Nextera Energy Inc ($NEE) Q2 2025 Earnings Call

Thanks, Mark, and good morning, everyone. NextEra Energy delivered strong second quarter results with adjusted earnings per share increasing 9.4% year-over-year. In addition, through the first 6 months of the year, our adjusted earnings per share has increased 9.1% year-over-year. The continued strong financial and operational performance at both FPL and Energy Resources positions our company well to meet its overall objectives for the year. America continues to be at a unique moment, and our industry remains front and center. After decades of stagnant electricity demand, we're now seeing growth across sectors of the US economy. Artificial intelligence and reshoring of manufacturing grab most of the headlines, and for good reason. But that doesn't tell the full story. Demand for more electricity is also coming from all sectors, including residential, commercial, industrial, and oil and gas, to name a few. A new study from ICF released this month described demand growth as both sudden and sharp. The report says demand growth over the next decade is expected to exceed the last three decades combined. Just the latest data point putting into perspective how unique this moment truly is. Bottom line, America needs more electricity, not less. Importantly, America needs it now, not just in the future. We are firmly aligned with the administration's goal to unleash American energy dominance, and to do so, we need all of the electrons we can get on the grid. There's truly no time to wait. We see this every day from our customers who aren't just saying they need power, they're signing contracts with us to build energy infrastructure because we can do it quickly and at a low cost. Again, the need for more electricity is real. We must do more than just plan for what's on our doorstep. We must act. As I've said many times, we're going to need all forms of energy to meet this moment. New gas and nuclear are on the way and will be critical to meeting demand over the long term. Renewables and storage can bridge the gap and will play an important role in an all-of-the-above future. Storage, in particular, is a game-changer. It's low cost, all forms of energy can charge it, and the grid can rely on it for capacity. Storage is also flexible and can utilize excess transmission capacity. That means it can quickly be deployed to where customers need it most. Importantly, renewables and storage are ready now and can provide much-needed electricity and capacity. But in order to achieve our objectives, we will need to continue to navigate the challenging regulatory and policy environment. The One Big Beautiful Act was tough but constructive, providing for a phase-out of wind and solar tax credits over time together with a longer runway for nuclear and storage. Although there is more certainty with the passage of the bill, we will need to manage that against the backdrop of executive orders, agency rulemakings, tariffs, and trade actions. While there are risks to be managed, we believe there are also significant opportunities given the steps we've taken to prepare for this moment as we expect a natural pull-forward of demand. We are in a constant state of construction. And over the last few years prior to the enactment of the OBBB, made substantial financial commitments to begin construction on renewable projects that we believe are sufficient to cover the projects we plan to place into service through 2029. We have a large pipeline of early and late-stage projects. We have a supply chain capability that I believe is the best in the sector, and we are leveraging artificial intelligence across our business, including in customer origination. We have the balance sheet, scale, experience, and technology. While no company is immune from all risk, we've proven time and again what I firmly believe, that there is no company in our sector better positioned to execute through the challenges and capitalize on the opportunities that lie ahead than NextEra. As the quintessential all-of-the-above energy company, we build more energy infrastructure than anyone in the United States. From renewables and storage to gas and nuclear, we do it all. And we will continue to build what customers need, including the critical transmission to bring power from plants to communities. At FPL, we are going to continue to do what we have done so well for customers over the past two decades. Florida's long-standing constructive regulatory and legislative environment enabled infrastructure investment to serve Florida's growing population. In fact, just last week, the Florida Supreme Court concluded that state regulators properly approved our 2021 settlement agreement by affirming the Florida Public Service Commission's final and supplemental final orders. FPL continues to invest in infrastructure to keep reliability high and bills low. And we continue to operate and invest in the nation's largest gas-fired fleet along with four nuclear units in Florida, which provides us the flexibility to leverage cost-effective solar and storage to meet the significant demand from our state's growing population. FPL is doubling down on what we've proven benefits our customers, investing in generation to meet growing electricity demand while driving fuel costs out of the bill. FPL plans to add more than 8 gigawatts of reliable, cost-effective solar and battery storage by 2029. It's the perfect complement to our existing natural gas and nuclear fleet in Florida. Together, it's how we serve our customers with a diversified energy mix. This not only further secures Florida's energy independence, it also improves system reliability and resource adequacy by delivering energy when customers need it most. FPL continues to be America's blueprint for utilizing all forms of energy to keep reliability high and electric bills low. Outside of Florida, Energy Resources continues to be the nation's leading energy infrastructure developer. The team originated 3.2 gigawatts of new projects since the last earnings call, including over 1 GW serving hyperscalers to help enable their AI build out and further drive America's leadership in the space. Our backlog alone now includes approximately 6 GW of projects intended to serve technology and data center customers. If you include our operating portfolio together with the expected build out of our backlog, we will have over 10 and a half GW serving technology and data center customers across the United States. We continue to make progress toward the potential restart of our Duane Arnold nuclear facility, while also working to advance new gas-fired generation opportunities. And we continue to build what's essentially a standalone rate-regulated utility within Energy Resources through NextEra Energy Transmission. With our scale, experience, and technology, including our supply chain capability and balance sheet, we are positioned to meet the opportunity set increased power demand will provide. I firmly believe no one has a better team, a better culture, or a better track record of execution than NextEra Energy. With that, I'll turn the call over to Mike to walk you through detailed results from the quarter.

