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 nine months ended September 30, 2023. NEE operates primarily through FPL, a regulated Florida electric utility serving approximately 5.8 million customer accounts, and NextEra Energy Resources (NEER), a competitive energy and renewable-generation business. FPL is wholly owned by NEE.
Key Financial Metrics
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| NEE operating revenues | $7.172 billion | $6.719 billion | $21.236 billion | $14.792 billion |
| NEE operating income | $1.836 billion | $1.862 billion | $7.577 billion | $2.035 billion |
| Net income attributable to NEE | $1.219 billion | $1.696 billion | $6.100 billion | $2.625 billion |
| NEE diluted EPS | $0.60 | $0.86 | $3.02 | $1.33 |
| FPL operating revenues | $5.475 billion | $5.075 billion | $14.169 billion | $13.211 billion |
| FPL net income | $1.183 billion | $1.074 billion | $3.406 billion | $2.939 billion |
- NEE operating margin was approximately 25.6% in Q3 2023 versus 27.7% in Q3 2022, and approximately 35.7% for the first nine months versus 13.8% in the prior-year period. The nine-month comparison was heavily affected by derivative valuation and impairment items.
- FPL operating margin was approximately 31.1% in Q3 2023 versus 29.7% in Q3 2022, and approximately 34.6% for the first nine months versus 31.4% in the prior-year period.
- NEE generated $8.423 billion of operating cash flow in the first nine months, compared with $7.267 billion in the prior-year period. Investing cash use was $18.777 billion, including $7.279 billion of FPL capital expenditures and $11.456 billion of NEER investments.
- NEE financing cash flow was $9.703 billion, supported by $9.978 billion of long-term debt issuance and $4.505 billion of common-stock/equity-unit issuance. Dividends paid were $2.823 billion.
- Cash, cash equivalents and restricted cash totaled $2.778 billion at September 30, 2023, down from $3.967 billion at September 30, 2022. NEE reported approximately $12.8 billion of net available liquidity.
- NEE long-term debt, including current maturities, was $67.162 billion; FPL long-term debt, including current maturities, was $24.889 billion. NEE commercial paper was $3.985 billion at quarter-end.
- NEE total assets were $171.674 billion and total liabilities were $115.106 billion at September 30, 2023. FPL total assets were $91.069 billion and total liabilities were $52.400 billion.
Material Changes Versus the Prior Comparable Period
- NEE quarterly net income attributable to NEE declined $477 million, primarily because NEER recorded a significant impairment of its investment in NextEra Energy Partners (NEP) and experienced unfavorable non-qualifying hedge activity. FPL and Corporate and Other partially offset the decline.
- NEE nine-month net income attributable to NEE increased $3.475 billion, primarily due to favorable non-qualifying hedge activity, higher NEER earnings from new investments and customer supply and trading, favorable nuclear decommissioning fund investment results, and the absence of the prior-year Mountain Valley Pipeline impairment.
- NEER recorded a $1.2 billion pretax, approximately $0.9 billion after-tax, other-than-temporary impairment on its NEP investment after NEP reduced its distribution growth expectations and its unit price declined. NEE’s carrying value was reduced from approximately $4.2 billion to $3.0 billion.
- FPL earnings increased $109 million in Q3 and $467 million for the first nine months. The improvement primarily reflected rate-base growth and new rates, partly offset by lower fuel revenues and higher depreciation, amortization and interest expense.
- FPL revenues included storm-cost recovery revenues of approximately $440 million in Q3 and $792 million for the first nine months, primarily related to Hurricanes Ian and Nicole. FPL also began recovering approximately $2.1 billion of 2022 fuel under-recovery and implemented additional fuel-charge reductions.
- NEE completed the acquisition of a renewable natural gas and landfill-gas portfolio in March 2023 for approximately $1.1 billion in cash plus assumed debt. In June 2023, NEER sold interests in wind and solar facilities totaling 688 MW to an NEP subsidiary for approximately $566 million plus working capital.
- NEE issued 33.38 million shares for $2.5 billion in March 2023 and 27.344 million shares for $2.0 billion in September 2023 in connection with equity-unit settlements.
Guidance, Outlook, Commentary and Risks
- The filing does not provide a clear new corporate earnings guidance range. Management states that FPL earned an approximately 11.80% regulatory return on equity and expects its 2021 rate agreement to remain intact, although the Florida Supreme Court remanded the agreement to the Florida Public Service Commission for further proceedings.
- Estimated capital expenditures for the remainder of 2023 through 2027 total $35.855 billion for FPL and $16.605 billion for NEER. These estimates remain subject to review and actual spending may vary significantly.
- FPL expects to sell Florida City Gas for approximately $923 million, subject to customary closing conditions, and anticipates a gain of approximately $400 million pretax, or $300 million after tax, when the transaction closes.
- At September 30, 2023, NEE had approximately $4.2 billion of structured-payables obligations, primarily included in accounts payable, and approximately $2.7 billion of guarantees and credit support related primarily to NEP subsidiaries.
- Derivative and market-price volatility remains material. NEE reported $3.1 billion of credit exposure from energy marketing and trading activities after collateral and contractual netting, with approximately 90% exposure to investment-grade counterparties.
- Other significant risks include regulatory and cost-recovery decisions, high capital requirements, interest-rate and commodity-price volatility, credit and collateral requirements, severe weather, cyber and operational disruptions, nuclear liabilities, environmental compliance, litigation and access to credit markets.
- FPL faces a certified class-action lawsuit relating to Hurricane Irma service interruptions. NEE also faces shareholder securities, derivative, ERISA and related legal proceedings concerning alleged disclosures, campaign-finance matters and retirement-plan fees. The filing does not state that a material loss is probable.
Most Important Facts for Investors to Verify
- Verify the effect and valuation assumptions of the approximately $1.2 billion NEP impairment and the sustainability of NEER earnings excluding non-qualifying hedge and other mark-to-market effects.
- Monitor the Florida Public Service Commission’s proceedings following the Florida Supreme Court remand of FPL’s 2021 rate agreement.
- Assess FPL’s storm-cost and fuel-cost recovery balances, including the approximately $1.3 billion estimated storm costs subject to prudence review and potential refunds.
- Reconcile the planned $52.460 billion of FPL and NEER capital expenditures through 2027 with operating cash flow, debt issuance, equity issuance and asset-sale funding.
- Review NEE’s leverage, refinancing needs, credit ratings and approximately $12.8 billion of net available liquidity, including facilities with maturities within the next 12 months.
- Evaluate NEP-related guarantees, structured payables, derivative collateral requirements and other contingent obligations that could affect liquidity.
- Confirm the timing and final proceeds from the planned Florida City Gas sale and the treatment of the anticipated gain.