NextEra Energy, Inc. 2020 Form 10-K Summary
Business context and reporting period
This combined Form 10-K covers NextEra Energy, Inc. (NEE) and its wholly owned regulated subsidiary, Florida Power & Light Company (FPL), for the fiscal year ended December 31, 2020. NEE operates primarily through FPL, a Florida electric utility, and NextEra Energy Resources (NEER), a competitive renewable energy, generation, transmission, trading and gas infrastructure business. Gulf Power was acquired in January 2019 and legally merged into FPL on January 1, 2021, although separate ratemaking and segment reporting continue during 2021.
- FPL served more than 5.6 million customer accounts and had approximately 28,500 MW of generation resources at year-end.
- NEER had approximately 23,900 MW of net generating capacity, with approximately 92% committed under long-term contracts.
- NEE employed approximately 14,900 people at December 31, 2020.
Financial performance and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Operating revenues | $17.997 billion | $19.204 billion | Down $1.207 billion |
| Operating income | $5.116 billion | $5.353 billion | Down $237 million |
| Net income attributable to NEE | $2.919 billion | $3.769 billion | Down $850 million |
| Diluted EPS | $1.48 | $1.94 | Down $0.46 |
| Cash flow from operations | $7.983 billion | $8.155 billion | Down $172 million |
| Capital expenditures and investments | $14.610 billion | $17.462 billion | Down $2.852 billion |
| Long-term debt | $46.082 billion | $39.667 billion | Up $6.415 billion |
| Net available liquidity | $10.946 billion | Not clearly provided in the filing text | Not comparable |
- NEE’s calculated operating margin was approximately 28.4%, compared with approximately 27.9% in 2019. Its calculated net income attributable to NEE margin was approximately 16.2%, compared with 19.6% in 2019; these are derived from reported figures and are not presented as GAAP subtotals in the filing.
- FPL net income increased to $2.650 billion from $2.334 billion. FPL operating revenues declined to $11.662 billion from $12.192 billion, principally because of lower fuel cost recovery and lower storm-related revenues, partly offset by higher retail base revenues.
- NEER net income attributable to NEE declined to $531 million from $1.807 billion. The decrease reflected the Mountain Valley Pipeline impairment, unfavorable non-qualifying hedge activity, lower nuclear results and the absence of prior-year NEP investment gains.
- Cash and cash equivalents were $1.105 billion at December 31, 2020. Total assets were $127.684 billion and total liabilities were $82.755 billion.
- NEE’s debt included $41.944 billion of noncurrent long-term debt, $4.138 billion of current long-term debt, $1.551 billion of commercial paper and $458 million of other short-term debt. FPL’s long-term debt was $15.676 billion, including its current portion.
- Operating cash flow funded approximately 55% of capital expenditures and investments. Financing activities provided $6.174 billion, including $12.404 billion of long-term debt issuance, $3.522 billion from differential membership investors and $2.743 billion of common dividends.
- NEE’s quarterly dividend was increased from $0.35 to $0.385 per share in February 2021.
Material changes versus the prior comparable period
- NEE’s consolidated earnings declined primarily because NEER recorded a $1.5 billion pretax, approximately $1.2 billion after-tax, impairment of its Mountain Valley Pipeline investment. The investment’s carrying value of approximately $1.9 billion was reduced to estimated fair value of approximately $400 million.
- After-tax losses from non-qualifying hedge activity increased to $650 million from $404 million, reflecting market-driven changes in forward power and natural gas prices, interest rates and foreign exchange rates.
- NEER recognized a $274 million after-tax gain on the sale of two Spanish solar projects. The prior-year period included approximately $96 million of net NEP investment gains, compared with a $94 million loss in 2020.
- FPL’s average retail rate base grew by approximately $3.9 billion, supported by solar generation, transmission and distribution investments. FPL’s regulatory ROE was approximately 11.60% in both 2020 and 2019.
- NEER added approximately 2,299 MW of wind capacity, repowered approximately 1,412 MW of wind capacity and added approximately 625 MW of solar capacity during 2020.
- Duane Arnold nuclear plant ceased operations in August 2020. FPL also accelerated the planned retirement of Gulf Power’s coal-fired Plant Crist following Hurricane Sally damage.
- NEE’s balance sheet expanded, with total assets increasing from $117.691 billion to $127.684 billion and noncontrolling interests increasing from $4.355 billion to $8.416 billion, reflecting continued project investment and third-party ownership financing.
Guidance, outlook, management commentary and risks
- FPL notified the Florida Public Service Commission that it intended to seek a four-year rate plan beginning in January 2022. Preliminary requests included an approximately $1.1 billion general base-revenue increase in 2022 and approximately $615 million in 2023, subject to regulatory approval.
- FPL expected to request a Solar Base Rate Adjustment for up to 900 MW of solar projects in each of 2024 and 2025. The preliminary estimated rate adjustments were approximately $140 million in each year, partly offset by lower fuel costs. The filing does not provide clear consolidated earnings guidance for 2021 or later periods.
- Approved or internally authorized capital expenditures for 2021–2025 totaled approximately $33.405 billion for FPL, $3.550 billion for Gulf Power and $7.090 billion for NEER, before any future revisions.
- FPL and Gulf Power incurred storm-related costs from hurricanes and tropical storms. Gulf Power recorded approximately $206 million of recoverable Hurricane Sally restoration costs, with regulatory recovery pending at year-end.
- COVID-19 had not materially affected NEE’s or FPL’s workforce, operations, financial performance, liquidity or supply chain through the filing date, but management could not predict the outbreak’s ultimate effects.
- Key risks include regulatory cost disallowances or delayed rate recovery, changes to renewable energy tax incentives, environmental and greenhouse-gas regulation, severe weather and hurricanes, nuclear operating and decommissioning liabilities, commodity and derivative volatility, counterparty and credit risk, cyberattacks, project permitting and construction delays, capital-market access and interest-rate exposure.
- NEE had approximately $4.3 billion of guarantees related to purchased power agreements, nuclear activities, production tax credits and other contractual obligations, in addition to approximately $1.8 billion of standby letters of credit and $621 million of surety bonds.
- The filing reports no material legal proceedings and states that management believes there was no material exposure related to its guarantee arrangements at year-end.
Most important facts for investors to verify
- Review the sustainability of earnings excluding the $1.2 billion after-tax Mountain Valley Pipeline impairment, hedge mark-to-market losses and other unusual items.
- Confirm the status and final terms of FPL’s 2021 base-rate proceeding, including requested revenue increases, ROE, solar recovery mechanisms and Gulf Power rate consolidation.
- Assess whether operating cash flow can continue to fund the company’s substantial capital program while maintaining dividends and investment-grade credit ratings.
- Examine debt maturities, refinancing needs and potential collateral requirements associated with derivatives, credit ratings and variable-rate obligations.
- Monitor regulatory and legal developments affecting Mountain Valley Pipeline, GridLiance, renewable tax incentives and other major projects.
- Evaluate exposure to hurricanes, uninsured transmission and pipeline losses, nuclear decommissioning costs, severe weather, commodity prices and cybersecurity events.
- Verify the accounting assumptions and valuation inputs for Level 3 energy derivatives, equity-method investments, pension assets and nuclear decommissioning obligations.