Business Context and Reporting Period
NextEra Energy, Inc. (NEE) filed a combined Form 10-K with its wholly owned subsidiary, Florida Power & Light Company (FPL), for the fiscal year ended December 31, 2023. The filing is an annual report, not a standalone fourth-quarter filing. NEE operates primarily through FPL, a rate-regulated Florida electric utility serving approximately 5.9 million customer accounts, and NextEra Energy Resources and NextEra Energy Transmission (collectively, NEER), a competitive clean-energy, storage, gas-infrastructure and transmission business.
NEE had approximately 16,800 employees at year-end. FPL and NEER were the reportable segments.
Key Financial Metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Operating revenues | $28.114 billion | $20.956 billion | +$7.158 billion |
| Operating income | $10.237 billion | $4.081 billion | +$6.156 billion |
| Net income attributable to NEE | $7.310 billion | $4.147 billion | +$3.163 billion |
| Diluted EPS | $3.60 | $2.10 | +$1.50 |
| Operating margin | 36.4% | 19.5% | Expanded |
| Net income attributable margin | 26.0% | 19.8% | Expanded |
| Cash flow from operations | $11.301 billion | $8.262 billion | +$3.039 billion |
| Capital expenditures and investments | $25.113 billion | $19.283 billion | +$5.830 billion |
| Long-term debt, including current portion | $68.306 billion | $61.889 billion | +$6.417 billion |
| Net available liquidity | $12.243 billion | Not clearly provided in the filing text | Not comparable from provided text |
NEE ended 2023 with total assets of $177.489 billion, total liabilities of $118.465 billion, common shareholders’ equity of $47.468 billion and noncontrolling interests of $10.300 billion. Cash, cash equivalents and restricted cash totaled $3.420 billion at year-end, compared with $3.441 billion at year-end 2022.
Interest expense increased substantially to $3.324 billion from $585 million, reflecting higher average interest rates and debt balances, as well as unfavorable changes in interest-rate derivative values. NEE’s effective income tax rate was 13.8%, compared with 15.3% in 2022, principally benefiting from renewable-energy tax credits.
Segment Performance
- FPL: Net income attributable to NEE increased to $4.552 billion from $3.701 billion. Operating revenues increased to $18.365 billion from $17.282 billion. FPL’s average rate base grew by approximately $6.9 billion, and its regulatory ROE was approximately 11.80% versus 11.74% in 2022.
- NEER: Net income attributable to NEE increased to $3.558 billion from $285 million. The improvement was driven primarily by favorable non-qualifying hedge activity, new wind, solar and battery investments, and lower Mountain Valley Pipeline impairment charges, partly offset by a $1.2 billion pretax impairment of the NEP investment and lower existing clean-energy results due largely to weaker wind resources.
- Corporate and Other: Results declined to a loss of $800 million from income of $161 million, primarily due to unfavorable interest-rate and other non-qualifying hedge activity and higher financing costs.
Cash Flow, Debt and Liquidity
- Operating cash flow was $11.301 billion, while investing cash outflows were $23.467 billion, primarily reflecting $25.113 billion of capital expenditures, independent power investments and nuclear fuel purchases.
- Financing activities provided $12.149 billion, including $13.857 billion of long-term debt issuance, $4.514 billion of common stock and equity-unit issuance, and $2.745 billion of proceeds from differential membership investors. These inflows were partly offset by $7.978 billion of long-term debt retirements and $3.782 billion of common-stock dividends.
- At December 31, 2023, total net available liquidity was approximately $12.2 billion, comprising $1.170 billion at FPL and $11.073 billion at NEECH. The calculation reflected cash, revolving credit capacity and letter-of-credit facilities, less borrowings, commercial paper and specified related-party amounts.
- NEE’s credit ratings were investment grade with stable outlooks: Baa1/A-/A- for NEE, A1/A/A for FPL, and Baa1/A-/A- for NEECH from Moody’s, S&P and Fitch, respectively.
- NEE estimated minimum annual long-term debt maturities of $6.901 billion in 2024, $8.037 billion in 2025, $1.874 billion in 2026, $7.731 billion in 2027 and $7.685 billion in 2028.
