Q1 2025 Nextera Energy Inc Earnings Call
Good morning and welcome to the NextEra Energy Inc. 1st quarter 2025 Earnings Conference Call.
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please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Mark Eiderman, Director of Investor Relations. Please go ahead.
Mark Eidelman: Thank you, Doorwim. Good morning, everyone. And thank you for joining our first quarter 2025 Financial Results Conference call for NextEra Energy.
Mark Eidelman: With me this morning are John Ketchum, Chairman, President and Chief Executive Officer of NextEra Energy, Brian Bolster, Executive Vice President and Chief Financial Officer of NextEra Energy, Armando Pimentel, President and Chief Executive Officer of Florida Power & Light Company,
Speaker Change: Rebecca Kijawa, President and Chief Executive Officer of NextEra Energy Resources, Mark Hickson, Executive Vice President of NextEra Energy, and Mike Dunn, President of NextEra Energy.
Speaker Change: John will start with opening remarks and then Michael provide an overview of our first quarter results. Our Executive team would then be available to answer your questions.
Speaker Change: We will be making four-looking statements during this call based on current expectations and assumptions which are subject to risks and uncertainties.
Actual results could differ materially from our four-looking statements. [inaudible]
Speaker Change: If any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release and the comments made during this conference call in the risk factor section of the company presentation or in our latest reports and filings for the Securities and Exchange Commission.
Speaker Change: Each of which can be found on our website www.nextEraenergy.com. Would you not undertake any duty to update any forward-looking statements?
Speaker Change: Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides and accompanying today's presentation for definitional information and reconciliation of historical non-GAAP measures to the closest GAAP financial measure. With that, I'll turn the call over to John .
Speaker Change: Thanks Mark, and good morning everyone. NextEra Energy is once again off to a strong start for the year delivering solid first quarter results.
John Ketchum: Adjusted earnings per share increased by nearly 9% year-over-year, reflecting solid financial and operational performance across FPL and energy resources.
John Ketchum: FPL placed in the service 894 megawatts of new solar and energy resources originated approximately 3.2 gigawatts of new renewables and storage projects.
John Ketchum: We continue to see strong demand for new sources of generation across all sectors of the US economy.
John Ketchum: For perspective, we expect more than 450 gigawatts of cumulative demand for new generation between now and 2030 in the United States.
John Ketchum: To meet this demand, we believe it's important to exercise what I described as energy realism and energy pragmatism [inaudible]
John Ketchum: Let me explain. Energy realism is about embracing all forms of energy solutions and understanding the demand for electricity in the United States is here now and it's not slowing down.
John Ketchum: Frankly, it's unlike anything we've ever seen since the end of World War 2. [inaudible]
Unknown.
John Ketchum: Energy pragmatism is about recognizing some technology is ready at scale today and other technology needs more time to get there and there will be significant trade-offs with regard to the timing and cost of each.
John Ketchum: Today, renewables and battery storage are the lowest cost form of power generation and capacity.
John Ketchum: and we can build these projects and get new electrons on the grid in 12 to 18 months.
John Ketchum: We should be thinking about renewables and battery storage as a critical bridge to when other technology is ready at scale like new gas fire plants.
John Ketchum: We expect 75 gigawatts of new gas to come online between now in 2030.
John Ketchum: That is significant for sure but nowhere close to meeting the over 450 gigawatts of total generation we believe are needed.
John Ketchum: It's also important to understand that gas fire plants will come online at a higher cost than renewables and storage That's because gas turbines are in short supply and in high demand
John Ketchum: It's also proving difficult to reestablish the highly skilled workforce required to build these complex power plants.
John Ketchum: Gas fire combined cycle plants rely on approximately 1,000 workers across dozens of niche trades.
John Ketchum: We've learned EPCs are hiring thousands of extra people to address high-wash-out rates.
John Ketchum: with some workers leaving earlier for higher-paying jobs, building, for example, LNG terminals, data centers, semiconductor chip manufacturing facilities, and other industrial facilities.
John Ketchum: Other workers are showing up to job sites without the necessary skills. All of this puts upward pressure on prices and the time to build gas plants. It's why the cost to build a gas-fired plant has tripled in the last few years and is poised to increase even further due to tariff exposure.
John Ketchum: We believe nuclear will continue to play an important role in meeting demand, but again we need to be practical about when that will happen.
There are limited opportunities to restart shuttered nuclear units.
John Ketchum: Two are underway in our sector and we continue to evaluate bringing our own Dwaynaudal Facility and Iowa back online.
John Ketchum: Beyond those limited opportunities, SMR technology is still 10 years away at scale and the best of scenarios and at a much higher price point than gas fire generation.
Unknown.
John Ketchum: There's also an option to defer coal retirements to meet demand.
John Ketchum: But even if we kept online every coal plant in America slated to retire, it would only add approximately 40 gigawatts to the grid.
John Ketchum: And many are months away from retirement or are already slated to be converted to gas again far short of the over 450 gigawatts needed between now and 2030.
Bottom line, don't take this as picking winners and losers. [inaudible]
John Ketchum: It's not nor can it be. America is going to need all forms of energy to meet this enormous demand.
