Nextera Energy Inc Q2 2025 Earnings Call Transcript

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

Question: Steve Fleishman - Wolfe Research LLC - Analyst : Yeah. Hi. Good morning. Thanks. So first, just on the OBBB and then also the Trump executive orders, could you maybe talk to, I guess, the safe harbor start of construction issue and how much OBBB has effectively maybe codified that, and what can really the administration change at this point, and then also just how to think about some of the recent permitting kind of updates that came out and just your exposure to federal lands in your backlog? Thanks. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. Thank you, Steve, for your question. This is John. So let me just start with your question around the tax provisions of the safe harbor, in particular. I think as most folks know by now, the way the OBBBA was drafted, it basically provides that wind and solar facilities have to be placed in service by December 31, 2027. However, there is a very important exception in that that says that projects that begin construction before July 4, 2026, are not subject to that placed in service requirement. So the issue is, what is meant by begin construction? And our view is pretty simple and pretty straightforward. The begin construction term has been around for well over a decade. It has a settled meaning within the industry. That meaning is informed by long-standing treasury department guidance. It's been relied upon not only by NextEra, but the solar and wind industry for years. So I start with the fact that as a plain meaning, it's also a term that's defined in the OBBA, in the FEOC provisions, and that definition is consistent with the settled meeting and the long-standing treasury guidance that I just spoke about. And importantly, the term, beginning construction has certain safe harbors for what actually constitutes starting construction, and it also has a four-year continuity of service safe harbor. So when I look at the steps that we've been taking in reliance on the settle meeting and the long-standing guidelines around the term, beginning construction, we've made significant financial commitments over the last few years, including in the first half of 2025 to begin construction under these rules that were in effect at the time those commitments were made. In doing so, we believe that we've begun construction on a sufficient number of projects to cover our development expectations through 2029. And of course, while we can't provide any guarantees, this is our interpretation, and this is our belief as to what the statute provides based on our experience in this industry over the last couple of decades.

Question: Steve Fleishman - Wolfe Research LLC - Analyst : One other question, just you mentioned a natural pull-forward. And maybe, could you give any sense on just have you started seeing signs from -- what have been the reaction of customers from the bill? Have you started seeing any kind of sense of natural pull-forward and just your market share expectations and thoughts given all the different things that have occurred? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. I think, Steve, customers are still digesting it. They have different levels of understanding of what what's come out. Obviously, we spent a lot of time on it. And so I would expect to see a reaction from customers over time. Obviously, we'll inform them through our origination process, but I see some natural breaking points that could create significant opportunities for us around pull forward. I mean, one is, if you break down the statute, certainly, with the 2027 place and service requirement, you could see projects that are accelerated into that year. Then it comes down to who safe harbors, right, who safe harbors before the enactment date. It's hard to know with any precision who did. We know we compete against a lot of really small developers who don't have the balance sheet, the construction financing to do things around safe harbor. And so, you could also look and say based on that, we would expect to pull-forward naturally in the '28 and '29 as well, where there might be less competition from folks that have not safe harbored that could create bigger opportunities for folks like NextEra that are in a perpetual state of construction and are safe harboring all the time based on the rules that were -- in effect that could create, potentially, bigger opportunities for us in those years.

Question: Nicholas Campanella - Barclays Services Corp - Analyst : Hey. Good morning. Thanks for all the updates. I just wanted to ask maybe just for an update on FPL. We've seen some testimonies in the rate case at this point. You kind of pointed to the fact that hearings will kick off in mid-August. Just is a settlement still on the table in any way, or are you expecting this to go right to hearing, if you can comment at all? Thanks.

