Nextera Energy Inc and Nextera Energy Partners LP Q3 2024 Earnings Call Transcript

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

Question: Steve Fleishman - Wolfe Research - Analyst : Maybe if it's possible, I would love to get more color on the framework agreements. And I think when Brookfield announced one of these with Microsoft, you kind of downplayed wanting to do things framework fashion just due to the fact that you wanted to maximize the value of each site. So could you maybe talk to the change in kind of now having framework agreements? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. Sure, Steve. This is John. First of all, the framework agreements that we have been able to strike with Entergy and with the two Fortune 50 companies that we mentioned that totaled over 10.5 gigawatts than 4.5% on the Entergy side, give us an enormous amount of flexibility in terms of which assets that we allocate towards those programs. And so we're not stuck tying up inventory and it creates a close partnership arrangement with each of these 3 counterparties that gives us a huge leg up in being able to secure incremental business. And what we would look for on the Entergy side, for example, is kind of a 50-50 on BOTs and PPAs, but I would think what we're doing with the framework agreements with the Fortune 50 customers would be more in the lines of power purchase agreements. I'll turn it over to Rebecca to see if she has anything to add.

Question: Steve Fleishman - Wolfe Research - Analyst : Okay. That's helpful. And maybe just a follow-up or two on this still. The -- is there a point in time when you'll be able to disclose who these agreements are with? And obviously can't do that now, but just -- is it fair to say these are both hyperscale or tech type customers or other industries? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 1:00PM, NEE.N - Q3 2024 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light So I'll take the first one, Steve. Is there a point in time where we can give names, probably. And I think the preference of the counterparties and our preference is to go ahead and make an announcement of who they are side-by-side with the transaction once we bring a deal to the table with them.

Question: Steve Fleishman - Wolfe Research - Analyst : Last quick question. Just on the Duane Arnold. Is there any milestones or key steps that we should be watching out for on that opportunity? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. So we are very busy looking at Duane Arnold. We're very interested in recommissioning the plant. We're doing all the things right now that you would expect us to do. We're doing all the assessments, which include engineering assessments, includes working with the NRC. It includes working with local stakeholders. So we are continuing to advance that project. And they're obviously -- it goes without saying there's very strong interest from customers, really data center customers, in particular, around that site. But we will keep all of you posted as our evaluation progresses.

Question: Shar Pourreza - Guggenheim Partners - Analyst : Just on Steve's question on Duane Arnold. I guess, John, any sort of sense on the cost to restart that plant and other structural items we should be thinking about as you approach a decision? And ultimately, if you strike a contract with a counterparty, is this an asset you'd want to own over the long term? Or could that be a monetization opportunity as we're thinking about your kind of ongoing balance sheet needs? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. Sure. I'll start with the first one and then go to the second. So I'm not going to give you a cost number yet because that's part of the evaluation that we're going through currently. Remember, this is a BWR, boiling water reactor. They are a lot less complex to bring back and to recommission. It's a simpler design because they don't have a steam generator like PWRs do. And so that gives us optimism at being able to do this at an attractive price and be able to execute it without as much risk that might be associated with recommissioning a plant that does not have a boiling water reactor but is a PWR design. On the second question, our desire to own versus monetize. For us, look, I mean, this is be a very attractive asset to own. We would hope to be able to get an attractive PPA. And this was -- is going to be a long term asset that I think would fit nicely into our potfolio.

Question: Shar Pourreza - Guggenheim Partners - Analyst : Got it. So just reflecting on sort of the yield curve model, it sounds like even NextEra remaining the ultimate owner of NEP is something that's a question mark as well too, right? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. No. Look, I think going forward, our preference would be to remain the owner of NextEra Energy Partners. We've looked at -- we consider all available options and alternatives. They don't discount any potential options going forward, but our base case would be to remain the owner of NEP going forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 1:00PM, NEE.N - Q3 2024 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call And Shar, the thing I want to add is we talked a lot about on this call about the underlying dynamics in the industry. We're in a period of substantial power demand in this industry. And there are many things where NextEra Energy is -- has a superior position in markets and there are going to be a number of potential growth opportunities that could favor not only NextEra Energy, but also potentially NextEra Energy Partners going forward, obviously, data centers being a big part of that as well. And so we have a number of things that we're looking at that could potentially lead to attractive growth opportunities for NEP going forward.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : John, seem -- I know you guys are always a step ahead of everyone else here. So I wanted to get ahead here, how do you frame the discussion on safe harboring assets heading into the election outcome, whatever it may be? How would you assess derisking your plans through '27, as you guys have talked about or even frankly, beyond the '27 point in terms of proactively safe harboring your outlook, whether that's storage, solar or wind? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. We have fully derisked our safe harbor program. I mean, we're bought through 2029. So those that are familiar with the safe harbor program that would -- the moves that we have made and the investments that we have made have protected our development program through the 4-year safe harbor through 2029. First -- so that's the first thing that I would say. The second piece is, don't forget, we're always very forward-looking from a supply chain perspective. And we've also -- we're very long transformers, we're very long switchgears, other electrical equipment that have caused problems for others in the industry. So we have planned ahead. We've taken all the necessary steps on safe harboring and we've also taken all the necessary steps in terms of locking up critical electric infrastructure that is leading to delays of projects by small developers, which, again, the small developers have fallen down. I think the tolerance level of our utility customer base and our C&I customer base is weathered thin and -- and so they're now looking to -- they have too much to lose too much on the line and they want to do business with established developers like NextEra that they know are going to get their projects built on time and that plan ahead. And don't get caught off guard by some of these issues that have chronically impacted the small developer in the renewable space.