John Ketchum: But we need to be practical about when technologies will be available at scale and how much they'll cost when they show up, all of which factors into how Americans pay, how much Americans pay on their electric bill each month.
John Ketchum: This is why Energy Policy in Washington is so important and why we cannot isolate ourselves to just a couple of technologies like gas and nuclear which are much more expensive than they've ever been and take far longer to build.
John Ketchum: We say all this as a company in our space that does it all.
NextEra Energy is the quintessential all forms of energy company.
John Ketchum: We know renewables and storage because we're a world leader in the space. We know gas because we operate the largest gas-fired fleet in America, and have built more gas-fired generation than anyone over the last two decades. We're a world leader in the space.
John Ketchum: We know nuclear because we operate one of the largest fleets in the United States and we know how to serve growth because we've been doing it for decades across the United States and in Florida which brings me to Florida Power and Light Company.
John Ketchum: FPL is proof that embracing all forms of energy works, especially during periods of growth.
John Ketchum: Florida is the nation's third largest state and people continue to move here. In fact, we've added more than 1.3 million new customer accounts in the last 20 years, making us roughly 30% larger than we were in 2005.
John Ketchum: Despite the incredible growth, FPL consistently delivers high reliability while having customer bills significantly below the national average.
John Ketchum: We continue to deliver what we believe is the best customer value proposition.
John Ketchum: As we celebrate our 100 year anniversary at FPL, our vision remains the same to continue making smart capital investments for the benefit of our customers.
John Ketchum: Be an industry leader on cost and deliver high reliability and outstanding customer service while keeping bills low for our customers.
John Ketchum: The continued driving customer value and the power of Florida's growth, we've been deploying the most cost-effective option for customers.
Solar and Storage
John Ketchum: Looking ahead, at FPL, we continue to see growth on the horizon, and we are projecting to add roughly three hundred and thirty-five thousand customer camps through 2020 -nine.
John Ketchum: To continue to meet growth and reliably serve customers, FPL plans to invest nearly fifty billion dollars from 2025 to 2029 and add more than twenty five gigawatts of new generation of battery storage by 2034.
John Ketchum: On February 28th, we submitted testimony and detailed information for FPL's 2025 base rape proceeding.
John Ketchum: The overall proposal for our 2026 through 2029 base rate plan is consistent with the test
John Ketchum: The stability of multi-year plans has allowed FPL to focus on efficiency in the business, which is critical to keeping customer bills low and has enabled FPL to maintain a strong balance sheet, which allows for consistent access to the capital markets. [inaudible]
John Ketchum: We look forward to the opportunity to showcase our long-term track record of providing low bills and high reliability for Floridians and our plans to build and even more resilient energy future for Florida.
John Ketchum: We believe FPL is strategically positioned as Florida remains one of the fastest growing states in the U.S.
John Ketchum: And we plan to meet Florida's long-term growth outlook with investments in generation, transmission, and distribution infrastructure which we believe will further enhance our best in class customer value proposition.
John Ketchum: Energy Resources had a strong quarter originating approximately 3.2 gigawatts of new renewables and battery storage projects.
John Ketchum: This marks the fifth time over the past seven quarters that Energy Resources has added more than three gigawatts to its backlog, a sign of the continued strong demand for new generation.
John Ketchum: Energy Resources also had its largest solar origination quarter and largest solar and battery storage origination quarter ever. Again, demonstrating the strong demand for renewables and storage because they are low cost and can be deployed now.
John Ketchum: Assuming we achieve the midpoint of our development expectations range, energy resources will be operated in more than 70 gigawatt generation, storage portfolio by the end of 2027.
John Ketchum: Taking FPL and energy resources together, we believe NextEra Energy has the most comprehensive power generation business in the world and is well positioned to capitalize on long-term growth prospects.
John Ketchum: There has been ample discussion about tariffs these last few weeks.
John Ketchum: While this is for some companies to look at their supply chains for the first time, we've spent the last three years diversifying and domesticating hours to strategically position our supplier relationships to manage potential disruption.
John Ketchum: For perspective, we've dramatically diversified where we source our solar panels. As a result, we don't source solar panels from countries impacted by the anti-dumping and counter-vailing duty tariff rates announced earlier this week.
John Ketchum: Plus, we source our wind turbines from the US with manufacturing in Florida.
John Ketchum: And because of our buying power, we have been able to significantly shift tariff risk to suppliers.
John Ketchum: After discussion with our suppliers, we currently estimate energy resources has less than $150 million in tariff exposure through 2028 on over $75 billion in expected capital spend.
John Ketchum: That's less than 0.2% of potential impact to our capital spend.
John Ketchum: before exercising contractual trade measure protections in our contracts with customers.
John Ketchum: Size and scale matter more than ever in today's environment. Suppliers want us to be repeat customers.
John Ketchum: And our customers want certainty, certainty that comes with doing business with an industry leader like NextEra Energy that has a long track record of delivering on its commitments.
John Ketchum: Still, we continue to look for ways to further mitigate trade risk and use our supply chain management capabilities to create new opportunities.