Question: Nicholas Campanella - Barclays Services Corp - Analyst : Makes a lot of sense. Appreciate that. And I just wanted to take one of Julien's question a step further just on the financing side and kind of thinking about the comments about the safe harbor visibility through 2029, as I understand the current plan '24 through '27, roughly about half of the funding is tax equity and project finance. And I'm just wondering, because you have this commentary around safe harbor visibility through '29, is that kind of the same mix that we should be expecting in financing the business through the late decade? Are there other sources of financing that you're thinking about leaning on? And I guess, maybe you can kind of talk about what's been contemplated at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 1:00PM, NEE.N - Q2 2025 Nextera Energy Inc Earnings Call

Question: Anthony Crowdell - Mizuho Securities USA LLC - Analyst : Hey. Good morning, team. I just have one quick one. I just have one quick one. You talked about maybe the company's gas strategy going forward. You talked about it on the Development Day. Just curious, you've seen some recent sales in the country already in service gas assets at attractive multiples. Just is that an avenue the company would pursue or a bit more of with the GEV partnership and building new build gas?

Question: Anthony Crowdell - Mizuho Securities USA LLC - Analyst : And just a quick clarity, did John say earlier that maybe an Analyst Day end of the calendar year or beginning of next calendar year? And I apologize if I did not hear that correctly. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light That's what I said.

Question: Andrew Weisel - Scotiabank GBM - Analyst : Hey, good morning, everybody. First question, I want to follow up a little bit on the Big Beautiful Bill. How are you thinking about the foreign entities of concern, the FEOC clause. Are you confident that you won't face exposure to that given your safe harbored equipment position? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Feel very confident about the FEOC provisions. Again, the way they work are as long as you began construction by December 31, 2025, you're not subject to those. So with the continuity safe harbor, add four years on, you get to the end of the taxable year '25, that takes you through '29. And then when you start looking at compliance beyond 2029, we feel very comfortable with our ability to comply with those provisions.

Question: Andrew Weisel - Scotiabank GBM - Analyst : Agreed and thank you for clarifying and framing that up. One last one -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 1:00PM, NEE.N - Q2 2025 Nextera Energy Inc Earnings Call John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light One other point I want to add on to that, too, is don't forget about storage too, right? I mean, storage is a massive opportunity for this company and for this country, given the capacity that it provides. So don't lose sight of storage in addition to all of the other opportunities that we have around the demand picture, the ability to build gas, the ability to build nuclear, the contributions from Duane; there's a lot that goes into that.

Question: Jeremy Tonet - JPMorgan Chase & Co - Analyst : Hi. Good morning. Not to belabor the point here with the outlook post -- One Beautiful Bill, and I guess, tax credits transitioning towards the end of the decade here, but just wondering if you could talk a bit more about the dynamics in the power markets at that point in time, particularly renewable PPA pricing and just see how you think that shifts at that point and how that -- and any impacts on margins for participants across the value chain and maybe what sets NEE apart from others. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. First of all, we've got a large pricing advantage and -- two advantages on renewables. First of all, they're very fast to build, right? You can get a renewable project up and built 12 to 18 months. Don't forget about our early- and late-stage inventory of projects; that's very important to keep in mind. And so when you think about all this demand for power that's here right now, we have a lot of pricing power, right, in the market, and we have a significant cost advantage over other resources that will show up later. And we need more capacity from nuclear and gas; it's just given the development pipeline being -- timeline being a little bit longer than what you see on renewables. That's why you've seen so much demand for renewables today. And then don't forget, too, we have a lot of renewable projects that continue to roll off of contract, right? And not a whole lot of attention gets paid to that. But when we're out in the market and able to recontract power purchase agreements that were entered into a decade or more ago into this new higher priced power market, there's a lot of embedded value in the existing portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 1:00PM, NEE.N - Q2 2025 Nextera Energy Inc Earnings Call And then you start thinking about layering in not only on top of renewables, the ability to continue to develop around gas-fired generation and nuclear as it comes along and our transmission business, right, where we made some comments today about how we're basically building a rate-regulated utility inside of NextEra. We've had an enormous amount of success around the competitive transmission business. So a lot of things to feel very good about as we look to the future.

