NextEra Energy, Inc. 2014 Form 10-K Summary
Business context and reporting period
This combined Form 10-K covers NextEra Energy, Inc. (NEE) and its wholly owned regulated utility subsidiary, Florida Power & Light Company (FPL), for the fiscal year ended December 31, 2014. NEE operates primarily through FPL and competitive energy subsidiary NextEra Energy Resources (NEER). NEE had approximately 44,900 MW of generating capacity, served more than 5 million customers, and employed approximately 13,800 people. FPL served approximately 4.7 million customer accounts in Florida; NEER operated approximately 19,800 MW of generating capacity, primarily from wind, solar, nuclear and natural gas.
Key financial metrics
| Metric | NEE 2014 | NEE 2013 | Change |
|---|---|---|---|
| Operating revenues | $17.021 billion | $15.136 billion | +12.4% |
| Operating income | $4.384 billion | $3.241 billion | +35.3% |
| Operating margin | 25.8% | 21.4% | Higher |
| Net income attributable to NEE | $2.465 billion | $1.908 billion | +29.2% |
| Diluted EPS | $5.60 | $4.47 | +25.3% |
| Net margin attributable to NEE | 14.5% | 12.6% | Higher |
| Cash flow from operations | $5.500 billion | $5.102 billion | +7.8% |
| Capital expenditures and investments | $7.017 billion | $6.682 billion | +5.0% |
| Total assets | $74.929 billion | $69.306 billion | +8.1% |
| Long-term debt, excluding current maturities | $24.367 billion | $23.969 billion | +1.7% |
| Net available liquidity | $7.010 billion | Source text does not provide a comparable value | — |
NEE ended 2014 with $577 million of cash and cash equivalents. FPL generated $3.454 billion of operating cash flow and invested $3.241 billion in capital expenditures, nuclear fuel and related projects. NEE paid $1.261 billion in common dividends, or $2.90 per share, and increased its quarterly dividend from $0.725 to $0.77 per share effective in February 2015.
FPL reported operating revenues of $11.421 billion, operating income of $2.828 billion and net income of $1.517 billion, compared with $1.349 billion of net income in 2013. FPL’s 2014 regulatory ROE was 11.50%, at the upper end of the range allowed under its rate agreement.
Material changes versus the prior comparable period
- NEE net income attributable to shareholders increased by $557 million, primarily from higher FPL and NEER results.
- FPL earnings benefited from a $2.3 billion increase in average retail rate base, the April 2014 completion of the 1,212 MW Riviera Beach modernization project, higher wholesale revenues and the absence of 2013 cost-savings transition charges.
- FPL’s retail base revenues rose to $5.347 billion from $4.951 billion. Wholesale and transmission revenues increased by approximately $131 million.
- NEER earnings increased to $985 million from $556 million. Drivers included new wind and solar investments, stronger wind resources, favorable market conditions and a $225 million after-tax improvement in unrealized non-qualifying hedge results.
- The 2013 $300 million pretax impairment of the Spain solar projects and related $342 million after-tax charges did not recur in 2014. However, the Spain projects continued to have operating losses, and project-level financing remained subject to events of default and restructuring discussions.
- The $231 million after-tax gain from 2013 discontinued operations did not recur. NEE also reversed its planned sale of Maine fossil assets and recorded a $21 million pretax gain in 2014.
- NEP completed its initial public offering in July 2014, generating approximately $438 million of proceeds and creating a noncontrolling interest in NEE’s consolidated financial statements.
- NEE settled a forward sale agreement in December 2014 by issuing 6.6 million common shares for approximately $552 million.
Guidance, outlook, commentary and risks
Management emphasized continued investment in regulated infrastructure and renewable generation. FPL expected to place its approximately 1,240 MW Port Everglades modernization project in service by mid-2016, build three solar PV projects totaling approximately 222 MW by the end of 2016, and maintain a projected summer 2015 reserve margin of approximately 27%.
NEER planned approximately 980 MW of U.S. wind, 175 MW of Canadian wind and 960 MW of solar additions during 2015 and 2016. NEE also planned substantial investment in transmission and natural gas infrastructure, including the Florida Natural Gas Pipeline System and the Mountain Valley Pipeline. The filing does not provide a specific consolidated earnings forecast.
- In December 2014, NEE agreed to acquire Hawaiian Electric Industries. Completion was targeted for the end of 2015 but depended on shareholder and regulatory approvals. The agreement included termination fees of $90 million plus reimbursement of up to $5 million of expenses under specified circumstances.
- NEE and FPL face extensive regulatory, environmental and nuclear-safety requirements. Potential impacts from greenhouse-gas rules, Clean Water Act Section 316(b), waters-of-the-U.S. rules and wildlife protections were uncertain.
- FPL’s ability to recover costs through rates is subject to regulatory prudence review and possible disallowance. Its rate agreement is effective through December 2016 and permits an ROE range of 9.50% to 11.50%.
- Commodity prices, weather, wind and solar resource levels, transmission availability, counterparty credit, derivatives valuation and market liquidity can materially affect NEER’s results.
- At December 31, 2014, NEE had approximately $11.2 billion of guarantees and indemnifications, $1.3 billion of standby letters of credit and $203 million of surety bonds; management considered associated payment risk unlikely and recorded no liabilities for these arrangements.
- FPL had approximately $36.1 billion of purchase obligations, including fuel, transportation and purchased-power commitments. Total disclosed NEE contractual obligations were approximately $111.3 billion.
- NEE had $24.367 billion of long-term debt excluding current maturities and $3.515 billion of long-term debt maturities due in 2015. Credit ratings were stable as of February 20, 2015: NEE corporate ratings were Baa1/A-/A-, while FPL corporate ratings were A1/A-/A.
- FPL’s nuclear decommissioning funds totaled approximately $3.449 billion, and NEE’s total nuclear decommissioning funds totaled approximately $5.091 billion. Nuclear incidents, regulatory changes and decommissioning costs could create significant liabilities.
Most important facts for an investor to verify
- Whether the earnings improvement is sustainable after adjusting for non-qualifying hedge gains, tax credits, project impairments and other unusual items.
- The status, final cost and regulatory recovery of FPL’s Port Everglades, solar, nuclear and transmission projects.
- The financial condition and restructuring outcome of the Spain solar projects, including the $647 million of project-level debt and $125 million of related derivative liabilities classified as current at year-end.
- Regulatory approval, financing and construction progress for the Hawaiian Electric merger and the Florida and Mountain Valley pipeline projects.
- NEE’s debt maturities, credit ratings, collateral requirements and available liquidity under adverse commodity-price or credit-market conditions.
- Potential exposure from environmental rules, nuclear liabilities, storm restoration, litigation and regulatory cost disallowances.
- Reconciliation of GAAP net income and management’s adjusted earnings, particularly the effect of the $153 million after-tax unrealized non-qualifying hedge gain in 2014.