Yeah, thank you, Steve, for your question. This is John. So, let me just start with your question around the tax provisions of the safe harbor, in particular. I think as most folks know by now, the way the OBBBA was drafted, it basically provides that wind and solar facilities have to be placed in service by December 31, 2027. However, there is a very important exception in that says that projects that begin construction before July 4, 2026 are not subject to that placed in service requirement. So, the issue is what is meant by begin construction and our view is pretty simple and pretty straightforward. The begin construction term has been around for well over a decade. It has a settled meaning within the industry. That meaning is informed by long-standing Treasury Department guidance. It's been relied upon not only by NextEra, but the solar and wind industry for years. So, I start with the fact that as a plain meaning, it's also a term that's defined in the OBBA in the FIACT provisions and that definition is consistent with the settled meaning in the long-standing Treasury guidance that I just spoke about. And importantly, the term beginning construction has certain safe harbors for what actually constitutes starting construction. And it also has a four-year continuity of service safe harbor. So, when I look at the steps that we've been taking in reliance on the settled meaning in the long-standing guidelines around the term beginning construction, we've made significant financial commitments over the last few years, including in the first half of 2025 to begin construction under these rules that were in effect at the time those commitments were made and doing so, we believe that we've begun construction on a sufficient number of projects to cover our development expectations through 2029. And of course, look, while we can't provide any guarantees, this is our interpretation and this is our belief as to what the statute provides based on our experience in this industry over the last couple of decades. Just on the siting permitting issue on the federal land, yeah. And on the permitting on federal lands, first of all, I'll say there was an EO and I think a response made by the Department of Interior a couple of months ago just articulating that solar and wind projects would not be prioritized. The executive order itself that came out on July 7th directed the Department of Interior to come up with new procedures on how it would handle wind and solar permitting to not favor them. And so, they instituted an additional layer that would require secretary or deputy secretary review. It's new. Obviously, we're working with the Department of Interior. Let's just see how it actually is applied in practice. But again, I think this letter is being responsive to the EO. When I look at it and I look at our backlog, most of our backlog already has secured federal permits. But let's also just see how this gets applied and I continue to feel comfortable with where we stand in terms of being able to navigate the federal permitting issue.

Yeah, I think Steve, customers are still digesting it. They have different levels of understanding of what's come out. Obviously, we spent a lot of time on it. And so, I would expect to see a reaction from customers over time. Obviously, we'll inform them through our origination process. But I see some natural breaking points that could create significant opportunities for us around pull forward. I mean, one is if you break down the statute, certainly with the 2027 placed in service requirement, you could see projects that are accelerated into that year. Then it comes down to who safe harbored, right? Who safe harbored before the enactment date. It's hard to know with any precision who did. We know we compete against a lot of really small developers who don't have the balance sheet, the construction financing to do things around safe harbor. And so, you could also look and say based on that, we would expect a pull forward naturally in the '28 and '29 as well where there might be less competition from folks that have not safe harbored. That could create bigger opportunities for folks like NextEra that are in a perpetual state of construction and are safe harboring all the time based on the rules that were in effect. That could create potentially bigger opportunities for us in those years.

