John Ketchum, NextEra Energy Interview

Absolutely, Bobby. It is such a terrific time to be in our sector to start with. Power demand is surging across the country and we're expecting about a six-fold increase in power demand over the next 20 years. When you think about a company like NextEra, we are perfectly positioned to lead the charge on driving American energy dominance across the board to meet that power demand. And we have two terrific companies. They are two of the leading companies in this industry. First of all, Florida Power and Light, which as you said makes us the world's largest rate regulated utility bar none across the world. And we have NextEra Energy Resources which is the largest competitive energy company in North America. And when you put those two great businesses together, we are uniquely positioned to capitalize on this massive opportunity that we see around power demand going forward. And what really allows us to do that is first of all our team. So we have a team that has been together for a long time. And we have a lot of talent within the organization. And in this industry, it all comes down to execution and the ability to deliver. And then you think about the skill sets and the competitive advantages that we've been able to put together. We have massive scale. We have all the skills that we need to achieve our objectives and we have scope across the US and in different parts of the energy sector. We are truly the quintessential all the above energy company. So if you think about generation, we're in wind, we're in solar, we're in battery storage. We have the largest gas-fired generation fleet in the United States. We're the seventh largest owner and operator of nuclear generation. It doesn't stop there. We're also a leader in competitive transmission. We have a leading pipeline business on the natural gas side. We have also a leading customer supply business. And so when you put all those pieces together, there's no energy challenge that we can't meet. And I think that's what really puts us in an unusual position to be able to seize on the opportunity set that we have going forward because we need a lot of electrons on the grid and we need them on the grid quickly.

So first of all, we're a highly analytical, decision-based company. So when we make decisions, it's after a lot of thought and we have a lot of capability internally where we're able to engage in high level analytics. And so one of the things we look at across AI opportunities is what's the demand picture look like? What's the capex plans amongst the top five hyperscalers, the DCOS as well, where are they looking to invest capital, what's going on in the chip market, what's the energy consumption that's involved, what are the coolant technologies that are coming along, how does electricity and energy fit into the equation and what does the long-term demand look like for that. And we do all that work, we see a very strong picture where we need power. We need power right now to be able to fuel all the data center buildout that's coming to support all these artificial intelligence applications because one thing that we cannot afford to do as a country and as an economy is lose the war on AI. One of the things that we talked about back in December that you'll recall is our artificial intelligence or technology partnership that we've formed with Google. And so one of the things I'm really excited about is every year we go through a cost cutting mechanism or initiative at NextEra and it's taken the form of different names. We called it velocity, we called it momentum, we called it accelerate. What it does, we go to our employees and we say, 'Give us your bottoms up solutions and thinking about how to take cost out and run more efficiently across the board in all the businesses that we're in, but also how to grow the top line from a revenue standpoint.' What I'm excited about this year is we've kind of rebranded that initiative. We call it Rewire. And what we're doing is we're reimagining every one of our businesses. It doesn't matter if it's operations or development or our treasury function or any of our back office applications. And we're saying to ourselves, how do we do it better? How do we do it more efficiently? How do we redefine the processes that help us get answers in the hands of customers faster and be able to drive lower cost energy solutions across the board? And so as we reimagine the way we can do business, we're also layering technology on top of that because technology is going to play a huge role in how we run the company going forward.

When we look at demand growth kind of across the board that's driving that 6x increase that I talked about earlier, about 40% of it probably comes from hyperscalers and in data centers but the other 60% is just coming from strong economic growth across the economy particularly as we embrace the administration's policies of trying to redomesticate jobs back to the United States. And so we're seeing it across the board in this last quarter where we had 3.6 gigawatts that we added to backlog. A gigawatt of that was hyperscalers, right? But the other 2.6 gigawatts was really everybody else. So that kind of fits within that picture that I just painted for you that demand is coming from other sectors. And let's face it, the average household's also using more power because we all have those devices that we've become addicted to that we use every night. And those devices are becoming a lot more sophisticated, but they also are resulting in a lot more energy uses at the home. And so we're seeing a lot of retail growth.

