Q1 2025 Earnings Summary
- Robust renewable and battery storage pipeline: The company continues to originate significant volumes of new renewables and storage projects (e.g., 3.2 GW in one quarter and record solar origination), underscoring strong demand and a growing project backlog.
- Effective tariff exposure management: Solid contractual protections have kept tariff exposure limited to about $150 million – less than 0.2% of CapEx – with clear strategies to potentially reduce it to zero, which supports cost control.
- Solid operating performance and return expectations: Maintaining strong quarterly performance (with a nearly 9% EPS increase) and guidance for an 11.6% ROE under normal weather conditions reinforces attractive return prospects.
- Tariff Exposure Risk: Despite protections, NextEra faces $150 million of tariff exposure—about 0.2% of its capital expenditure—and any failure to fully mitigate this exposure could pressure costs and margins.
- Execution and Cost Escalation on Gas Projects: Increased build times for gas-fired plants—from 4.5 to 6+ years—and rising construction costs may delay capacity additions and hurt profitability, particularly as gas plants face higher costs relative to renewables.
- Regulatory and Credit Transferability Uncertainty: Potential changes or restrictions in tax credit transferability could disrupt established financing strategies, leading to higher financing costs and impacting project returns.
| Metric | YoY Change | Reason |
|---|---|---|
Operating Revenues | 9% increase (from $5,731M to $6,247M in Q1) | Operating revenues improved by approximately 9%, driven by stronger gains from changes in energy prices (e.g. non-qualifying commodity hedges contributed an extra $188M versus $51M previously), additional revenues from new investments ($107M), and a $74M boost from the customer supply business, compared to Q1 2024. |
Operating Income | 12% increase (from $2,013M to $2,256M in Q1) | Operating income improved by about 12%, largely as a result of the higher operating revenues and relatively modest increases in expenses, reflecting improved operational performance compared to Q1 2024. |
Net Income | 76% decline (from $1,937M to $464M in Q1) | Net income fell sharply by 76% YoY, with a drop of roughly $1,473M, indicating that despite better operational revenue and income, significant non-operating losses such as adverse hedge outcomes and other adjustments heavily compressed the bottom line compared to Q1 2024. |
Earnings per Share | 63% decline (from $1.11 to $0.41 in Q1) | EPS declined by 63%, reflecting the drastic drop in net income as well as the impact of negative factors like losses on non-qualifying hedges, higher interest expenses, and possible dilution effects, which together reduced shareholder earnings markedly relative to Q1 2024. |
Business Segment Breakdown | – (FPL: $3,997M; NEER: $2,163M; Corporate & Other: $87M in Q1) | Revenue segmentation highlights a dominant contribution by FPL (approximately 64% of total operating revenues), while NEER and Corporate & Other lag significantly; this shift indicates that FPL’s performance is a key driver in overall revenue, suggesting a strategic focus or resilience in this segment compared to the previous period. |
Operating Cash Flow | 10% decrease (from $3,077M to $2,769M in Q1) | Operating cash flow was reduced by about 10%, primarily due to changes in working capital such as lower deferred income taxes and diminished cost recovery adjustments, as well as increased recoverable storm-related costs which together resulted in lower net cash inflows compared to Q1 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS | FY 2025 | no prior guidance | increased nearly 9% year-over-year | no prior guidance |
ROE | FY 2025 | no prior guidance | 11.6% | no prior guidance |
Tariff Exposure | FY 2025 | no prior guidance | $150 million tariff exposure, potentially down to zero | no prior guidance |
Interest Rate Hedging | FY 2025 | $32 billion | Nearly $37 billion | raised |
FPL Investments | 2025-2029 | no prior guidance | nearly $50 billion | no prior guidance |
Renewables Portfolio | FY 2027 | 75 gigawatts | 70 gigawatts | lowered |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Renewable and Battery Storage Pipeline | In Q4 2024, NextEra highlighted a robust renewables backlog – adding more than 12 GW in 2024 including 3.3 GW in the recent quarter, record origination in solar and battery, strong demand from customers, and significant pipeline visibility. | In Q1 2025, the company reported that Energy Resources originated approximately 3.2 GW of new renewables and battery storage projects – its largest solar origination quarter ever – underlining record performance and low costs driving rapid deployment. | Consistent positive emphasis on expanding renewable capacity with enhanced momentum in Q1 2025 indicating a stronger, more record‐driven performance. |
Tariff Exposure Management and Risk | No mention of tariff exposure management or risk was found in Q4 2024 earnings information. | Q1 2025 details a comprehensive strategy to limit tariff exposure (estimated at $150 million with plans to reduce it to near $0), including supplier risk allocation and domestic battery sourcing. | Newly introduced topic; an emerging focus in Q1 2025 that reflects proactive risk management measures not previously discussed. |
Regulatory and Tax Credit Transferability Uncertainty | This topic did not appear at all in Q4 2024 discussions. | Q1 2025 earnings call included an in‐depth discussion on legislative uncertainty around tax credit transferability, its critical role for financing clean energy projects, bipartisan advocacy, and the potential impact on utilities and nuclear projects. | Newly introduced topic demonstrating increased regulatory attention in Q1 2025. |