Thank you, Steve.

Yeah, I mean, first I'll start with that last piece, right? Which is as I said in the prepared remarks, I think the One Big Beautiful Bill Act, while tough, was constructive. I think it does create some opportunities for us going forward for some of the reasons that I laid out with Steve. On the EPS growth point, I'll hold off on that until our next analyst day, which we'll hold sometime later this year beginning at the beginning of next year. But as I think about the waterfall opportunity and that pull forward that you were hitting on, again, the uncertainty that could be created with the '27 placed in service and then you come down to who safe harbored for '28 and '29, obviously, that favors large developers like NextEra that plan ahead, right? And if you're in a market where you have folks drop out, right? Because they didn't plan ahead, they don't have the ability to get construction financing, don't have the ability to safe harbor, it obviously creates bigger opportunities for us in these natural pull forward points. And I'm going to come back to a point that I think is important for investors to understand. I think if you look at our track record over time, not just the last 3 years, but going back over time, whenever there's a little bit of uncertainty, a little bit of risk, a little bit of complexity, that typically favors our business, right? Because I firmly believe that we have the capability to navigate and to plan the business in a way that helps mitigate these risks going forward. And look, no company's immune from everything. But I think we do, if you look at the track record, have demonstrated an ability to really figure out how to mitigate these exposures on a go-forward basis. The last piece I'll make is don't forget if we do see some small developers kind of fall away, there'll be more projects that could potentially hit the market and come up for sale creating more, not only on our organic greenfield opportunity set, but perhaps some opportunities to step into projects that other developers have tried to advance, but for whatever reason might struggle to get it across the finish line given some of the backdrop of some of the challenges that we're addressing in the industry that I think we're best equipped to address.

Yeah, no, thanks for asking the question, Julian. You know, Duane Arnold just continues to advance. I mean, I think anytime you have a, you know, there's only three of them in the country, right? You know, between Palisades and the Crane facility in Duane. I mean, these are unique opportunities because you don't face the new build costs associated with nuclear. And so, these are really, you know, unicorn type opportunities. And so, we continue to advance Duane. I'm very pleased with the way things are going on the onsite reviews and some of the engineering analysis that we've done. But more importantly, you know, we continued to advance discussions with customers. So, you know, feel good, you know, where we sit now about, you know, how things are progressing on the Duane front. And you know, look with Point Beach, it's not only the Point Beach facility, but also, you know, the opportunity to do some things around SMRs. So, we have the same opportunity set, you know, at Duane. You know, if we're successful in bringing Duane forward, that obviously creates a hotbed of data center activity, you know, around that facility the same as what you've seen in Wisconsin with Clover Leaf and the Fox facility that, you know, Microsoft is behind as well. And so, I like the potential, you know, longer term options there in addition to just the recommissioning efforts that we potentially have at Duane. And look, we have a, I don't want to lose sight of the fact that not only do we have an active gas-fired generation development effort at our company, you know, we are also, you know, very active in the development of small modular reactors and the potential that nuclear, you know, can provide going forward. And again, that goes back to my comments of being an all of the above energy company. Our goal is to provide the customer with what it wants when it needs it at the right price to help address the power demand, you know, that we see in this country. And, you know, look no further than the PJM capacity option auction yesterday. I mean, there's a lot of demand out there. And there are very few companies that have the development capability that we do. A lot of companies that have an existing asset position, very few companies can develop new generation assets or have the skill sets, you know, on their teams to do it. And that gives us a unique advantage in this market.

Hey, thanks, Julian.

Well, that's a great question. We always prepare like we are going to hearings because we want to be as prepared as possible. And they're about 3 weeks away at this point. It doesn't mean that there is not the opportunity for discussions that would lead to a settlement. I think the notion should be that those discussions probably can happen at any time. And if it makes, from our perspective, it makes sense for our customers, that's something that we would obviously move on as we have for the last three rate cases. So, I'm still confident that we have a great rate case to present to the Public Service Commission in the middle of August. That has been my focus really for the last 6 months. If there is the opportunity, if the opportunity pops up, I am going to absolutely make myself available to make sure that we can put our best foot forward for our customers in a settlement.

