NextEra Energy (NYSE:NEE) reported strong third-quarter results in 2023, with an approximately 10.6% year-over-year growth in adjusted earnings per share. The company's regulated utility, Florida Power & Light (FPL), saw earnings per share growth of $0.04, driven by a 13.6% increase in regulatory capital employed. Energy Resources, the renewable energy arm, reported a record quarter of new renewables and storage origination, contributing to an adjusted earnings growth of approximately 21% year-over-year.
Key takeaways from the call include:
- FPL's capital expenditures for the quarter were approximately $2.6 billion, with full-year 2023 capital investments expected to range between $9 billion and $9.5 billion.
- Energy Resources' backlog now totals over 21 gigawatts, following a record quarter of new renewables and storage origination at approximately 3,245 megawatts.
- NextEra Energy plans to fund its business through a combination of cash flow from operations, tax equity, project finance, and corporate debt, with no expected equity issuance for the remainder of 2023.
- The company is implementing offsetting initiatives such as cost reductions and capital efficiency opportunities to mitigate potential impacts of a 50 basis point upward shift in the yield curve.
- NextEra Energy Partners, a subsidiary, plans to reduce its growth rate to 6% and does not expect to require growth equity until 2027.
NextEra Energy's robust performance is attributed to its disciplined financial strategy and focus on maintaining appropriate returns on its projects. The company plans to issue project-level debt funding for their renewable energy projects and a portion of their term maturities. They anticipate a minimal impact on adjusted earnings per share in 2023 and 2024 from a 50 basis point upward shift in the yield curve, but an impact of $0.03 to $0.05 in 2025 and 2026, equivalent to approximately 1% of adjusted EPS expectations.
The company's backlog is in good shape, benefiting from interest rate swaps, global supply chain management capabilities, and the ability to procure equipment and materials at scale. They expect mid-teens returns on equity for solar projects and over 20% for wind and storage projects.
NextEra Energy Partners has executed $1.9 billion in hedges to minimize refinancing costs for 2024 and 2025 maturities. The partnership's third-quarter adjusted EBITDA was $488 million, and cash available for distribution was $247 million. The board declared a quarterly distribution of 86.75 cents per common unit, reflecting a 6% annualized increase.
In terms of asset sales and capital recycling, renewables are the primary focus, but the company remains open to opportunities to monetize non-core assets. The company expects the pipeline for the fourth quarter to be weighted towards the 2024-2026 timeframe, with a strong focus on storage and increasing adoption across different markets.
NextEra Energy's strong Q3 performance and ambitious growth plans for its renewable energy sector position it well for future growth. The company's commitment to financial discipline, cost reductions, and capital efficiency opportunities underscore its strategic approach to managing potential market challenges.
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