Question: Jeremy Tonet - JPMorgan Chase & Co - Analyst : Got it. That's helpful. And just one last quick one, if I could. You touched on SMRs briefly before. Just wondering any updated thoughts in terms of your assessment of SMRs at this point and timing for when this resource could be widely deployed? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light We've been -- like I said, we have a whole development team on SMRs. We've been advising corporate clients. So I think our knowledge curve is probably higher than most in the market today as a result of that. And we continue to evaluate -- there's 95 OEMs and SMRs and really trying to focus on the technical reviews of who are going to be the winners and losers and how we think about cost structures against competing generation types and then cost sharing, particularly on the first few out of the gate, how we will continue to work with this new administration around supporting nuclear. So it's something that is a point of emphasis and focus for us. And look to us -- look for us to continue to advance those efforts in that regard on top of what we're doing on gas-fired generation development and all the opportunities that we have around renewables and storage and storage REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 1:00PM, NEE.N - Q2 2025 Nextera Energy Inc Earnings Call being truly a terrific capacity resource for a long time to come given how quick it could be deployed and given that it doesn't need a gas connection to make it work.

Question: David Arcaro - Morgan Stanley & Co Ltd - Analyst : Hey. Thanks so much. Good morning. I was thinking -- I was wondering, as you book out -- I'm curious if you're booking 2029 volumes at this point. And if you are, do you have contingencies that you're incorporating into contracts for any potential tax credit risk that might arise just depending on the safe harbor provisions and the clarity from treasury? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. So first of all, we feel good about our '29 builds. In all of our contracts, we have some limited protections around tax and trade measures as well as we've talked about on some of our prior calls, but we feel very good about where we stand around our '29 program.

Question: Carly Davenport - Goldman Sachs Group Inc - Analyst : Hey. Good morning. Thanks so much for taking the questions. Maybe just on the origination this quarter. You highlighted 1 gigawatt backlog as tied to the hyperscalers. Are you able to share any detail on those particular additions in terms of resource mix, timing, or geography, just to get a sense of what's resonating with that customer base? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 1:00PM, NEE.N - Q2 2025 Nextera Energy Inc Earnings Call

Question: Carly Davenport - Goldman Sachs Group Inc - Analyst : Got it. Okay. Great. Thank you for that. And then just back to the comments earlier on the natural pull-forward in demand, I guess, are there practical limitations to the degree to which you could accelerate development plans, whether labor supply chain or connection that could be pain points on kind of ability to get projects online by that '29, 2030 timeframe? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light I think all those things you just listed are actually competitive advantages and why we would do really well in a pull-forward market because we have each of the things that you listed, whether it's sites, interconnects, engineering construction, supply chain, balance sheet; all of those things are massive competitive advantages for us compared to the rest of the industry and I think creates substantial opportunities for us in a pull-forward scenario.

Question: Ryan Levine - Citi Infrastructure Investments LLC - Analyst : Good morning and thanks for taking my question. Two questions. On the gas generation front, what regions of the United States are you seeing more traction? And does the FERC ERAS decision from yesterday impact your outlook in MISO? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. I think, first of all, we're seeing gas generation demand really across the country. So if you look at our gas development pipeline, it's not focused in any one region. If you're looking at getting gas online quicker, obviously, there are states that are more accommodating to be able to do that. Texas, obviously, is -- comes to mind in that regard. When I think about the ERAS decision yesterday by MISO, sure, that could create some additional opportunities, but you're going to have to be able to also monitor through where is their gas supply, how long will take to get the turbine. And more importantly, aside from gas supply and the turbine, the labor, some of the skilled labor constraints that we've seen in that sector, what does that do to timing in terms of being able to bring those assets in line. But it's certainly something that we are focused on, and that's why I think given the timing of some of those projects, we're

Question: Ryan Levine - Citi Infrastructure Investments LLC - Analyst : Thanks. And then what are the key technical milestones remaining on Duane Arnold, and would you expect any ramp in the labor force in the coming months in order to hit the reiterated guidance around execution? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. It's the typical work that you would expect on a recommissioning, right, doing work across the site, looking at what the condition of the site is in, looking at containment in particular, looking at the equipment, all those things we feel good about based on what we have seen so far, and things continue to progress well.