Sure. So, as we look at where we sit today and as we look at what our renewable build looks like, it is a lot more of what we've done over the course of the last 20 years. And that has been building good projects that are very attractive to our tax equity providers and that are very attractive to our project finance providers. And those parties looking at the quality of those projects and providing the financing for them. As we look today and as we look over the last 2 years, we have increased our tax equity providers by, you know, 50%. Just last week I was talking to one of our long-term tax equity providers who was asking and mentioned they wanted to increase their exposure to us. So, we feel very good about where we sit in terms of accessing both the tax equity and the project financing market as an attractive low-cost way for us to finance our renewable and storage facilities.

Sure, it's Brian. On the gas strategy front, listen, we're going to look at new build. We'll look at opportunities in the market. I think what we need to do if we're going to look at the market is obviously the value has to make sense. I think we have to feel very good that we're going to be able to do something with that on the contracting front in the near term. So, I don't think we want to just go spec long merchant generation. So, but we are, you know, we're turning over kind of every rock as we look at that. Everything from are there assets that are going to be interesting that fit nicely that we think we can offer back to the market. And we're going to look at greenfield opportunities. So, you know, we're pursuing it on all fronts.

That's what I said.

Feel very confident about the FIAC provisions. Again, the way they work are as long as you've begun construction by December 31, 2025, you're not subject, you know, to those. So, with the continuity safe harbor, add 4 years on, you get to the end of the taxable year 2025, that takes you through 29. And then when you start looking at compliance beyond 2029, we feel very comfortable with our ability to comply with those provisions.

Yeah, I mean that's, you know, obviously pretty far off, but sure. I mean that's, you know, that is a, you know, you add Duane Arnold to the mix and, you know, that's one of, you know, many ways that, you know, we have to continue to grow the business in the future.

One other point I want to add on to that, too, is, you know, don't forget about storage, too, right? I mean, storage is a massive opportunity, you know, for this company and for this country given the capacity that it provides. So, don't lose sight of storage and additional all the other opportunities that we have around the demand picture, the ability to build gas, ability to build nuclear, the contributions from Duane. There's a lot that goes into that.

Yeah, so if you look at the two cents that offset the four cents of regulatory capital growth, there's a variety of factors that can move that across. Recall that in 2024, the return on equity was at 11.8% and, you know, for this year it was at 11.6%. So, that is one factor and there's other puts and takes that can, you know, drive that two cent differential. However, as we look on a go-forward basis, I wouldn't expect that differential to continue throughout the rest of the year.

Yeah, I mean, you know, first of all, you know, we've got a large pricing, you know, advantage and you have two advantages on renewables. You know, first of all, they're very fast to build, right? I mean, you can get a renewable project, you know, up and built 12 to 18 months. Don't forget about our early and late stage inventory of projects. That's very important to keep in mind. And so, when you think about all this demand for power that's here right now, we have a lot of pricing power, right? You know, in the market and we have a significant, you know, cost advantage over other resources that will show up later, you know, and we need more capacity from nuclear and gas. It's just given the development timeline being, you know, a little bit longer than what you see on renewables. That's why, you know, you're seeing so much demand for renewables today. And so, you know, and then don't forget, too, we have a lot of renewable projects that, you know, continue to roll off of contract, right? And not a whole lot of attention gets paid to that. But when we're out of the market and able to recontract, you know, power purchase agreements that were entered into, you know, a decade or more ago into this new higher price power market, there's a lot of embedded value in the existing portfolio. And then you start thinking about layering in not only on top of renewables, the ability to continue to develop around gas fire generation and nuclear, you know, as it comes along. And our transmission business, right? Where we made some comments today about how we're basically building a rate regulated utility inside of NextEra. We've had an enormous amount of success around the competitive transmission business. So, a lot of things to feel very good about as we look to the future.