Material Changes Versus the Prior Comparable Period
- Consolidated earnings increased sharply, primarily because NEER’s non-qualifying hedge results changed from significant losses in 2022 to gains in 2023. The filing identifies approximately $1.497 billion of after-tax gains from non-qualifying hedge activity in 2023 versus a $696 million after-tax loss in 2022.
- FPL benefited from rate-base growth, new base rates under the 2021 rate agreement and higher storm-cost recovery revenues. Storm-related recovery revenues increased by approximately $1.117 billion, while fuel-cost recovery revenues declined by approximately $714 million due primarily to lower fuel and energy prices.
- FPL’s depreciation and amortization expense increased by $1.094 billion, primarily because of amortization of deferred storm costs associated with Hurricanes Ian and Nicole.
- NEER added approximately 1,651 MW of wind capacity and 2,073 MW of solar capacity in 2023. Approximately 94% of NEER’s net generating capacity was committed under long-term contracts at year-end.
- NEE acquired renewable-energy and biogas projects for approximately $1.1 billion in cash in March 2023 and FPL sold its Florida City Gas interests for approximately $924 million, recording a gain of approximately $406 million pretax.
- NEE recorded a $1.2 billion pretax, approximately $900 million after-tax, impairment related to its investment in NEP. This compared with an approximately $800 million pretax impairment related to Mountain Valley Pipeline in 2022.
Guidance, Outlook, Commentary and Unusual Items
- The filing does not provide a clear standalone 2024 earnings or EPS guidance figure in the supplied text.
- Management expects continued investment in FPL’s generation, transmission and distribution systems and in NEER’s clean-energy portfolio. Estimated 2024–2028 capital expenditures are $43.775 billion for FPL and $18.300 billion for NEER, subject to review and adjustment.
- FPL expects to place additional solar generation into service, including 1,341 MW expected in 2024 and 894 MW expected in 2025. FPL placed 894 MW of solar capacity in service in January 2024.
- The Inflation Reduction Act is expected to support renewable development through expanded wind, solar, storage, hydrogen and other clean-energy tax incentives. NEE reported approximately $370 million of proceeds from renewable-energy tax-credit sales in 2023.
- The Florida Supreme Court remanded the FPSC’s order approving FPL’s 2021 rate agreement to the FPSC. Management expects the agreement to remain intact but cannot predict the ultimate outcome with certainty.
- FPL’s approximately $1.3 billion of storm-cost recovery for Hurricanes Ian and Nicole is subject to an FPSC prudence review and potential refund. FPL recorded an interim surcharge beginning in April 2023.
- NEE disclosed shareholder securities, derivative and ERISA-related litigation involving allegations concerning campaign-finance activities, fiduciary duties and plan fees. The filing states that NEE and FPL are vigorously defending the matters; potential damages are not specified.
- The filing identifies material exposure to interest rates, commodity prices, derivative valuation, credit and counterparty risk, severe weather, cyberattacks, environmental regulation, nuclear operations, renewable-energy policy changes, construction delays, supply-chain disruption and access to capital markets.
- NEE’s critical audit matters included valuation of Level 3 energy derivatives and the impact of rate regulation on FPL’s financial statements. Deloitte & Touche issued unqualified opinions on the financial statements and internal control over financial reporting.
Most Important Facts for Investors to Verify
- Reconcile reported GAAP earnings with management’s adjusted earnings, particularly the substantial effect of non-qualifying hedge activity and the NEP impairment.
- Monitor FPL’s remanded 2021 rate agreement, regulatory ROE, storm-cost prudence review and any related customer refunds or rate changes.
- Assess the ability to fund the planned $62.075 billion of 2024–2028 capital expenditures while refinancing significant near-term debt maturities.
- Evaluate the sensitivity of earnings, liquidity and collateral requirements to interest rates, commodity prices, derivative valuations and credit-rating changes.
- Review NEP’s financial condition, distribution-growth outlook, related-party obligations and NEE’s remaining investment exposure following the 2023 impairment.
- Track execution, permitting, supply-chain costs and tax-credit eligibility for planned wind, solar, battery-storage, transmission and renewable-fuels projects.
- Review outstanding litigation, environmental and nuclear contingencies, including potential uninsured losses and regulatory disallowances.