Nextera Energy Inc Q4 2024 Earnings Call Transcript

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

Question: Steve Fleishman - Wolfe Research, LLC - Analyst : Just a couple of high-level questions. So on the GEV framework agreement announcement. Could you maybe give a little more color on -- would you co-own projects with them? And also just, would you only be doing contracted projects, long-term contracts? Or would you consider doing kind of new build merchant like in ERCOT or PJM? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Steve, thanks for the question. First of all, we're very excited about this framework agreement with GE Vernova. Again, as I said in the prepared remarks, Nobody has built more gas-fired generation in this country. Really not only over the last decade, the last two decades than NextEra. So we've got significant experience. We have an 80-year relationship with GE, just terrific relationship, not only on the renewable side, but also on the gas fire generation side with all that we have historically done. So I think you're bringing two powerhouses together with experience in gas-fired generation. The idea would be to go after and target large load customers and do it in an integrated way where we can combine gas-fired generation with renewable battery storage solutions. And each party would bring the expertise that you would expect to the table. In terms of the ownership, yes, they would be co-owned as part of a 50/50 joint venture. These would be long-term contracted assets as well. We could contemplate in the right situation with the right customer, also potentially a build-on transfer on gas-fired generation as well, that was part of a larger transaction that included renewables and other growth opportunities. But we're very excited about this. I think it enables us to bring a comprehensive solution set that is right down our alley.

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : Just real quick, John, I know you noted the time to market for nuclear between the '27-'30 time frame. I guess what is Duane Arnold within that time frame? And also, there's obviously one restart out there and there's a cost estimate. Is there anything you can provide just directionally for REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 2:00PM, NEE.N - Q4 2024 Nextera Energy Inc Earnings Call Duane Arnold restart versus the comp that's out there? And would you potentially look to expand the site of the support from a counterparty or the federal government? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yes. Thanks, Shar, for the question. So happy to say that we have made our filing with the NRC around the licensing recommission that facility. We have more work to do. Some of that work includes work with customers. I'm certainly not going to put the cost estimate out there that would hurt our negotiating position in those discussions. And you can rest assured that we are in active discussions with customers today. There's a lot of interest in the plant as we look forward. But my comments around nuclear are really -- look, as one of the largest nuclear operators in the country, we obviously know a lot about it. I think the near-term opportunities are around the recommissioning with Palisades, of Crane, of Duane Arnold as well. And those are really the ones that I think I would confine to the time frame of being over the next three, four, five years. As you think about next decade in my comments around next decade, those are really more around the small modular reactors, which are still a first-of-a-kind technology, have some uncertainty in terms of developing and permitting and the ability of them to be able to deliver -- be delivered to market on time and on schedule. And so as we think about small module reactors and we have a team internally at NextEra Energy that is focusing on nothing but small modular reactors. We'd love to be able to develop them. But as we get into them, there are some practical limitations. So we're thinking as a country about their ability to contribute to all the power demand that we see that's here right now. My only comment is that I would think about them more as a next decade solution, probably middle of the latter part of the next decade if we're thinking about small modular reactors at scale and cost continues to remain a wildcard.