Yeah, I mean, I think that data point, you know, suggests that, you know, first of all, you look at where new build gas prices are, you know, in order to build to make them economic. And I think you see the PJM capacity market, you know, reacting to that because don't forget, right? And this is why I keep emphasizing development skills and capabilities and the ability to add new infrastructure to the system. Existing assets are already there to accommodate the demand that exists today, right? And so, what you're trying to do with the capacity market is incent generation that does not exist today. Somebody's got to go out and develop and build that. No matter what you do with the existing generation today, it's got to be, if that's going to be used to serve new demand, that generation has to be replaced by something, whether it's renewables, whether it's storage, whether it's gas fire generation, whether it's new nuclear. And so, what I would be focused on as well is the, you know, who has the development skills and capabilities and who doesn't because we are going to have to build new generation. There's only so much you can do around existing assets. They already exist today to accommodate the power demand that exists today. You know, when you look to the future, you've got to start adding incremental generation. We are uniquely advantaged and have a unique capability set in that regard because we're one of the very few companies in this country that have been building for the last two decades. And we have, you know, a development team that is up and running in 49 states across this country. So, I'd put our development team up against anyone. We need new incremental generation. The existing stuff isn't going to get us there.

We've been, you know, like I said, we have a whole development team on SMRs. We've been advising corporate clients. So, I think our knowledge curve is probably higher than most in the market today as a result of that. And, you know, we continue to evaluate. There's 95 OEMs in SMRs and, you know, really trying to, you know, focus on the technical reviews of who are going to be the winners and losers and how we think about cost structures against, you know, competing generation types. And, you know, and then cost sharing, particularly on the first few out of the gate, how we will continue to work with this new administration around supporting nuclear. So, it's something that is a point of emphasis and focus for us and, you know, look for us to continue to advance those efforts in that regard on top of what we're doing on gas fire generation development and all the opportunities that we have around renewables and storage and storage being, you know, truly a terrific capacity resource for a long time to come given how quick it can be deployed and given that it doesn't need a gas connection to make it work.

Yeah, so first of all, we feel good about, you know, our '29 build and all of our contracts. We have some limited protections around tax and trade measures, you know, as well as we've talked about on some of our prior calls, but, you know, we feel very good about where we stand around our '29 program.

Yeah, I think it's still a little too early on 2030. I mean, most of the focus from our customer base is, you know, '29 and then just given their need for power and electrons right now. That's where the demand is and, you know, you can see that just in our originations, you know, this quarter about, you know, 3.2 gigawatts. So, you know, I think we'll naturally see 2030 start to become more of a point of focus probably as we move forward over the next, you know, 12 to 24 months, but right now it's been a lot of attention paid around, you know, '27 but '28 and '29 in particular in terms of the need for new generation.

Hey Carly, it's Brian. So, without going into details with regard to the specific customers or the timing, I mean, it is, you literally kind of need to go customer by customer, region by region. They all have different needs depending on how they're looking at their demand when they're trying to bring that on. There is a lot of focus on the next couple years and then there's also folks who are looking to build out at the end. So, I hate to say it, but it's kind of a mixed bag of really depends by the customer and where they are and I guess that's why we're able to spend and do well with them because we can meet the customers with their need. We've got a broad pipeline and portfolio that allows us to give them a little bit of every flavor that they're interested in. So, you know, there's no kind of common theme other than engaging in dialogue on a national basis over multiple years.

I think all those things you just listed are actually competitive advantages and why we would do really well in a pull forward market because we have each of the things that you listed, whether it's sites, interconnects, engineering, construction, supply chain, balance sheet, all of those things are massive competitive advantages for us compared to the rest of the industry. And, you know, I think create substantial opportunities for us in a pull forward scenario.

Yeah, I mean, I think, you know, first of all, we're seeing gas generation demand really across the country. So, if you look at our gas development pipeline, you know, it's not focused in any one region. I mean, if you're looking at getting gas online quicker, you know, obviously there are states that are more accommodating to be able to do that. Texas obviously comes to mind in that regard. When I think about the Eris decision yesterday by MISO, sure that could create some additional opportunities, but you're going to have to be able to also monitor through where is there gas supply, how long will it take to get the turbine and more importantly, aside from gas supply and the turbine, the labor, some of the skilled labor constraints that we've seen in that sector, what does that do to timing in terms of being able to bring those assets in line, but certainly something that we are focused on and that's why I think, you know, given the timing of some of those projects, we're going to continue to need an all of the above solution to accommodate the demand that we are seeing in those regions.

Yeah, I mean, it's the typical work that you would expect on a recommissioning, right? You know, doing work across the site, looking at what the condition of the site is in, looking at containment, in particular looking at the equipment. All those things we feel good about based on what we have seen so far and things continue to progress well.