John Ketchum: Our team had the foresight last year to secure arrangements to purchase U.S. made batteries for a significant portion of our backlog with the remainder of the battery sourced outside of China where tariff exposure is contractually allocated to the supplier.
John Ketchum: Batteries are already more than two times cheaper than gas fire plants.
John Ketchum: Available now, and much more flexible to interconnect to the grid.
John Ketchum: Taking most tariffs, exposure off the table for our customers, and need a battery storage solutions.
John Ketchum: is a big win and a way for us to meet demand while keeping bills low for customers. Our battery sourcing strategy gives us optionality and favorable pricing for our already secured domestic battery supply contracts.
John Ketchum: In short, our tariff exposure on batteries is expected to be negligible and we expect our domestic sourcing options to create significant competitive advantages for us and our customers going forward as we originate new battery storage projects.
Finally,
John Ketchum: We now have nearly $37 billion of interest rate hedges in place.
John Ketchum: that allows us to flexibility manage interest rate exposure over the coming years. [inaudible]
and a large portion.
John Ketchum: of our upcoming maturities. In fact, we entered into swaps as part of our programmatic hedging strategy when interest rates sharply declined in early April after reciprocal tariffs were announced, putting our hedged risk-free rate at roughly 3.9%.
John Ketchum: Our Registrate sensitivity is included in the appendix of today's presentation.
John Ketchum: Before I hand it over to Mike, I want to briefly touch on last month's plan leadership transition announcement. As we announced in March, after 18 years of service to NextEra Energy, Rebecca Kujawa will be retiring.
John Ketchum: Rebecca has had an incredible career at our company and has brought a strong strategic perspective and leadership approach to everything she's accomplished.
Mike: Brian Bolster will succeed Rebecca as President and CEO and NextEra Energy Resources.
Speaker Change: Brian has done an amazing job as our CFO and has the ideal combination of capabilities.
Experience
Speaker Change: and customer relationships to lead one of America's largest energy infrastructure development companies. Mike Dunn has been promoted and will succeed Brian as CFO of NextEra Energy.
Speaker Change: Mike has deep financial acumen and vast knowledge of the energy industry having spent his entire career in this sector.
Speaker Change: Both Brian and Mike are effectively transitioning into their new roles.
Speaker Change: We believe we have the best team in the industry with a track record of delivering day in and day out.
Speaker Change: There is no team better equipped or better positioned to help meet this unique moment.
Speaker Change: That's not to say it will be easy. The enormous electricity demand of the United States creates challenges and not getting this right risks higher power prices [inaudible]
But this is where NextEra Energy shines.
Speaker Change: We thrive when the stakes are high. We lean into complexity. It's what differentiates us.
Speaker Change: So many companies are approaching this moment from a standing start.
Speaker Change: We've been running this marathon for decades and I couldn't be more optimistic.
about our prospects to deliver for our customers.
with the outstanding team we have in place.
Speaker Change: With that, let me turn it over to Mike who will review first quarter results in more detail. Thanks, John . For the first quarter of 2025, FPL's earnings per share increased $0.7 euro per year.
Mike Dunn: The principal driver of this performance was FPL's regulatory capital employee growth, but approximately 8.1% year over year.
Mike Dunn: We continue to expect FPL to realize one in 10% average annual growth in regulatory capital employed over our current rate agreements for your term, which runs through 2025.
Mike Dunn: FPL is capital expenditures for approximately $2.4 billion for the quarter and we expect FPL's full year capital investments to be between $8.8 billion.
Mike Dunn: For the 12 months ending March 2025, FPLs reported return on equity for regulatory purposes will be approximately 11.6%.
Mike Dunn: During the first quarter, we utilize approximately $620 million of reserve ammunization, leaving FTO with a balance of probably $274 million.
Mike Dunn: As we previously discussed, FPL historically uses more reserve amortization in the first half of the year.
We expect this trend to continue this year.
Mike Dunn: This quarter, FPL placed in a service, 894 megawatts of new cost-effective solar, putting FPL's own and operated solar portfolio at over 7.9 gigawatts.
which is the largest utility on solar portfolio in the country.
In April , a field filed its annual 10-year site plan.
Mike Dunn: which continues to indicate that solar and storage are the most cost effective options for customers
over the next decade.
Mike Dunn: The 2025 plan projects the need for over 17 gigawatts of cost-effective solar generation across our service territory over the next 10 years.
Mike Dunn: And as a complement to FPL's plan solar additions, FPL is planning to deploy over 7.6 gigawatts of battery storage.
which provides cost-effective capacity.
Mike Dunn: With this plan, we expect to increase FPL solar mix from approximately 9% of our total generation in 2024.
to approximately 35% in 2034.
while continuing to provide customers with low cost and reliable energy.
Mike Dunn: As John mentioned, on February 28th, we submitted testimony in detailed supporting information for FPL's 2025 base rate proceeding.
Mike Dunn: We are requesting a base rate adjustment of approximately $1.5 billion starting in January , 2026.
and 127 million dollars in January 2027.
Mike Dunn: and a solar and base rate adjustment or sober mechanism to recover revenue requirements for solar and battery storage projects.
in 2028 and 2029.