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : Got it. All right. That's perfect. And then just lastly on -- just a follow-up on Steve's gas question there. 2030 plus -- to me seems a little far out, just given the hyperscalers needs including just the trends around additionality and speed to market. I think supply chains should start to ease in the next couple of years. I guess just directionally, this could be pretty, I guess, a sizable opportunity for NextEra. I guess when can this sort of start to become accretive to growth and hit the backlog? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yes. Thanks, Shar for the question. So my comments on gas are when you look at finding a site, getting it permitted, getting gas to the facility, getting interconnected and then the equipment limitations of actually getting a turbine slot, getting access to that turbine, and then the EPC labor REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 2:00PM, NEE.N - Q4 2024 Nextera Energy Inc Earnings Call -- remember, we -- this is an industry that really hasn't seen any active development or construction in years. And so that's my comment earlier about really beginning from a standing start. And so all of that puts pressure on cost. I mean we've seen enormous demand, as you know, from GE Vernova's commentary for gas turbines. And it's not only domestic, it's international, and that's more than double the cost of a gas turbine and EPC labor is in such short supply that the costs there have tripled. And I look back to just our last gas-fired facility that we built here in Florida, Dania Beach. If we take the cost we paid for that facility, on a dollar per kW basis to today, I mean we -- the cost has tripled in price. And so those are some of the sensitivities. So it's -- it's not only time but it's money as well and making sure that we can put an economic solution in front of the customer. In terms of when it contributes, consistent with that time frame. I mean, I think it's the that 2030 and beyond time frame. And don't get me wrong, there are probably some pockets of the country that would be an exception. ERCOT, you can build more quickly than you can in other parts of the country. Other parts of the country are just more difficult, right, because you have to deal with the courts. We know from our own experience with what it took to get the MVP pipeline built in the Mid-Atlantic region, if you think about PJM, in particular, it's just not easy to get the gas to those facilities and to get gas infrastructure built this new administration certainly is undoubtedly going to move forward with reforms that will make that easier achieve, but there could be litigation over those things as well. So as we put all the pieces together, we're just being practical. We're just being realistic, we see it more as a later this decade solution.

Question: Julien Dumoulin-Smith - Jefferies LLC - Analyst : So maybe to follow up a little bit on some of the core questions here. How do you think about getting into this gas business? I know you talked about development kind of in the 2030 plus. Any thoughts about strategically entering into it in a proactive way from an acquisition perspective to create some origination prospects, right, to leverage off of? And then related, how are you thinking about this explore pivot and having sort of a development sell-down partner. I know, for instance, your comment earlier about a 50/50 development effort with JVs in their financial services effort. How do you think about the renewable side of that equation in terms of no longer having the same sell-down vehicles you did before. Thoughts about the monetization vector? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yes. Let me take those in pieces. So if I think about the gas business and your question about whether or not we would look to do something through acquisition, I don't think we need to do that. And here's why we don't need to do that, Julian, is -- we are a giant development company, right? That is our business. We are a massive development company that's been up and running for the better part of a couple of decades. We have all the pieces in place already. We have a land team, we have a permitting team. We have gas infrastructure capability to build gas pipeline laterals to build new gas pipelines. We have a transmission business. There wouldn't be a whole lot to be gained for us adding a piece through an acquisition. Given that we already have all those components in place, internally. It's an easy pivot for us to move into gas, and we've already been up and running in that and already have put together a nice pipeline, and we'll continue to grow that as we move forward. On the XPLR side, I really don't want to answer any questions about XPLR on this call given that we have a call scheduled for Tuesday, but I will answer your question about sell-down vehicles and recycling capital generically for NextEra Energy. I think as you can see with our reaffirmation of our capital recycling plan and our equity plan that we've included in today's call, there are no changes, right. No changes at all. And so we feel REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 2:00PM, NEE.N - Q4 2024 Nextera Energy Inc Earnings Call good about where we are in terms of our ability to recycle capital and has no impact again on our equity needs. And we have plenty of outlets available to be able to do that, whether that would be through XPLR or some other avenue as we've talked about in the past.

Question: Nic Campanella - Barclays Capital Inc. - Analyst : Thanks for all the updates. So hey, just a 2% change to customers for FPL in this upcoming rate case definitely stands out in a positive way. Just wanted to see if you had any updated thoughts on how you're thinking about the surplus reserve mechanism? And then also, just how are you kind of thinking about earned ROEs at FP&L in '25? Unidentified Company Representative Great. Thank you. So we are -- the growth that we saw this last quarter, the growth that we saw in the year was certainly positive. But it's not just this past year. We've been seeing it really since the pandemic. Our expectations going into the next rate case over the next four years is that growth may come down a little bit over the next four years because of what we saw during the pandemic. But we still believe it's going to be a fairly strong growth in our service territory. And that's why our expectations for the '26, '29 time period for capital investing in the business, would be above the roughly $36 billion that we are going to put in over the four-year settlement agreement that ends at the end of '25. So a lot of that detail will come out here in the next -- that's probably about six weeks now because we expect to follow our rate case at the end of February. Your question regarding the reserve mechanism. We're sitting at roughly $800 million after using of $400 million or so in 2024. So we feel good. We're certainly not going into 2025. And believing that all of the risks that we use as the surplus mechanism are behind us. We've had to tap that reserve mechanism for a lot of inflation, higher interest rates. A lot more growth in our area and therefore, a lot more CapEx expenses that we expected. So with the 11.4% ROE at the end of 2024, I expect there might be a little bit of upside to that 11.4% in 2025, but it's obviously early. We want to make sure that we get through this year in good shape. And we feel really positive about the case that we are going to present to our regulators in February because we've been doing the right things for our customers. So as long as we do that, I think we'll be okay.

