drafting Steve, at the end of the day. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 1:00PM, NEE.N - Q1 2025 Nextera Energy Inc Earnings Call That's how that bill was drafted. It would depend on the ultimate outcome and drafting of future bills. But let me just make a couple of comments on transferability. We spent a lot of time obviously advocating for tax credits and transferability for good reason. And the reasons are, I think, well known by investors, gas has its limitations in terms of availability for the reasons I went through in the prepared remarks, they're a lot more expensive. Gas turbines have been hit by tariffs, too, and a lot of folks going to talk about that, which is actually going to I think we had put the proxy at [2,400 a kW at our development day. It's probably closer to 2,600 to 2,800 today]. When you factor in tariffs, gas turbines have actually been hit harder than, I think, solar or wind or storage in that regard. And so we need a bridge, and that bridge has to come from renewables and storage because we have all this demand today, it's got to be met by something. And the ability to transfer credits, it goes hand in glove with the credit itself. You have to be able to monetize the credit to be able to get the benefit back to the customer. And I'll use a couple of examples. I mean, utilities, for example, right? And this is one of the things that we continue to stress in Washington utilities historically have struggled to use tax equity financing. Commissions want to prove it. It's -- you have to sell half the plant to qualify for tax equity financing. And so how do you get the benefit, which we calculate to be a 12% increase in household income to the ultimate utility customer without the ability to transfer the credit. Nuclear, I'll use as an example. So with nuclear, a tax equity structure doesn't work, right? There's no bank that's going to take a 50% ownership interest in a nuclear plant. And so you have to have transferability for nuclear as well. And nuclear is going to play an important part of our future. It's definitely a focus of this administration. 45x as well, if you didn't have transferability on credits for wind, solar, storage, nuclear, 45x becomes very difficult, right? How do you stimulate all these investments, 80% of which are going into Republican jurisdictions when you're trying to convince the CEO to build a manufacturing facility under 45x, but if the credit is not there with the ability to transfer it on the back end for wind, solar, battery storage, the demand for the product is not there either. And so what's the incentive to invest billions of dollars in the manufacturing facility under a 45x credit. So when you put all of these things together, credits and transferability go together. You have to -- you can't have one without the other. That's the message we're bringing to Washington. It's one that's being well-understood. I think the evidence lies in the fact that we just had 21 house representatives, Republican house representatives sign on to a letter saying don't touch the credits, don't touch transferability. We have four senators say the sign on to a very similar letter. They get it. They get the two go together. We'll be a little bit of a bumpy ride as we maybe see some proposed bill, sure. But I think at the end of the day, folks in Washington understand the transferability and tax credits or hand in glove and go together. You have to have an ability to monetize the tax credit.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : John, congrats again on all the new roles here. Very well deserved. John, maybe just to start with a little bit of a more mundane question. You're talking about going to the higher end of the range here [at near]. Do you want to talk a little bit about what the contributing factors are there for '25? And then I've got a quick follow-up on what you just said there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 1:00PM, NEE.N - Q1 2025 Nextera Energy Inc Earnings Call John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. So when I think about higher end of the range, I'd start with the first quarter results, right? I mean we're already out of the gate at 9%. And we have a business plan that we feel good about. We feel good about executing against. And I don't think there's a whole lot more to say about that.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Yeah, sorry. I thank you on the transferability. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light So let me make sure I got focused on transfer really. You pivoted tariffs. Can you clarify your question on tariffs? Just so I understand answer the question.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : If I can clarify quickly, the reason there's $150 million is because you have to go back and clarify the contracts? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light The reason that it is $150 million is that there are certain risk-sharing mechanisms and contracts. Most of the contracts, the supplier takes all the risk, some of the contracts, they take almost all of the risk except for a small sliver that we work through with them. And Julien, I want to make one more point, and I want to make sure folks understand this from the remarks. That's $150 million on $75 million billion of CapEx. That's less than 0.2%, and we feel like we've got a good shot at getting that to zero. And final point I'll make is -- and Steve asked me a little bit about it, but there's been a lot written about battery exposure. We don't have better exposure, full stop. We do not have battery exposure. We are really well-positioned. We entered into a domestic contract. We have actually a real opportunity rather than a risk around batteries.