Operating Performance and Return Expectations | In Q4 2024, NextEra reported strong operational metrics with full‐year adjusted EPS growth, significant cash flow expansion, improvements at FPL (including customer growth), and robust return expectations supported by growth and efficiency metrics. | Q1 2025 continued the positive narrative with a nearly 9% year‐over‐year EPS increase, record renewables origination figures, strategic supply chain management, and clear return expectations (FPL ROE of 11.6% and interest rate hedge details). | Consistently positive sentiment with continuous strong performance signals; slight enhancements in renewables initiatives bolster the outlook. |
Gas-fired Generation Project Execution and Cost Escalation | In Q4 2024, the company underscored significant hurdles in executing gas-fired projects including permitting, site challenges, and steep cost escalations – with turbine costs more than doubled and EPC labor costs tripling. | In Q1 2025, similar challenges were emphasized with the cost to build gas-fired plants having tripled in recent years, along with increased build times and workforce skill shortages, further emphasizing the rising cost and timeline risks. | Consistent negative sentiment; both periods reflect escalating costs and execution challenges that may limit the role of gas-fired generation. |
Customer Growth Trends in Service Territory | Q4 2024 disclosures noted that FPL added nearly 119,000 customer accounts in the quarter, bringing totals to over 6 million, driven by Florida’s robust population growth and strong retail sales growth, with moderated longer‐term growth expectations for 2026–2029. | In Q1 2025, the narrative described historical growth over 20 years (adding over 1.3 million accounts) and projected the addition of roughly 335,000 new accounts through 2029, with continued strong demand driven by one of the fastest-growing states. | Consistent strong growth outlook; both periods project robust customer expansion with Q1 2025 emphasizing longer‐term, significant account additions. |
Interest Rate Risk Management and Capital Expenditure Pressures | In Q4 2024, NextEra detailed a robust hedging program – with $32 billion in interest rate swaps (average rate near 3.9%), sensitivity analysis showing minimal EPS impact, and active capital expenditure management using reserve mechanisms amid inflation and infrastructure investment needs. | Q1 2025 revealed a similar strategy with nearly $37 billion in hedges protecting 100% of the backlog, a planned capital investment of $50 billion from 2025 to 2029, and diversified supply chain measures to alleviate tariff risks – supporting continued customer growth and infrastructure expansion. | Consistent management approach; both periods demonstrate proactive risk management and capital planning, with Q1 2025 reflecting a scaled-up investment agenda. |
Nuclear Capacity Expansion via Duane Arnold Recommissioning | In Q4 2024, the focus was on recommissioning the Duane Arnold plant with progress on regulatory filings with the NRC for a licensing change, a good overall plant condition (aside from the cooling tower), and an estimated restart as early as the end of 2028. | In Q1 2025, the company highlighted significant progress on the Duane Arnold opportunity, noting no major obstacles and strong demand for the project, with leadership describing the opportunity as “exciting” and actively moving forward. | Progressive continuity; while regulatory groundwork was laid in Q4 2024, Q1 2025 shows increased optimism and forward momentum in project execution. |
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ROE Outlook
Q: Will ROE trend lower this year?
A: Management expects the 11.6% ROE to remain largely unchanged over the year based on normal weather, indicating consistent performance throughout. -
Tariff Exposure
Q: How will tariffs impact overall costs?
A: They project about $150 million exposure on a massive $75 billion CapEx—less than 0.2%—and contractual protections should drive that exposure toward 0, minimizing risks from tariffs. -
Financial Guidance
Q: What drives the higher guidance range?
A: Management noted that starting at 9% in the first quarter and a robust business plan underpin the expectation of operating at the higher range, signaling strong momentum. -
CapEx Impact
Q: Does the 10-year site plan alter CapEx spending?
A: The new site plan fits into the long‑term $50 billion CapEx program over four years, with an expected run rate similar to the prior guidance, reinforcing steady investment. -
Transferability Risk
Q: What if tax credit transfers face restrictions?
A: They can pivot to tax equity financing alternatives, leveraging decades of experience to secure project returns while keeping financing flexible and costs controlled. -
Duane Arnold Projects
Q: What’s the update on the Duane Arnold opportunity?
A: Progress remains strong with no showstoppers at the site, and demand for new generation continues to be robust, validating the project's potential. -
Renewables Demand
Q: How is demand from tech and data centers evolving?
A: There is no change in appetite; renewables continue to be favored for their low cost and rapid deployment, with tech customers showing consistent interest. -
Gas Generation
Q: How does gas development fit into the strategy?
A: Although gas projects face longer build times, combining gas with renewables provides a path to reliable, carbon‑managed solutions specifically attractive to hyperscalers. -
Rate Case
Q: Is a rate case settlement likely soon?
A: A settlement is on the table and, based on precedent, could occur as early as six weeks before the effective rate case, aligning with a mid‑August timeline to benefit customers.
Research analysts covering NEXTERA ENERGY.