Question: Carly Davenport - Goldman Sachs & Company, Inc. - Analyst : Just wanted to throw in a couple of follow-ups. The first one just on some of the renewables conversation. Is there anything you can share on how this is or is not impacting the conversations that you're having with customers? Are they seeing any concern about the ability to build these projects or the economics of them going forward if you see some change on the policy side? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light So Carly, the answer to that question is no, it hasn't heard any of our discussions with customers. The only thing customers are concerned about is making sure that these projects get built because they need them. They have made decisions to already shut down existing generation if these projects or for any reason to be delayed, which we don't believe they will be. That would have a significant impact on their ability to provide power to their own to their own customer base. I'm talking about utilities and co-ops and municipalities who need these electrons right now, and then also with our C&I customers. I mean these commercial industrial customers have made investments in manufacturing facilities, semiconductor chip facilities, they're chemical companies. I mean you name it, across the board, they've invested in infrastructure and are counting on the electrons to show up. So I think it's actually quite the opposite.

Question: Carly Davenport - Goldman Sachs & Company, Inc. - Analyst : Great. Really appreciate that color. And then maybe just one on the rate side. It's become a little more topical in our conversations. Can you just refresh us on the broader interest rate hedge program? It looks like some of the interest rate sensitivities moved just a bit relative to prior disclosure. So just can you refresh us on the strategy to manage rates exposure? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Yes. So Carly, we put $32 billion of interest rate swaps in place, with an average coupon of around 3.9%. So we feel very good about our hedge position, and that shows up in what we communicated today. So if you look at our sensitivities for '25 and '26, it's about $0.01 to $0.03 on an EPS basis. If you look at '27, it's $0.03 to $0.05. So very manageable, and we keep a very close eye on interest rate risk exposure around the portfolio, but feel good where we are with the $32 billion of interest rate swaps in place. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 24, 2025 / 2:00PM, NEE.N - Q4 2024 Nextera Energy Inc Earnings Call

Question: Jeremy Tonet - J.P. Morgan Securities LLC - Analyst : Just want to continue with some of the themes you talked about before. But regarding your conversations with hyperscalers at this point. Just wondering if you're seeing any kind of changes in the tone or thoughts as far as the renewables, clearly still carbon-free premiums there. But as far as openness to gas, just wondering if there's any change in tone there or thoughts in your -- from your customers when you're talking about their -- what they're looking to achieve?

Question: Jeremy Tonet - J.P. Morgan Securities LLC - Analyst : Got it. That's very helpful there. I didn't know if behind the meter gas was coming up in conversations at all versus prior conversations.

Question: Jeremy Tonet - J.P. Morgan Securities LLC - Analyst : Very helpful. And if I could, just one last quick one on XPLR. Thanks for your thoughts so far. Just wondering if you could provide incremental thoughts from a need perspective, non-ex PLR perspective, we would expect to hear that on Tuesday. But just as far as NEE views XPLR, is there any change in the strategic -- how it fits into NEE's strategic outlook going forward at this point? John Ketchum - Nextera Energy Inc - Chairman of the Board, President, Chief Executive Officer; Chairman of Florida Power & Light Jeremy, we're going to have a full conversation around Explorer on Tuesday. So why don't we plan on having that conversation then.