Mike Dunn: with the proposed base rate adjustments and current projections for few on other costs.
Mike Dunn: We believe that FPL's typical residential customer bill will grow in an average rate of about 2.5% from January in 2025 to the end of 2029.
Mike Dunn: which is expected to result in a typical residential bill being approximately 25% below the projected national average, and more than 20% lower than our typical bills 20 years ago when adjusted
Mike Dunn: Florida Public Service Commission has established a schedule for this proceeding beginning with quality of service hearings in May and technical hearings in mid-August.
The proceedings would likely conclude in the fourth quarter.
Mike Dunn: with staff recommendation and commission rulings on Revenue Requirements and Rates.
Mike Dunn: We look forward to the opportunity to present our case to the Commission this summer.
Mike Dunn: and a focus on achieving a balanced outcome that supports continued smart investments for the benefit of our customers.
The Indicators show that Florida's economy remains healthy.
Mike Dunn: Florida continues to be one of the fastest growing states in the nation and has three of the five fastest growing US metro areas between 2023 and 2024.
Mike Dunn: That feels first quarter retail sales increased by approximately 1.8% year-over-year.
driven primarily by continued favorable underlying population growth.
Mike Dunn: Now let's turn to energy resources, which were put at adjusted earnings growth of nearly 10% year-over-year.
Mike Dunn: Contributions from new investments increase 12 cents per year, year-over-year, primarily reflecting continued growth in our power generation portfolio.
Mike Dunn: Our existing Clean Energy portfolio declined three cents per share during the quarter, associated with various puts and takes in the business. [inaudible]
Mike Dunn: and the comparative contribution from our customer supply business decreased by one cent per share.
Mike Dunn: Contributions from NextEra Energy Transmission increase one cent per share year over year.
All of their impacts decreased by 5 cents per share.
Mike Dunn: Driven by higher interest costs of six cents per share, half of which are related to new barring costs to support our new investments.
Mike Dunn: As we privacy disclosed and as we deemphasize the business, we have reclassified gas infrastructure to include gas pipelines and existing clean energy and upstream gas infrastructure in customer supply.
Mike Dunn: Gas pipelines and upstream gas infrastructure, each had a one cent decline in the quarter.
Mike Dunn: Energy Resources originated approximately 3.2 gigawatts of new renewables in storage to the backlog.
Mike Dunn: With these additions, our backlog now totals roughly 28 gigawatts. After taking into account 0.7 gigawatts of new projects placed in the service, since our last earnings call.
This highlights the continued strong growth for renewables and storage.
Mike Dunn: We're also excited to announce our first solar repiring project which we expect to be completed in 2026.
Mike Dunn: Going forward, we plan to include both wind and solar reparing megawatts in the newly updated reparing line of our development expectations.
Mike Dunn: Our backlog additions represent the diverse part of men that we are seeing across industries.
Mike Dunn: Roughly 40% of our backlog additions are driven by commercial and industrial customer demand.
60% are driven by demand from power companies.
Mike Dunn: As evidenced by our nearly one gigawatt addition, our customers continue to choose Barry Storge as the lowest cost, writing out solution to meet their capacity needs.
Turning now to our first quarter, 2025 Consolidated Results [inaudible]
Mike Dunn: Adjusted earnings from corporate and other decreased by three cents per share year over year.
Our long-term financial expectations remain unchanged.
Mike Dunn: We will be disappointed if we are not able to deliver financial results at for near the top end of our adjusted EPS expectation ranges in 2025, 2026 and 2027.
Mike Dunn: From 2023 to 2027, we expect that our average annual growth in operating cash will be at or above for just an EPF compound annual growth rate range.
[inaudible]
Mike Dunn: We also continue to expect to grow a dividends per share at a roughly 10% rate per year through at least 2026 off of a 2024 base.
As always, our expectations assume our caveats.
Mike Dunn: That concludes our prepare to marks, and with that, we will open the line for questions.
We will now begin the Question and Answer session.
Mike Dunn: To ask a question, you may press star then one on your telephone keypad.
Mike Dunn: If you are using a speaker phone, please pick up your handset before pressing the keys.
Mike Dunn: If at any time your question has been addressed and you would like to withdraw your question, please press star then two
Mike Dunn: At this time, we will pause momentarily to assemble our roster.
Mike Dunn: The first question comes from Steve Fleishman with Wolf Research. Please go ahead.
Steve Fleshman: Yeah, good morning, thank you. So first, just related to the tariff disclosure you provided which sounded very good.
the
Steve Fleshman: The battery portion where you're moving a lot domestic, I assume that means you're also getting domestic battery cells as part of that.
Is that right?
The contract works, we get... [inaudible]
[inaudible]
Steve Fleshman: Oh, Steve, sorry, I cut off there for a minute. Let me start over to work.
So...
Steve Fleshman: With the battery, the domestic battery contract that we have entered into, it is assembled here in the United States. There are certain components that come in from outside the United States, but because it's assembled here and it has enough concentration in here in the US, it qualifies for domestic content. And we have contractual protections in the agreement in place regarding the qualification for domestic content. [inaudible]
Steve Fleshman: and also to the extent that there is any tariff exposure related to any imported parts.
