NextEra Energy, Inc. (NEE-PN) is a leading energy company that operates through two principal businesses: Florida Power & Light Company (FPL) and NextEra Energy Resources (NEER). FPL is one of the largest electric utilities in the United States, serving approximately 5.9 million customer accounts in Florida. NEER is the world's largest generator of renewable energy from wind and solar, as well as a leader in battery storage.

Financials

In the fiscal year ended December 31, 2023, NextEra Energy reported annual revenue of $28,114,000,000 and net income of $7,310,000,000. The company's annual operating cash flow was $11,301,000,000, and its annual free cash flow was $1,753,000,000.

For the second quarter of 2024, NextEra Energy delivered strong financial results, with earnings increasing more than 9% year-over-year. The company's adjusted earnings per share increased 9.4% year-over-year in the first six months of 2024.

FPL: Delivering Value for Customers and Shareholders

FPL continues to make smart capital investments in low-cost solar generation and battery storage, while also reducing its overall fuel costs. Since 2001, FPL's generation modernizations have saved customers nearly $16 billion. The utility also boasts best-in-class non-fuel operations and maintenance (O&M) expenses, which are 70% better than the national average, saving customers $3 billion every year compared to the average utility.

FPL's strong performance is driven by a culture of continuous improvement and productivity, as demonstrated through the company's annual "Project Velocity" initiative. This year, FPL identified $460 million in run-rate cost savings opportunities through 2027, a portion of which will benefit FPL's customers.

Despite unprecedented growth in Florida, with approximately 1,000 people moving to the state every day, FPL has been able to keep residential bills nearly 40% below the national average and the lowest among all Florida investor-owned utilities. The utility's reliability also ranks among the best in the industry, with customers experiencing 66% fewer minutes of power interruption per year compared to the national average.

FPL's regulatory capital employed has grown at a 12% compound annual growth rate since the beginning of 2022, outpacing the 9% growth rate originally anticipated for the four-year settlement period. To accommodate this accelerated growth, FPL has utilized its reserve amortization mechanism, which enables the utility to absorb the cost of capital investments without increasing customer bills in the interim.

As of June 30, 2024, FPL had a remaining reserve amortization balance of $586 million, which is expected to be sufficient to support the utility's capital investment plan and its ability to earn an 11.4% regulatory return on equity (ROE) in 2024 and 2025. FPL expects to seek recovery of these increased expenditures in its rate case filing next year.

NEER: Capitalizing on Replacement and Growth Cycle Demand

NextEra Energy Resources (NEER) is benefiting from two types of demand: replacement cycle and growth cycle. The replacement cycle refers to the retirement of higher-cost, less efficient generation in favor of low-cost renewables and battery storage. NEER has long been a beneficiary of this trend, and the company expects it to continue.

The growth cycle demand, however, is a new phenomenon. With the exception of a few states, such as Florida, power demand from new growth has been static in the industry for decades. That is changing, as power demand is projected to grow four times faster over the next two decades compared to the prior two. This growth is being driven by demand across multiple sectors, including data centers, electrification, and re-domestication, creating a long-term opportunity for faster deployment of low-cost generation.

To meet this increased power demand, NEER expects the demand for new renewables to triple over the next seven years versus the prior seven. The company has a 300-gigawatt pipeline, half of which is in the interconnection queue process or is already interconnection-ready. NEER's scaled experience, technology, and ability to build new transmission where required enable the company to meet the growing demands of its power and commercial and industrial customer base.

NEER's competitive advantages are further enhanced by its existing portfolio, with interconnection timelines for new sites stretching for three to seven years or beyond. The company can dramatically improve its speed to market by utilizing the existing interconnection from its operating footprint to deploy co-located solar and storage, as well as execute on wind and potential solar repowers.

In the second quarter of 2024, NEER added over 3,000 megawatts of new renewables and storage projects to its backlog, including an 860-megawatt agreement with Google to meet the tech giant's data center power demand. This marks NEER's second-best origination quarter ever, supporting the company's belief that the bulk of the growth demand will be met by a combination of new renewables and battery storage.

Corporate and Other: Navigating Interest Rate Volatility

NextEra Energy's Corporate and Other segment, which includes the operating results of other business activities, as well as corporate interest income and expenses, saw a decrease in earnings during the three months ended June 30, 2024. This was primarily due to unfavorable after-tax impacts of approximately $370 million related to non-qualifying hedge activity as a result of changes in the fair value of interest rate derivative instruments.

However, for the six months ended June 30, 2024, Corporate and Other's results increased, primarily due to more favorable after-tax impacts of approximately $187 million related to non-qualifying hedge activity compared to the prior-year period.

NextEra Energy Partners: Evaluating Options to Improve Cost of Capital

NextEra Energy Partners (NEP), a subsidiary of NextEra Energy, owns a portfolio of contracted renewable energy assets consisting of wind, solar, and battery storage projects, as well as a contracted natural gas pipeline. The partnership is continuing to evaluate all options to secure a competitive cost of capital and address the remaining convertible equity portfolio financing buyouts.

In the second quarter of 2024, NEP's adjusted EBITDA was $560 million, and cash available for distribution was $220 million. The partnership expects run-rate contributions for adjusted EBITDA and cash available for distribution from its forecasted portfolio at December 31, 2024, to be in the ranges of $1.9 billion to $2.1 billion and $730 million to $820 million, respectively.

From a base of its fourth quarter 2023 distribution per common unit at an annualized rate of $3.52, NEP continues to see 5% to 8% growth per year in limited partner distributions per unit, with the current target of 6% growth per year as a reasonable expectation through at least 2026. The partnership expects its payout ratio to be in the mid to high 90s through 2026.

Liquidity

NextEra Energy maintains a strong financial position, with total net available liquidity of approximately $13.6 billion as of June 30, 2024. This includes $5.9 billion in available liquidity at FPL and $11.7 billion at NEECH.

The company has been active in the capital markets, issuing $14.1 billion in long-term debt during the first six months of 2024. Additionally, in June 2024, NextEra Energy sold $2 billion of equity units, further strengthening its balance sheet.

NextEra Energy's capital expenditures for the remainder of 2024 through 2028 are expected to total approximately $39.9 billion at FPL and $23.8 billion at NEER, primarily for new generation, transmission, and distribution investments, as well as nuclear fuel and other projects.

Outlook

NextEra Energy remains confident in its ability to deliver financial results at or near the top end of its adjusted earnings per share expectation ranges in 2024, 2025, 2026, and 2027. The company expects its average annual growth in operating cash flow to be at or above its adjusted earnings per share compound annual growth rate range during this period.

Additionally, NextEra Energy continues to expect to grow its dividends per share at roughly 10% per year through at least 2026 off of a 2024 base.

Conclusion

NextEra Energy's strong performance in the second quarter of 2024, as well as the first six months of the year, demonstrates the company's ability to deliver value for its customers and shareholders. FPL's focus on smart capital investments, cost management, and reliability, coupled with NEER's leadership in renewable energy and storage, position NextEra Energy as a premier energy company poised to capitalize on the growing demand for clean, reliable, and cost-effective power.