First of all, it starts with the combination of the two businesses together. When you're able to take the leading utility in the United States and put it together with what I think is the leading competitive unregulated energy business, energy infrastructure business, and energy resources, you get tremendous scale benefits across both of those companies. And it doesn't matter if it's the buying power on the supply chain, the way we operate the facilities together and both companies use technology to do that. So we can reduce and limit the number of folks in the field. The combined expertise that we have around transmission and distribution and the ability of energy resources to think like a utility when it's designing new solutions and new products for our customers. The majority of the earnings and the cash flow at Energy Resources come from long-term contracted assets. And so, one of the things that I think we've been very disciplined on is a few things. I mean, one is capital allocation. Making sure that we're allocating our capital to assets that generate strong returns. Second is that we are allocating that capital towards long-term contracted investments. We're not taking on a lot of merchant risk where classic IPs have. And so the ability for us to survive over the long term, if you look at our track record of the last 20 years, is deploying capital in long-term contracted generation assets. And it's been our ability to build out a platform that supports that long-term contracting model. And we've been able to do it in a way that really allows us to capture upsized opportunities when you have a market like what we have today where we have really strong power demand. If we have to build transmission, we can do it. If we have to build gas pipelines, we can do it. Every facet of the energy value chain we're in that supports that ability and that underlies that long-term contracted model. And then one of the things that we talked about as well at the investor conference in December is we're not a one-trick pony over at energy resources, right? The company overall has more than 12 ways to grow. We have FPL as you mentioned. We now have large load in Florida under the tariff that we got out of a recent rate case and I know we'll come back to FPL in a minute. And then you think about energy resources. I mean, I've talked a lot about generation, but the transmission business, the gas pipeline business, you combine those with FPL, think about the regulatory balance that gives us to be able to grow the company. Then you have the wind, the solar, the storage, the gas-fired generation, the nuclear, the ability to recontract assets that we've signed up over the last 20 years to be able to capture all that upside. The customer supply business, giving us all that market knowledge, and then thinking into the future as we always do 5, 10 years down the road, being able to secure a technology partnership with a company like Google, redefining and reimagining how we're going to do business, leveraging AI like nobody else in this industry can because of the data set and the first mover advantage that we have. I just couldn't be more excited about all the opportunities that we have. But that's what really separates NextEra Energy Resources and that's what gives us the staying power.

Sure. Yeah. Let me start with the story first that kind of as a precursor. I was at a CEO conference with just an unnamed hyperscaler, I don't know, it was 18-24 months ago and I said to this particular CEO, I said, 'What are we, what's our industry missing? Like what if you woke up tomorrow and said the perfect solution from somebody in the electric generation industry would be X, what would it be?' He said, 'John, I need five gigawatt solutions. I need a company that can bring five gigawatts because every data center I'm building is going to ultimately grow to be five gigawatts, at least 5 gigawatts.' And when they're making investments in certain parts of the country, they've done all the leg work, all that leg work I talked about about working with the local community, selling them on, not selling, but demonstrating the job growth, the property tax, sales tax, all the economic benefits that come along with that. So once they've already got a gigawatt of compute capacity there, they want to expand to five. Not that five is a magic number, maybe it's six, maybe it's seven, maybe it's three, maybe it's four, but five on average was this conversation that I had and went back to the team and we challenged ourselves to rethink, do we have the right model to approach the hyperscale market? What is it that NextEra could do that nobody else could do? And it was to accommodate this goal, this goal of hey, give me five gigawatt solutions. And so we immediately went to the drawing board and said there's got to be a better way. We are the only company in our sector or one of the only companies in our sector that can build at scale because think about what it takes to build out a 5 gigawatt data center. I mean you're looking at north of $20 billion of capex investment. It's going to take a multitude of generation solutions to be able to do that. They're always going to come back the customer and say, 'Look, if you could just get me a gigawatt that can get me online by '27, '28, that's all that's what I need right now. Then I can grow with you.' Why? Because their business model fits that. If they have a gigawatt of commitments where they've already sold data center capacity out for a gigawatt, that gets them going on the first gigawatt. It can be renewables, right? Then as we're getting that first gigawatt built, in that first 18-24 months, we're already working simultaneously on the gas gen that's going to follow it up. Or maybe it's an SMR that's going to follow it up. Maybe we're in a part of America though that's rural where many of these facilities get built. They don't have adequate transmission access. We can build the line. They don't have adequate gas access to support the gas plant that needs to power the data center. We can build the gas pipeline to get them there. The easiest solution for them is going to be a hyperscaler that's going to bring their own generation and then where we come in too is we can build that generation. We can do it low cost. We could take it off the balance sheet of the investor-owned utility or the co-op municipality so they don't have to face bill pressure by building that themselves. If they want to own a piece of it or take some of it back in the form of PPA, we'll do that too to create a win-win situation which is what we've been doing for years.