Business Context and Reporting Period
NextEra Energy, Inc. (NEE) and Florida Power & Light Company (FPL) filed a combined unaudited Form 10-Q for the quarter and six months ended June 30, 2023. NEE operates through FPL, a regulated Florida electric utility serving approximately 5.8 million customer accounts, and NextEra Energy Resources (NEER), a competitive energy and transmission business focused heavily on renewable generation and battery storage. FPL is wholly owned by NEE.
Financial Performance and Key Metrics
| Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |
|---|---|---|---|---|
| NEE operating revenues | $7,349 million | $5,183 million | $14,065 million | $8,073 million |
| NEE operating income | $2,799 million | $948 million | $5,741 million | $173 million |
| NEE net income attributable to NEE | $2,795 million | $1,380 million | $4,881 million | $929 million |
| NEE diluted EPS | $1.38 | $0.70 | $2.42 | $0.47 |
| FPL operating revenues | $4,774 million | $4,425 million | $8,693 million | $8,137 million |
| FPL net income | $1,152 million | $989 million | $2,223 million | $1,864 million |
| NEE operating margin | 38.1% | 18.3% | 40.8% | 2.1% |
| FPL operating margin | 34.6% | 31.7% | 36.8% | 32.5% |
- NEE net cash provided by operating activities was $4,759 million in the first six months, compared with $4,793 million in the prior-year period.
- NEE used $12,814 million in investing activities, including $4,664 million of FPL capital expenditures and $8,249 million of NEER investments.
- NEE generated $7,368 million from financing activities, including $9,978 million of long-term debt issuance and $2,503 million from common stock and equity-unit issuances.
- NEE ended June 30, 2023 with $1,577 million of cash and cash equivalents and $13,599 million of net available liquidity at FPL and NEECH.
- NEE reported total debt of approximately $69.6 billion, including current and long-term debt; FPL reported approximately $24.9 billion.
- NEE total assets were $168.3 billion and total liabilities were $113.9 billion at June 30, 2023. FPL total assets were $89.4 billion and total liabilities were $50.4 billion.
- NEE paid $1,876 million of common-stock dividends during the first six months, including a quarterly dividend of $0.4675 per share.
Material Changes Versus the Prior Comparable Period
- NEE’s second-quarter net income attributable to NEE increased by $1,415 million, while six-month earnings increased by $3,952 million. The principal driver was a substantial improvement in NEER results.
- NEER second-quarter earnings increased by $1,329 million and six-month earnings increased by $4,268 million, primarily due to favorable non-qualifying hedge activity, higher earnings from new investments, improved customer supply and proprietary trading margins, and favorable nuclear decommissioning fund investment results.
- NEER’s non-qualifying hedge activity contributed approximately $1,012 million to the year-over-year second-quarter improvement and $3,045 million to the six-month improvement. These mark-to-market effects can create significant earnings volatility and may not represent underlying economic performance.
- FPL second-quarter net income increased $163 million, and six-month net income increased $359 million, primarily due to growth in plant in service and rate base. FPL’s average rate base was approximately $6.6 billion higher for the quarter and $6.3 billion higher for the six-month period than in the prior year.
- FPL revenue growth included storm-cost recovery revenues of approximately $348 million in the quarter and $352 million for the six-month period, primarily related to Hurricanes Ian and Nicole. Lower fuel prices reduced fuel revenues but also reduced fuel and purchased-power expense.
- Corporate and Other results declined because of higher interest costs and, for the six-month period, less favorable interest-rate hedge activity.
- NEE completed the acquisition of a renewable natural gas and biogas portfolio for approximately $1.1 billion in cash, assumed approximately $34 million of debt, and recognized approximately $0.3 billion of provisional goodwill.
- NEER sold five wind and three solar facilities totaling 688 MW to a NEP subsidiary for approximately $566 million of cash proceeds plus $32 million of working capital, subject to post-closing adjustments.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The filing does not provide a clear new full-year earnings guidance figure. Management uses adjusted earnings, a non-GAAP measure, but the filing does not present a single consolidated adjusted-earnings outlook in the provided text.
- FPL began recovering approximately $2.1 billion of 2022 fuel under-recovery over 21 months beginning April 2023. FPL also received approvals for multiple reductions in 2023 levelized fuel charges totaling approximately $1.635 billion.
- FPL began recovering estimated eligible storm costs of approximately $1.3 billion through a 12-month interim surcharge beginning April 2023. Recovery remains subject to an FPSC prudence review and potential refunds.
- Estimated capital expenditures for the remainder of 2023 through 2027 total $38.3 billion for FPL and $14.4 billion for NEER. Actual spending may vary significantly.
- NEE has approximately $3.8 billion of outstanding structured-payables obligations, substantially included in accounts payable.
- NEE provides approximately $3.8 billion of guarantees and credit support primarily for NEP-related obligations, plus approximately $5.7 billion of guarantees related to purchased-power agreements, nuclear activities, PTC obligations, retail supply activities, and other contracts.
- Derivative positions remain material. A downgrade to below investment grade could require approximately $2.2 billion of additional collateral, excluding other potential requirements from financial-ratio or cross-default triggers.
- NEE faces commodity, interest-rate, equity-market, counterparty, regulatory, environmental, nuclear, construction, cybersecurity, severe-weather, insurance, and credit-market risks. The filing states that there were no material changes to the risk factors in the 2022 Form 10-K.
- FPL continues to defend a purported class-action lawsuit concerning Hurricane Irma service interruptions. NEE and certain current and former executives also face a securities class action filed in June 2023 alleging inadequate disclosure and misstatements concerning legal and reputational risks related to campaign-finance allegations and other political activities. Damages are unspecified.
- Second-quarter and six-month results were materially affected by mark-to-market derivative gains, changes in nuclear decommissioning fund investments, tax credits, storm-cost recovery, and comparisons against the prior-year Mountain Valley Pipeline impairment.
Most Important Facts for Investors to Verify
- Earnings quality: Separate recurring operating performance from large non-qualifying hedge gains and other mark-to-market effects.
- FPL regulatory recovery: Monitor FPSC prudence reviews, storm-cost recovery, fuel under-recovery collections, and subsequent fuel-charge reductions.
- Capital funding: Assess whether operating cash flow, debt issuance, equity issuance, asset sales, and NEP transactions can support the substantial planned capital program.
- Leverage and liquidity: Reconcile reported debt, commercial paper, structured payables, credit-facility availability, collateral requirements, and upcoming maturities.
- NEER execution: Verify the timing, cost, and returns of renewable, storage, RNG, transmission, and gas-infrastructure projects, including projects involving NEP and Mountain Valley Pipeline.
- Legal and reputational exposure: Follow developments in the Hurricane Irma litigation and the securities class action against NEE and executives.
- Market and counterparty sensitivity: Review derivative fair values, Level 3 assumptions, potential collateral postings, and the disclosed $3.4 billion of NEE energy-marketing credit exposure.