Steve Fleshman: Or components related to those batteries, those are protected as well and backstop by substantial credit. So that is a domestic contract and that's the way investors should think about it.
Got it, thanks for that. And then, just in terms of—
The...
Exposure on
Steve Fleshman: The tariff exposure which you've talked for a long time about making sure that you're protected there with your suppliers. Obviously, one of the issues can be making sure that the suppliers still supply while they absorb tariffs.
Just how do you feel about?
Steve Fleshman: the supplier health to kind of meet the commitments as well.
Steve Fleshman: I feel good. I feel very good for two reasons. You know, one, you know, given the buying power that NextEra has, suppliers don't want to disappoint, and they want to make sure they fall through. They're looking at this.
Steve Fleshman: as a long game for their business second.
Steve Fleshman: The way our contracts are set up with our credit protections in the agreement there's...
Steve Fleshman: very strong incentive to follow through on those commitments. And then the third point that I would make is that
Steve Fleshman: The U.S. still remains an extremely attractive market to suppliers across the globe being that they have a lot of margin when they deliver into the U.S. And we put those three things together.
Steve Fleshman: I lose no sleep over whether or not our supplies will fall through on their commitments and deliver into the US.
Speaker Change: Yes, got it. Makes sense. And then just on the switching to a lot of focus these days on IRA obviously and changes and specifically on transferability. And so maybe just one clarification on transfer abilities in the event, hypothetically, if it were to.
Speaker Change: Go away in the future in a bill. Would it still be applicable for...
Speaker Change: Existing assets that were done under transferability as well as safe harbor assets on transferability.
Speaker Change: Yeah, so I mean, there was a recent piece of legislation, you know, that was, that was brought forward that basically, you know, as the Fedorcek, you know, Bill, I'll use that as an example to answer the question. So on the Fedorcek bill,
Speaker Change: There would be an ability to continue, you know, the safe harbor, you know, for four years and transferability is left in place there. So it all comes down to the drafting.
Speaker Change: Steve at the end of the day. That's how that bill was drafted. It would depend on, you know, the ultimate outcome and drafting of future bills. But let me just make a couple of comments on on transferability.
Speaker Change: We spent a lot of time obviously advocating for tax credits and transferability for good reason and the reasons are
Speaker Change: I think well known by investors, gas has its limitations in terms of availability, for the reasons I went through in the prepared remarks, there are a lot more expensive gas turbines have been hit by tariffs too, and a lot of folks don't talk about that, which is actually going to...
Speaker Change: Wander, you know, storage in that regard. [inaudible]
Speaker Change: and so we need a bridge and that bridge has to come from renewables and storage because we have all this demand today it's got to be met by something
and the ability to transfer credits.
Speaker Change: It goes hand in glove with the credit itself. You have to be able to monetize the credit to be able to get the benefit back to the customer. And I'll use a couple of examples, I mean utilities for example, right? And this is one of the things that we continue to stress in Washington.
Speaker Change: Utilities, you know, historically have struggled to use tax equity financing, you know, commissions want to prove it, it's, you have to sell half the plant, you know, to qualify for tax equity
Speaker Change: And so, how do you get the benefit which we calculate to be a 12% increase in household income to the ultimate utility customer without the ability to transfer the credit? Nuclear, I'll use as an example.
Speaker Change: with nuclear, you know, attack equity structure doesn't work, right? There's no bank that's going to take 50% ownership interest.
Speaker Change: and a nuclear plant. And so you have to have transferability for nuclear.
Speaker Change: as well, and nuclear is going to play an important part of our future. It's definitely a focus of this administration. 45X.
Speaker Change: When you're trying to convince the CEO to build a manufacturing facility under 45X, but if the credit's not there with the ability to transfer it on the back end for when solar battery storage, the demand for the product.
Speaker Change: is not there either. And so, what's the incentive to invest billions of dollars in the manufacturing facility under a 45 X credit? So, when you put all these things together, credits and transferability go together. [inaudible]
Speaker Change: You can't have one without the other. That's a message we're bringing to Washington. It's one that's being well understood. I think the evidence...
Speaker Change: Lies in the fact that we just had 21 House Representatives Republican. [inaudible]
House Representative Sinon to a letter saying...
Don't touch the credit. [inaudible]
Don't touch transferability. [inaudible]
Speaker Change: with four senators, say, you know, sign on to a very similar letter. They get it. They get the two go together. Well, be a little bit of a bumpy ride as we maybe see some proposed bills, sure, but I think at the end of the day.
Speaker Change: Folks in Washington understand that transferability in tax credits are our hand and glove and go together you have to have an ability to monetize the tax credit.
Great. Thank you very much.
Speaker Change: Our next question comes from Julien Dumoulin Smith, where Jeffries, please go ahead [inaudible]
Julian Dumoulin-Smith: Hey John , a team, thank you all very much and it's congrats again on all the new worlds here.
Speaker Change: Very well observed. Hey, John , maybe just to start with a little bit of a more mundane question. You're talking about going to the higher end of the range here at Nier. Do you want to talk a little bit about what the contributing factors are there for 25 and then I've got a quick follow up on what you just said there.
