Decarbonization Turbocharges NextEra Energy's Results

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Decarbonization of the Electric Power Industry is a strategic trend that NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida) has ridden for years, and there is no apparent slowdown in sight. The company, composed of its Florida Power & Light (FPL) electric utility and its NextEra Energy Resources (NEER) merchant clean energy business, on January 25 reported sharp gains in earnings and renewable energy project backlog.

The NEER unit was growing rapidly before the passage of the Inflation Reduction Act of 2022 pledged to invest an estimated $370 billion of federal funding into clean energy projects. Although those dollars have only started to trickle out, in future years that trickle likely will turn into a torrent. And NEER is well-positioned to benefit, as is its corporate sibling FPL. For more on NextEra's growing renewables portfolio, see October 25, 2023, article - NextEra Continues to Expand Renewables Portfolio.

"NextEra Energy had an excellent year of execution in 2023," said John Ketchum, chairman, president and chief executive officer, in the January 25 earnings statement. "Due to strong operational and financial performance at both FPL and NEER, we exceeded the high end of our adjusted earnings per share expectations range and continued our track record of providing long-term value for shareholders."

He said the company's FPL electric utility "continued to deliver for its customers with a focus on keeping bills affordable, delivering exceptional reliability and executing its well-established capital plan."

The renewable power merchant business, NEER, "had its best-ever year of new renewables and storage origination" in 2023, when it added approximately 9,000 megawatts (MW) of new projects to its backlog, the company's earnings statement said. In 2022, NEER added about 8,000 MW of clean-energy projects to its backlog.

During the just-completed fourth quarter, NEER's backlog included the addition of approximately 1,005 MW of solar power, 75 MW of wind power, 805 MW of energy storage and 175 MW of wind-repowering projects. At yearend 2023, NEER's project backlog exceeded 20,000 MW.

Over 5,600 MW of new renewable and storage projects came online for NEER last year, a 22% gain over the 4,600 MW of projects that began operating in 2022.

Industrial Info Resources is tracking 209 U.S. renewable energy capital projects involving corporate parent NextEra Energy. The total investment value (TIV) of those projects is approximately $53.6 billion. Texas, Florida, Nevada and California are the states where NextEra is developing the greatest dollar-value of renewable and storage projects.

About 107 of those projects, with a combined TIV of approximately $18.4 billion, are considered medium- or high-probability by Industrial Info, meaning they have a 70% or greater chance of beginning construction according to schedule.

In the fourth quarter and the full year, net earnings rose sharply for NextEra's FPL business unit. The utility business unit earned about $1.1 billion in the fourth quarter of 2023, up from $885 million in the comparable year-earlier quarter. For the full year, net earnings on a generally accepted principles of accounting (GAAP) basis reached $4.5 billion from $3.7 billion in 2022.

The company said FPL served about 81,000 more customers in the just-completed quarter compared to the fourth quarter of 2022; some of that was attributable to the acquisition of Gulf Power Company, which was completed as of January 1, 2022.

For the NEER business, fourth-quarter earnings on a GAAP basis dipped to $885 million from $996 million in the comparable year-earlier quarter. But on a full-year basis, NEER's profits soared to $3.6 billion from $285 million for 2022. Results in 2022 were affected, positively and negatively, by one-time items.

In the January 25 earnings statement, Ketchum took the unusual step of projecting adjusted earnings per share, a non-GAAP measure, for the next several years, due to the strength of the FPL and NEER businesses. "Given the strength of both businesses, we will be disappointed if we are not able to deliver financial results at or near the top of our adjusted earnings-per-share expectations ranges in each year through 2026, while maintaining our strong balance sheet and credit ratings," he said.

He estimated that adjusted earnings would range between $3.23 and $3.43 per share in 2024, $3.45-$3.70 per share in 2025, and $3.63-$4.00 per share in 2026.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).