Question: David Arcaro - Morgan Stanley - Analyst : Wondering if you could expand a little bit on your thoughts on SMRs as an asset. And in particular, if you might consider that at FPL over time within your resource mix? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. On SMR, so let me start with -- we have a small SMR team inside the company, right? So we have been following SMRs for a very long time. We actually advised a couple of Fortune 100 companies on SMRs today. But here's what we see. We're very close to the SMR market. There's really 9, 11, it depends on your count of how many OEMs there are in the SMR area. We look at them all. We know we do technology reviews around them. We do financial reviews around them. A lot of them are very strained financially. They are or only a handful that really have capitalization that could actually carry them through the next several years. And so that's one piece. The second piece is, look, you're looking at a first-of-a-kind technology that are unproven, that comes with a ton of risk associated with that. They're still very expensive. I don't see that changing. Really as things move forward. There -- particularly as you see renewables getting cheaper, and I think renewables used for energy and storage and gas use for capacity I think, on an economic basis, tougher SMRs to compete. The other thing that doesn't get a lot of attention is nuclear fuel. The nuclear fuel supply chain has a lot of repair and work that has to occur. I think most of you know, we passed sanctions against Russia on enrichment and conversion. We basically have to start enrichment and conversion industry here in the U.S. It's going to take a lot of time to get that up and running. Some SMRs, they don't run off of low-enriched uranium, they run off of HALEU, HALEU remains a bit unproven as well. And so when we stack all that together, David, that's why we're just not bullish SMRs. We think it's kind of next -- end of the next decade alternative. But it is also something that we stay close to. And we have capacity at our existing generation facilities to be able to add SMRs. And it's something that FPL will continue to keep a close eye on also as we move forward. But again, it's so far out in the future from a viability standpoint at scale. It's -- we're prioritizing other generation resources at this time, and I think renewables are, as I said in my prepared remarks, are here for the long haul.

Question: Jeremy Tonet - JPMorgan - Analyst : Just want to turn to the near backlog additions. It looks like 3 gigs has been added the past few quarters here, and it looks like about [11] over the past year. Just wondering, I guess, your expectation for run rate backlog additions over an extended period of time. Should we be thinking kind of like 12 a year roughly? Or do you see that increasing over time? And then on slide 5, you lay out significant demand growth there for renewables. And just wondering how you think about NextEra market share going forward there?

Question: Jeremy Tonet - JPMorgan - Analyst : Just market share going forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 1:00PM, NEE.N - Q3 2024 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call

Question: Jeremy Tonet - JPMorgan - Analyst : Got it. That's very helpful there. And just quickly, I guess, on origination opportunity set, how do you see solar versus wind stacking up at this point and also big addition in batteries there. So just wondering what you're seeing currently on that front?

Question: Andrew Weisel - Scotiabank - Analyst : Just a quick couple of follow-ups actually. So first on (inaudible), I don't want to get too bogged down on the details, but one question I had is about transmission constraints. I know when the nuclear unit shut down, you agreed with (inaudible) to build a lot of solar and best storage -- battery storage. Given that the new capacity addition will take up some of the preexisting transmission capacity, will you need to expand transmission opportunity there if you were to restart the nuke? And if so, would that add a lot of time in addition to the cost? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 1:00PM, NEE.N - Q3 2024 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yeah. Andrew, this is one of the benefits of having a very large pipeline. So because we have a very large pipeline, we have the ability to convert queue positions over to different types of technologies. So not concerned about the transmission.

Question: Andrew Weisel - Scotiabank - Analyst : Midpoint. You don't use the word midpoint very often. Okay. Fair enough. One -- sorry, go ahead. John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light No, I was just going to say, midpoint is just a reference to our current development expectations. Obviously, we're pushing the team to do far better than the midpoint. And again, the framework agreement, I think gives us opportunities that we otherwise would not have had.