John Ketchum: Yeah, so when I think about, you know, higher into the range, I start with the first quarter results, right? I mean, we're, you know, we're already out of the gate at...
Speaker Change: at 9% and you know we have a business plan that you know we feel good about, feel good about executing against and I don't think there's a whole lot more to say about that.
Speaker Change: Awesome. Thank you. And look, really appreciate the details and transferability. I know folks have been very keen to hear from you guys on that. Related here, can you speak a little bit on the timing dynamics on when and how that ultimately will work? You say in your remarks, once we work with our customers.
Speaker Change: How do you think about the impact 150 from the timing perspective on 25 versus is that really going to get to that zero in 26?
Speaker Change: It seems like this is sort of an assumption that principally the tariff impact is going to impact customers with higher PPAs and you're going to go back to them today, perhaps like what we saw before with maybe some of the COVID impacts.
Speaker Change: So, Julie, your question is on tariffs, right? Not transferability? Yeah, sorry. Yeah, sorry. No, I thank you on the transferability. So let me make sure I got focused on transferability.
Speaker Change: You pivoted terrors. Can you clarify your question on terrors? Just so I understand your question. Yeah, sorry.
Speaker Change: The timing of that, right? So you talk about supply chain, you say once you work with your customers, how do you think about the timeline for working with your customers?
Speaker Change: and is the reason for your tariff exposure to be fairly low, principally because you are passing along those costs to your customers in revised PPAs or do you have existing contractual tasks?
Speaker Change: Yeah, so let me take those in pieces. Let's just start with the supplier first. So when we look at our entire backlog, right?
and we look at our projected Q2 Originations.
Speaker Change: that we have had with them since Liberation Day on April 2nd.
Speaker Change: That's the first piece, so that works you down to 150, then...
Speaker Change: The point we were making and their prepared remarks is that not only do we have...
Speaker Change: The ability to shift care for us to suppliers and supply contracts, which I just covered, we also have trade measure protection provisions in our customer contracts.
Speaker Change: So, we believe we got a really good shot at working with our customers to take that $150 million exposure down significantly.
Speaker Change: And perhaps even down to zero, if we use the track record we had around circuit convention, a lot of lessons learned.
Speaker Change: There, and these are rights that we already have embedded in our agreements. And so when I think about, you know, where we stand, you know, I feel very good about about tariff. It's just not going to have much of an impact at all on on our business.
Unknown Speaker
Speaker Change: If I can clarify quickly, the reason there's 150 is because you have to go back and clarify the contract.
Speaker Change: The reason that it is 150 is that there are certain risk-sharing mechanisms in contracts. Most of the contracts the supplier takes all the risks some of the contracts.
Speaker Change: They take almost all the risk except for a small sliver that we work through with them.
Julian Dumoulin-Smith: All right, thank you guys very much. Thank you, and Julien, I want to make one more point and I want to make sure folks understand this, you know
from the remarks.
That's $150 million on $75 billion dollars.
Julian Dumoulin-Smith: of CapEx, that's less than 0.2%, and we feel like we've got a good shot of getting that to zero.
Incredible, honestly.
Speaker Change: And final point I'll make is Steve asked me a little bit about it but there's been a lot written about battery exposure. We don't have battery exposure.
Call Stop.
We Do Not Have Battery Exposure
Speaker Change: We are really well positioned. We enter into a domestic contract. We have actually a real opportunity rather than a risk around batteries.
Thank you.
Speaker Change: The next question comes from Nick Campanella with Barclays. Please go ahead.
Nick Campanella: Hey, good morning, and thanks for taking the questions. So maybe just to close the loop on the tear of discussions, just where do you think returns are? From an IRR perspective, or an ROE perspective, you know, these protections that you have in place.
Rossier Competitors,
Nick Campanella: Could make you more competitive, I would think, does that boost your returns or do you see these?
Nick Campanella: Yeah, I mean, great, hey, that's a great question, Nick. So I look at it a couple different ways. I mean, first of all, you know, we're in great shape on our returns for all the obvious reasons. We just covered so I don't think I need to spend time on that.
Nick Campanella: I look at this as a huge opportunity for us because, you know, we compete again against a lot of small developers and they don't have the buying power, the leverage in contracts to be able to shift risk like we can.
Nick Campanella: You know, we started looking at this three years ago, we've been at it, you know, we didn't just wake up on November 6th and say, you know, oh my god, what do we do about our supply chain? I mean, we've been thinking about this for years.
Nick Campanella: And so we put the right things in place. This is going to create a lot of opportunity for us. So, if circumvention is any example, what happened in circumvention is a lot of small developers.
Nick Campanella: Blue themselves up couldn't satisfy, you know, their commitments with their customers . . .
and a lot of demand came our way and so...
Nick Campanella: I would expect that's my point around opportunity that given the position that we're in around tariffs, I expect a lot of opportunity to come our way as small developers.
Nick Campanella: You know, just aren't in the position we are they're trying to absorb significant matter risk particularly those that are that have entered into contracts for batteries.
