NextEra announces retirement of Florida Power & Light CEO and comments on campaign-finance allegations

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NextEra Energy Inc. reported mixed fourth-quarter results on Wednesday, but the stock sank as Wall Street appeared to focus more on the Florida-based electric utility’s comments about allegations of campaign-finance violations by its subsidiary Florida Power & Light Co. (FPL).

The company also said FPL Chief Executive Eric Silagy was retiring after more than 11 years in the role.

The stock fell 7.2% in afternoon trading but pared earlier losses of as much as 9.5%. It was on track to suffer the biggest one-day selloff since it tumbled 8.3% on Jan. 25, 2022.

NextEra Chief Executive John Ketchum started the post-earnings conference call with analysts by saying that the previously announced review of allegations of Florida state and federal campaign-finance violations was “substantially complete.”

“Regarding the Florida allegations, based on information in our possession, we believe that FPL would not be found liable for any of the Florida campaign finance law violations, as alleged in the media articles,” Ketchum said, according to a FactSet transcript. “With respect to the [FEC] complaint, you may recall that it was filed by a special-interest group and primarily relies on media articles that allege certain violations of the Federal Election Campaign Act by various parties including by implication, FPL.”

Ketchum said that because the total contribution amount referenced in the complaint is less than $1.3 million, he does not expect the allegations to have a material effect on the company’s financials.

The media reports Ketchum was referring to are allegations that FPL financed the run of a sham candidate with the same last name as former Florida State Sen. José Javier Rodriguez, a Democrat, who had proposed a law regarding solar power that would have eaten into FPL’s profits. That sham candidate reportedly drew enough votes from Rodriguez that he lost his re-election bid.

FPL’s Silagy was named in the reports as having made comments that helped fuel those allegations. He later called those comments a poor choice of words.

In the call, Ketchum tried to play down the circumstances behind the FEC complaint. He said “anybody in the United States can file a claim with the FEC” and added that in the current political environment, he would expect an uptick in claims filed.

“That’s where we are right now. A citizen, a special-interest group filed a complaint. There is no formal legal proceeding or any proceeding with the FEC right now,” Ketchum said.

The FEC will take 12 to 18 months to decide if should investigate the claim further, Ketchum said. In the meantime, he said the company plans to file a response in the “next few weeks” seeking dismissal of the claim.

Still, with the FPL allegations at the top of investors’ minds, RBC Capital analyst Shelby Tucker said the announcement that longtime CEO Silagy was retiring “does not help optics.”

In the question-and-answer portion of the call, Wolfe Research analyst Steve Fleishman asked if there was a connection between the investigation into the allegations and Silagy’s retirement.

Ketchum said there was no connection, adding that when he became NextEra’s CEO in March 2022, Silagy said he would give Ketchum a one-year commitment to the company and would revisit that at the end of that year.

“Eric satisfied that commitment to me,” Ketchum said.

Silagy followed up by noting that his predecessors had held the role for 10 years, and that with FPL preparing to go into another rate-case cycle, if he continued in the role, he would be committing to stay through 2026.

Despite the company playing down the negative optics, the stock was the S&P 500’s biggest percentage decliner in afternoon trading.

NextEra reported fourth-quarter net income that rose to $1.52 billion, or 76 cents a share, from $1.20 billion, or 61 cents a share, in the same period of the previous year.

Excluding nonrecurring items, adjusted earnings per share of 51 cents, up from 41 cents, topped the consensus analyst estimate of 49 cents, according to FactSet.

Revenue rose 22.2% to $6.16 billion, missing expectations of $6.30 billion, according to FactSet. FPL revenue climbed 18.7% to $4.07 billion, and revenue from NextEra Energy Resources, the company’s clean-energy business, jumped 28.2% to $2.09 billion.

For full-year 2022, adjusted EPS rose to $2.90 from $2.55, topping the FactSet consensus of $2.89.

Looking ahead, the company affirmed its adjusted EPS guidance range for 2023 of $2.98 to $3.13 and for 2024 of $3.23 to $3.43. That could also be interpreted as a disappointment to investors.

“Given the 2022 [year-end] number, we are somewhat surprised management did not elect to raise 2023 guidance,” RBC’s Tucker wrote in a note to clients.

NextEra’s stock has gained 2.6% over the past three months, while the Utilities Select Sector SPDR exchange-traded fund has advanced 5.3% and the S&P 500 has tacked on 3.7%.

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