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NextEra Energy Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Energy Resources had another record year of new renewables and storage origination, adding more than 12 gigawatts to the backlog, including approximately 3.3 gigawatts since the last call, a sign of the momentum of demand for new generation and renewables, and storage in particular.
- The company announced two framework agreements with two Fortune 50 companies that have the potential to develop renewables and storage projects totaling up to 10.5 gigawatts between now and 2030, as well as a joint development agreement with Entergy. When combined, the announced framework agreements total up to a potential 15 gigawatts, demonstrating the company's unique position in the market and customers' confidence in its ability to help meet the nation's need for power.
- The company's core focus will be to pursue a fair and objective review of its case that supports continued execution of its successful strategy for customers.
- The company's consistent financial outperformance is due to the efforts and execution by its team.
- The company is continuing to make progress in evaluating the recommissioning of its Duane Arnold nuclear plant in Iowa.
- Contributions from the gas infrastructure business decreased by $0.08 per share.
- The company expects growth to come down a little bit over the next four years due to the pandemic.
- The company expects to continue experiencing higher interest rates and other capital markets factors during the term of the proposed four-year rate plan.
- The company expects to include base rate adjustments of approximately $1.55 billion starting in January of 2026 and $930 million starting in January of 2027.
- The company expects to request support for continued deployment of low-cost generation and capacity additions and the continuation of the solar and battery base rate adjustment or SoBRA mechanism to recover the revenue requirements of cost-effective projects.
- The company expects to be a top five infrastructure investor over the next four years.
Q&A Highlights from NextEra Energy Inc Earnings Call Q4 2024
- Analyst asked about the details of the GEV framework agreement, specifically if NextEra Energy would co-own projects with GE Vernova and if they would consider contracted projects or newbuild merchant projects.
- NextEra Energy is excited about the framework agreement with GE Vernova and is looking to combine gas-fired generation with renewable, battery storage solutions. The projects would be co-owned as part of a 50/50 joint venture and would be long-term contracted assets. The company could also consider a build-own-transfer on gas-fired generation in the right situation with the right customer.
- NextEra Energy is excited about the framework agreement with GE Vernova and is looking to combine gas-fired generation with renewable, battery storage solutions. The projects would be co-owned as part of a 50/50 joint venture and would be long-term contracted assets. The company could also consider a build-own-transfer on gas-fired generation in the right situation with the right customer.
- Analyst asked about the restart of the Duane Arnold nuclear power plant and the potential for expansion of the site.
- NextEra Energy has made its filing with the NRC around the licensing to recommission the facility, and they have more work to do, including work with customers. The company is in active discussions with customers and there is a lot of interest in the plant. The near-term opportunities are around the recommissioning of Palisades, of Crane, of Duane Arnold as well, and those are expected to be over the next three, four, or five years. The company is also exploring small modular reactors, but they are still a first-of-a-kind technology with some uncertainty in terms of developing and permitting. The team at NextEra Energy is focused on developing small modular reactors, but they are a next decade solution, probably middle or the latter part of the next decade.
- NextEra Energy has made its filing with the NRC around the licensing to recommission the facility, and they have more work to do, including work with customers. The company is in active discussions with customers and there is a lot of interest in the plant. The near-term opportunities are around the recommissioning of Palisades, of Crane, of Duane Arnold as well, and those are expected to be over the next three, four, or five years. The company is also exploring small modular reactors, but they are still a first-of-a-kind technology with some uncertainty in terms of developing and permitting. The team at NextEra Energy is focused on developing small modular reactors, but they are a next decade solution, probably middle or the latter part of the next decade.
- Analyst asked about the condition of the Duane Arnold plant.
- The Duane Arnold plant is in good shape, with the only damage being the derecho that took down the cooling tower. Building a cooling tower is run-of-the-mill construction, and there is not a lot of risk involved.
- The Duane Arnold plant is in good shape, with the only damage being the derecho that took down the cooling tower. Building a cooling tower is run-of-the-mill construction, and there is not a lot of risk involved.
- Analyst asked about the potential for gas-fired power generation to become accretive to growth and hit the backlog.
- John Ketchum, CEO of NextEra Energy, stated that gas-fired power generation could be a sizable opportunity for the company, but it would not be accretive to growth and hit the backlog in the near term. He cited the time and cost pressures associated with finding a site, getting it permitted, getting gas to the facility, getting it interconnected, and the equipment limitations of getting a turbine slot, as well as the EPC labor shortage and tripled costs. He also mentioned the need for economic solutions for customers and the 2030 and beyond timeframe for gas-fired power generation.
- John Ketchum, CEO of NextEra Energy, stated that gas-fired power generation could be a sizable opportunity for the company, but it would not be accretive to growth and hit the backlog in the near term. He cited the time and cost pressures associated with finding a site, getting it permitted, getting gas to the facility, getting it interconnected, and the equipment limitations of getting a turbine slot, as well as the EPC labor shortage and tripled costs. He also mentioned the need for economic solutions for customers and the 2030 and beyond timeframe for gas-fired power generation.
- Analyst asked about the company's plan to enter the gas business and how they would approach it.
- The company doesn't need to acquire a gas business as they already have the necessary components in place, such as land, permitting, gas infrastructure, and a transmission business. They have been up and running in the gas business and will continue to grow that area as they move forward.
- The company doesn't need to acquire a gas business as they already have the necessary components in place, such as land, permitting, gas infrastructure, and a transmission business. They have been up and running in the gas business and will continue to grow that area as they move forward.
- Analyst asked about the company's thoughts on the surplus reserve mechanism and their expectations for earned ROEs at FPL in 2025.
- The company has been seeing positive growth in their service territory since the pandemic, and they expect to see strong growth in the next four years. They believe that their expectations for the 2026-2029 time period for capital investing in the business will be above the $36 billion that they were going to put in over the four-year settlement agreement that ends at the end of 2025. They have used $400 million of their reserve mechanism in 2024, and they feel good about their current situation. They expect a little bit of upside to their 11.4% ROE in 2025, but they want to make sure they get through 2024 in good shape before making any predictions.
- The company has been seeing positive growth in their service territory since the pandemic, and they expect to see strong growth in the next four years. They believe that their expectations for the 2026-2029 time period for capital investing in the business will be above the $36 billion that they were going to put in over the four-year settlement agreement that ends at the end of 2025. They have used $400 million of their reserve mechanism in 2024, and they feel good about their current situation. They expect a little bit of upside to their 11.4% ROE in 2025, but they want to make sure they get through 2024 in good shape before making any predictions.
- Analyst asked about the company's strategy to manage interest rate exposure.
- The company has put $32 billion of interest rate swaps in place with an average coupon of around 3.9%, which they feel good about. Their sensitivities for 2025 and 2026 are $0.01 to $0.03 on an EPS basis, and for 2027, it's $0.03 to $0.05. The company keeps a close eye on interest rate risk exposure around the portfolio, but feel good where they are with the $32 billion of interest rate swaps in place.
- The company has put $32 billion of interest rate swaps in place with an average coupon of around 3.9%, which they feel good about. Their sensitivities for 2025 and 2026 are $0.01 to $0.03 on an EPS basis, and for 2027, it's $0.03 to $0.05. The company keeps a close eye on interest rate risk exposure around the portfolio, but feel good where they are with the $32 billion of interest rate swaps in place.
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