Nick Campanella: because they probably are buying from Chinese manufacturers and don't have domestic contracts and don't have a position that we have.
Thanks for that.
Speaker Change: And then just maybe a quick update on where you stand in the Duane Arnold contracting opportunity. I think you are working through an engineering study beforehand. How is that kind of progressing and?
Nick Campanella: You know, how have discussions been in terms of getting a contract for this site? Thanks.
Nick Campanella: It's going great. We continue to make a lot of progress at Dwayne Arnold. We have seen no showstoppers there and continue to see a lot of demand for generation from the project.
Nick Campanella: You know, it continues to be, you know, an opportunity that's, that's exciting for us and look, you know, we continue to work it, you know, so move forward.
Thank you.
Speaker Change: The next question comes from Jeremy Tonet with JP Morgan, please go ahead [inaudible]
Hi, good morning.
Good morning.
Speaker Change: I just want to touch base, I guess, on the GB partnership. And if there's any updates that you can provide to us, granted, it's recent since you talked about the developer day, but just wondering any updated thoughts to share there.
Unknown Speaker
Speaker Change: Yeah, I mean, things with, you know, under the framework agreement, continue to advance. We've been doing work together on the customer origination side, as a matter of fact, we hosted.
Speaker Change: in event last week that we called the ploy following development day, where Scott and I jointly hosted, you know, a number, you know, of companies across various sectors and
Speaker Change: Very fruitful, and we continue to try to advance opportunities on that from particularly around large scale load.
Speaker Change: Okay, great. Thanks. And maybe just kind of continuing with this a little bit more. I just wanted to see, I guess, you know, you talked a lot about, you know, gas development timeline for new turbines, but just as we look, you know, in the outer years here, just wondering how you think, I guess, you know, gas power factors in for, for, you know,
Speaker Change: Hyperscale, we're specifically, I guess, how conversations are going there, given decarbonization goals, but the attributes that gas can offer as well, just any updates, thoughts there will be great. Yeah, it's interesting because we talked a lot about this at Development Day, there's three things we shoot for right, one is just achieving the development expectations, I'll call it kind of the...
Speaker Change: We continue to see a strong preference by hyperscalers for front of the meter, you know, solutions which means ultimately a three-way conversation right between us.
Investor and Utilities and the Hyperscaller. [inaudible]
Speaker Change: Through the Ppas and other arrangements provide a nice combination of gas fired generation together with renewable solutions that provide a nice large scale fix that can leave the site essentially carbon neutral or close to carbon neutral at the end of the day, which is a very attractive.
Speaker Change: Two.
Speaker Change: To these customers and I think is why we are uniquely positioned to serve that market in partnership with the terrific relationships that we've been able to build with investor owned utilities over the last 20 or 30 years and with the strong relationships, we have with the hyperscale market so more to come on that.
Speaker Change: Got it that's helpful I'll leave it there thanks.
David Arcaro: Our next question comes from David Arcaro with Morgan Stanley. Please go ahead.
David Arcaro: Hey, good morning, Thanks, so much.
David Arcaro: I wanted to.
Speaker Change: To go back to Transferability just for a quick follow up there I'm wondering what the contingency plan might be if there were changes of restrictions on the use of tax credit transfers.
Speaker Change: With the financing alternatives B as you think about your.
Speaker Change: Overall kind of holistic financing plan.
Speaker Change: Yes.
Speaker Change: Question, So as we look and if you think about our company over two decades before 2022.
Speaker Change: We had we use tax equity to finance, our tax credits and we're able to do that in a very programmatic and and good basis. If we look today, we are seeing a flight to quality from tax equity providers coming to us where theyre looking because our projects get done on time because.
Speaker Change: Perform and what we've seen over the course of the last two years is essentially a doubling of the tax equity providers looking to to work with us.
Speaker Change: Also a key piece of our transfer program allows us to pick the best project returns between transferability and tax equity when it comes to PTC projects. The returns can be higher in times of transferability, but from a credit perspective, essentially the same outcome.
Speaker Change: So as we work through we've done this for 20 years, we've seen tax equity come to us and we're so we're not saying that there will be no impacts we feel very good about where we sit from a.
Speaker Change: Financing perspective transferability.
Speaker Change: Got it okay. That's helpful.
Speaker Change: And then I appreciate the comments.
Speaker Change: Comment you gave to Jeremy's question I was wondering maybe a bit higher level. What are you seeing in terms of renewable demand trends.
Speaker Change: From Tech customers, specifically in data center opportunities has there been I guess.
Speaker Change: Any any change in the interest there or the or the low growth or demand growth that youre seeing from the data center side of things.
Speaker Change: Short answer is yes, no change.
Speaker Change: We continue to see a lot of appetite for.
Speaker Change: Renewables and it fits perfectly with the discussion that.
Speaker Change: We continue to have on the G or nova side around providing.
Speaker Change: Gas fired generation as a potential solution as well, but they remain very focused too on.
Speaker Change: On renewables right Theyre ready now they are low cost or an offset for gas if they if they ultimately decided to go.
That route and a part of the country that doesn't have excess grid capacity and load studies, taking too long.
Speaker Change: To complete and when I look at the demand and the outlook in the renewable sector going forward.