Question: Nick Campanella - Barclays - Analyst : So maybe just to close the loop on the tariff discussions, just where do you think returns are from an IRR perspective or an ROE perspective these protections that you have in place versus your competitors could make you more competitive, I would think. Does that boost your returns? Or do you see these kind of remaining flat in the post tariff world? Maybe you could address that. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. I mean great -- that's a great question, Nick. So I look at it a couple of different ways. I mean first of all, we're in great shape on our returns for all the obvious reasons we just covered. So I don't think I need to spend time on that. I look at this as a huge opportunity for us because we compete again against a lot of small developers, and they don't have the buying power, the leverage in contracts to be able to shift risk like we can. We started looking at this three years ago. We've been at it. We didn't just wake up on November 6 and say, oh my God, what do we do about our supply chain? I mean we've been thinking about this for years. And so we put the right things in place. This is going to create a lot of opportunity for us. So if circumvention is any example, what happened in circumvention is a lot of small developers blew themselves up, couldn't satisfy their commitments with their customers and a lot of demand came our way. And so I would expect that's my point around opportunity. But given the position that we're in around tariffs, I expect a lot of opportunity to come our way as small developers just aren't in the position that we are. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 1:00PM, NEE.N - Q1 2025 Nextera Energy Inc Earnings Call They're trying to absorb a significant amount of risk, particularly those that are -- that have entered into contracts for batteries because they probably are buying from Chinese manufacturers and don't have domestic contracts and don't have the position that we have.

Question: Jeremy Tonet - J.P. Morgan - Analyst : I just want to touch base, I guess, on the GB partnership. And if there's any update that you can provide to us, granted, it's recent since you talked about the Developer Day, but just wondering, any updated thoughts to share there? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. I mean things with -- under the framework agreement continue to advance. We've been doing work together on the customer origination side. As a matter of fact, we hosted an event last week that we call Deploy following Development Day, where Scott and I jointly hosted a number of companies across various sectors. And very fruitful, and we continue to try to advance opportunities on that front, particularly around large-scale load.

Question: David Arcaro - Morgan Stanley - Analyst : Wanted to go back to transferability just for a quick follow-up there. Wondering what the contingency plan might be if there were changes or restrictions on the use of tax credit transfers, what would the financing alternative be as you think about your overall kind of holistic financing plan?

Question: David Arcaro - Morgan Stanley - Analyst : Got it. Okay. That's helpful. And then I appreciate the comments you gave to Jeremy's question. I was wondering, maybe a bit higher level. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 1:00PM, NEE.N - Q1 2025 Nextera Energy Inc Earnings Call What are you seeing in terms of renewable demand trends from tech customers, specifically in data center opportunities. Has there been, I guess, any change in the interest there or the load growth or demand growth that you're seeing from the data center side of things. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Short answer is no change. We continue to see a lot of appetite for renewables. And it fits perfectly with the discussion that we continue to have on the GE Vernova side around providing gas-fired generation as a potential solution as well. But they remain very focused, too, on renewables, right? They're ready now, they're low cost. They're an offset for gas if they ultimately decide to go that route in a part of the country that doesn't have excess grid capacity and the load study is taking too long to complete. And when I look at the demand and the outlook in the renewable sector going forward and we always are looking a quarter out or so. I mean, we could -- we just continue to see strong demand across the board and with hyperscalers being a nice size part of that.

Question: Carly Davenport - Goldman Sachs - Analyst : Maybe a higher level one. Just as you think about the backlog additions, can you talk a bit about the 2024 to 2027 plan relative to the additions for post-2027 delivery? Do you see any risk around project slippage beyond the current plan into 2028-plus, just given the more uncertain macro environment and potentially more complex contract discussions? Or do you still feel confident in the execution there? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah, Carly, I mean, good question. So maybe I'll start just with circumvention and remind folks that when we saw circumvention, we did see some shifting out in demand, right? And that's impacted, I think, our -- some of the near-term development expectations with us forecast to come in at the low end of the range on the '24, '25 numbers. You can see that in the development forecast write-up. But then we were also able to push those projects in the '26, '27, '28 in some of the out years. I think that dynamic was more specific to circumvention than it is here. I think here, there's just so much demand and the need for electrons right now where customers just can't afford to wait. And gas is such a long-term solution. I mean, we've gone up from 4.5 years to build the combined cycle unit to six or longer. And so needing the electrons now, I think that is forcing more near-term demand. Obviously, some of the impact, too, will ultimately depend on where we come out with Washington, but you've heard my comments there.

Question: Bill Appicelli - UBS - Analyst : Just a couple of questions on the utility. The 10-year site plan that you guys filed, how should we think about that impacting the capital expenditure program relative to the [$34 billion to $37 billion], does that have any impact on that? And -- or is it sort of post that? And should we assume a higher run rate than the sort of [8.8 to 8.9] that you've outlined for '26, '27. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 1:00PM, NEE.N - Q1 2025 Nextera Energy Inc Earnings Call

Question: Bill Appicelli - UBS - Analyst : Okay. And then regarding the rate case, is settlement still a preferred outcome here? And is that window of time ahead of this technical hearings in August?

Question: Bill Appicelli - UBS - Analyst : Okay. And then just one last quick one. The 11.6% ROE given the amount of surplus amortization that was utilized, I mean, should that trend a little bit lower over the balance of the year? Or is the expectation that can be maintained?