Speaker Change: We always are looking at a quarter out or so that we could we just continue to see strong demand across the board and with Hyperscale orders.
Speaker Change: B B.
Speaker Change: A nice sized part of that.
Okay excellent. Thank you.
Speaker Change: The next question comes from Carly Davenport.
Speaker Change: Goldman Sachs. Please go ahead.
Speaker Change: Hey, good morning, Thanks, so much for taking the question.
Speaker Change: Maybe a higher level one just as you think about the backlog additions can you talk a bit about the 2024 to 2027 plan relative to the additions for post 2027 delivery do you see any risk around project slippage beyond the current plan into 2028, plus just given the more uncertain macro environment and potentially more complex contracted.
Speaker Change: Sessions or are you still feel confident in the execution there.
Speaker Change: Yes currently I mean, good question. So maybe I'll start just with circumvention and remind folks that when we saw our convention, we did see some shifting out and demand right.
Speaker Change: That's impacted I think are some of the near term development expectations with us forecast to come in the low end of the range on the on the 'twenty four 'twenty five numbers you can see that in the development forecast.
Speaker Change: Right up but then we were also able to push those projects in the 'twenty six 'twenty seven.
Speaker Change: 28, and some of the out years.
Speaker Change: I think that dynamic was more.
Speaker Change: Specific to circumvention than it is here.
Speaker Change: I think here, there's just so much demand and the need for electrons right now where customers just can't afford to wait and gas is such a long term solution. I mean, we've gone up from four and a half years to build a combined cycle unit.
Speaker Change: Six or longer.
Speaker Change: So needed in the electrons now I think that is that is forcing more near term demand obviously.
Speaker Change: Some of that some of the impact tool will ultimately depending on.
Speaker Change: Where we come out.
Speaker Change: With Washington.
Speaker Change: You've heard my comments there.
Speaker Change: Great. That's really helpful. Thank you I'll leave it there.
Speaker Change: The next question comes from Bill episodes with UBS. Please go ahead.
Bill: Hi, Good morning, just a couple of questions on the utility.
Bill: 10 year site plan that you guys filed how should we think about that impacting the capital.
Bill: Expenditure program.
Bill: Relative to the $34 billion to $37 billion does that have any impact on that end or is it sort of post that and should we assume a higher run rate than the sort of $8 89.
Bill: Outline for 'twenty six 'twenty seven.
Armando Pimentel: It's Armando.
Armando Pimentel: Good morning.
Armando Pimentel: Think about it any differently the Capex plan that we filed in our rate case for the next four years is roughly $50 billion of Capex right over the next over the next four years.
Armando Pimentel: Eight 8% or so that are that you just highlighted is roughly in line with.
Armando Pimentel: Our expectations would be over the next four years, and it's and it's driven by making sure that we continue to do the best thing for our customers. We expect 335000, new customers over the next four years and the and the FPL and the appeal area and that drives a lot.
Armando Pimentel: Of investment one and then the additional investment part of that $50 billion to make sure that we can continue to make our customers' value proposition better. So I think it's more of the same.
Speaker Change: Okay, and then regarding the rate case.
Armando Pimentel: Settlement.
Armando Pimentel: Our preferred outcome here and as that window of time ahead of this technical hearings in August.
Armando Pimentel: I think settlements always something thats on the table obviously it takes.
Armando Pimentel: Two sides to in our case since there is a number of intervenors more than two sides to come together to get to for auto conclusion thats. Good for our customers right. This is all about our customers and making sure that doing the best outcome for for them for them long term if you look at historically.
Armando Pimentel: <unk> me, where we've had where we've had settlements they've generally been.
Armando Pimentel: Anywhere from six weeks before the the rate.
Armando Pimentel: Our rate case as opposed to start which in this case would be mid August to right before right. After.
Armando Pimentel: The actual rate case, so there is going to be a settlement then that's the likely outcome certainly it could happen outside of that time. It can happen at any time, but our focus right now is really on putting together the best case that we can for our customers starting mid August.
Speaker Change: Okay, and then just one last quick 111.
Armando Pimentel: 11, 6%.
Armando Pimentel: Ro.
Armando Pimentel: Given the amount of surplus amortization that was utilized I mean should that trend a little bit lower over the balance of the year is the expectation that that can be maintained.
Armando Pimentel: So were required at the beginning of the year to file with our commission and let them know what our expectations are for for the year. Obviously that can change you saw that changed last year, when we lowered it but our expectation is the 11, 6% is about right based on the expectations that we have for normal weather.
Armando Pimentel: <unk>.
Armando Pimentel: This year, we'll obviously take a look at that every quarter, but 11, 6% as our expectation for the year right now.
Speaker Change: Great. Thank you so much.
Armando Pimentel: Okay.
Armando Pimentel: Thank you.
Armando Pimentel: This concludes our question and answer session and conference.
Armando Pimentel: Thank you for attending today's presentation you may now disconnect.
Armando Pimentel: Yeah.
Armando Pimentel: [music].
Armando Pimentel: Yes.
Armando Pimentel: Yes.
Armando Pimentel: Yeah.